Holding

Producers who sell agricultural produce in a market area are deemed traders and must obtain a licence under Section 9(1) and pay the market fee under Section 17(iii)(b).

Summary

The petitioners, producers of Khandsari sugar, argued that as mere producers they were exempt from obtaining a licence and paying market fee under the U.P. Utpadan Mandi Adhiniyam, 1964. The respondents, the Krishi Utpadan Mandi Samiti, contended that the petitioners were "traders" within the meaning of the Act and therefore required to comply with Sections 9(1) and 17(iii)(b). The Supreme Court examined the proviso to Section 9(1), holding that it exempts only those who produce for their own domestic consumption, not those who sell in the market area. It further held that the petitioners, by producing and selling Khandsari sugar, qualify as "traders" under Section 2(y) and must obtain a licence and pay the market fee. The Court dismissed the writ petition, finding no merit in the petitioners' claims.

Issues considered

Whether a producer of agricultural produce who sells the produce in a declared market area is required to obtain a licence under Section 9(1) of the U.P. Utpadan Mandi Adhiniyam, 1964.
Whether the proviso to Section 9(1) exempts such a producer from the licence requirement.
Whether the petitioners qualify as a "trader" within the meaning of Section 2(y) of the Act.
Whether the petitioners are liable to pay market fee under Section 17(iii)(b) of the Act.

Legislation cited

U.P. Utpadan Mandi Adhiniyam, 1964s. 17(iii)(b), s. 2(y), s. 5, s. 9(1)

Subjects

licence requirementmarket feeproducer vs traderdomestic consumption exemptionagricultural market regulationU.P. Utpadan Mandi Act

Judgment

VIRENDRA KUMAR & ORS.
A
v.
KRISHI UTPADAN MANDI SAMITI & ORS.

SEPTEMBER 23, 1987

B [RANGANATH MISRA AND MURARI MOHON DUTT, JJ.]

U.P. Utpadan Mandi Adhiniyam, 1964: ss. 2(y}, 5, 9(1) proviso
& 17(iii)(b)-Producers of Khandsari sugar-Owners of Khandsari
Units-Selling produce in the market area-Whether liable to take out
licence and pay market fee-Such producer-Whether a trader.
...
c Section 9(1) of the U.P. Utpadan Mandi Adhiniyam, 1964 pro-
hibits local body or other person from setting up within the market area
any place for the sale-purchase of the specified agricultural produce,
except under a licence granted by the Committee concerned. A proviso
thereto, however, exempts a producer In respect of agricultural pro-
D duce produced, reared, caught or processed by him or any person who
purchases or stores any agricultural produce for his domestic consump-
tion. Clause (b) s. 17(iii) empowers a Committee to levy and collect
market fee payable on transactions of sale of specified agricultural
produce. Where such produce is sold through a commission agent,
sub-cl. (1) of cl. (b) makes him liable to collect the market fee and pay
the same to the Committee.

The petitioners, who are producers of Khandsari sugar, claimed
that as they were only 'producers' in respect of agricultural produce in
the market area they were not required to take out any licence or to pay
the market fee under the Act, that the expression "for his domestic
-
p consumption" in the proviso to s. 9(1) does not refer to a producer of
agricultural produce but to a person who purchases or stores any
agricultural produce, and that sub-s.(I) of s. 9 would apply only to a
producer who was a trader and the petitioners were not 'traders' within
the definition of the term under s. 2(y) and also as contemplated by
sub-s. (1) ofs. 9.
G
Dismissing the writ petition,

HELD: 1. It is not the intention of the Legislature that a 'pro- r-
ducer' of an agricultural produce within the Market Area should be
exempted from taking out any licence even though he sells his produce
H in the Market Area. [311G-HI
308
VIRENDRA v. KRISH! UTPADAN SAMIT! 309

2. Sub-section (1) of s. 9 of the U.P. Utpadan Mandi Adhiniyam, A
1964 will not apply to the two categories of persons mentioned in the
proviso thereto, namely, (1) a producer who produces, r~ars, catches or
processes agricultural produce for his domestic consumption, and (2)
any person who purchases or stores any agricultural produce for his
domestic coiisUlllption. If, however, the producer produces, rears,
catches or processes agricultural produces not for his domestic con- B
sUmption but for the sale thereof in the Market Area such a producer
will not come within the purview of the proviso and he will have to take
out a licence under s. 9(1). 1312B-C; Fl
Since the petitioners in the instant case are producing Khandsari
for sale in the Market Area they will have to take out a licence under
sub-s. (1) of s. 9. They are thus also liable to pay market fee to the C
Committee on their transactions ofsale, under s. 17(iii)(b). [313DI

