Cadbury India Limited vs State Of Maharashtra And Others
2017 Latest Caselaw 6357 Bom

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               IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                       CIVIL APPELLATE JURISDICTION

                        WRIT PETITION NO.  3472  OF  2006


Cadbury India Limited                                        ... Petitioner

V/s.

State of Maharashtra and Ors.                                ... Respondents

                               -----
Dr.  Abhinav Chandrachud a/w Ms. Henna Daluf, Ms. Komal Khushalam with 
Anuram Ghoste i/b Crawford Bayley & Co. for the Petitioner.
Mr. B.V. Samant, AGP for the Respondent Nos. 1 and 4.
Mr. N.N. Bhadrashete for the Respondent Nos. 2 and 3.

                                          CORAM : S.C.DHARMADHIKARI &
                                                     SMT. VIBHA KANKANWADI, JJ.

DATE : 18th AUGUST, 2017

:ORAL JUDGMENT: (PER S.C.DHARMADHIKARI,J)

1. By this petition under Article 226 of the Constitution of India, the

Petitioner challenges the order dated 12th April 2006, copy of which is at

Annexure 'Z' to the petition.

2. That order has been passed by the third Respondent to this Writ

Petition.

3. The Petitioner is a Company incorporated under the Indian Companies

Act, 1956 carrying on its business from the registered office situated at

Mumbai and the factory at Thane, District Thane.

Sneha Chavan                                                                            1/37





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4. The Petitioner claims to be manufacturing confectionery and food

drinks which is extensively marketed and distributed throughout India.

The first Respondent to the Petition is the State of Maharashtra through

the department of Co-operation and Textiles.

5. The second Respondent is a Committee under the Maharashtra

Agricultural Produce Marketing (Development and Regulation) Act,

1963 (for short 'the APMC Act').

6. The Petitioner does not dispute that the first Respondent has enacted

the APMC Act as also the APMC (Regulation) Rules, 1967. The

substantive provisions of the Act enable the Government to set up an

Agricultural Produce Market Committee for the market areas of Mumbai

and Thane. The second Respondent has been so established under

Section 13(1A) of the APMC Act. There are Bye-laws of the Mumbai

APMC and which are made by the third Respondent under Sections 61

and 61A of the APMC Act read with Rules 120 and 121 of the Rules.

The third Respondent is the Authority who has passed the impugned

order and the fourth Respondent recovers the sum determined and

adjudicated under that order as arrears of land revenue.

Sneha Chavan                                                                      2/37





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7. The Petitioner does not dispute that on 20th June, 1998, the

Government of Maharashtra issued a notification which was duly

published in the Official Gazette pursuant to the Section 4(1) of the

APMC Act and declared that the marketing of the agricultural produce

specified in the notification namely food grains, pulses, cereals, oilseeds,

condiments, sugar, edible oil, dry fruits etc. shall be regulated under the

APMC Act in the Bombay Market Area specified in the notification.

Later on, the Government of Maharashtra issued another notification

dated 16th January 1995 and duly published it in the Official Gazette,

pursuant to Section 13(1A) (a) of the APMC Act and specified that the

additional area of the whole of Thane Taluka of Thane District and 30

villages from Uran Taluka of Raigad District as area to be deemed as

Bombay Marketing Area for the purpose of the APMC Act. Once the

Petitioner does not dispute that the APMC Act confers a power in the

State Government to establish a market committee namely the second

Respondent and for the market areas specified in the notification, then,

the constitution, establishment and powers of the second Respondent to

act in accordance with the APMC Act is an issue which need not bother

us.

8. It is claimed that from 16th January 1995 to 01st May 2000, Respondent

Nos. 2 and 3 did not apply the provisions of the APMC Act, Rules and

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Bye-laws to the Petitioner and no market fee, supervision cost and so

called market charges were levied and collected from the Petitioner

during that period. However, on or about 02nd May 2000, the road

carrier carrying 175 boxes of cashew nuts purchased by the Petitioner in

the State of Kerala for delivery therefrom to the Petitioner's factory at

Thane was intercepted by the officers, servants of the second

Respondent and market fee and supervision cost totaling Rs.6,405.60

was imposed. That amount was deposited and the argument is that it

was without prejudice to the rights and contentions of the Petitioner.

9. The claim is that from 01st January 2001, the Petitioner was not

subjected to the imposition of any market fee, supervision cost and/or

market charges under the Act, Rules and/or Bye-laws by the

Respondent Nos. 2 and 3.

10. In January, 2001, the Petitioner received from the Respondent No.3 a

notice dated 01st January 2001 alleging that the Respondent No.2 found

that the Petitioner has been trading in declared agricultural produce

from its factory at Thane. That is how the Petitioner was called upon to

pay to the second Respondent/the APMC as per Sections 31 and 34A of

the APMC Act and Bye-law 13 of the Bye-laws, market fee and

supervision cost for trading in declared agricultural produce, with

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retrospective effect from 01st January 1995.

11. It is common ground that in view of receipt of this notice, the Petitioner

was once again reminded in March 2001 by a communication dated 20 th

March 2001 that under Section 32A of the APMC Act, the Petitioner

should produce before the third Respondent for inspection at their

Thane factory, the accounts, registers, documents etc. in respect of the

transactions of the notified commodities made by the Petitioner for the

business from 01st October 1999 to 28th February 2001. The inspection

was scheduled on 31st March 2001. After receipt of this letter, the

Petitioner by a written communication dated 27 th March 2001 informed

that the agricultural produce is purchased by the Petitioner within and

outside of State of Maharashtra from various suppliers/traders for

consumption as raw material in the manufacture of confectionery

products and food drinks. The agricultural produce purchased by the

Petitioner is fully and completely consumed in the manufacturing

process and that the Petitioner did not market or deal or trade in such

agricultural produce either within or outside the State of Maharashtra.

