REPORTABLE

 IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1476 OF 2006

Heinz India Pvt. Ltd. & Anr. …Appellants

Versus

State of U.P. & Ors. …Respondents

(With Civil Appeal No.1478/2006, Civil Appeal No.1477/2006  

and W.P. (C) No.144/2005)

J U D G M E N T

T.S. THAKUR, J.

1. These appeals by special leave arise out of an order  

dated  20th August,  2004,  passed  by  the  High  Court  of  

Judicature at Allahabad whereby a batch of writ  petitions  

challenging an order passed by the Director,  Rajya Krishi  

Utpadan  Mandi  Parishad,  Lucknow,  dated  3rd July,  1997,  

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under Section 32 of the Uttar Pradesh Krishi Utpadan Mandi  

Adhiniyam, 1964 (hereinafter called ‘the Act’),  have been  

dismissed. The order passed by the Director,  Rajya Krishi  

Utpadan Mandi Parishad pertained to 19 revision petitions  

of which 8 petitions were filed by Glaxo India Ltd. relevant  

to the period 1st November, 1990 to 30th September, 1994  

while the remaining 11 petitions pertained to Heinz India  

Pvt. Ltd. relevant to the period between 1st October, 1994  

and 31st May, 1996.  During the pendency of the Special  

Leave  Petitions,  Writ  Petition  (C)  No.144/2005  was  filed  

under  Article  32  of  the  Constitution  of  India,  inter  alia,  

praying for a writ  of certiorari,  quashing order dated 25 th  

September,  2004  passed  by  the  Deputy  Director  

(Administration)  Krishi  Utpadan  Mandi  Parishad,  Gomti  

Nagar,  Lucknow  in  another  batch  of  revision  petitions  

(pertaining to the period between 3rd June, 1996 and 30th  

April, 2004) and an assessment order dated 7th July, 1998  

passed  by  the  Krishi  Utpadan  Mandi  Samiti,  Aligarh.  A  

declaration to the effect that the goods removed from the  

petitioner’s unit  at  Aligarh to places outside the State of  

Uttar Pradesh were by way of stock transfer and no Mandi  

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Fee was payable on such transfers has also been prayed  

for. The facts giving rise to the appeals and the writ petition  

may be summarised as under:

2. Glaxo India Ltd., set up an industrial unit at Aligarh for  

the manufacture of what is sold in the market under the  

brand names Glacto, Complan, Farex, Glucon D and other  

products  generically  called  milk  foods/weaning foods and  

energy  beverages.  It  is  not  in  dispute  that  the  

manufacturing  process  undertaken  in  the  said  unit  

produced ghee as a by-product of the said items. It is also  

not in dispute that with effect from 1st October, 1994, the  

Family Products Division of Glaxo India Ltd. was taken over  

by Heinz India Pvt. Ltd. who continued manufacturing the  

products mentioned above including  ghee as a by-product  

of its manufacturing activity.   

3. In terms of Section 17(iii) of the Act, sale of specified  

agricultural produce within the Mandi limits attracts levy of  

what is described as Mandi Fee from the person effecting  

the sale. The Mandi Samiti accordingly started demanding  

the said fee from Glaxo India Ltd., upto the year 1994 and  

from  Heinz  India  Ltd.,  from  1994  onwards  qua sales  

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effected by the said two companies of its products including  

ghee. These demands were resisted by both the companies  

primarily on the ground that bulk of the  ghee produced in  

their unit at Aligarh, if not the entire quantity, was sent out  

of the Mandi limits on stock transfer basis and that there  

was no sale involved in such transfers so as to attract the  

levy of the Mandi Fee on the same. Even so, the companies  

appear to have continued removing their  goods from the  

Mandi limits in accordance with the procedure in vogue at  

the  relevant  time.  In  Krishi  Utpadan  Mandi  Samiti  &  

Ors. v. Shree Mahalaxmi Sugar Works & Ors. (1995)   

Supp (3) SCC 433,  decided on 2nd February,  1995,  this  

Court noticed the Explanation to Section 17(iii) of the Act  

and  observed  that  there  was  a  presumption  against  the  

dealers.  This  Court  held  that  in  view  of  the  said  

presumption  it  is  open  to  the  Mandi  Samiti  to  raise  

demands against the dealers before the issue of passes. If  

there is a valid rebuttal to the presumption and it is shown  

that no sale took place within the notified market area the  

dealers will  be entitled to the passes, otherwise not. This  

Court further held that even if the dealers are compelled to  

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pay the market fee as demanded it shall be open to them to  

challenge the same in the manner provided under the Act.  

This implied that if the claim of the dealers that the goods  

were not being removed pursuant to any sale transaction  

was  rejected  and  a  demand  for  payment  of  Mandi  Fee  

raised, the aggrieved dealer could question that demand in  

appropriate proceedings.   

4. It is evident from a reading of the order passed by the  

Mandi  Parishad that  the earlier  procedure of  issuing free  

gate  passes  remained  in  vogue  upto  February,  1995,  

whereafter  the  Mandi  Samiti  started  issuing  gate  passes  

only on payment of the Mandi Fee demanded by it.  This  

change  came  about  as  a  result  of  the  aforementioned  

decision of this Court in Shree Mahalaxmi Sugar Works  

(supra). Subsequently, in  Krishi Utpadan Mandi Samiti   

v. M/s Saraswati Cane Crusher & Ors. (Civil Appeal   

Nos. 1769-1773 of 1998),  decided on 25th March, 1998  

this Court prescribed the procedure to be followed in the  

matter  of  issue  of  gate  passes,  making  of  provisional  

assessment  and  the  time  frame  for  making  a  final  

assessment.    

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“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 requisite 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   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.”

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5. Suffice it to say that according to the above decision  

the  dealers  could  make  a  claim  for  the  refund  of  the  

amount paid by them on furnishing of proof of the fact that  

the goods had moved out of the mandi area without being  

subjected to a transaction of sale.  

6. What is important for the present is that Heinz made  

claims  for  the  refund  of  the  amount  paid  by  it  towards  

market fee and furnished to the Mandi Samiti material to  

support  that  claim.  The  material  so  produced  was  then  

evaluated by the Mandi Samiti who came to the conclusion  

that  the  same  was  not  sufficient  to  rebut  the  statutory  

presumption  that  the  removal  of  goods  from  the  Mandi  

limits  was pursuant to  a sale  effected within such limits.  

The claim for refund of the amount paid by the appellant-

Heinz  was  accordingly  rejected  by  the  Mandi  Samiti  in  

terms of the orders referred to earlier.  

7. Aggrieved by the order  passed by the Mandi  Samiti  

both Glaxo India Ltd. and Heinz India Pvt. Ltd. filed revision  

petitions before the Director, Mandi Parishad, invoking his  

jurisdiction under Section 32 read with Section 33 of the Act  

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as a delegate of the Mandi Parishad. By his order dated 24th  

October, 1996, the Director dismissed the revision petitions,  

aggrieved whereof the companies filed Writ Petitions before  

the  High  Court  of  Allahabad.  These  Writ  Petitions  were  

eventually allowed by the High Court in terms of an order  

dated 3rd April, 1997, and the matter remitted back to the  

Director  for  a  fresh  consideration  and  disposal  in  

accordance with law.

8.  The  Director  accordingly  heard  the  revision  petition  

afresh,  re-appraised  the  material  relied  upon  by  the  

companies in support of their claim for refund and came to  

the conclusion that the claim of the companies for refund  

remained  unsubstantiated  and  the  presumption  arising  

under  the  Explanation  to  Section  17(iii)  un-rebutted.  The  

Director observed:

“17…..

(3)  Neither  the  evidences  produced  by  Revisionist   company  with  the  details  of  information  of  sale  has   been given to C & F Agent with dates on the basis of   which C & F Agent would deliver the goods to the buyer   after  receipt  of  payment  nor  any  instance  has  been   produced for giving required instructions to C & F Agent   regarding the sale of goods and nor even any evidence   has been produced. In this way, the evidence produced  

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regarding  the  actual  mode  of  sale  at  the  place  of   destination as to how and by whom it is being done, are   contradictory or are missing.  Mandi Samiti gave time  to revisionist for clarifying and proving this sale process   but, the revisionist has not been able to produce clear   case and desired evidence on this subject till date.  

