Mohammadbhai Khudabux Chhipaand... vs The State Of Gujarat And Another

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

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 15 March, 1962

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

In this matter, the Supreme Court of India rendered its judgment on fifteen March, one thousand nine hundred and sixty‑two. The petition was titled Mohammadbhai Khudabux Chhipaand and another versus the State of Gujarat and another, and it included several connected petitions. The bench that heard the case comprised Justice K.N. Wanchoo, Justice P.B. Gajendragadkar, Justice A.K. Sarkar, Justice K.C. Das Gupta and Justice N. Rajagopala Ayyangar. The decision was recorded in the official law reports as one thousand nine hundred and sixty‑two AIR one thousand five hundred seventeen and as part of the supplementary Supreme Court Reporter, volume three, page eight hundred seventy‑five. The judgment also cited subsequent citations such as R 1966 SC 385, RF 1981 SC 1127, R 1982 SC 710, RF 1983 SC 1246 and others. The dispute concerned the Agricultural Produce Markets Act, which governs market committees, the levy of fees, licences for A‑class and B‑class traders, and alleged discrimination in the application of rules that had earlier been declared invalid. The State of Gujarat had responded to the earlier decision in Gulam Mohammad v. State of Bombay, where rules 53, 65, 66 and 67 framed under the Bombay Agricultural Produce Markets Act, 1939, were held ultra vires sections 6A and 11 of that Act. To address that decision, Gujarat issued a notification on twenty‑third June, one thousand nine hundred and sixty‑one amending rule 53, and on twenty‑sixth June, one thousand nine hundred and sixty‑one promulgated an ordinance that amended certain sections of the Act and introduced a new section twenty‑nine‑B to validate actions taken before the ordinance’s commencement.

The petitioners, comprising both wholesale and retail dealers, invoked article thirty‑two of the Constitution of India and sought relief on five principal grounds. First, they argued that the June twenty‑third, 1961 notification was discriminatory and violated article fourteen because it permitted market committees to impose fees on agricultural produce using different methods. Second, they contended that section twenty‑nine‑B did not adequately cure the defects identified by the Supreme Court, insisting that the relevant provisions of the Act and its rules required retrospective amendment. Third, they maintained that the bye‑laws imposed substantially higher fees on A‑class traders than on B‑class traders and that B‑class traders were allowed to sell to consumers throughout the market area while A‑class traders were not, amounting to discrimination. Fourth, they asserted that the ordinance’s amendment of the principal provisions of the Act nullified the basis on which the Supreme Court had previously upheld the legislation. Fifth, they claimed that rules 65, 66 and 67, previously declared ultra vires, had not been re‑framed or validated by the ordinance, and therefore the market committee lacked authority to issue licences under those rules.

The Court considered the argument that section 29‑B was invalid because it prevented the refund of licence fees that had been collected before the Ordinance became effective, on the ground that it violated article 31 (1) of the Constitution. The Court held that the notification dated 23 June 1961 could not be described as discriminatory, because the fees were imposed only through the bye‑laws framed by the market committee pursuant to the authority granted by section 11, subject to the maximum limits prescribed in the notification. The Court explained that if a bye‑law set fee rates in two different ways that resulted in discrimination, then that particular bye‑law would have to be struck down, but the notification itself was not the source of discrimination. The Court further observed that the fact that rule 53 allowed the market committee to levy fees by one method on one agricultural product and by another method on a different agricultural product did not constitute discrimination, because each commodity was to be treated as a separate class. The Court found that section 29‑B was sufficient to cure the defects pointed out in the earlier Supreme Court judgment and to validate the actions and transactions that had taken place before the Ordinance dated 26 June 1961 was promulgated. The Court recognized a legitimate basis for classifying traders into A‑class and B‑class, and held that the restrictions imposed by the Act, the Rules and the bye‑laws were reasonable restrictions designed to protect the general public. The Court clarified that the licence granted to B‑class traders was intended to allow them to purchase in the market yard and to regulate their activities in the wholesale trade, not to control retail dealers, and therefore the market committees were acting within their powers under the Act. Although section 5A had been amended, the Court held that when read together with the Rules it did not constitute a radical departure from the scheme of the Act as it existed before the amendment. The Court applied the doctrine of eclipse to rules 65 and 67, noting that they had been valid when originally framed, became invalid after the insertion of section 5A in 1953, and regained validity after the amendment of section 5A by the Ordinance. The Court relied on the authorities in Dhikaji Narain Dhokras v. State of Madhya Pradesh and Deep Chand v. State of Uttar Pradesh. Finally, the Court held that because section 29‑B validated the levy and collection of licence fees, article 31 (1) was not applicable, since the fees fell within the taxing power of the legislature, which also possessed the power to legislate retrospectively, relying on the precedent set in M.P. V. Sundararamier & Co. v. State of Andhra Pradesh.

The Court noted that the petitions were filed under article 32 of the Constitution of India for the enforcement of fundamental rights. The original jurisdiction involved petitions numbered 226 to 229 and 233 of 1961. Counsel for the petitioners in petitions 226 to 229 included senior advocates, while counsel for petition 233 was also appointed. The petitioners were represented by a team of counsel, and the respondents were represented by their own counsel. The Court recorded the names of the counsel appearing for each side and indicated that the matter would be heard together as a group of connected petitions.

