Title not extracted — [1985] Supp. 1 S.C.R. 145

It was submitted before the High Court that there was no compli- c ance with the requirement of previous sanction add previous publication in the prescribed manner in regard to the amendment of the bye-law for enhancing the rate of market fee leviable under s. 65 (2) from one per cent to two per cent. The High Court has observed that there was no answer to that criticism in regard to the validity of the amendment to the bye-law for raising the market fee from one per cent to two per cent and therefore the State Govern· ment promulgated Ordinance 22 of 1981 when arguments before the High Court were coming to a close amending S. 148 as also ss. 134 and 158 of the act. The amendment introduced by that Ordinance omitted the words "after previous publication in the prescribed manner'' which occurred in S.l48 of the Act with retrospective effect from the date of commencement of the Act. Sec. 3 of the amending Ordinance 22 of 1981 validated the bye·law notwithstand· ing the fact that the affected int~rests were not heard in any manner. The High Court has observed that this amendment took away the obligation of prior hearing of the affected interests on the ground that the persons affected have no right to be heard before stautorty rules or bye-laws are made unless the right is conferred by the Statute and that the • right has been taken away by ss. 3 and 5 of the amending Ordinance 22 of 1981. The High Court found that in this case the Chief G marketing Officer himself has issued directions to the market Committees to amend the bye-laws for enhancing the market fee from one per cent to two per cent and the bye-laws were accordingly amended by the market committees and the Chief Marketing Officer thereafter accorded sanction. The High Court has held that the B Chief marketing Officer's direction can be regarded as his previous sanction for amending the bye-laws.

t.'I'.C. v. ICARNATAKA (Varadarajan, J.) is~

However, the learned Judges themselves do not appear to have been quite happy about what had happened,for they have observed in para 61 of their judgment thus:

"The question might, however, become a live issue if the Market Committees were to amend the bye-laws made under s. 65(2) of the Act in future without such an opportunity of hearing effected interests."

Even the learned Advocate General appearing for the State and the learned Counsel appearing for the market Committees stated before the High Court, though according to them no obligation of hearing the affected interests was implicit in s. 65(2). that it would c be eminently desirable that the Market Committees adopt some reasonable procedure in that behalf and that the amendment to s. 148 made by the Ordinance was only intended to cure the defect in making the impugned bye-laws and avoid great public inconvenience which may result from the invalidation of the bye·Jaws and that D there was no intention to make the deletion a permanent feature. They submitted that any reasonable procedure which may be suggested by the High Court would be adopted in practice even if there was no such legal compulsion. In view of that request by the learned Advocate General and learned Counsel for the Market Committee the High Court has observed in its judgment thus: E

"It appears to us that before a Market Committee proposes to amend a bye-law to make an upward revision of the rate of fee, in future, the Market Committees must, first follow the dire.;tions of the Supreme Court at para F 55 in KEWAL KRISHAN PURl'S case (supra). It would also be proper for the Market Committees to prepare a statement containing the particulars of the development works and services intended to be undertaken out of the market fee receipts together with cost-projections thereof, . also setting out the likely period of execution. The plans and estimates for all civil engineering works should be prepared and sanctioned as prescribed in Rules 70 and 71 of the Rules framed under the Act. Then the Market Committees should notify the proposals calling for objections and suggestions from the affected interests with in a stipulated period, not being less then one month. The mode of inviting objections and suggestions may bet

186 SUPREME COURT REPORTS (198S] SUPPL. s.c.t.

in addition to the publication on the Notice Board of the A Market Committee's Office, by appropriate publication in a daily news-paper, having circulation in the area. Those who wish to file objections or offer suggestions shall be entitled to inspection of the statements con- taining the estimates, co~ts and other financial projections. B The Market-Committees sha:tl take into consideration the objections and suggestions so offered and here the mterest.s affected before amendin~ the bye-laws revising the fee. This appears to be the minimal requirement of a hearing of the interests affected. The Market-Committees shalJ, of course, be at liberty to adope a more comprehen- c sive procedure. The C.M.O. should also look into the objections and suggestions before according his sanction. All that we need say at this stage is that following of such a procedure would help the market committees to render better and efficient service, and the bye-laws framed after following such a procedure would be beyond reproach on procedural grounds, obviating needless and avoidable litigation."

Point No .. 12 framed in para 7 of the judgment of the High Court relates to the question of justification for enhancement of the market fee payable under s. 65(2) of the Act from one per cent to two per cent and reads thus:

"Whether the enhancement of market fees leviable uhder s. 65(2) of the Act from one per cent to two per cent brought about by amendment of the bye-laws of the Market Committees in unsupportable in law and fails for want of correlation with the value of services rendered to the payers of the fees."

G The High Court has observed:

"In 1974 when the k:vy had come to be challenged in Vaman Rao's case, (supra) the several market commi- ttees had filed financial projections for a 15 year period n from 1974-75 to show the estimated income and expendi· ture. Just about that time all the market committees had occasion to prepare and furnish similar financial proposals to the Chief Marketing Officer in connection

i.T,C. v, KARNATAKA (Varadarajan, J.) 187

with certain proposals for development with the aid of a loan from the World Bank. As learned counsel wanted A the Court to examine these proposah also having regard to the principles and guide lines laid down by the Supreme Court in Kewal Krishan Puri's case (supra), we directed by over order dated 30.11.1981, the Chief Marketing Officer to furnish in respect of each r~spondent B Market Committee, a comprehensive statement in a tabular from, setting out the following amongst other particulars:

1. The year of establishment of the Market-Committee. c

2. Amount actually spent for capital or developmental works from the beginning till 30.6.1974.

3. The particulars (in metric tonnes) of the total annual arrivals of all notified agricultural commodities for the three years 1978·79, 1979·80 and 1980-81. D

4. · Average daily arrivals (in metric tonnes) for the years 1978·79, 1979-80 and 1980-81.

5. Total amount of market-fee collected for the years 1978·79. 1979-80 and 1980·81. E

6Copy pinpoint6. Revenue expenditure incurred for the years 1978-79, 1979-80 and 1980·81.

7Copy pinpoint7. Cash on hand or in banks or in the form of invest· ment as on 1-7·1981. F

8Copy pinpoint8. Items of developmental works originally envisaged (for a period of 15 years during I Y74·75 to 1988·89) to,2ether with item wise estimated cost thereof; revised estimates, if any, item wise; progress in execution in terms of financial outlays of work, itemwise in respect of each item up to 1.7.1981; balance remain- ing to be executed (in terms of money) with break up for the future years upto 1988-89 if the work to be completed in ·instalments in future; any deletion of or alteration in the items of work envisaged in 1974· 75; and any other additional developmental works proposed after 1974-75."

188 SUPREME cOuRT REPORT (J985j SUPPL. S.C.R.

In response to this order, the Chief Marketing Officer A has filed the statements which are at Exhibits R-1 to R-111, In addition, several of the respondent-Market Committee have filed statements wich though not in the same form also contain similar information."

The petitioners before the High Court made fourfold submi- B ssions regarding those statements. they are:

(1) Exs. R-1 to R-111 are totally at variance with the corres- ponding estimates furnished for the same period in 1974-75 and they have been prepared only in order to supply an artificial quid pro quo c for enhancement of the levy and are merely show-pieces on paper to get over the present challenge;

(2) the vagaries and disparities in the proportion of the pro- posed development of market yard to market yard are so glarding that no authority in the position of the Chief Marketing Officer D would reasonably approve such unco-ordinated and disproportionate development of the regulated markets;

(3) many of the items of works envisaged in the development such as constructions of shops, godowns and like are unrelated to the concept of special service to the buyers and cannot be reckoned as qualifying for correlation. If these impermissible items are deleted from the estimates, the Market Committees would not be in a position to establish the requisite quid pro quo; and

(4) a substantial part of the proposed financial outlays relates to what are called rural markets the outlays on which could not be reckoned as for rendering special service to the buyers.

After considering the above proposals and estimates and the arguments advanced at length about them and after taking into consideration the proceedings of the National Seminar on Rural Markets Development held in New Delhi during December 1979 in which it is stated that in Karnataka the Panchayats manage the rural markets as agents of the Market Committees and 75 per cent of the revenues is given to the Panchayats for managing the markets and the remaining 25 per cent is taken by the Market Committees, the High Court has held that the outlays on the establishment of rural markets cannot be held to be impermissible for the purpose of reckoning correlation.

I.T.c. v. KARNATAKA (Varadarajant J.) 189

The High Court has observed : A "Indeedt in the proposals for the development of the Market-Committees, it is legitimate to expect a scientific consistency and adherence to some broad norms of development. Under the 'Act' the Chief Marketing Officer is required to sanction the budgets of these Market Committees. Any project for development must take B into account, and be reasonably related to, factors such as the quantum of notified agricultural produce handled annually at the markets; the increase thereof expected in the reasonable near future; the market-fee and other annual incomes; the potentialities for expansion and the c like. Any proposals for growth and development are to be scientific; they ought to be sensible. In quite a few cases they prima facie appear to be neither. There ought to be some broad-norms reconciling the actualities and potentialities of the markets on the one hand and the ambitions of development of the Market Committees and D the financial outlays proposed thereon on the other. The criticism that the proposals for development disclose no uniformity or consistency with any norms cannot be said to be without justification. In several cases markets with decidedly lesser potentialiaties for expansion and handling [. lesser quantum than other markets propose to spend sums on development which are several times higher than those proposed by those other markets.

It is no doubt true that uniform standards, though desirable, may not be practical in all cases and the requirement of a market which handles, say ten thousand tonnes of cotton every year might differ very widely from those of a market which may handle the same tonnage of ;orne other notified produce which though in terms of weight may be equivalent but in terms of volume be very much lesser. A market which deals prodominantly with some seasonal commotities may have its own special problems and requirements. But in some cases before us even where there are similarities in the nature of the produce and in other circumstances, the ambitions for .H development are irreconcilably disparate. Even amongst markets which are similarly situate from the point of view

190 SUPREME COURT REPORTS {1985) SUPPL. S.C.R.

of the market fee income, quantum of produce handled and transacted; potentialities for expansion and levels of development XX already reached, the proposals reveal a wide divergence. There is admittedly no uniformity or standardisation of norms for growth even broadly and each Market-Committee has its own plans of growth ad hoc.