(4)  When  the  chain  related  to  the  sale  at  the  place  of   destination in accordance with aforesaid through stock  transfer  breaks  then  while  keeping  in  view  the  declaration  given  under  Excise  Rule  52(A)/173C,  two  possibilities appear.  First is that the sale agreement for   deal  at  the  place  of  destination  and  according  to   marketing system given in letter dated 4.1.95 it  may  be, that the Revisionist company by itself or through its   marketing  staff  who  might  be  visiting  the  place  of   destination give the delivery of goods to C & F Agent by   fixing  before  the  arrival  of  goods  at  the  place  of   destination  after  receiving  amount  of  money  in  the  form of bank draft and pay order which resulted in the   sale  having  taken  place  from  the  factory  at  Aligarh   office  because  the  direct  contact  of  buyer  with   revisionist took place at Aligarh or it took place through  the  employees/officers  of  revisionist’s  marketing   department at Aligarh and they were given the delivery   on that basis only.               

xxx xxx xxx

xxx xxx xxx

19. In this way by the analysis and close consideration of   said paras 16, 17 and 18 it is concluded that under the  arrangement given by Hon’ble Supreme Court in 1995  (Supp.3) S.C.C. 433 the sale taking place in the matter   of M/s Mahalaxmi Sugar Works, Revisionist’s disputed  transmitted and its  sale  taking place at  the place of   destination by taking stock outside the mandi area in   the form of stock transfer and the concept of taking out   the sale under explanation of 17(3)(B), it has failed to   prove by producing counter  valid  rebuttal  of  concept   because  according  to  the  case  went  for  revision  on   stock transfer and place of destination it has failed to   tell  the  presence  by  producing  the  best  chain  of   evidence for proving....”

9. Writ  Petition  Nos.  2320(M/S),  2516(M/S),  2517(M/S),  

2518(M/S), 2519(M/S), 250(M/S), 226(M/S) and 2527(M/S) of  9

1997 filed  by  Glaxo  India  Ltd.,  before  the  High  Court  of  

Allahabad challenged the correctness of the above order.  

Heinz India Pvt. Ltd. also filed Writ Petition Nos. 2323(M/S),  

2321(M/S),  2322(M/S),  2324(M/S),  2325(M/S),  2326(M/S),  

2474(M/S), 2475(M/S), 2476(M/S), 2477(M/S) and 2478(M/S)  

of 1997 before the High Court challenging the same order.  

The High Court, however, concurred with the view taken by  

the  Mandi  Samiti  and  the  Director  of  the  Parishad  and  

dismissed the writ petitions by its order dated 20th August,  

2004. The High Court held that the material produced by  

the companies did not make out a case for refund for it did  

not  rebut  the  presumption  that  ghee produced  in  the  

company’s unit at Aligarh was not sold from Aligarh or that  

the stocks of ghee had been transferred outside the Mandi  

limit  on consignment basis.  The High Court  gave several  

reasons  for  holding  that  the  material  produced  by  the  

companies in support of their claim that the so called sales  

were in fact stock transfer was either not reliable or was  

deficient.  High  Court  also  held  that  the  companies  had  

withheld  the  best  evidence  available  to  them  without  

offering any explanation for doing so. The High Court said:

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“The long and short of the discussions made above is   that the petitioners have miserably failed to rebut the   presumption of sale in the market area at Aligarh and   therefore,  the  Director  and  the  assessing  authorities   rightly  levied  the  Mandi  fee  on  the  consignments  of   Ghee  transported  by  Glaxo  and  its  successor  Heinz   India  Private  Limited  to  other  States.  The  judgments   passed by the Revisional Authority are not perverse so  as  to  be  interfered  with  by  this  Court;  rather  all  the  questioned judgments are well discussed and reasoned.   In the result, the petitioners are not entitled to claim  any relief.”

10. The present appeals assail the above order as already  

mentioned.

11. We have heard the learned counsels of the parties at  

considerable  length.  Three  questions  fall  for  our  

determination. These are:

1. Whether the Krishi Utpadan Mandi Adhiniyam does not  

contain  the  necessary  machinery  provisions  for  

assessment  of  the  fees  and  for  adjudication  of  

disputes in relation thereto? If so to what effect?

2. What  precisely  is  the correct  legal  standard/test  for  

determining whether  or  not  the presumption arising  

under the Explanation to Section 17(iii) of the Act has  

been rebutted?  

And  

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3. Whether  the  orders  passed  by  the  Mandi  Utpadan  

Samiti and that passed by the Director, as delegate of  

the Mandi Parishad, suffer from any legal infirmity to  

call for interference?

Re: Question No.1

12. This Court has in a long line of decisions rendered from  

time  to  time,  emphasised  the  importance  of  machinery  

provisions  for  assessment  of  taxes  and  fees  recoverable  

under a taxing statute. In one of the earlier decisions on the  

subject a Constitution Bench of  this Court  in  Kunnathat  

Thathunni  Moopil  Nair  etc.,  v.  State of  Kerala  and  

Anr.  (AIR  1961  SC  552) examined  the  constitutional  

validity of the Travancore-Cochin Land Tax Act (15 of 1955).  

While recognising what is now well-settled principle of law  

that taxing statute is not wholly immune from attack on the  

ground that it infringes the equality clause in Article 14, this  

Court found that the enactment in question was violative of  

Article 14 of the Constitution for inequality was writ large on  

the Act and inherent in the very provisions under the taxing  

section thereof.  Having said so, this Court also noticed that  

the Act was silent as to the machinery and the procedure to  

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be followed in making the assessment.  It  was left  to the  

Executive to evolve the requisite machinery and procedure  

thereby  making  the  whole  thing  from  beginning  to  end  

purely administrative in character completely ignoring the  

legal  position that the assessment of a tax on person or  

property  is  a  quasi-judicial  exercise.  Speaking  for  the  

majority Sinha, C.J. said:

“Ordinarily,  a  taxing  statute  lays  down  a  regular   machinery for making assessment of the tax proposed   to  be  imposed  by  the  statute.  It  lays  down  detailed  procedure  as  to  notice  to  the  proposed  assessee  to   make a return in respect of  property proposed to be   taxed, prescribes the authority and the procedure for   hearing any objections to the liability for taxation or as   to  the  extent  of  the  tax  proposed  to  be  levied,  and   finally,  as  to  the  right  to  challenge  the  regularity  of   assessment  made,  by  recourse  to  proceedings  in  a   higher  Civil  Court.  The  Act  merely  declares  the  competence of the Government to make a provisional   assessment,  and  by  virtue  of  s.  3  of  the  Madras   Revenue Recovery Act, 1864, the land-holders may be  liable  to  pay the  tax.  The Act  being silent  as  to  the   machinery and procedure to be followed in making the   assessment  leaves  it  to  the  Executive  to  evolve  the   requisite  machinery  and procedure.  The whole  thing,   from  beginning  to  end,  is  treated  as  of  a  purely   administrative character, completely ignoring the legal   position  that  the  assessment  of  a  tax  on  person  or   property is at least of a quasi-judicial character.”

(emphasis supplied)  

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13. In  Rai Ramkrishna and Ors. etc. v. State of Bihar   

(AIR  1963  SC  1667) this  Court  was  examining  the  

constitutional validity of the Bihar Taxation on Passengers  

and Goods (Carried by Public Service Motor Vehicles) Act,  

1961. Reiterating the view taken in Kunnathat Thathunni  

Moopil Nair  (supra) this Court held that a statute is not  

beyond the pale of limitations prescribed by Articles 14 and  

19 of the Constitution and that the test of reasonableness  

prescribed by Article 304(b) is justiciable. However, in cases  

where  the  statute  was  completely  discriminatory  or  

provides no procedural machinery for assessment and levy  

of  tax  or  where  it  was  confiscatory,  the  Court  would  be  

justified  in  striking  it  down  as  unconstitutional.  In  such  

cases  the  character  of  the  material  provisions  of  the  

impugned statute may be such as  may justify  the Court  

taking the  view that  in  substance the taxing statue is  a  

cloak  adopted  by  the  legislature  for  achieving  its  

confiscatory purpose.   

14. In  Raja Jagannath Baksh Singh v. State of Uttar   

Pradesh and Anr. (AIR 1962 SC 1563) this Court was  

examining  the  constitutional  validity  of  U.P.  Large  Land  

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Holdings Tax Act (31 of 1957).  Dealing with the argument  

that  the Act  did not  make a specific  provision about the  

machinery  for  assessment  or  recovery  of  tax,  this  Court  

held:  

“….if a taxing statute makes no specific provision about   the  machinery  to  recover  tax  and  the  procedure  to   make the assessment of the tax and leaves it entirely   to the executive to devise such machinery as it thinks   fit and to prescribe such procedure as appears to it to   be fair, an occasion may arise for the Courts to consider   whether the failure to provide for a machinery and to  prescribe  a  procedure  does  not  tend  to  make  the   imposition of the tax an unreasonable restriction within   the meaning of Article 19(5). An imposition of tax which  in  the  absence  of  a  prescribed  machinery  and  the  prescribed procedure would partake of the character of   a purely administrative affair can, in a proper sense, be  challenge as contravening Article 19(1)(f).”