The Petitioner clarified that the suppliers/traders supplying the

agricultural produce from within the notified areas of the State of

Maharashtra to the Petitioner, had earlier paid the respective market fee

and supervision cost on the said agricultural produce to the respective

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APMCs to which such payment was liable to be made and therefore, the

Petitioner was not liable to a further or subsequent levy. It is in these

circumstances, the argument was that the provision of APMC Act, Rules

and/or Bye-laws were not applicable in the case of the Petitioner and

requested the Respondent Nos. 2 and 3 to reconsider the matter.

12. The Petitioner annexed to the communication various Purchase Orders

and which were placed on traders for purchase of agricultural produce

within the Bombay Market Area.

13. The Petitioner states that the Officers of the second Respondent visited

their factory at Thane and thereafter, called upon the Petitioner to

produce for inspection the audit reports, sale tax returns and documents

relating to the receipts of agricultural produce from October 1999 till

April 2001. The Petitioner claimed that they produced all these

documents and even provided photocopies thereof to the officials of the

second Respondent. It is claimed that on 06 th May 2001 once again the

factory of the Petitioner was visited and at that time additional

documents were produced for inspection. This is recorded by the

Petitioner in writing. However, despite this clarification the Petitioner

was threatened with recovery of the amounts by coercive means. The

third Respondent addressed a notice dated 16 th June 2001 and served it

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on Petitioner's office applying the provisions of the Act and called upon

the Petitioner to explain as to why the sum quantified in the notice

should not be recovered. It was stated that the market fee and

supervision cost was charged on the total amount of Rs.9.55 crores

towards the purchase of agricultural produce. This was the produce

purchased and that time, it was clarified that the calculation of

purchase was provided, but not the requisite documents so as to

establish and prove the correctness of the arguments canvassed earlier

that the Act, Rules, Bye-laws are inapplicable to the Petitioner.

14. Since the Petitioner was served with such a notice and a further notice

dated 27th June 2001, the Petitioner once again clarified the matter in

writing by a letter dated 24th September 2001 and their Advocate's

communication of 04th October 2001.

15. The correspondence continued in this manner and what the Petitioner

was called upon to pay is the total sum of Rs.7,64,728.36, then,

quantified as market fee and supervision cost. The Petitioner disputed

the recovery by arguing that the amount cannot be recovered unless it is

established and proved that the Act and Rules are applicable. This

whole issue was thus, forming subject matter of the correspondence and

culminating eventually in a demand notice of 15 th June 2002

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quantifying a sum of Rs.8,41,203/-. Since, that was not paid, the

Collector was requested to recover it as arrears of land revenue.

Further, it was informed that the Petitioner has moved this Court by the

earlier Writ Petition being Writ Petition No. 5132 of 2001. That petition

was placed before a Division Bench of this Court on 18 th December

2003. Earlier, the Petitioner was granted interim relief on a condition of

deposit of Rs.13 lacs. Thereafter, that petition was disposed of on 18 th

December 2003 essentially, on the basis of an alternate equally

efficacious remedy available to the Petitioner.

16. Thereafter, the Petitioner was to appear before the Respondent No.3

and for a personal hearing. The communications in that regard are

referred to from paragraphs 14 onwards of this petition. Eventually, the

Petitioner was served with an order dated 12 th April 2006 quantifying

the sum of Rs.8,83,829.53 as market fee, supervision cost amounting to

Rs.58,921.97 as also interest on both amounts up to March, 2006 totally

computed at Rs.6,87,294.85. The total amount was quantified at

Rs.16,30,046.35.

17. The amount as quantified above pertains to the purchases from the

suppliers within and outside Bombay Market Area between 01 st October

1999 to 31st March 2002.

Sneha Chavan                                                                          8/37





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18. It is this order which is challenged in this petition under Article 226 of

the Constitution of India on various grounds.

19. Dr. Abhinav Chandrachud, learned Counsel appearing for the Petitioner

firstly contended before us that on a perusal of the Section 31 of the

APMC Act, it would be evident that it is not applicable to the Petitioner.

The Act is applicable provided there is a marketing of the agricultural

produce within the market area. It is then, the fee and supervision

charges etc. which are leviable and recoverable. The Act is inapplicable

in respect of those transactions where the Petitioner may purchase

agricultural produce but outside the market area. That such produce is

merely brought within the market area and for use and consumption as

raw material in the Petitioner's factory at Thane is not enough to apply

the provision of the Act to the Petitioner. The Act applies only when

there is a marketing of the agricultural produce within a market area.

The bringing of raw materials for use and consumption in the factory

and for manufacturing final or end product, thus, does not attract the

levy.

20. Alternatively and without prejudice, it is submitted that if there is such

agricultural produce and which is purchased within the market area and

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the market fee would therefore, have to be paid, still, as far as that

aspect is concerned, at best there is a power to levy, assess and recover

the Market fee. There is no question of payment of any interest or

supervision charges.

