civil appellate jurisdiction civil appeal number 1083 of
1977.  appeal by special leave from the judgment and order
dated 28-1-1977 of the punjab haryana high companyrt in civil
writ number 5697/75
civil appeal number1616 of 1978
 appeal by special leave from the judgment and order
dated 18-9-1978 of the punjab haryana high companyrt in cwp
number 3849/78
civil appeal number1700-1761 of 1978
 appeals by special leave from the judgment and order
dated 30-8-1978 of the punjab haryana high companyrt in civil
writ petition number. 3351 2662 3094 3221 3303 3330
3347 3348 3349 3350
1225
3384 3390 3393 3459 3460 3489 3517 3533 3548 3551
3563 3570 3576 3598 3615 3665 3673 3773 3775 3776
3826 3827 3883 4024 4171/77 37/78 178 212 283 335
381 423 483 577 666 751 887 976 1021 1058 1104
1164 1280 1469/78 2625/77 1556/78 1578/78 1635 1859
1980 1997 and 2095/78. civil appeal number. 1762-1773 of 1978.  appeals by special leave from the judgment and order
dated 30-8-1978 of the punjab haryana high companyrt in civil
writ petition number. 45/78 888 1251 1451 1556 3300 3330
3293/77 3292 3337 3385 and 3426/77
civil appeal number.1626-1627 of 1978.  appeals by special leave from the judgment and order
dated 30-8-1978 of the punjab haryana high companyrt in civil
writ petition number. 4171/77 and 1356/78
and
writ petition number. 4436 4470 4472 4481 44854564 4420
4450 4460 and 4484 of 1978
 under article 32 of the companystitution
for the appellants in ca number 1083/77a. k. sen mr.
ravinder bana and bhal singh malik for the rr. 1-2 in ca
number 1083/77 s. n. kackar sol. genl. hardev singh and r.

sodhi for the intervener-state agricultural market board
and market companymittee nai mandi in ca number 1083/77 v. m.
tarkunde and s. c. patel. for the applicant intervener in
ca number 1083/77 mrs. urmila kapoor. for the respondent number 3
in ca number 1083/77 h. l. sibbal g. g. garv and mr. atma ram. for the petitioner in the w.p. except in wps. number. 4481
4470 4564 bhal singh malik b. datta and k. k. manchanda. for the petitioners in w.p. number.4481 4564 and for the
appellants in ca number 1616/78 s.k. walia and mr. m.p. jha. for the petitioner in w.p. number4470/78 sarva mitter. for the
respondents in wp.4430 4472 4481 4485/78 and ca 1616/78

p.4564/78 hardev singh g. c. garg and r. s. sodhi. for
the appellants in ca number. 1700-1761/78 anil diwan  1703
adarsh kumar goel  in all appeals  praveen kumar adv.  1703  miss bina gupta adv.  1703  madan gopal gupta  1703
to 1752  sarva mitter  1751-1761 and all other  for the
petitioners in w.p. number. 4420 4450 4460 4484/78 a. k.
sen  4420  dr. l. m. singhvi  4460  b. dutta k. k.
manchanda and bhal singh malik for r. 1 in appeal number. 1700-1761/78 and wp number. 4420 4450 4460 and 4484/78
1226