3. The expression "for bis domestic consumption" in the proviso
to s. 9(1) refers to a producer of agricultural produce. The proviso
should be interpreted in a manner which would be in conformity with
the intention of the legislature and also the object of the Act, i.e., the D
regulation of sale and purchase of agricultural produce and estab-
lishment, superintendence and control of market therefor. If the
proviso is interpreted to mean that the producer of agricultural
produce is exempt from taking out a licence under s. 9(1), even though
he produces, rears, catches or processes not for his domestic consump-
tion but for selling thelll in the Market Area, it would defeat the very E
object of the Act. l312C-DI

- 4. The petitioners by producing Khandsari sugar and selling it
within the market area are also 'traders' within the meaning of s. 2(y)
and also as contemplated by sub-s. (1) ofs. 9. [313BI
. Ramesh Chandra v. State of U.P., [1980] 3 SCR 104, referred to.
F

-I
ORIGINAL JURISDICTION: Writ Petition No. 766 of 1987.

(Under Article 32 of the Constitution of India).
G
Soli J. Sorabjee and Pramod Swarup for the Petitioners.

~ Dr. Y.S. Chitale:Mrs. S. Dikshit and Pradeep Mishra for the Res-
pondents.

The Judgment of the Court was delivered by H
310 SUPREME COURT REPORTS (1988] 1 S.C.R.

DUTT, J. In this writ petition under Article 32 of the Constitu·
A
tion of India the petitioners have prayed for issuance of the writ in the
nature of mandamus directing the respondents not to compel the
petitioners to take out licences and to pay market fee under the U .P.
Utpadan Mandi Adhiniyam, 1964, hereinafter referred to as 'the Act'.

B The petitioners are the producers of khandsari sugar imd are the
owners of Khandsari Sugar Units which they operate with the aid of
power crushers for the production of khandsari sugar. The petitioners ,y
claim that as they are only producers of khandsari sugar, they are not

c
liable to take out any licence or to pay the market fee under the Act as
illegally demanded by the respondents Mandi Samitis. -
It appears from the Preamble that the Act provides for the regu·
lation of sale and purchase of agricultural produce and for the estab- -{
lishment, superintendence and control of market therefor in Uttar
Pradesh. Section 5 of the Act provides for the declaration of intention
of the State Government to regulate and control sale and purchase of
D agricultural produce in any area to be declared as a Market Area.
Under section 6, the Market Area will be declared by the State
Government by a notification in the Gazette after considering the
objections received within the period referred to in section 5 of the
Act. Section 9(1) of the Act provides as follows:-

"S. 9(1).-As from the date of declaration of an area as ,)..
E
Market Area no Local Body or other person shall, within
the Market Area, set up, establish or continue, or allow to
be set up, established or continued, any place for the sale-
purchase, storage, weighment or processing of the speci-
.
tied agricultural produce, except under and in accordance
F with the condition of a licence granted by the Committee
concerned, anything to the contrary contained in any other '
law, custom, usage or agreement notwithstanding: ~-
Provided that the provisions of this sub-section shall
not apply to a producer in respect of agricultural produce
G produced, reared, caught or processed by him or to any
person who purchases or stores any agricultural produce
for his domestic consumption."
r-
Section 17 lays down the powers of the Committee constituted ·
under section 13 of the Act. Clause (iii)(b )(1) of section 17 provides as
H follows:-
VIRENDRA v. KRISHI UTPADAN SAMn;J [DUTT, J.] 311

"S.17-A Committee shall, for the purpose of this Act,
A
have the power to-

(iii) levy and collect:
B

- (b) market fee, which shall be payable on trans-
actions of sale of specified agricultural pro-
duce in the market area at such rates, being
..,,_.. not less than one percentum and not more C
/ /' than one and half percentum of the price of
the agricultural produce so sold, as the State
Government may specify by notification,
and such fee shall be realised in the follow-
ing manner- D

(1) If the produce is sold through a commis-
sion agent, the commission agent may
realise the market fee from the pur-
chaser and shall be liable to pay the
same to the Committee;" E

- It is urged by Mr. Sorabjee, learned Counsel appearing on behalf
of the petitioners, that as the petitioners are only producers in respect
of agricultural produce, they are not required to take out any licence in
view of the proviso to section 9(1) of the Act. Counsel submits that
under the proviso, sub-section (1) of section 9 will not apply to two F
-f categories of persons, namely, ( 1) the producer in respect of agri-
cultural produce and (2) any person who purchases or stores any
agricultural produce for his domestic consumption. In other words,
according to the learned Counsel, a producer who produces the
agricultural produce in the Market Area and sells them will not have to
take out.a licence under sub-section (1) of section 9. We are unable to G
accept the contention. In our view, it is not the intention of the Legis-
lature that a producer of an agricultural produce within the Market
Area would be exempt from taking out any licence, even though he
sells his produce in the Market Area. We have already noticed that the
Preamble of the Act shows that it is for the regulation of sale and
purchase of agricultural produce and for establishment, superintend- H
312 SUPREME COURT REPORTS [1988] 1 S.C.R.