21. As far as the interest component is concerned, the argument is that

assuming there is a power to make Rules and the Rules empower

further making of Bye laws, still, so long as there is an absence of a

clear stipulation in that, the APMC cannot recover interest. It cannot

recover interest on consideration of equity as well. If there is a power

to recover penalty that cannot be equated with imposition of the

liability to pay interest. As far as interest is concerned, if it is to be

recovered under general law there as well, there are preconditions sets

out. It is either recoverable as compensation or damages for wrongful

deprivation of the claim of the sum due and payable. There is no such

finding and therefore, the impugned order to the extent it seeks to

recover interest is untenable in law.

22. As far as the supervision charges are concerned, there as well the

provision of the APMC Act would permit the recovery of such charges

provided there is any material to prove that the supervision was done

and as contemplated by law. In that regard, our attention has been

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invited to the provisions of the Act and particularly, the newly added

Chapter IV-A titled as "Cost of Supervision". The argument is that by

Sub-Section (1) of Section 34A, it is mandated that there has to be a

supervision of the staff appointed by the State Government and which is

towards the purchase of agricultural produce, brought in the market

area and its marketing, which is regulated by the Act. If the costs of

such supervision have to be paid to the State Government and that cost

is incurred by the APMC, then proof of such payment has to be

produced and so long as that is not produced the cost of supervision

cannot be recovered from the purchaser.

23. In support of the above arguments, heavy reliance has been placed on

the following judgments of this court as also the Hon'ble Supreme

Court.

"1) Devendra Trading Company V/s. State of Maharashtra & Ors. 1974 Mh.LJ. 463.

2) Britannia Industries Ltd. V/s. Bombay Agricultural Produce Marketing Committee, Bombay and Another, 2006(5) Mh. L.J. 266

3) IVP Limited & Ors. V/s. Mumbai Agricultural Produce Market Committee & Ors., 2006(4) Bom. C.R. 592.

4) Mumbai Agricultural Produce Market Committee & Anr. V/s. Hindustan Lever Limited & Anr. (2008) 5 Supreme Court Cases 575

5) India Carbon Limited and Ors. V/s. State of Assam, (1997) 6 Supreme Court Cases 479.

Sneha Chavan                                                                       11/37





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       6)      V.V.S.   Sugars   V/s.   Government   of   A.P.   And   Ors.,   (1999)   4  
       Supreme Court Cases 192
       7)      Consolidated Coffee Ltd. V/s.  Agricultural Income Tax Officer,  

Madikeri & Ors. (2001) 1 Supreme Court Cases 278."

24. The Writ Petition has been contested by the Respondent Nos. 2 and 3.

Mr. Bhadrashete appearing on behalf of Respondents would submit that

there is no merit in the petition and it deserves to be dismissed. Mr.

Bhadrashete invites our attention to the impugned order to submit that

purely factual findings have been rendered and these are not perverse

at all. It was the Petitioner's case that APMC Act is inapplicable and to

the transactions which have been carried out beyond the market area

and rather outside the same. However, Mr. Bhadrashete would submit

that the Petitioner is not disputing the power of the State Government

to enact the APMC Act. Once it is so enacted, then, the provisions of

the Act which further empower the State Government to establish for

the market area so notified a market committee, then, the second

Respondent can safely be termed as the creature of the Statute. As

empowered by the Statute, the market fee can be levied, assessed and

recovered. The market fee is sought to be levied imposed and

recovered on marketing of the agricultural produce within the Bombay

Market Committee area. In answer to the demand raised, it is the

Petitioner's case that the agricultural produce has not been purchased

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within the market area but outside area. If that is so procured but is

admittedly a agricultural produce, then, it was incumbent upon the

Petitioner to provide the relevant details. The transactions in question

are from 01.04.2001 to 31.03.2002. The Petitioner has averred at page

47 of the present petition that such details would be provided and with

regard to the agricultural produce purchased outside the Bombay

Market Area. The Petitioner therefore, should have supplied the relevant

documents and providing the relevant details namely the place of the

contract, the place of delivery and the place of payment. It is clear that

the documents that are produced and relied upon, the copies of which

are annexed to the petition from pages 157 to 241 are pertaining to

those transactions in agricultural produce which have been carried out

from April, 2004. They are not relevant. In the present case, the

relevant date is as stated above. For that period no proof is produced.

Hence, the market fees are leviable and recoverable.

25. Since that market fee has been not paid, but the APMC is dragged into

unnecessary and fruitless litigation, then, even the interest is due and

payable. As far as the supervision charges are concerned, there as well,

the burden was on the Petitioner for they alleged that there was no staff

deployed by the State Government and whose services were availed of

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by the APMC. Hence, even those charges could be recovered.

26. Mr. Bhadrashete therefore, submits that the impugned order is not

vitiated by any error of law apparent on the face of the record or

perversity warranting our interference in the writ jurisdiction.

27. For properly appreciating these contentions, we must refer to the APMC

Act. The APMC Act has been enacted so as to develop and regulate the

marketing of agricultural and certain other produce in market area and

markets (including private markets and farmer consumer market) to be

established therefore, in the State, to confer powers upon market

committees to be constituted in connection with or acting for purposes

connected with such markets, to establish market fund for the purposes

of market committee and to provide for purposes connected with the

matters aforesaid.