Indeed the Indian Standards Institution has standardised the pattern of regulated markets classifying them into 'A', 'B', 'C', 'D', and 'E' classes based on the quantum of the notified agricu,tural produce handled c therein annually. The assessment of the marketing- projects in Karnataka made by Experts of the Inter- national Development Association in connection with the World Bank aid for development of the markets has classified and graded the markets based on certain well accepted common-criteria. The cost-projections for various classes of markets are also made therein. The present proposals have obviously not kept any of them in view. One explanation was that the whole concept of marketing is expanding and these precipitious ? are not now apposite. However, the wide divergence in the plans for development lends some credence to the criticim of the petitioners that the e~timates were not taken seriously even by the Market-Committees or the C.M.O.

F But apart from such basic infrastructures which stand on a different footing, the benefit of utilitarian projects relatable to and developed from fee resources must be available to the payers of the fee for at least a G considerable part of the period covered by the financial estimates and projections. The logic of some of the Market-Committees in this behalf, if pushed to its logical or illogical conclusions, would mean that the present H generation of fee-payers would pay for services which would only be available to the next-generation. In our opinion levy of fee cannot be justified on such wholly prospective services''

l.T.C. V, KARNATAKA (Vordarajan. J.) 191

After considering in some detail the proposals and estimates on the assumption that they are correct the learned Judges of the High A Court have observed :

"The upshot of the above discussion is that though we are unable to hold, on the material placed before us by the petitioners, that the levy ought to fail for want of • quid pro quo however, having regard to the infirmities B noticed in the estimates and the financial projections of the proposed developmental works on the basis of which the enhancement is sought to be justified, we are also unable to say with any confidence and without reservutions that the enhancement offee, depending us it does on those estimates c is totally justified. Some time-bound directions to which ' we will refere presently for a second look at the estimates by the statutory authorities are required to be issued in this """ behalf. ~· Indeed, having regard to the wide range of the D •. -J; apparently inexplicable disproportions in the developmental projects of the Mrious Market-Committees both the /ear- ned Advocate-General and the Learned cou11se/ for the Market-Committees, stated that there was obvious scope-in our opinion an imperative need-for some rationalisation of the pattern of development of market-yards based upon and related to the relevant factors such as quantum and nature of agricultural produced handled by the markets; potentialities of development of the market in reasonably near future and the like. It is neither possible nor advisable to lay down exhaustively all the criteria that may become relevant to the task. However, the need for such an exercise to regulate the development to these market-yards on a scientific, rational and uniform basis was accepted by all the parties."

- A time-bound schedule has to be prescribed for the Chief Marketing Officer, as the authority under the 'Act', approving the budgets, to evolve and standardise broad G

and general norms, taking into account the observations made in the course of this order, both for infra-structural and developmental works and services, on as uniform a H basis as may reasonably be feasible, for the various markets depending upon their classification to be made

192 SUPREME COURT REPORTS (1985] SUPPL. S.C.il.

by the C.M.O on the basis of such criteria as he may deem relevant and also to evolve corresponding cost patterns of the projects with suitable inbuilt indicia for escalation of cost-structures, from time to time, propor- tional to the rise in the price of material. These norms shall operate as broad and general guide-lines for the development of regulated markets and shall be kept in view of the market-committees in planning developmental projects. Departure from these norms and standards shall, of course, be permissible on grounds of special requirements of individual regulated markets depending upon their specific individual problems and requirements. c At the time of sanction of the budgets of the Market- Committees the C.M.O. should scrutinise the budgets with reference to and applying the broad-norms and criteria evolved and adopted by him so that the programme and the projects of development for the next D 8 years are need based and are as far as may be, on a uniform and rational ba~is.

The learned Advocate-General and the learned counsel for the Market-Committees concede that this exercise is neceJsary and beneficial as indeed the matter involved an outlay of nearly 145 crores of rupees in the next 8 years on the regulated markets.

Accordingly, the C.M.O. shall within 4 months from now evolve and standardise these norms and specifications and circulate the same to the Market-Committees. Respondent· Market-Committees in categories ·c•, 'D' and 'E' in Para-80 supra will, within 3 months there· from, revise their proposals for development in accordance with these norms and specifications,departures from stand- G ard specification being permissible if the special conditions peculiar to the particular markets so require and compel. The C.M.O. will again scrutinise these revised proposals and their cost projections and if, upon such scrutiny, is of opinion that the present 2% market-fee of any Market· H Committee in the category 'C', 'D' and 'E' supra is unjustified, the C.M.O. will make appropriate orders under s. 150 of the Act directing the Market-Committee or Committees concerned to amend their bye-laws to

I.T.C, V. ){ARNATAKA (Vardarajan, J.) 193

effect an appropriate downward revision in the quantum of the fee. Wherever the C.M.O. is of the opinion, after A an examination of the proposals, that there Is no need to make a downward revision, he shall make a specific note in the behalf. These orders shall be made within a period of8 months from now." B This is the gist of the discussion of learned Judges of the High Court in regard to the above point No. 12 framed by them on the question whether enhancement of the market fees leviable under. S. 65 (2) of the Act from one per cent to two per cent brought about by the amendment of the bye-laws of the Market Committees is unsupportable in law and fails for want of correlation with the value c of services rendered to the payers of the fee. The learned Judges have stated at the end of the point in para 7 of their judgment that the discussion relating to the point is in paras 75 to 110 and that the finding is in para 111. Para Ill extraced above consists only of the direction given by the learned Judges of the High Court to the Chief Marketing Officer. The learned Judges have not expressed their D opinion one way or the other in para 111 as regards the justification for the enhancement of the market fees leviable on buyers under section 65 (2) of the Act from one per cent to two per cent by amendment of the bye-laws though earlier in para 107 they have observed that they E

"are unable to hold, on the material placed before u~by the petitioners that the levy ought to fail for want of quid pro quo; however, having regard to the infirmities noticed in the estimates and financial projections of the proposed developmental works on the basis of which the enhan<;ement is sought to be justified, we are also unable to say with any confidence and without reservations that the enhancement of the fee, depending as it does on those estimate is totaly justified. Some time bound directions to which we will refer presently, for a second look at the estimates of the statutory authorities are required in this behalf.''

and they have given the same in para 109 of their judgment. H Dealing with the provisions of the Cardamom Act, 1965 and the rules mad~ thereunder, in paras 34 to 38 of the judgment the

194 SUPREME COURT REPORTS (1985) SRPPL. S.C.~•

High Court has held that the provisions of the Act in so far as A marketing of cardamom is concerned, are repugnant to the provisions ...... of the Cardamom Act (Central Act 42 of 1965). But in paras 41 and 42 the High Court has held that the Tobacco Board Act, 1975 makes provision only in relation to Virginia tobacco and not all varities of tobacco and the Act is not repugnant to the provisions of the Tobacco Board Act and all that is necessary is for the Market B Committee to obtain auctioneer's licence under the provisions of the Tobacco Board Act. Proceeding on the basis that the Tobacco Board Act is in relation only to Virginia tobacco and not all varities of tobacco the High Court has observed that any intention of the "Superior Legislature" (meaning Parliament) to cover the whole c field and make a comprehensive law in regard to marketing of tobacco is not manifest in the Central enactment and that the two legislations can co·exist and operate cumulatively.

I have set out above the gist of the High Court's decisions on the points regarding which alone arguments were advanced before this Court in the Writ Petitions, Civil Appeals and Special Leave Petitions. They are :

(I) That the provisions of S. 65 (1) of the Act as substituted by the Amendment Act 17 of 1980 and also the validating S. 42 of that Amendment Act in so far as it seeks to validate the levy of market fee on sellers of notified agricultural produce during the period from 19.5.1975 to 28.9.1978 are unconstitutional and void;

F (2) That the Chief Marketing Officer shall within four months from the date of the judgment evolve and -- standardise the norms and specifications and circulate the same to the Market Committees is direction given by the High Court. This was done by the High Court as it was conceded by the learned Advocate General appearing for G the Market Committees that the exercise suggested by the High Court in para 109 of the judgment is •·necessary and beneficial as indeed that the matter involved an outlay of nearly 145 crores of rupees in the next 8 years on the regulated markets"; H (3) That the provisions of the Act are repugnant to the Cilrc;la:p:~om Act, 1965 and the Rules framed there..

I.T.C. V. E!ARNATAKA (Varaarajan, J.) 195

under but not the provisions of the Tobacco Board Act, 1975; and A

(4) That a writ of mandamus be issued to direct the State Government and the Market Committees to refund to the Writ petitioners who had approached the High Court and had the benefit of the issuance of writs of B mandamus for the refund of the sellers' market fees actually paid under S. 65 (l) in cases where the manda- mus issued had not been complied with by the respon- dents in the writ petitioners in view of the validating provision contained in S. 42 of the Amendment Act 17 of 1980 on such writ petitioners filing their claims in c writing before the Market Committees concerned, and in the second category of cases where the writ petitioners had not approached the High Court earlier their claims for refund of the market fee paid by them as sellers shall be confined to the market fees paid under S. 65 (1) within D a period of 3 years immediately preceding the presentation of the writ petitions, and the same procedure as in the case of the other class of writ petitioners shall be followed.

Mr. Soli J. Sorabjee appearing for most of the appellants and E the petitioners in the writ petitions and special leave petitions (namely traders) advanced arguments on all the above points. Mr. S.N. Kackar appearing for the appellants in Civil Appeals Nos. 1247 to 1474 of 1983 adopted the arguments of Mr. Sorabjee and supplemented it with his own. Mr. Bhatt appearing for the State advanced arguments in the State's appeals filed against the F High Court's decision invalidating S. 65 (I) as substituted by the Amendment Act 17 of 1980 and also S. 42 of that Amendment Act and the direction for the refund of the market fees collected under s. 65 (I) as substituted by that Amendment Act. Mr. A.K. Sen appearing for the Market Committees advanced argumets on the validity of the amendment of the bye-laws made for enhancement of the n;J.arket fees on buyers leviable under s. 65 (2) of the Act, while Mr. S.T. Desai, Dr. Y S. Chitale and late Mr. P.R. Mridul appear- ing for the Market Committees advanced arguments supporting the High Court's judgment that the provisions of the Act are not repu~nant to those of tbe Tobacco Board Act1 197$.