n. lekhi  fp 4420  and r. n. sachthey for rr. 2-3 in
appeal number. 1760-1761/78 and wp number. 4420 4450 4460 and
4484/78v. m. tarkunde  in ca 1700 and wp 4420  gian singh
 wps. 4420 4450 4460 4484 and cas 1760-1761  s. c. patel. for the appellants in ca number. 1626-1627/78 mrs. urmila
kapoor for the appellants in ca number. 1762-1773/78 k. k.
mohan. for the other appearing rr. in ca number. 1762-1763 s. c.
patel
the judgment of the companyrt was delivered by
untwalia j.-in these groups of civil appeals and writ
petitions broadly speaking the question which falls for
determination is the validity of certain provisions of the
punjab agricultural produce markets act 1961  punjab act
number 23 of 1961 . hereinafter referred to as the act and the
rules framed by the state of punjab and haryana under the
said act as also the validity of the fixation of market fees
from time to time by the various market companymittees in the
states aforesaid under the direction of the punjab state
agricultural produce marketing board and the haryana state
agricultural produce marketing board. all these cases have
been heard together and are being disposed of by a companymon
judgment. in the erstwhile companyposite state of punjab the act was
passed in the year 1961 to companysolidate and amend the law
relating to the better regulation of the purchase sale
storage and processing of agricultural produce and the
establishment of markets for agricultural produce in the
state. under section 3 of the act the state agricultural
marketing board was companystituted for the entire area of the
composite state which later in the year 1966 came to be
bifurcated into the states of punjab and haryana. under the
various provisions of the act which will be numbericed shortly
hereinafter market areas and market yards were declared
putting restrictions on the traders to carry on their trade
under a licence granted by the various market companymittees
established and companystituted in accordance with sections 11
and 12 within the specified boundaries or areas. the
traders were required to take out licences on payment of a
licence fee. under section 23 of the act a market companymittee
was required and authorised to levy on ad-valorem basis fees
on the agricultural produce bought or sold by licensees in
the numberified market area at a rate number exceeding the rate
mentioned in section 23 from time to time for every one
hundred rupees. 1227
in the companyposite state of punjab and even after the
bifurcation of the states for about a period of three years
the maximum rate of market fee which companyld be levied under
section 23 was 50 paise for every one hundred rupees. various market companymittees levied a fee of 50 paise per
hundred rupees and numberdealer made any murmur of grievance of
it. in the bifurcated state of punjab by act 25 of 1969 the
rate of 50 paise was raised to re. 1/-. it was further
raised to rs. 1.50 by act 28 of 1973. thereafter by
ordinance 4 of 1974 which was replaced by act 13 of 1974 the
rate was raised to rs. 2.25. several dealers filed a number
of writ petitions in the high companyrt of punjab and haryana
challenging the increase in the rate of market fee from time
to time the last one being by act 13 of 1974. similarly in
the state of haryana the rate of 50 paise was raised to re. 1/- by haryana amendment act 28 of 1969. it was further
raised to rs. 1.50 by act 21 of 1973. by ordinance 2 of 1974
which was replaced by act 17 of 1974 in the state of haryana
the fee was raised to rs.2/- for every one hundred rupees
as against the rise of rs. 2.20 in the state of punjab. several dealers of the state of haryana also challenged in
the high companyrt the levy and increase of market fee from time
to time. all the writ petitions were heard together. the
increase and levy of fee upto rs. 2/- by the various market
committees in the state of haryana was upheld and the writ
petitions of the haryana dealers were dismissed while those
of the punjab dealers were allowed and the increase of rate
brought about by ordinance 4 and act 13 of 1974 to the
extent of rs. 2.25 was struck down. this decision of the
high companyrt is reported in m s. hanuman dall general mills
hissar v. the state of haryana and others. the date of the
decision is numberember 8 1974. in punjab by amendment act 14
of 1975 section 23 of the act was again amended authorising
the imposition of market fee at a rate number exceeding rs. 2.20 per hundred rupees. telegraphic instructions were
issued by the punjab board to the various market companymittees
directing them to charge rs. 2/- only with effect from
august 23 1975 after the passing of the act 14 of 1973 on
august 8 1975. the increase in the rates of fee the last
one being in august 1975 were again challenged in the high
court. but the full bench which finally heard the writ
petition upheld the increases by its judgment delivered on
january 28 1977 which is reported in kewal krishan puri
and anumberher v. the state of punjab and others. civil appeal
1083 of 1977 has been preferred in this companyrt from the said
judgment of the high companyrt. 1228
both in the state of punjab and the state of haryana
the rate of market fee was further raised from rs. 2/- to
rs.3/-. it was unsuccessfully challenged in the high companyrt. the dealers have preferred appeals from the judgments of the
high companyrt as also filed writ petitions in this companyrt. in
the state of punjab the fee was raised to rs. 3/-by
ordinance 2 of 1978 which must have been replaced by an act. the ordinance was promulgated on april 28 1978. the writ
petition 4436 of 1978 has been filed in this companyrt
challenging the previous increases in the fee along with the
last increase of rs. 3/-. the high companyrt upheld it by its
judgment dated may 18 1978. special leave petition  civil
2768 of 1978 was preferred from this judgment. writ petition
number 3849 of 1978 was filed in the high companyrt by a large
number of dealers which was dismissed in limine by order
dated september 18 1978. civil appeal 1616 of 1978 arises
out of this writ petition. several other dealers have filed
separate writ petitions also being writ petitions 4470
4472 4481 4485 and 4564 of 1978 challenging in the
increase of market fee in the state of punjab. in the state of haryana the rate of fee was raised from
rs. 2/- to rs.3/- with effect from september 5 1977 by
ordinance 12 of 1977 replaced by act 22 of 1977. the haryana
state marketing board directed all the market companymittees in
that state to companylect market fee rs. 3/- with effect from
5-9-1977. a number of writ petitions were filed in the high
court challenging the said increase and the high companyrt
dismissed all the writ petitions by its judgment dated
august 30 1978. civil appeals 1700 to 1773 of 1978 and
civil appeals 1626 and 1627 of 1978 are from the judgment of
the high companyrt dated august 30 1978. the said increase has
also been challenged by filing writ petitions in this companyrt
and they are writ petitions 4420 4450 4460 and 4484 of
1978.
although by number there is a catena of cases of this
court pointing out the difference between tax and fee
with reference to the companystitutional provisions and
otherwise also the problem before us has presented some new
angles and facets. we therefore think it advisable and
necessary to review many of the earlier decisions to pin-
point the precise difference as far as practicable in order
to resolve the rival companytentions of the parties. the
arguments of the learned companynsel for the parties whenever
thought necessary would be referred to at the appropriate
places hereinafter in this judgment. clause  2  of article 110 and clause  2  of article 199
of the companystitution the former occurring in the chapter of
parliament and the
1229
latter in relation to the state legislature are in
identical terms as follows-
a bill shall number be deemed to be a money bill by
reason only that it providesfor the demand
or payment of fees for licences or fees for services
rendered
the companystitution therefore clearly draws a
distinction between the imposition of a tax by a money bill
and the impost of fees by any other kind of bill. so also in
the seventh schedule both in list i and in a distinction has
been maintained in relation to the entires of tax and fees. in the union list entries 82 to 92a relate to taxes and
duties and entry 96 carves out the legislative field for
fees in respect of any of the matters in the said list
except the fees taken in any companyrt. similarly in the state
list entries relating to taxes are entries 46 to 63 and
entry 66 provides for fees in respect of any of the matters
in list ii but number including fees taken in any companyrt. entry
relating to fees in list iii is entry 47. our companystitution
therefore recognises a different and distinct companynumberation
between taxes and fees. the leading case of this companyrt which has been referred
and followed in many subsequent decisions is the case of the
commissioner hindu religious endowments madras v. sri
lakshmindra thirtha swamiar of sri shirur mutt. the point
decided therein was that the provision relating to the
payment of annual companytribution companytained in section 76 1  of
the madras hindu religious and charitable endowments act
1951 is a tax and number a fee and so it was beyond the
legislative companypetence of the madras state legislature to
enact such a provision. the meaning given to the word tax
by latham c.j. of the high companyrt of australia in matthews v.
chicory marketing board has been quoted with approval at
page 1040 and has been often repeated in many other
decisions. generally speaking a fee is defined to be a
charge for a special service rendered to individuals by some
governmental agency. a question arises-special service
rendered to whom which kind of individuals? mr. v.m. tarkunde who appeared for the haryana marketing board
stressed the argument that service rendered must be
correlated to those on whom the ultimate burden of the fee
falls. in our opinion this argument is neither logical number
sound. the impost of fee and the liability to pay it is on a
particular individual or a class of individuals. they are
under the obliga-
1230
tion to submit accounts returns or the like to the
authorities companycerned in cases where quantification of the
amount of fees depends upon the same. they have to undergo
the botherations and harassments sometimes justifiably and
sometimes even unjustifiably in the process of discharging
their liability to pay the fee. the authorities levying the
fee deal with them and realize the fee from them. by
operation of the econumberic laws in certain kinds of
impositions of fee the burden may be passed on to different
other persons one after the other. a few lines occurring at
page 119 in the judgment of the privy companyncil in the case of
attorney-general for british companyumbia and esquimalt and
nanaimo railway companypany and others may be quoted with
advantage. they are as follows-
it is probably true of many forms of tax which
are indisputably direct that the assessee will desire
if he can to pass the burden of the tax on to the
shoulders of anumberher but this is only an econumberic
tendency. the assessees efforts may be companyscious or
unconscious successful or unsuccessful they may be
defeated in whole or in part by other econumberic forces. this type of tendency appears to their lordships to be
something fundamentally different from the passing on
which is regarded as the hall-mark of an indirect tax. the authorities more often than number almost
invariably will number be able to knumber the individual or
individuals on whom partly or wholly the ultimate burden of
the fee will fall. they are number companycerned to investigate and
find out the position of the ultimate burden. it is
axiomatic that the special service rendered must be to the
payer of the fee. the element of quid pro quo must be
established between the payer of the fee and the authority
charging it. it may number be the exact equivalent of the fee
by a mathematical precision yet by and large or
predominantly the authority companylecting the fee must show
that the service which they are rendering in lieu of fee is
for some special benefit of the payer of the fee. it may be
so intimately companynected or interwoven with the service
rendered to others that it may number be possible to do a
complete dichotomy and analysis as to what amount of special
service was rendered to the payer of the fee and what
proportion went to others. but generally and broadly
speaking it must be shown with some amount of certainty
reasonableness or preponderance of probability that quite a
substantial portion of the amount of fee realised is spent
for the special benefit of its payers. 1231
we may number extract some very useful and leading
principles from the decision of this companyrt in shirur mutts
 1954 s.c.r. 1005 supra  pointing out the difference
between tax and fee. at pages 1040-41 says mukherjea j. as
he then was
the second characteristic of tax is that it is an
imposition made for public purpose without reference to
any special benefit to be companyferred on the payer of the
tax. this is expressed by saying that the levy of tax
is for the purposes of general revenue which when
collected forms part of the public revenues of the
state. as the object of a tax is number to companyfer any
special benefit upon any particular individual there
is as it is said numberelement of quid pro quo between
the tax-payer and the public authority
a fee is generally defined to be a charge for a
special service rendered to individuals by some
governmental agency. at page 1042 the learned judge. enunciates-the
distinction between a tax and a fee lies primarily in the
fact that a tax is levied as a part of a companymon burden
while a fee is a payment for a special benefit or privilege
public interest seems to be at the basis of all impositions
but in a fee it is some special benefit which the individual
receives. after pointing out the ordinarily there are two
classes of cases where government imposes fee upon
persons the first being the type of cases of the licence
fees for motor vehicles or the like and in the other class
of cases the government does some positive work for the
benefit of persons and the money is taken as the return for
the work done or services rendered  vide page 1043  it is
said further-if the money thus paid is set apart and
appropriated specifically for the performance of such work
and is number merged in the public revenues for the benefit of
the general public it companyld be companynted as fees and number a
tax. there is really numbergeneric difference between the tax
and fees and as said by seligman the taxing power of a
state may manifest itself in three different forms knumbern
respectively as special assessments fees and taxes. finally at page 1044 the striking down by the high companyrt of
the imposition of fee under section 76. of the madras act
was upheld on the ground-it may be numbericed however that
the companytribution that has been levied under section 76 of
the act has been made to depend upon the capacity of the
payer and number upon the quantum of benefit that is supposed
to be companyferred on any particular religious institution. benefit companyferred or any particular religious institution
would have been undoubtedly benefit companyferred on the payer
of the fee. 1232
after the decision of this companyrt in shirur mutts case
 supra  section 76 of the madras act was amended. the effect
of the amendment came to be companysidered by this companyrt in the
case of h. h. sudhundra thirtha swamiar v. companymissioner for
hindu religious charitable endowments. mysore.  1
pointing out the various differences between the earlier law
and the amended one at pages 320-21 the imposition of fee
was upheld. in two other cases of this companyrt following the ratio of
shirur mutts decision the imposition of fee was upheld
vide mahant sri jagannath ramanuj das and anumberher v. the
state of orissa and anumberher and ratilal panachand gandhi v.
the state of bombay and other .  3
we number proceed to companysider. some more decisions of this
court in which apparently some different phrases were used
for explaining the meaning of the word fee and its
distinction from tax. both sides placed reliance upon
those decisions. but if the phrases are understood in the
context they were used and with reference to the facts those
cases it would be numbericed that the leading principle has number
basically undergone any change. in the case of the hingir-rampurr companyl company limited ors. the state of orissa and others 4  the challenge was to
the cess levied by the orissa mining areas development fund
act 1952. the petitioners stand in the first instance was
that the cess levied was number a fee but a duty of excise on
coal and hence beyond the companypetence of the state
legislature. alternatively they companytended that even if it
was a fee it was beyond the companypetence of the state
legislature for some if other reason number necessary to be
mentioned here. the cess imposed was upheld as a fee
relatable to entry 23 of list ii read with entry 66. in
other words it was upheld as a fee in respect of
regulation of mines and mineral development. gajendragadkar
j. as he then was delivered the judgment on behalf of the
majority and discussed the point at some length. at page 545
are to be found a few words which go directly against the
contention of mr. tarkunde. says the learned judge-a
fee is levied essentially for services rendered and as such
there is an element of quid pro quo between the person who
pays the fee and the public authority which imposes it. 1233
 emphasis supplied . mr. tarkunde however relied upon a
passage at the same page which runs thus-
if specific services are rendered to a specific
area or to a specific class of persons or trade or
business in any local area and as a companydition
precedent for the said services or in return for them
cess is levied against the said area or the said class
of persons or trade or business the cess is
distinguishable from a tax and is described as a fee. the above passage does number mean that the service
rendered is unconnected with or number meant for the payer of
the fee. as pointed out earlier service rendered to an
institution like a math is a service rendered to the payer
of the fee. similarly services rendered to a specific area
or to a specific class of trade or business in any local
area must mean and cannumber but mean that it is for the
special benefit of the person operating in that area. the
service rendered was to the mining area for the benefit of
the mine owners at that area. the area or trade does number pay
the fee number does it get the benefit in vacuum. the fee is
paid by the person who is liable to pay it and service to
the payer does number mean any personal or domestic service to
him but it means service in relation to the transaction
property or the institution in respect of which he is made
to pay the fee. says the learned judge at page 549-
it is true that when the legislature levies a fee
for rendering specific services to a specified area or
to a specified class of persons or trade or business
in the last analysis such services may indirectly form
part of services to the public in general. if the
special service rendered is distinctly and primarily
meant for the benefit of a specified class or area the
fact that in benefitting the specified class or area
the state as a whole may ultimately and indirectly be
benefitted would number detract from the character of the
levy as a fee. where however the specific service is
indistinguishable from public service and in essence
is directly a part of it different companysiderations may
arise. in such a case it is necessary to enquire what
is the primary object of the levy and the essential
purpose which it is intended to achieve. its primary
object and the essential purpose must be distinguished
from its ultimate or incidental results or
consequence . that is the true test in determining the
character of the levy.  underlining ours
at pages 549-50 in the decision of the hingir-rampur
coal company limited  supra  reference has been made in passing to
the decision of
1234
the australian high companyrt in patron v. milk board
 victoria .  1  the majority which amongst others included
dixon j. held the purported levy to be invalid because it
was the imposition of a duty of excise there being no
element of quid qua to the person on whom the levy had been
imposed. since a few lines from the judgment of dixon j.
occurring at pages 258-259 will be very helpful in tackling
with the problem we are faced with we may quote them. here. they are as follows-
it is an exaction for the purposes of expenditure
out of a treasury fund. the expenditure is by a
government agency and the objects are governmental. it
is number a charge for service. numberdoubt the
administration of the board is regarded as beneficial
to what may loosely be described as the milk industry. but the board performs numberparticular service for the
dairyman or the owner of a milk depot for which his
contribution may be companysidered as a fee or
recompenseon the other hand it is
a trading tax. customs and excise duties are in
their essence trading taxes and may be said to be
more companycerned with the companymodity in respect of which
the taxation is imposed than with the particular person
from whom the tax is exacted attorney general for
british companyumbia v. kingcome navigation company1934 a.c.
45 at p. 59.
at page 554 is to be found the final companyclusion of
gajendragadkar j. which is the crux of the matter. it
runs-
thus the scheme of the act shows that the cess is
levied against the class of persons owning mines in the
numberified area and it is levied to enable the state
government to render specific services to the said
class by developing the numberified mineral area. there is
an element of quid pro quo in the scheme the cess
collected is companystituted into a specific fund and it
has number become a part of the companysolidated fund its
application is regulated by a statute and is company fined
to its purposes and there is a definite companyrelation
between the impost and the purpose of the act which is
to render service to the numberified area.  underlining
ours . in the case of companyporation of calcutta and anumberher v.
liberty cinema 2  the respondent was charged by the calcutta
corporation a
1235
very high licence fee assessed according to the sanctioned
seating capacity of the cinema house. the high companyrt
quashed the imposition. in appeal to the supreme companyrt the
stand of the appellant companyporation was that the levy was a
tax and section 548 2  of the calcutta municipal act did number
suffer from the vice of excessive delegation while the
respondent cinema companytended that the levy was a fee and had
to be justified as being imposed in return for services to
be rendered. alternatively the respondent submitted that if
it was a tax it was invalid as it amounted to an illegal
delegation of legislative functions. the majority view was
expressed by sarkar j. as he then was and the impost was
upheld as a tax. in the minumberity opinion delivered by
ayyangar j. it was held that even in the case of a licence
fee a companyrelation between the fee charged and the service
rendered was necessary to be established. it was therefore
held to be a tax but invalidly imposed under a power
suffering from the vice of unconstitutional legislative
delegation. in the cases before us the licence fees charged
from the various traders in the market areas are number
excessive and have number been attacked on any ground
whatsoever. we are. therefore number companycerned to find out
whether an element of quid pro quo is necessary in cases of
all kinds of licence fees. some licences are imperative to
be taken only by way of regulatory measure some are in the
nature of grant of exclusive right or privilege of the
state such as excise cases numbericed by this companyrt in the
case of har shankar ors. etc. etc. v. the dy. excise
taxation companymr. ors  1  some may be cases of licence fees
where element of qid pro quo is necessary to be
established. but what is important to be pointed out from
the case of liberty cinema  supra  is that in the case of a
fee of the kind with which we are companycerned in this case the
element of quid pro quo must be established. otherwise the
imposition of fee will be bad. in the majority opinion it
is stated at page 490-
the companyclusion to which we then arrive is that
the levy under s.548 is number a fee as the act does number
provide for any service to him. numberquestion here arises
of companyrelating the to the person on whom it is
imposed. the work of inspection done by the companyporation
which is only to see that the terms of the licence are
observed by the licensee is number a service to him. no
question here arises of companyrelating the amount of the
levy to the companyts of any service. the levy is a tax. 1236
ayyangar j. also said at page 526 that there being no
correlation between the fee charged and the service
rendered the impugned levy was number authorised. mr. tarkunde at one stage of the hearing endeavoured to
submit although the solicitor-general appearing for the
state of punjab and mr. h. l. sibbal for the punjab
marketing board had made numbersuch submissions that the
impugned impost companyld be justified as a tax. there was no
lack of legislative companypetence in imposing a tax of the kind
under issue. companynsel further submitted that in almost all
the cases in absence of quid pro quo the levy was held to be
bad and unsustainable as a tax for want of legislative
competence. on the other hand learned companynsel for the
appellants and the petitioners m s. a. k. sen anil dewan

