Holding

Any trader or dealer dealing in scheduled agricultural produce within a notified market area, including small retailers, must obtain a licence under Section 4(3) of the Himachal Pradesh Agricultural Produce Marketing Act, and the market fee levy is constitutionally valid where a reasonable quid‑pro‑quo exists.

Summary

The appellant, a small retailer dealing in scheduled agricultural produce in Kasauli (a notified market area of Solan district), challenged the requirement to obtain a licence under Section 4(3) of the Himachal Pradesh Agricultural Produce Marketing Act, 1949 and to pay the market fee. He argued that he did not operate in the principal or sub‑market yards, that the single‑point levy should exempt him, and that the levy lacked a constitutional quid‑pro‑quo, violating Articles 19(1)(g) and 14 of the Constitution. The Supreme Court held that any trader or dealer, including small retailers, dealing in scheduled produce within a notified market area is obligated to obtain a licence and that the market fee is a valid fee, not a tax, provided there is a reasonable quid‑pro‑quo, which is satisfied by the steps taken to establish market and sub‑market yards. The Court affirmed the High Court's decision, dismissed the appeal and ordered costs.

Issues considered

The scope of "dealer" under Section 2(1) of the Himachal Pradesh Agricultural Produce Marketing Act and whether it includes small retailers.
Whether a retailer operating outside principal and sub‑market yards but within a notified market area must obtain a licence under Section 4(3).
Whether the market fee levy satisfies the constitutional requirement of quid‑pro‑quo and is therefore valid under Articles 19(1)(g) and 14.
Whether the single‑point levy exemption under Rule 81 relieves the retailer from licence and fee obligations.

Legislation cited

Constitution of Indias. Article 14, s. Article 19(1)(g)

Subjects

licencemarket feeagricultural produce marketingquid pro quosingle point levyretailerconstitutional validityArticle 19Article 14notified market area

Judgment

A SH. BHAGWAN DAS SOOD
v.
STATE OF HIMACHAL PRADESH AND ORS.

OCTOBER 25, 1996
B
[G.N.RAY AND G.B. PATTANAIK, JJ.)

Himachill Pradesh Agricultural Produce Marketing Act, 1949 -
Himachal Pradesh Agricultural Produce Marketing Rules-Sections 2(1), 4(3)
and 21/Rule 91---Retailers dealing in Scheduled Area-Whether liable to ob-
C tain licence-Held : Obligation not confined to wholesalers or intennediate
dealers-Small retailer operating within a notified market a1ea is also under
an obligation to obtain licence-Payment of single point levy-Held, does not
entitle a dealer of agricultural produce to refuse to take licence under Section
4(3) of the Marketing Act-Onus on Appellant to establish that he has no
D liability to pay Market Levy.
. Constitution of India, 1950 : Imposition of Market Levy-Constitution-
al. Validity of-Held, existence of quid pro quo essential-Service rendered
must be real and not illusory-Not necessary that infrastructure of Principal
E. and sub-market yards had been complete-It would be sufficient if effective
steps had been taken in reality to identify market and sub-market yards.

The appellants challenged before the High Court the requirement to
obtain licence under Section 4(3) of the Himachal Pradesh Agricultural
Produce Marketing Act, and to pay market fee. High Court held that levy
F of market fee Was quite justified and the provisions of Sec. 4(3) and 21 of ·.
the Marketing Act, were intra vires and valid. Aggrieved by the judgment
of the High Court the appellant preferred the present appeal. On behalf
of the appellant it was contended that they did not carry on their business
within the ·principal market or market yards/sub-market yards. The
G market fee had direct relationship with the service rendered and since no
service was rendered in respect of the area in which appellant was carrying
on their business, realisation of market fee was illegal and unconstitution-
al. It was further contended that appellants are petty retailers who pur·
chased. articles fr3m other dealers which had already been subjected to
market fee, and that the appellant was not liable to pay any fee as the
H products were subject to single point levy.
788
B.D. SOOD v. STATE [G.N. RAY, J.] 789
On behalf of the respondent it was contended that appellant has been A
carrying on business in agricultural produce in Kasauli within a notified
market area and was a dealer within the meaning of Section 2(1) of the
Marketing Act, that appellant was bound to obtain licence under Section
4(3) of the Marketing Act. It was also contended by the respondent that it
was not necessary to establish that trades of a particular area within the
B
notification area have in fact received the benefit of service and amenities
envisaged by the marketing Act and Rules framed thereunder.