28. The law has been made and extensively amended from time-to-time.

The Act is divided into several Chapters. Chapter 1 contends

preliminary provision. Particularly by Section 2 the definitions. It is

common ground that agricultural produce is defined in Section 2 (a)

"All produce (whether processed or not) of agriculture, horticulture,

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animal husbandry, apiculture, pisciculture, fisheries and forest specified

in the Schedule thereto. There is no dispute that the produce which is

alleged to have been marketed is agricultural produce. The word "Bye-

law" is defined to mean Bye-laws made under Section 61. The word

"Market" is defined in section 2(h). Whereas, the "Market Area" is

defined in section 2(i) and the word "Market Committee" is defined in

Section 2(j). These definitions read as under:

"Section 2(a) "Agricultural Produce" means all produce (whether processed or not) of agriculture, horticulture, animal husbandry, apiculture, pisciculture [fisheries] and forest specified in the Schedule"

"Section 2(h) "Market" means any principal market established for the purposes of this Act and also a subsidiary market.

"Section 2(i) "Market Area" means an area specified in a declaration made under section 4 [and includes the area deemed to be a market area under clause (a) of sub section (1A) of section 13].

"Section 2(j) "Market Committee" or "Committee" means a committee constituted for a market area under Section 11 [and includes [the Bombay Agricultural Produce Market Committee established under clause (a) of sub-section (1A)] [and the Divisional or Regional Market Committee declared

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under clause (a) of sub-section (1B)] of section 13 and] a committee or committees constituted as a result of amalgamation of Market Committees or division of a Market Committees under section 44]"

29. A perusal of these definitions together with the substantive provisions

namely Sections 3, 4 and Section 13 would denote that in the present

case, the second Respondent is a duly constituted market committee for

a market area. It can invoke and apply the provisions of the Act. The

term "prescribed" is defined in Section 2(m) to mean prescribed by

Rules made under the APMC Act and the term "Rules" is defined in

Section 2(p) means Rules under the APMC Act. The term "Secretary" is

defined in Section 2(r) to mean Secretary of a Market Committee and

includes the Joint, Deputy or Assistant Secretary. A perusal of these

definitions would indicate that the third Respondent to this petition was

the duly empowered official or Authority to pass the impugned order.

30. We are not concerned with the provisions in relation to the

establishment, constitution of the Market Committees, their

composition and the election of the office bearers etc.

31. Chapter IV opens with the heading "the Market Committees Powers

and Duties". Section 29 thereof enables a Market Committee to exercise

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the power and perform the duties set out therein. A Market Committee,

therefore, has from time to time, direct, do such acts and other acts, as

may be required in relation to the superintendence, direction and

control of markets or for regulating marketing of agricultural produce in

any place in the market area and for the purpose connected with the

matters aforesaid. By Sub-Section 2(xvii) of Section 29, a Market

Committee may levy, take, recover and receive charges, fees, rates and

other sums of money to which the Market Committee is entitled. By

Section 31 there is a power conferred in the Market Committee to levy

fees and rates of commission. Sub-Section 1 of section 31 reads as

under:

"31. Power of Market Committee to levy fees [and rates of commission (adat)].-

[(1)] It shall be competent to a Market Committee to levy and collect fees in the prescribed manner at such rates as may be decided by it (but subject to the minimum and maximum rates which may be fixed by the State Government by notification in the Official Gazette in that behalf), from every purchaser of agricultural produce marketed in the market area:

Provided that, when any agricultural produce brought in any market area for the purposes of processing only is not processed within thirty days from the date of its arrival therein, it shall, until the contrary is proved, be presumed to have been marketed in the market area, and shall be liable for the levy of fees under this section, as if it had been so marketed:

Sneha Chavan                                                                           17/37





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       [Provided further that,-
       (a)      any agricultural produce brought in any market area for the  

exclusive purpose of export shall be exempted for the payment of fees and supervision cost, if such exporter or his duly authorised agent presents the letter of credit or confirmed order of export or confirmed export order consignment, whichever is relevant or applicable, at the time of entry of such produce in the market area to the officer authorised in this behalf by the market committee concerned along with a declaration in that behalf, in such form as the State Government may, by order from time to time direct;

(b) If such exporter fails to submit a certified copy of the bill of lading or the air-freight bill or any other documents as may be specified by the State Government as a proof of such export, within ninety days from the date of entry of the agricultural produce in the market area, such agricultural produce shall be deemed to have been marketed within the market area and he shall forthwith pay the market fees under this section and shall also pay the supervision cost under section 34A on such agricultural produce, alongwith eighteen per cent interest on the total amount due and payable as the market fees and supervision cost, from the date of bringing of such produce in the market area.] [Provided also that, no such fees shall be levied and collected in any market area in relation to agricultural produce in respect of which fees under this section have already been levied and collected by any other Market Committee, private market, farmer-consumer market, special commodity market or under direct marketing in the State or in relation to declared agricultural produce purchased by person engaged in industries carried on without the aid of any

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machinery or labour in any market area.]"

32. A perusal of this Sub-section would reveal that the Market Committee is

competent to levy and collect fees in the prescribed manner at such

rates as may be decided from every purchasers of agricultural produce

marketed in the market area.

33. Since, our attention has been invited to Chapter IV-A titled as "Cost of

Supervision" we reproduce Section 34A as well.