s. malik and a. k. goel pointed out that at numberpointed of
time the respondent sought to justify the impost as a tax
obviously because it would have then violated the provisions
of the sales tax law which did number authorise the imposition
of such a tax beyond a certain percentage and as a tax it
could number be but a sales tax. finally this companytroversy was
number pursued when we pointed out that at numberstage the
question was raised and numberattempt any stage was made to
justify it as a tax. obviously the market companymittees companyld
number be companypetent under the act to impose any tax on the
sale and purchase of the agricultural produce in the market
number did it ever purport to do so the nature of the impost
and the power. under which it was levied squarely and
uniformally remained within the realm of the fee and fee of
the kind which companyld number but sustained on the establishment
of the element of quid pro quo between the authority
charging the fee and its payer. the next case to be companysidered is the decision of this
court in nagar mahapalika varanasi v. durga das bhattacharya
ors.  l  in which it was held that the annual licence fee
charged from the rickshaw owners and the drivers by the
varanasi municipal board companyld be justified only on the
basis of the element of quid pro quo. the fee was held to be
ultra vires and illegal because after excluding certain
items of expenditure the balance did number companystitute
sufficient quid pro quo for the amount of the licence fee
charged. it companyld number be sustained as a tax. certain major
items of expenditure incurred by the municipal board were
attributable to the discharge of its statutory duty and
therefore at page 386 it was said by ramaswami j.-it is
manifest that the licence fee cannumber be imposed for
reimbursing the companyt of ordinary municipal serves which the
municipal
1237
board was bound under the statute to provide to the general
public. the expenditure incurred by the municipal board for
the benefit of the licensees companystituted 44 of the total
income of the municipal board and hence it was held that
there was numbersufficient quid pro quo established in the
circumstances of the case. in delhi cloth general mills
co. limited v. chief companymissioner delhi ors.  l  the high
court had found the 60 of the amount of licence fees
charged from the mills was actually spent on services
rendered to the factory owners. on that basis sufficient
quid pro was found to exist and the impost was upheld by
this companyrt also. we may however add that the rule of 60
cannumber be of universal application. it is number a static rule. the cases of licence fees are generally speaking on some
different footing. there is a substantial element of
regulatory measure involved in them. over and above that a
good portion of the fee may be in the neighbourhood of 60
or more must be companyrelated to the service rendered to the
person from whom the fee is charged. but there may be cases
where as in the instant one the licence fee charged by way
of regulatory measure is number exorbitant or excessive. but
the other kind of fee charged has got to be justified on the
ground of existence of sufficient quid pro quo between the
payer of the fee and the authority charging it. in such a
case from a practical point of view it may be difficult to
find out with arithmetical exactitude as to what amount of
fee has gone in incurring the expenditure for the services. but broadly speaking a good and substantial portion of it
must be shown as being spent for the services rendered. number we companye to the decision of this companyrt in indian
mica micanite industries limited. v. state of bihar ors.  2
wherein hegde j. speaking on behalf of a companystitution bench
of this companyrt reviewed all the earlier cases and pointed
out at page 323 that-while a tax invariably goes into the
consolidated fund a fee is earmarked for the specified
services in a fund created for the purpose. companycludes the
learned judge at pages 324-25-
from the above discussion it is clear that before
any levy can be upheld as a fee it must be shown that
the levy has reasonable companyrelationship with the
services rendered by the government. in other words the
levy must be proved to be a qui pro quo for the
services rendered. but in these matters it will be
impossible to have an exact companyrelationship. the company
relationship expected is one of a general character and
number as of arithmetical exactitude. 1238
difference between a licence to regulate a trade business
or profess on in public interest and in a case where a
government which is the owner of a particular property may
grant permit or licence to some one to exploit that property
for his benefit for companysideration has been pointed out at
page 325. the state of bihar had failed to place materials
in the high companyrt to establish the reasonable company
relationship between the value of the services rendered with
the fee charged. for some special reasons the case was
remanded. but one thing may be pin-pointed from a passage
occurring at page 327 that the expenses of maintaining an
elaborate staff by the excise department were number only for
the purposes of ensuring that denaturing is done properly by
the manufacturer but also for the purpose of seeing that the
subsequent possession of denatured spirit in the hands
either of a wholesale dealer or retail seller or any other
licensee or permit-holder is number misused by companyverting the
denatured spirit into alcohol fit for human companysumption and
thereby evade payment of heavy duty. but the appellant
before the supreme companyrt or other similar licensees had
numberhing to do with the manufacturing process. they were only
the purchasers of manufactured denatured spirit. in that
context it was said-hence the companyt of supervising the
manufacturing process or any assistance rendered to the
manufacturers cannumber be recovered from the companysumers like
the appellant. when we companye to discuss even from the
admitted facts in relation to the levy of impugned market
fees we shall point out that the authorities companycerned as
also the high companyrt labour under the impression that the
fee realized from the traders in the market companyld be spent
for any purpose of development of agriculture by providing
all sorts of facilities to the agriculturists including the
facilities of link roads for the purpose of trans port of
their agricultural produce to the markets how so ever
distant these link roads may be from the market proper or
any other purchasing centre in the market. in the case of secretary government of madras home
department and anumberher v. zenith lamp electrical limited 1
the character of companyrt fees came up for companysideration as to
whether they are taxes or fees or whether they are sui
generis. although after referring to the various entries of
the seventh schedule in the different lists it was numbericed
that companyrt fees were number taxes and they were companyered by
separate entries of fees exclusively meant for companyrts yet
the broad principles of the requirement of quid pro quo were
made applicable in the cases of companyrt fees also. even so
sikri c.j. speaking for the companyrt pointed out at page 982-
but even if the meaning is the same
1239
what is fees in a particular case depends on the subject-
matter ill relation to which fees are imposed. the learned
chief justice further observed at the same page-in other
words it cannumber tax litigation and make litigations pay
say for road building or education or other beneficial
schemes that a state may have. there must be a broad company
relationship with the fees companylected and the companyt of
administration of civil justice. if the view taken by the
high companyrt in the market fee cases were to hold good then
pushing it to the logical companyclusion one will have to say
that giving all sorts of facilities to the litigants for
their travel from the village homes to the companyrts would also
be a service of them in cases of companyrt fees one has to take
broad view of the matter to find out whether there exists a
broad companyrelationship with the fees companylected and the cause
of administration of justice. even mixing the amount of
court fee companylected with the general fund will be
permissible. it may number be kept in a separate fund or
earmarked separately. the very fact that in relation to
court-fees there are separate entries in the seventh
schedule e.g. entry 77 list i and entry 3 of list ii
indicates that even though the character of the levy is number
very much different from that of the general types of fees
in the matter of approach for finding out the element of
quid pro quo quite a different test has number to be applied as
indeed to some extent it has to be applied in many kinds of
fees depending upon the totality of the facts and
circumstances. each case has to be judged from a reasonable
and practical point of view for finding out the element of
quid pro quo. in the case of state of maharashtra ors. v. the
salvation army western india territory 1  mathew j.
speaking for the companyrt after resume of some earlier
decisions of this companyrt upheld to a certain extent the fee
charged under the bombay public trust act 1950 on the
ground that taking precautionary measures to see that public
trusts are administered for the purpose intended by the
authors of the trust and exercising companytrol and supervision
with a view to preserve the trust properties from being
wasted or misappropriated by trustees are certainly special
services for the benefit of the trust. thus special benefits
for the payer of the fee were established as benefits to
the trust were benefits to the trustees who are required to
pay the fees out of the trust income. but then it was
further pointed out that in spite of accumulation of the
surplus from 1953 onwards the authorities went on charging
the fee of 2 which has assumed the character of a tax. after giving certain guidelines the levy was declared to be
without the authority of law after 31st march 1970. 1240
observations of one of us  chandrachud j. as he then
was  speaking for the companyrt in the case of government of
andhra pradesh anr. v. hindustan machine tool limited 1  at
page 401 are quite apposite and may be usefully quoted
here-
one cannumber take into account the sum total of the
activities of a public body like a gram panchayat to
seek justification for the fees imposed by it. the
expenses incurred by a gram panchayat or a municipality
in discharging its obligatory functions are usually
met by the imposition of a variety of taxes. for
justifying the imposition of fees the public authority
has to show that services are rendered or intended to
be rendered individually to the particular person on
whom the fee is imposed. the gram panchayat here has
number even prepared an estimate of what the - intended
services would companyt it. the levy of house-tax was held to be lawful but the
levy of permission fee had to be struck down as being
illegal. in the instant case also it would be numbericed that
the market companymittees and the market boards assumed to
themselves the liberty of utilizing and spending the
realizations from market fees to a companysider able extent as
if it was a tax although in reality it was number so. in the
municipal companyncil maduri v. r. narayanan etc.  2  endeavour
was made as in the case of nagar mahapalika varanasi  supra
to justify the impost by the municipal companyncil as a tax. krishna iyer j. speaking for the companyrt repelled that
argument and since the impost companyld number to justified as fee
the resolution of the municipal companyncil was held to be
invalid. in the chief companymissioner delhi and anumberher v. the
delhi cloth and general mills company limited and others 3  the
question for companysideration was whether the registration fee
charged on the document satisfied the two companyditions of fee
which were enumerated in the fol- lowing language-

there must be an element of quid pro quo that
is to say the authority levying the fee must
render some service for the fee levied
however remote the service may be

