" 158 M. C. V. S. ARUNACHALA NADAR ETC. October 6. THE STATE OF MADRAS & OTHERS (S. R. DAS c. J., BHAGWATI, B. P. SINHA, SuBBA RAO and K. N. WANCHOO, JJ.) E'undamental Right-Reasonable restrictions-Statute regulating buying and selling of commercial crops-Constitittional validity- Madras Commercial Crops Markets Act (Mad. XX of r933)-
Constitution of India, Arts. r9(r)(g) and r9(6). The Madras legislature enacted the Madras Commercial Crops Markets Act for providing satisfactory conditions for the gro\vers of commercial crops to sell their produce on equal terms with the purchasers and at reasonable prices. The Act. Rules and the Bye-laws framed thereunder have a long term targef of providing a net work of markets wherein facilities for correct weighment are ensured, storage accommodation is provided, and reliable market information is given. Till such markets are established the Act provides for the imposition of licensing restrictions<to enable the buyers and sellers to meet in licensed premises. After the establishment of the markets no licenses would be issued within a reasonable radius from the markets and all growers will have to resort to the markets for selling their crops.
The result would be to eliminate, as far as possible, the middlemen and to give reasonable facilities for the growers of comni.ercial crops to secure best prices for their commodities. Held, that the impugned provisions of the Act impose
reasonable restrictions on the citizen's right to do business an<l are \Yalid. Such a statute cannot be said to create unreasonable restrictions on the citizen's right to do business unless it is clearly established that' the provisions are too drastic, unnecessarily harsh and over-reach the object for which they were made.
Chintaman Rao v. The State of Madhya Pradesh, [1950] S.C.R. 759 and State of Madras v. V. G. Rao, [1952] S.C.R. 597, refer- red to. CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 169-171 of 1955.
Appeals from the judgment and order dated July 10, 1953, of the Madras High Court in Writ Petit.ions Nos. 75, 87 and 135 of 1953. R. Ganapathy Iyer and Shanmugavel, for the appel-
V. K. T. Chari, Advocate-General for the State of Madras, V. V. Raghavan and R. H. Dhebar, for the respondents. (1) S.C.R. H. N. Sanyal, Additional Solicitor General of India a.nd R. H. Dhebar, for Intervener No. 1
M.C. V.S. T. M. Sen, for Interveners Nos. 2 and 3. Arunachala J.Vadar Et6. S. B. Sen, Additional Government Advocate for the State of Madhya Pradesh and I. N. Shroff, for Inter- vener No. 4.
1958. October 6. The Judgment of the Court was delivered by SuBBA RAO J.-These three appeals by certificate granted by the High Court are directed against the common order of the High Court of Judicature at
Madras, dated July 10, 1953, dismissing three writ petitions filed by the appellants impugning the validity of the provisions of the Madras Commercial Crops Markets Act (Mad XX of 1933), hereinafter
referred to as the Act, and the Rules framed there- under, and certain notifications issued by the first respondent herein in pursuance thereof. The Act was passed to provide for the better regu-
lation of thi:i buying and selling of commercial crops in the State of Madras ar.d for that purpose to esta- blish markets and make Rules for their proper administration. On May 18, 1951, the titate Govern-
ment issued G. 0. No.· 1049 (Food & AgriculturP Department) extending the provisions of the Act to Ramanathapuram and Tirunelveli Districts in respect of cotton and groundnuts. On February 25, 1952, the
State Government issued G. 0. No. 251 (Food & Agri- culture Department) ordering the constitution of a Market Committee at Koilpatti and Sankarankoil in Tirunelveli District. By a similar G. 0., viz., G. Q.
No. 356 (Food & Agriculture Department) dated March 8, 1952, the Government directed the constitu- tion of a Market Committee at Virudhunagar and markets at (1) Virudhunagar; (2) Rajapalayan and
(3) Sattur in Ramanathapuram District. The Market Committees were duly constituted, and, on January 9, 1953, the Market Committee at Virudhunagar issued a notice stating that the Act and the Rules had come
into force in Ramanatbapuram District on January l, 1953, and requiring persons who did business in cotton v. The State of .U adras & Other.; Subba Rao]. '958 and groundnut to take out licences as provided therein.
