Sangam Milk Producer Company Ltd. vs The Agricultural Market Committee

REPORTABLE 2024 INSC 174

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.6493 OF 2014

SANGAM MILK PRODUCER COMPANY LTD. …APPELLANT(S) Versus

THE AGRICULTURAL MARKET COMMITTEE & ORS.

…RESPONDENT(S)

WITH

C.A. No. 6494/2014

C.A. No. 6495/2014

C.A. No. 6496/2014

C.A. No. 6497/2014

C.A. No. 6498/2014

JUDGMENT

Signature Not Verified Digitally signed by Ashwani Kumar Date: 2024.03.05 16:15:45 IST Reason: 2

SUDHANSHU DHULIA, J.

1. Two questions arise in these appeals for our determination.

The first question is whether “ghee” is a “product of livestock”

under the provisions of The Andhra Pradesh (Agricultural

Produce and Livestock) Markets Act, 1966 (hereinafter referred

to as “the Act”) and the second would be whether the

Government notification (G.O. Ms. No.286 dated 05.07.1994),

which inter alia notifies “ghee” as one of the products of

livestock for the purpose of regulation of purchase and sale of

“ghee” in all notified market areas was published after due

compliance of the procedure contemplated under the

provisions of the Act?

2. In the erstwhile State of Andhra Pradesh, the above Act was

brought with the purpose to consolidate and amend the laws

regulating the purchase and sale of agricultural produce,

livestock and products of livestock, along with establishment

of markets in connection therewith. The aim was to secure

effective and remunerative price of commodities by bringing

producers and traders face to face thereby eliminating

middlemen and do away with some other earlier unethical

trade practices, which were exploiting agriculturists and 3

farmers. In other words, it was a farmer friendly legislation.

The commodities which were to be regulated were not only

agricultural produce but also livestock as well as products of

livestock. Whereas livestock has been defined under Section

2(v) and products of livestock has been defined under Section

2(xv). Both the Sections are reproduced below:

(v) 'livestock' means cows, buffaloes, bullocks, bulls, goats and sheep, and includes poultry, fish and such other animals as may be declared by the Government by notification to be livestock for the purposes of this Act;

(xv) 'products of livestock' means such products of livestock as may be declared by the Government by notification, to be products of livestock for the purposes of this Act.

3. Under sub-Section (1) of Section 3 of the Act, the Government

has to initially publish a draft notification declaring its

intention of regulating purchase and sale of proposed notified

agricultural produce, livestock or products of livestock in an

area. It is only after hearing objections from public, it finally

publishes its notification under sub-Section (3) of Section 3

declaring the area to be a ‘notified area’ in respect of such

agricultural produce, livestock and products of livestock.

Under Sub-Section (4) of Section 3 the Government also has a 4

power to exclude from a notified area, any area earlier included

in it.

4. After a notification is made under Section 3, there comes the

process of notification under Section 4 of the Act. Under

Section 4 (1) of the Act, a process is given wherein the

Government further notifies a market committee for every

notified area. Under Sub Section (3) of Section 4, the market

committee is empowered to establish markets for the purchase

and sale of any notified agricultural produce, livestock or

products of livestock. After the establishment of markets by

the market committee under Section 4 (3), the Government

declares by a notification under Section 4 (4)1, the ‘notified

market area’ for the purposes of the Act in respect of the

notified products.

In short, the above provisions provide that first there will be

a larger physical unit called “notified area” wherein the market

committee shall establish markets and thereafter, through a

notification u/s 4 (4), the Govt. declares a “notified market

area” in respect of the notified products.

1 Section 4 (4) stands omitted vide the Andhra Pradesh (Agricultural Produce and Livestock)

Markets (Amendment) Act, 2015.

5

5. In the year 1968, the State of Andhra Pradesh had issued a

notification u/s 3 (3) of the Act declaring “notified areas” in the

State where “ghee” was included in Schedule II of the said

notification as a livestock product. Thereafter, in the year

1971, a notification u/s 4 (4) was published, which declared

the ‘notified market areas’ in respect of the respondent-

committee, i.e. Agricultural Market Committee, Guntur and

“ghee” was specified as a notified product. However, in 1972

the 1971 notification was amended and “ghee” was taken out

of the list of notified livestock products in respect of the

respondent-committee, and it remained so for a considerable

period of time. We must clarify here that both these

notifications i.e., notifications of 1971 & 1972 were issued u/s

4 (4) of the Act and not u/s 3 (3) of the Act.