(emphasis supplied)

15. In The State of Andhra Pradesh and Anr. v. Nalla   

Raja Reddy and Ors. (AIR 1967 SC 1458),  this  Court  

was examining the constitutional validity of Andhra Pradesh  

Land Revenue (Additional Assessment) and Cess Revision  

Act  (22 of  1962)  as  amended by Amendment  Act  (23 of  

1962). Noticing the absence of machinery provisions in the  

impugned enactments this Court observed:

“…if S.6 is put aside, there is absolutely no provision in   the Act prescribing the mode of assessment. Section 3  

15

and 4 are charging sections and they say in effect that   a person will have to pay an additional assessment per   acre in respect of both dry and wet lands. They do not   lay  down  how  the  assessment  should  be  levied.  No  notice has been prescribed; no opportunity is given to   the  person  to  question  the  assessment  on  his  land.   There is no procedure for him to agitate the correctness   of  the  classification  made  by  placing  his  land  in  a   particular  class  with  reference  to  ayacut,  acreage  or   even  taram.  The  Act  does  not  even  nominate  the  appropriate officer to make the assessment to deal with   questions arising in respect of  assessments and does   not prescribe the procedure for assessment. The whole   thing is left in a nebulous form. Briefly stated, under the  Act there is no procedure for assessment and however   grievous  the  blunder  made  there  is  no  way  for  the   aggrieved  party  to  get  it  corrected.  This  is  a  typical   case  where  a  taxing  statute  does  not  provide  any  machinery of assessment.”

                   (emphasis supplied)

16. The appeals filed by the State against the judgment of  

the High Court striking down the enactment were on the  

above basis dismissed.

17. Reference may also be made to  M/s Vishnu Dayal  

Mahendra Pal and Ors. v. State of Uttar Pradesh and  

Ors.  (1974)  2  SCC  306,  and  D.G.  Gose  and  Co.  

(Agents) Pvt. Ltd. v. State of Kerala and Anr. (1980)   

2 SCC 410, where this Court held that sufficient guidance  

were available from the preamble and other provisions of  

the Act. The members of the committee owe a duty to be  

conversant with the same and discharge their functions in  

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accordance with the provisions of the Act and the Rules and  

that in cases where the machinery for determining annual  

value has been provided in the Act and the Rules of the  

local authority, there is no reason or necessity of providing  

same or similar provisions in the other Act or Rules.  

18. There  is  no  gainsaying  that  a  total  absence  of  

machinery  provisions  for  assessment/recovery  of  the  tax  

levied under an enactment, which has the effect of making  

the entire process of assessment and recovery of tax and  

adjudication of  disputes relating thereto administrative in  

character,  is  open  to  challenge  before  a  Writ  Court  in  

appropriate  proceedings.  Whether  or  not  the  enactment  

levying the tax makes a machinery provision either by itself  

or in terms of the Rules that may be framed under it  is,  

however, a matter that would have to be examined in each  

case.  In our opinion, it is not necessary to dilate any further  

on  this  aspect  in  the  context  of  the  provisions  of  Uttar  

Pradesh  Krishi  Utpadan  Mandi  Adhiniyam,  1964  having  

regard to the fact that the question whether the said Act  

provides a suitable machinery for assessment and recovery  

of  the  fee  has  been  examined  by  this  Court  in  Ram  

17

Chandra Kailash Kumar & Co. & Ors. v. State of U.P.   

& Anr. 1980 (Supp) SCC 27. That decision arose out of a  

writ  petition  filed  before  the  High  Court  of  Allahabad  

challenging the constitutional validity of the Adhiniyam. The  

High  Court  had  dismissed  the  challenge  to  the  

constitutional  validity  of  the  enactment  which  order  was  

then  assailed  before  this  Court  in  an  appeal  by  special  

leave. This Court formulated as many as 24 distinct points  

for determination based on the grounds that were urged in  

support  of  the  challenge.  One  of  the  points  that  fell  for  

consideration was whether the rules framed under the Act  

provide for  any machinery for  adjudication of disputes in  

addition to the factum and quantum of liability arising as  

under the Act. The contention precisely was that neither the  

Act  nor  the rules  made any  provision for  adjudication of  

disputes  that  would  arise  on  both  these  aspects.   While  

rejecting  the  submission  on  behalf  of  the  Marketing  

Committee that no such disputes actually exist or are likely  

to exist which would require any machinery of the Market  

Committee for adjudication, this Court observed:

“xxxxxxx  A  machinery  for  adjudication  of  dispute  is   necessary  to  be  provided  under  the  rules  for  proper   

18

functioning of the market committees. We have already  observed  and  expressed  our  hope  for  bringing  into   existence such machinery in one form or the other.  But   it  is  not  correct  to  say  that  in  absence  of  such  a   machinery no market fee can be levied or collected.  If   a dispute arises then in the first instance the market   committee itself or any sub-committee appointed by it   can give its finding which will be subjected to challenge   in  any  Court  of  law  when  steps  are  taken  for   enforcement  of  the  provisions  for  realisation  of  the   market fee.”

19. It  is  evident  from  the  above  that  this  Court  had  

specifically rejected the contention that in the absence of  

any machinery under the Act and the Rules no market fee  

could be levied or collected.  That being so, it not necessary  

for us to either re-examine that aspect or to take a contrary  

view contrary at this stage.

20. Mr. Sudhir Chandra, learned senior counsel appearing  

for  the  appellant-company,  however,  contended  that  the  

hope  expressed  by  this  Court  that  a  comprehensive  

machinery  provision  shall  be  made  for  adjudication  of  

disputes has been belied by the inaction of the respondents  

for over 30 years which calls for suitable directions and/or  

guidelines to the State as also to the authorities under the  

Act  to  make  necessary  machinery  provisions  especially  

when serious disputes involving substantial sums of money  

19

towards  market  fee  are  arising  for  adjudication  without  

there being a semblance of an adjudicatory mechanism or  

judicial  approach  in  the  matter  of  adjudication  of  such  

disputes.  Elaborating  his  submissions  Mr.  Chandra  

contended that while the Market Committee examines the  

question  of  refund  of  the  fee  paid  by  the  seller  of  any  

produce, any dispute touching the correctness of any such  

adjudication or assessment by the committee is examinable  

by the Board in terms of Section 32 of the Act.  Since the  

Board is a multi-member body any exercise in the nature of  

review or revision of the order passed by the Committee on  

the claim for  refund cannot be undertaken by the Board  

itself, the practice that is followed is that such revisions are  

heard and decided by the Director to whom the revisional  

powers of the Board are delegated in terms of Section 33 of  

the Act.  What according to Mr. Chandra is surprising is that  

even the Director does not hear the matters himself. The  

actual disposal of the revision is left to a junior officer to  

whom  the  Director  may  assign  the  case  for  disposal.  

Hearing by any such junior officer who is neither by training  

nor  by  qualification  suited  for  such  determination  of  

20

complicated issues regarding the liability of the purchaser  

or seller of goods within a market area makes the entire  

process  of  determination  farcical.  A  machinery  for  

adjudication of disputes can be said to have been provided  

for  only  if  the  same  ensures  a  fair  and  objective  

adjudication of the matters in disputes at the hands of the  

authority  who  is  either  by  reasons  of  his  training,  

experience or qualification fit to determine the controversy.  

So long as such a provision is absent in the scheme of the  

Act,  the  requirement  of  machinery  for  adjudication  of  

disputes  must  be  deemed  to  be  absent,  argued  Mr.  

Chandra.  