Viswanatha Sastri, N. S. Bindra and R. H. Dhebar appeared for respondent No. 1 in all of the petitions. The judgment was delivered on 15 March 1962 by Justice Wanchoo. The five petitions, each filed under article 32 of the Constitution and described as a connected series, sought to examine the constitutional validity of the Bombay Agricultural Produce Markets Act, Bombay Act No. XXII of 1939 (referred to as “the Act”), as it stood after amendment by the Bombay and Saurashtra Agricultural Produce Markets (Gujarat amendment and validating Provisions) Ordinance No. 1 of 1961 (referred to as “the Ordinance”), together with the Rules and the bye‑laws made under the Act. The petitions were presented as a sequel to the Court’s earlier decision in Gulam Mohammed v. State of Bombay, reported at (1) [1962] 2 S.C.R. 659, delivered on 2 May 1961. One of the petitioners before this Court had also been a party to that earlier case, which concerned a market that had been established in Ahmedabad. In the earlier proceeding the challenge to the core provisions of the Act was rejected, but the Court held that certain Rules—specifically Rules 53, 65, 66 and 67—were beyond the authority of sections 11 and 5A of the Act. Consequently, the Court issued a direction prohibiting the respondents in that case from enforcing the Act, its Rules or its Bye‑laws against the petitioners until a lawfully established market existed in the relevant area under section 5A, and also restrained the levying of any fee under section 11 beyond the maximum amount prescribed by the Rules. Following that decision, the State of Gujarat amended Rule 53 by a notification dated 23 June 1961. The Ordinance was subsequently promulgated on 26 June 1961, effecting amendments to several sections of the Act and inserting a new section 29‑B, which was intended to validate certain acts or things done before the Ordinance came into force. The present set of petitions was filed after those events. Four of the petitions, numbered 226 to 229, relate to the city of Ahmedabad, while the fifth petition, numbered 233, concerns the city of Nadiad. Of the Ahmedabad petitioners, two describe themselves as wholesale dealers and the other two claim to be retail dealers.

The petitioners from Ahmedabad put forward several specific contentions. First, they argue that the notification amending Rule 53 violates article 14 of the Constitution and is therefore void. Second, they contend that although section 5AA has been amended, the amendment operates only prospectively; consequently, the defect identified in the earlier judgment of this Court remains unresolved, and the insertion of section 29‑B into the Act does not suffice to validate actions that were taken before the Ordinance became effective. Third, they maintain that the bye‑law under which the market committee issues licences to Class A and Class B dealers is discriminatory and imposes unreasonable restrictions on the fundamental right to carry on trade and business, rendering it unconstitutional. Lastly it is contended

The Court observed that the market committee claims authority to issue licences for retail trade, yet it lacks power to regulate retail trade under the Act, a position previously held by this Court. Consequently, the market committee is employing rule 64 in a way that was not intended, and although rule 64 was upheld in the earlier judgment, the Court now considers that rule to be ultra vires.

In the Nadiad proceedings, most of the petitioners are wholesale dealers, while a few assert that they are retail dealers. These petitioners challenge the constitutionality of the Act after it was amended by the Ordinance. They argue that the Ordinance introduces radical changes to the principal provisions of the Act, thereby defeating the basis on which those provisions were earlier upheld by this Court. As a result, they contend that the amended Act infringes the fundamental right to carry on trade and business guaranteed under article 19(1)(g) of the Constitution because the restrictions imposed are unreasonable.

The petitioners further maintain that rules 65, 66 and 67 were struck down by this Court in the earlier judgment for exceeding the powers conferred on the State under section 26 of the Act. Accordingly, those rules cannot be considered part of the current set of Rules, and the market committee had no authority to act pursuant to those rules.

Finally, one petitioner claims that he paid a licence fee to the market committee and, following the earlier judgment of this Court, was entitled to a refund of that fee. He contends that the newly inserted section 29‑B in the Act deprives him of that refund and is therefore invalid and illegal because it contravenes article 31(1) of the Constitution.

Additional points raised by the Nadiad petitioners are noted but are not pursued because they were not pressed before the Court. The State opposed the petitions and addressed every argument advanced by the petitioners. The Court finds it unnecessary to enumerate the State’s grounds for rejecting the petitioners’ contentions, as those grounds will be discussed when each petitioner’s argument is examined individually. Likewise, the Court does not repeat the historical background of the Ahmedabad market, which is already recorded in the earlier judgment, nor the history of the Nadiad market, which mirrors that of Ahmedabad and is not in dispute. The Court therefore proceeds to outline the specific points that will be considered.

The Court observed that the petitions presented a number of questions, some of which were common to all of the petitions and some of which were not. Because the petitions were dealt with together and the counsel appearing in the various petitions adopted each other’s arguments during the hearing, the Court decided to treat every question as if it had been raised in every petition. Consequently, the Court listed the matters that required a decision. First, it asked whether the notification dated 23 June 1961 that fixes the maximum fee that may be charged is violative of Article 14 of the Constitution. Second, it considered whether the insertion of section 29‑B in the Act is sufficient to validate acts or transactions that were performed before the Ordinance was promulgated. Third, it examined whether the by‑laws by which the market committee issues licences to A‑class and B‑class dealers are discriminatory, thereby offending Article 14, and whether they amount to an unreasonable restriction on the fundamental right to carry on trade and business under Article 19(1)(g). Fourth, it inquired whether the market committee is acting beyond its statutory power in requiring retail dealers to obtain licences and whether Rule 64 is defective because of the manner in which the market committee enforces it. Fifth, it asked whether the principal provisions of the Act, after being amended by the Ordinance, should be struck down as an unreasonable restriction on the fundamental right to carry on trade and business under Article 19(1)(g). Sixth, it considered whether it was necessary to re‑frame Rules 65, 66 and 67 under the power conferred on the State Government by section 26, and if so, what the effect of not having done so would be. Seventh, it examined whether section 29‑B is unconstitutional in view of Article 31(1) of the Constitution because it prevents the refund of licence fees collected before the Ordinance came into force.