Dismissing the appeal, this Court

HELD: 1. Under the Himachal Pradesh Produce Marketing Act, 1949 C
any trader or dealer dealing in Scheduled Agricultural Produce within a
notified market area is under an obligation to obtain a licence under section
4(3) thereof. Such obligation is not confined to whole salers of agricultural
produce or intermediate dealers indulging in whole sale and retail business
and also to retain traders like the appellant. License is required to be taken
by a small retailer operating within a market area. (802-F-G] D

2. Requirement for obtaining a licence is mandatory under Section
4(3) of the Act. Validity of imposition of levy on certain items of agricul-
tural produce on the score of exemption on account of single point levy is
entirely a different exercise and it does not entitle a dealer of agricultural E
produce to refuse to take licence under section 4(3) of the Act. It is for the
appellant to establish that he has no liability to pay market levy in view of
single point levy. (803-B, 806-C]

3.1. Levy of market fee is essentially a fee and not a tax and its
imposition necessarily inheres the essence of quid pro quo between the fees F
levied and services returned to the payer of such fees. (804-B]

3.2. Existence of quid pro quo is essential for retaining the character
of fee but such quid pro quo is not to be reckoned with any mathematical
precision with reference to quantum of fees realised and percentages of G
fees spent for providing various amenities under the Act. (804-D-E]

3.3. The service rendered to the payers of market fee must by real and
not illusory. In deciding the question of rendering real and not illusory
service in discharging the obligation emanating from quid pro quo to levy
the market fee, no straight jacket formula can be evolved. It is necessary to H
790 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.

A take a pragmatic approach to the problem of establishing market and sub
market yards with necessary infrastructures and accompanying facilities
and amenities to be made available to traders and producers coming to
such yards in order to decide whether concrete steps have been taken in
implementing the schemes provided under the marketing Act and Rules
framed thereunder. It is not necessary that imposition of levy is to be
B effected only on establishment of principal and sub market yards by com-
pleting the infrastructure. It will be sufficient for imposition of levy that
effective steps have been taken in reality to identify market and sub market
yards. [805-B-D]

C Kewal Krishan Puri and another v. State of Punjab and others, AIR
(1980) SC 1008; Ram Chandra Kai/ash Kumar and Co., v. State of U.P., AIR
(1980) SC 1124 arid Sreenivasa General Traders v. State of Andhra Pradesh,
AIR (1983) 80 SC 1246, relied on.

Mahammad Hussain Gu/am Mohammad and another v. State of Bom-
D bay and another, [1962] 2 SCR 659; M. C. V.S. Anmachala Nadar v. State of
Madras, [1959] Suppl. (1) SCR 92,Lakha Lal v.State of Bihar, [1968] 3 SCR
539 and R.K Porwal v. State of Maharashtra, [1981] 2 SCR 866,888, referred
to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7371 of
E 1995.
From the Judgment and Order dated 30.11.91 of the Himachal
Pradesh High Court in W.P. No.39 of 1989.

P.P Rao, R.Venkataramani, S.M. Garg and Mrs. Sheela Goel for the
F Appellant.
E.C. Aggarwala for the Respondent No. 2 & 3.

Rajiv Nanda, T. Khan and T. Sridharan for the State of Himachal
Pradesh.
G
The Judgment of the Court was delivered by

G.N. RAY, J. This appeal is directed against judgment dated Novem-
ber 30, 1994 passed by the Division Bench of Himachal Pradesh High
Court in Civil Writ Petition No.39of1989. The said writ petition was heard
H along with other writ petitions including Civil Writ Petition No.568 of 1988
B.D.SOODv. STATE(G.N.RAY,1.] 79_1

(Mis Sardar Singh & Sons v. State of Himachal Pradesh) involving common A
question of law and all the said writ petitions were disposed of by the
.., judgment rendered in C.W.P.No.568 of 1988.

The main contention raised before the Himachal Pradesh High
Court in the said petitions was that the Writ Petitioners were not required
to take licences under Section 4(3) of the Himachal Pradesh Agricultural
B
Produce Market Act, 1949 (hereinafter referred to as Markets Act) and
are also not required to pay market levy. The petitioners contended that
the market committee had established principaVsub market yards within
the territorial jurisdiction of the market committee. But the petitioners did
not carry on their business within the principal market or market yards/sub C
market yards. On the contrary, they had been· dealing with agricultural
produce outside the principal market/yard or sub yards. They had been
carrying on their business in their own premises which were though within
the notified market area, but were outside the principal market/market
yard or sub-market yards. Even then, the market committees were insisting
the petitioners to obtain licence and pay market fee in accordance with the D
provisions of the Markets Act and the Rules framed thereunder. Such
action on the part of the market committee was wholly illegal and uncon-
stitutional. It appears from the imougned decision of the High Court that
the petitioners' contention was that the provisions relating to taking of
licences for carrying on business .and payment of market fee under the E
Markets Act have placed unreasonable restrictions on their rightto carry
on their trade and hence Section 4(3) and 21 of the Markets Act are
violative of Article 19(1) (g) of the Constitution of India. It was contended
that market fee had. a direct relationship with the services .rendered and
since the market committee rendered no service in respect of the area in
which the petitioners had carried on their trading activities but the services . F
rendered by the market committee remained confined only to principal
market/market or sub market ¥ard established by the market committee,
realisation of market fee was illegal and unconstitutional.

Such contentions were disputed by respondents by contending that G
principal market yards and sub market yards had been identified and
constructions had been undertaken. According to respondents, such
market and market and sub market yards would consist of shops, auction
platforms and various public utility services like provision for drinking
water, latrines, sanitation, farmers' rest houses etc. would be provided.
Such scheme would cost expenditure of several crores of rupees by each H
792 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.