"34A. Supervision over purchase of agricultural produce in any market or market area and payment of cost of supervision by purchasers-(1) The State Government may, by general or special order, direct that the purchase of agricultural produce, the marketing of which is regulated in any market or market area under this Act, shall be under the supervision of such staff appointed by the State Government as it may deem to be necessary; and subject to the provisions of this Chapter, the cost of such supervision shall be paid to the State Government by the person purchasing such produce in such market or market area. (2) The cost to be paid by a purchaser shall be determined from time to time by the State Government and notified in the market or market area (in such manner as the State Government may deem fit), so however that the amount of the cost does not exceed five paise per hundred rupees of the purchase price of the agricultural produce which is purchased by such purchaser."

34. By Section 60, there is a power in the State Government to make Rules

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for carrying into effect the purposes of the Act and by Section 61 Bye-

laws can be made by the Market Committee subject to the conditions

stipulated therein. That certain Rules have been made and they are

styled as "The Maharashtra Agricultural Produce Marketing

(Development and Regulation) Rules, 1967". Rule 120 of the same is

titled as "Bye-laws". Clause (y) of Rule 120 enables making of Bye-laws

stipulating conditions of trading and marketing in the market area

including any matter for which Bye-laws are required to be made under

these rules for giving effect to the provisions of the Act and the Rules.

The Bye-laws enable a rate of fee to be collected from the purchasers

under Section 31 and refund thereof. The rates of charges provided

under the Act and several matters which have been enlisted in Rule 120

can be taken care of by the Bye-laws.

35. The impugned order after referring to the previous history leading to

the issuance of the notices and raising of the demand, recites that from

June 1995, the second Respondent has been empowered to control,

supervise and to perform all the functions and duties in relation to the

marketing of an agricultural produce. The order recites as to how the

agricultural produce, namely, sugar, dry fruits, edible oils brought

within the jurisdiction of Mumbai APMC would attract the market fee

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and supervision charges under Section 34A of the Act as also interest @

17.25% on the defaulted amount as per the provision of Bye-law No.14

of Mumbai APMC. It is stated that despite these clear stipulations as far

as the Petitioner is concerned, it marketed the agricultural produce, but

failed to pay market fee, supervision charges and the interest thereon to

the market committee. The correspondence between the parties

culminating in the demand, the challenge thereto by filing Writ Petition

No. 5132 of 2001, the order therein has been all referred.

36. In pursuance of the order and since a reply was given to the notices and

a personal hearing was also granted, the third Respondent is

empowered to pass an order. It says that personal hearing was held on

several dates and the Petitioner was reminded to produce the relevant

documents and equally substantiate its pleas.

37. From the record, it is evident that after the order was passed by this

Court the Petitioner received a communication dated 24 th March 2004.

The Petitioner was specifically informed that the period involved is 01 st

October 1999 to 31st March 2001. The communication from APMC

specifically referred to the Petitioner's stand that they are not liable to

pay market fee and supervision charges. The communication from

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APMC recites that the Petitioner did not give inspection of Registers,

documents etc. The Petitioner only provided a statement showing the

value of the items purchased amounting to Rs.9.55 crores. Once again

the Petitioner was reminded to furnish the relevant documents. The

Petitioner reiterated its stand that it is not liable to pay market fee. The

Petitioner alleged by its letter dated 24 th September 2001 that it has

submitted for inspection the original purchase invoices for items which

were purchased and for the period October 1999 to March, 2001. The

market committee invited the attention of the Petitioner to the letter

dated 04th October 2001, pointing out that the inspection of the

documents referred to in the correspondence of the Petitioner was not

given nor copies thereof are furnished. The Petitioner falsely alleged

that such an inspection was given and the copies were furnished. The

Petitioner was informed in writing that since the relevant documents

and for the period concerned were not provided, the Petitioner would

be proceeded against on the footing that APMC Act is applicable and

that it is liable to pay the amount.

38. In response to such a communication from the APMC and also

informing the Petitioner that there would be a personal hearing granted

on 07th July 2004, the Petitioner responded by a letter dated 01 st August

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2004. It admitted in this letter that a personal hearing was granted. It

also noted that the argument canvassed orally as well as in writing that

the market fee and supervision cost are not required to be paid. The

agricultural produce was purchased by the Petitioner within and outside

the market area and that as far as, the agriculture produce purchased

within the market area, it was purchased from licenced suppliers who

had already paid necessary market fee and supervision cost thereon.

The Petitioner would not be therefore, liable to make any subsequent or

further payment. The stand of the Petitioner was that as far as

agriculture produce purchased outside the market area, the same was

purchased from suppliers outside the market area and was beyond the

ambit and scope of the APMC Act. It was argued that the agricultural

produce purchased by the Petitioner was utilized for captive

consumption and there is no further selling, dealing with or marketing

of this produce. From page 146 of the paper book which is an extract of

the Petitioner's stand in writing, we have found the following :

"We further submitted that your office, notwithstanding provision of complete and entire inspection of the relevant records by my Client, was harassing my client with arbitrary and malfide demands of inspection of records of my client. We pointed out that complete and entire inspection of the relevant records of my client, including providing copies of Audit Reports of my client for the years 1999 and 2000, Sales Tax Returns

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from October 1999 till March 2001, Delivery documents relating to receipt of agricultural produce and full statement setting out the Value, Quantum, Supplier and date of receipt of agricultural produce for the period from October 1999 till April 2001 had been provided to your office. However, your office has willfully ignored and obdurately unheeded the inspections of records provided by my client. In any event, my client, pursuant to request made by your good-self during the hearing, has submitted to you, thereafter on 3rd August 2004, photocopies of most of the Invoices for years 2001, 2002 and 2003."