6. Later, on 15.07.1994, the Govt of A.P. published a general

notification directing all the notified markets within the State

of AP to regulate all the products notified in Schedule II of the

1968 Notification, which also included Ghee.

7. It is this notification of the year 1994 which came to be

challenged by the producers of livestock products and which

has now before us for determination. This notification was

challenged before the Andhra Pradesh High Court on two 6

grounds. The first challenge was that “ghee” is not a “product

of livestock” and therefore cannot be regulated and notified.

The second ground for challenge was that there is a procedure

which is laid down under the law, mainly under Section 3 of

the Act which prescribes the process i.e., first a draft

notification has to be published, objections are invited against

the notification and only after hearing such objections can this

notification be made. It was contended that this process has

not been followed and therefore the notification is bad.

8. This matter ultimately went to a Full Bench of the Andhra

Pradesh High Court in Writ Petition No. 24818 of 2008 titled

Kommisetty Nammalwar & Co. Guntur v. Agricultural

Market Committee, Tenali & Ors. (2009) SCC OnLine AP

317 and by a 2:1 majority, the Andhra Pradesh High Court

rejected the argument of the appellants and upheld the

notification of the year 1994, holding that the notification

under challenge is not under Section 3 but under Section 4 of

the Act, and is valid and moreover “ghee” is a livestock

product. Based on the said judgment the Writ Petitions filed

by the appellants in Civil Appeal Nos. 6493 of 2014 (M/s 7

Guntur District Milk Production2), 6494 of 2014 (M/s.

Lakshmi Das Premji Ghee Merchants), 6496 of 2014 (M/s

Durga Dairy Ltd.), 6497 of 2014 (The Krishna District Milk

Producers Co-operative Union Ltd., Vijaywada) & 6498 of 2014

(M/s. Karnataka Co-operative Milk Producers Federation

Limited) were also dismissed by the Andhra Pradesh High

Court. The decision of the Full Bench in Kommisetty

Nammalwar (supra) upholding the validity of the 1994

notification is also under challenge before us in C.A No.6495

of 2014.

9. We have heard learned counsel for the parties at length and

have perused the material on record.

10. The argument that “ghee” is not a product of livestock is

baseless, and bereft of any logic. The contrary argument that

“ghee” is indeed a product of livestock is logically sound.

Livestock has been defined under Section 2(v) of the Act, where

Cows and buffalos are the livestock. Undisputedly, “ghee” is a

product of milk which is a product of the livestock. The

majority opinion of the Full Bench decision in Kommisetty

Nammalwar (supra) while referring to the judgments of this

2 Vide Order dated 02.01.2024 passed by this Court in IA No.241663 of 2023 in CA No.6493

of 2014 name of appellant is amended as Sangam Milk Producer Company Ltd. 8

Court in Park Leather Industry (P) Ltd. v. State of U.P.

(2001) 3 SCC 135; Kishan Lal v. State of Rajasthan, AIR

1990 SC 2269; Ram Chandra Kailash Kumar v. State of

U.P. 1980 Supp (1) SCC 27 and Smt. Sita Devi (Dead) by

LRs. v. State of Bihar & Ors. 1995 Supp (1) SSC 670 held

that all animal husbandry products would fall within the

meaning of ‘products of livestock’ as defined under Section 2

(xv) of the Act. Further, the majority decision has also held

that the inclusion of “ghee” as a livestock product cannot be

faulted merely because it is derived from another dairy

product. It was observed by the High Court that even though

“ghee” is not directly obtained from milk, which is a product of

livestock, it would still be a “product of a product of livestock”.

The relevant portion of the judgment of the High Court is as

under:

“Scientifically or common sense point of view, even though ghee is not directly obtained from milk (which is certainly a product of cow/buffalo), it is certainly a product of a product of livestock i.e., cow or buffalo. It would be rather illogical or irrational to say that ghee is not a milk/dairy product or to say that it is not a product of livestock. Ghee is certainly a product of livestock. It is, therefore, to be seen whether ghee comes within the definition of product of livestock or within the meaning of notified product of livestock. Section 2(x) and 2(xv) of 9

the Act used the plural ‘products of livestock’. The legislative intention is very clear that not only a product of livestock like milk (when notified by the Government), butter etc., are products of livestock but even derivative items (derived from a product of livestock) are intended to be product of livestock for the purpose of the Act. We are convinced that the term ‘ghee’ has to be interpreted on the basis of expression ‘products of livestock’ as defined in Section 2(xv) of the Act. Whatever products are declared as such by the Government by notification, they become products of livestock for purposes of the Act.”

