REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.9589 OF 2010

Krishi Utpadan Mandi Samiti & Anr. …Appellants

Versus

Ved Ram …Respondent

J U D G M E N T

T.S. THAKUR, J.

1. This  appeal  by  special  leave  calls  in  question  the  

correctness  of  an  order  passed  by  the  High  Court  of  

Judicature at Allahabad whereby Civil Misc. Writ Petition No.  

58900 of 2007 filed by the respondent-company has been  

allowed,  the  order  passed  by  the  Krishi  Utpadan  Mandi  

Samiti, Ghaziabad and that passed by the Deputy Director,  

Rajya Krishi Utpadan Mandi Parishad, Meerut in revision set  

aside.  The  High  Court  has  further  directed  the  Krishi  

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Utpadan  Mandi  Samiti,  Ghaziabad  to  make  a  fresh  

assessment  of  the market  fee  for  the period  in  question  

after providing an opportunity of being heard to the writ-

petitioner or his authorised agent.  The challenge arises in  

the following factual backdrop.

The respondent-company is engaged in the business  

of  manufacture  and  sale  of  milk  products  including  desi  

ghee which it markets under the brand name ‘Paras’.  The  

company has  set  up a  manufacturing  unit  at  Sahibabad,  

District  Ghaziabad,  which  falls  within  the  market  area  of  

Krishi Utpadan Mandi Samiti, Ghaziabad (‘KUMS’ for short).  

The  company’s  case  is  that  it  sells  the  milk  products  

manufactured by it through its consignee agents located at  

several places in different parts of the country.  A list of 15  

consignee agents spread over the States of West Bengal,  

Gujarat, Goa, Orissa, Maharashtra, Rajasthan and New Delhi  

was in that regard enclosed by the respondent with the writ  

petition filed by it before the High Court. These consignee  

agents,  according to the respondent-company,  provide to  

the  company  services  like,  unloading  of  goods  from the  

trucks, storage in the depots of the company, dispatch of  

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the stocks by trucks to redistribution stockists as per sale  

orders, raising sale invoices on behalf of the company and  

collecting payments for the stocks sold.   

In  terms  of  a  show-cause  notice  issued  by  the  

appellant-Samiti, the respondent-company was called upon  

to  produce  all  relevant  documents  with  regard  to  the  

production,  sale-purchase,  movement  and  storage  of  its  

product for the relevant period.  This notice was triggered  

by  a  declaration  received  from  the  respondent-company  

that  consignment  note  No.94  dated  14th May,  2004  

dispatching  5250  Kgs.  of  desi  ghee to  Anand  Sales  

Corporation at Ahmedabad was a stock transfer which did  

not  require  any  gate  pass  for  its  movement  outside  the  

market area.  

On receipt of the notice the respondent-company filed  

a  reply  explaining  the  nature  of  the  transaction  and  

claiming that transfer of stocks to its godowns outside the  

mandi area was on “stock transfer basis” and not pursuant  

to  any  sale  effected  within  the  mandi  area.  The  Mandi  

Samiti remained dissatisfied with that explanation with the  

result  that  by an order  dated 27th April,  2005 the Samiti  

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held that obtaining of gate passes after producing evidence  

to  rebut  the  presumption  arising  under  Explanation  to  

Section 17(iii)(b) of the Uttar Pradesh Krishi Utpadan Mandi  

Adhiniyam,  1964  was  necessary.  The  Samiti  further  held  

that  the  respondent-company had not  adduced  sufficient  

evidence to rebut the presumption that the movement of  

goods from the mandi area to places outside such area was  

pursuant to a sale effected within the said area.  The Samiti  

accordingly  levied  a  market  fee  of  Rs.9,39,200/-  and  

development  fee  of  Rs.2,34,800/-  totalling  Rs.11,74,000/-  

for 3906.80 quintals of desi ghee taken out from the market  

area  of  KUMS,  Ghaziabad  under  Section  17(iii)(b)  of  the  

Adhiniyam mentioned above.  It was further directed that in  

future the respondent-company shall produce the details of  

its business and obtain gate passes whenever it removes  

ghee from the market area of KUMS, Ghaziabad.   