M. c. '" s. A further notice dated January 17, 1953, stated .4rnnarhalu Na<iar that all the traders in cotton and groundnut, who Elf. failed to take out licences on or before Febrnarv 15,
1953, were liable to prosecution. Similar n~'ticeH The State 01 dated January 22, 1953, and February 14, 1953, were ftlatfra.~ 0- Otlte,s · db l l ·•J issue y the hairman, irunc ve i '' fll' zet Commit-
Subba Rao;. tee at Koilpatti calling upon all traders, producers and weighmen dealing in cotton to take out. licences befOl'e February 28, 1953, and threatening pro8e.cution for failure to comply therewith. The appellants in the
above three appeals and others filed writ petitions in the High Court of Madras against (1) the State of Madras ; (2) the Collectors of the concerned Districts and (3) the Chairmen of the Market Committees, for
the iHsue of a Writ of Manda.mus directing the respon- dents to forbear from enforcing any or all the provi- sions of the Act as amended and the R uk8 and Bye- hiws framed thereunder.
A Bench of the Madras High Com:t, eonsi~ting of Rajamannar C. J. and Venkata.ra.ma. Ai_var .J. by an order dated .Jul.v 10, 1953, dismissed tlw >Lpplications. The learned Judges held that s. 5(4)(a) of the Al't was
void to the extent it.conferred on the Colledur :iutho- l'ity to refuse a licence at his own discrdion 11,nd rule 37 was void in so far as it prohibitecl persons whose names had not yet been registered as buyers
and sellers, from carryiug on business in the notified area. Subject to that, the impugned Act and the ltules were upheld under Art. 19(6) of the Const.itntion as a. v a.lid piece of marketing legislation. Jn the
result, the applications were dismissed. The afore- said three appellants have filed these appeal~ against the order of the High Court in so far as it dismissed their applications.
Learned counsel for the appellants contends that the provisions of the Act and the Itnles framed thereunder constitute a.n unreasonable restriction upon the appellants' fundamental right to do business and that
they not only do not achieve the object for which they are enacted but defeat their purpose. Elaborating this argument, he took us through some of the provisions of the Act and the Rules ma.de thereunder in an
attempt to establish that the provisions cripple the business of the appellants, restrict the ri~hts o! the A•"~~;~1:· ~~dar small traders, cause unnecessary and umntent10nal Etc..
hardship to the growers and thereby exceed the pur- v. pose of the enactment and defeat its object. The Staid of Before we scrutinize the provisions of the Act, the Madras if>. Others law on the subject may be briefly noticed. Under Art.19
Subba Rao J. (l)(g) of the Constitution of India all persons have the right to practise any profession, or to carry on any occupation, trade or business. Clause (6) of that Arti- cle enables the State to make any law imposing in the
interest of general public reasonable restrictions on the exercise of the right conferred by sub-cl. (g) of cl. (1). It has been held that in order to he reasonable, a restriction must have a rational relation to the object.
which the legislature seeks to achieve and must not go in excees of that object (See Chintaman Rao v. The State of 1Wadhya Prade.sh) (1). The mode of approach to ascertain the reasonableness of a restriction has
been succinctly stated by Patanjali Sastry C. J., in State of Madras v. V. G. Row {2) thus: "It is important in this context to bear in mind that the test of reasonableness, wherever prescribed,
should be applied to each individual statute impugned, and no abstract standard, or genera.I pattern, of re- asonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed,
the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the pre- vailing conditions at the time, should all enter into the
judicial verdict." Bearing the aforesaid principles in ·mind, we shall ascertain the object of the Act., from the circumstances under which it was passed, and its provisions, ttnd see
whether the provisions have any reasonable relation to the object which the legislature seeks to achieve. There is a historical background for this Act. Marketing legislation is now a well-settled feature of
(1) [1950] S.C.R. 759. (2) (1952] S.C.R. 597, 6o'!· r9Jll all commercial countries. The object of such legisla- M c v 5 tion is to protect the producers of commercial crops il>una~h~la · N~d"' from being exploited by the middlemen and profiteers Etc.
and to enable them to secure a. fair return for their v. produce. In Madras State, as in other parts of the The St•I• 01 country, various Commissions and Committees have Madras &- Others b
d th bl eeu appomte to mvest1gate e pro em, to suggest subba Rao 1. ways and means of proriding a fair deal to the growers of crops, particularly commercial crops, and find a market for selling their produce at proper rates.
