Mohammad Hussain Gulam Mohammadand vs The State Of Bombay And Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Petition No. 129 of 1959

Decision Date: 2 May 1961

Coram: K.N. Wanchoo, P.B. Gajendragadkar, A.K. Sarkar, K.C. Das Gupta, N. Rajagopala Ayyangar

In the case of Mohammad Hussain Gulam Mohammadand and another versus the State of Bombay and another, the Supreme Court of India delivered its judgment on 2 May 1961. The judgment was authored by Justice K.N. Wanchoo and the bench comprised Justices K.N. Wanchoo, P.B. Gajendragadkar, A.K. Sarkar, K.C. Das Gupta, and N. Rajagopala Ayyangar. The official citation for the decision appears as 1962 AIR 97 and 1962 SCR (2) 659, with further references recorded in various law reports.

The dispute centered on the Bombay Agricultural Produce Markets Act, 1939 (Bombay Act 22 of 1939), which the Bombay Legislature had enacted to improve the regulation of buying and selling agricultural produce in the State of Bombay and to facilitate the establishment of organized markets. Under the Act, the Commissioner was empowered, by means of a notification, to designate certain territories as market areas; consequently, those designated areas were prohibited from being used for the purchase or sale of any agricultural produce listed in the notification unless the activity was carried out under a licence. The Act further required the creation of market committees tasked with granting licences for operations within the market areas. Section 11 of the Act authorized a market committee, subject to the provisions of the Rules and any prescribed maximum rates, to levy fees on agricultural produce bought and sold by licence holders within the market area. Section 29 empowered the State Government, through a Gazette notification, to add to, amend, or cancel any items of agricultural produce specified in the Schedule of the Act, thereby allowing adjustments according to local conditions.

The petitioners challenged the constitutional validity of the Act and the rules made under it, focusing particularly on sections 4, 4A, 5, 5A, and 5AA, which dealt with the declaration of market areas and the establishment of markets. They argued that these provisions placed unreasonable restrictions on their right to engage in trade in agricultural produce, violating the fundamental right guaranteed by Article 19(1)(g) of the Constitution of India. In addition, the petitioners contested the validity of section 11, section 29, and Rules 53, 64, 65, 66, and 67, claiming that these too infringed on their constitutional freedoms.

The Court examined the statutory scheme and held that sections 4, 4A, 5, 5A, and 5AA of the Bombay Agricultural Produce Markets Act were constitutionally valid and fell within the legislative competence of the State. The Court concluded that the provisions did not impose unreasonable restrictions on the petitioners’ right to carry on trade in the agricultural produce that the Act regulated. Consequently, the challenged provisions were upheld as intra vires and consistent with Article 19(1)(g) of the Constitution.

In reaching its conclusions, the Court first noted that it was bound by the precedent set in Nadar v. The State of Madras, [1959] Supp. 1 S.C.R. 92, and therefore followed that authority. The Court then examined the nature of the fee prescribed by section 11 of the Act. It observed that although the fee is calculated on the volume of agricultural produce bought and sold, it does not constitute a sales tax because it is merely a charge for services rendered by the market committee in enforcing the various provisions of the Act. Consequently, the Court held that section 11 is constitutionally valid.

The Court next turned to rule 53, which permits the market committee to determine any rate it wishes for the fees to be collected on agricultural produce transacted within the market area. The Court found this provision to be invalid because, under section 11, the State Government must first fix a maximum fee by rule; without such a ceiling, the committee lacks authority to set any fee at all. Accordingly, rule 53 was declared ultra vires.

Regarding section 29, the Court held that the power conferred on the State Government to add, amend, or cancel any item of agricultural produce listed in the Schedule, in accordance with local conditions prevailing in different parts of the State, is exercised in furtherance of the legislative policy that is evident on the face of the Act. The Court therefore concluded that section 29 is intra vires. In arriving at this view, the Court applied the reasoning in The Edwards Mills Co. Ltd. and Beaway v. State of Ajmer and Another, [1955] 1 S.C.R. 735.

The Court also examined rule 64, describing it as a mechanism for enforcing the regulatory provisions relating to market yards and sub‑market yards. It found this rule to be a valid method of implementation and therefore upheld its validity.