The notification itself reads as follows: “No. APM/060/30797‑F‑In the exercise of the powers conferred by section 26 of the Bombay Agricultural Produce Market Act, 1939 (Bombay XXII of 1939), the Government of Gujarat hereby amends the Bombay Agricultural Produce Market Rules 1941 as follows: In the said rules, in Rule 53, for sub‑rule (1) except in the explanation thereto, the following shall be substituted: ‘The Market Committee shall levy and collect fees on agricultural produce bought and sold in the market area at such rates as may be specified in the bye‑laws, subject to the following maximums: (i) Rate when levied according to cart load shall not exceed 40 naya paise per cart load; (ii) Rate when levied ad valorem shall not exceed 40 naya paise per Rs. 100; (iii) Rate when levied according to weight shall not exceed 1 per quintal 15 naya paise and 2 per Bengali Maund 5 naya paise; (iv) Rate when levied according to the number of containers containing the agricultural produce shall not exceed, (a) per bale of cotton 40 naya paise …”

The notification issued under the authority of the Governor of Gujarat stipulates that the market committee may levy and collect fees on agricultural produce at rates not to exceed the maxima specified, namely a rate of up to forty naya paise per cart load, up to forty naya paise per hundred rupees of value, up to fifteen naya paise per quintal and five naya paise per Bengali maund when levied according to weight, up to forty naya paise per bale of cotton and five naya paise per gunny bag or any other container, and a rate not to exceed two rupees per animal for cattle, sheep and goat. The petitioners contend that the notification is discriminatory in two respects. First, they argue that because the notification permits the market committee to choose among several modes of fee assessment—by cart load, by value, by weight, or by container—it creates the possibility that the committee could impose fees on one commodity by one method and on a different commodity by another method, thereby resulting in discriminatory treatment. Second, they assert that the notification authorises the committee to levy fees on the same commodity by more than one of the prescribed methods; for example, the same commodity such as potatoes could be charged both by weight and by cart load depending on whether the potatoes are brought to the market in a cart or in a basket, and that the rule contains no restriction to prevent such dual charging, which they say could also engender discrimination. The Court, however, observes that the notification itself does not impose any fee on any commodity; rather, it merely establishes the maximum rates that may be prescribed under section eleven of the Bombay Agricultural Produce Market Act, which empowers the market committee to levy fees within those limits. Consequently, the notification alone cannot be characterised as discriminatory. Nonetheless, the Court proceeds to examine the two allegations raised by the petitioners on the ground that, although the notification does not itself levy fees, it may nevertheless enable the market committee, exercising its power under section eleven, to practice discrimination when it levies fees within the prescribed maxima. Regarding the first allegation, the Court acknowledges that employing different assessment methods for different agricultural products could lead to variations in the incidence of the fees if one were to compare the outcomes solely on the basis of a single mode. However, the Court holds that such a situation does not amount to discrimination because each agricultural product must be treated as a separate class for the purpose of fee assessment. Accordingly, the market committee may validly apply one method of fee collection to one type of produce and a different method to another type without infringing the principle of non‑discrimination. The Court further notes that the second allegation—that the rule does not expressly forbid the committee from using two methods for the same commodity—is likewise not sufficient to establish discriminatory conduct, given that the rule is a general provision applicable to all market committees throughout the State and that the authority to levy fees remains subject to the overall framework of the Act.

It is a well‑known principle in taxation systems that taxes are imposed with varying incidence according to the nature of the article being taxed, and a fee imposed under section 11 is merely an exercise of the power of taxation, using the term in its broadest sense. Consequently, the fact that the market committee may levy a fee by one method on one agricultural produce and by a different method on another agricultural produce does not constitute discrimination, because each commodity must be regarded as a separate class. Turning to the second contention, the rule does not expressly forbid the market committee from employing two of the prescribed modes for levying fees on the same agricultural produce. It is important to recall that the rule is a general provision authorising market committees across the State to levy fees within the maximum limits prescribed for agricultural produce. The rule enumerates several methods of fee collection because the authority that framed the rule recognized that goods can reach market areas in diverse ways. The rule therefore has a wide reach and permits a market committee to levy fees either by cart load, by monetary value, by weight, or by the number of containers. While it is possible that applying two different modes to the same produce could, in theory, produce rates that appear discriminatory, it would be improper to assume that the committee, when drafting bye‑laws fixing rates for any particular produce, must automatically give effect to the anti‑discrimination principle embodied in Article 14 of the Constitution. In practice, the committee is likely to fix a rate for a given agricultural produce in only one of the four permissible modes; where that occurs, no discrimination can be said to arise. Moreover, it would be unreasonable to presume that the government, in issuing the notification, assumed that a single mode—whether based on cart load, value, weight, or container count—must be used for every agricultural product. Nor is it difficult, when a rate is fixed under one mode such as cart load, to compute the fee where the produce arrives in a different form, for example in baskets; the proportional fee can be charged on each basket by equating a certain number of baskets to one cart load. Similarly where the bye‑law fixes

The explanation began by stating that when a by‑law sets fees based on the number of containers but a dealer brings the produce in a cart load, the fee can still be computed. The calculation is achieved by determining how many containers would be equivalent to one cart load, and then applying the container rate to that equivalent number. Similarly, if fees are prescribed according to weight or value, the method of bringing the produce does not create any difficulty, because the fee can be measured directly against the weight or the monetary value. Accordingly, the market committee, while exercising the powers granted under section eleven read together with the notification, will assess fees for a single commodity using only one of the permitted modes. When the committee follows this practice in actual operation, there is no possibility of discrimination arising in the incidence of the fees.