196 SUPRBMB COURT REPORTS (1985) SUPPL, S,C.ll.

The submissions of Mr. Sorabjee in short are these: A The item of expenses envisaged for the rural roads has gone with the striking down of s. 65 (l) and (3) of the Act and the omission of clause (3) of s. 65 from the Act by the Amendment Act 17 of 1980 from the date of its commencement as if it never existed on the statute book. The amount collected under that sub-section B will take care of the proposed expenditure envisaged in the estimates and projections for the improvement of the services in the regulated markets and therefore the enhancement of the market fee from one per cent two per cent of the price of the specified agricultural produce is invalid. The reduction of the enhanced levy from two per cent to c one per cent by the Circular No. SMD-268/RGN-83 dated 27.2.1984 issued pursuant to the State Government's decision shows that the State Government and the Market Committees prefer this course to the exercise suggested by the High Court to be completed within eight moths of the judgment and that there was no justification for the enhancement of the market fee from one per cent to two per cent by amendment of the bye·law relating to the levy of market fee under s. 65 (2) of the Act. The amendment of the bye-laws was not in accordance with the procedure laid down by s. 148 of the Act for making bye-laws and amendments thereto for want of previous approval of the Chief Marketing Officer and previous publication of the proposed amendment and hearing of the affect interests, and ss. 3. 5 (a) and 5 (b) of Ordinance 22 of 1981 promulgated when the hearing of the Writ Petitions in the High Court was in progress would not cure the defect. In the course of the arguments before the High Court it was specifically conceded that there was no comp· Iiance with the requirement of s. 148 in making the amendment of the bye-law for enhancement of the market fee from one per cent to two per cent. But on 17.12.1981 Karnataka Ordinance 22 of 1981 was promulgated, and ss. 3 and 5 (a) thereof stated :

"3. Amendment of section 148-ln section 148 of the principal Act, in sub-section (1), the words "after previous publication in the prescribed manner", shall be and shall be deemed always to have been omitted.

5 (a) aU acts, proceedings or things done or action taken by the State Government or by the Market Committees or by any other authority in connection with the levy or collection of p}ar~et f~e shall for a.l1 l'urposes

t.t.C. Y, KARNATAil.A (Vardarajan, J.) 197 be deemed to be and to have always been done or taken in accordance with law,. A and s. 5 (b) stated that:

"no suit or other proceedings shall be instituted, maintained or continued in any court or before any B authority for refund of any such market fee or for questioning the validity of any action or thing taken or done under the said bye-laws and no court shall recognise or enforce any decree or order declaring the said bye-laws or any action or thing taken or done thereunder as invalid on the ground that the bye-laws were made with- c out giving reasonable opportunity to persons likely to be affected thereby to file their objections and suggestions, or otherwise without following the procedure prescribed."

Ss. 3, 5 (a) and 5 (b) have been replaced by ss. 12 and 14 of D the Karnataka Agricultural Produce Marketing (Regulation) (Amendment) Act, 1982. The amendment of the bye-law made for enhancement of the market fee from one per cent to two per cent is not in accordance with law. The High Court has practically held so as can be seen from the direction given by it in para 61 of the judg- E ment as to what should be done before a market committee amends its bye-law to make an upward revision of the rate of market fee in the light of the submission made by the learned Advocate General appearing for the State and the learned Counsel appearing for the Market Committees that it will be eminently desirable that the Market Committees should adopt some reasonable -procedure in that behalf and that the amendment of s. 148 (1) of the Act made by Ordinance 22 of 1981 was only intended to cure the defect in the making of the impugned amendment of the bye· law to avoid great public inconvenience which will result from the invalidation of the bye-law and that there was no intention to make the deletion a permanent feature, and any reasonable procedure which may be suggested by the High Court would be adopted in practice even if there was no such legal compulsion. There were no resolutions, etimates or projections of the market Committees for making improvements to the regulated markets immediately or within the near future before the bye-law was amended for enhancing the market fee from one per cent to two per cent under the directions of

198 SUPREME COURT REPORTS [1985) SUPPL. S.C.R.

the Chief Marketing Officer, and Exs. R-1 to R-111 and other state- A ments referred to in the High Court's judgment were prepared long after the date of filing of the Writ Petitions in the High Court and only pursuant to the directions given by the High Court for that purpose on 30.11.1981. The High Court was not satisfied even with those estimates, projections and statements and has therefore issued 8 the directions contained in paras 109 and 111 of the judgment and those directions have been given in respect of all the Market Committees and not in respect of only 8 or 4 Market Committees in categories 'C', 'D' and 'E' ~s contended by Mr. A.K. Sen. Enhancement of the market fee from one per cent to two per cent is not justified. The High Court erred in holding that the Tobacco c Board Act, 1975 covers only Virginia tobacco and is not repugnant to the provisions of the Act, ignoring the provisions of ss. 8 (2) (a), 8 (3) and 12 of the Tobacco Board Act and r. 35 of the Rules made under the provisions of that Act. Though reference is made in s. 8 (2) (a) to (g) of that Act to Virginia tobacco c1ause (h) relates to "promoting the gradation of tobacco at the level of growers", clause D (I) relates to "sponsoring, assisting, co-ordinating or encouraging scientific, technological and economic research for the promotion of tobacco industry", and s." (3) says that :

"without prejudice to the genel'ality of the provisions E of sub-section (1) and subject to priority being given to matters specified in sub-section (2), the measures referred to in sub-section (1) may also provide in relation to tobacco, other than Virginia tobacco, for all or any of the matters specified in clauses (c) to (g) of sub-section F (2) and for this purpose any reference in those clauses to Virginia tobacco shall be constured as including a reference to tobacco other than Virginia tobacco".

S. 12 of the Act says that : G "no person shall export tobacco or any tobacco products or function as a packer, auctioneer of, or dealer in, tobacco unless he registers himself with the Board in accordane with the rules made under this Act."

H R. 35 of the Tobacco Board Rules, 1976 relates to registration as exporter or packer or auctioneer of, or dealer in tobacco.

i.i'.c. Y. DRNATAKA (Jiartlarojan, j.) 199

Clauses (c) to (g) of s. 8 (2) read thus : A "(c) maiut-=nance and improvement of existing markets, and development of new markets outside India for Indian Virginia tobacco and its products and devising of marketing strategy in consonance with demand for the commodity outside India, including group marketing B under limited brand names; - ·- (cc) establishment by the Board of auction plat~ forms, with the previous approval of the' Central Government, for the sale of Virginia tobacco by registered growers or curers, and functioning of the Board as an c auctioneer at auction platforms established by or registered with it subject to such conditions as may be 5pecified by the Central Government;

(d)· recommending to Central Government the minimum prices which may be fixed far purposes of D Virginia tobacco with a view to avoiding unhealthy · competition amongst the exporters;

(e) regulating in other respects Virginia tobacco marketing in India and export of virginia tobacco having due regard to the interests of growers, manufacturers and the nation; ·'

(f) propagating information useful to the growers, dealers and exporters (including packers) of Virginia · tobacco and manufacturers of Virginia tobacco products and others concerned with Virginia tobacco and products thereof; and

(g) purchasing Virginia tobacco from growers when the same is considered necessary or expedient for protect- ing the·interests of the growers and disposal of the same · G iii India or abroad as and when considered appropri~te'"; :

·These clauses (c) to (g) would apply to tobacco also in view of I. a (3) of the Tobacco Board Act. H Mr.· Kacker adopted the arguments. of Mr. Sorabjee and. / supplemented it with his own. His submissions are these ;

2oo SUPREME COURT REPORTS (198SJ SUPPL. S.C.R.

Before sub~section (3) of s. 65 was struck down in A Rajasekhariah's case (supra) on 28.9.1978 several crores of rupees had been collected under s. 65 (1) from 19.5.1975 when it was amen~ ded by Amendment Act 24 of 1975 to 28.9.1978 and that that amount must be sufficient to meet the estimates and projections envisaged in Exs. R-1 to R-111 and other statements prepare.d and produced by the Market Committees pursuant to the High Court's B directions issued on 30.11.198 I having regard to the fact that sub- section (3) of s. 65 under which that amount had to be credited to the Roads and Buildings Fund has been struck down in Rajasekhariah's case (supra) and that sub-section has been omitted from the Act as if it never existed in it. The Market Committees had c surplus fund with them in 1979 and they bad no scheme for effecting improvements to the regulated markets when they enhanced the market fee from one per cent to two per cent under sub-section (2) of s. 65 of the Act by amending the bye-law except the statements produced in Vaman Roo's case (supra) in 1974. The statements Exs. R-1 to R~ 111 and other statements produced in the High Court D were not in e:\istence when the Writ Petitions were presented in the High Court. The market fee has been since reduced to one per cent with effect from 1.4.1984. The High• Court should not have given an opportunity to the Market Committees to fill up the lacuna by preparing and producing Exs. R-1 to R·lll and the other statements E when the Writ Petitions were being heard in the High Court.

On the other hand, Mr. A.K. Sen submitted his arguments which may be summarised thus :

As many as 4298 Writ Petitions were filed in respect of 93 F Varket Committees. Clear quid pro quo was established in respect of 73 Market Committees falling in categories 'A', 'B', 'C' and 'D' for enhancement of the market fee from one per cent to two per cent and no further enquiry was needed on the principles laid down in Kewal Krishan Pari's case (supra). The High Court found that reconsideration of the financial projections by the Market Com- mittees was necessary only in regard to 8 out of the remaining 20 Market Committees, and it was entitled to give the directions which had been given to the Chief Marketing Officer to re-examine them. There is no repugnancy between the Act and the Tobacco Board Act, 1975.