A of the market committee. Though the works were in process, works of such
magnitude involving very heavy expenditure could not be immediately
~
implemented in full and the works in progress would require some more
time to be completed. The respondents contended that even in respect of
areas outside principal market and market or sub market yards inspecting
staff had been appointed to ensure proper weighment and payment of price
B to the producers of scheduled agricultural produce. It was also contended
that income to be derived from market fee would be spent for providing
the aforesaid facilities and amenities. Hence, there was sufficient nexus
justifying imposition of levy and collection of the same.

c marketByfeethe·wasimougned judgment, the High Court has held that levy of
quite justified. The requirement of obtaining licence fee
and payment of levy of market fee constituted reasonable restriction under
Article 19 (l)(g) of the Constitution. Hence, the provisions of Section 4(3)
and 21 of the Markets Act were intra vires and valid. It appears that the
High Court has relied on the .decisions of this Court in Kewal Krishna Puri
·D and another v. State of Punjab and others, AIR (1980) SC 1008; Ram
Chandra Kai/ash Kumar and Co. v. State of U.P., AIR (1980) SC 1124 and
Sreenivasa General Traders v. State ofAndhra Pradesh, AIR (1983) SC 1246.

In Kewal Krishna Pun's case (supra), market fees were levied under
the Punjab Agricultural Produce Markets, 1961. But such fees were in-
E· creased. Such increase was challenged before this Court by contending that
the market fees levied under the said Act were sufficient for meeting the
requirements of the said Act. Even then, increase in such fees was made
for diverting the said fund for purposes other than those for which market
fees were levied. A Constitution Bench of this Court has held that the fee
F must have_ direct nexus with the services provided by the market committee
and since the increase was not intended to provide any additional service,
the same cannot be lawfully imposed.

It has been indica~ed by this Court in Kewal Krishna Puri 's case that
the element of quid pro quo may not be possible or even necessary to be
G established with mathematical exactitude but proudly and 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
fees. It has also been indicated that a good and substantial portion of
amount collected on account of fees, may be, in the neighbourhood of two
H thirds or three fourths, must be shown with reasonable certainty as being
B.D.SOODv. STATE(G.N.RAY,J.) 793

spent for rendering services of the kind as mentioned hereinbefore. A

In Ram Chandra Kai/ash Kumar's case (supra), the principles justify-
ing imposition of levy of market fee as indicated in Kewal Krishna's case
have been affirmed by another Constitution Bench of this Court. It has
been held in Ram Chandra's case that declaration of big areas as market
B
areas does not offend any provisions of law. In Sreenivas General Traders
case (supra) this Court has held that establishment of a principal market
yard or sub market yard and provisions for amenities and facilities to
persons using the same is sufficient quid pro quo for the purpose. This
Court has also emphasised in this decision that traditional view of quid pro
quo has undergone sea change, though correlation between the fee col- c
lected and service rendered or intended to be rendered is still important.
The true test is whether its primary and essential purpose is to render
specific service to a specified area or class. It is of no consequence that
the State may ultimately and indirectly be benefited by it. The power of the
Legislature to levy a fee is established by the fact that it must be by and D
large a quid pro quo for the service rendered. All that is necessary is that
there should be reasonable relationship between the levy of fee and ser-
vices rendered.

The principles governing quid pro quo justifying levy of market fee
in Kewal Klishna's case were taken into consideration by this Court in Mis E
Amar Nath, Om Prakash v. State of Punjab, AIR (1985) SC 218. In view of
finding by this Court that increase in levy was unjustified in Kewal Krishna's
case, the Legislature by amendment inserted Section 23A in the Punjab
Agricultural Produce Markets· Act, 1961. The said provision dealt with
saving of excess fee already charged. Section 23A provided that not- F
withstanding anything contained in any judgment, decree or order of any
court, it would be lawful for a market committee to retain fee levied and
collected by it in excess of that levied under Section 23. In considering the
constitutional validity of Section 23A since impugned inAmar Nath's case,
this Court has held that observations contained in Kewal Knshna's case
about the extent of fees levied and realised to be spent for justifying quid G
pro quo are not to be read as Euclid's Theorems nor as provisions of the
statute. The observation must be read in the context in which they appear.
The constitutional validity of Section 23A has been upheld in Amar Nath's
case by indicating that Section 23A intended to prevent unjust enrichment
by these dealers who had already passed on the burden to the next H
794 SUPREME COURT REPORTS [1996) SUPP. 7 S.C.R.

A purchaser and so reimbursed themselves.

The High Court has held in the impugned judgment that levy of
market fee on the traders carrying on business outside principal
market/market or sub market yard, cannot be held as invalid as it has
sufficient nexus with the services rendered. The services are directly benefi-
B cial to the producers of agricultural produce and are available within the
notified market area.