The text then considered a hypothetical situation in which a market committee might decide to employ two different modes for levying fees on the same agricultural produce, for example one based on cart load and another based on weight. In such a scenario, a question of discrimination could emerge and would have to be examined if and when it arose. Whether discrimination actually occurs would depend on the rates fixed by the committee for the two modes. If the rates are set so that the overall burden on the trader is essentially the same whether the fee is calculated by cart load or by weight, then discrimination would not be present. Conversely, if the rates differ such that the effective burden varies markedly between the two methods, a case of discrimination would arise, and the by‑law that imposed the disparate rates would have to be declared invalid because the discriminatory effect stems from the by‑law, not from the original notification. The discussion concluded that the likelihood of a committee fixing two modes in a manner that actually creates discrimination is extremely remote; therefore the notification itself cannot be struck down on the ground of discrimination. Only a by‑law that prescribed discriminatory rates in two modes could be invalidated.

Turning to the facts of the present case, the Court observed that the by‑laws framed by the market committees in the matters before it each fixed a single mode of levying fees for the relevant produce. The petitioners did not allege that the committees had employed more than one mode of fee assessment for the same agricultural produce. Consequently, there was no evidence of discrimination arising from the actual by‑laws that were issued under the authority of section eleven read together with the notification. In light of these circumstances, the challenge to the notification on the basis of discrimination could not succeed.

Section 29‑B, sub‑section (1) declares that when a market area had been notified before the Ordinance came into force, the market for that area shall be treated as having been lawfully created for the purposes of the Act from the moment a market yard within that area was first announced under the Rules or the Act. The provision further states that such a market shall always be regarded as having included that declared market yard. By inserting this rule, the Legislature sought to cure the defect identified by the earlier judgment, namely the absence of a legally recognised market at the time of certain actions. Sub‑section (1) also provides that any act performed by a market committee or any other authority after the market’s deemed establishment but prior to the Ordinance’s commencement, which would otherwise have been void, shall be deemed valid and shall not be subject to challenge on the ground that no market existed in the area at the time the act was taken.

Sub‑section (2) of the same section stipulates that any fees that were levied or collected on agricultural produce bought and sold in a market area before the Ordinance’s commencement, when such fees were imposed by a market committee at rates set out in its bye‑laws, shall be regarded as lawfully levied and collected. Consequently, those levies and collections cannot be contested merely because at the time they were imposed no maximum rates had been prescribed as required by section 11. The purpose of this clause is to remedy the defect pointed out in the earlier judgment, which arose from the State Government’s failure to prescribe such maxima under section 11. Sub‑section (3) goes further to declare that all licences issued to operate in a market area or any part thereof, together with any fees charged for such licences before the Ordinance’s commencement, and any related actions taken under the Rules and bye‑laws, shall be deemed always to have been valid. Their validity may not be questioned on the basis that, at the time those actions were taken, the relevant powers, rights or obligations had not been properly conferred or imposed by the Act on the market committee, authority or person concerned. This provision is intended to remedy the defect that arose when rules 65 and 67 were held ultra vires by this Court in its earlier judgment. The petitioners argued, however, that these provisions were insufficient to validate the defects identified in that earlier judgment.

The Court observed that the argument asserting the necessity of retrospective amendment of the Act and the Rules could not be sustained because the existing provisions already rectify the defects identified in the earlier judgment. While acknowledging that the Ordinance did not retrospectively amend the relevant sections, the Court held that such amendment was unnecessary. Retrospective change is required only when a change in the law is intended, but regarding section 11, the legislature had not intended to discontinue the State Government’s authority to levy fees in the future. Consequently, the sole purpose was to confirm the validity of actions taken before the Ordinance, a purpose expressly provided for in sub‑sections (2) and (3) of section 29‑B. Regarding the creation of market committees, the Court noted that an amendment to section 5‑AA of the Act removed the earlier requirement that a market could be established solely upon the State Government’s direction. This amendment was made to apply prospectively. Although a retrospective amendment could have obviated the need for sub‑section (1) of section 29‑B, the legislature chose a prospective amendment and simultaneously introduced a separate validation provision in sub‑section (1) of section 29‑B. The Court found no reason to deem that validation insufficient merely because the legislature employed one method rather than another to achieve its objective. Accordingly, the Court concluded that section 29‑B adequately cures the defects highlighted in the earlier judgment and validates all actions and transactions undertaken before the Ordinance’s commencement that would otherwise have been invalid. The contention on this point was consequently rejected.

The Court then turned to the classification of traders under the present bye‑laws, which distinguish between two categories: A‑class and B‑class traders. An A‑class trader is defined as a licence holder authorized to purchase and/or sell agricultural produce in quantities of at least ten pounds within the market yard, and such a trader is required to pay an annual licence fee of seventy‑five rupees. A B‑class trader, by contrast, holds a licence to purchase agricultural produce in the same minimum quantity but is permitted to sell the produce at retail to consumers throughout the market area. B‑class traders are further sub‑divided into shop‑keepers, lari‑holders, and top‑lawalas (hawkers), who pay annual licence fees of twelve rupees, six rupees, and three rupees respectively. It was submitted that this fee structure amounts to discrimination because A‑class traders bear a substantially higher fee than B‑class traders. The Court, however, found that there is a rational basis for differentiating between the two classes, noting that the classification rests on the distinct commercial roles and functions of the traders.