Mr. Bhatt submitted that after s. 65 (3) has been omitted from the Act as if it never existed.in it there was no question of striking

i.T.C. V. KARNATAKA (J!ardara}an, J.) 201

down s. 65 (I) as substituted by the Amendment k t 17 of J980, that s. 42 of that Amendment Act has validated the levy and there is no A question of the refund of the market fee collected under s. 65 (1} as the fee collected under the Act has to be used for the purposes envisaged by the Act and than in any event the refund could be only to the Market Committees and not to the traders. B It is not necessary for me to refer to the arguments of Mr. S.T. Desai, Dr. Y.S. Chitale and late Mr. P.R. Mridul regarding the question of repugnancy of the provisions of the Act with those of the Tobacco Board Act, 1975 as my learned brother Murtaza Fazal Ali, J. has dealt with that question in his judgment and I agree with him in that regard. I wish to add that the learned Judges of c the High Court have disposed of this matter of repugnancy between the Act and the Tobacco Board Act, 1975 in two short paras 41 and 42 without much of a discussion under the belief that the Tobacco Board Act, 1975 concerns only Virginia tobacco and not other vari· ties of tobacco. They have held after some discussion in paras 34 D and 38 of their judgment that the Act is repugnant to the Cardamom Act which is almost similar to the Tobacco Board Act in its scope and operation. The consequence is that cardamom has to be taken out of the schedule to the Act. No appeal has been filed against that part of the High Court's judgment. The Act relates to markets falling under entry 28 of List II (markets and fairs) while the Toba- E cco Board Act falls under entry 52 of List I (industries) of the Seventh Schedule to the Constitution. Industries would certainly include marketing of the products. The Act would therefore be

- repugnant to the Tobacco Board Act in view of Art. 254 (I) of the Constitution. The attention of the learned Judges does not appear to have been focussed on s. 8 (3) and s. 12 of the Tobacco Board Act extracted above and r. 35 of the Rules framed under that Act, a F

perusal of which would show that the Tobacco Board Act covers tobacco of all varities in regard to matters required to be done by the Market Committees under the provisions of the Act. The High Court has thus erred in holding that the provisions of the Act are G not repugnant to the Tobacco Board Act, 1975 and that they can co-exist and operate cumulatively.

In the course of arguments both sides invited this Court's H attention to a number of decisions. I think it is sufficient if reference is made to only five of them and also to the decision of this Court in Civil Appelals Nos. 4500-4501 of 1984 (Mjs. Amarnath Om Pradesh

202 SUPR2ME COUllT REPOllTS (1985) SUPPt. S.C.tl.

& Others v. State of Punjab and Food Corporation of India v. State of A Punjab) disposed of on 19.11.1984. The first of those decisions is of Mathew, Bhagwati and Untwalia, JJ. in State of Maharashtra & Ors. v. The Salvation Army,\1J In that decision Mathew, J, speaking for the Bench observed :

8 "We do not think any such levy for investment or diversion of the surplus would be consistant with the principle behind the levy of fee. While we do not think it necessary that all available surplus in a year or for some years should always go in for redu ing the rate of contribution for the subsequent year or years, we are of c the view that the organisation cannot be allowed to accumulate an unreasonable amount, unreasonable in the sense that the amount might not be reasonably required for the proper and afficient working of the organisation in a foreseeable future. No hard and fast rule applicable in all contingencies can be formulated. The Court will have to draw a line somewhere when surplus must be the taken into consideration for reducing the levy of con- tribution. In drawing the line, the Court will have to look into the nature ot the organisation, the potentiality for its growth, the multiplication in its work consequent on its expansion for rendering the services visualised by the Act and the necessity for capital expenditure in the near future, as also the amount of levy collected or expected to be collected in a year. As already stated the

F Division Bench was of the view that the stage when the surplus must be taken into account to determine the character of the levy was reached by the end of March - 31, 1958 when the available surplus came to Rs. 30. 44, 541/ --. The Division Bench was alive to the desirability of locating the head office and regional offices in buildings to be owned by the organisation and incurring of capital expenditure in that behalf. The Charity Organisation has purchased a building worth about Rs. 30 lakhs. Even according to the Division Bench, investment of the surplus in buildings for locating the head and regional offices cannot be said to be diversion of the surplus for purposes alien to the object of the organisation, namely, the better administration of the trusts." (1) (1975}3 S.C.R. 47S.

t.'r.C. V. KARNATAKA (VarJarajan, /.)

This decision indicates what should be borne in mind when there is a complaint that the market fee already levied is excessive or before any further increase in the levy is made.

The second decision is that of a Bench of five learned Judges of this Court !Chandrachud, C.J. and Bhagwati, Untwalia, Murtaza Fazal Ali and Pathak, JJ.) in Kewal Krishan Puri v. State of Punjab B (supra) where the purpose for which Marketing Development Fund and Market Committee Funds levied and collected under the Punjab Agricultural Produce Markets Act, 1961 and justification for enhancement of the rate of market fee from two per cent to three per cent came up for consideration. This appears to be a leading decision on this subject. It has been relied upon not only by C Mr. Sorabjee and Mr. Kacker but also by Mr A.K. Sen. In that case, Untwalia, J. speaking for the Bench observed thus :

"Such a fee cannot be utilised for the purpose of rendering all sorts of facilities and services for the benefit D of agriculturists throughout the area. It may be very necessary to render such services to the agriculturists; rather, they must be rendered. But the laudable end in itself cannot justify the means to achieve that end if the means have got no sanction of the law ............ . E From a conspectus of the various authorities of this Court we deduce the following principles for satisfying

- the tests for a valid levy of market fees on the agricultural produce bought or sold by licensees in a notified market area: F

(1} That the amount of fee realised 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, G

(2) That the services rendered to the licensees must be in relation to the transaction of purchase or sale of the agricultural produce. H (3) That while rendering services in the marketing area foil the purposes of facilitating the transactions of

204 SUP!WMB COURT IUlPORfS (1985] SUPPL. S.C.l,

purchase and sale with a view to achieve the objects A of the marketing legislation it is not necessary to confer the whole of the benefiit on the licensees but some special benefits must be conferred on them which have a direct, close and reasonable correlation between the licensees and the transactions. ll (4) That while conferring some special benefits on the licensees it is permissible to render such service in the market which may be in the general interest of all concerned with the transactions taking place in the market. c (5) That spending the amount of market fees for the purpose of augmenting the agricultural produce, its facility of transport in villages and to provide other facilities meant mainly or exclusively for the benefit of the agriculturists is not permissible on the ground [) that such services in the long run go to increase the volume of transactions in the market ultimately benefiting the traders also. Such an indirect and remote benefit to the traders is in no sense a special benefit to them. E (6) That the element of quid pro quo may not be possible, or even necessary, to be established with arithmetical exactitude but even broadly and

F reasonably it must be established by the authorities who charge the fees that the amount is being spent for rendering services to those on whom falls the - burden of the fee.

(7) At least a good and substantial portion of the amount collected on account of fees, ma be in the neighbourhood of two-thirds or three-fourths, must shown with reasonable certainty as being spent for rendering services of the kind mentioned above_ •.. . .. .. . . . . . .. . ... .. . The benefit of market fee, there- fore, has to be correlated with the transactions taking place at the specified place in the market area and not in the whole of the area.

I.T.C. v. KARNATAKA (Vardarajan, J.) 205

A Supposing a market has been established consisting of principal market yard or sub-market yards at a particular place where there is no facility for the carts or the trucks and other vehicles to go, then approach roads, and if necessary even culverts and bridges may be const- ructed, or repaired out of the Market Committee Fund. B Such an expenditure within the limited limit will be with the object of facilitating the taking place of the trans- actions of purchase and sale in the market and will confer some special benefits to the traders apart from a share of the benefit going to the agriculturists who are not required to share the burden of the market fee. But as we have pointed out above, if one were to give a very wide meaning to this phrase of construction and repair of approach roads, culverts and bridges to say that such construction can be permitted anywhere in the market area for the facility of the agriculturists which ultimately will benefit the traders also, then the whole concept of correlation of fee and its character of having an element of quid pro quo will dwindle down and become an empty formality. E

If many of the purposes mentioned in the Act, as we have shown above, are outside the ambit of the service element and fa]] within the realm of the governmental functions, then it is plain tbat to say by generalisation that the fee money can be spent for the purposes of objects of the Act is not quite correct.

The High Court points out that the money cannot be spent in construction of governmental activities for providing main roads in the State. How, then, the Market Committees can be made to contribute a very big chunk of their market fee income in the construction of link roads through all villages ? To put the matter logically, if a link road is to be constructed from a village f9 the main road for enabling an agriculturist to trans.-

206 SUPREME COURT REPORTS (1985] SUPPL. S.C.R.

port his produce up the main road then the Market A Committee should be under an obligation to construct or .. at least to maintain the main road also in order to enable that agriculturist to reach the market which may be at a distance of 20 miles from the link road. It is plain that construction of such link roads is as much a part of the governmental activity as that of the main roads. 8

The impost must be correlated with the service to be rendered to the payers of the fees in the sense and to the c extent we have pointed out above. Again the High Court fell into an error in paragraph 15 of the judgment when, while upholding the construction and repair of approach roads, culverts and bridges in the larger sense of the term, it said :

D 'Ifthe approach roads, culverts or bridges are in such a bad shape that they would become hinderance in the mobility of the produce from one part of the notified market area to the principal market yard, then the worst sufferor would be the grower for whose benefit the Act bas been enacted.' E

It may be as was submitted before us that it is not imperative either for the Market Committees or the Board to prepare balance-sheets because their accounts are audited by Government auditors but for the purpose of raising the market fee any further, the balance-sheet will give a true picture of the position along with the budgets and estimates. Then, and then only there may be a legal justification for raising the rate of the market fee further to a reasonable limit."