Finally, the Court considered rules 65, 66 and 67, which allow the market committee to grant licences for conducting business in any market area. The Court held that these provisions exceed the powers granted to the market committee by section 5A, and consequently declared them ultra vires.

The case was presented under original jurisdiction as Petition No. 129 of 1959, seeking enforcement of fundamental rights under Article 32 of the Constitution of India. Counsel for the petitioners, counsel for the respondents, and counsel for the interveners were respectively engaged. The judgment was delivered on 2 May 1961 by Justice Wanchoo, who noted that the petition raised the constitutional validity of the Bombay Agricultural Produce Markets Act, No. XXII of 1939, and the rules made thereunder. The petitioners, businessmen from Ahmedabad, argued that a notification designating a 12‑mile radius around Ahmedabad as a market area under section 4 of the Act, together with the establishment of a market yard, a market proper, and a market committee named “The Agricultural Produce Market Committee, Ahmedabad,” imposed unreasonable restrictions on their right to trade in agricultural produce, thereby infringing Article 19(1)(g). The Court’s analysis addressed each contested provision and rule in turn, arriving at the conclusions set out above.

In this case, the petitioners described that a notification had been issued under the Bombay Agricultural Produce Markets Act, No. XXII of 1939, which declared the whole area within a twelve‑mile radius of Ahmedabad to be a market area under section 4 of the Act for certain agricultural products beginning on 1 June 1948. At the same time, a market yard and a proper market were established for dealing in those commodities, and a market committee was created under section 5 of the Act, bearing the name “The Agricultural Produce Market Committee, Ahmedabad.” Subsequently, further notifications extended regulation under the Act to additional agricultural produce within the same market area. In 1959, a locality known as the “Kalupur market” situated in the Telia Mill compound near the Ahmedabad railway station was declared a sub‑market yard for the purposes of the Act. The petitioners were conducting business in the Kalupur market; consequently, after the area was designated a sub‑market yard, the market committee required the petitioners to obtain licences under the Act, without which they were not permitted to continue their trade.

The petitioners argued that various provisions of the Act, its Rules and the bye‑laws framed thereunder imposed unreasonable restrictions on their constitutional right to trade in agricultural produce guaranteed by article 19(1)(g) of the Constitution. They emphasized that the heavy licence fees demanded by the market committee created a substantial burden on trade in the regulated commodities and therefore amounted to an unreasonable restriction on their right to trade. Additionally, they contended that the declaration of the market area together with the establishment of market yards and sub‑market yards forced producers of agricultural commodities to transport their produce over long distances, which likewise imposed an unreasonable restriction on their trade. The petitioners specifically challenged the principal provisions of the Act as well as certain provisions of the Rules and the bye‑laws drafted by the market committee, which they intended to identify at the appropriate stage of the proceedings.

Further, the petitioners maintained that the State of Bombay had never required the market committee to establish a market as mandated by section 5AA of the Act, and that, in law, no market had been established by the committee. Accordingly, they asserted that the committee possessed no authority to issue licences or to exercise any other powers conferred upon market committees by the Act. They prayed that the Act, the Rules and the bye‑laws framed thereunder be declared unconstitutional, ultra vires and void. In the alternative, they sought a direction to the respondents, particularly the market committee, not to enforce the provisions of the Act, the Rules and the bye‑laws against the petitioners so long as a market had not been lawfully established. The respondents opposed the petition, contending that the Act, the Rules and the bye‑laws imposed reasonable restrictions on the fundamental right to trade under article 19(1)(g). They further argued that a market had indeed been established as required by law, and therefore the market committee legitimately possessed the authority to enforce all provisions of the Act, the Rules and the bye‑laws and to insist that the petitioners obtain the requisite licences.