Mr P.P. Rao, learned Senior Counsel appearing for the appellant,
has submitted that Section 4(3) and 21 of the Markets Act may not be held +
c invalid on the score of offending Article 19(1) (g) of the Constitution and
the Markets Committee may be competent to impose kvy of market fee
on scheduled agricultural produce generally but the question required to
be considered as to whether any market fee was at all leviable on the
appellant and consequently the appellant was under any obligation to take
D licence under the Markets Act, has not been considered by the High Court
presumably because a number of writ petitions were disposed of by the .(

common judgment impugned in this appeal where the specific question
raised by the appellant was not in issue in other cases and the High Court
has addressed to itself the question of constitutional validity of Section 4(3)
and 21 of the Markets Act only in the context of existence of quid pro quo
E warranting imposition of levy of market fee. The High Court has not
adverted to the core question involved in the appellant's case that the
appellant being a petty retailer, had purchased from other- deaj_ers such
articles which had already been subjected to levy of fee under the Markets
Act and hence there was no question of payment of levy of fee by the
F appellant. Consequently, there was no requirement for obtaining any
licence under the Markets Act for carrying out the said retailer's business
in an area far away from any principal/sub market yard where no benefit
consistent with levy of market fee was available, even though quid pro quo
for justifying imposition of levy of market fee is not required to be corre- -·
lated with any mathematical precision with the amount of service rendered
G and amount of fees levied and realised by the Market Committee.

Mr. Rao has contended that the scheme of the Markets Act and
- ..
Rules framed thereunder is to protect the interests of the producers and
for this purpose the Act and the Rules contain various provisions to enable
H the market committees to notify market areas and establish markets and
B.D.SOODv. STA1E[G.N.RAY,J.] 795
market yards in different parts, provide services therein and levy and A
collect fees from the licenced dealers. According to Mr. Rao, on a
,,,.. .... reasonable interpretation of the Act, the power to establish markets in the
notified market area is coupled with duty to establish sufficient number of
markets in different parts of the notified area which are reasonably acces-
sible to producers and traders.
B
Mr. Rao has contended that in the instant case, non-establishment
of a principal market or market yards in or around Kasauli town where the
appellant is carrying on his retail business outlet, renders the traders in
Kasauli town not liable to obtain licences and pay any market fee. Mr. Rao
has submitted that the imposition of levy of market fee may be held justified c
if the principal market and market yards or sub market yards are reasonab-
ly accessible to the producers and traders of scheduled agricultural
produce so that the benefit arising out of an organised market having
various amenities, are available to the producers and dealers coming to the
::::;o- principal/sub market yards. When principal/sub market yards are estab-
D
~ lished, completion of such principal/sub market yards with consequential
constructions of shops, yards, toilets, rest room, offices etc. etc. may take
a reasonable time. It may not be necessary to wait for imposition of levy
of market fee till the construction of infra structures of such principal/sub
market yards are fully completed because such completion takes some
time. There may be impelling necessity to generate funds out of imposition E
of levy of market fee to take various works necessary to establish principal
and market and sub market yards at a desired level consisting of various
essential infra structures with amenities of services attached thereto for
effective implementation of the aims and objectives under the Markets Act.
Where principal market and market/sub market yards with some essential F
infra structures have been established and provisions for reasonable
amenities to the producers and traders coming to such principal market
and market yards or sub market yards are being taken within a reasonable
time frame "imposition of levy of market fee may be justified. In such a case,
validity of imposition of levy cannot be challenged on the ground that
amount of levy collected and amount of services then available are not fully G
correlated provided no part of income derived out of levy of market fee is
,. .. spent for purposes for which levy of fee was not imposed.

Mr. Rao has submitted that where a large acre has been notified as
market area under the Act but only in one or two places, a principal market H
796 SUPREME COURT REPORTS [1996) SUPP. 7 S.C.R.

A and market yards or sub-market yards have been established where the
amenities envisaged under the Act and Rules are available, and transaction
taking place in such market/market yards are regulated but to a large ... "
percentage of producers and traders of scheduled agricultural produce, no
amenity of an organised principal market/market yards is at all available
because of inaccessibility to such market yards either on account of long
B
distance of such market/market yards from the place of business of such
traders or for some other reasons, imposition of levy on such traders who
do not purchase from organised market/market yards and are wholly
deprived of any benefit available to them arising out of imposition of levy
of market fee, simply on the basis that such areas also come under the ~
c notified market area, must be held illegal and unconstitutional. According
to Mr. Rao, in such circumstances, the basic ingredient 0f fee being related
with return of some service to the payer of fee is not satisfied and the fee,
in reality, partakes the character of tax.

D
. Mr. Rao, in support of his contentions, has relied on the decision of
this Court in M.C.V.S. Amnachala Nadar v. State of Madras, [1959) Suppl.
1 SCR 92 and Lakha Lal v. State of Bihar, [1968) 3 SCR 539 and R.K
~
-
Porwal v. State of Maharashtra, [1981) 2 SCR 866, 888. In Amnachala
Nadar's case (supra), this Co.urt has noted the practice of notifying a radius
of five miles around the market buildings and yards and occasionally ten
E miles and has observed that keeping in mind the purpose of establishing
organised market/market yards for the benefit of producers and to protect
them from exploitation by traders and middlemen it is unlikely that the
government will fix longer distance in the prevailing circumstances. In
Lakha Lat's case (supra), a Constitution Bench of this Court has held that
power under Section 4(1) of the Bihar Markets Act to notify market area
F
should be exercised reasonably consistent with the beneficial purpose
envisaged under the Act. In R.K. Porwal's case (supra), this Court has
examined the question of reasonableness of the location of a market and
after being satisfied that the location of the market was reasonable, upheld
the same.
G
Mr. Rao, has submitted that it cannot be reasonably presumed that
the Himachal Pradesh Legislature have intended that Section 4(3) should
be construed literally to cover even retail dealers in scheduled agricultural
produce to be covered for the imposition of levy and requirement to obtain
_..,
-
H licence from such retail dealers. Until Section -4(3) is read down by
B.D. SOOD v. STATE [G.N. RAY, J.] 797