The third decision is of Chinnappa Reddy, A.P. Sen and Baharul Islam, JJ, in Southern Pharmaceuticals and Chemicals v. State of Kerala & Ors. etc.(1) where Sen, J. speaking for the Bench H has observed at page 542 thus :

(1) !1982] 1 S.C.R. 519,

I.T.C. V. KARNATAKA (Vardarajan, J.) 207

"It is also increasingly realised that the element of quid pro quo stricto senso is not always a sine qua non of A a fee. It is needless to stress that the element of quid pro quo is not necessarily absent in every tax.''

It has to be noticed that the observation was made by the learned Judge in a case in which the appellants who were manu- facturers of medicinal and toilet preparations containing alcohol B challenged the constitutional validity of certain provisions of the Kerala Abkari Act, 1967. In the earlier part of the judgment Sen, J. has observed :

"The distinction between a 'tax' and 'fee' is well c settled. The question came up for consideration for the first time in this Court in the Commissioner, H.R.E. Madras v. Lakshmindra Thirtha Swamiar of Shirur Mutt (1954 SCR 1005). Therein, the Court speaking through Mukherjea, J. quoted with approval the definition of 'tax' given by Latham, C.J. in Matthews v. Chickory D Marketing Board (60 CLR 263). In that case the learned Chief Justice observed:

'A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered.'

Coming now to fees, a fee is generally defined to be a charge for a special service rendered to individuals by some Governmental agency.

If, as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolutely necessary that the levy of fees should on the face of the legislative provision, be correlated to the expenses incurred by Government in rendering the services."

The same view was taken in Mahant Sri Jagannath v. State of Orissa(l) and Rathi/al Param Chand Gandhi v. State of Bombay.(2) H (1) [1954] S.C.R. 1046. (2) p954J S.C.C. I0$.5.

208 SUPREME COURT RP.PORTS (1985) SUPPL, S.C.R.

Therefore, the aforesaid observation of ·sen, J. that it is now A increasingly realised that the element of quid pro quo stricto sensa is not always a sine qua non of a fee and that it is needless to stress that the element of quid pro quo is not necessarily absent in very tax cannot be made applicable to the facts of the present cases which relate to market fees where the element of quid pro quo is absolutely 8 necessary.

The fourth decision is A.P. Sen, Venkataramiah and R.B Misra. JJ, in Sreenivasa General Traders & Ors. v. State of Andhra Pradesh(!) where Sen, J. speaking for the Bench has observed:

c ''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 service. It is now increasingly realised 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......... .. .... It is also increasingly realised that the element of quid pro quo in the strict sense is not always a sine qua non for a fee. It is needless to stress that the element of quid pro quo is not necessarily absent in every tax. ••

The above decision arose out of proceedings taken under the G Andhra Pradesh (Agricultural Produce and Livestock) Market Act,

1966. With respect, it is not possible to agree with the above observation that there is no generic difference between a tax and a fee and the element of quid pro quo in the stricto senso is not always a sine qua non for a fee in view of my learned brother Sen's appro- H val in Southern Pharmaceutical and Chemical's case (supra) of the

(1 l [1983] 3 S.C.R. 843.

I.T.C. Jl. KARNATAKA (Vatdarajan, J.) 209

distinction pointed out by Latham, C.J. in Matthews v. Chickory Marketing Board (supra) between a tax and fee and that it is A absolutely necessary that levy of fee should on the face of the legis- lative provisions be correlated to the expenses incurred in rendering services and the learned Judge's observation in that decision that the same view was reiterated by this Court in Mahant Sri Jogannath Ramanuj Das's case (supra), Rathi/at Param Chand Gandhi's case B (supra) and also in view of the decision of the larger Bench of five Judges of this Court in Kewal Krishan Puri's case (supra) that quid pro quo is a necessary element of the market fee.

The fifth decision is of Desai and Chinnappa Reddy, JJ. in Municipal Corporation of Delhi v. Mohd. Yasin( 1) where my learned c brother Chinnppa Reddy~ J. speaking for the Bench has observed:

"Though a fee must have relation to the services rendered or the advantages conferred, such relation need not be direct, a mere casual relation is enough," D That was a case where the Delhi Municiple Corporation purported to enhance the fee for slaughtering animals in the slaughter houses from 25 paise to one .rupee per animal in the case of sheep, goats and pigs and from one rupee to eight rupees per animal in the case of buffaloes. With respect, it is not possible to E accept this view having regard to the decision of a large Bench of this Court in Kewal Krishan Puri's case (supra) which is relied upon by both sides in these cases as stated above.

The last of the decisions to be mentioned is of Chinnappa F Reddy, A.P. Sen and VenkP.taramiah, JJ. in Civil Appeal Nos. 4500 4501 of 1984-M/s Amarnatn Om Prukash & Ors. v. State of Punjab and Food Corporation of India v. State of Punjab (supra) disposed of on 19.11-1984, That decision which relates to what bad happened under Punjab Agricultural Produce Market Act is referred to in the judgment of my learned brother Sabyasachi G Mukhrji, J. in his judgment in these matters. In that case my learned brother Chinnappa Reddy, J. speaking for the Bench has observed that it is of fundamental importance that there shoud be a net work of roadways if effective aid is to be given to farmers to transport and market their produce. No execption could be taken to this H

(1) [I983J 3 S.C.R. 229,

210 SUPREME COURT REPORTS (1985) SUPPL. S.C.R.

observation. In Kewal Krishan Puri's case (supra) while the construe· A tion of link roads has been welcomed by the learned Judges, it has been observed: .... "Uplift of villages and helping the agriculturists by all means is the duty and the obligation of the State no 8 doubt and it has to do it by incurring expenses out of the public exchequer consisting of the income from various kinds of taxes etc."

Referring to the observations of A.P. Sen. J. in Sreenivasa General c Traders's case (supra) Chinnappa Reddy, J. has observed in his judgment thus :

"He also draw attention to the increasing realisation that the element of quid pro quo in the strict sense was not always a sine que non for fee. Nor was the element of quid pro quo necessarily absent in every tax. He further pointed out that an insistence upon a good and substantial portion of an amount collected on account of fee_ say in the neighbourhood of two-thirds or three·fourths, being shown with reasonable certainty as having been spent for rendering services in the market to t.he payer of the fee could not be a rule of universal application, and that it was a rule which had necessarily to be confined to the special facts of Kewal Krishan Puri s case (supra). Other- wise, it would affec~ the validity of marketing legislations undertaken throughout the country during the past half a cuntery. We agree with tne view of Sen, J. that the observations extracted by him from Kewal Krishan Puri'~ case were not really necessary for that case and we also agree with the clarification of the observation made by Sen, 1. G With respect, I am not able to see how an why the observa- tions made in Kewal Krishan Puri's crse (supra) have to be confined to the special facts of that case. Kewal Krishan Puri's case arose out of proceedings taken under the Punjab Agricultural Produce H Markets Act, 1961 which is an Act for the better regulation of the purchase, sale, storage and processing of agricultural produce and for the establishment of markets for agricultural produce in that ~~at~. The objects of that Act and the Act with which we are

I.T,C. Jl, KARNATAKA ('Vardarajan, J.) 211

concerned in these cases are almost the same. The maximum rate of market fee whi:lh could be levied by the various market commi· A ttees under s. 23 of the Punjab Act was fifty paise for every hundred rupees. The fee was raised from time to time. A number of writ petitions were filed in the High Court challenging the power of the Board to increase the levy. That is what has happend in these cases arising under the Act which relates to Karnataka State. The B question whether quid pro quo was necessary and to what extent and what should be done by the Market Committees before the fee could be raised fell for considration in that case as in these cases. In Sreenivasa General Traders' case (supra) which arose under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 the market fee which was 25 paise per hundred rupees was raised to 50 paise in 1972 and eventually to one rupee for every hundred rupees. The contention was that increase in the rate of market from 50 paise to one rupee was illegal on the ground that there was no correlation between the increase and the services rendred. That is exactly the position in the present case where the increase was from one per cent to two per cent of the price paid by the buyers. Therefore, with respect I an unable to see how and why what bas been decided in Kewal Krishan Puri's case (supra) should be confind to the facts of that case alone. Again with respect, I consider myself bound by the decision in Kewal Krishan Puri's case and that even the Bench of which I am one of three is bound by that decision having regard to the principles governing precedents and the necessity to avoid confusion in the minds of the High Courts and Subordinate Courts as regards the correct view to be followed by them. Fortunately, in these cases, as stated above, both sides relied upon the decision in Kewal Krishan Puri's case (supra) which inter alia laid down of following principles :

l. That the amount of fee realised must be earmarked for rendering services to the licensees in the notified market area and a good aud substantial portion of it must be shown to be expended for this purpose; G

2. That the element of quid pro quo may not be possible or even necessary to be established with arithmetical exactitude; H

3. That at least a good and substantial portion of the amount collected on account of fees, may be in the nei~hbourhood of two-thirds or three-fourths, must

212 SUPREME COURT RBPORTS ll985] SUPPL. S.C.R.

be shown with reasonable certainty as being spent for rendering services of the kind mentioned in the judgment; and

4. That if the market fee is sought to be raised proper budgets, estimates and balance·sheets showing the balance of the money in hand and in deposit, the estimaated income nd expenditure etc. should be carefully prepared.

It may be that it is not imperatiye either for the Market Committee or the Board (Chief Marketing Officer in the present cases) c to prepare balance-sheets becaue their account are audited by Government auditors for the purpose of · raising market fee any further. The balance-sheet will given a true picture of the position also with the budgets and estimates and then and only then there may be legal justification for raising the market fee to a reasonable extent. On drawing the correct balance-sheets and preparing D correct estimates and budgets the authorities will be able to know the correct position to decide reasonably as to what extent the raising of the market fee can be justified taking an over~all picture of the matter.