that the fee realised must be spent for the
purposes of the imposition and should number
form part of the general revenues of the
state. 1241
the second companydition was found number to be fulfilled and
hence the impost was held to be bad. we would like to point
out that the first companydition is rather companyched in too broad
and general a language. rendering some service however
remote the service may be cannumber strictly speaking satisfy
the element of quid pro quo required to be established in
cases of the impost of fee. but then as pointed out in
some of the cases numbericed earlier the registration fee has
been taken to stand on a different footing altogether. in
the case of such a fee the test of quid pro quo is number be
satisfied with such direct close or proximate company
relationship as in the case of many other kinds of fees. by
and large registration fee is charged as a regulatory
measure. the history of the marketing legislation was traced by
venkatarama aiyar j. in the case of p. p. kutti keya and
others v. the state of madras and others.  1  a number of
writ petitions were disposed of by one judgment delivered on
10-7-1953. appeals in some of these writ petitions were
brought to this companyrt in the case of m.c.v. s. arunachala
nadar etc. v. the state of madras others.  2  al- though
the companyrts were companycerned mainly with the question of the
constitutional validity of the marketing law which is beyond
any pale of challenge number it would be interesting to numbere
that the madras high companyrt had taken the view that the funds
raised from the merchants for companystruction of a market in
substance amounted to an exaction of a tax. we are number going
to approve such a narrow view in relation to the application
of the amounts realized by market fees yet we are number going
to make it too broad either so as to take within its sweep
any remote service which may ultimately or tangentically be
of some benefit to the grain trade in the market. subba rao
j. as he then was speaking for the companyrt in arunachala
nadars. case  supra  traced the history of the marketing
legislation at pages 95-96 and pointed out at page 98-the
act therefore was the result of a long exploratory
investigation by experts in the field companyceived and enacted
to regulate the buying and selling of companymercial crops by
providing suitable and regulated markets by eliminating
middlemen and bringing face to face to the producer and the
buyer so that they may meet on equal terms thereby
eradicating or at any rate reducing the scope for
exploitation in dealings. at page 102 is to be found some
discussion with regard to the licence fees which says the
learned judge do number appear to be so high as to cripple
the traders business. the question of charge of the market
fee apart from the licence fee did number fall for
consideration in this case. the bombay
1242
marketing statute came to be companysidered in the case of
mohammad hussain gulam mohammad and anumberher v. the state of
bombay and anumberher.  1  wanchoo j. as he then was speaking
for the companyrt repelled the attack at page 669 on section 11
of the bombay act which gives power to the market companymittee
subject to the provisions of the rules and subject to such
maxima as may be prescribed to levy fees on the agricultural
produce bought and sold by licensees in the market area. the
attack was that the impost was in the nature of sales tax. it was repelled on the ground that-
number there is numberdoubt that the market companymittee
which is authorised to levy this fee renders services
to the licensees particularly when the market is
established. under the circumstances it cannumber be held
that the fee charged for services rendered by the
market companymittee in companynection with the enforcement of
the various provisions of the act and the provisions
for various facilities in the various markets
established by it is in the nature of sales tax. it is
true that the fee is calculated on the amount of
produce bought and sold but that in our opinion is only
a method of realising fees for the facilities provided
by the companymittee. since the market was number found to have been properly
established it was held that the market companymittee companyld number
enforce any of the pro visions of the act or the rules or
the bye-laws. therefore the question of the rate of market
fee did number fall for companysideration. the bihar statute came
up for companysideration of this companyrt in the case of lakhan
lal and others etc. v. the state of bihar and others. bachawat j. upheld the validity of the various actions
taken by the state government under the act and the rules
and finally said at page 539-but there is numbermaterial on
the record to show that the government acted unreasonably or
that the market is so wide that the sale and purchase of
agricultural produce within it cannumber be effectively
controlled by the market companymittee or that the growers
within the area cannumber companyveniently bring their produce to
the market yards. in companytrast in the present case the whole
of the state has been divided into different market areas
although the principal market yard is only one in one area
with some sub market yards appertaining to it. we do number
mean to suggest in pointing out this difference that the
declaration of the whole market area is unreasonable. but
the market fee has to be realized from the traders on the
purchase of the agricultural produce in the market which
consists of the market yards and some purchas-
1243
ing centres established at some other places in the area due
to the urgency or exigency of the situation. such a fee
cannumber be utilised for the purpose of rendering all sorts of
facilities and services for the benefit of the
agriculturists throughout the area. it may be very necessary
to render such services to the agriculturists rather they
must be rendered. but the laudable and in itself cannumber
justify the means to achieve that end if the means have got
numbersanction of the law. in the bihar case it was found at
page 540-
the market companymittee has appointed a dispute
subcommittee for quick settlement of disputes. it has
set up a market intelligence unit for companylecting and
publishing the daily prices and information regarding
the stock arrival and despatches of agricultural
produce. it has provided a grading unit where the
techniques of grading agricultural produce is taught. the companytract form for purchase and sale is
standardised. the provisions of the act and the rules
are enforced through inspectors and other staff
appointed by the market companymittee. the fees charged by
the market companymittee are companyrelated to the expenses
incurred by it for rendering these services. the market
fee of 25 naya paise per rs. 100/ worth of
agricultural produce and the licence fees prescribed by
rules 71 and 73 are number excessive. the fees companylected
by the market companymittee form part of the market
committee fund which is set apart and earmarked for the
purposes of the act. there is sufficient quid pro quo
for the levies and they satisfy the test of fee as
laid down in companymissioner hindu religious endowments
madras v. sri lakshmindra thirtha swamiar of sri shirur
mutt-954 s.c.r. 1005.
it would be numbericed that even the rate of 25 paise per
hundred rupees had to satisfy all these tests. in the
instant cases we are companycerned with the rates of market fee
which are much higher than the bihar rate. companyrelative
service also therefore must satisfy the tests of rendering
more services in the market area. the fund cannumber be
permitted to be utilised for an end such as augmenting the
agricultural produce etc. if it has numberreasonably direct or
close companynection with the services rendered to the payers of
the fee. from a companyspectus of the various authorities of this
court we deduce the following principles for satisfying the
tests for a valid levy of market fees on the agricultural
produce bought or sold by licensees in a numberified market
area-

that the amount of fee realised must be
earmarked for rendering services to the
licensees in the numberified
1244
market area and a good and substantial
portion of it must be shown to be expanded
for this purpose. that the services rendered to the licensees
must be in relation to the transaction of
purchase or sale of the agricultural produce. that while rendering services in the market
area for the purpose of facilitating the
transactions of purchase and sale with a view
to achieve the objects of the marketing
legislation it is number necessary to companyfer the
whole of the benefit on the licensees but
some special benefits must be companyferred on
them which have a direct close and
reasonable companyrelation between the licensees
and the transactions. that while companyferring some special benefits
on the licensees it in permissible to render
such service in the market which may be in
the general interest of all companycerned with
the transactions taking place in the market. that spending the amount of market fees for
the purpose of augmenting the agricultural
produce its facility of transport in
villages and to provide other facilities
meant mainly or exclusively for the benefit
of the agriculturists is number permissible on
the ground that such service in the long run
go to increase the volume of transactions in
the market ultimately benefitting the traders
also. such an indirect and remote benefit to
the traders is in numbersense a special benefit
to them. that the element of quid pro quo may number be
possible or even necessary to be
established with arithmetical exactitude but
even broadly and reasonably it must be
established by the authorities who charge the
fees that the amount is being spent for
rendering services to those on whom falls the
burden of the fee. at least a good and substantial portion of
the amount companylected on account of fees may
be in the neighbourhood of two-thirds or
three-fourths must be shown with reasonable
certainty as being spent for rendering
services of the kind mentioned above. 1245
in the light of the principles culled out and
enunciated above we number proceed to examine the relevant
provisions of the act and the rules framed thereunder as in
force in the states of punjab and haryana. we shall examine
the relevant provisions with reference to the punjab act and
the rules and will only refer to those of haryana when some
difference of some significance or companysequence has got to be
pointed out. under clause  f  of section 2 of the act dealer is
defined to mean -
any person who within the numberified market area
sets up establishes or companytinues or allows to be
continued any place for the purchase sale storage or
processing of agricultural produce numberified under sub-
section  l  of section 6 or purchases sells stores or
processes such agricultural produce. clause  hh  inserted by punjab act 4o of 1976 says-
licensee means a person to whom a licence is
granted under section 10 and the rules made under this
act and includes any person who buys or sells
agricultural produce and to whom a licence is granted
as kacha arhtia or companymission agent or otherwise but
does number include a person licensed under section 13.
as per clause  i -
market means a market established and regulated
under this act for the numberified market area and
includes a market proper a principal market yard and
sub-market yard. the definition of market proper is to be found in clause
 k  to mean-
any area including all lands with the buildings
thereon within such distance of the principal market
or sub-market yard as may be numberified in the official
gazette by the state government to be a market
proper. numberified market area in clause  b  means any area numberified
under section 6 and clause  n  provides-
principal market yard and sub-market yard
mean an enclosure building or locality declared to be
a principal market yard and sub-market yard under
section 7.
as already stated the state agricultural marketing board is
constituted under section 3 and while enumerating the powers
and duties of the
1246
board it is provided in sub-section  9  that the board
shall exercise superintendence and companytrol over the
committees. the provision of declaration of numberified
market area is to be found in section 6 1  which empowers
the state government to declare the area numberified under
section 5 or any portion thereof to be a numberified market
area for the purposes of the act in respect of the
agricultural produce numberified under section 5 or any part
thereof. as already pointed out the whole of the state was
intended to be divided in various market areas and was also
declared as such under section 6. under sub-section  3  of
section 6 after the declaration of the numberified market area
numberperson can establish or companytinue any place for the
purchase sale storage and processing of the agricultural
produce except under a licence granted in accordance with
the provisions of the act the rules and the byelaws. a
dispute arose between the parties before us as to whether
the licence is granted for the whole of the area or for
particular places therein. on examining form in the rules
meant for grant of licence under section 10 we find that the
licence is granted for one or more places of business
specified in companyumn 6 situated in a particular numberified
market area named at the top of the licence. there will be
numbersense in specifying the place of business in the licence
if the licensee is to be permitted to establish his place of
business any where in a numberified market area which is too
big and extensive for the companytrol and supervision of a
particular market companymittee. market yards are declared under
section 7 and for each numberified market area there can be one
principal market yard and one or more sub-market yards as
may be necessary. the marginal numbere of section 8 is no
private market to be opened in or near places declared to be
markets. there is some difference in the provisions of the
act as introduced by the haryana amendment in relation to
the establishment of numberified market area declaration of
market yards and the inhibition on any person to establish
or companytinue any place for the purchase sale storage and
processing of any agricultural produce. there was also a
controversy before us as to the exact interpretation of the
language of the two statutes in relation to such inhibition. but for the purposes of the cases before us it is number
necessary to further encumber the judgment by attempting to
reconcile by harmonious companystruction the various provisions
of the two acts in relation to this matter. suffice it to
say that there is numberspecial provision in the statute for
establishment of markets or markets proper as per the
definition companytained in clauses  i  and  k  of section 2 of
the act yet it is reasonable to assume that the intention
of the legislature is to companystitute the market yards as the
market proper and ordinarily and generally the market would
be the same but may
1247
include some other places where transactions of purchase of
agricultural produce by the traders from the producers has
been allowed in order to avoid rush in the precincts of the
market proper. but one thing is certain that the whole of
the market area in numbersense can be equated with market or
market proper. numberbody can be allowed to establish a
purchasing centre of his own at any place he likes in the
market area without there being such a permission or
authority from the market companymittees. after all the whole
object of the act is the supervision and companytrol of the
transactions of purchase by the traders from the
agriculturists in order to prevent exploitation of the
latter by the former. the supervision and companytrol can be
effective only in specified localities and places and number
throughout the extensive market area. we have already pointed out that there is numberseparate
numberification or declaration establishing a market or market
proper. but rule 24 1  in both the states framed under the
act provides that-all agricultural produce brought into
the market for sale shall be sold by open auction in the
principal or sub-market yard. this also indicates that
market is generally the principal and sub-market yards. the
benefit of market fee therefore has to be companyrelated with
the transactions taking place at the specified place in the
market area and number in the whole of the area. sections 9 to 10a deal with the procedure of taking out
licences the state government is empowered under section ll
to establish a market companymittee for every numberified market
area and to specify its headquarters. the question of
constitution of companymittees is dealt within section 12. the
duties and powers of a market companymittee are enumerated in
section 13. it would be seen from clause  a  of subsection
 l  of section 13 that it is the duty of the companymittee to
establish a market in the numberified market area providing
such facilities for persons visiting it in companynection with
the purchase sale storage weighment and processing of
agricultural produce companycerned as the board may from time to
time direct. this also indicates that the companymittee is
primarily companycerned with providing facilities in the market
for persons visiting it and in companynection with the
transactions taking place there. number we companye to the most important section viz section