Several Committees, in their reports, considered this question and suggested that a satisfactory system of agricultural marketing should be introduced to achieve the object of helping the agriculturists to secure a pro-
per return for the prdduce grown by them. The Royal Commission on Agriculture in India appointed in 1928, observed: "That cultivator suffers from many handicaps: to begin with he is illiterate and in general ignorant of
prevailing prices in the markets, especially in regard to commercial crops. The most hopeful solution of the cultivator's marketing difficulties seems to lie in the improvement of communications and the establishment
of regulated markets and we recommend for the consi- deration of other Provinces the establishment of regu- lated markets on the Berar sy~tem as modified by the Bombay legislation. The establishment of regulated
markets must form an essential part of any ordered plan of agricultural development in this country. The Bombay Act is, however, definitely limited to cotton markets and the bulk of the transactions in Berar
market is also in. that crop. We consider that the system can conveniently be extended to other crops and; with a view to avoiding difficulties, would suggest that regulated markets should only be established
under Provincial legislation." The Royal Commission further pointed out in its report: " The keynote to the system of marketing agricul- tural produce in the State is the predominant part
played by middlemen." " It is the cultivator's chronic shortage of money (1) S.C.R. that has allowed the intermediary to achieve the pro- r95B minent position he now occupies." . 1 .
db 111. c. v. s. The necessity for marketmg leg1s at10n was stresse Y .·lrun,,clw),, .vadar other bodies also like the Indian Central Banking en- Etc. qniry Committee, the All India Rnral Credit and Survey
v. Committee, etc. Recently the Government of Madras rhe State of appointed an expert Commit.tee to review the Act. In .11'rdras & Otliers its report the Commit.tee graphically described the
Subb.1 Rao ]. difficulties of the cuHivators and their dependence upon the middlemen thus : "The middleman plays a prominent part in sale trnnsactions and his terms and methods vary accord-
ing to the nature of the crop and the status of the cnlt.ivator. The rich ryot who is unencumbered by debt and who has comparntively large stocks to dispose of, brings his produce to the taluk or district centre and
entrusts it to a commission agent for sale. If it is not. sold on the day on which it is brought, it is stored in the commission agent's godown at the cultivators' expense and as Lhe latter generally cannot afford to
wait ahont until the sale is effected he leaves his pro- duce to be sold by the commission agent at the best possible price, and it is doubtful whether eventually he receives the best price. The middle class ryot invari-
ably disposes of his produce through the same agency hut, unlike the rich ryot he is not free to choose hiR commission agent., because he generally takes advance;; from a particular commission 11gent on the condition
that he will hand over his produce to him for sale. Not only, therefore, he places himself in a position where he cannot dictate and insist on the sale being effected for the highest price but he loses by being
compelled to pay heavy interest on the advance taken from the commission agent. His relations with middlemen are more akin to those between a creditor and a debtor, than of a selling agent and producer.
In almost all cases of the poor ryots, the major po1·- tion of their produce finds its way into the hands of the village money-lender and whatever remains is sold to µettiy traders who tour the villages and the price a.t
which it changes hands is governed not so much by t.he r958 market rates, but by the urgent needs of the ryot which are generally taken advantage of by the purchaser. M. ~·1 v.Ns. d The dominating position which the middleman occu- ,,,,n1c11a a
a ar Etc. pies and his methods of sale and the terms of hi's deal- v. ings have long ago been realized." The Stale of The aforesaid observations describe the pitiable Mad'"' and Othm dependence of the middle-class and poor ryots on ·the Subba 1100 ;. middlemen and petty traders, with the result that the cultivators are not able to fiiid markets for their
produce wherein they can expect reasonable price for them. With a view to provide satisfactory conditions for the growers of commercial crops to sell their produce on equal terms and at reasonable prices, the Act was
passed on July 25, 1933. The preamble introduces the Act with the recital that it is expedient to provide for the better regulation of the buying and selling of com- mercial crops in the Presidency of . Madras and for
that purpose to establish markets and make rules for their proper administration. The Act, therefore, was the result of a long exploratory investigation by ex- perts in the field, conceived and enacted to regulate the
buying and selling of commercial crops by providing suitable and regulated markets by eliminating middle- men and bringing face to face the producer and the buyer so that they may meet on equal terms, thereby
eradicating or at any rate reducing the scope for ex- ploitation in dealings. Such a statute cannot be said to create unreasonable restrictions on the citizens' right to do business unless it is clearly established that the provisions are too drastic, unnecessarily harsh and
overreach the scope of the object· to achieve which it is enacted. It is therefore necessary to scrutinize the provisions of the Act and the Rules made thereunder to ascertain whether the restrictions imposed are not reasonable.