21. Section 32 of the Act empowers the Board to call for  

and  examine  the  proceedings  of  the  Committee  for  the  

purpose of satisfying itself as to the legality or propriety of  

any decision or order passed by a Committee and to pass  

such orders thereon as it may deem fit including an order  

modifying, annulling or reversing any such decision or order  

of  the  Committee.  Dealers  aggrieved  of  an  order  of  

assessment or an order declining refund of the fee paid by  

them are entitled to question the correctness of any such  

21

demand in terms of the said provision which is in the nature  

of  a  revisional  power  vested  in  the  Board.  It  is  common  

ground that the dealers in the present case had invoked the  

said power of the Board under Section 32. It is also common  

ground that  the revisions  so  filed have been entertained  

and dealt with on merits. What is unsatisfactory according  

to the dealers is the fact that the revisions have been dealt  

with by an officer authorised by the Director.  Mr. Chandra  

did not dispute the proposition that the power vested in the  

Board including that under Section 32 of the Act could be  

exercised  by  the  Director  as  a  delegate  of  the  Board  

keeping  in  view  the  provisions  of  Section  33  of  the  Act  

which permits such delegation. Sections 32 and 33 read as  

under:

“32. Powers  of  the  [Board]  to  call  for  the  proceedings  of  a  Committee  and  pass  orders  thereon.  -  The  [Board]  may,  for  the  purpose  of   satisfying itself  as  to the legality  or  propriety  of  any   decision of,  or order passed by, a Committee, at any  time  call  and  examine  the  proceedings  of  the  Committee,  and,  where  it  is  of  the  opinion  that  the   decision or order of the Committee should be modified,   annulled  or  reversed,  pass  such orders  thereon  as  it   may deem fit.

33. Delegation of powers. –  The Board may, by  regulations,  delegate  subject  to  such  conditions  and  restrictions and in such manner, as may be specified   therein, any of its powers to the Director.”

22

22. What,  according  to  the  learned  counsel  for  the  

appellants, was unacceptable is the fact that the revisions  

could  be  heard  and  disposed  of  even  by  an  officer  

authorised  by  the  Director.  This,  argued  Mr.  Chandra,  

resulted  in  dilution  of  the  sanctity  and  efficacy  of  the  

revisional exercise not because it  was  dehors the statute  

but  because  the  exercise  of  quasi-judicial  powers  were  

entrusted to an officer at the lower rung of the hierarchy.  

23. Section 2(h) defines the term ‘Director’ as under:     

“‘Director’  means  an  officer  appointed  by  the  State   Government  as  Director  of  Mandis  and  includes  any   other officer authorised by the Director to perform all or   any of his functions under this Act.”

24. It is manifest from a plain reading of the above that  

the expression ‘Director’ wherever used in the Act including  

Section  33  thereof  includes  an  officer  authorised  by  the  

Director to perform all or any of his functions under the Act.  

Significantly  enough  neither  before  the  High  Court  nor  

before us was it contended that the officer who had handled  

and disposed of the revision petitions filed by the dealers,  

was not duly authorised in terms of Section 2(h) or that the  

power of the Board under Section 32 of the Act was not duly  

23

delegated  to  the  Director.  It  is  not,  therefore,  a  case  of  

inherent lack of jurisdiction. All that the appellants propose  

is  that  the revisions  could  either  be heard by the Board  

itself or made over for disposal to a Committee of officers  

senior  enough to decide issues of  fact  and law involving  

substantial financial stakes of the parties.   Now it is true  

that the stakes involved in the present batch of cases are  

substantial and those called upon to satisfy the demands  

raised against them would like their cases to be heard by a  

senior officer or a Committee of officers to be nominated by  

the Board. But in the absence of any data as to the number  

of cases that arise for consideration involving a challenge to  

the  demands  raised  by  the  Market  Committee  and  the  

nature of the disputes that generally fall for determination  

in such cases, it will not be possible for this Court to step in  

and direct an alteration in the mechanism that is currently  

in place. The power to decide the revisions vests with the  

Board who also enjoys the power to delegate that function  

to the Director. So long as there is statutory sanction for the  

Director  to  exercise  the  revisional  power  vested  in  the  

Board,  any  argument  that  such  a  delegation  is  either  

24

impermissible or does not serve the purpose of providing a  

suitable  machinery  for  adjudication  of  the  disputes  shall  

have to be rejected. It is noteworthy that Rule 133-A of the  

Rules framed under the Act regulates the filing and disposal  

of  the  revision  petitions  under  Section  32  thereof.   This  

provision was inserted with effect from 11th May, 2008 and  

empowers the Board either to decide the revision petition  

itself or to nominate an officer for doing so. It also provides  

for  grant  of an opportunity of  being heard to the person  

concerned and a time bound disposal of the revision. Rule  

133-A is,  therefore, a step in the direction of providing a  

machinery under the Act for adjudication of disputes that  

may arise between dealers on the one hand and the market  

committee  on  the  other.  That  being  so,  the  Act  is  not  

completely bereft of a machinery nor can it be said that the  

observations made by this Court in Ram Chandra Kailash  

Kumar’s case  (supra)  have gone  unheeded.  All  that  we  

need to add is that in order to make the Board’s revisional  

power more effective and its exercise more transparent and  

credible, the Board would do well to delegate the power of  

hearing and disposal  of  the revision petitions to a senior  

25

and experienced officer who is well-versed in dealing with  

legal issues concerning assessment and/or determination of  

the  liability  under  the  Act.  Beyond  that  it  is  neither  

necessary nor proper for us to say anything. Question No.1  

is answered accordingly.

Re: Question No.2

25. Explanation  to  Section  17(iii)  of  the  Act  raises  a  

presumption  to  the  effect  that  any  specified  agricultural  

produce  taken  out  of  or  proposed  to  be  taken  out  of  a  

market area by or on behalf of a licensed trader has been  

sold within such area; the price of the produce so presumed  

to be sold is then determinable in the manner prescribed.  

The Explanation reads:

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

26. It is fairly evident that the presumption is rebuttable in  

nature; for it holds good only till the contrary is not proved  

by the dealer.  The question is what is the standard of proof  

26

required to rebut the statutory presumption; and whether  

the  Market  Committee,  the  Director  or  the  High  Court  

applied  the  correct  legal  standard  for  holding  that  the  

presumption was not effectively rebutted.   

27. Relying  upon  the  decision  of  this  Court  in  Sodhi  

Transport Co. & Ors. v. State of U.P. & Ors. (1986) 2   

SCC 486, Mr. Sudhir Chandra contended that the standard  

of proof applicable was that applied in civil actions which  

are decided on the preponderance of  probability  and not  

the  higher  standard  of  “proof  beyond  reasonable  doubt”  

applied in criminal cases.  The appellants had according to  

the learned counsel discharged the burden of rebutting the  

presumption by adducing evidence which tended to show  

that  the  ghee manufactured by them had not  been sold  

within the market area to attract the levy of market fee on  

the  price  thereof.  He  urged  that  the  produce  had  been  

removed out of the market area on transfer of stock basis  

without any element of sale in such transfers.  Reliance was  

in support placed by Mr. Chandra upon an agreement which  

Heinz had executed with its Clearing and Forwarding (C&F)  

Agent in the State of Rajasthan apart from other material  

27

adduced before the Market Committee,  in a bid to prove  

that the stocks in  question had not  been sold within the  

market area.

28. Appearing  for  the  Market  Committee  Mr.  Rakesh  

Dwivedi argued that the mere production of some evidence  

howsoever feeble was not enough to rebut the presumption  

which would  continue to hold the field  till  such time the  

trader adduced evidence to prove the contrary. It was only  

“proof to the contrary” that  could rebut the presumption  

and  for  doing  so  just  any  material  or  evidence  was  not  

enough.   It  must,  argued  Mr.  Dwivedi,  be  evidence  that  

would  clearly  establish  that  there  was  indeed  no  sale  

effected within the market area as presumed in terms of  

the Explanation. The appellant-companies had failed to do  

so as before the Market Committee and the Director and  

even before the High Court.

29. Black’s  Law  Dictionary  5th Edition,  1979,  defines  

‘Presumption’ as under:

“A  presumption  is  a  rule  of  law,  statutory  or   judicial,  by which finding of  a basic fact gives rise to   existence  of  presumed  fact,  until  presumption  is   rebutted.”

28

30. The same dictionary defines ‘Rebut’ as under:

“In pleading and evidence, to defeat, refute, or take  away the effect  of  something.  When a plaintiff  in  an  action produces evidence which raises a presumption of   the  defendant’s  liability,  and  the  defendant  adduces  evidence  which  shows  that  the  presumption  is  ill- founded, he is said to “rebut it.”

