REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8963 OF 2003                

Krishi Utpadan Mandi Samiti, Allahabad                         ... Appellant  

                                             Versus

M/s Baidyanath Ayurved Bhawan (Pvt.) Ltd. & Anr.   ...Respondents

J U D G M E N T

Dr. B.S. CHAUHAN, J.

1. This appeal has been preferred against the judgment and order  

dated 14.7.2003 passed by the High Court of Judicature at Allahabad in  

C.M.W.P. No. 12372 of 2003 by which the High Court allowed the  

writ  petition holding that  respondent no.1 was not  required  to take  

licence under Section 9 of the Uttar  Pradesh Krishi  Utpadan Mandi  

Adhiniyam, 1964 (hereinafter called `the Act 1964’).

2. Facts  and  circumstances  giving  rise  to  present  appeal  are  as  

under:

A. Respondent  no.  1  is  a  company  registered  under  the  Indian  

Companies  Act,  1956  and  manufactures  Ayurvedic  medicines  

including  Chawanprash  at  Naini,  Allahabad.   For  that  purpose,  the  

respondent no. 1 has obtained a licence under the Drugs and Cosmetics  

Act,  1940.  For  manufacturing  Chawanprash  the  said  respondent  

purchases certain agricultural produce e.g. Gur, Amala and Ghee etc.  

and use the same as raw material.  

B. The appellants served a notice dated 17.3.1999 calling upon the  

respondent no. 1 for taking a licence under section  9 of the Act 1964  

as it was purchasing and processing the aforesaid agricultural produce  

in its ordinary course of business.  Respondent no. 1 submitted reply to  

the said notice on 31.3.1999 pleading  that it was not required to take  

licence as the said respondent was not doing any business in the sale or  

purchase of agricultural produce.  The appellant found the explanation  

furnished by respondent  no.  1 unsatisfactory and,  thus,  sent  another  

notice dated 2.12.2000 calling upon respondent no.1 to take a licence  

failing which legal proceedings could be initiated against it.  Similar  

notices were subsequently sent to respondent no. 1 on 3.12.2000 and  

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16.12.2000  but  respondent  no.  1  did  not  pay  any  heed  to  the  said  

notices.  The appellant issued notice dated 14.2.2001 to respondent no.  

1 for personal appearance and furnishing the explanation as to why the  

licence  under  Section  9  of  the  Act  1964  was  not  required.  The  

respondent no. 1 did not comply with the said notice, thus the appellant  

filed  complaint Case No. 480 of 2002 in the court of Special Judicial  

Magistrate, Allahabad against the respondent no. 1, alleging violation  

of the statutory provisions of the Act 1964.   

C. Being  aggrieved,  the  respondent  no.  1  approached  the  High  

Court by filing Writ Petition No. 12372 of 2003 for quashing of the  

complaint  Case  No.  480  of  2002.   The  High  Court  vide  impugned  

judgment and order dated 14.7.2003 allowed the writ petition holding  

that the said respondent had been using the agricultural produces after  

buying  for  internal  purpose  i.e.  for  consumption  in  its  factory  for  

manufacturing  the  end  product  and  not  for  further  transferring  the  

agricultural produces to someone else and thus, the respondent no. 1  

was not required  to take licence under Section 9 of the Act 1964.   

Hence, this appeal.   

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3. Smt. Shobha Dikshit,  learned senior counsel appearing for the  

appellant,  has  submitted  that  respondent  no.  1  is  manufacturing  

Ayurvedic medicines and purchases Amla, Gur and Ghee etc. from the  

market  area  established  under  the  Act  1964,  which  are  admittedly  

agricultural produce.  Therefore, being a trader, the respondent no. 1 is  

required  to  take  a  licence  so  far  as  the   purchase  of  specified  

agricultural produce from the market area is concerned and also pay  

requisite market fee and any violation of the provisions of the Act 1964  

would attract penal consequences i.e. prosecution under Section 37 of  

the  Act  1964.   The  use  of  the  aforesaid  agricultural  produce  for  

manufacturing  of  the  medicines  cannot  be  termed  as  domestic  

consumption. The word `domestic’ means required for  personal use of  

the family and this term cannot be interpreted in such wide terms as to  

include manufacturing of a different commodity at commercial level in  

an industry.   The High Court  erred in  defining the  term `domestic’  

giving  a  very  wide  interpretation  i.e.  meant  for  supplying  the  end  

product in the country and not for export.  Even otherwise, in view of  

the fact that an adequate and efficacious remedy provided under the  

Act 1964 was available to the respondent, the High Court ought not to  

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have  entertained  the  Writ  Petition.  Thus,  the  appeal  deserves  to  be  

allowed.  