39. Thus, the Petitioner claimed that complete and entire inspection of

relevant records was provided including copies of audit report for the

years 1999-2000, sales tax returns from October 1999 till April 2001,

delivery documents relating to the receipt of agricultural produce and

full statement setting out the value, quantum, supplier and the date of

receipt of agricultural produce for the period October, 1999 till April

2001. It is claimed that all these had been provided to the second

Respondent but it has been willfully ignored. The Petitioner therefore,

recorded that despite their stand as above, they have submitted on 03 rd

August 2004 photocopies of most of the invoices for the years 2001,

2002 and 2003 on 03rd August 2004.

Sneha Chavan                                                                             24/37





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40. From a perusal of page 148 onwards, it is evident that though a

statement was provided enlisting the details, namely, the parties name,

invoice number, invoice date, amount for the year 2001, for the year

2002 what is clear from the same is that each of these documents are

pertaining to the year 2002 and were not relevant for the issue under

consideration. As far as, the invoice for 2001 is concerned, the first

invoice is dated 28th May 2001. The period in question was October

1999 to March, 2001.

41. We are therefore, of the view that Mr. Bhadrashete is right in

contending that the Petitioner failed to establish and prove its case that

the agricultural produce in question was purchased from outside the

market area. The Petitioner was obliged to prove its case as the burden

is squarely on it. Mr. Bhadrashete therefore, is right in urging that the

burden has not been discharged. The impugned order clearly recites

that what has been provided are documents subsequent to the period in

question and wholly irrelevant for a decision on the issue at hand. This

is a factual finding and which is rendered consistent with the materials

placed on record. The Petitioner was reminded to produce the relevant

records, after the personal hearing and even after its letter of 03 rd of

August 2004 recording the factum of a personal hearing. Till the date

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of the impugned order namely 12th April 2006 sufficient opportunity

was granted to produce the relevant documents. Mr. Bhadrashete is

also right in relying upon the document a copy of which is at page 264

of the paper book which shows that the Petitioner purchased the

material from the party at Phaltan, District Satara. It was purchased on

the term (cash on delivery), however, no details are provided. Thus the

place of the contract, place of the delivery, place of payment which

would evidence that a complete transaction, outside the market area

was entered into and executed, has not been provided.

42. We are therefore, not in agreement with Dr. Chandrachud that the

order itself recites that the agricultural produce was purchased outside

the market area and therefore, there was no question of the same being

marketed within the market area. We do not think this manner of

reading the order can be termed as accurate. The order must be read

as a whole and not by picking one or two sentences therefrom. These

sentences cannot be read in isolation. The order recites and clearly that

it is the Petitioner, who in its oral and written argument contended that

the APMC Act was inapplicable for it has purchased sugar, dry fruits and

edible oil from outside the market area. If this agricultural produce has

not been purchased within the market area, then, there is no question of

its marketing within the said area enabling the APMC to recover the

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market fee. The Petitioner was called upon to produce the names of the

suppliers and the place, the transport memo, the evidence of payment

of Octroi and the invoices. If that is how the argument of the Petitioner

could have been substantiated and its case can be held to be proved and

such position in law was known to the Petitioner, then, relying upon a

stray sentence or two in the impugned order would not be enough and

to get out of the enactment.

43. We are of the clear view that the third Respondent was right in arriving

at the factual conclusion that the burden which the Petitioner took upon

itself has not been discharged and therefore, the Petitioner must be held

liable to pay the market fees.

44. Pertinently, Dr. Chandrachud does not dispute that if the market fee in

relation to such agricultural produce which is marketed within the area

of the second Respondent has been paid, then, Petitioner's liability in

that behalf is admitted. The Petitioner is therefore, liable to pay that

sum and which has been paid. It is liable to pay the market fees because

it has not been able to prove its version that a substantial portion of the

agricultural produce was purchased outside the market area and was

never marketed within the same.

Sneha Chavan                                                                27/37





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45. Dr. Chandrachud however, would submit that there is no question of

payment of interest on the aforesaid amounts and in that regard, he

would rely upon the Section 31, as also Section 60 and the Bye-law. Dr.

Chandrachud placed reliance upon the Chapter-IX which is titled

"Penalties".

46. We have no doubt in our mind that there is a distinction carved out by

the Act as far as penalty is concerned that is not equated with interest

and which is sought to be recovered. Section 60 enables making of

Rules. As far as the market fees are concerned, there are specific

powers and by Section 61 Bye-laws can be made. Section 61 reads as

under :

"61. Bye-Laws-(1) Subject to any rules made by the State Government under section 60 and with the previous sanction of the Director or any other officer specially empowered in this behalf by the State Government, the Market Committee may in respect of the market area under its management make bye- laws for determining the quantity of agricultural produce for the purpose of its retail sale, for the regulation of the business (including meeting, quorum and procedure of the Market Committee) and the conditions of trading in the market area, including provision for refund of any fees levied under this Act.

(2) Any bye-law made under this section may provide that any contravention thereof shall, on conviction, be punished

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with fine which may extend to one hundred rupees."

47. A perusal of Section 61 leaves us in no manner of doubt that market

committee may in respect of the market area in its management make

Bye- laws for determining the Quantity of agricultural produce for the

purpose of its retail sale and for the regulation of its business and the

conditions of trading in the market area, including provision for refund

of any fees levied under this Act.