            31. Both in England and America,  law permits raising of  

presumptions  both  conclusive  and  rebuttable.  There  is  

considerable  judicial  authority  in  both  jurisprudential  

systems, dealing with the question of the standard of proof  

required  to  rebut  a  presumption  whether  statutory  or  at  

common  law.  In  England,  the  civil  standard  of  proof  is  

defined  by  Lord  Denning  in  Miller  v.  Minister  of  

Pensions [1947] 2 All ER 372, thus:     

“……….It need not reach certainty, but it must carry a   high  degree  of  probability.  Proof  beyond  reasonable   doubt  does  not  mean  proof  beyond  the  shadow  of   doubt. The law would fail to protect the community if it   admitted fanciful  possibilities to deflect the course of   justice. If the evidence is so strong against a man as to   leave only a remote possibility in his favour which can  be dismissed with the sentence "of course it is possible,   but  not  in  the  least  probable"  the  case  is  proved   beyond reasonable doubt, but nothing short of that will   suffice.”

29

32. Three years later came Bater v. Bater [1950] 2 All   

ER 458, in which the civil standard of proof to an extent  

modified, was seen by some jurists as somewhat confusing  

the concept so clearly stated in  Miller’s case (supra).  In  

Bater  (supra)  the  Court  declared  that  neither  civil  nor  

criminal  standard  of  proof  was  an  absolute  standard.   A  

‘civil  case’  may  be  proved  by  a  preponderance  of  

probability, explained, Denning J.,

“……but there may be degrees of probability within that  standard. The degree depends on the subject-matter. A   civil  court,  when considering  a  charge  of  fraud,  will   naturally  require  a  higher  degree  of  probability  than  that  which  it  would  require  if  considering  whether   negligence were established. It does not adopt so high  a  degree  as  a  criminal  court,  even  when  it  is   considering a charge of  a criminal  nature,  but  still  it   does require a the degree of probability required should   be commensurate with the occasion.”

33. Then  came  Hornal  v.  Neuberger  Products  Ltd.  

[1957] 1 Q.B. 247,  where the Court held that  in a civil  

action where fraud or other matter which is or may be a  

crime  is  alleged  against  a  party  or  against  persons  not  

parties to the action, the standard of proof to be applied is  

that applicable in civil actions generally, namely, proof on  

the balance of probability, and not the higher standard of  

30

proof  beyond  all  reasonable  doubt  required  in  criminal  

matters; but there is no absolute standard of proof, and no  

great gulf between proof in criminal and civil matters; for in  

all cases the degree of probability must be commensurate  

with the occasion and proportionate to the subject-matter.  

The elements of gravity of an issue are part of the range of  

circumstances which have to be weighed when deciding as  

to  the  balance  of  probabilities.  The  law  in  England,  

therefore,  is  that  degree  of  probability  must  be  

commensurate  with  the  subject-matter.  This  implies  that  

graver  the charge in  a  civil  action,  higher  the  degree of  

proof  required.  A  civil  case  may  be  proved  by  

preponderance of probability, but the degree of probability  

would depend upon the nature of the subject-matter.   

34. In  the  American  system of  justice,  the  Courts  have  

adopted  a  somewhat  different  approach,  though  the  

essence, may appear to be the same as is accepted by the  

Courts in England.  In America, standard of proof depends  

upon the degree of confidence which the American society  

thinks  the  fact  finder  should  have  in  the  correctness  of  

factual  conclusions  for  a  particular  type  of  adjudication.  

31

[See  Addington v. Texas, 441 U.S. 418, 423 (1979)].  

Proof may be required by a preponderance of the evidence,  

by clear and convincing evidence or by proof that is beyond  

reasonable doubt.  Proof by ‘clear and convincing evidence’  

lies between standard of ‘preponderance of the evidence’ at  

one  end  and  ‘beyond  a  reasonable  doubt’  at  the  other.  

Clear  and  convincing  evidence  has  been  described  as  

evidence that produces in the mind of the trier of the fact  

an  abiding  conviction  that  the  truth  of  the  factual  

contentions  is  highly  probable.  [See  32A  Corpus  Juris  

Secundum Evidence § 1624].          

35. We may at this stage refer to a few decisions of this  

Court on the subject. In  Izhar Ahmad Khan v. Union of  

India  and  Ors.  (AIR  1962  SC  1052), this  Court  was  

examining  the  provisions  of  Schedule  III  Rule  3  of  the  

Citizenship  Rules,  1956  which  made  it  obligatory  on  the  

enquiring authority to infer the acquisition of citizenship of  

a foreign country from the fact that the passport of foreign  

country  has  been  obtained  by  an  Indian  citizen.  The  

question was whether a rule about irrebuttable presumption  

is a rule of evidence or not. The question had arisen in the  

32

context  of  rule-making power of  the Central  Government  

under Section 9(2) of the Citizenship Act, 1955 according to  

which  the  Central  Government  could  prescribe  rules  of  

evidence subject  to  which the competent authority  could  

hold an inquiry.  The contention urged was that instead of  

prescribing a rule of evidence the Central Government had  

by enacting Rule 3 and raising a conclusive presumption  

regarding the acquisition of citizenship of another country,  

framed a rule of substantive law and not a rule of evidence.  

36. This  Court  held  that  while  answering  any  such  

question it is not correct to assume that all rules prescribing  

irrebuttable presumption are rules of substantive law.  Any  

such question, declared this Court, has to be answered after  

examining the rule and its impact on the proof of the fact in  

issue.  Explaining  the  juristic  basis  of  a  rebuttable  

presumption and the approach to be adopted in applying  

such  presumptions  to  different  situations  this  Court  

observed:

“25. It is conceded, and we think, rightly, that a rule   prescribing  a  rebuttable  presumption  is  a  rule  of   evidence. It is necessary to analyse what the rule about   the  rebuttable  presumption  really  means.  A  fact  A  which  has  relevance  in  the  proof  of  fact  B  and  inherently has some degree of probative or persuasive  

33

value in that behalf may be weighed by a judicial mind   after it is proved and before a conclusion is reached as   to whether fact B is  proved or  not.  When the law of   evidence  makes  a  rule  providing  for  a  rebuttable   presumption  that  on  proof  of  fact  A,  fact  B  shall  be   deemed  to  be  proved  unless  the  contrary  is   established, what the rule purports to do is to regulate   the  judicial  process  of  appreciating  evidence  and  to   provide  that  the  said  appreciation  will  draw  the  inference from the proof of fact A that fact B has also   been proved unless the contrary is established. In other   words, the rule takes away judicial discretion either to   attach  the  due probative  value  to  fact  A  or  not  and  requires  prima  facie  the  due  probative  value  to  be   attached  in  the  matter  of  the  inference  as  to  the   existence  of  fact  B,  subject,  of  course,  to  the  said   presumption being rebutted by proof to the contrary.  

xxx xxx xxx xxx xxx xxx

Thus, the rule of rebuttable presumption adds statutory   force to the natural and inherent probative value of fact   A in relation to the proof of the existence of fact B and   in adding his statutory value to the probative force of   fact A, the rule, it is conceded, makes a provision within   the scope and function of the law of evidence. If that is   so, how does it make a difference in principle if the rule   adds conclusive strength to the probative value of the   said fact A in relation to the proof of the existence of   fact B? In regard to the category of facts in respect of   which an irrebuttable  presumption is  prescribed by a   rule  of  evidence,  the  position  is  that  the  inherent   probative value of fact A in that behalf is very great and  it  is  very  likely  that  when  it  is  proved  in  a  judicial   proceeding,  the  judicial  mind  would  normally  attach  great importance to it in relation to the proof of fact B.   The rule steps in with regard to such facts and provides   that  the  judicial  mind  should  attach  to  the  said  fact   conclusiveness in the matter of its probative value. It   would be noticed that as in the case of  a rebuttable   presumption,  so  in  the  case  of  an  irrebuttable   presumption,  the  rule  purports  to  assist  the  judicial   mind in appreciating the existence of facts. In one case  the probative value is statutorily strengthened but yet   left open to rebuttal, in the other case, it is statutorily   strengthened and placed beyond the pale of rebuttal.   Considered  from  this  point  of  view,  it  seems  rather   difficult to accept the theory that whereas a rebuttable   

34

presumption  is  within  the  domain  of  the  law  of   evidence,  irrebuttable  presumption  is  outside  the  domain of that law and forms part of the substantive   law.”

37. In  Harbhajan  Singh  v.  State  of  Punjab  &  Anr.   

(AIR 1966 SC 97),  this Court was examining the nature  

and scope of onus of proof which an accused person had to  

discharge  in  seeking  protection  of  the  Exception  9  to  

Section 499 IPC. This Court held that onus to prove its case  

lies on the prosecution no matter what the charge or where  

the trial is held.  The principle that prosecution must prove  

the  guilt  of  the  prisoner  is  part  of  the  common  law  of  

England and also part of the criminal law of this country.  