4. Per contra, Shri Subramonium Prasad, learned counsel appearing  

for the respondents, has submitted that as per the statutory provisions  

of the Act 1964, the respondent no. 1 cannot be held to be the buyer or  

seller  of  the agricultural  produce nor  it  is  engaged in processing of  

agricultural produce, therefore, the provisions of the Act 1964 are not  

applicable.  The respondent-company purchases   agricultural  produce  

only as  raw material for manufacturing of Chawanprash in its factory.  

Thus, in such a fact-situation, the respondent no. 1 is not  required to  

take a licence under Section 9(2) of the Act  1964 read with  Rule 70 of  

the  U.P. Krishi Utpadan Mandi Niyamavali, 1965 (hereinafter called  

the `Rules 1965’).  The appeal lacks merit and is liable to be dismissed.  

5. We have considered the rival submissions made by the learned  

counsel for the parties and perused the record.   

6. In  Star Paper Mills Ltd. v. State of U.P. & Ors., (2006) 10  

SCC 201, this Court while dealing with the same statutory provisions  

accepted the submissions made on behalf of the State that in view of  

the fact that adequate and efficacious statutory remedy was available to  

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the person aggrieved, the High Court  ought not to have entertained the  

writ  petition  without  the  statutory  remedy  being  exhausted.  While  

deciding the said case, this Court placed reliance upon large number of  

earlier judgments of this Court under the Act 1964.

          Be that as it may, as the matter has been dealt by the High Court  

on  merit  and  a  period  of  more  than  8  years  has  elapsed,  it  is  not  

desirable to entertain the issue of availability of alternative remedy or  

exhaustion of statutory remedy. The matter requires to be considered  

on merit.

7. The appeal raises the following substantial question of law:  

Whether the specified agriculture produce purchased by  the Respondent No. 1 within the market area and used in   manufacturing a commercial product could be held to be   for  domestic  consumption  and thereby  would  exempt  it   from obtaining licence under Section 9(2) as also from  levy and payment of market fee under Section 17(iii)(b) of   the Act 1964?  

8. The Act 1964 has been enacted with the object to regulate the  

sale and purchase of the specified agricultural produce in market area  

and to curb down the unfair trade practices prevalent in the old market  

system within the State of Uttar Pradesh.  The object of the Act has  

been to reduce the multiple trade charges, levies and exactions charged  

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from the  producer-seller;  to  provide  for  the  verification  of  accurate  

weights and scales and to ensure that the producer-seller is not denied  

his legitimate dues.  Further to provide amenities to the producer-seller  

in  the  market  and  for  providing  better  storage  facilities,  to  stop  

inequalities  and unauthorised  charges  and levies  from the producer-

seller and to make adequate arrangements for market intelligence with  

a view to posting the agricultural producer with the latest position in  

respect of the markets dealing with a particular agricultural  produce.  

9. For adjudication of the aforesaid issue, it may be necessary to  

refer to some of the statutory provisions of the Act 1964.

(a) Section 2(a) of the Act, 1964 defines “agricultural produce” as  

under:  

“Agricultural  produce”  means  such  items  of   produce  of  agriculture,  horticulture,  viticulture,   apiculture,  sericulture,  pisciculture,  animal   husbandry  or  forest  as  are  specified  in  the   Schedule, and includes admixture of two or more  of such items, and also includes any such item in   processed  form,  and  further  includes  gur,  rab,   shakkar, khandsari and jaggery.”  

(b) “Trader” is defined under Clause (y) of the Section 2 as under:

“Trader”  means  a  person  who  in  the  ordinary   course of business is engaged in buying or selling   agricultural produce as a principal or as a duly   

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authorised  agent  of  one  or  more  principals  and  includes  a  person,  engaged  in  processing  of   agricultural produce.”  