Aggrieved  by  the  order  passed  by  the  Samiti,  the  

respondent-company filed a  revision  under  Section 32 of  

the Adhiniyam before the Regional Deputy Director, Rajya  

Krishi Utpadan Mandi Parishad, U.P. which was dismissed by  

the Deputy Director by its order dated 31st October, 2007.  

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The Deputy Director while affirming the order passed by the  

Samiti held that the transactions in question were not by  

way of stock transfers but sales within the market area of  

KUMS Ghaziabad, hence exigible to market fee.   

The  respondent-company  then  filed  Writ  Petition  

No.58900 of  2007 before the High Court  of  Judicature at  

Allahabad, challenging the orders passed by the Samiti and  

the Deputy Director on several grounds.   The High Court  

has, by the order impugned in the present appeal, allowed  

the said petition set aside the orders of the Samiti and the  

Deputy  Director  and  remanded  the  matter  back  to  the  

Samiti  for  a  fresh  assessment  in  accordance  with  law.  

While doing so, the High Court has not only found fault with  

the  approach  adopted  by  the  Samiti  and  the  Deputy  

Director but also commented adversely about the capacity  

of the officers making the orders in deciding the questions  

of  law  and  fact  that  arise  in  connection  with  such  

transactions.  According  to  the  High  Court  the  entire  

approach adopted by the Samiti  and the Deputy Director  

was  biased,  arbitrary,  and  authoritative  and  based  on  a  

misreading of the legal provisions and the judgments of this  

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Court. The High Court felt that all this happened because  

the officers who were handling the issue of such importance  

were not equipped with the requisite knowledge about the  

legal principles and procedure applicable while dealing with  

complex questions of law and fact.  More importantly,  the  

High Court evolved a new and somewhat novel procedure  

for examination of the issues involved in such cases while  

providing  for  safeguards  by  way of  securing  the  amount  

claimed by the Mandi Samiti towards market fee. The High  

Court observed:

“The  market  fee  is  levied  on  the  sale  of  agricultural   produce in the market area. The Explanation only raises  a  rule  of  presumption  which  may  be  rebutted  by   manufacturing trader or the trader as the case may be.   The Court cannot presume that the movement of goods   cannot be occasioned unless the sale is affected.  The   nature of evidence to be produced at the time of gate   pass  is  a  contentious  matter  which  has  not  been   resolved  in  the  last  three  decades.   A  number  of   attempts  made by the courts  have not  succeeded in   proper  understanding  of  law  by  the  officers  and  employees  of  the  market  committees  and  Mandi   Parishad.  In  the  circumstances,  in  addition  to  the   directions,  which  have  been  given  by  the  judgments   cited above, the Court directs that the Petitioner  will   furnish  to  Secretary,  KUMS  Ghaziabad,  a  ‘revolving   bank  guarantee’  of  the  amount  of  market  fees  on   yearly basis based on the average of the historical sales   and  payments  of  the  market  fees  in  the  last  three   years. The bank guarantee will be furnished on the first   of  April  and  unless  revoked,  it  shall  be  revalidated   every  year.   The  market  committee  will  issue  gate   passes on a declaration made by the petitioners that   the  goods  are  moving  by  way  of  stock  transfer  and  

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have not been sold.  They will produce the consignment   note,  and  the  proof  of  dispatch  giving  names  and  addresses of stockists.  These documents will constitute  sufficient proof of rebuttal at the stage of a request for   gate  pass.   The  market  committee  will  assess  the  market fee on yearly basis after 31st March of the next  year  and  consider  documents  furnished  by  way  of   rebuttal of the presumption of sale in respect of each  and  every  transactions  separately.  It  will  not  be  sufficient to say that the gate pass was not obtained or   obtained  without  payment  of  market  fees  or  that   documents are not sufficient.   The order would show  application of mind and reasoning for both accepting or   rejecting the proofs on the furnished in respect of each  and every transactions separately.”