reasonably interpreting the scope and ambit of the said Section, Section A
,.,. 4(3) is liable to be struck down being violative of Articles 14 and 19(1) (g)
of the Constitution.

Mr. Rao, has submitted that it is the case of the appellant that the
appellant has a shop or outlet in the town of Kasauli and he is a retailer
of scheduled agricultural produce. He purchases such articles from other
B
bigger dealers. From the shop or n;tail outlet of the appellant in Kasauli,
there is no principal market/market or sub market yards within a radius of
about 20 kilometers. Mr. Rao has submitted that the appellant cannot
afford purchasing from dealers in principal market/market yards or sub
yards because of long distance of such place of business and consequential c
cost of transportation. The appellant, for impelling necessity, purchases
from other dealers in near about places and carry on his retail business in
various agricultural produce in his shop at Kasauli under the administrative
control of Kasauli Cantonment Board. Hence, in any event, the appellant
?.' is not liable to pay market fee levied on various agricultural produces by D
• the Market Committee.

Mr. Rao has submitted that Markets Act and the Rules framed
thereunder envisage a single paint levy. Once a particular scheduled
agricultural produce has already been subjected to levy of market fee,
subsequent sale or purchase of such produce cannot be subjected to levy
E
of market fee. In this connection, Mr. Rao has referred to Rule 81 of
Himachal Pradesh Agricultural Produce Market Rules, 1971 framed under
,,
the Markets Act. Sub rule (1) of Rule 81 provides as follows :

81. Exemption from payment of fees - F

(1) If a fee has once been levied on sale or purchase of any quantity
of agricultural produce in a notified market area and the dealer
concerned complies with the provisions with the sub-rule (2) of
this Rule, then no fee shall be leviable on the sale or purchase
within the same notified area of any agricultural produce manufac-
G
,>.-
• tured or extracted from the agricultural produce in respect of
which the fee has already been paid.

(2) The dealer concerned in the sale or purchase of any quantity
of agricultural produce from which he manufactures or extracts H
798 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.

A any other agricultural produce shall maintain in Form L time and
correct accounts of sale or purchase as the case may be, of the
said agricultural produce manufactured or extracted from it. .... :
Mr. Rao has submitted that dealers in agricultural produce are not
exempted from the levy of market fee. It is only the actual growers of
B agricultural produce who are exempted from the imposition of levy of
market fee when they sell agricultural produce grown by them to dealers.
Since the appellant is small retail dealer who purchases from various other
dealers it should be reasonably held that the other dealers being liable to
pay levy of market fee, must have been subjected to such levy on the first
C transaction in course of dearlership business and once the goods in ques-
tion have already been subjected to levy subsequent transaction between
dealer and sub dealer and sub dealer and retailer like the appellant is not
open to any levy of market fee.

D Mr. Rao has also submitted that the purpose of requiring a licence
to be obtained for carrying on dealership business is to bring the dealer
under control so that such dealer does not escape payment of levy of
market fee due from him. Where a retailer has no obligation to pay levy
of fee, the very purpose of obtaining licence for dealership business in case
of such retailer does not arise. Mr. Rao has submitted that the dealer must
E be understood and defined in the context or its liability to pay levy of
market fee. All traders in the State of Himachal Pradesh are not liable to
pay levy of market fee even if they carry on their business within a notified
market area. It is only the dealers dealing in scheduled agricultural produce
under the Act, who have been brought within the purview of Markets Act.
F Hence, a retailer purchasing the items of its business from other dealers,
who as aforesaid, must be presumed to have been subjected to levy of
market fee on the agricultural produces sold by such dealer to the retailer
should be excluded from the definition of dealer by interpreting the defini-
tion reasonably and in the context of single point levy envisaged under sub
rule (1) of Rule 81 of the Rules framed under the Act.
G
Mr. Rao has submitted that unfortunately the liability of the appel- -.!,-

lant either to take a licence for carrying on retail business in agricultural
produces and his liability to pay levy of market fee in the context of single
point levy, have not been taken into consideration by the High Court
H because the Writ Petition of the appellant was heard along with other Writ
B.D. SOOD v. STAIB [G.N. RAY, J.) 799

Petitions where only a common question of Jaw raised in such writ petitions A
about non existence of liability to pay any levy of market fee in the absence
of quid pro quo of services to be rendered to the writ petitioners on
account of levy of market fee had been taken into consic!eration. Mr. Rao
has submitted that the writ petition of the appellant should be remanded
to the High Court for considering the questions of law in the context of B
factual matrix to be established by the respective parties.