(c) Section 9 of the Act 1964 excludes the application of the Act on  

purchase of agricultural produce for  “domestic consumption”:  

“(1) As from the date of declaration of an area as   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 specified   agricultural  produce,  except  under  and  in  accordance  with  the  conditions  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 produced, reared, caught or  processed by him or to any person who purchases   or  stores  any  agricultural  produce  for  his   domestic consumption.  (2) No person shall, in a Principal market Yard or   any Sub-Market Yard, carry on business or work   as  a  trader,  broker,  commission  agent,   warehouseman,  weighman,  palledar  or  in  such  other capacity as may be prescribed, in respect of   any  specified  agricultural  produce  except  under   and in accordance with the conditions of a licence   obtained  therefore  from  the  Committee   concerned.”  

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(d) Section 17 of the Act 1964 empowers the Committee to issue,  

renew, suspend or cancel a licence, and to levy and collect market fee.  

However, the proviso thereto reads as under:

“Provided that no market fee or development cess   shall  be levied or collected on the  retail  sale of   any  specified  agricultural  produce where  such  sale  is  made  to  the  consumer  for  his  domestic   consumption only.”                    (Emphasis added)

(e) Section 37 of the Act, 1964 further empowers the Committee to  

impose  penalty  on  a  person  who  contravenes  any  of  the  provision  

contained in Section 9 of the Act 1964 or the Rules 1965.  

(f) Rule 70 of the Rules 1965 reads as under:

“Licensing  by  the  Market  Committee  (Section  17(i) – (1) The Market Committee shall ……call  upon all Local Bodies and other persons wishing to  set up, establish or continue any place for the sale,  purchase, storage, weighment or processing of the  specified agricultural produce, in the Market Area,  and  shall  likewise  call  upon  all  Traders,  Commission  Agents,  Brokers,  Warehouseman,  Weighmen, Measures, Palledars and other persons  handling  or  dealing  in  specified  agricultural  produce,  in  the  Market  Yards,  to  apply  for  a  licence under sub Section (1) of Section 9 or Sub  Section (2) of Section 9 of the Act, as the case may  be, in such form as may be specified by the Market  Committee  in  its  bye-laws,  within  a  period  of  fifteen days from the date of publication of the said  notice.

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Provided that the provisions of this sub-rule shall  not apply to a producer in respect of agricultural  produce produced, reared, caught or processed by  him and to any person who purchases or stores any  agricultural  produce  for  his  domestic  consumption.”  

10. The  cumulative  effect  of  combined  reading  of  the  aforesaid  

statutory  provisions  comes  to  the  effect  that  sale  of  the  specified  

agricultural  produce from any place in the market area is prohibited  

unless the person concerned has a licence. The statute provides for an  

exception of having a licence or from paying the market fee if the sale  

of an agricultural produce is made to a person for his “domestic  

consumption” in “retail sale”.

11. Indisputably,  the  aforesaid  produce  purchased  by  respondent  

company  are  agricultural  produce.  In  view  of  the  circular  dated  

18.4.1988,  issued  by  the  appellant,  a  retail  trader  cannot  sell  any  

specified agricultural produce to any person more than the prescribed  

limit  therein.  The  said  circular  fixed  the  maximum  quantity  of  an  

agricultural produce which the retail dealer can sell to an individual for  

domestic  consumption.  The  Circular  issued  under  the  Rules  1965  

prescribes  the  limit  of  sale  to  an  individual  and  storage  of  the  

agricultural produces, by the retailer:   

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Retailer  could  sell  to  an  individual

Retailer can purchase  

           Gur-   20 Kg. Amla- 5 Kg.

Ghee-  4 Kg.  

Gur-  10 Quintals  Amla-1 Quintal

       Ghee- 50  Kg.   