In this matter the Court explained that A‑class traders are authorised to both purchase and sell agricultural produce within the market yard, whereas B‑class traders are permitted only to purchase there and are not allowed to sell in the market yard. The State Government submitted that B‑class traders are typically persons who, after buying wholesale from A‑class traders or directly from producers in the market yard, sell the produce at retail to consumers. The Court observed that the permission granted to B‑class traders to buy in the market yard is intended to promote competition; without such a provision a small number of A‑class traders could dominate a market yard and create a monopoly. The Court found this classification to be reasonable. It noted that A‑class traders operate as wholesale dealers, enjoy the right to both buy and sell in the market yard, and consequently pay a higher licence fee. In contrast, B‑class traders are ordinary retailers; they may buy in the market yard to support their retail activities but they are expressly prohibited from selling there, and because they are small traders they are assessed a lower licence fee. The Court further reasoned that allowing only a few A‑class traders to dominate wholesale trade could depress prices, so permitting B‑class traders to purchase at a modest fee helps ensure that producers receive a fair price for their produce. Accordingly, the Court saw no discrimination in creating the two classes, as the classification rests on a fair and rational basis. It also held that the restriction on B‑class traders does not constitute an unreasonable impediment to the constitutional right to carry on trade and business, because the regulation is clearly contemplated by the governing Act and serves the Act’s objectives. The Court referred to an earlier judgment that had already upheld the validity of the Act and the reasonableness of the restrictions imposed by the Act, its Rules and the Bye‑laws in the public interest. Although the respondent argued that B‑class traders are authorised to sell to consumers anywhere in the market area while A‑class traders are not, the Court reiterated that a prior decision had held that retail trade falls outside the scope of the Act. Consequently, the addition in the Bye‑law of the phrase “to sell in retail to consumers anywhere in the market area” for B‑class traders does not alter their rights, because as retailers they would already be free to sell to consumers without any control by the Act. The Court concluded that the inclusion of those words does not confer any additional right to B‑class traders; rather, it is surplus to the operative classification.

In this case the Court observed that the right of B‑class traders to sell to consumers is not regulated by the Act, and therefore they would be free to exercise that right even without the phrase “to sell in retail to consumers anywhere in the market area.” The Court considered that phrase to be surplusage in the present circumstances. Regarding A‑class traders, the Court noted that they are unquestionably wholesalers and there is no question of them engaging in retail sales. Consequently, the Court held that the insertion of the aforementioned words with respect to B‑class traders adds nothing substantive to the classification scheme and therefore makes no material difference. As a result, the contention that this wording creates a valid basis for the classification was found to have no force and was rejected.

With respect to point (4), the petitioners argued that the market committee was attempting to regulate retail dealers by requiring them to obtain licences, an act which the Court had previously held to be beyond the authority of the committee because retail trade is not within the scope of the Act. The petitioners based this argument on the wording “to sell in retail to consumers anywhere in the market area” attached to the licence requirement for B‑class traders, contending that this amounted to the committee controlling retail trade, which it could not do. The Court found this contention untenable. It stated that B‑class traders must obtain licences solely to purchase agricultural produce in quantities of at least ten pounds within the market yard. The licence, in the Court’s view, is not intended to authorize retail sales throughout the market area; the disputed wording is merely surplusage. The real purpose of the licence is to permit purchase in the market yard and thereby regulate the traders’ wholesale activities.

The petitioners further submitted that section 2(ix)(a) of the Act does not define a limit for retail sales in any by‑law. The Court acknowledged that the Act contains no specific provision setting such a limit, but observed that the by‑law’s requirement that no transaction below ten pounds may be carried out in the market yard implicitly indicates a threshold for retail sales. The by‑laws that distinguish A‑ and B‑class traders set a lower limit below which trade in the market yard is prohibited, demonstrating that the market committee’s intention was not to regulate retail trade through the issuance of licences. The Court noted that a substantial portion of retail trade could involve transactions below ten pounds, and therefore the by‑laws cannot be interpreted as a scheme to control retail trade. Accordingly, the Court could not accept the petitioners’ argument that the classification of traders under the by‑laws amounted to regulation of retail trade. It was clear, the Court concluded, that B‑class traders are permitted only to purchase in the market yard and are not authorised to sell there; for retail sales they remain free to sell wherever they wish, because the Act does not regulate retail trade.

The Court observed that the Act did not regulate retail trade. Rule 64 was described as granting only incidental powers for the regulation of market yards, and it had already been upheld as valid in an earlier decision. Consequently, the Court found no justification for declaring the rule invalid merely because the market committee might use it to influence retail trade. The Court reiterated that the market committee could not be said to control retail trade by issuing A‑class and B‑class licences, and therefore Rule 64 was not being applied in a manner contrary to its intended purpose. The Court also noted that certain petitioners in Petitions Nos 228 and 229 disputed whether they held particular shops in the market yard from the municipal committee or should be deemed to hold them from the market committee, and what rights the market committee possessed in that context. The Court observed that suits concerning this dispute were already pending before tribunals, and that such questions must be resolved by those courts rather than by a petition under Article 32. Accordingly, the Court held that Rule 64 could not be struck down on the basis of any disagreement among the market committee, the municipal committee, and stall‑holders regarding their respective rights over the stalls. The Court therefore rejected that contention as lacking merit.

The Court turned to the principal argument that the amendment of the Act by the Ordinance had altered the foundation on which the Court had previously upheld the Act’s provisions as constitutional, and that the amended Act now imposed an unreasonable restriction on the right to carry on trade. The Court stated that this argument required an examination of the Act as it stood after the amendment to determine whether any radical departure from the original scheme had occurred. The Court explained that if no substantial change had taken place, the earlier constitutional endorsement would continue to apply and the amended Act would remain valid. The Court then reviewed the relevant provisions, noting that the Act still dealt with the regulation of purchase and sale of agricultural produce and the establishment of markets for such produce. Section 3 remained unchanged, providing for the constitution of market areas and market committees and authorising the Commissioner, by notification, to declare his intention to regulate the purchase and sale of agricultural produce within a specified area. Section 4(1) also remained unamended, granting the Commissioner authority, after conducting any necessary inquiry and considering objections, to designate a particular area as a market area for the purposes of the Act. The Court concluded that, in the absence of any radical alteration to these core provisions, the amendment did not defeat the constitutional basis of the earlier judgment, and therefore the Act, as amended, continued to be constitutionally sound.