Disputing such contentions of Mr. Rao, Mr. E.C. Aggarwala, learned
counsel appearing for the respondents Nos.2 and 3, has submitted that the
appellant on the admitted position that he purchaes agricultal produce
from other dealers and carries on retail business in such produce is a C
'dealer' as defined in Section 2(1) of the Markets Act. Notified market area
has been declared under Section 4 of the Markets Act. Section 4(3) of the
Markets Act prohibits every person from setting up any place for purchase,
sale etc. of agricultural produce so notified except under a licence granted
in accordance with the provisions of Markets Act. Section 5 of the Markets D
Act contemplates that in each notified market area there shall be one
principal market yard and one or more sub-market yards as the Govern-
ment or the Board may find necessary. Section 21 of the Markets Act
provides that market committee shall levy on ad valorem basis fee on
agricultural produce bought or sold by licencees in the notified market area
at the rate not exceeding one rupee for everyone hundred rupees, as may E
be fixed by the Board.

The market area of Solan District in Himahcal Pradesh included the
area of Kasauli, Dharampur, Jagjitnagar, Garkhal etc. including Chakki Ka
More. By notification dated June 18, 1973, the extent of area of the Market
Committee, Solan was described as :- F

(1) All the revenue estates including Municipal Committees, notified
area committees and Cantonement Board area of Solan District (except
Nalagarh Tehsil).
G
(2) Revenue of Rajgarh Sub-Tehsil/Padihad Tehsil of Sirmor Dis-
>- trict.

Mr. Agarawala has contended that the appellant Bhagwan Das ad-
mittedly carries on business in agricultural produce in Kasuali which is
within a notified market area. The appellant is a 'dealer' within the meaning H
800 SUPREME COURT REPORTS [1996) SUPP. 7 S.C.R.

A of Section 2(1) of the Markets Act. In view of the fact that the entire Solan
revenue estate and District of Solan excluding Nalagarh area have been
notified as market area, the appellant being a dealer and carrying on
business in agricultural produce was bound to obtain licence under Section
4(3) of the Markets Act. Inspite of repeated requests, the appellant has
B refused to take such licence under the Markets Act.

It has been contended by Mr. Agarwala that in the district of Solan,
various sub-market yards have been constructed which have been set out
in the counter affidavit filed before the High Court. It was also stated in
the counter affidavit that proposals were afloat for development of market
C yards and sub-market yards at several places within the district of Solan,
I
primarily amongst them are jagjit Nagar, Dharampur, Garkhal and ten
other areas. Chakki Ka More where a sub yard has been established is at
•
a distance of 28 kilometer from Kasauli. Dharampur is at a distance of 12
kilometer from Kasauli and Jagjit Nagar is at a distance of only 11
D kilometer from Kasauli. Mr. Agarwala has informed the Court on instruc-
\,-
tion from the respondent Nos.2 and 3 that sub market yard at Jagjit Nagar
has been constructed and has become operative and sub market yard at
Dharampur is likely to be completed soon because tender for construction
has already been invited. The sub-market yard in Chakki ka More had been
completed and made operative as far back as in 1981.
E
Mr. Agarwala has submitted that the entire district of Solan is a hilly
terrain and is not densely populated as in other places in the plains. It is
not practicable to establish and construct sub- market yards within close
distance in such hilly terrain sparcely populated. The agricultural produc-
F tion is also not much so that large volumes of transaction of such produce
will take place in various sub'market yards. if constructed at close
proximity. Hence, for appreciating the felt need of establishing sub-.market
yards in the district of Soian, the· test of reasonable distance of market
yards which is applicable in plain lands involving good prod:uctive activities
of the agriculturists, cannot be applied in view of geographical features .and
G contours of the district of Solan and volume of agricultural produce grown
in the district. - ...

Mr. Agarwala has submitted that the purpose of obtaining licence is
to bring a trader within the supervising control and regulation of the
H market committee. Licence being issued for a particular place in the
B.D.SOODv. STATE[G.N:RAY,J.) 801
market area, the market committee knows that a particular trader or dealer A
is carrying on its business in such particular area. Question of payment of
market fee arises only after a person has obtained a licence and submits
proof of the fact that particular agricultural produce in which he is carrying
on business activity has already been subjected to levy of market fee so that
further levy of market fee is not enforced.
B
Mr. Agarwala has also submitted that the question of including small
traders was taken into consideration by this Court in Anmachala Nadar's
case (supra). It has been held that "The Act is an integrated one and it
regulates the buying and selling of commercial crops. If the small traders
are exempted, it creates loopholes in the scheme through which the big C
trader may operate and thereby the object itself may be defeated."