12. In  G.  Giridhar  Prabhu  &  Ors.  v.  Agricultural  Produce  

Market Committee, AIR 2001 SC 1363,  this Court considered similar  

provisions  under  the  Karnataka  Agricultural  Produce  Marketing  

(Regulation) Act,  1966, wherein the  Court was concerned with the  

term “trader” contained therein. After considering earlier judgments of  

this Court, particularly, in H.P. Marketing Board & Ors. v. Shankar  

Trading Co. Pvt.  Ltd. & Ors., (1997) 2 SCC 496;  and Vijayalaxmi  

Cashew Co. & Ors. v. Dy. CTO & Anr., (1996) 1 SCC 468 etc., the  

Court  held  that   transaction  by  a  “trader”  includes  processing,  

manufacturing and selling.  Therefore, a trader who buys a particular  

agricultural produce, subjects it to selling or manufacturing   process  

and   brings    into existence a different agricultural produce would  

cease to be a trader. The Court held as under:

“………The definition of the term “trader” is not a   restrictive  definition.  It  is  not  restricted  to  a   person  who  only  buys.  If  a  person  buys  for   domestic  or  personal  consumption,  then  he  would not be a trader. It  is only when a person  

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buys for the  purpose of selling or processing or   manufacturing  that  he would  become a trader.   Thus a person may buy, process or manufacture   and then sell. When he processes or manufactures   notified  agricultural  produce  which  he  had  bought,  it  may change its character and become  another  notified  agricultural  produce.  Thus,  by  way  of  examples,  a  person  may  buy  milk  and  through processes  make them into  butter  and/or  cheese or a person may buy hides and skins and by   a process make it into leather.  However,  merely   because  a  distinct  and  separate  notified   agricultural  produce  comes  into  existence  does  not mean that the person who bought, processed  and sold ceases to be a trader. The term “trader”  encumbrances  (sic embraces)  not  just  the  purchase transaction but the entire transaction of   purchase, processing, manufacturing and selling.”

                                                                    (Emphasis supplied)

13. In  The State of A.P. v. M/s. H. Abdul Bakhi and Bros., AIR  

1965 SC 531, while dealing with a similar issue, i.e. defining `Dealer’  

under the provisions of Andhra Pradesh General Sales Tax Act, 1950,  

held  that  a  person who buys  goods for  consumption  in  a  process  of  

manufacturing  is  also  a  dealer.   The  Court  held  that  a  person  who  

consumes a commodity purchased by him in the course of his trade, or  

use in manufacturing another commodity for sale, could be regarded as a  

`Dealer’.   

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14.     In  Krishi  Upaj  Mandi  Samiti  &  Ors.  v.  Orient  Paper  &  

Industries  Ltd., (1995)  1  SCC  655,  the  similar  provisions  of  M.P.  

Krishi Upaj Mandi Adhiniyam, 1973, were considered by this Court.  In  

the said case, the question arose as to whether the market fee can be  

levied on agricultural produce brought for sale or sold in the market area  

in case the mill  did not produce the agricultural  produce for sale but  

produce  them for  use  as  its  raw material  for  manufacturing  the  end  

product.   That  was  a  case  where  the  bamboos  were  purchased  for  

manufacturing  of  paper.   The  Court  held  that  once  the  agricultural  

produce is brought in the market area and sold therein, it becomes liable  

to be levied with market fee, as no person can be permitted for sale or  

purchase of the agricultural produce within the market area without a  

licence even a raw material for manufacturing some other product.  The  

Court further held as under:

“…..It is immaterial for this purpose whether the  bamboos are purchased by the respondent-Mills   for selling them or  for using them as their raw  material  in  the  manufacture  of  paper.  The  liability of the respondent-Mills to pay the market   fees is in no way negated on that account….”  

(Emphasis added)

15. This  case  stands  squarely  covered  by  the  judgment  of  

Constitution Bench  of this Court in Ram Chandra Kailash Kumar &  

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Co. & Ors. v. State of U.P.  & Anr., AIR 1980 SC 1124, wherein the  

provision of the Act 1964, which is involved in the instant  case was  

considered and the Court held as under:

“If paddy  is  purchased  in  a  particular  market   area  by  a  rice  miller  and  the  same  paddy  is   converted into rice and sold then the rice miller   will be liable to pay market fee on his purchase of   paddy from the agriculturist-producer under sub- clause  (2)  of  Section  17  (iii)  (b).  He  cannot  be  asked  to  pay  market  fee  over  again  under  sub- clause (3) in  relation to the transaction of rice.   Nor will  it  be open to the Market  Committee  to   choose between either  of  the  two n the  example   just  given.  Market  fee  has  to  be  levied  and  collected in relation to the  transaction of  paddy  alone.”