The judgment observed that Section 3 of the Act remained unchanged; it continued to empower the Commissioner, by way of a notification, to designate the agricultural produce to be regulated and the specific area in which such regulation would apply. Likewise, Section 4(1) also stayed unaltered, authorising the Commissioner, after conducting any necessary inquiry and after considering any objections or suggestions raised following the notification under Section 3, to declare a particular region as a market area for the purposes of the Act. The Court noted that Section 4(2) had been amended, but characterised the amendment as non‑radical and held that it did not alter the core provisions of the legislation. Section 4‑A had likewise been amended to provide for the declaration of a “market proper” together with the consequential changes that such a declaration would entail. The Court pointed out that this amendment merely incorporated into the Act what had previously been contained in Rule 51, and therefore it did not introduce any fundamental change to the statutory scheme.

Further, the judgment explained that Section 5‑AA had been amended by deleting the provision that required the State Government to compel a market committee to establish a market. In its present form, Section 5‑AA imposes a duty on the market committee to enforce the provisions of the Act and, when a market is established under the Act, to provide the facilities in that market as may be directed by the State Government from time to time in relation to the purchase and sale of the agricultural produce that falls within its jurisdiction. The Court described this amendment as merely incidental and held that it did not affect the overall scheme of the Act as it existed before the amendment.

The Court then turned to the amendment of Section 5A, which now reads: “Where a market is established under section 4A, the market committee may issue licences in accordance with the rules to traders, commission agents, brokers, weighmen, measurers, surveyors, warehousemen and other persons to operate in the market area or any part thereof.” The petitioners’ principal grievance centred on this amendment. They argued that, under the original, unamended statute, once a market had been established the market committee was required to issue licences for operation within the market, thereby concentrating the business of buying and selling agricultural produce in a principal market yard and one or more sub‑market yards. This arrangement, they contended, afforded agricultural producers a place where a large number of buyers could be found, enabling them to obtain fair prices under regulated conditions. The petitioners maintained that, by contrast, the amended Section 5A permitted the market committee, after a market was established under Section 4A, to grant licences to traders and others to operate in any part of the market area, removing the necessity for a principal market yard or sub‑market yards. The Court acknowledged that this line of argument would possess some force if the rules prescribed under the Act were ignored; however, it noted that the relevant rules framed by the State Government remained in force, a point that was addressed in the subsequent discussion.

The Court noted that the rules issued by the State Government had not been altered. Rule 51 authorised the State Government to designate certain areas as market yards and the market proper. Rule 60 required that every item of agricultural produce brought into the market must first be taken to the principal market yard or to a sub‑market yard, and that such produce could not be sold outside those yards unless the exception in sub‑rule (2) applied. Sub‑rule (2) permitted agricultural produce to be sold in the principal market yard, in a sub‑market yard, in the market proper, or elsewhere in the market area, provided the sale complied with the applicable bye‑laws. The Court explained that this distinction was logical because, for produce that needed processing—such as ginned cotton—the commodity had to be taken to a processing factory, making it inconvenient and more costly to bring it back to a market yard for sale. When Section 5A was read together with the existing rules, the Court found that the present provisions were essentially the same as before: agricultural produce, except for that which had been processed, still had to pass through the principal or sub‑market yards and be sold there. The only alteration introduced by the amendment was that, previously, traders could operate in the market solely under the provisions of the Act, whereas after the amendment they could operate under the provisions of the Act read in conjunction with the rules. Because the rules themselves remained unchanged, the combination of the Act and the rules continued to provide the kind of regulation originally intended. It was submitted that, in the future, the market committee might be able to dispense with the requirement of having principal and sub‑market yards and could concentrate wholesale trade solely within the market area, since the amended Section 5A allowed the committee to issue licences according to the rules. However, the Court observed that the authority to amend the rules did not lie with the market committee, and until the State Government altered the rules, the situation would remain as it was under the unamended Act. The Court found no indication that the State Government intended to revise the rules to permit the market committee to grant licences under Section 5A for unrestricted trade throughout the market. Consequently, as long as the rules remained as they were, there was no fundamental departure from the scheme of the Act before its amendment.

In this case, the Court observed that the amendment of the Act had not produced a departure from the scheme that existed before the amendment, and therefore the reasons that had earlier compelled the Court to uphold the Act and the Rules made under it remained applicable. The Court noted that if, at some future time, the Rules were altered in a manner that created a radical departure from the present position, a question could arise as to whether the scheme of control intended by the Act had failed to achieve its purpose. In such a scenario, the Court might have to consider whether the Act and the Rules made under it had become unconstitutional. However, while the Rules continued in their existing form, the Court held that section 5A had to be read together with the Rules, because licences were issued under that section in accordance with the Rules. By reading section 5A alongside the current Rules, the Court concluded that there was no radical departure from the scheme of the Act as it stood before the amendment, and consequently the earlier reasons for upholding the Act, the Rules and the bye‑laws fashioned under them still governed. The Court also addressed subsidiary contentions raised by the petitioners, who challenged the constitutionality of the Act and its Rules on the ground that they constituted an unreasonable restriction on the fundamental right to carry on trade or business. The petitioners argued that a trader operating throughout the State might need to obtain eighty or more licences to trade in different market areas, creating a heavy burden and potentially raising the price of agricultural produce. The Court considered this argument to be theoretical. It stated that if a trader were large enough to conduct business in all eighty or more market areas established in the State, there was no reason why he could not obtain a licence for each area. Such a trader would be capable of bearing the burden, and the Court did not see any necessary or serious impact on the price of agricultural produce.