2. On behalf of the appellant-Samiti it was argued by Mr.  

Rakesh  Dwivedi,  learned  senior  counsel,  that  the  

observations  made  by  the  High  Court  regarding  the  

capacity  of  the  officers  to  understand  and  effectively  

determine  the  contentious  issues  that  arose  for  

determination  was wholly  unjustified.   He submitted  that  

instead of finding fault with the capacity of the officers to  

understand  the  issues,  the  High  Court  would  have  done  

better  in  pointing  out  the  errors  committed  by  the  

authorities below in either appreciating the law or applying  

the same to the facts of the case at hand. He urged that the  

officers  had  appreciated  the  evidence  adduced  by  the  

respondent properly and were well within their powers to  

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reject the same for reasons which they had set out in their  

respective orders.  So long as there was no perversity in the  

approach adopted by the Samiti and the Deputy Director in  

appreciating evidence and/or the application of principles of  

law  to  the  facts  of  the  case,  the  mere  fact  that  those  

officers were not formally trained in law was no reason to  

dub them as incompetent or incapable, especially when any  

such  training  was  no  guarantee  against  commission  of  

mistakes.  

3. It  was  further  argued  that  the  High  Court  had  

completely  overlooked  the  fact  that  the  respondent-

company  had,  in  complete  breach  of  the  directions  and  

procedure sanctioned by the orders passed by this Court,  

removed  the  stock  of  ghee without  the  requisite  gate  

passes necessary for  such removal.   The High Court had  

also committed an error in evolving a procedure which was  

different from the one that was stipulated by this Court in  

Krishi  Utpadan  Mandi  Samiti  and  Ors.  v.  Shree  

Mahalaxmi Sugar Works and Ors. 1995 Supp (3) 433  

and  Krishi  Utpadan  Mandi  Samiti  v.  M/s  Saraswati   

Cane Crusher & Co. & Ors. (Civil Appeal Nos. 1769-

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1773 of 1998)  decided on 25th March, 1998.  Mr. Sudhir  

Chandra appearing for the respondent supported the order  

passed by the High Court and prayed for dismissal of this  

appeal.  

4. In Shree Mahalaxmi Sugar Works (supra) this Court  

noticed  the  Explanation  under  Section  17  of  the  Uttar  

Pradesh  Krishi  Utpadan  Mandi  Adhiniyam,  1964  and  

declared  that  the  Samiti  was  entitled  to  raise  demands  

against the dealers before passes for removal of the goods  

could be issued to them.  This Court held that if there was a  

valid rebuttal to the statutory presumption that a sale had  

taken place within the notified market area, the dealers will  

be entitled to the passes, otherwise not.  If the dealers are  

compelled to pay market fee as demanded, it shall be open  

to  the  aggrieved  to  challenge  the  same  in  the  manner  

provided  under  the  Act.  The  order  passed  by  this  Court  

being a short order may be extracted in extenso:

“1. Leave granted.

2. The Explanation to Section 17 of the Uttar Pradesh   Krishi Utpadan Mandi Adhiniyam, 1964 reads as follows:

“Explanation.—  For  the  purpose  of  clause  (iii),  unless  the  contrary  is  proved,  any  specified   

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agricultural produce taken out or proposed to be  taken out of a market area by or on behalf of a   licensed trader  shall  be  presumed to  have been  sold within such area and in such case, the price of   such  produce  presumed  to  be  sold  shall  be  deemed to  be  such reasonable price  as  may be  ascertained in the manner prescribed.”

From this it is clear that there is a presumption against   the dealers. In view of that presumption, it is open to   the  appellants-Krishi  Utpadan  Mandi  Samiti  to  raise   demands against  the dealers  before  passes could  be   issued. If there is a valid rebuttal in that the sale did not   take place within the notified market area, the dealers   will be entitled to the passes, otherwise not. Of course,   even the dealers are compelled to pay the market fee  as demanded. It is open to them to challenge it in the   manner provided under the Act.