Another case of which a reference must be made here is the

decision taken by this Court in Park Leather Industry (P)

LTD. v. State of U.P. and Others (2001) 3 SCC 135. In this

case, the Supreme Court was dealing with the provisions of

U.P. Krishi Utpadan Mandi Adhiniyam, 1964, which has a

provision dealing with similar issues as are there before this

Court. In the U.P. Act, “agricultural produce” was widely

defined and it included inter alia produce of animal husbandry

which were specified in the schedule. In the schedule, one of

the items was prescribed under the head “animal husbandry

products” was “hides and skins”. The question was whether

tanned leather would come within the term “hides and skins”

or not? This Court held that the term “tanned leather” can be 10

included under “hides and skins”, for the purposes of the Act

and more importantly for the purposes of payment of “market

fee”. The reason being that although while making a leather

into “tanned leather” a process of cleaning, curing and adding

preservatives may be adopted, yet the finished product which

is “tanned leather” though different in physical appearance or

even chemical combination and even commercially a different

item still remains “leather” and would come under the

definition of “hides and skins”. The same reasoning has been

adopted by the Full Bench of Andhra Pradesh High Court that

‘Ghee’ is derived out of ‘milk’ by undergoing a process, yet it

still remains a product of livestock, for the purposes of the Act

and payment of “market fee”.

We are absolutely in agreement with the above reasoning.

11. The second argument of the appellant that the procedure given

under Section 3 of the Act has not been followed, is also not

correct. There is a basic difference between the notification

which has to be made under Section 3 of the Act and the

notification which has to be made subsequently under Section

4 of the Act. What has to be done under Section 3 is a one-

time measure where the Government notifies an area where

purchase and sale of agricultural produce, livestock and 11

products of livestock can be made. This is a one-time exercise.

What happens under Section 4 of the Act is that the Govt.

declares the ‘notified market area’ in respect of any notified

product (products which have already been notified under

section 3 of the Act). A perusal of Sections 3 and 4 of the Act

clearly shows that whereas a draft notification is mandatory

under Section 3 and so is the hearing of objections to the draft

notification, there is no similar provision under Section 4 of

the Act.

The two Sections of the Act Section 3 and Section 4 are

being reproduced below for a comparative analysis :

Section 3 Section 4

3. Declaration of notified 4. Constitution of Market area :– Committee and declaration of notified market area :-

(1) The Government may (1) The Government shall publish in such manner as constitute, by notification, may be prescribed a draft a market committee for notification declaring their every notified area from intention of regulating the such date as may be purchase and sale of such specified in the notification agricultural produce, and the market committee livestock or products of so constituted shall be a livestock in such area as body corporate by such may be specified in such name as the Government notification. may specify in the said notification, having (2) Such notification shall perpetual succession and a state that any objections or common seal with power to 12

suggestions which may be acquire, hold and dispose received by the Government of property and may, by its from any person within a corporate name, sue and be period to be specified therein sued:

will be considered by them.

Provided that any (3) After the expiration of market committee the period specified in the functioning immediately draft notification and after before such constitution in considering such objections respect of a notified area and suggestions as may be abolished under the received before such proviso to clause(c) of sub- expiration, the Government section (4) of section 3 shall may publish in such stand abolished. manner as may be prescribed a final (1-A) Any notification made notification declaring the under sub-section (1) for area specified in the draft the constitution of a new notification or any portion market committee in thereof, to be a notified area respect of any new notified for the purposes of this Act are declared under clause in respect of any agricultural (c) of sub-section (4) of produce, livestock and section 3, may contain products of livestock such supplemental, specified in the draft incidental and notification. consequential provisions, including provisions as to (4) Subject to the provisions the composition of the new of sub-sections (1), (2) and market committee or new (3), the Government may, by and existing market notification – committees and the apportionment of the (a) exclude from a notified assets and liabilities area, any area comprised between the market therein; or committees affected thereby]. (b) include in any notified area, any area specified in [(1-B) Notwithstanding such notification; or anything contained in Section 3 and in sub-

(c) declare a new notified section (1) and (1-A) of area by separation of area Section 4 of the Act, the from any notified area or by Government, may, by uniting two or more notified notification, also areas or parts thereof or by constitution a separate market committee to a 13

uniting any area to a part of special market in a notified any notified area; area.]

Provided that where, as (2) It shall be the duty of the result of declaration of a new market committee to notified area under this enforce the provisions of clause, the entire area this Act and rules and bye-

comprised in an existing laws made thereunder in notified area is united to one the notified area or more notified areas, the said existing notified are (3) (a) Every market shall stand abolished. committee shall establish in the notified area excluding the scheduled areas such number of markets as the Government may, from time to time, direct for the purchase and sale of any notified agricultural produce, livestock or products of livestock and shall provide such facilities in the market as may be specified by the Government, from time to time, by a general or special order.

(b) Every market committee shall also establish in the notified area such number of markets as the Government may, from time to time, direct for the purchase and sale, solely of vegetables or fruits and shall provide such facilities in the market as may be specified by the Government, from time to time, by a general or special order.