In order to examine the challenge to the constitutionality of the Act, the Rules and the bye‑laws made thereunder, the Court first set out the principal provisions of the Act and the regulatory scheme it creates. The Act governs the purchase and sale of agricultural produce within the State of Bombay and provides for the establishment of markets for such produce. Section 2 of the Act contains the definitions of the terms used throughout the statute. Section 3 empowers the Commissioner, by way of a public notification, to announce his intention to regulate the purchase and sale of agricultural produce in a specified area, and invites any objections or suggestions to be filed within a month of the notice. After receiving any objections, the Commissioner may, after holding any necessary inquiry, declare under section 4(1) that the notified area is to be treated as a market area for the purposes of the Act. Section 4(2) then provides that, once a market area has been declared, no place within that area may be used for the purchase or sale of any agricultural produce specified in the notification, except as permitted by section 5A. Following the declaration of a market area, section 5 authorises the State Government to constitute a market committee for each such area. Section 5AA imposes upon the market committee a duty to enforce the provisions of the Act and, when directed by the State Government, to establish a market in the area, furnishing such facilities as the Government may prescribe in connection with the purchase and sale of the produce concerned. Recognising that there may be a delay between the declaration of a market area and the actual establishment of a market, the proviso to section 4(2) allows the Commissioner to grant licences to any person to use any place in the declared area for the purchase or sale of the produce pending the market’s establishment, and obliges the market committee under section 5AA to enforce the conditions attached to those licences. Section 5A further provides that, once a market has been established, the market committee may, in accordance with the Rules, issue licences to traders, commission agents, brokers, weigh‑men, measurers, surveyors, warehousemen and other persons who wish to operate in the market, provided that a licence is not required for any person who already holds a licence granted under the proviso to section 4(2). Consequently, the effect of these provisions, read together with the definitions in section 2, is that a market area is first declared under section 4(1), after which the statutory mechanisms for regulation, licensing and, eventually, market establishment come into force.

In this case the Court observed that a market could be established in a declared market area. The Rules clarified that a market might consist of what were described as a market proper, a principal market yard and, where appropriate, one or more sub‑market yards. Section 4A required that each market area contain one principal market yard and, as necessary, one or more sub‑market yards. By way of a notification the Commissioner was authorised to designate any enclosure, building or locality within the market area as the principal market yard and to designate other enclosures, buildings or localities as sub‑market yards.

The Court noted that the Act anticipated a possible delay between the declaration of a market area and the actual establishment of a market. For this reason the proviso to section 4(2) allowed licences to be issued while a market was still being established. However, the establishment of a market could occur only when the State Government directed the market committee, under section 5AA, to set up a market in the declared area. The Court found that the Act and the Rules did not prescribe a detailed procedure for the market committee to follow after receiving such a direction, but that a reading of sections 4A and 5AA together indicated the following sequence.

First, after the State Government required the market committee to establish a market, the committee was required to submit a recommendation to the Commissioner indicating which localities should be declared as the principal market yard and, if any, as sub‑market yards. Second, the Commissioner would then issue a notification effecting those declarations. Only after that notification could the market be said to have been legally established. Until the committee acted and the Commissioner gave notice, no market existed in law, and provisions of the Act that became operative only after a market’s establishment could not be applied. During the interim period the trade continued to be regulated under the proviso to section 4(2).

When the market was finally established, the Court explained, the market committee obtained the power to issue licences under section 5A. The Court also mentioned other provisions of the Act that dealt with the constitution of market committees, the creation of a market‑committee fund and ancillary powers of the committees, although those provisions were not directly relevant to the matters before the Court. The Court referred specifically to section 11, which permitted the market committee, subject to the Rules and any prescribed maxima, to levy fees on agricultural produce bought and sold by licence‑holders within the market area. The Court observed that this fee‑levying power applied to the purchase and sale of agricultural produce in the market area and could be exercised by the committee as soon as the market area was declared, even if a market had not yet been formally established under section 5AA.