48. As far as, Bye-laws are concerned, Rule 120 of the Rules enables

making of Bye-laws and one of the aspect or matter on which the Bye-

law can be made is the rate of fee to be collected from the purchaser

under Section 31 and refund thereof.

49. In the impugned order, a reference is made to the Bye-law No.14 for the

claim of interest @ 17.25 %. However, it is evident that the Bye-laws

can be made subject to any rules made by the State Government under

Section 60 and with the previous sanction of the Director or any other

official specially empowered in this behalf by the State Government.

Beyond making reference to Bye-law No.14 we have not found any

document or record which would enable the second Respondent to levy

interest.

Sneha Chavan                                                                       29/37





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50. Dr. Chandrachud is therefore, right in relying upon the judgment of this

Court and particularly on the judgment in the case of IVP Limited and a

prior judgment as well. The Hon'ble Division Bench of this Court in

Britania Industries (Supra) construed the provisions of the Act and as

far as levy of market fee it held that the APMC cannot levy market fee

on the sugar, vanaspati oil, cashew nuts, dry fruits purchased/procured

by the Petitioner outside the market area of the committee. Going

further in the case of IVP Limited, [2006(4) Bom.C.R. 592] , the

Division Bench held that the levy of penalty and interest is a matter

dealt with by Sections 31 and 34 and Bye-law No.14. In that regard,

the Division Bench in the following paras held thus:

"16. Now coming to the issue of charging supervision fees, we have to keep in mind that there is a difference between the power of the Market Committee under Section 31 for levying market fees and under Section 34A for supervision fees. Market fees is conceptually and in deed factually a revenue to the Market Committee so as to support its financial outlay in creating infrastructure and rendering services to the agriculturists, traders, agents, buyers and various other parties in the industry. Such is not the case so far as the supervision charges are concerned. As per Section 34A(1) of the Act the State Government may, by general or special order, direct that the purchase of agricultural produce, the marketing of which is regulated in any market or market area under this Act, shall be under the supervision of such staff appointed by the State Government as it may deem to be necessary and subject to the provisions of Chapter IV-A, the cost of such supervision

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shall be paid to the State Government by the person purchasing such produce in such market or market area. As per Sub-section (2) of Section 34A, the cost to be paid by a purchaser shall be determined from time to time by the State Government and notified in the market or market area, in such manner as the State Government may deem fit, so however that the amount of the cost does not exceed five paise per hundred rupees of the purchase price of the agricultural produce which is purchased by the purchaser. Essentially, the State Government in the first instance is required to employ such staff appointed by it to render service in regulating the purchase/marketing of agricultural produce and then recovered the cost of supervision so as to meet the expenditure incurred on such staff in terms of their salary and other benefits etc. The cost to be paid by the purchaser has to be determined from time to time by the State Government and notified in the market or market area but in any case it shall not exceed five paise per hundred rupees of the purchase price of the agricultural produce. This means that from market to market the supervision charges may differ, as fixed by the State Government or in terms of its total quantum for recovery as it varies as per the number of staff employed. The scheme of Chapter V-A as inserted by Act No. 26 of 1972, in the Act thus shows that cost of supervision is an incidental charge to be recovered and paid to the Government and in respect of the staff employed by it. It is not an absolute power of the Committee to recover the levy for its supervision or they are not the supervision charges paid to the Market Committee. As a condition precedent it must be shown that the Government had employed staff in rendering service either at the petitioners' premises or in the market area in regulating the sale/distribution of vanaspati and unless such staff is employed on whom the Government is required to

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spend by way of their salary and other benefits, the Market Committee is not required to reimburse to the State Government supervision charges and, therefore, it cannot claim recovery from the petitioners per se. The scheme of Rule 34-A of the Rules is clear and it supports these conclusions. The impugned orders which have been passed either during the pendency of the petition or before the petition was filed are silent on the quantum of supervision charges paid by the respondent No. 1-Committee to the State Government in respect of the sale/distribution of Vanaspati produced by the petitioners and marketed in the market area of respondent No. 1, though not from the market yard. In the absence of the petitioners having an outlet or a depot or a trading centre in the market yard of respondent No. 1, the other place is only the premises of the petitioners as admittedly the respondent No. 1 has not established any other collection centres or subsidiary markets by exercising powers under Section and Section 30A of the Act. We are, therefore, of the considered view that the respondent No. 1-Committee has no powers to cause recovery of supervision charges from the petitioners as at present and the impugned orders to that extent are unsustainable.

17. Now coming to the issue of the Market Committee's power to charge interest either at 12% or 21% or any rate between 12% to 21%, is concerned, the Committee has relied upon bye-law No. 14(A) which states that on failure to remit the market fees and supervision charges etc. in the succeeding month to the month for which they were payable are not paid, it is entitled to charge interest at the rate of 21% per annum on the amount of recovery. The official translation of the said Bye-law No. 14(A) reads as under:-

14(A) As per the provisions of the Maharashtra Agricultural

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Produce Market (Regulation) Act, 1963 and Rules 1967 and the By-laws framed in pursuance thereof, the concerned Commission Agents, Traders-Importers or any other persons shall have to pay to the Market Committee the amounts viz. Market Fee, Supervision Fee, Weighing Charges, Levy etc. dues up to the end of next month from the month in which such amounts become due. If they fail to pay the same within the prescribed time limit, then interest at the rate of 21% per annum shall be charged on the total amount due.