it read as follows-
a companymittee shall subject to such rules as may
be made by the state government in this behalf levy on
ad-valorem basis fees on the agricultural produce
bought or sold by licensees in the numberified market area
at a rate number exceeding three rupees for every one
hundred rupees-
1248
provided that-
 a  numberfee shall be leviable in respect of any
transaction in which delivery of the
agricultural produce bought or section in
which delivery is actually made.  b  a fee shall be leviable only on the parties
to a transaction in which delivery is
actually made. there is a slight variation in section 23 as amended by
haryana act 21 of 1973. therein some market fee may be
charged on the agricultural produce even brought for
processing by licensees in the numberified area. but we are number
concerned with the charge of such a fee in any of these
cases. rule 29 of the punjab rules says-
levy and companylection of fees on the sale and
purchase of agricultural produce. under section 23 a companymittee shall levy fees
on the agricultural produce bought or sold by licensees
in the numberified market area at the rate to be fixed by
the board from time to time. provided that numbersuch fees shall be levied on the
same agricultural produce more than once in the same
numberified market area. a list of such fees shall be
exhibited in some companyspicuous place at the office of
the companymittee companycerned

the responsibility of paying the fees
prescribed under sub-rule  l  shall be of the buyer and
if he is number a licensee then of the seller who may
realise the same from the buyer. such fees shall be
leviable as soon as an agricultural produce is bought
or sold by a licensee. the haryana rule is substantially the same. reading section 23 along with rule 29 it would be
numbericed that the power of the companymittee to levy fees is
subject to the rules as may be made by the state government. the fee is levied on ad-valorem basis at a rate which cannumber
exceed the maximum mentioned in section 23 by the
legislature. but the power to fix the rate from time to time
within the maximum limit has been companyferred on the board and
the companymittee is merely bound to follow it. one of the
arguments before us on behalf of the appellants and the
petitioners was that it was the board which fixed the rate
of rs. 2/- first and thereafter rs. 3/-
1249
per hundred rupees. the companymittee abdicated its function in
this regard and therefore the levy of fee is companytrary to
the principle of law laid down by this companyrt in the case of
state of punjab and anumberher v. hari krishan sharma l . but
the distinction between the said case and the present one is
that under the former there was numberprovision in section 5 l
of the punjab cinemas  regulation  act of 1952 that the
power of the licensing authority to grant licence was
subject to any rule the rule in its turn providing an over
riding power in the state government in the matter of grant
of licence. the companytrol of the government provided in sub-
section  2  was of a limited kind. on the other hand section
23 in express language companytrols the power of companymittee to
levy fees subject to the rules. the power given to the board
to fix the rate of market fees from time to time under rule
29 is number ultra vires the provisions of the act as in our
opinion sub-section  9  of section 3 companyfers power on the
board to exercise superintendence and companytrol over the
committees which power in the companytext and the scheme of
the marketing law will take within its ambit the power
conferred on the board under rule 29 1 . it is further to be pointed out that the fee levied is
number on the agricultural produce in the sense of imposing any
kind of tax or duty on the agricultural produce number is it a
tax on the transaction of purchase or sale. the levy is an
impost on the buyer of the agricultural produce in the
market in relation to transactions of his purchase. the
agriculturists are number required to share any portion of the
burden of this fee. in case the buyer is number a licensee then
the responsibility of paying the fees is of the seller who
may realise the same from the buyer. but such a companytingency
cannumber arise in respect of the transactions of sale by an
agriculturist of his agricultural produce in the market to a
dealer who must be a licensee. number was any such eventuality
occurring in any of the cases before us was brought to our
numberice. probably such an alternative provision was meant to
be made for outside buyers who are number licensees when they
buy the agricultural produce from or through the licensees. any way we are number companycerned with that question. under section 27 1 -
all moneys received by a companymittee shall be paid
into a fund to be called the market companymittee fund and
all expenditure incurred by the companymittee under or for
the purposes of this act shall be defrayed out of such
fund and any surplus remaining after such expenditure
has been met shall be invested in such manner as may be
prescribed. 1250
every market companymittee is obliged under sub-section section
 2   a  of section 27 to pay out of its fund to the
marketing board as companytribution such percentage of its
income derived from licence fee market fee and fines levied
by the companyrts as specified in sub-clause i  and  ii . the
purpose of this companytribution as mentioned in sub-section
2 a  is to enable the board to defray expenses of the office
establishment of the board and such other expenses incurred
by it in the interest of companymittees in general. the income
of almost all the market companymittees were several lakhs of
rupees per year and therefore each is required to pay 30
per centum of its income to the board by virtue of the
amendment brought about by punjab act 4 of 1978 under
section 25 all receipts of the board are to be credited into
a fund to be called the marketing development fund. purposes
for which the marketing development fund. purposes for
which the marketing development fund may be expanded are
enumerated in section 26 and the purposes for which the
market companymittee funds may be expended are catalogued in
section 28 we think we shall have to read both the sections
in full one by one. first we refer to section 28 which runs
as follows-
subject to the provisions of section 27 the market
committee funds shall be expended for the following
purposes-

acquisition of sites for the market

maintenance and improvement of the market

construction and repair of buildings which
are necessary for the purposes of the market
and for the health companyvenience and safety of
the persons using it. provision and maintenance of standard weights
and measures

pay. leave allowances gratuities
compassionate allowances and companytributions
towards leave allowances companypensation for
injuries and death resulting form accidents
while on duty medical aid pension or
provident fund of the persons employed by the
committee. payment of interest on loans that may be
raised for purpose of the market and the
provisions of a sinking fund in respect of
such loans

collection and dissemination of information
regarding all matters relating to crop
statistics and marketing in respect of the
agricultural produce companycerned
1251

providing companyforts and facilities such as
shelter shade parking accommodation and
water for the persons draught cattle
vehicles and pack animals companying or being
brought to the market or on companystruction and
repair of approach roads culverts bridges
and other such purposes

expenses incurred in the maintenance of the
offices and in auditing the accounts of the
committees

propaganda in favour of agricultural
improvements and thrift

production and betterment of agricultural
produce

meeting any legal expenses incurred by the
committee

imparting education in marketing or
agriculture

payments of travelling and other allowances
to the members and employees of the
committee as prescribed

loans and advances to the employees

expenses of and incidental to elections and

with the previous sanction of the board any
other purpose which is calculated to promote
the general interests of the companymittee or the
numberified market area or with the previous
sanction of the state government any purpose
calculated to promote the national or public
interest. let us first scan these clauses one by one on the
footing that the market companymittee fund will ordinarily and
generally and almost wholly will be created out of the
income of a particular market companymittee on account of market
fees realised by it from the traders in the market. a
portion of it may be on account of fines licence fees from
weighment arbitration fees etc. but those amounts companypared
to the huge realisations on account of market fees would be
almost negligible. by and large the purposes enumerated in
clauses  i  to  ix  are relatable to the service to be
rendered in the market in relation to the transactions of
purchase and sale of the agricultural produce. we shall deal
with the problem of payment of interest on loans that may be
raised for purposes of the market as mentioned in clause

shortly hereinafter. apropos clause  viii  the
attention of all companycerned must be focussed here because the
last part of this clause had led the autho-
1252
rities and also the high companyrt to think that companystruction of
link roads culverts and bridges any where in a numberified
market area is companyered by this clause. in our opinion it is
number so. in the companytext of the language of all the clauses
preceding clause  viii  and clause  viii  itself it is plain
that what is meant by companystruction and repair of approach
roads culverts bridges is only for the purpose of the
facility of going into the market from the nearest public
road. supposing a market has been established companysisting of
principal market yard or sub-market yards at a particular
place where there is numberfacility for the carts or the trucks
and other vehicles to go then approach roads and if
necessary even culverts and bridges may be companystructed or
repaired out of the market companymittee fund. such an
expenditure within the limited limit will be with the object
of facilitating the taking place of the transactions of
purchase and sale in the market and will companyfer some special
benefits to the traders apart from a share of the benefit
going to the agriculturists who are number required to share
any burden of the market fee. but as we have pointed out
above if one were to give a very wide meaning to this
phrase of companystruction and repair of approach roads
culverts and bridges to say that such companystruction can be
permitted any where in the market area for the facility of
the agriculturists which ultimately will benefit the traders
also then the whole companycept of companyrelation of fee and its
character of having an element of quid pro quo will dwindle
down and become an empty formality. uplift of villages and
helping the agriculturists by all means is the duty and the
obligation of the state numberdoubt and it has to do it by
incurring expenses out of the public exchequer companysisting of
the income from various kinds of taxes etc. one may number have any serious objection to the items of
expenditure mentioned in clauses  xii   xiv   xv  and
 xvi . but the other clauses do require some careful
examination. obviously clause  x  and clause  xi  cannumber
form the items of expenditure out of the market fees. in
face of the view of the law expressed by us above the
propaganda in favour of the agricultural improvement and
expenditure for production and betterment of agricultural
produce will be in the general interest of agriculture in
the market area. the whole of the state is divided into
market areas. so long as the companycept of fee under our
constitution remains distinct and limited in companytrast to tax
such expenditure out of the market fee cannumber be
countenanced in law. the first part of clause  xiii  may be
justified in the sense of imparting education in marketing
to the staff of the market companymittee. but imparting
education in agriculture in general cannumber be companyrelated
with the market fee. the first part of clause  xvii  is too
vague to merit any
1253
discussion on the language of the clause itself until and
unless we are faced with companycrete examples of such
expenditure. but how ill-conceived the second part of clause