Until a market has actually been established, the fees that are prescribed in section eleven were to be imposed on licence holders under the proviso to section four of subsection two. After that point, the statute contains provisions that create criminal offences for any violation of its various requirements, although the Court found it unnecessary to examine those offence provisions in detail. Section twenty‑six confers upon the State Government the authority to make rules that are necessary for the implementation of the Act’s provisions. Section twenty‑seven authorises the market committee to formulate bylaws, but such bylaws may be made only after obtaining prior approval from the Director or from any other officer who has been specially empowered by the State Government for that purpose, and they must also be consistent with any rules that the State Government may have framed under section twenty‑six. Finally, section twenty‑nine empowers the State Government, by issuing a notification in the official gazette, to add to, amend, or delete any agricultural produce items that are listed in the Schedule to the Act. Together, these sections constitute the principal mechanisms of the Act and together create the scheme whereby a market area is declared and a market is subsequently set up within that area. The petitioners raised their first argument that sections four, four‑A, five, five‑A and five‑AA, which deal with the declaration of a market area and the establishment of a market, are unconstitutional because they impose an unreasonable restriction on the constitutional right to carry on trade in agricultural produce. The Court found that this argument had no merit. The Court noted that it had previously examined a comparable statute, the Madras Commercial Crops Markets Act, No XX of 1933, in the case of M C V S Arunachala Nadar and others v. The State of Madras and others, reported in 1959 Supp 1 S C R 92, and that the provisions of that Madras Act relating to the regulation of commercial crops had been upheld. The essential provisions of the Madras Act concerning the declaration of a market area—referred to in that statute as a “notified area”—and the establishment of markets are virtually identical to those contained in the present Act. Consequently, the Court considered it futile for the petitioners to claim that the main provisions contained in sections four, four‑A, five, five‑A and five‑AA of the present Act are unconstitutional. Nevertheless, counsel for the petitioners argued that a distinction existed between the Madras Act and the present Act because the former dealt only with commercial crops, whereas the latter potentially brings every type of crop within its regulatory reach. The petitioners conceded that while regulation of the sale and purchase of commercial crops might be constitutionally permissible, extending regulation to all crops could amount to an unreasonable restriction on the fundamental right guaranteed by Article 19 (1) (g). The Court again held that this contention bore no force. The Madras Act, which was limited to commercial crops, had defined certain crops as “commercial crops” in its definitions clause and further provided that the term “commercial crop” would also encompass any other crop or product that the State Government might designate as a commercial crop by publishing a notification in the Fort St George Gazette for

In the Madras Act, the term “commercial crop” was defined so broadly that the State Government could designate any crop as a commercial crop for the purposes of that legislation. Because of this inclusive definition, the State was authorised to incorporate any crop within the meaning of “commercial crop” into the regulatory scheme of the Madras Act. When the Act was originally enacted, it contained a schedule that listed certain crops. Section 29, however, granted the State Government the authority to add to, amend, or delete any of the items appearing in that schedule. Consequently, although the original schedule enumerated specific crops, the Act permitted the State to bring any other crop not originally listed within its regulatory provisions by amending the schedule. The mere possibility of such inclusion did not, in the Court’s view, render the Act an unreasonable limitation on the fundamental right to trade guaranteed by Article 19(1)(g). The wide‑ranging definition of “commercial crop” in the Madras Act likewise allowed the State to treat any crop it deemed suitable as a commercial crop for the purposes of that Act. Therefore, the Court found no substantive difference between the scope of the Madras Act and that of the present Act. Moreover, there was no justification for excluding a crop that could be dealt with on a commercial scale from the Act’s regulatory ambit. Section 4(2A) clarified that the Act did not apply to the purchase or sale of specified agricultural produce when the producer was also the seller and the buyer acquired the produce for personal use, or when such produce was sold through retail transactions. This exemption demonstrated that the Act’s provisions were confined to wholesale trade rather than retail sale. Because wholesale trade implies the handling of commercial crops, the Act treated commercial crops in the same manner as the Madras Act. Accordingly, the Court concluded that there was no distinction in the main provisions of the two statutes, and, relying on the reasoning set out in Arunachala Nadar’s case, held that sections 4, 4A, 5, 5A and 5AA of the Act were constitutional, intra vires, and did not impose unreasonable restrictions on the right to carry on trade in the regulated agricultural produce. The next point of contention concerned section 29 of the Act, which empowers the State Government, by publishing a notification in the official gazette, to add, amend or cancel any item of agricultural produce listed in the schedule. It was submitted