The petitioners further alleged that the Act affected transactions between traders located outside a market area. The Court expressed that it could not discern the precise meaning of this allegation. It explained that fees were payable only when the sale of produce occurred within the market area, requiring the produce to pass through the principal market yard or a sub‑market yard. When a trader purchased goods from outside the market area and the subsequent sale also took place outside the market area, the transaction was not subject to any fees, because fees could be levied only on agricultural produce bought and sold within the market area under rule 53 read with section 11. The Court added that if the sale occurred outside the market area but the commodity was later brought into the market area by a wholesale trader, no fee could be charged on that movement. Only if there was a further sale within the market area or in the market yards by the wholesale trader to a local buyer could a fee become applicable. The Court therefore found no basis to regard these provisions as an unreasonable restriction on the right to carry on trade and business. If there

In the situation described, a wholesale trader may make an additional sale within the market area or in the market yards to a local purchaser, and such a sale could be subject to a fee. The Court expressed difficulty in seeing how, under these circumstances, the requirement could be characterized as an unreasonable restriction on the right to carry on trade and business. The next argument raised was that the provisions of the Act also regulate transactions that occur between traders, and that they extend to agricultural produce that was not cultivated within the market area when such produce is sold inside the market area. The Court acknowledged that this observation is correct. However, the Court explained that, in order for the control mechanism to be effective in protecting the interests of agricultural producers, it is necessary to include incidental regulation of produce grown outside the market area but brought into the market yard for sale. Without such regulation, parties could evade the provisions of the Act by claiming that the produce sold in the market yard was not grown within the market area. For the same reason, the Court held that transactions between traders must also be regulated if the objective of safeguarding agricultural producers and the general public is to be achieved. Consequently, the Court concluded that the Act, together with the Rules and the Bye‑laws made thereunder, cannot be invalidated on this ground, and the contention raised on this basis therefore fails.

The subsequent contention concerned Rules 65, 66 and 67, which the Court had struck down in an earlier judgment and which, according to the submissions, had neither been re‑framed nor validated by the Ordinance. The argument was that, because these rules no longer exist, the market committee lacks authority to issue licences that were previously provided for by those rules. Rule 65 stipulates that no person may carry on business as a trader or as a general commission agent in agricultural produce within any market area unless the person holds a licence granted by the market committee under that rule. Rule 67 similarly provides that no person may conduct business as a trader, commission agent, broker, weigh‑man, measurer, surveyor, warehouse‑man or in any other capacity within any market area unless the person possesses a licence issued by the market committee. It was submitted that licences are granted under these rules in conjunction with Section 5A, which now provides that, where a market has been established, the market committee may issue licences in accordance with the rules to traders, commission agents, brokers and others so that they may operate in the market area or any part of it. The submission further argued that Section 5A is merely an enabling provision that becomes operative only when the rules are framed, and that licences under Section 5A must be issued in accordance with the rules; therefore, if no rules exist governing the issuance of licences, the market committee cannot rely on the enabling provision of Section 5A to compel traders to obtain licences. The Court noted that it is Rules 65 and 67 that expressly prohibit conducting business in the market area without a licence and that those rules prescribe the procedure for applying for a licence, the period for which a licence remains valid, and other related matters.

The rules outlined the period for which a licence would remain valid and dealt with other incidental matters. It was submitted that, because those rules had been struck down by this Court and had neither been re‑framed nor validated under the Ordinance, the market committee possessed no authority to compel traders to obtain licences merely on the basis that section 5A enabled it to issue licences. The State, however, argued that although rules 65 and 67 had been declared inconsistent with section 5A as it stood before its amendment, the subsequent amendment of section 5A revived those rules, and therefore they should now be enforceable. To support this position, the State relied on certain decisions of this Court which held that an Act that was valid when it was passed before the Constitution came into force, and which later became partially invalid because of a constitutional inconsistency, becomes wholly effective again when the Constitution is amended to remove that inconsistency. This principle was articulated in Bhikaji Narain Dhakras v. State of Madhya Pradesh, where this Court observed that “the true effect of Article 13(1) is to render an Act inconsistent with the fundamental right inoperative to the extent of the inconsistency. It is over‑shadowed by the fundamental right and remains dormant but is not dead.” The Court explained that the amendment made in clause (6) of Article 19 by the First Amendment Act removed the inconsistency, so the impugned Act resumed operation from the date of that amendment, with the distinction that, unlike the amendment to clause (2) of Article 19 which was expressly retrospective, no rights or obligations could be founded on the provisions of the impugned Act for the period between the commencement of the Constitution and the amendment. The Court further considered Deep Chand v. State of Uttar Pradesh, where the majority distinguished between the two clauses of Article 13. Under clause (1), pre‑Constitution law continues except to the extent of its inconsistency with the provisions of Part III, whereas under clause (2), any post‑Constitution law contravening those provisions is a nullity from its inception to the extent of such contravention. Accordingly, a law that was bad ab initio under Article 13(2), either wholly or to the extent of the contravention, could not be revived by the doctrine of eclipse; that doctrine applies only where a law was valid when made but later became invalid for certain purposes because of a supervening constitutional inconsistency. The State reiterated its argument that if rules 65 and 67 were valid

It was observed that the doctrine of eclipse applied to the rules in question. The sole point of contention was whether Rules 65 and 67, in the form in which they existed at the time of the introduction of section 5A of the Act, had been in existence before 1953 and, if so, whether they were valid in that form prior to that year. The parties devoted considerable time to tracing the legislative history of the Act and the two rules, as well as the manner in which the Act and the rules appeared before the insertion of section 5A in 1953. The investigation revealed that the rules had been framed for the first time in 1941, after the Act had been enacted. Rule 65(1) was found to be identical to the version that had been struck down by the earlier judgment. Rule 67(1) was also substantially the same, with the only difference being that the original wording did not contain the phrase “the traders and commission agents” that later appeared when the rule was struck down. This addition was held to be immaterial because the classes of traders and commission agents were already covered by Rule 65(1). The later inclusion of “warehousemen” in Rule 67(1) was not considered relevant for the present petitions, as the petitions did not involve warehousemen. Consequently, it appeared that Rules 65(1) and 67(1) were, in practice, the same at the time they were first framed in 1941 as they were when they were later struck down.