E It may be noticed that even the High Court has given similar directions to the Market Committees and the Chief Marketing Officer to see whether there is justification for increasing the market fee from one per cent to two per cent on the invitation of the learned Advocate General appearihg for the State and the learned Consel appearing for the Market Committee as stated above. F Now that I have set out the facts and the decision of the High Court to the extent necessary and the arguments of the learned counsel for the parties and the lay bearing on the questions involved as It understand the same. I proceed to record my findings. G The principles of law laid down by the Bench of five learned Judges of this Court in Kewal Krishan Puri's case (supra) so long as they have not been dissented from, varied or set aside by a larger Bench are binding, with respect, not only on smaller Benches of this H Court but also undoubtedly on the High Courts and other Subordi- nate Courts and parties similarly placed. I have already pointed out that the facts and the points which arose for consideration in

1.1\c. v. KARNATAli!A (Vardarajan, i.)

Kewal Krishan Puri's case (supra), ~sreenivasa General Traders' case (supra) and the present cases are broadly similar. All ' these cases A relate to market fees and the enhancement thereof. I have set out the seven points laid down by this Court in Kewal Krishan Puri's case (supra) in the earlier part of my judgment and four of those points which have a direct bearing on these ca~es in the preceding paras. It is not necessary to establish the element of quid pro quo in regard 8 to market fees with arithmetical exactitude, but an amount' of fee must be earmarked for rendering services to the buyers in the notified market area and a good and substantial portion of it must be shown to be expended for those purposes. The good and substantial portion earmaked for rendering services may be in the neighbourhood of two-thirds or three-fourths and it must be shown with reasonable c certainly as being spent for rendering services of the kind mentioned in Kewal Krishan Puri's case (supra). If the market fee is sought to be raised, proper budgets, estimates, balance-sheets showing the money in hand and in deposit, expenditure on projects to be under- taken etc. should be carefully prepared. Then and only then there may be a legal justification for raising the rate of the market fee D further to a reasonable extent, for only then the authorities will be able to know the correct position and to decide reasonably as to what extent the raising of the market fee can be justified, taking an over-all view of the matter. But in the present cases, none of the;>s requirements was satisfied before the market fee was raised The E Market C.-:>mmittees bad no such materml before them before they raised the rate of the market fee from one per cent uniformly to two per cent by amendment of the bye-law on the mere direction of the Chief Marketing Officer. These facts are not in dispute. Therefore, with respect, the High Court erred in Jaw in not applying the principle of law laid down by this Court in Kewal Krishan Purl's case F (s~pra) and failing to strike down the enhancement of the market fee from one per cent to two per cent on account of the failure to comply with the principles laid down in Kewal Krishan Puri's case (snpra). The State Government and the Market Committees appear rightly to have retraced their steps by reducing the rate of the market G :)je from two per cent to one per cent by the Circular No. SMD-268/ RGN-83 dated 27.2 1984 with effect from 1.4.1984. The learned Judges of the High Court themselves do not appear to have been quite happy about how the enchancement of the market fee had been made. for they have observed in para 61 of their judgment, as mentioned above, that the question might become a live issue if the Market Committees were to amend the bye·laws made under s.l48

214 SUPREME COURT REPORTS [1983) SUPPL. S.C.l.

read with s.65(2) of the Act in future without giving an opportunity to the affected interests of being heard in regard to the proposed enhancement. Even the learned Advocate General appearing for the State and the learned Counsel appearing for the Market Committees had stated before the learned Judges of the High Court that it would be eminently desirable that the Market Committees should adopt 8 some reasonable procedure in that behalf and that the amendment to s.l48 ofthe Act made by Ordinance 22 of 1981 dispensing with the need for prior publication and hearing of the affected interests was only intended to cure the defect in making the impugned amend- ment to the bye-law for avoiding 'great public inconvenience which may result from the invalidation of the bye-law and there was no c intention to make the deletion, brought about by the Ordinance, a permanent feature'. They submitted before the learned Judges of the High Court that any reasonable procedure which may be suggested by them would be adopted in future 'even if there is no such legal . compulsion'. In these circumstances, the High Court has observed : ''It appears to us that before the Market Committees D propose to amend a bye-law to make an upward revision of the rate of fee, in future, the Market Committees must first follow the direc· tions of the Supreme Court (given) in para 55 in Kewal Krishan Puri's case". The learned Judges have thereafter given the directions contained in the judgment in that case as mentioned above. With E respect, I am unable to see how the directions given by this Court in Kewal Krishan Puri' s case (supra) should be followed only in future and how there is no compulsion in law for the Market Com- mittees to follow the directions already given by this Court in that case and how this could be dispensed with or ignored for the pur- pose of the impugned enhancement. With respect I think that the F High Court has erred in not applying the principles of law laid down by this Court in Kewal Krishan Puri's case (supra) and in observing that they should be applied only in future. In these circumstances, I hold that the enhancement of the market fee from one per cent to ~wo per cent by amendment of the bye·law under the directions of G the Chief Marketing Officer without complying with the principles of law down in Kewal Krishan Puri's case (supra) is bad in law. The same would be the position even if the amendment to the bye-law made in accordance with s. 148 of the Act as it is stood before the amendment by the Ordinance 22 of 1981. H Point No. 12 in para 7 of the High Court's judgment relating to the question of enhancement of the market fee reads thus :

i.T.C. V. K.ARNATAKA (Vardarajan, j,) 2i5

"Whether the enhancement of market fee leviable under s. 65(2) of the Act from one per cent to two per A cent brought about by the amendment of the bye-law res- ponnents-Market-Committees is unsupportable in law and fails fo want of correlation with the value of services rendered to the payers of the fee." B The burden cast on the appellants is to prove the negative. The appellant are bound to succeed in the light of the decision in Kewal Krishan Puri' s case (supra} if they P• ove that the enhancement of the market fee was made without complying with the law laid down in that case. That has been established by the appellant without any manner of doubt whatsoever. c As rightly contended by Mr. Kacker the High Court has erred in giving the direction dated 30.11.1981 to the Chief Marketing Officer for furnishing a comprehensive statement in respect of each of the Market Committees in a tabular form as indicated in para 69 D of the impugned judgment, set out in the earlier part of this judgment. The High Court has, thus, given an opportunity to the Market Committees to fill up the lacuna since the materials supplied thereafter by way of Exs. R-1 to R-III and simi1ar statements perused by the High Court were not available either on the date of the amendment of the bye-law enhancing the rate of the market fee from E one per cent to two per cent or even on the dates on which the Writ Petitions were :filed in the High Court. The High Court has erred in giving the direction and granting an opportunity to the Market Committees to fill up the lacuna. I do not agree with Mr. A.K. Sen that the High Court was entitled to do so. F The High Court has found even Exs. R-1 to R-Ill and the other statements prepared and furnished pursu~nt to its order dated 30.11.1981 not sufficient to sustain the enhancement of the fee. This is clear from what the High Court has stated in paras 107 to lll of its judgment which is extracted for ready reference : G

"101. The upshot of the above discussion is that though we are unable to hold, on the material placed before us by the petitioners, that the levy ought_ to fail for H want of quid pro quo, howe••er having regard to the irtfirmi· tiE:s noticed in the estimates and financial projections of the proposed developmental works on the basis of which the

. SUPREME COURT REPORTS (i98)) SUPPL. 5.~.~•

'enhancement is sought to be justified, we are also unable to A ·say with any confidenee and without reservations that the enhancement of fee depending as it does on those estimates iS totally justified. Some time-bound directions to which we will refer presently for a second [Qok at the estimates by the statutory authorities are required to be ·issued in ·B this behalf.

108. Indeed, having regard to the wide range of the · apparently inexplicable disproportions in the developmental projects of the various Market-Committees both the learned Advocate-General arid the learned Counsel for the Market- c Committees, stated that there was ·obvious scope-in our ,opinion an imperative need-for some rationalisation of: ./ the pattern of development of market-yards based upon and related to the relevant factors such as quantum and nature of agri~ultural produce handled by the markets; potentialities of development of the market in the reason• ably near future and the like. Ii is neither possible nor advisable to lay down exhaustively all the criteria that · may become relevant to the task. However the need for ' such exercise to regulate the development to these market· yards on scientific rational and uniform basis was accepted hj all the parties. /

109. A time-bound schedule has to be prescribed . forth~ Chief Marketing Officer, as the authority under. ., I 'the 'Act, approving the budgets, to evolve and standardise ·F broad and general norms, taking into account the observations made in the course of this order, both for ~. infra-structural and developmental works and services, on ·. - as uniform a basis as may reasonably be feasible, for ' ·the various markets depending upon their classifiCation tobe made by the C.M.O. on the basis of such criteria G ·:- he may deem relevimt and also to evolve c-orresponding· i . cost patterns of the . projects f with suitable inbuilt indicia -for ·escalation ·of cost structures, from time to time, proportional to the rise -in . the price of material.· These norms · shall operate as broad · and H·--- general guide-lines for the development of regulated - markets and shall be kept in view of the market· ~

- committees" . iri .. planning developmental . .projects. I

t.f.c. Y. KARNATAKA CVardarajan, J.) 211 Departure from these norms and standards shall, of course, be permissibli on grounds of special requirements A of individual regulated markets depending upon their specific individual problems and requirements. At the time of sanction of the budgets of the Market-Committees the C.M.O. should scrutinise the budgets with reference to and applying thebroad-norms and criteria evolved and 8 adopted by him so that the programme and the projects of development for next 8 years are need based and are as far as may be, on a uniform and rational basis.

110. The learned Advocate-General and the learned counsel for the Market Committees concede that this exercise is necessary and beneficial as ;ndeed the matter involved an outlay of nearly 145 crores of rupees in the next 8 years on the regulated markets.