3. The appeals are disposed of in the above terms.”

5. Pursuant  to  the  above  pronouncements  the  Mandi  

Samiti  appears  to  have  started  issuing  gate  passes  on  

payment of mandi fee demanded by them at the time of  

issue of gate pass. A change in the procedure came about  

as a result of the decision of this Court in  M/s Saraswati  

Cane Crusher (supra). In that case the dealers had argued  

that  the  procedure  being  followed  pursuant  in  Shree  

Mahalaxmi  Sugar  Works  (supra)  was  not  satisfactory  

inasmuch  as  the  requirement  of  hearing  and  of  an  

adjudication  was  not  being  satisfied  unless  an  aggrieved  

dealer was in a position to challenge the assessment in the  

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manner provided under the Act.   A three-Judge Bench of  

this Court found merit in that contention and held that the  

order passed in  Shree Mahalaxmi Sugar Works  (supra)  

required some repair work. The Court observed:

“We are satisfied that the orders of  this  Court afore- referred to would need some repair work. We treat the   said order to be conceiving of a provisional assessment   where after doors are opened for a final assessment.   We  conceive  that  when  demands  are  raised  by  the   Krishi Utpadan Mandi Samiti against a trader before he   could ask for transit of goods outside the market area,   the trader would be entitled to tender a valid rebuttal to  say  that  no  sale  had  taken  place  within  the  notified   area and that if the explanation is accepted there and   then  by  the  Mandi  Samiti,  no  question  of  payment   would arise as also of withholding the gate passes. If   prima facie evidence led by the trader is not accepted   by the Mandi Samiti,  the trader or the dealer can be   compelled to pay the market fee as demanded before   issuance of gate pass.  If the trader makes the payment   without  demur,  the matter  ends and the assessment  finalized.   But in case he does so and raises protest,   then the assessment shall be taken to be provisional in   nature making it obligatory on the trader to pay the fee   before obtaining the requite gate pass.  After protest   has been lodged and the provisional  assessment has   been made, a time frame would be needed to devise   making the final assessment.  We, therefore, conceive   that it innately be read in the order of this Court that a   final assessment has to be made within a period of two   months after provisional assessment so that the entire   transaction  in  that  respect  is  over  enabling  the  aggrieved  party,  if  any,  to  challenge  the  final   assessment in the manner provided under the afore Act   or under the general law of the land in appropriate fora.   Having added this concept in this manner in the two  Judge  Bench  decision  of  this  Court,  we  declare  that   what repair has been done instantly would add to the   order  of  the  High  Court  and  the  instant  corrective   decision shall be the governing rule. The Civil Appeals   would thus stand disposed of.

Since  the  assessment  thus   far  made  against  the  traders, who are involved in the instant appeals, would   

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have  to  be  treated  as  provisional  awaiting  final   assessment, we permit the concerned traders to move   the  respective  Mandi  Samiti  within  two  months  from  today to hear their objections and proceedings onwards   be  regulated  in  accordance  with  procedure  devised   hereinbefore. Nonetheless we add that should the basis   of  provisional  assessment be knocked off,  the Samiti   would  refund  the  market  fee  to  the  traders/dealers   within two months thereafter.”

6. It appears from the above that the orders passed by  

this Court in Shree Mahalaxmi Sugar Works (supra) was  

interpreted to mean that a provisional assessment would be  

made against the trader before he could ask for a transit  

pass for removal of the goods outside the market area. In  

the course of  the said  provisional  assessment  the trader  

would be entitled to tender a valid rebuttal to the statutory  

presumption under Section 17 of the Adhiniyam and argue  

that no sale having taken place within the notified area, it  

was not liable to pay any market fee on the movement of  

goods.  If  the  explanation  offered  by  the  trader  was  

accepted the gate pass would be issued without insisting  

upon any payment of the fee.  But if the evidence laid by  

the trader is not prima facie accepted by the Mandi Samiti  

the trader or the dealer can be compelled to pay market fee  

before issue of gate pass to him. The Court further held that  

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if  the  trader  makes  the  payment  without  demand  the  

matter ends and the issue finalised.  In case, however,  he  

raises a protest then the assessment shall be taken to be  

provisional in nature making it obligatory for the trader to  

pay the fee before obtaining the requisite gate pass. After  

protest has been lodged the provisional assessment shall  

be followed by a final assessment within a time frame. The  

Court prescribed a period of two months in respect of each  

such transaction enabling the aggrieved party to challenge  

the same under the Act or under the general law of the land  

before the appropriate fora.  