In this case the Court addressed the argument that section 29 of the Act grants the State Government an unfettered authority to place any crop into the Schedule without any guiding principle or control. The Court held that this contention must fail. Although section 29 itself does not set out a specific criterion for deciding which crops should be added to or removed from the Schedule, the Court observed that the Act as a whole supplies the necessary guidance. As already noted, the scheme of the Act deliberately excludes retail sale and is concerned only with what may be described as wholesale trade; this overall purpose provides the State Government with sufficient direction when determining whether a particular agricultural produce ought to be included in or excluded from the Schedule. The State Government is required to examine, in each individual case, whether the volume of trade in the produce is of a character that gives rise to wholesale trade. If it reaches the conclusion that the trade in the produce meets that character, it may lawfully add that produce to the Schedule. Conversely, if it finds that the production of a crop listed in the Schedule has declined to the extent that it no longer constitutes a subject of wholesale trade, the Government may duly remove that crop from the Schedule. The Court referred to the decision in The Edward Mills Co. Ltd., Beawar v. The State of Ajmer and another (1), where section 27 of the Minimum Wages Act, 1948, which allowed the appropriate Government to add any employment to either part of the Schedule after giving a notification, was held to be constitutional. In that case the Court observed that the legislative policy was evident on the face of the impugned enactment; the purpose was to enable the Government, considering local conditions, to decide whether fixing minimum wages for a particular trade or industry not already listed was desirable. The Court applied the same reasoning to section 29 of the present Act, concluding that the power to add, amend, or delete items of agricultural produce from the Schedule must be exercised in accordance with the local conditions prevailing in different parts of the State and in line with the legislative policy plainly evident in the Act. Accordingly, by enacting section 29, the legislature did not relinquish its essential powers nor assign to the administrative authority anything more than an auxiliary power necessary to implement the Act’s purpose and policy. The Court therefore rejected the contention that section 29 confers uncontrolled power on the State Government and is unconstitutional.

The Court dismissed the argument that section 29 of the Act conferred an unfettered power on the State Government and was therefore unconstitutional. The next challenge concerned section 11 of the Act together with the rules made under it. Section 11 authorises the market committee, subject to the rules and to any maximum limits prescribed, to levy fees on agricultural produce that is bought and sold by licencees within the market area. It was contended that the fee authorized by section 11 amounted to a sales tax. The Court observed that the market committee, by levying this fee, provides services to the licencees, especially when the market is first established. Consequently, the fee cannot be characterised as a sales tax because it is charged for services rendered by the committee in enforcing the various provisions of the Act and in providing facilities in the markets it creates. Although the fee is calculated on the value of produce bought and sold, the Court held that this method of calculation is merely a means of recovering fees for the facilities supplied by the committee. Accordingly, the attack on section 11 must fail. In addition, it was argued that rules 53 and 54, which deal with the levy of fees under section 11, are ultra vires because they do not conform to section 11. The Court noted that section 11 provides that fees shall be fixed by the market committee, subject to any maximum limits prescribed by the Rules, and that the fee is to be charged on agricultural produce that is bought and sold. This creates two restrictions on the committee’s power. First, the fee fixed must not exceed the maximum limits set by the Rules; consequently, until such maximums are fixed, the committee cannot lawfully levy any fee. Second, the fee may be charged only on produce that is actually sold, not merely on produce brought into the market. Rule 53 states that the market committee shall levy and collect fees on agricultural produce bought and sold in the market area at rates that may be specified in the bye‑laws. However, the Rules do not prescribe the maximum limits within which the bye‑laws may set fees. Therefore, the first attack on the Rules is that the committee cannot prescribe any fee under section 11 until the State Government, through the Rules, specifies the maximum limits—a step that has not yet been taken. The Court also considered the attack on rule 54, which provides that fees on agricultural produce become payable as soon as the produce is brought into the principal market yard, sub‑market yard, market proper, or market area as may be specified in the bye‑laws.

The Court observed that Rule 53 states that the market committee shall levy and collect fees on agricultural produce bought and sold in the market area at rates that may be specified in the bye‑laws. The petitioner argued that this provision permits the committee to charge fees on produce merely brought into the market, even if the produce is never actually bought or sold, and that such a practice conflicts with section 11 of the Act. The Court read section 11 and concluded that the statute clearly requires the State Government to prescribe a maximum (or “maxima”) within which the market committee may fix any fees. Until the State Government sets that maximum in the Rules, the market committee cannot lawfully fix any fees under section 11.