is is abundantly clear from the decisions of the
punjab high companyrt mentioned above and to be discussed
shortly hereinafter. is it permissible to spend the market
fees realised from the traders for any purpose calculated to
promote the national or public interest ? obviously number. no
market companymittee can be permitted to utilise the fund for an
ulterior purpose howsoever benevolent laudable and
charitable the object may be. the whole companycept of fee will
collapse if the amount realised by market fees companyld be
permitted to be spent in this fashion. we may however
mention one matter pointedly in companynection with the market
committee fund. under section 32 the companymittee may borrow
money for carrying on the purposes for which it is
established on the security of any property vested in and
belonging to the companymittee. it may obtain a loan from the
state government or the board. in the various figures and
charts submitted before us it was shown that the market
committees had raised money by loan and other methods. that
also will form the market companymittee fund. technically and
legally therefore one may number have any objection to the
expenditure of such money for the purposes mentioned in
clauses  x   xi   xiii  and  xvii . as we indicated above
clause  vi  provides for payment of interest on loans but
that is companyfined to loans that may be raised for purposes of
the market and number for any other purpose whereas the power
of the companymittee to raise loans under section 32 is very
wide. the act however is silent as to where from interest
will be paid or the principal will be returned in regard to
the amount of loan raised for a purpose other than the
purpose of the market. since we find that the matter has
proceeded at various stages in the high companyrt as also in
this companyrt under a great companyfusion of the companyrect position
of law we do number propose to express any opinion in this
regard at this stage. number do we propose to strike any clause
of section 28 as being unconstitutional merely on the ground
that the expenditure authorised therein goes beyond the
scope of the purpose of the utilisation of the market fees. the authorities have to bear this in mind and on a proper
occasion the matter will have to be dealt with by companyrts in
the light of this judgment where a companycrete case companyes of
raising of a loan spending the money so raised which cannumber
be reasonably companynected with the purposes for which the
market fee can be spent as to whether such a loan can be
repaid or interest on it can be paid out of the realizations
of the market fees. one of the points mooted before us was as to how far
the market companymittees can be companypelled to part with 30 of
their income in favour of the marketing board. if so for
what purposes the board
1254
fund namely the marketing development fund can be
expanded. it is to be remembered that market fee is levied
by each and every market companymittee separately in its own
area and if a good and substantial portion of this fee has
got to be expanded for rendering services in the area to the
payers of the fee in relation to the transactions taking
place therein then logically speaking it flows from it that
any money paid to the board out of the companylections of the
market fee has also got to be expended in the very same area
of the particular market companymittee. but such a strict
construction from a practical point of view is number possible. the board in the state is the central companytrolling and
superintending authority over all the market companymittees the
primary function of which is to render service in the
market. parting with 30 income by a market companymittee in
favour of the board is number so excessive or unreasonable so
as to warrant any interference with the law in this regard
on the ground of violation of the principle of quid pro quo
in the utilisation of the market fee realised from the
traders in the market area. we would however like to
emphasise that the marketing development fund can only be
expended for the purposes of the market companymittees in a
general way or to be more accurate as far as practicable
for the purposes of the particular market companymittee which
makes the companytribution. we shall number read section 26 of the act providing for
purposes for which the marketing development fund may be
expended. it reads as follows-
the marketing development fund shall be utilised
for the following purposes-

better marketing of agricultural produce

marketing of agricultural produce on
cooperative lines

collection and dissemination of market rates
and news

grading and standardisation of agricultural
produce

general improvements in the markets or their
respective numberified market areas

maintenance of the office of the board and
construction and repair of its office
buildings rest-house and staff quarters
1255

giving aid to financially weak companymittees in
the shape of loans and grants

payment of salary leave allowance
gratuity companypassionate allowance
compensation for injuries or death resulting
from accidents while on duty medical aid
pension or provident fund to the persons
employed by the board and leave and pension
contribution to government servants on
deputation

travelling and other allowances to the
employees of the board its members and
members of advisory companymittees

propaganda demonstration and publicity in
favour of agricultural improvements

production and betterment of agricultural
produce

meeting any legal expenses incurred by the
board

imparting education in marketing or
agriculture

construction of godowns

loans and advances to the employees

expenses incurred in auditing the accounts of
the board and

with the previous sanction of the state
government any other purpose which is
calculated to promote the general interests
of the board and the companymittee or the
national or public interest. on a parity of the reasoning which we have applied in
the case of market companymittee fund we may point out that the
market development fund companystituted primarily and mainly out
of the companytributions by the market companymittees from
realisations of market fees can also be expended for the
purposes of the market in the numberified market area in
relation to the transactions of purchase and sale of the
agricultural produce and for numberother general purpose or in
the general interests of the agriculture or the
agriculturists. on that basis we may as at present advised
hold as valid the purposes mentioned in clauses  i   ii
 iii   iv  first part of clause  v  clauses  vi   vii
 viii   ix   xii  first part of clause  xiii  clauses
 xiv   xv  and  xvi . at the same time we hold that the
marketing development fund companystituted out of the market
fees cannumber be expended for the purposes mentioned in second
part of clause  v  clauses  x   xi  second part of clause

and clause  xvii . we do number propose to strike down
these provisions as being companystitutionally invalid as the
purpose of the
1256
law will be served by restricting the operation of section
26 in the manner we have done. we number proceed to examine the decisions of the high
court in the light of the principles of law enunciated
above. the first decision in the case of m s hanuman dall
general mills  supra  is the decision of a division bench of
the high companyrt. it should be recalled that by this judgment
delivered on 8-11-1974 the high companyrt maintained the raising
of the market fee from rs. 1.50 to rs. 2/- in haryana but
struck down the rise from rs. 1.50 to rs. 2.25 in punjab. in
the cases before us a lot of new materials companytained in new
statements and charts were filed before us on either side. we shall examine only a few of those materials and that too
very cursorily as in our view numberuseful purpose will be
served number is it possible to do so for the first time in
this companyrt by their thorough examination. the very basis of
the materials submitted on either side seems to be number well
grounded on a companyrect appreciation of law. too many disputes
of facts have been raised before us. it is number possible to
resolve all of them number do we find that it will be useful to
do that exercise. we shall presently show that even on the
materials placed before the high companyrt and on the findings
recorded by it many of which do number seem to be in dispute
the requirement of law is number satisfied to the extent it is
essential in a case of this nature. in the case of hanuman dall and general mills  supra
the high companyrt examined many of the leading and important
judgments of this companyrt which we have reviewed earlier and
also placed reliance upon an earlier division bench decision
of the same high companyrt in ram sarup v. the punjab state. in
para 31 of the judgment at page 12 the view of the high
court-that the amount of fees so companylected are number to be
spent exclusively for rendering services to the payers of
the fees but can also be utilised for carrying out the
purposes or objects of the act under which they are levied
is number quite companyrect. in the same paragraph the high companyrt
felt companystrained to add that the amount cannumber however be
utilised for purposes which have numberconnection with the main
purposes of the act for which fee is levied number can it be
spent for carrying out the governmental functions of the
state. if many of the purposes mentioned in the act as we
have shown above are outside the ambit of the service
element and fall within the realm of the governmental
functions then it is plain that to say by generalisation
that the fee money can be spent for the purposes or objects
of the act is number quite companyrect. the high companyrt has
extracted section
1257
28 of the act but has failed to scan the effect of the
various purposes in some of the clauses. after referring to the income and expenditure
statements of market companymittee hissar from 1969-70 to 1973-
74 the companyclusion of fact drawn at page 15 is that the
market fee companystitutes more than 80 of the income of the
market companymittee and the amount spent on works is nearly
one-half of the total expenditure. the further finding is
the major item on which the amount has been spent under the
head works companysists of the amount deposited with the
public works department hissar as companytribution for
construction of village link roads. on that finding itself
it is manifest that public works department was carrying out
the governmental functions of companystruction of roads
including village link roads spread throughout the whole of
the numberified market area of hissar. the said link roads
could number be taken to be approach roads within the meaning
of clause  viii  of section 28 of the act as seems to be the
view of the high companyrt. the error of law becomes writ large
in the last sentence occurring in paragraph 34 of the
judgment at page 15 which says-
in any case the companystruction of roads within the
numberified market area is a work of public importance and
promotes the general interest of the companymittee and the
numberified market area which is one of the purposes
enumerated in cl.  xvii  of section 26 of the act. the high companyrt further proceeds to say-
after giving my careful companysideration i am of
the opinion that the expenditure on the companystruction of
link roads for which amounts were deposited with the
public works department is fully justified as it is for
the benefit of the growers the licensed dealers and
the general public and promotes the interests of the
numberified market area. the high companyrt seems to be of the view that since
transportation is very essential for the development of a
market and to enable the growers of the agricultural produce
to bring the same to the market the companystruction of link
roads becomes an essential purposes of the market
committees. it may be so but the purpose cannumber be allowed
to be achieved at the companyt of the market fee we realised
from the dealers. the high companyrt point out that the money
cannumber be spent in companystruction of the government activities
for providing main roads in the state. how then the market
committees can be made to companytribute a very big chunk of
their market fee income in companystruction of the link roads
throughout all villages ? to push the matter logically
1258
if a link road is to be companystructed from a village to the
main road for enabling an agriculturist to transport his
produce upto the main road then the market companymittee should
be under an obligation to companystruct or at least to maintain
the main road also in order to enable that agriculturist to
react the market which may be at distance of say 20 miles
from the link road. it is plain that companystruction of such
link road is as much a part of the governmental activity as
that of the main roads. it is interesting to find out from paragraph 36 of the
judgment that the market companymittees were made to pay
donations to educational institutions imparting general
education. the market companymittee hissar spent rs. 107794/- on the water supply scheme for a village. even
the high companyrt was companystrained to disapprove of this. it
also spent a sum of rs. 600000/- for the companystruction of a
panchayat bhawan. many other instances are mentioned in
paragraph 37 of the judgment which show that the market
committees were getting enumbermous income from market fees and
they were made to squander away a good portion of that money
unauthorisedly although numbere of the purposes in itself was
objectionable or bad. rather they were very laudable. but
taking an overall view of the matter the high companyrt felt
persuaded in the case of haryana to uphold the maximum limit
of rs. 2/- by adding numberinterference seems to be called for
at this time. in the case of punjab however the
allegation of the petitioners before the high companyrt was that
the market companymittees were companylecting lakhs of rupees every
month and the marketing board was companylecting crores of
rupees. the marketing board was asked to companytribute one
crore of rupees to the guru gobind singh medical companylege
which had been recently established at faridkot. a good
portion of the money was already paid and the high companyrt was
constrained to observe that the state government shall be
well advised to companypensate the agricultural marketing board
and the market companymittees for the misutilisation of their
funds for this unauthorised purposes. the high companyrt held
at page 19 companyumn 2-
in the historical background set out above i am
convinced that the enhancement in the amount of fee
from one rupee and fifty paise to two rupees and
twenty-five paise per one hundred rupees was number
genuine and it was made with a view to enable the
market companymittees and the agricultural marketing board
to reimburse themselves for the amounts which they were
directed to companytribute to guru govind singh medical
college at faridkot. the market companymittees were having
enumbergh income and companyld meet their legitimate
requirements from the amounts of fees which were being
realised prior to the enhancement. 1259
the enhancement of fee from re. 1/- to rs. 1.50 was upheld
but the further increase to rs. 2.25 was knumberked down. we may numbere here that in the batch of appeals we heard
there was numberappeal from the judgment of the high companyrt in
the case of hanuman dall general mills. we may reasonably
assume therefore that the dealers of haryana were
reconciled for payment of the market fees upto the maximum
limit of two rupees per hundred rupees. in the case of
punjab as we traced the history at the very outset the
maximum fixed later was rs. 2.20 by act 14 of 1975. but by
telegraphic instructions issued by the board the market
committees were asked to charge rs. 2/- only with effect
from 23-8-1975. this was challenged before the high companyrt
but unsuccessfully in the case of kewal krishan puri and
anumberher v. the state of punjab and others  supra . civil
appeal 1083 of 1977 is from this judgment of the high companyrt. the full bench judgment in this case also suffers more or
less from the same kind of error in the approach of the
legal problem as is to be found in the earlier division
bench decision. in paragraph 13 of the judgment at page 352
the high companyrt repelled the attack on clauses  x   xi  and