111. Accordingly, the C.M.O. shall wHhin 4 months from now evolve and standardise these norms and specifications and circulate the same to the Market- Committees. Respondent- Market-Committees in categories 'C', 'D' and 'E' in Para-SO supra will, within 3 months therefrom, re~·ise their proposals for development in accordance with these norms and specifications, departutres from standard speciucation being permissible if the special conditions peculiar to the particular markets so require and compel. The C.M.O. will again scrutinise these revised proposals and their cost-projections and if, upon such scrutiny, is of opinion that the present 2% market-fee of any Market-Committee in the category 'C', 'D' and 'E' supra is unjustified, the C.M.O. will make appropriate orders. under s. 150 of the Act directing the Market- Committee or Committees concerned to amend their bye-laws to effect an appropriate downward revision in the quantum of the fee. Wherever the C.M.O. is of the opinion, after an examination of the proposals, that there is no need to make a downward revision, he shall malce a specific note in the behalf. These orders shall be made within a period of 8 months from now." H What the High Court has stated in paras 107 to 110 and in the first sentence of para 111 would apply to all the Market-Committees

218 SUhEMB COURT REPORTS [1985] SUPPL, s.c.B..

which had enhanced the market fee from one per cent to two per cent, and the Chief Marketing Officer has been given four months time from the date of the judgment to evolve and standaries the norms and sp;:cifications and to circulate the same to the Market Committees. After giving such a direction the learned Judges of the High Court have given som0 other direction to the Market Committees falling in categories 'C', 'D' and 'E' mentioned in para 80 of their judgment, namely "within three months therefrom they should revise their proposals for development in accordance with the norms and specific1tions. Then the Chief Marketing officer will again scrutinise these revised proposals and their cost projections, and if upon such a scrutiny he is of the opinion that the present two per c cent of market fee of any Market Committee in categories 'C' 'D' and 'E' is unjustified, he will make the appropriate orders directing the Market Committees concerned to amend their bye· laws to effect an appropriate downword revision in the quantum of the fee and wherever he is of the opinion after examination of the proposals that there is no need to make a downward revision he shall make a D specific not in this behalf and he shall make these orders within a period of eight months from the date of the judgment". It is not clear why after giving the general direction in respect of all the Market Committees which had enhanced the market fee from one per cent to two per cent the learned Judges of the High Court E thought it necessary to give another set of directions to the Market Committee falling in categories 'C' 'D' and 'E'. This confusion was perhaps responsible for Mr. A.K. Sen contending seriously in the course of his arguments that the directions given by the High Court relate to only 8 or 4 of the Market Committees falling in categories 'C' 'D' and 'E'. It is not possible to accept this argument for the F reason that the High Court has not recorded any finding on Point No. l2 to the effect that there is sufficient correlation in respect of all the Market Committees except 8 or 4 of the market Committees falling in categories 'C', 'D' and 'E'. After setting out Point No. 12 in para 7 of their judgment the learned Judges of the High Court G have indicated that the discussion relating to that point is in paras 75 to 110 and that the finding is in para 111. As stated earlier, a perusal of paras 107 to 110 and first sentence in para Ill, especially para 110, would show that the direction has been given by the learned Judges in respect of all the Market Committees which had enhanced the fee from one per cent to two per cent. The learned Judges have stated in para 110 that the learned Advocate General appearini for the State and the learned Counsel appearing for the

l.T,C. V, KARNATAKA (VardQrajan, J.) 219

Market Committees conceded that the exercise suggested by the learned Judges in para 109 of there judgment is necessary and beneficial as the matter involved an outlay of nearly 145 crores of rupees in the next eight years on the regulated market. Surely, an outlay of 145 croces of rupees could not be in respect of only 8 or 4 of the Market Committees falling in categories 'C', 'D' and 'E'. The learned Judges of the High Court have observed in para 107 of 8 their judgment that having regard to the infirmities noticed in the estimates and financial projections of the proposed developmental works on the basis of which the enhancement is sought to be justified they "are unable to say with any confidance and without reservations that the enhancement of the fee depending, as it does, on these estimates is totally justified", and that some time. bound directions c to which they would refer for having a second look at the estimates of the statutory authorities are required to be issued. There is nothing in these observations of the High Court to indicate that they are confined to only 8 or 4 of the market Committees falljng in categories 'C', 'D' and 'E'. The learned Judges of the High Court have no D doubt observed in the first sentence in para 107 that on the materials placed before them by the writ petitioners they cannot hold that the levy ought to fail for want of quid pro quo. With respect I think that there is some confusion in this part of the judgment of the Hig~ Court which has given room for argument of Mr. A.K. Sen that the directions have been given only in repect of R or 4 of the Market E Committees falling in categories 'C', 'D' and 'E'. ,\.s stated earlier, the learned Judges of the High Court have not recorded any finding on Point No. 12 to the effect that correlation is established satisfac· torily in regard to all the Market Committees which had enhanced the market fee from one per cent to two per cent except 8 or 4 of the Market Committees falling in categories 'C', 'D' and 'E'. The F direction given in para Ill is stated under Point No. 12 in para 7 of the impugned judgment to be the finding on that point relating to correlation. I, therefore, agree with Mr. Sorabjee that the direc- tions given in paras 107 to 110 and the first sentence in para 111 of the impugned judgment relate to all the Market Committees which had enhanced the market fee from one per cent to two per cent and not to only 8 or 4 of the Market Committees falling in categories 'C', 'D' and 'E' and that in view of the observation made in para 107 that having regard to the infirmities noticed in the estimates and financial projections of the proposed development works on the basis of which alone the enhancement is sought to be justified they are unable to say with any confidence and without reservations

220 (1985)sUPPL. S.C.R.

that the enhancement of the fee is totally justified, they should have held that there is no conelation and that there is no justification for the enhancement of the rate of the market fee. For these reasons, .. ~

I hold that there is no. correlation and that there is no justification for the enhancement of the market fee from one per cent to two per cent. I am constrained to observe that the learned Judges of the High Court have failed to exercise the jurisidiction vested in them by law by not recording any finding on Point No. 12 one way or the other, namely, that there is or no correlation, and that they have clothed the Market Committees and the Chief Marketing Officer with their jurisdiction to decide the question whether the enhancement is justified and if not justified to effect a downward c revision wherever necessary.

In view of what has been stated above about the enhancement of the market fee the question whether the amendment of the bye- laws for raising the rate of the market fee from one per cent to two per cent has been validly male or not becomes academic and is, however, considered for the sake of completeness. According to s. 148 ( 1l of the Act as it stood on the date of the amendment of the bye-laws for enhancing the rate of the market fee from one per cent to two per cent and on the dates on which the Writ Petitions were filed in the High Court "subject to the provisions of this Act and the rules made thereunder under s. 146 and with the previous sanction of the Chief Marketing Officer a market committee may, after previous publication in the prescribed manner, make bye-law for regulation of the business and the conditions of trading in the market area. Every bye-law made in this section shaH be published in the prescribed manner". As stated earlier, the question of market fee would fall under s. 148 (2) (xuiii) of the Act. It was contended before the High Court that there is no compliance with the require- ment of previous sanction and previous publication in the prescribed manner in regard to the amendment of the bye-laws for raising the market fee leviable under s. 65 (2) of the Act from one per cent to two per cent. The High Court has observed that finding no answer to that criticism in regard to the amendment of the bye-laws the State Government has come forward with Ordinance 22 of 1981 when the arguments in the Writ Petitions were coming to a close. That Ordinance has since been replaced by the Karnataka Act 4 of

H 1982. Ss. 3 and 5 of the Ordinance which have been replaced by ss. 2 and 114 the Amendment Act may be extracted for easy reference:

I.T.C. V. KARNATAKA (Jfardarajan, J.) 221

"3. Amendment of section 148.-In section 148 of the principal Act, in sub-section (1), the words cafter prC- A vious publication in the prescribed manner", shall be and shall be deemed always to have been omitted."

us. Validation-Nothwithstanding anything contai· ned in any judgment, decreet or order of any court or B other authority, any bye-law made or purporting to have been made, and levy or collection of market fee made and any action or thing taken or done in relation to such levy or collection under the provisions of the principal Act, before the commencement of this Ordinance shall be deemed to be as valid and effective as if such bye-law or c levy or collection or action or thing had been made, taken or done under the principal Act as amended by section 2 and 3 of this Ordinance and accordingly,-

(a) all acts, proceedings or things done or action taken by the State Government or by the Market Commit· tee or by any other officer of the State Government or of the Market Committee or by any other authori- ty in connection with the levy or collection of the market fee shall, for all purposes, be deemed to be and to have always been done or taken in accordance with law; and

(b) no suit or other proceedings shall be instituted, maintained or continued in any Court or before any authoritY for refund of any such market fee or for questioning the validity of any action or thing taken or done under the said bye·laws, and no court shaU rec.>gnise or enforce any decree or order declaring the said bye-laws or any action or thing taken or done thereunder as invalid on the ground that the bye-laws were .made without giving reasonable opportunity to persons likely to be affected thereby to file their objections and suggestions, or otherwise without following the procedure prescribed". H Previous publication referred to in s. 148 (1) as it originally stood before the 9,mendment to the bye-laws for enhancing the ratt

222 SUPREME COURT REPORTS (1985) SUPPL. S.C.R.

of the market fee from one per cent to two per cent was made was intended to give a reasonable opportunity to the persons likely to be affected to file their objections or make their suggestions and for being heard in regard to the increase in the rate of the market fee and other relevant matters. That right is purported to have been taken away by s. 3 of the Ordinance, and s. 5(b) of the Ordinance validates the amendment to the bye-laws made without such previous publication without giving an opportunity to the affected interests of being heard in the matter. The High Court has found that in these cases the Chief Marketing Officer him~elf had given directions to the Market Committees to amend the bye-laws for enhancing the market fee from one per cent to two per cent and the bye-Jaws were amended c by the Market Committees accordingly and that the Chief Market- ing Officer's direction to amend the bye-laws for enhancing the rate of the market fee can be regarded as his previous approval. I am unable to agree with this view of the learned Judges of the High Court. Previous approval can only be of some proposal or resolution of the Market Committees for doing one or the other of the things required to be done under the provisions of the Act. When undisputably there was no such resolution or proposal by the Market Committees for enhancement of the rate of the market fee I am unable to see how the direction of the Chief Marketing Officer given to the Market Committees to amend the bye-laws for raising the rate of the inarket fee from one per cent to two per cent can be considered to be his approval. Admittedly, there was no previous publication as required by s. 148(1) as it stood at the relevant time, and that requirement is purported to have been dispensed with retrospectively by s. 3 of Ordiance 22 of 1981. It is seen from the impugned judgment that it was submitted before the learned Judges F of the High Court that the affected interests' right of being heard was conferred by the Statute and it has been taken away by the subsequent amendment to the Statute with retrospective effect and that there is, therefore, no ground for the affected interests to complain. No such submissions were, however, made in this Court. Market fee is not a tax which is imposed by law passed by a Legis- G lature where the interests affected are or are supposed to be represented unlike the market fee the enhancement whereof is made by subordinate legisla1ion by way of amendment of the relevant bye-laws by the Market Committees. That is why the provision for previous publication was made in s. 148(1) of the Act as it stood at the relevant time. It is not possible to accept the contention that the right given by law was taken away by taw and cannot, therefore, be