The said provisions fall under two groups : the first group provides the machinery for controlling the trade in commercial crops and the second group of provisions imposes restrictions on the carrying on of the said
trade. Section 2( 1-a) defines ' commercial crop ' to mean cotton, groundnut or tobacco and includes any other crop or product notified by the State Government in the Fort St. George Gazette as a commercial crop
M. c. v. s. for the purposes of this Act. Under s. 3, the State .4r1rnacllafa Nada• Government issues a notification declaring their inten- Etc. tion to exercise control over the purchase and sale of
v. h · 1 · · l Tile Stal• of sue commerc1a crop or crops m a part1cu a.r arna Mad.as ,r,, Others and calls for objections and suggest.ions to be made within a prescribed time. After the objectiom; are
s11hba uao J. received, the State Government conside1·s them and declares the areas to be specified in the notification or any portion thereof to be a notified area for the pur- pose of the Act in respect of commercial crop or crops
specified in the notification. Under s. 4-A, the State Government has to establish a market committee for every notified area and it shall be the 'duty of the market committee to enforce the provisions of the
Act. Sections 6 to 10 provide for the constitution of Market Committees and s. 16 for their supersession for the reasons mentioned therein. In exe1·cise of the powers conferred by s. 18 of the Act the State Govern-
ment made Rules which provide for the manner in which the members of Market Committees should be elected, and also for the constitution of sub-Com- mittees. In exercise of the powers conferred by s. 19
of the Act and also subject to the Madras Commercial Crops Markets Rules, 1948, the Committees for the various districts made bye-laws for regulating their meetings and for the discharge of their duties by the
various subordinate bodies. The said provisions which bring into existence a machinery for regulating the trade are not attacked by the learned counsel for the appellants. Under the second group, there are provisions provid-
ing for matters which are succinctly stated in the 'Report of the Expert Committee on the review of the Madras Commercial Crops Markets Act, 1933' at p. 7 as under: "(I) A common place is provided for seller and
buyer to meet and facilities are offered by way of space, buildings and storage accommodation. (2) Market practices are regularized and Market . u.c. v.s. ,..1'unr1ch11ln Nadar Etc.
v. The State of 1lludras ~;.Others Subha Rao J. charges clearly defined and unwarranted ones prohibited . (3) Correct weighment is ensured by licensed weighmen and all weights are checked and stamped.
(4) Payment on hand is ensured. (5) Provision is made for settlement of disputes. (6) Daily prevailing prices are made available to tho grower and reliable market rnformation provided
regarding arrivals, stocks, prices, etc. (7) Quality standards are fixed when necessary and contract forms standardized for purchase and i:;ale." section 5 says : ' No person shall, within a notified
area, set up, establish or use, or continue or allow to be continued, any place for the purchase or sale of a notified commercial crop, except under and in accord- ance with the conditions of a liceuce granted to him
by the Collector.' The first proviso to that section provides that after the establishment in such area of a market for tJ1e purchase and sale of >t notified com- mercial crop, no licence for the purchase or sale of
such commercial crop shall be granted or renewed in respect of any place situated within such distance of the market as may from time to time be fixed by t.he State Government. The second proviso enablPs the
Market Committee to exempt from the provisions of the above sub-section any person who carries on the business of purchasing or selling any commercial crop in qua.ntities not exceeding those prescribed by Rules
made under the Act. The third proviso authorizes the said Committee to exempt a person selling com- mercial crop which has been grown by him, or a co- operative society registered or deemed to be registered
under the Madras Co.operative Societies Act, 1932, selling a commercial crop which has been grown by any of its members, and also empowers it to withdraw t.he exemption. Sub-section (2) of s. 5 gives exemption
to a person purchasing for his private use a commer- cial crop in quantities not exceeding those prescribed by Rules made under the Act. Sub-section (3) prohibits any person within a notified area from setting up,
establishing or using, continuing or allowing to be '958 continued, any place for the storage, weighment, M. c. v. s. pressing or processing of any notified commercial crop Arnnachala Nadar except under and in accordance with the conditions of
Etc. a licence granted to him by the Collector. Under v. b (3) t d f th The State of proviso to su -s. a person IS exemp e rom e Jfudras"" Others operation of that Rule in respect of any notified com-
mercial crop grown by him. Sub-section (4) enables s11bba Rao J. the Collector, on the report of the Market Committee a11d after such inquiry as he deems fit; to cancel or sµspend any licence granted under the said section.