As against this under Section 31(3) of the Act, failure to pay the market fees, the Market Committee has the power to levy penal charges as prescribed over and above the recovery of fees. Under Section 34B of the Act, the cost of supervision shall be collected by the Market Committee in the same manner in which the fee levied by it under Section 31 is collected and under Sub-section (2) therein the cost of supervision collected by the Market Committee shall be paid to the State Government in the prescribed manner within a period of 15 days from the close of the month in which such cost is collected. As per Section 34C of the Act, if a Market Committee makes a default in the collection or payment to the State Government of any sum or part thereof due in respect of the cost of supervision, the director may direct that the said sum or part thereof, as the case may be, together with penalty equal to 1% of such sum or part shall be recovered from the Market Committee as an arrear of land revenue under Section 57. Thus, the penal charges at 1% have been prescribed to be recovered from the Market Committee, in case the default for payment of supervision fees to the State Government. Bye-laws are framed under

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Section 61 of the Act, which states that subject to the Rules made by the State Government under Section 60, the Market Committee may in respect of the market area under its management make bye-laws for determining the quantity of agricultural produce for the purpose of its retail sale for the regulation of business including meeting, quorum and procedure of the Market Committee and the conditions of trading in the market area, including provision for refund of any fees levied under the Act, with the previous sanction of the Director or any other officer specially empowered in that behalf by the State Government. Rule 120 of the Rules pertains to framing of the bye-laws and it states that subject to the provisions of Section 61 and the Rules, a Market Committee may make bye-laws in respect of all or any of the matters thereunder i.e. (a) to (y), levying interest does not find place thereunder. It is the case of the Market Committee that such a power falls within the ambit of Clause (y) of Rule 120 which reads as under :"

"Conditions of trading and marketing in the market area including any matter for which bye-laws are required to be made under these rules or for giving effect to the provisions of the Act and the Rules."

We are afraid Clause (y) below Rule 120 does not come to the rescue of the Market Committee in support of its case that it has the power to charge interest varying from 12% to 21% on the delayed dues of market fees and supervision charges under bye-law No. 14(A). Section 31 as well as Sections 34A to 34C clearly provide for only penal charges and bye-law No. 14 cannot be termed so as to cover condition of trading and marketing in the market area. We have also noticed that on issuance of the notice by the Market Committee, the petitioners have taken due steps and during the pendency of the petitions or before

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the impugned orders for recovery were passed, they have deposited certain sums. In both the petitions it is not a case of inordinate delay in responding to the demands and, in fact, the demands have been substantially met within few months. No reasons have been given in the impugned orders as to why the Market Committee felt it appropriate to recover interest and not the penal charges from the petitioners. We, therefore, hold that the respondent No. 1 has no powers to charge interest at the rate of 12% or any higher rate upto 21% on the delayed payment of market fees and supervision charges and it was not even otherwise justified to levy such charges in the instant cases."

51. From a perusal of these paragraphs and the observations as above

which find approval from a two judge bench judgment of the Hon'ble

Supreme court in the case of Mumbai APMC and Anr. V/s. Hindustan

Lever Ltd & Ors., reported in (2008)5 SCC 575 that payment of

interest must be referable to the Statute. In the present case absent the

statutory provision or carrying anything a similar force, which could not

be a mere Regulation or Bye-law on broad consideration of equity or

otherwise the interest could not be recovered. Dr. Chandrachud

therefore, is right in his contention that the Petitioner cannot be called

upon to pay interest as quantified or at the rate stipulated in the

impugned order.

Sneha Chavan                                                                               35/37





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52. Even as far as the supervision charges are concerned, the provision is

clear. In both the judgments, namely, Britania Industries, IVP Limited

and Hindustan Lever (supra), the Hon'ble Supreme Court referring to

Section 34-A and 34-B held that supervision charges cannot be levied or

calculated in such a manner so as to cause unjust enrichment in favour

of the State. So long as there is no specific order by the State

Government appointing staff to supervise buying and selling of

agricultural produce in the market, there is no basis for calculating the

supervision cost and seeking to recover it.

53. To that extent as well, we find the contentions of the Petitioner to be

well founded.

54. As a result of the above discussion, the Writ Petition succeeds partly.

Rule is made absolute to the extent that the Petitioner shall be liable to

pay the market fee and in the sum quantified but it cannot be called

upon to pay interest and supervision cost. The interest is quantified at

Rs.6,87,294.85 and the supervision charges are Rs.58,921.97. Barring

these two sums and under these two heads the rest of the amounts can

be recovered by the APMC from the Petitioner in terms of the impugned

order. That is maintained accordingly.

Sneha Chavan                                                                           36/37





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55. It is stated that the Petitioner has deposited a sum of Rs.12,65,105/- in

this Court and which is lying invested. The Registry is directed to

compute the amount in terms of our direction and release the sums by

encashing the fixed deposit with accrued interest. However, the balance

amount after compliance with our order and direction shall be made

over and paid to the Petitioner.

56. Needless to clarify that the second Respondent would be entitled to

interest only on the component of the market fees. Whereas, the

balance interest which accrued on the fixed deposit and to the extent of

the excluded sum shall be made over and paid to the Petitioner. There

will be no order as to costs.

(SMT. VIBHA KANKANWADI, J.)                                  (S.C.DHARMADHIKARI, J.)




Sneha Chavan                                                                           37/37