I.T.C. r. KARNATAKA (Vardarajan, J.) 223

claimed by the affected interests, for though it was mentioned in s. 148(1) of the Act as it stood at the relevant time it was a right which was available to the affected interests under the principales of natural justice of being heard before the enhancement could be made. The High Court appears to have been aware of this position and to have not been quite happy about how the enhancement of the market fee has been brought about, for the learned Judges have observed in 8 para 61 of their judgment that the questioa might become a Jive issue if the Market Committees were to amend the bye-laws in future without giving an opportunity of being heard to the affected interests. Even the learned Advocate General appearing for the State and the learned Counsel appearing for the Market Committees had stated before the learned Judges of the High Court that the amendmt!nt c to s. 148(1) made by the Ordinance was only intended to cure the defect in . making the impugned bye-laws to avoid great public inconvenience and that there was no intention to make the deletion of the requirement of previous publication a permanent feature. The right of the affected interests of being heard before Market Committees could raise the rate of the market fee being a D right available to them under the principles of natural justice cannot be denied to them even by omitting in s. 148(1}. the clause relating to previous publication of the proposal to make or amend any bye-law under s. 148 of the Act. In any event the amendment has not taken away the requirement of previous approval of the Chief Marketing E Officer, and since there was no resolution or proposal of the Market Committees to enhance the rate of the market fee before the Chief Marketing Officer gave the direction to the Market Committees to amend the bye-laws for raising the market fee the direction cannot be taken as previous approval of something which was not in exis- tence at that time. I, therefore, hold that the amendment of the F bye-laws made for enhancement of the rate of the Market fee from one per cent to two per cent is invalid in law notwithstanding s. 3 of Ordinance 22 of 1981 and s. 12 of Karnataka Act 4 of 1982.

S. 65(1) of the Act as it originally stood provided for Market G Committees to levy and collect market fees from buyers in respect of agricultural produce bought by (i) any trader or other person in the yard and (ii) any trader outside the market or sub-market in the market area, at such rate as may be specified in the bye-laws (which will not be more than thirty paise per one hundred rupees of H the price of the specified agricultural produce) in such manner and at such times as may be specified in the bye-laws. S. 65(2) laid down that for the purposes of sub-section (1), all notified agricultural

224 StJPRBMB COURT REPORTS (1985} !lUPPL. S.C.R..

produce leaving a yard shall, unless the contrary is proved, be presu- A med to have been bought within such yard by the person in posses· sion of such produce. S. 65 was amended by Amendment Act 24 of 1975 which came into force on 19.5.1975. S. 2 of that Amendment Act substituted s. 65 of the principal Act as amended by Act ;o of 1973 by a new section which read as: 8 "S. 65. Levy of market fees.-

(1) The market committees shall levy and collect market fees from every seller in respect of agricultural produce sold by such seller in the market area at the c rate of one rupee for one hundered rupees of the price of such produce sold;

(2) the market committees shall levy and collect market fees from every buyer in respect of agricultural D produce bought by such buyer in the market area at such rate as may be specified in the bye-laws (which shall not be more than one rupee per hundred rupees of the price of such produce bought) in such manner and at such times as may be specified in the bye-laws; E (3) every market committee shall, not withstanding anything contained in this Act, credit to the Karnataka Roads and Bridges Fdnd constituted under the Karnataka Motor Vehicles Act, 1957 F market fees collected under sub-section (1) for being spent or the purpose of construction, repair, improvement and maintenance of rural roads in the State.''

Market fee was levied on the sellers for the first time under G s. 65(1) as substituted and the entire collection made under that sub-section bad to be credited to the Karnataka Roads and Bridges Fund for being spent for the purposes of construction, repair, improvement and maintenance of rural roads in the State. Sub· sections (1) and (3) of s. 65 of the Act, as substituted by Amendment H Act 24 of 1975 were struck down on 28.9.1978 by the decision in Rajasekhariah's case (supra). Subsequent to that decision s. 65 of

I.T.C. v. KARNATAKA (Vardarajan, J.) 225

the principal Aetas substituted by Amendment Act 24 of 1975 was amended by s. 20 of Amendment Act 17 of 1980 thus : A "S. 20. Amendment of section 65.-ln section 65 of the principal Act, --

(1) for sub-section (1), the following sub-section shall be and shall be deemed to have been substituted with B effect from 19th day of May, 1975 namely:-

"(I) In respect of the agricultural produce sold in a market area, there shall be levied and collected by the market committee thereof, from every seller, market fees at the rate of one per cent of the sale c proceeds of the produce so sold;

(2) Sub-section (1) as so substituted shall be and shall be deemed to have been omitted with effect from the 23th day of September, 1978; D (3) in sub-section (2), for the words "one rupee", the words "two rupees" shall be substituted;

(4) sub-section (3) shall be and shall be deemed always to have been omitted." E

The result of the amendment was that the levy and collection of market fees on and from sellers of agricultural produce at one per cent of the price of the agricultural produce sold in the market area had been rest.ricted to the period from 19.5.1975, the date on which Amendment Act 24 of 1975 which substituted the new s. 65 in the place of the original section 65 came into force upto 28.9.1978, the date on which the substituted sub-sections (1) and (3) of s. 6S were struck down in Rajasekhariah's case (supra), andthe substituted sub-section (3) was omitted by Amendment Act 17 of 1980 as if it never evisted in the Statute. S. 42 of Amendment Act 17 of 1980 G relates to validation of market fees-etc. and reads:

"S. 42 Notwithstanding anything contained in any decree, order of judgment of any court, or other authority, any levy or collection of market fee made or purported to have been made, any action taken or thing done in relation to such levy or collection under the

226 SUPREME COURT REPORt'S (198SJ SUPPL. !!.C.R..

provisions of the principal Act before the commencement of this section shall be deemed to be as valid and effective as if such levy or collection or action or thing had been made, taken or done under the principal Act as amended by this Act and accordingly,-

(a) aU acts, proceedings or things done or action taken by any market committee in connection with the levy and collection of such market fee shaH, for all pur· poses, be deemed to be or to have always been made, done 'Jr taken in accordance with law;

c (b) no suit or other proceedings shall be maintained or continued in any court or before any authority for the refund of any such market fee; and

(c) no court shall enforce any decree or order directing the refund of any such fee; D .. The market fee levied on and collected from sellers under the substituted s. 65(1) of the Act went to the credit of the Karnataka E Roads and Bridges Fund under sub-scetion (3). Sub-section (3) had been omitted by Amendment Act 17 of 1980 as if it never existed in the Statute as mentioned above. The High Court, following this Court's decision in Kewal Krishan Puri's case (supra) has held that rural roads are essentially and primarily intended for the benefit of the public and the class of market fee payers as part of the gene1 al public is entitled to the benefit of their user and the fee cannot be levied on and collected from them for being spent for the purpose of construction, repair, improvement and maintenance of such roads, more so because rural roads, even if constructed, repaired, improved or maintained from the market fee collected under the Act, do not become the property of the Market Committees and shed their character as public roads. Expenditure of market fees for construc- tion of roads, main or rural, is impermissible in view of the decision in Kewal Krishan Puri's case (supra), and even s 65(3) has been omitted as if it never existed in the Statute after it was struck down in Rajasekhariah's case (Supra). The quid pro quo for the levy under substituted s. 65(1) on sellers was the construction, repair, improve- ment and maintenance of rural ro~ds which is no longer permissible

J,T.C. V, KARNATAKA (Vardarajan, J.) 227

to be done out of moneys collected as market fees. There ii thui no quid pro quo to any extent for the levy under the substituted A s. 65(1) of the Act and therefore, it fails, and it is not protected even by s. 42 of the Amendment Act 17 of 1980 and has been rightly struck down by the High Court. S. 42 of the Amendment Act 17 of 1980 in so far as it seeks to save the levy and collection of market fee on sellers under the substituted s. 65(1) cannot also stand. The B High Court is, therefore, right in its finding on this aspect of the case.

In the Act there is no provision in regard to the market fee like s. 23A of the Punjab Agricultural Produce Markets Act sub-section (1) thereof reads thus : c "Notwithstanding anything contained in any judgment, decree or order of any court it shall be lawful for a market committee to retain the fee levied and collected by it from a licensee in excess of that leviable D under s. 23 if the burden of such fee was passed on by the licensee to the next purchaser of the agricultural produce in respect whereof such fee was levied and collected."

In Civil Appeals Nos. 4500-4501 of 1984 decided on 19.11.1984 E this Court has held that what s. 23A of the Punjab Act does is to prevent unjust enrichment by means of a refund to which the person claiming it has no moral or equitable entitlement. The market f~e collected from sellers under the substituted s. 65(1) must have been credited to the Karnataka Roads and Bridges Fund and used for the F' purpose of construction, repair, improvement and maintenance of rural roads which are undobtedly for the benefit of the general public. The excess fee collected under s. 65(2) of the Act also must have been utilised for the purposes contemplated by the Act. The persons from whom they have been collected, sellers and buyers, would naturally have passed on the levy to those who purchased the agricultural produce from them and the levy must have ultimately been borne by the consumers of the produce. Any refund would go to unjust enrichment of the persons from whom they have been collected. In these circumstances I do not think that any order for refund of the market fee collected under the rubstituted s. 65(1) and the excess market fcc collected under s. 65(2) of tl'.c Act could be made in these cases.