7. The above procedure has been working effectively for  

the  past  decade  and  a  half  and  ought  to  have  been  

effective  in  the  instant  case  also.  The  unfortunate  part,  

however, was that the respondent-company did not respect  

the  procedure  stipulated  under  the  above  orders  of  this  

Court.  It  did  not  apply  for  and  obtain  gate  passes  for  

removal of its goods. The Samiti, therefore, had no occasion  

to pass any provisional or final order based on the material  

adduced before it. It is only when the respondent-company  

filed a declaration that the removal of the stocks pursuant  

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to consignment note No.94 dated 14th May, 2004 in favour  

of  Anand  Sales  Corporation  at  Ahmedabad  was  a  stock  

transfer  and did  not  require  a  gate pass  that  the Samiti  

issued a show-cause notice asking the respondent-company  

to  furnish  the  documents  with  regard  to  the  production,  

sale, purchase, movement and storage of the goods.  Based  

on the figures furnished pursuant to the said show-cause  

notice  the  Samiti  determined  the  market  fee  and  the  

development fee and raised a demand for payment thereof  

with a direction to the company to follow the prescribed  

procedure for removal of goods from the mandi area. The  

revisional authority, as seen above, upheld the assessment  

of the fee and the consequential directions issued by the  

Samiti.   The High Court,  however,  completely overlooked  

the effect  of  the orders  passed by this  Court  in  the two  

cases mentioned earlier and brought in a new mechanism  

which could in its opinion be more effective, in dealing with  

the situation that arose so very often between the Samiti on  

the one hand and the traders on the other. The High Court  

failed to appreciate that it was not on virgin ground.  The  

matter  was  fully  covered  by  the  decisions  of  this  Court.  

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Further  repair  of  the  procedure  and  the  mechanism  so  

provided could only be under the orders of this Court. The  

High Court ought to have left it to this Court to determine  

as to whether the mechanism and procedure provided by  

our orders required any modification, and if so,   in what  

form and to what extent.  Instead of doing that, the High  

Court embarked upon an exercise which was not necessary  

especially  when  the  same  did  no  service  to  judicial  

discipline.                    

8. The High Court was also in error in holding that even  

when  the  movement  of  goods  without  gate  passes  may  

have been in violation of the rules regulating the issue of  

such passes, any such violation could only call for a penalty  

under  the  said  rules.  Assessment  of  market  fee  on  the  

removal of such goods from the mandi area was, according  

to  the  High  Court,  a  different  matter  unrelated  to  the  

breach of the rules requiring the traders to remove goods  

only on the authority of validly issued gate passes.   The  

High Court appears to have overlooked the fact that if gate  

passes are required to be obtained under the rules, removal  

of stocks without applying for such gate passes and without  

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furnishing prima facie evidence of proof that there was no  

sale of the goods involved,  was a reason enough for the  

Mandi Samiti to demand payment of the market fee on the  

stocks that were removed. The absence of gate passes was  

tantamount  to  removal  of  the  goods  in  breach  of  the  

relevant rules and also in breach of the directions issued by  

this Court in the two cases mentioned above.  A dealer who  

adopted  such  dubious  procedure  and  means  could  not  

complain of a failure of opportunity to produce material in  

support  of  its  claim  that  no  sale  was  involved.  No  

opportunity to a dealer who was acting in defiance of the  

rules and removing the goods without any intimation and  

permission of the Samiti could be granted for the occasion  

to  grant  such  an  opportunity  would  arise  only  when the  

trader applied for the issue of a gate pass. As a matter of  

fact,  the  goods  having  been  taken  away  without  gate  

passes and without any material to show that there was no  

sale, the Samiti could demand payment of the market fee  

and leave it open to the respondent-trader to claim refund  

by  rebutting  the  presumption  that  the  removal  was  

pursuant to a sale. At any rate, the Samiti and the Deputy  

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Director  have  concurrently  held  that  the  respondent-

company has not been able to rebut the presumption under  

Section 17 of the Adhiniyam. We see no reason to interfere  

with  that  finding  especially  when  the  appraisal  of  the  

evidence by the said two authorities has not been shown to  

us to be in any way perverse to warrant interference with  

the same.      

9. In the result, we allow this appeal, set aside the order  

passed by the High Court and restore that passed by the  

Samiti and the Deputy Director in revision. The parties are  

left to bear their own costs.                                    

……………………..………….. …J.

(T.S. THAKUR)

……………………..………….. …J.

(DIPAK MISRA)

New Delhi March 23, 2012

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