Furthermore, the Court held that section 11 expressly limits the levy of fees to the quantity of produce that is actually bought and sold. It does not allow fees to be charged on all produce that may have been brought into the market but later taken back because it remained unsold. Regarding the respondents’ answer concerning Rule 54, the Court noted that the rule merely describes a convenient method of collecting fees and that the various bye‑laws contain provisions for refund when there is no sale of the produce that was brought into the market. The petitioners did not specifically allege the absence of any refund provision. Consequently, the Court stated that Rule 54 will be valid only if the bye‑laws include an adequate refund mechanism for produce on which fees were charged but subsequently returned unsold; in that circumstance the rule would function merely as a method of levying the fee that section 11 permits.

The Court also referred to a related petition, Yograj Shankersingh Parihar and another v. The State of Bombay and another (57 of 1957), which was heard together with the present case. In that petition the challenge was directed at Rule 53 on the ground that the fee resembled a sales tax. No argument was raised that the fee could not be levied under Rule 53 because the maxima had not been specified in the Rules. In the present case, however, it is undisputed that no maximum has been set in any rule, and Rule 53 itself leaves it to the market committee to prescribe rates that may be detailed in the bye‑laws. The Court reiterated that, without a maximum fixed by the State Government in the Rules, the market committee cannot prescribe any fees under section 11 through bye‑laws.

Since no such maximum has been prescribed, the Court concluded that the contention that the fees charged under the bye‑laws for the purposes of section 11 are beyond the statutory authority must prevail. The respondents argued that a proper construction of section 11 is that if the Rules prescribe maxima, the committee fixes fees within those limits, but if the Rules do not fix any maxima, the committee may still prescribe fees of its own choosing. The Court declined to accept that interpretation, finding it would amount to adding the words “if any” after “maxima” and would unduly expand the legislative intent, which was to confine the committee’s power to the maxima set by the State Government.

In the present case the respondents contended that, even when the Rules did not specify a maximum, the market committee retained the authority to set any fees it deemed appropriate under section 11. The Court declined to accept this view, observing that such an interpretation would effectively insert the words “if any” after “maxima” in the statutory language. The Court noted that section 11 conferred on the market committee a power of taxation in its broadest sense, but that the legislature clearly intended to limit this power rather than allow the committee unrestricted discretion to determine fees. The limitation was to be effected by requiring the State Government, through the Rules, to prescribe the maximum amounts that could be levied. Consequently, the committee’s authority was meant to operate under the supervision of the State Government, which was positioned to consider the overall circumstances and set the appropriate ceiling. While the committee was given some flexibility to determine fees within the prescribed maximum, the Court compared this arrangement to various municipal statutes where taxation powers are likewise subject to higher‑level control. Section 11, the Court explained, similarly imposed State Government oversight on the committee’s taxing power, a measure that served the collective interests of the community. The Court further held that the State Government could not practically surrender this supervisory role, as appeared to have happened under rule 53 when the committee was left to fix rates without a prescribed maximum. Accordingly, the Court concluded that, absent a maximum fixed by the State Government in the Rules, the committee possessed no authority to impose any fees, and the respondents’ construction was rejected. The Court then turned to the challenge to rule 64, which prohibited any person from entering a principal market yard or sub‑market yard contrary to a direction issued by a servant or member of the market committee, and from disobeying the committee’s directions concerning the placement of carts carrying agricultural produce, the exposure of produce, the relevant roads, or the times of movement. Violation of these provisions, the rule provided, attracted a fine upon conviction. The respondents argued that this rule was ultra vires because it unreasonably restrained the right to trade. The Court found no merit in that argument, describing the rule merely as a mechanism for enforcing the regulatory framework governing market yards and sub‑market yards. Finally, the Court addressed the objection to rule 65, which stipulated that no individual could conduct business as a trader or general commission agent in agricultural produce within any market area unless licensed by the market committee pursuant to that rule.

The Court observed that the argument against Rule 65 was that it exceeded the authority granted by section 5A, which authorises a market committee to issue licences to traders and commission agents only after a market has been established under section 5AA. The Court noted that the power to grant licences to traders before a market is established is found in the proviso to section 4(2), and that this power resides with the Commissioner, not with the market committee. Consequently, the Court held that the market committee’s authority under section 5A is limited to licensing for operations inside an already established market, and does not extend to licensing for business throughout a market area. Because Rule 65 authorises the market committee to grant licences for doing business in any market area, the Court concluded that the rule goes beyond the committee’s statutory power and intrudes on the Commissioner’s authority under the proviso to section 4(2). The Court therefore declared Rule 65 to be ultra vires and to be struck down. The Court further held that Rule 66, being merely incidental to Rule 65, must also fall and be declared invalid.