ence and control of market therefor. The very object of the Act, as ~
A indicated in the Preamble, will be defeated, if a producer of an
agricultural produce within the Market Area is exempted from taking
out a licence merely because he is a producer of an agricultural pro-
duce. ft is true that under the proviso, sub-section (1) of section 9 will
not be applicable t0 a producer of agricultural produce. But such a
B producer must be a producer of agricultural produce processed,
reared, caught or processed by him for his domestic consumption. If, y
however, the producer produces, rears, catches or processes the
agricultural produce not for his domestic consumption, but for the sale
thereof in the Market Area, such a producer will not come within the
purview of the proviso and he will have to take out a licence under
sub-section (1) of section 9 of the Act. We are unable to accept the
-
c contention of the learned Counsel for the petitioners that the expres-
sion "for his domestic consumption" in the proviso does not refer to a
producer of agricultural produce, but to a person who purchases or
-r'
stores any agricultural produce. As has been stated already, if the
proviso is interpreted to mean that a producer of agricultural produce
D is exempt from taking out a licence under sub-section ( 1) of section (9)
of the Act, even though he produces, rears, catches or processes not
for his domestic consumption but for selling them in the Market Area,
it would defeat the very object of the Act. The proviso, in our opinion,
should be interpreted in a manner which would be in conformity with
the intention of the Legislature and also the object of the Act. There- )-
E fore, in our view, there can be no doubt that a producer who produces,
rears, catches, or processes agricultural produce for his domestic con-
sumption and also any person who purchases or stores any agricultural
produce for his domestic consumption are exempt under the proviso
from taking out any licence. In other words, sub-section (1) of section
9 will not apply to these two categories of persons as mentioned in the
F proviso.
~-
It is, however, urged on behalf of the petitioners that sub-section
(1) of section 9 would apply only to a producer who is a trader. Our
attention has been drawn to the definition of the word 'trader' under
section 2(y) of the Act as meaning a person who in the ordinary course
G of business is engaged in buying or selling agricultural produce as a
principal or as a duly authorised agent of one or more principals and
includes a person, engaged in processing of agricultural produce. It is ,....
submitted that the petitioners are not 'traders' within the meaning of
the said definition and also as contemplated by sub-section (1) of
section 9 of the Act. In support of this contention, the learned Counsel
H for the petitioners has placed much reliance upon a decision of this
VIRENDRA v. KRISHJ UTPADAN SAMIT! [DUTT, J J 313

Court in Ramesh Chandra v. State of U.P., (1980] 3 SCR 104 which A
also relates to the Act with which we are concerned. In that case, it has
been observed that a producer-trader will be required to· take out a
licence and the expression 'producer-trader' has been explained to be
a person who is both a producer of agricultural produce and himself
trades in it. We do not think that the decision at all supports the
contention of the petitioners. The petitioners, in our opinion, by pro- B
ducing khandsari sugar and selling it within the Market Area are also
'traders' within the meaning of section 2(y) and also as contemplated
by sub-section (1) of section 9. The petitioners are, therefore,
'producer-traders' as explained in the above decision of this Court.

The next question that falls for consideration is whether the C
petitioners are liable to pay market fee. We have already extracted
above the provision of section 17(iii)(b)(1) which has been relied upon
by the learned Counsel for the petitioners in support of his contention
that the petitioners are not liable to pay market fee. Section 17(iii)
(b )( 1), inter alia, provides that if the produce is sold through a commis-
sion agent, the commission agent may realise the market fee from the D
purchaser and shall be liable to pay the same to the Committee. It is
argued on behalf of the petitioners that as they sell their produce
through a commission agent, it is only the commission agent who is
liable to pay the market fee and not the petitioners. It has, however,
been frankly conceded by Mr. Sorabjee on behalf of the petitioners
that there is no averment in the petition that the petitioners sell their E
produce through a commission agent. In the absence of any such aver-

- ment, we are afraid, such a contention is not available to the petition-
ers. There is, therefore, no substance in the contention that the
petitioners are not liable to paf market fee.

No other point has been urged on behalf of the petitioners. F

For the reasons aforesaid, the writ petition is dismissed. There
will, however, be no order as to costs.

P.S.S. Petition dismissed.