Having  said  so,  the  Court  further  declared  that  if  an  

exception is taken by an accused person he is not required  

to justify his plea beyond a reasonable doubt and that the  

degree  and  character  of  proof  which  he  is  expected  to  

furnish in support of his plea cannot be equated with the  

degree  and  character  of  proof  that  is  expected  of  the  

prosecution.  This  Court  with  approval  quoted the  English  

decision in  R. v. Clark (1921 61 SCR 608),  which was  

35

approved by Lord Hailsham in Sodeman v. R [1936] 2 All   

ER 1138 to the following effect:

“………….the necessity for excluding doubt contained in   the rule as to the onus upon the prosecution in criminal   cases might be regarded as an exception founded upon   considerations  of  public  policy.  There  can  be  no   consideration  of  public  policy  calling  for  similar   stringency  in  the  case  of  an  accused  person  endeavouring to displace a rebuttable presumption."

38. We  may  also  refer  to  the  decision  of  this  Court  in  

Sodhi Transport Co.  (supra) upon which heavy reliance  

was placed by learned counsel for the appellant in support  

of the plea that the standard of proof required of the person  

against whom statutory presumption is raised is a simple  

preponderance  of  probability  and  no  more.  In  Sodhi  

Transport  Co.  (supra) this  Court  was  examining  the  

provisions of Section 28-B of Uttar Pradesh Sales Tax Act,  

1948 which was alleged to be ultra vires of the Constitution  

inasmuch  as  it  permitted  the  authorities  to  raise  a  

rebuttable presumption regarding the sale of goods having  

taken place inside the State of U.P. if the transit pass is not  

handed over to an officer at the check-post or the barrier  

near the place of exit from the State. Such a presumption  

with  an  object  of  preventing  evasion  of  tax,  it  was  

36

contended, as regards the proof of a set of circumstances  

which  would  make  a  transaction  liable  to  tax  was  

tantamount  to  conferring on the authority  concerned the  

power  to  levy  a  tax  which  the  legislature  could  not  

otherwise levy. Repelling the contention this Court held that  

a  rebuttable  presumption  has  the  effect  of  shifting  the  

burden of proof, for the authority concerned, before levying  

sales tax arrives at the conclusion about the exigibility of  

the tax by a judicial process and only upon his satisfaction  

that the goods have been sold inside the State. In doing so,  

the authority no doubt relies upon the statutory rules and  

presumption contained in Section 28-B of the Act.  But such  

presumption can be rebutted by the person against whom  

action  is  taken  under  Section  28-B  when  the  person  

concerned has the opportunity to displace the presumption  

by leading evidence. That being so, provision of Section 28-

B inasmuch as the same raises a rebuttable presumption  

did  not  suffer  from any  vice  of  unconstitutionality.   This  

Court observed:

“14. A presumption is not in itself evidence but only   makes a prima facie case for party in whose favour it   exists. It is a rule concerning evidence. It indicates the  person  on  whom  the  burden  of  proof  lies.  When   

37

presumption is conclusive, it obviates the production of   any  other  evidence  to  dislodge  the  conclusion  to  be   drawn  on  proof  of  certain  facts.  But  when  it  is   rebuttable it only points out the party on whom lies the  duty  of  going  forward  with  evidence  on  the  fact   presumed, and when that party has produced evidence  fairly and reasonably tending to show that the real fact   is not as presumed the purpose of presumption is over.   Then the evidence will determine the true nature of the  fact  to  be  established.  The  rules  of  presumption  are   deduced  from  enlightened  human  knowledge  and  experience and are drawn from the connection, relation   and coincidence of facts, and circumstances.”

39. Mr. Chandra, however, laid considerable emphasis on  

the  words  “tending  to  show that  the  real  fact  is  not  as  

presumed”, to argue that the test applied by this Court in  

rebuttable  presumptions  had  been  the  test  of  

‘preponderance of  probability’.   We do not  think so.  It  is  

well-settled that a decision is an authority for the point it  

decides.  It  is  equally  well-settled  that  the  text  of  the  

decision cannot be read as if it were a statute. That apart  

the expression used by this Court is “evidence fairly and  

reasonably tending to show”, which signifies that it is not  

just  any  evidence,  howsoever  shaky  and  nebulous  that  

would  satisfy  the  test  of  preponderance of  probability  to  

rebut the statutory presumption but evidence that can by  

proper and judicial application of mind be said to be fairly  

and  reasonably  showing  that  the  real  fact  is  not  as  

38

presumed.  In other words the evidence required to rebut a  

statutory presumption ought to be clear and convincing, no  

matter the degree of proof may not be as high as proving  

the fact to the contrary beyond a reasonable doubt.  The  

heightened  standard  of  proof  required  to  rebut  a  

presumption raised under the statute at hand is in our view  

applicable for two distinct reasons.  The first and foremost  

is  that  the  presumption  is  raised  in  relation  to  a  fiscal  

statute.  While  the  amount  payable  is  not  a  tax  it  is  

nevertheless  a  statutory  levy  which  is  attracted  the  

moment  the  transaction  of  sale  takes  place  within  the  

market area. Goods, admittedly produced within the market  

area and not consumed within such area are presumed to  

be  leaving  pursuant  to  a  transaction  of  sale  unless  the  

contrary is proved. That the goods are produced within the  

market area is not in dispute in the instant case. That they  

left  the  market  area  is  also  admitted.  In  the  ordinary  

course, therefore, the presumption would be that the goods  

left  pursuant  to  a  sale  unless  the  appellants  are  in  a  

position to prove the contrary.  

39

40. The second reason for applying a higher standard of  

proof  than mere preponderance of probability  is  that  the  

nature  of  transaction  pursuant  to  which  the  goods  are  

removed  from  the  market  area  is  within  the  exclusive  

knowledge of the appellants or the persons to whom such  

goods  are  being  dispatched.  In  other  words,  the  

circumstances in which the transactions, which the statute  

presumes to be sales, but which the appellants claim are  

simple transfer of stocks are within the exclusive knowledge  

of  the  appellants.  The  entire  evidence  relevant  to  the  

transactions, being available only with the appellants and  

the true nature of the transactions being within their special  

knowledge, there is  no reason why the rebuttal  evidence  

should not satisfy the higher standard of proof and clearly  

and convincingly establish that the fact presumed is not the  

actual fact.  Our answer to Question No.2 accordingly is that  

the evidence intended to rebut the statutory presumption  

under Section 17 of the Adhiniyam ought to be clear and  

convincing evidence showing that what is presumed under  

the provision is not the real fact.             

Re: Question No.3

40

41. The Market Committee and the Director have recorded  

concurrent findings of fact to the effect that the petitioners  

had failed to establish that no sale of the stocks of  Ghee  

had  taken  place  within  the  Mandi  limits  at  Aligarh.  The  

statutory  presumption  that  any  transfer  of  stocks  from  

within the Mandi area, was pursuant to a sale was thus held  

to have remained unrebutted.   A challenge to the above  

finding would necessarily raise the question as to the scope  

of judicial review of such findings.  We need to sail smooth  

over that aspect before examining the validity of the orders  

within the permissible parameters of judicial review.

42. The power of judicial review is neither unqualified nor  

unlimited. It has its own limitations. The scope and extent of  

the  power  that  is  so  very  often  invoked  has  been  the  

subject-matter  of  several  judicial  pronouncements  within  

and outside the country.  When one talks of ‘judicial review’  

one  is  instantly  reminded  of  the  classic  and  oft  quoted  

passage from Council of Civil Service Unions (CCSU) v.   

Minister  for  the Civil  Service  [1984]  3  All  ER  935,   

where Lord Diplock summed up the permissible grounds of  

judicial review thus:  

41

“Judicial Review has I think developed to a stage today   when, without reiterating any analysis of the steps by   which  the  development  has  come  about,  one  can  conveniently classify under three heads the grounds on  which  administrative  action  is  subject  to  control  by   judicial review. The first ground I would call ‘illegality’,   the  second  ‘irrationality’  and  the  third  ‘procedural   impropriety’.

By ‘illegality’ as a ground for judicial review I mean that   the decision-maker must understand correctly the law  that regulates his decision-making power and must give   effect to it. Whether he has or not is par excellence a   justiciable  question  to  be  decided,  in  the  event  of   dispute,  by  those  persons,  the  judges,  by  whom the  judicial power of the State is exercisable.