Turning to Rule 67, the Court found that it similarly empowers the market committee to issue licences for business in the market area and to prohibit business without such licences. The Court applied the same reasoning as for Rule 65, stating that the committee’s licensing power relates only to operation within a market, while licensing for the broader market area remains with the Commissioner until a market is formally established. The Court described the drafting of Rules 65 and 67 as reflecting a confusion on the part of the rule‑making authority, because a clearer approach would have limited the Rules to licences for market operations, which are the only matters within the committee’s competence once a market area is declared and a market is established under section 5A. The Court explained that, at that stage, section 4(2) becomes effective and no place in the declared area may be used for buying or selling agricultural produce except as provided by section 5A. Accordingly, while the apparent intention may have been to restrict licences under Rules 65 and 67 to markets that the committee is authorised to manage, the wording of the Rules refers to the market area rather than the market itself, and therefore exceeds the committee’s statutory power. Finally, the Court addressed the contention that no market had been established in law as required by section 5AA. The Court reiterated its earlier comment that the legislative scheme anticipates a possible delay between the declaration of a market area under section 4 and the eventual establishment of a market under section 5AA, acknowledging that this point does not alter the analysis of the Rules’ validity.

In this case the Court observed that a gap may exist between the moment a market area is declared under section 4 and the later establishment of a market under section 5AA. The Court explained that a market can be created only by a market committee formed under section 5, and that such creation is possible only when the State Government, pursuant to section 5AA, directs the committee to establish a market; consequently the State Government’s direction functions as a condition precedent to any market being set up under section 5AA. The Court further noted that neither the Act nor the Rules prescribe any specific procedure that the market committee must follow after receiving such a direction. Relying on the language of section 4A, which empowers the Commissioner to establish a principal market yard and any sub‑market yards, the Court inferred that, once the committee obtains a directive from the State Government, it would be obliged to submit a recommendation to the Commissioner and request that the Commissioner formally notify the creation of the principal market yard and any sub‑market yards that may be required. The petitioners contended that the State Government never issued a direction under section 5AA to the market committee for the establishment of a market, and that even if any direction had been issued, the committee did not take any action thereafter to set up a principal market yard or sub‑market yards. The Court recorded that the market area in Ahmedabad was first declared effective from 1 June 1948 by a notification dated 15 April 1948. Subsequently, another notification was issued by the State Government establishing a market and a market proper under the provisions of the Act as they stood before the 1954 amendment, which later transferred the power to create a principal market yard and sub‑market yards to the Commissioner. The Court observed that, despite this earlier framework, no direction was issued as required by the original section 5 of the Act (now renumbered as section 5AA) compelling the market committee to establish a market. This omission was brought to the attention of the Bombay High Court in the matter of Bapubhai Ratanchand Shah versus the State of Bombay. The Chief Justice, at page 887, remarked that a very curious situation had been disclosed: because no market had been established under section 5, the provisions of section 5A could not come into operation, leaving the market committee without authority to grant licences to traders, commission agents, and others. In the absence of a market under section 5 and licences under section 5A, the only authority to issue licences would have been the State Government under the proviso to section 4A(2). Yet the rules showed that licences were being issued by the market committee rather than by the State Government, leading the Chief Justice to find it difficult to understand how either the Government or the market committee could lawfully issue such licences.