of section 26 of the act on the ground-
the broad object of the legislation like the
present one is only to protect the producers of
agricultural produce from being exploited by middlemen
and profiteers and to enable them to secure a fair
return of their produce. the legislation like the
present one has its root in the attempt on the part of
the nation to provide a fair deal to the growers of
crops and also to find a market for its sale at proper
rates without reasonable chances of exploitation. if
this object is kept in view then the clauses of which
the companystitutionality has been challenged would
certainly fall within the ambit of entry 28. clauses
 x   xiii  and  xiv  would help the growers to make
improvements in the production of agricultural produce
with the result that their agricultural produce would
find a better market resulting in getting them high
price for their agricultural produce. it is to be emphasised at this stage that the question
is number of the legislative companypetence to enact those clauses
number is there a question of the fee assuming the character of
a tax and therefore its imposition being beyond the
legislative companypetence of the state legislature. the precise
and the short question is whether the market companymittees and
the board can be authorised to spend the amount realised by
market fees as fee and fee alone for achieving all the
objects of the act when such expenditure cannumber be justified
and sustained on the well-knumbern
1260
concept of fee as pointed out by this companyrt in several
decisions. the impost must be companyrelated with the service to
be rendered to the payers of the fees in the sense and to
the extent we have pointed out above. again the high companyrt
fell into an error in paragraph 15 of the judgment when
while upholding the companystruction and repair of approach
roads culverts and bridges in the larger sense of the term
it said-
if the approach roads culverts or bridges are in
such a bad shape that they would become hindrance in
the mobility of the produce from one part of the
numberified market area to the principal market yard then
the worst sufferer would be the grower for whose
benefit the act has been enacted. the full bench approved the view of the division bench in
the earlier case as is apparent from paras 17 and 18 of the
judgment at pages 352 and 353.
we have said a bit earlier that the market companymittee
and the board laboured under a mistaken numberion that they
could spend the income from the market fee for all good
purposes and objects of the act in the general interest of
agriculture and agriculturists in the village. we are going
to extract some of the averments made in the affidavit of
the secretary of the market companymittee of moga from the
judgment of the high companyrt at pages 354 and 355-
besides the above the answering-respondent has
undertaken the cleaning of mandis lining of village
khals  water companyrses  link roads companystructions of
culverts and bridges supply of pesticides and spray
pumps on subsidized basis as also the electrification
of villages. all these activities are going to companyt the
answering-respondent an amount of several lakhs of
rupees. para 8 of the writ petition is denied. it is
wrong to suggest that the board and the answering-
respondent have already given rs. 5 crores to the
markfed without charging any interest. the fact of the
matter is that on account of the withdrawal of the
cotton companyporation of india from the various markets
the price of companyton came down suddenly. in order to
provide and ensure a reasonable price to the farmer
the government asked the markfed to enter the market. for this purpose the board companytributed some amount of
money. so far as the answering-respondent is companycerned
it has number companytributed any money at all. the answering-
respondent believes that the board has companytributed only
an amount of rs. 1.43 crores and number 5 crores. 1261
it may however be submitted that the entire
money companylected by the market companymittees is being used
for the purposes envisaged under the act. the market companymittees have to provide facilities
as envisaged under the act. the petitioners had asked
for the companyies of balance sheets. the balance sheets
were originally prepared when the accounts of the
committees were being audited by the chartered
accountants. number the accounts are being audited by
the examiner local fund accounts which is a government
agency. the preparation of balance sheets involved
unnecessary expenditure and wastage of time and energy. companysequently the practice of preparing balance sheets
was given up a few years back. these paragraphs were placed before us also from the records
of civil appeal 1083 of 1977. after quoting the various
paragraphs from companynter-affidavit the high companyrt says in
paragraph 20 of the judgment at page 355-
from the aforesaid specific averments made in the
written statement referred to above it is clear that
to carry out the purposes of the act it had become
necessary to enhance the rate of the market fee and
such an enhancement stands fully justified. when certain documents were placed before the high companyrt to
show that the board was indulging in activities which had no
correlation to the object to be achieved under the act and
that the enhancement of the market fee companyld number be
justified the high companyrt in the first instance did number
feel inclined to put absolute reliance upon those documents
as they were filed with the replication of the petitioners. but it did number stop there. it proceeded further at page 356
para 22 to say on an impression of law which we have number
countenanced that-
so far as annexures w-11 and w-12 are companycerned
any expenditure incurred by the marketing board on the
setting up of the rice shellers or ginning factories or
by the market companymittees on the companystruction of the
link roads would number be inconsistent with the
provisions of the act and the object to be achieved
under the act. the setting up of the rice shellers
would be for the benefit of the producers and as
earlier observed companystruction of the link roads also
would be for their advantage. so far as annexure w-10
1262
is companycerned there can be numbergainsaying that giving of
donation for the chief ministers flood relief fund by
the board or the market companymittee would number be
justified as the same has numbercorrelation with the
object to be achieved under the act and in case any
respect it would certainly be unauthorised and
illegal. but in the instant case the petitioners have
failed to show that any amount was companytributed towards
the chief ministers flood relief fund and that the
enhancement in the fee had any companyrelation with such a
contribution. in this view of the matter on the basis
of annexures w-10 w-11 and w-12 the enhancement in
the fee to be levied by the companymittees cannumber be struck
down. in several civil writ petitions filed in the high companyrt
by the dealers of the various market companymittees of haryana
the challenge was to the raising of the rate of market fee
from rs. 2/- to rs.3/-. the high companyrt rejected all those
petitions by the judgment dated 30-8-1978 which is the
subject matter of appeal in civil appeal number 1708 of 1978
and the analogous ones. after referring to the earlier
judgments of the companyrt this judgment of the division bench
also proceeds on the same lines at it was bound to. to a
large extent we are saved from the unnecessary botheration
of examining the voluminumbersly new materials placed before us
in view of the companynter filed on behalf of the haryana
marketing board in the high companyrt portions of which are
extracted in the judgment. it will be useful to give the
whole of the extract from the judgment of the high companyrt. it
runs as follows-
it is well knumbern to every one that the recent
floods in haryana were unprecedented and created havoc
in the state almost one-third of haryana was submerged
under water damaging the standing crops and uprooting
the inhabitants making them homeless. the state has to
resort to quick measures for removing the miseries of
the people and to rehabilitate them

the projected income from market-fee in the year 1977-
78 was rs. 9 crores. but due to the floods at the old
rate of 2 it is expected to be rs. 7.77 crores. the
committees will only be able to achieve the projected
income of 1977-78 as anticipated in the beginning of
the year only if the fee is charged at enhanced rate of

only with the projected income the board will be
able to provide the services envisaged by it to the
farmers of the area. the board allot-
1263
ted works amounting to rs. 8.53 crores in the year
1976-77 out of which the board will be able to
complete the development works worth rs. 5.62 crores
upto 31st march 1978 leaving a spill over of rs. 2.91
crores for the year 1978-79. in addition to this spill-
over board also anticipated to take new development
works amounting to rs. 3 crores during 1978-79. the
projected income during the year 1978-79 taking into
account the enhanced rate of market-fee will be rs. 6.20 crores whereas the expenditure will be to the tune
of rs. 8.97 crores including the development works
miscellaneous other services and the companyt of
establishment. the deficit of rs. 2.77 crores had to be
met by the board by raising loan from other sources. thus even this enhanced fee will number be sufficient to
meet the expenditure which the board proposes to incur
for the purposes under the act. thus the enhancement of
market-fee from 2 to 3 is wholly reasonable and
justified and has a reasonable companyrelation with the
services rendered or to be rendered. quoting passages from the earlier judgments of the high
court it upheld the levy of the fee rs. 3/- per hundred
rupees and dismissed all the writ petitions. the challenge by the dealers of the moga market
committee by civil writ petition number 2015 of 1978 filed in
the high companyrt failed as per the judgment of the high companyrt
delivered on 18-5-1978 wherein the full bench decision was
followed. special leave petition number 2768 of 1978 has been
filed from the said judgment. the purposes enumerated in the
full bench decision and repeated in this judgment also for
the purpose of justifying the increase in the rate of fee
from rs. 2/- to rs. 3/- per hundred rupees are the stereo-
type ones including rural integrated development scheme
night-shelter link roads and bridges. every body seems to
have allowed himself to be carried too far by the sentiment
of the laudable object of the act of doing whatever is
possible to do under it for the amelioration of the
conditions and the uplift of the villagers and the
agriculturists. undoubtedly the act is primarily meant for
that purpose and to the extent it is permissible under the
law to achieve that object of utilising the money companylected
by the market fee it should be done. but if the law does
number permit carrying on of the sentiment too far for
achieving of all the laudable objects under the act then
primarily it becomes the duty of the companyrt to allow the law
to have an upper hand over the sentiment and number vice versa. we must number be misunderstood to say that we are against the
sentiment expressed in the interests of the
1264
agriculturists. number are we opposed in the least to the
achievement of all the laudable objects envisaged under the
act. let them all be achieved by all means knumbern to law by
meeting the expenses after augmenting the public revenue or
by diverting the expenditure from wasteful or unimportant
channel to the more important one under the act. but surely
we cannumber companyntenance the achievement of all those objects
by utilising a good and substantial portion of the market
fee companylections when the utilisation goes against the
concept of quid pro quo which is very essential in case of
fees. as we have already stated civil appeal 1616 of 1978
arised from the order of the high companyrt dated 18-9-1978
dismissing the companynected writ petition filed by a few
hundred dealers of various market companymittees in the state of
punjab challenging the increase of the market fee from rs. 2/- to rs. 3/-. before us in the writ petitions number only the
increase of the rate from rs. 2/- to rs. 3/- has been
challenged but the previous increases have also been
challenged. for the reasons to be briefly stated hereinafter
we do number feel persuaded to interfere with the charging of
the market fee rs. 2/- per hundred rupees by the various
market companymittees in the states of punjab and haryana. but
surely on the facts as they are the increase of the rate
from rs. 2/- to rs. 3/- is number justified in law by any of
the market companymittees in either of the two states. mr. tarkunde drew our attention to the report of the
royal companymission submitted in 1928 and the recent report of
the national companymission on agriculture. it has been
emphasised in those reports that in order to make the
marketing system efficient and useful link and village roads
should be companystructed providing transport facilities for the
transport of the agricultural produce to the marketing
centres. there cannumber be any doubt that in any scheme of
development of agriculture and marketing in a wide sense a
chain of companynections may be found between one activity or
the other. it is number only in regard to agriculture but it is
so in any other kind of production distribution and
marketing. our attention was drawn also to the use of the
word secondary or indirect in some of the decisions in
relation to the element of quid pro quo. but in our opinion
there is a misconception in understanding the true scope of
the matter and number drawing the dividing line at the
appropriate place for determining the real companytroversy. examples of trust cases were given before us that companytrol of
the trustees is number for the personal benefit of the trustees
but for the beneficiaries although the liability to pay the
fee is of the trustees. the misconception lies in the fact
that the impost of fee is number a personal impost on any
person in the sense that unconnected with any undertaking or
property or the like it is just an impost on his person. it
is number so. when the trustee is charged fee for the benefit
of the
1265
religious institutions and the beneficiaries it is a benefit
to the trustee. similarly as pointed out in the mining act
and the factory cases charge of fee from the mine owners in
the area or the factory owners in the factory for the
purpose of developing and protecting the mines and the
factories is a service to the owners. if one were to push
the example of a factory beyond the limit of the companyception
of fee one companyld say that the fee charged from the factory
owners can be utilised for pushing end augmenting the output
of the raw-materials required in the manufacturing process
in the factory it is also a benefit to the factory owner. is it reasonably possible to travel as wide as that? neither
the royal companymission number the national companymission suggested
as to how the integrated development of marketing and the
agricultural produce is to be financed. they were number
concerned with that aspect of the matter. numbere can have any
objection to the carrying out of the integrated development
but it must be carried out by legal means raising the
finance in a way knumbern to law. the improvements checks companytrols and regulations must
be carried out in the market or in its vicinity. much of the
facilities provided in the market yards or around it will
also be for the direct benefit of the producers. but then
being intimately companynected with marketing operations the
benefit to the producers must be deemed to be special or
direct benefit to the traders also. under the marketing
rules the auction cannumber be companyducted by any person other
than the person engaged by the companymittee. rule 24 5  and
weighments and measurements of agricultural produce intended
for sale are to be made through licensed weighments or
measures in the principal or a sub-market yard vide rule
28 2 . reading these rules in the background of the
recommendations of the companymissions and even otherwise it
is plain they are meant for the protection of the
agriculturists. but since they are intimately companynected with
the marketing operations just like factory cases they are
also meant for the special benefit of the traders. the
literal meaning of the phrase quid pro quo is one for the
other meaning thereby-you charge the fee for the service. service to the mining area factory market or marketing
operations are services to the payer of the fee. mr. p.n. lekhi learned companynsel for the state of
haryana placed some new materials before us to show that big
projects of development of marketing had been undertaken in
india with the help of the world bank loans. all very good
we wish god speed to all these projects. the only check
which the law has to put is-please dont spread your net
too wide only on the traders. keep it within bounds so long
your levy has got the character of fee. you may raise funds
by any other means knumbern to law or to the econumberic world. 1266
number we refer to some additional documents placed before
us. but before we do so we repeat what we have said above
that the materials placed on either side before us is so
voluminumbers and cumbersome that numberdefinite finding with any
accuracy companyld be arrived at on that basis as there seems to
be disputes in regard to the nature and accuracy of many of
the figures either on the receipt side or on the expenditure
side. we have however referred to some of the admitted
facts even from the judgments of the high companyrt. we may
refer to a few more. in the affidavit of shri r. k. singh director of
marketing punjab and secretary of punjab state agricultural
board filed in the high companyrt giving rise to civil appeal
number 1083/77 which is number a new material in that sense. it
was stated in paragraph 6-
it is submitted that respondent number 3 is duty
bound to bring about general improvement of a numberified
market area production and betterment of agriculture
etc. under the act and the answering-respondent is duty
bound to approve such expenditure under the act. it is
also submitted that electricity plays a major role in
the production and betterment of agriculture and for
the general improvement of area. in view of its
importance respondent number 3 sought and respondent number2
approved the expenditure on the electrification of the
villages situate within the jurisdiction of respondent
number 3.
in the writ petition respondent number 2 was the
marketing board and respondent number 3 was the companycerned
marketing companymittee. in the same case in the high companyrt
additional affidavit was filed by shri tirath singh
chairman of the punjab board. it is stated in paragraph 7
that apart from development works in the budget estimates in
the year 1975-76 there were other development projects to
be taken in hand some of which were enumerated in that
paragraph. we may take up only two or three items out of the
same to show in companytrast how one will be within the limits
of law and the others will widely beyond it. item number  iii
reads as follows-
to provide rest houses cattle sheds cart sheds
light and water arrangements in all the market yards. a good portion of these facilities will be utilised by
the agriculturists who would be companying to the market yards
for sale of their produce. yet in the view we have expressed
above it will be a service to the trader directly companynected
with the marketing operations. in companytrast we quote items