By ‘irrationality’ I mean what can by now be succinctly   referred  to  as  ‘Wednesbury  unreasonableness’.  It   applies  to  a  decision  which  is  so  outrageous  in  its   defiance of logic or of accepted moral standards that no   sensible  person  who  had  applied  his  mind  to  the   question  to  be  decided  could  have  arrived  at  it.   Whether  a  decision  falls  within  this  category  is  a   question that judges by their  training and experience  should be well equipped to answer or else there would   be something badly wrong with our judicial system… …

I  have  described  the  third  head  as  ‘procedural   impropriety’ rather than failure to observe basic rules of   natural justice or failure to act with procedural fairness   towards  the  person  who  will  be  affected  by  the   decision. This is because susceptibility to judicial review  under this head covers also failure by an administrative   tribunal to observe procedural rules that are expressly   laid  down  in  the  legislative  instrument  by  which  its   jurisdiction is conferred, even where such failure does   not involve any denial of natural justice.”

43. The above principles have been accepted even by this  

Court in a long line of decisions handed down from time to  

time.  We  may,  however,  refer  only  to  some  of  those  

decisions where the development of law on the subject has  

42

been  extensively  examined  and  the  principles  applicable  

clearly enunciated.  In  Tata Cellular v. Union of India  

(1994)  6 SCC 651,  this  Court  identified  the  grounds  of  

judicial  review  of  administrative  action  in  the  following  

words :

“The duty of the court is to confine itself to the question   of legality. Its concern should be : 1. Whether  a  decision-making  authority  exceeded  its   

powers? 2. Committed an error of law, 3. committed a breach of the rules of natural justice, 4. reached a decision which no reasonable tribunal would   

have reached or, 5. abused its powers.

Therefore,  it  is  not  for  the  court  to  determine  whether a particular policy or particular decision taken in   the fulfilment of  that policy is  fair.  It  is  only concerned   with  the  manner  in  which  those  decisions  have  been   taken. The extent of the duty to act fairly will vary from  case  to  case.  Shortly  put,  the  grounds  upon  which  an   administrative  action  is  subject  to  control  by  judicial   review can be classified as under :

(i) Illegality  :  This  means the decision-maker must  understand correctly  the law that  regulates  his   decision-making power and must give effect to it.

(ii) Irrationality,  namely,  Wednesbury  unreasonableness.

(iii) Procedural impropriety.”

44. Reference may also be made to the decision of this  

Court in State of Punjab v. Gurdial Singh (1980) 2 SCC  

471 where Krishna Iyer, J. noticed the limitations of judicial  

review and declared that the power vested in the Superior  

43

Courts ought to be exercised with great circumspection and  

that  interference  may  be  permissible  only  where  the  

exercise of  the power seems to have been vitiated or  is  

otherwise  void  on  well  established  grounds.   The  Court  

observed:

“The court is handcuffed in this jurisdiction and cannot   raise its hand against what it thinks is a foolish choice.   Wisdom in administrative action is the property of the   executive and judicial circumspection keeps the court   lock-jawed save where the power has been polluted by  oblique  ends or  is  otherwise  void  on well-established   grounds. The constitutional balance cannot be upset.”

45. There is  almost complete unanimity on the principle  

that  judicial  review  is  not  so  much  concerned  with  the  

decision itself  as much with the decision-making process.  

(See  Chief Constable of North Wales Police v. Evans  

[1982] 3 All ER 141). As a matter of fact, the juristic basis  

for such limitation on the exercise of the power of judicial  

review is that unless the restrictions on the power of the  

Court are observed, the Courts may themselves under the  

guise of preventing abuse of power, be guilty of usurping  

that power. Justice Frankfurter’s note of caution in Trop v.  

Dulles 356 U.S. 86 (1958) is in this regard apposite when  

he said:

44

“All power is, in Madison’s phrase, ‘of an encroaching  nature’.  Judicial  power  is  not  immune  against  this   human  weakness.  It  also  must  be  on  guard  against   encroaching beyond its proper bounds, and not the less   so since the only restraint upon it is self-restraint.”

46. That the Court dealing with the exercise of power of  

judicial review does not substitute its judgment for that of  

the legislature or executive or their agents as to matters  

within the province of either, and that the Court does not  

supplant ‘the feel of the expert’ by its own review, is also  

fairly well-settled by the decisions of this Court.  In all such  

cases  judicial  examination  is  confined  to  finding  out  

whether  the  findings  of  fact  have  a  reasonable  basis  on  

evidence and whether such findings are consistent with the  

laws of  the land.   [See Union of India v.  S.B.  Vohra,  

(2004)  2  SCC  150,  Shri  Sitaram  Sugar  Co.  Ltd.  v.   

Union  of  India,  (1990)  3  SCC  223,  and Thansingh  

Nathmal  and  Ors.  v.  Supdt.  of  Taxes  and  Ors.,   

Dhubri, AIR 1964 SC 1419].  

47. In Dharangadhra Chemical Works Ltd. v. State of   

Saurashtra and Ors., AIR 1957 SC 264,  this Court held  

that decision of  a Tribunal on a question of fact which it has  

jurisdiction to determine is not liable to be questioned in  

45

proceedings under Article 226 of the Constitution unless it  

is shown to be totally unsupported by any evidence.   

48. To the same effect is the view taken by this Court in  

Thansingh Nathmal’s case (supra) where this Court held  

that the High Court does not generally determine questions  

which  require  an  elaborate  examination  of  evidence  to  

establish the right to enforce which the writ is claimed.

49. We may while parting with the discussion on the legal  

dimensions of judicial review refer to the following passage  

from Reid v. Secretary of State for Scotland [1999] 1  

All ER 481, which succinctly sums up the legal proposition  

that judicial review does not allow the Court of review to  

examine  the  evidence  with  a  view  to  forming  its  own  

opinion about the substantial merits of the case.  

“Judicial  review involves a challenge to the legal   validity of the decision. It does not allow the court of   review to examine the evidence with a view to forming   its own view about the substantial merits of the case. It   may  be  that  the  tribunal  whose  decision  is  being   challenged has done something which it had no lawful   authority  to  do.  It  may have abused or  misused the   authority which it had. It may have departed from the   procedures which either by statute or at common law  as a matter of fairness it ought to have observed. As   regards  the  decisions  itself  it  may  be  found  to  be   perverse  or  irrational  or  grossly  disproportionate  to   what was required. Or the decision may be found to be   erroneous  in  respect  of  a  legal  deficiency,  as  for   

46

example,  through  the  absence  of  evidence,  or  of   sufficient  evidence,  to support  it,  or  through account   being taken of irrelevant matter, or through a failure for   any reason  to  take  account  of  a  relevant  matter,  or   through  some  misconstruction  of  the  terms  of  the  statutory  provision  which  the  decision  maker  is   required to apply. But while the evidence may have to  be explored in order to see if the decision is vitiated by  such legal deficiencies it is perfectly clear that in case   of review, as distinct from an ordinary appeal, the court   may not set about forming its  own preferred view of   evidence.”

50. In  its  order  dated  13th September,  1995  the  Mandi  

Samiti,  Aligarh,  has  upon  examination  of  the  evidence  

adduced before it recorded a finding that the same did not  

inspire confidence for a variety of reasons. The Samiti has  

found  that  the  appellants  had  failed  to  produce  any  

evidence as to when and where any transaction regarding  

sale and purchase of ghee manufactured within Mandi area  

was finalised. No evidence was adduced by the appellants  

to show as to who had been instrumental in finalising such  

sale transactions out of its officers and employees. If  the  

product was being sold under the directions of the officers  

of  the  Company  it  should  have  been  possible  for  the  

company to firmly establish the identity of such officers and  

furnish details as to when and where the sale transaction of  

different stocks of ghee sent out from the market area was  

47

finalised.  The  Samiti  was  of  the  view  that  although  the  

appellant  had  claimed  that  there  were  separate  C&F  

agreements with various agents appointed by it at several  

destinations  outside  the  mandi  area  the  appellant  had  

produced  only  two  of  such  agreements  in  support  of  its  

case that such C&F agents existed at all such destinations.  

The Mandi Samiti noticed that 25 consignments relevant to  

the order passed by the Samiti  on 13th September,  1995  

were sent out of the Mandi area but the appellant-company  

had  not  adduced  evidence  pertaining  to  all  such  

consignments. Even in regard to consignments where such  

evidence  had  been  adduced  the  Samiti  noticed  

shortcomings that adversely affected the credibility of the  

evidence.  For instance, there were no Book Numbers on  

the sales invoice-cum-challans relied upon by the company.  

The evidence was in the form of loose papers, hence not  

reliable.  It  was  noticed  that  although  payments  were  

mentioned on the documents submitted, no particulars as  

to who made the payment and to whom, were available.  