[(bb) Every market committee may also establish in the notified 14

area such number of special market as the Government may from time to time direct for the purchase and sale of any notified agricultural produce, livestock or products of livestock or fruits and vegetable and may provide such facilities in the special market as may be specified by the Government from time to time, by a general or special order.]

[(bbb) Every Market Committee may also declare in the notified area any warehouse or cold storage or processing unit or any other place as a market by following the procedure as may be prescribed.]3

[(c) The Market Committee shall specify the limits of every market established or declared as a market by it and the Government may notify the market with such limits, to be notified market area for the purposes of this Act.]4

[(4) As soon as may be after the establishment of a market under sub-section (3), the Government shall declare by the notification the market area such other area adjoining thereto as

3 Added by the Andhra Pradesh (Agricultural Produce and Livestock) Markets (Amendment) Act, 2015. 4 Subs. by Ibid.

15

may be specified in the notification, to be notified market area for the purpose of this Act in respect of any notified agricultural produce, livestock or products of livestock.

(5) Subject to the provisions of sub-sections (1), (2),(3) and (4), the Government may, by notification –

(a) exclude from a notified market area, any area comprised therein; or

(b) include in any notified market area, any area specified in such notification.]5

After discussing provisions of Sections 3 & 4 of the Act, the

majority opinion in the Full Bench concluded that procedural

compliance is only necessary when there is a declaration or

later a merger/de-merger of a notified area and there is no

requirement of following any particular procedure while

issuing a notification under Section 4 (4) of the Act

notifying/de-notifying any already notified products for the

purpose of regulation by any respective Agricultural Market

Committee (AMC). In other words, a prior hearing or prior

5 Omitted vide the Andhra Pradesh (Agricultural Produce and Livestock) Markets (Amendment) Act, 2015. 16

publication of the draft notification is not a requirement under

Section 4 of the Act, since the notification of the year 1994 is

a notification under Section 4 and not of Section 3 of the Act.

Therefore, the argument that the process under Section 3, has

not been followed is totally misconceived. No prior process

was required to be followed as contemplated under Section 3

of the Act for working the scheme under Section 4 of the Act.

Consequently, we hold that there was nothing wrong in the

1994 notification and the challenge to the notification has

rightly been turned down by the Full Bench of the Andhra

Pradesh High Court.

12. We are now left with one more issue related to the market fee.

Since the 1994 notification had an effect which made ‘Ghee’ a

product that could be regulated under provisions of the Act,

Market Committees were empowered to levy fee on the sale and

purchase of ‘ghee’ as per section 12 of the Act. During the

pendency of the matter before the High Court, the appellants

were not required to pay market fee as they were granted

interim protection by the High Court. After the majority

decision of the High Court in Kommissetty Nammalwar

(Supra), market committees started issuing demand notices to

the producers of ‘Ghee’ asking them to pay fees from the date 17

of the notification in the year 1994 to the date of the High

Court judgment i.e. 01.05.2009. This issue was also raised by

appellants in the present appeals and it was prayed that they

should be exempted from paying the fee to the market

committees prior to the High Court judgment. This Court while

issuing the notices in present matters, vide interim order,

restrained market committees from collecting the market fees

for the period prior to the High Court judgment. Even some of

the present appeals were heard on this limited question.

13. As per section 4(2) of the Act, the Market Committee has the

duty to enforce the provisions of the Act within a notified area.

Section 4(3), which empowers Market Committees to establish

markets within the notified area, also directs that these

Market Committees have to provide facilities in the markets

for the purchase and sale of notified products. Appellants’

argument that these Market Committees did not provide any

facilities has already been dealt with and rejected by the High

Court and we are also of the same view as that taken by the

High Court. The appellants have availed the facility given by

the Market Committee and hence they are liable to pay the fee.

There may also be a question of unjust enrichment here. For

all these reasons, we are of the opinion that this market fee 18

should be paid as well. The appellants' prayer that

Respondent Market Committees should be restrained from

collecting market fees prior to the date of the High Court

Judgment cannot be accepted. All the same, since this fee

which has now accumulated for more than 14 years between

05.07.1994 to 01.05.2009 may entail some hardship on the

appellants, they shall be permitted to deposit this fee with the

Committee within two years from today, in four equal

instalments.

14. Consequently, we dismiss these appeals and uphold the

majority decision of the Andhra Pradesh High Court. The

interim orders passed by this Court in the present batch of

cases where we had restrained the respondents from collecting

market fees prior to the date of the High Court judgment

during the pendency of these appeals, stand vacated.

……...……….………………….J. [SUDHANSHU DHULIA]

..….....………………………….J. [S.V.N. BHATTI]

New Delhi.

March 05, 2024.