The Court observed that the conclusion reached by the earlier discussion was that the Market Committee had been treated as authorised to issue licences even though sections 5 and 5A of the Act had not been brought into force. Mr Joshi argued that the Committee functioned as a delegate of the State Government and that the power to issue licences had been delegated by that Government. The Court found this argument difficult to accept. The learned Chief Justice then noted that the petition itself did not raise any challenge to this point, and therefore, irrespective of whether such a challenge might have been sustainable, the petitioners were not permitted to raise it before the Court. Though that observation was made in another market case, the Court understood that the same principle applied to the present matter. After the Bombay High Court’s observation, the State Government issued a notification numbered PMA 7055 on August 11 1955, which was dated August 1 1955, directing the Agricultural Produce Market Committee of Ahmedabad to establish a market in the area for which the Committee had been created. However, the respondents’ affidavit contains no evidence that, following this direction, the Committee took any steps to establish a market by recommending to the Commissioner the creation of a principal market yard or sub‑market yards under section 4A of the Act. In fact, the principal market yard already existed before the 1955 direction and continued to operate. Likewise, when a sub‑market yard was set up at Kalupur in 1959, the notification issued by the Commissioner on 16 January 1959 does not indicate that it was acting on the Committee’s desire or recommendation.

The Court reasoned that, had the Committee requested the Commissioner to establish the sub‑market yard and had it recommended Kalupur as the site, the notification should have expressly stated that the Commissioner was acting at the Committee’s desire and on its recommendation. Even if the notification omitted such a reference, the respondents were obliged, when the petition specifically raised the issue in paragraph 25, to disclose when the State Government had directed the Committee to establish the market and what actions the Committee had taken thereafter. Instead, paragraph 24 of the respondents’ counter‑affidavit merely stated, “with reference to paragraph 25 of the petition, I crave leave to refer to section 5‑A of the Act for ascertaining its contents, true meaning and legal effect. I deny all the allegations, contentions and submissions contained in paragraph 25 of the petition as are contrary to or inconsistent with what is stated herein as if they were specifically set out herein and traversed.” The Court noted that this response represented a highly unusual method of addressing the petitioners’ allegations.

The petitioners alleged that no direction required by section 5AA of the Act had ever been given to the market committee to establish a market, and that the market committee had taken no steps pursuant to any such direction. The notification numbered PMA 7055 was produced during the arguments and appeared to be merely a formal exercise. This view aligned with the observations of the Bombay High Court in Bapubhai Ratanchand Shah’s case, reported in I.L.R. 1955 Bombay 870. The Court noted that the “curious situation” identified by that High Court in March 1955 persisted in the present market, and it further observed that despite the formal direction contained in notification PMA 7055 dated August 1955, no proper legal steps had been taken to establish the market. It was acknowledged that the State Government, before the 1954 amendment, and subsequently the Commissioner after the amendment, had created a principal market and a sub‑market yard in the relevant area. However, there was no evidence that the principal market yard had been established on the initiative of the market committee following a State Government direction as required by section 5 of the Act before the amendment. Likewise, there was no proof that the sub‑market yard at Kalupur, established in 1959, resulted from such a direction by the market committee. Consequently, the same “curious situation” that Chief Justice Chagla had observed in another market area was present in the Ahmedabad market area. This situation rendered the market committee unable to issue licences under section 5A of the Act or to exercise any other powers that depend on a lawfully established market. Accordingly, the Court allowed the petition and ordered that the market committee be prohibited from enforcing any provisions of the Act, the rules, or the bye‑laws with respect to the market until a market is properly established under section 5AA. No additional points were raised before the Court during the hearing, and the matter proceeded on the issues already presented. In its conclusion, the Court held that the petitioners’ challenge to the constitutionality of the principal provisions of the Act and of rule 64 failed. However, the Court found that the challenge to rule 53 succeeded on the ground that it was ultra vires section 11 because the State Government had not prescribed a maximum fee. The Court also held that the challenges to rules 65, 66 and 67 succeeded because they were ultra vires the provisions of section 5(a) read with the proviso in section 4(2). Because the Court had found that the market had not been properly established, it concluded that the market committee could not enforce any of the provisions of the Act.

In this matter the Court observed that the market committee had no authority to enforce any of the rules or bye‑laws that it had framed, and it also lacked power to issue licences until a market was properly established under the law. Consequently, the Court allowed the petition in part. It directed that the respondents be restrained from enforcing any provision of the Act, any rule, or any bye‑law against the petitioners in relation to the market until such time as a market is lawfully created for the specified area pursuant to section 5AA. The Court further ordered that no fees may be levied under section 11 until the Rules prescribe a maximum fee. On the basis of these determinations, the Court directed that each party bear its own costs. Accordingly, the petition was allowed in part.