16.   In Virendra Kumar & Ors. v. Krishi Utpadan Mandi Samiti  

& Ors., (1987) 4 SCC 454, this Court considered a case where it was  

claimed that  petitioners  had been producers  in  respect  of  agricultural  

produce (khandsari),  and thus they were not required to take out any  

license  under  Section  9(1)  of  the  Act  1964.  This  court  rejected  the  

argument  observing  that  Section  9(1)  would  not  be  applicable  to  a  

producer of agricultural  produce only in case the producer processed,  

reared,  or  caught for  domestic  consumption.  In case the agricultural  

produce is not for domestic consumption, but for sale thereafter in the  

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market  area,  such  a  producer  will  not  come within  the  exception  of  

Section 9(1) of the Act 1964.  

17. In view of the above, we are of the considered opinion that as  

the retail  trader  cannot  sell  the agricultural  produce in quantity more  

than  prescribed  in  the  circular  and  also  such  retailer  himself  cannot  

purchase and store more than prescribed in the circular, therefore, the  

meaning  of  “domestic  consumption”  has  to  be  understood  in  such  

restricted sense. Thus, meaning thereby for personal use i.e. for the use  

of family members of the purchaser and not for any production activity,  

otherwise prescribing the limits  of  purchase and storage by the retail  

trader becomes redundant. The parties could not bring to the notice of  

the  High  Court  the  relevant  provisions  of  the  Act  1964 which  were  

necessary to be considered to adjudicate upon the issue in controversy.  

Purchase of agricultural produce in bulk cannot be termed to have been  

made for “domestic consumption.” The Court cannot travel beyond the  

pleadings. The meaning of “domestic trade” and “foreign trade”, had not  

been in issue in the instant case. The “domestic consumption” under the  

Act 1964 has to be given a very restricted and limited meaning i.e. for  

personal use of the purchaser, i.e. for the consumption by the family and  

not for commercial and industrial activities.  

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18. Shri  Subramonium Prasad,  learned counsel  appearing for  the  

respondents, has placed very heavy reliance upon the judgment of this  

Court in M/s. Kesarwani Zarda Bhandar v. State of Uttar Pradesh &  

Ors., AIR 2008 SC 2733, wherein it has been held that market fee is  

leviable  on specified agricultural  produce  and  not  on  agricultural  

produce  simplicitor.   Zarda,  the  end  product  of  the  manufacturing  

process is not a specified agricultural produce and it can be subjected to  

payment  of  market  fee  provided  it  is  held  to  be  “Tobacco”.  Zafrani  

Zarda,  does  not  answer  the  description  of  specified  agricultural  

produce  as defined under Section 2(a)  of  the  Act.   If  it  is  held that  

Zafrani  Zarda  is  merely  a  processed  form of  “Tobacco”,  it  could  be  

subjected to levy of market fee, but if it is manufactured it would not.  

The aforesaid judgment has no application in the instant case  

for the reason that issue involved in this case is relating to requirement  

of having a license under Section 9(2) of the Act 1964 for the purchase  

of a specified agricultural produce from the market area.  The appellants  

have never asked the respondent company to pay market fee on the end  

product Chawanprash.  

19. In view of the above, we are of the considered opinion that as the  

respondent-company  buys  specified  agricultural  produce  from  the  

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market area and it is not meant for domestic consumption, the company  

is required to take license under Section 9(2) of the Act 1964.

20. In  such  a  fact-situation,  appeal  is  allowed.   The  impugned  

judgment  and  order  dated  14.7.2003  passed  by  the   High  Court  of  

Allahabad in Writ Petition No.12372 of 2003 is hereby set aside.  No  

costs.     

         ……………………………..J.  (P. SATHASIVAM)

                                                              ……………………….........J.                                                                (Dr. B.S. CHAUHAN) New Delhi, August  11, 2011

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