Mr. Agarwala has further submitted that the law is well settled by a
series of decisions of this Court as already referred that correlation of
quantum of fees levied under the Markets Act and extent of services D
rendered by the Market Committee by establishing principal market yards
and sub yards etc. is not to be scrutinised with any mathematical precision.
It will be sufficient to uphold the validity of levy of market fee if it is
established that steps for establishing market yards and sub yards have
been taken and realisation from levy of market fee is being spent for the
avowed object under the Markets Act. Mr. Agarwala has submitted that it E
is not necessary to establish that traders of a particular area within the
notified area have in fact received the benefit of services and amenities
envisaged by the Marke~s Act and Rules framed thereunder.

·In this connection, Mr. Agarwala has referred to a decision of this p
Court in Mohammed Hussain Gu/am Mohammad and another v. State of
Bombay and another, [1962] 2 SCR 659. The attention of the Court has
been drawn to the observation at page 663 of the report to the following
effect :

"The act, however, envisages that there may be time lag between G
the declaration of a market area and the establishment of a market;
therefore the proviso to Section 4(2) lays down that pending
establishment of a market in a market area, the Commissioner may
grant a licence to any person to use any place in the said area for
the purpose of purchase and sale of any agricultural produce." H
A
802 SUPREME COURT REPORTS (1996] SUPP. 7 S.C.R.
Mr. Agarwala has submitted that even though no market yard was
\
\

established, the imposition of market fee under the Bombay Act has been
upheld by this Court. Mr. Agarwala has also submitted that establishment
of various yards is reasonably expected to take some time and also involves
substantial expenditure. If steps for establishing market and sub-market
B yards have been bona fide taken by a Market Committee by ensuring that
collection from levy of market fee is being spent and intended to be spent
for the purposes for which such levy has been imposed, the levy must be
held to be a valid imposition under the Markets Act and such validity is
not required fo be tested in the context of quantum of levy imposed and
extent of service rendered by tlie Market Committee.
<'
c
Mr. Agarwala has also submitted that appellant had an obligation to
take licence under the Markets Act because admittedly he deals in agricul-
tural produce. Not only he failed and neglected to take licence under
Section 4(3) but even when reminded of such obligation to take licence he
filed the writ petition for contending that levy of market fee in the absence
D of quid pro quo was unconstitutional and invalid. Such contention being
wholly untenable in the facts of the case and law being clearly laid down
in a series of decisions of this Court, there was no occasion for the
appellant to move this Court. The appeal being devoid of any substance,
should be dismissed with exemplary cost.
E
After giving our careful consideration to the facts and circumstances
of the case and the submissions made by the learned counsel for the
parties, it appears to us that under the Markets Act any trader or dealer
dealing in ·scheduled agricultural produce within notified market area is
under an obligation to obtain licence under Section 4(3) of the Markets
F Act. Such obligation is not confined to wholesalers of agricultural produce
or intermediate dealers indulging wholesale artd retailed business but also
to retail traders like the appellant;

In our view, ·licence· is required to be taken by a small . retailer
G operating within a notified market area. The question of reasonable inter-
. pretation of 'dealer' under Section 2(1) and provisions requiring a dealer
to obtain licence under Section 4(3), in the context of single point levy of
market fee under Rule 81 of the Rules framed under the Act, as sought to
be contended. by Mr. Rao, though ingeneous, is devoid of any substance.

H It has been rightly contended by Mr. Agarwala that a licenced dealer
B.D. SOOD v. STATE [G.N. RAY, J.] 803

·] may raise objection against imposition of levy by establishing with reference A
to records that the agricultural produce since purchased by such dealer has
already been subjected to levy. Requirement for obtaining a licence is
mandatory under Section 4(3) of the Markets Act. Validity of imposition
of levy on certain items of agricultural produce on the score of exemption
on account of single point levy, is entirely a different exercise and exemp- B
tion from liability on such score in re~pect of trading activities in question
does not entitle a dealer of agricultural produce within a specified market
area to refuse to take licence under Section 4(3) of the Markets Act.

By a series of decisions of this Court, reference to which have already · C
been made, the principles for upholding constitutional validity of imposi-
. tion of levy of market fee in a notified market area have been laid down.
The Agricultural Produce Marketing Acts have been enacted by various
state legislatures. The beneficial legislation is aimed to prevent exploitation
of growers of agricultural produce in the hands of dealers, traders and
middlemen. There is commonness, by and large, in such legislations. The D
Marketing Act and the Rules framed thereunder usually contain provisions
for establishing organised market and market yards, provisions to ensure
· sale and purchase of agricultural produce at a fair price to be notified, to
ensure correctweighment of such produce brought and sold in the market
yards, to ensure storage of agricultual produce by giving reasonable advan- E
· ces against the produce stored in the godowns of the Market Committee
so that distress sale at a lower place at the time of harvesting is prevented
for the benefit of farmers and agricutlurists, to provide roads and pathways
for transport of agricultural produce to organised market yards, to dissemi-
nate information to the farmers about improved techniques in cultivation, F
to ensure supply of good quality seeds, manures, agricultural implements
etc. for intensive cultivation, to provide. place of rest for farmers bringing ·
their produce in the organised market yards after ensuring sanitary condi-
tions in and around such organised market yards etc. etc. In order to
ensure generation of funds in the hands of Market Committee and Boards G
constituted under the Marketing Act, so that organised markets . and
market yards are established with necessary infrastructures involving sub- ·
stantial cost, the Marketing Act invariably contains provisions for imposi-
tion of levy of market fee at a specified rate on the traders and dealers in
specified agricultural produce operating within the specified market area H
804 SUPREME COURT REPORTS [1996) SUPP. 7 S.C.R.