The Samiti also noticed that signatures of the vendor of the  

goods on the sale invoice-cum-challan were absent. It was,  

48

therefore,  not  clear  whether  the  person  making  the  sale  

was an individual  from the company or one representing  

the C&F agent.  The Samiti found information furnished by  

the appellant incomplete and discrepant in regard to the  

sales made in Jodhpur, Jaipur and Indore. The Samiti on the  

basis of the above observations took the view that the so  

called C&F agents were the actual purchasers of the  ghee  

from the company and the C&F agreements, two of which  

were placed on record, were only meant to avoid payment  

of market fee.

51. In  its  order  dated 3rd July,  1997 the Mandi  Parishad  

which  heard  the  revision against  the above order  of  the  

Mandi Samiti did not find any error in the appreciation of  

the evidence per se to warrant a different view.  It took the  

view that no evidence was produced to show as to why a  

particular  quantity  of  ghee  was  to  be  delivered  to  a  

particular place.  The transport biltis did not mention as to  

who shall pay the freight for the transportation of the ghee.  

This is because if the transport of ghee outside Aligarh, was  

a stock transfer and not pursuant to a sale made within the  

market area, the payment of freight would have been the  

49

responsibility of the company for there is no transfer of the  

ownership  in  that  case  to  any  third  party.  The company  

should  have  in  that  case  firmly  established  that  the  

transport charges payable in regard to the transport of the  

stocks of ghee out of the mandi area were paid by it and by  

no one else.  Keeping in view the fact that the company is  

doing  business  worth  crores  of  rupees  and  maintains  

regular accounts book,  both in  the ordinary course of  its  

business as also for tax purposes, there was no reason why  

the  company  should  have  failed  to  establish  that  the  

transport charges were paid by it. The Director exercising  

powers of the Mandi Parishad also held that there was a  

break in the chain of reasons in as much as the appellants  

did not bring forth the link evidence giving details of the  

sale transactions pursuant to which C&F agents had made  

the delivery of the goods.  

52. The  orders  passed  by  the  Mandi  Samiti  and  the  

Director  exercising  powers  of  the  Mandi  Parishad  thus  

clearly  show  that  there  was  no  clear  and  convincing  

evidence to  establish  that  the presumption arising under  

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Section 17(iii) of the Act stood rebutted and that the actual  

was not, what was presumed under the said provision.  

53. To the same effect are the findings recorded by the  

Mandi  Samiti  in its  order dated 7th July,  1998 with minor  

variations  here  and  there.  The  Mandi  Samiti,  inter  alia,  

noticed that while some of the transport consignment note  

showed that the same would be billed at Bombay, some  

others  showed that  they  would  be  billed  at  Aligarh.  The  

amount  of  freight  was  also  not  mentioned  nor  details  

regarding  the  payment  of  these  consignments  notes  

produced. It was not established whether the payment was  

to be made by the appellants or the recipients of the goods.  

Hence, the same were insufficient to prove that no sale had  

taken place inside the mandi area.  

54. There was also no evidence to prove that the rent of  

godown was being paid by the appellant-company nor was  

there any evidence to show the procedure followed for the  

sale of the products at Indore and Jaipur. Twenty one of the  

invoices made for Jaipur had no signature of the recipient of  

the goods nor it was clear as to who received the payment  

and what was the mode of making of such payments. The  

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Samiti noted that these invoices were not in book form but  

were in the form of loose papers and did not bear any book  

number. No evidence was, according to the Mandi Samiti,  

produced  by  the  appellant  regarding  the  decision  of  the  

company’s  marketing  department  in  connection  with  the  

stock transfer and in connection with the directions given to  

the Aligarh office for transfer of a particular consignment  

sent to a particular destination and in a particular quantity.  

55. The  Samiti  also  noted  that  the  appellants  had  not  

produced any evidence to show that the C&F agents were  

not authorized to settle the bargain for sale of goods and  

were  supposed  to  simply  follow  the  directions  of  the  

company as regards the delivery of specified quantity to a  

specified  party  upon  receipt  of  payment.  No  evidence  

regarding  instructions  to  the  C&F  agents  was  adduced  

before  the  Mandi  Samiti  to  prove  that  the  company  

continued  to  exercise  complete  dominion  over  its  stocks  

and  also  the  power  to  sell  the  goods  and  to  receive  

payments kept in the custody of the C&F agent.  

56. Suffice  it  to  say  that  the  Mandi  Samiti  appreciated  

each  piece  of  evidence  and  found  the  same  to  be  

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insufficient to hold that the sale transactions had, in fact,  

taken place outside the mandi area so that the presumption  

arising under Section 17(iii) of the Act stood rebutted. The  

Director exercising powers of the Mandi Parishad has in its  

order dated 25th September, 2004 once again evaluated the  

evidence and concurred with the view taken by the Mandi  

Samiti.   

57. In the light of the legal position stated in the earlier  

part  of  this  order,  it  is  neither  feasible for  us to  embark  

upon an exercise of re-appreciating the entire material or to  

substitute our own findings for those recorded by the Mandi  

Samiti  and  the  Director/Mandi  Parishad.   So  long  as  the  

finding  recorded  by  the  Mandi  Samiti  and  the  Mandi  

Parishad are not irrational or perverse, and so long as the  

view  taken  by  them  is  a  reasonably  possible  view,  this  

Court would not interfere.

58. In  course  of  arguments  at  the  Bar,  we  repeatedly  

asked Mr. Chandra as to why the appellants had failed to  

adduce the material which would throw a flood of light as  

to the true nature of the transaction within or outside the  

mandi area.   Mr.  Chandra’s reply was that the material  

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was available and could be produced if so required. Some  

of this material which was with the appellant but was not  

produced was sought to be introduced even at the stage  

of  hearing  before  us,  while  the  rest  could,  argued  Mr.  

Chandra be laid before the Samiti, if an opportunity to do  

so could be granted to the appellant.  

59. We regret our inability to accede to any such request.  

We  do  not  think  that  a  party  who  has  had  ample  

opportunity before the authorities below, to substantiate  

its claim can have the luxury of either producing material  

for the first time in the Supreme Court or ask for a remand  

to  enable  it  to  do  what  it  ought  to  have  done  at  the  

appropriate  stage.  It  was  not  the  contention  of  the  

appellants that they were not given a fair opportunity to  

prove their case before the authorities below.  As a matter  

of fact, orders passed by the Mandi Samiti and the Mandi  

Parishad  show  that  sufficient  opportunity  was  indeed  

afforded to the appellants and the matter had remained  

pending for a number of years before those authorities.

60. Mr. Chandra contended that the appellants had been  

requesting  the authorities  to  indicate  as  to  what  kind  of  

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material would satisfy them but since the authorities had  

failed  to  respond  to  that  query  the  appellant  had  not  

produced the bulk of the material which was relevant and  

available with them. We do not think that such a procedure  

was legally permissible or even called for in the facts and  

circumstances of the case. As to what material  would be  

sufficient to prove the case of the party who goes to the  

Court for relief is a matter for the party or those in charge  

of  its  legal  affairs  to  determine.  No  litigant  can  ask  for  

guidelines  from  the  Court  or  statutory  body  as  to  the  

evidence which the party should adduce to substantiate its  

claim.  The  query  made  by  the  appellants  as  to  what  

material  if  adduced  would  satisfy  the  authorities  was,  

therefore,  misplaced and  a  red  herring  to  say  the  least.  

This is particularly so when the appellants were in no way  

handicapped on account of lack of resources or capacity to  

get  the  best  of  legal  advice.  Companies  with  such  

tremendous resources as the appellants before us cannot  

find a shortcut to the discharge of their obligations under  

the law by asking the Court or the authority concerned to  

indicate as to what kind of evidence would be sufficient in  

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its opinion to entitle them to the refund of the amount paid  

or payable towards market fee.   

61. So also, no remand ought to be made only to enable a  

party to produce additional material.  A remand is neither  

mechanical nor a routine affair. If there is nothing wrong in  

the  orders  under  challenge,  there  is  no  question  of  

interference  with  the  same.  There  is  no  reason  for  this  

Court to set the clock back and start a process which would  

take the parties another decade or so to come to terms with  

the problem.  

62. In  the  result  these  appeals  as  also  W.P.  (C)  

No.144/2005  fail  and  are  hereby  dismissed  with  cost  

assessed at Rs.15,000/- in each case.     

……………………….……..……J.        (T.S. THAKUR)

………………………….…..……J. (DIPAK MISRA)

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New Delhi March 23, 2012

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