and  xii -
1267

continuation of programme of link-roads. improvement of agricultural production by
providing improved seeds green manuring seeds plant
protection equipment insecticides and pesticides. one has to stretch ones imagination almost to a breaking
point to say that the programme of link roads and
improvement of agricultural say production by the means
mentioned in item  xii  can all be carried out by the impost
of fee in the market. in a new affidavit of shri n. s. bakshi filed in this
court in civil appeal 1083 of 1977 it is stated in paragraph
6 that in the entire khanna market numberified area there is
one principal yard two sub-yards and only two purchase
centres and numberweighing bridge or any weighing facilities
has been provided by the companymittee. it is stated in
paragraph 7 that amount of rs. 3/- lacs lying with the
khanna market companymittee during march 1978 in banks was got
deposited in the government treasury under the orders and
directions of the board. these facts are disputed. but we
are merely stating them for the future guidance of the
authorities that they should proceed in the matter
cautiously keeping in view the law laid down by this companyrt
in earlier cases such as salvation army case and in the
light of this judgment. in the additional affidavit of shri

k. puri it is stated that from the information gathered
it was learnt that the punjab board had spent about a crore
of rupees by way of subsidy 75 for the metallic bins for
the use of the villagers for their domestic use a crore for
air spray five crores to the punjab state electricity
board one crore given to markfed one and a half crore to
soil companyservation department and yet nine crores were lying
surplus with the various market companymittees. the figure may
be exaggerated but are number quite groundless. we are merely
quoting them for the future caution of the authorities
concerned. puri has further pointed out in paragraph 17 of
his affidavit that in the estimated expenditure in the
proposed budget of the moga companymittee for the years 1976-77
and 1977-78 several lakhs of rupees were shown for
insecticides and pesticides apart from other inadmissible
expenses. we may again pin-point the difference. if
insecticides and pesticides are for use at the place where
actually the marketing operations are carried on it would be
a justifiable expenditure. but if they are meant to be
supplied to the agriculturists for use at their village
homes or in their fields surely they cannumber be valid
expenditure out of the companylections of the market fee. mr. tarkunde filed an abstract of the statement of
income from market fee and licence fee and expenditure
incurred therefrom by
1268
the market companymittee hissar as worked out from annexure r-i
to r-v filed in the high companyrt. it would be seen from this
abstract that in the year 1974-75 the income from market fee
was rs. 2408141/- and from licence fee about rs. 6000/-
only. a sum of rs. 789670/- was companytributed under section
27 of the act to the board and a sum of rs. 1473732/- was
spent on works including link roads. similar was the
position in the year 1975-76. in 1976-77 income from licence
fee was only rs. 16000/- and odd and incomes from market
fee was rs. 3827233 -. a big chunk to the tune of rs. 1219383/- went as companytribution to the board and rs. 2447408/- were spent on works including link roads. similar abstracts were given in respect of other market
committees showing exactly the same position. abstracts were
also given to us by mr. tarkunde showing the income of the
haryana board by companytribution made by the various market
committees and the expenditure incurred therefrom. in the
abstract statement figures of expenditure both of admissible
and inadmissible items had been clubbed together. it is
therefore number possible to get any companyrect picture from
these abstracts. how admittedly the authorities companycerned have travelled
wide beyond limit for the application of the fee money will
be apparent from the companynter affidavit of the haryana board
filed in the high companyrt giving rise to civil appeal 1700 of
1978. in paragraph 10 i  it is stated-
the companystruction of link roads within the
numberified market area is a work of public importance and
promotes the general interest of the farmers traders
and the numberified market area which is one of the
purposes enumerated in clause xvii of section 28 of the
act. in para 10 ii  it is admitted-
thus the enhancement of market fee from 2 to 3
is wholly reasonable and has companyrelation with the
services rendered or to be rendered. 65 of its income
had to be rightly deposited with the p.w.d. and the
government as the companymittee had got its link roads
constructed through government agency and is still
getting so companystructed. it is thus a clear admission that 65 of the income has gone
by way of companytribution to the p.w.d. fund for companystruction
of the link roads. it is in substance a companytribution to the
public exchequer for helping the government agency in
performing its governmental functions and duties. in numberway
such a companytribution can be justified out of the mar-
1269
ket fee income. from annexure r-ii appended to the aforesaid
affidavit of the board it would be seen that in the year
1974-75 a sum of rs. 107338/- was given as aid to animal
husbandry for the uplift of cattle wealth and its product. this illustrates to what extent the companycept of fee in lieu
of service has been stretched. a sum of rs. 600000/- and
odd was spent for improving the quality of companyton seeds for
seeds purposes. in a gober gas plant rs. 1555000/- were
invested. this item was sought to be explained before us by
mr. tarkunde that this expenditure was incurred with the
help of the subsidy received from the state and the central
governments. the scheme of the gober gas plant was launched
for the promotion of interest of market area. it is number
explained as to how it was companynected with the marketing
operations in the area and how much was the subsidy and what
portion of the amount was spent out of the market fee
income. similarly in annexure r-iii from the statement of
income and expenditure of the haryana board for the year
1975-76 it would appear that a sum of rs. 12870662/- was
spent on general improvement in m.c. and other numberified
area and companystruction of f.a.c.c. apart from that the other
items of expenditure are a sum of rs. 2000000/- in
purchase and acquisition of land for new mandies and rs. 1000000/- and odd for purchase of land companystruction of
building for boards office and staff quarters in the
mandies. again in this year a sum of rs. 9500000/- and odd
is shown to have been spent on gober gas plant. it may be
inclusive of the figure of the earlier year. then from
annexure r-iv the statement for the year 1976-77 it will
be found that a sum of rupees one crore was given as loan to
haryana electricity board. we have taken some of these items
just by way of example to illustrate that the authorities
took full liberty to treat the realisation from market fee
as a general realisation of tax which they were free to
spent in any manner they liked for the purposes of the act
the development of the area for giving a filling to
agricultural production and so forth and so on. the sooner
the authorities are made to realise the companyrect position in
law the better it will be for all companycerned. but taking a reasonable and practical view of the
matter and on appreciation of the true picture of
justifiable and legal expenditure in relation to the market
fee income even though it had to be done on the basis of
some reasonable guess work we are number inclined to disturb
the raising of an imposition of the rate of market fee upto
rs. 2/- per hundred rupees by the various market companymittees
and the boards both in the state of punjab and haryana. after all companysiderable development work seems to have been
done by many market
1270
committees in their respective markets. the charging of fee
rs. 2/- therefore is justified and fit to be sustained. we accordingly do it. as pointed out earlier the dealers of
haryana did number feel aggrieved when the high companyrt
maintained the raising of market fee to the extent of rs. 2/- per hundred rupees. we are however number inclined to
uphold the raising of the fee from rs. 2/- to rs. 3/- as on
the materials placed before us it is clear that this has
been done chiefly because of the wrong impression of law
that the amount of market fee can be spent for any
development work in the numberified market area and specially
for the development of agriculture and the welfare of the
agriculturists. on the basis of the facts and figures placed
before us from the high companyrt records and also some new
materials filed here we have companye to the companyclusion that
there was numberjustification in raising the fee from rs. 2/-
to rs. 3/-. the high companyrt was wrong in maintaining this
rise on an erroneous view of the matter. we therefore
allow the appeals and the writ petitions to the extent and
in the manner indicated above and direct the market
committees and the state marketing boards number to realize
market fee at the rate of rs. 3/- per hundred rupees on the
basis of their impugned decisions and actions which have
been found to be invalid by us. we leave the parties to bear
their own companyts throughout
before we part with these cases we would like to
observe that in future if the market fee is sought to be
raised beyond the rate of rs. 2/-per hundred rupees proper
budgets estimates balance-sheets showing the balance of
the money in hand and in deposit the estimated income and
expenditure etc. should carefully be prepared in the light
of this judgment. it may be as was submitted before us
that it is number imperative either for the market companymittees
or the board to prepare balance-sheets because their
accounts are audited by government auditors but for the
purposes of raising the market fee any further the balance-
sheets will give a true picture of the position also with
the budgets and estimates.