A and in principal and sub-market yards established by the Market Commit-
tee. The dealers and traders are required to take licence for their trading
activities in such area in respect. of specified agricultural produce so thai ....
their trading activities are monitored and controlled and they may not
escape the liability of imposition of market levy.
B Levy of market fee being essentially a fee and not a tax, such
imposition of levy of market fee necessarily inheres in it the essence of quid
pro quo between the fees levied and services returned to the payer of such
fees. What should be the extent of service rendered to the payers of levy
of market fe(')s so as to keep such levy of fees within the bounds of accepted
c principle of 'fee' involving existence of reasonable quid pro quo has been
a vexed question agitated before various High Courts including this Court
from time to time. Some of the decisions of this Court on this question
have been indicated. The legal position regarding constitutional validity of
levy of mar~et fee may be summarised as follows :-
D ...
(i) Existence of quid pro quo is essential for retaining the character
of 'fee' in the matter of levy of market fees.

(ii) Such quid pro quo is not to be reckoned with any mathematical
;

precision with reference to quantum of fees realised by imposition of levy
E and the percentage of such fees spent for establishing market yards,
construction of various infra structures etc. and providing various amenities
as envisaged under the Marketing Act and the Rules framed thereunder
for effective implementation of aims and objectives under the Act.
.
F (iii) The service to be rendered to the payers of market fee must be
real and not illusory.

(iv) Such service must have an objective basis and have a direct link
and not to be remote in its effect.

G (v) It is not necessary that imposition of levy is to be effected only
on establishment of principal and sub market yards by completing the
infrastructures required for such establishment of market and sub-market
...
yards. Such construction being time consuming and expenditure oriented,
it will be sufficient to justify valid imposition of levy if it is demonstrable
H that after notifying market area, effective steps not in contemptation but in
B.D. SOOD v. STATE [G.N. RAY, J.) 805
reality have been taken to identify market and sub-market yards and A
,... schemes for establishment of such market or sub-market yards have in fact
been put to action and the market fees levied and realised are being
ploughed back for the advancement of the purpose for which market fees
have been levied and realised.
B
(vi) In deciding the question of rendering of a real and not illusory
service in discharging the obligation emanating from quid pro quo, to levy
of market fee, no straight jacket formulae can be evolved. Fact situation in
I; the matter of establishment of principal and sub-market yards and the
practical feasibility of construction of infrastructures, roads, pathways etc.
for establishment of such market yards within a time frame and in the light C
of financial constraints is bound to vary depending on various factors
including imponderables. It is, therefore, essentially necessary to take a
pragmatic approach to the problems associated with establishing market
and sub-market yards with necessary infrastructures etc. and accompanying
facilities and amenities to be made available to traders and producers D
coming to such yards, in order to decide whether concrete steps have been
translated into action with reasonable sincerity in implementing the
schemes envisaged under the Marketing Act and the Rules framed there-
under.
E
In the instant case, it has been established that the market committee
in the district of Solan after notifying market area, has taken real and
effective steps to identify various sub market yards and some of such yards
have been commissioned after constructing essential infrastructures and in.
respect of some of such yards, tenders have been invited. It is true that the
facility of sub-market yards from the town of Kasauli is at some distance.
F
But it should be borne in mind that Solan is a hilly terrain wittl sparce
population. The volume of agricultural produce is also limited because of
geographical features of the area. Consequently, volume of transaction in
agricultural produce is expected to be much less than that in good agricul-
tural belts in the plains. Such factors are undoubtedly operating as con- G
straints in establishing sub-market yards with necessary infrastructures
within a proximate
I
distance from the place of business of various traders
in the said 'district. Simply on such account, the appellant cannot be
permitted to contend that he has no obligation to pay levy of market fee
for failure to comply with the obligation of quid pro quo for imposition of H
806 SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.

A levy of market fee. The appellant has failed to establish that there is total
lack of quid pro quo vis-a-vis imposition of levy of market fee in the district
of Solan and also in the town of Kasauli.

In our view, the appellant being admittedly a dealer under Section
2( 1) of the Act was required to take a licence. The question of liability to
B pay levy of market fee is to be decided on the basic of actual business
activities of the appellant with reference to agricultural produce involved
in such business activities. If in respect of some agricultural produce the
appellant has no liability of market levy in view of single point levy, it is for
the appellant to establish such claim with reference to records. It is
C unfortunate that the appellant has not obtained licence despite reminder.
The appellant has successfully prevented the action on the complaint made
against him for not taking the licence under Section 4(3) of the Markets
Act by moving the writ petition before the High Court and raising un-
tenable contentions in such writ petition. We, therefore, find no reason to
D interfere with the impugned judgment. This appeal is dismissed with cost
assessed at rupees ten thousand only.

S.V.K.I. Appeal dismissed.

' '

c