The Act, as originally passed in 1939, did not contain a provision comparable to section 5A. Its scheme provided that, under Article 4(2), only the Government could grant licences for establishing any place for the purchase and sale of agricultural produce that was notified under the Act. Subsequently, under section 5, it was the duty of the market committee established for each market area to enforce the provisions of the Act, to apply the conditions of the licence granted by the Government, and, when required by the Government, to establish a market in that area. Section 26 conferred on the Government the power to frame rules for the purpose of carrying out the Act’s provisions. Sub‑section 2(e) and (f) of that section read as follows: “(2) In particular and without prejudice to the generality of the foregoing provisions such rules may provide for or regulate: (e) the maximum fees which may be levied by the market committee in respect of licences granted to traders and on the agricultural produce bought and sold in the market area and the recovery of such fees; (f) the issue of licences to brokers, weigh‑men, measures and surveyors, the form in which and the conditions subject to which such licences shall be issued or renewed and the conditions subject to which”. These provisions, which allowed the framing of rules concerning the grant of licences, did not limit the power to issue licences solely for the market established under section 5 as originally drafted. Rather, the powers were broad, permitting the Government to frame rules that empowered the market committee to issue licences for carrying on business throughout the market area. Accordingly, Rules 65(1) and 67(1) fell within the authority granted to the State Government under Section 26 when they were originally framed in 1941, and they would therefore have been valid at that time.

The Court observed that the phrase “the licences shall carry on their business and the fees to be charged therefore” indicated that the statutory provisions permitting the making of rules for granting licences did not limit the power to issue licences solely to a market that had been created under section 5 as it originally stood. The Court explained that those powers were expressed in general terms, and that the Government was therefore able to formulate rules that empowered a market committee to issue licences for conducting business outside the confines of the market area. Consequently, Rules 65(1) and 67(1), which were framed in 1941, fell within the authority conferred on the State Government by section 26 and were valid at the time of their creation. The Court then turned to the amendment made in 1948, noting that clauses (e) and (f) of section 26(2) were merged and re‑numbered as sub‑section (2)(f), which now read: “In particular and without prejudice to the generality of the foregoing provision such rules may provide for or regulate: (f) the issue of licences to traders, commission agents, warehousemen and other persons operating in the market, brokers, weighmen, measurers and surveyors, the form in which, and the conditions subject to which such licences shall be issued or renewed and the fees to be charged therefore.” The Court pointed out that, although the expression ‘market area’ does not appear in this revised provision, the provision remains of a general character and does not confine the licence to operation only within the market. Accordingly, Rules 65 and 67 were not inconsistent with the 1948 amendment. The Court further considered the amendment of 1953, which introduced section 54 (as it existed before the later ordinance amendment) and provided that “where a market is established under section 5, the market committee may issue licences in accordance with the rules to traders, commission agents, brokers, weighmen, measurers, surveyors, warehousemen and other persons to operate in the market.” The Court noted that an earlier judgment, relying on this section, had held that Rules 65 and 67 were invalid after the enactment of section 5A because they authorised the committee to issue licences for activity in the market area, a concept distinguished from the market itself. However, the Court clarified that Rules 65(1) and 67(1) were valid when originally framed, remained valid until section 5A was inserted in 1953, and became void only upon that insertion. Since section 5A has now been amended by the ordinance, the Court found that Rules 65 and 67 are now clearly consistent with the amended provision, with Rule 66 being merely a consequential rule. Applying the doctrine of eclipse, the Court concluded that those rules are revived because they are no longer eclipsed by section 5A as they were before the ordinance, and therefore the contention challenging them fails. Finally, the Court addressed the argument that subsection (3) of section 29‑B, which validates the collection of licence‑fees by market committees, is invalid.

The Court observed that the argument claimed it was impossible to refund licence‑fees that had been collected when the market committee lacked authority to do so. The Court said it could not accept this argument because it was not disputed that a legislature may enact laws retrospectively, even in matters of taxation. The Court referred to the decision in M. P. V. Sundararamier & Co. v. State of Andhra Pradesh, where the Sales Tax Laws Validation Act, 1956, was upheld as constitutionally valid. The Court noted that fees fall within the broad taxing power of the legislature. Consequently, Article 31(1) of the Constitution did not apply to the present case. Instead, the Court turned to Article 265, which provides that no tax shall be levied or collected except by authority of law. The Court identified sub‑section (3) of Section 29‑B as the statutory provision that retrospectively authorised the levy of the licence‑fees in question. Because the legislature possesses the power to legislate retrospectively in taxation matters, the Court could not see how the provisions of sub‑section (3) of Section 29‑B, which validate the levy and collection of the licence‑fees, could be held invalid under Article 31(1). The Court also stated that the same reasoning applied to fees collected under Section II that were validated by the same sub‑section of Section 29‑B. Thus, the Court found no merit in the contention and rejected it. As a result, the Court dismissed the petitions, ordered costs, and awarded a set of hearing fees. The petitions were therefore dismissed.