There are provisions providing for penalties for infringement of the statutory regulations and for referring disputes to compulsory arbitration. The bye-laws framed by the Committees prescribe graded
scales of. licence fees in respect of various licences required under the Act; these show that a trader has to take separate licences under s. 5(1) and s. 5(3). The licence fee payable for additional premises is
comparatively smaller than the amount payable for the main premises. Licence fee is also fixed for brokers, weighmen, etc. Rule 28(3) (iii) of the Rules states that it shall not be necessary for a pe1son to
obtain more than one licence for setting up, establish" ing or continuing or allowing to be continued more than one place in the same notified area for the purchase, sale, storage, weighment, pressing or processing of
the same commercial crop. A combined reading of the Rule and the bye-laws shows that though different licences may have to be obtained under s. 5(1) and s. 5(3), one licence is sufficient for different places and only small payments have to be made for every addi-
tional premises for the same purpose. It is not necessary to notice the other provisions as nothing turns upon them in the present case. Shortly stated, the Act, Rules and the Bye-laws framed thereunder
have a long-term target of providing a net work of markets wherein facilities for correct weighment are ensured, storage accommodation is provided, and equal powers of bargaining ensured, so that the growers
may bring their commercial crops to the market and sell them at reasonable prices. Till such markets are r958 established, the so.id provisions, by imposing licensing M c . restrictions, enable the buyers and sellers to meet in
Aru'n;rh~l~ · i~d"' licer.ised premises, ensure correct w~ighment, make Uc. available lo them reliable market mformation and v. provide for them a simple machinery for settlement of
Th• Stal• of disputes. After the markets are built or opened by Mad•as Ii> oihm the marketing committees, within a reasonable radius Subba Rao J. from the market, as prescribed by the Rules, no licence
is issued ; thereafter all growers will have to resort to the market for vending their goods. The result of the implementation of the Act would be to eliminate, as far as possible, the middlemen and to give reasonable
facilities for the growers of commercial crops to secure best prices for their commodities. Learned counsel for the appellants contends that the restrictions imposed by the provisions of s. 5 are not
only unreasonable but tend to defeat the \•ery purpose of the legislation. Elaborating this argument, the learned counsel says that t.hey are unreasonable from the st.andpoint of the big trader, the small trader a.nd
also the grO\rnr of crops. The trader, his argument proceeds, can only buy or sell in the licensed premises paying heavy licensing fees under different heads and paying also heavy overhead charges, with the inevit-
able consequence that he will not ho able to run his business with profit. It is also said that he cannot go wherever he likes to buy the produce at cheap rates and can negotiate for or enter into contracts of sale
only in the licensed premises, with the result that he has to pay higher prices to the sellers. The first 11rgurnent rather exaggerates the situation ; for, the rates of licence fees shown in the bye-la.ws framed by
the Marketing Committee at Virudhunagar do not appear to be so high as to cripple the trader's business. X o material has been placed beforn us to establish that the rates are so high and the burden is so unbearable
that a .trader, who is otherwise making profit, cannot carry on his business. The second objection of the learned counsel in itself affords a reasonable basis for the legislat.ion ; for, what the learned counsel in effect says is that the trader is exploiting the small growers
f (1) S.C.R. SUPREME COUlt'l' REPOltTS and that he is prevented from doing so under the licensing regulations. . M. c. v. s. From the standpomt of the seller It IS said that Arunachala Natlar though he may be exempted from the operation of the
Etc. said Act under the second proviso to s. 5 (1) he is v. prevented from selling his· produce by insisting that he 1'he State 01 should trade onlv with the licensed trader and in the Madras .s. Others licensed premis~s. Assuming that that is the legal
Subba Rao J. position under the Rules, uothing prevents the grower from selling his produce to another grower whose requirements are greater than \vhat he produces or to a smaller trader exempted under the third proviso t<'
s. 5 (1). After the market is established, it is contend- ed, a grower will be obliger! to carry the goods to a. centralised place if he is to di~pose of the go1Jds, whi<'h can hardlv be clescriberl as increasing tlw facilities for marketing the goods. It is true that the grOWl!l'S may
be under some difficulties in t.his regard, but that is counter-balanced by the marketing facilities provided for them under the Act. It is also said that wht-111 a market is establhihed,
no licence to purchase, or sell, commercial crops will he granted or renewed in ·respect of any place· situated within such distance from the market. as may from time to time be fixed by the State Goverm11ent and that
nothing under the Act prevents the Government from fixing a long distance as a prohibited area ; with the result that a person, who is having a licence to trade in and about the place where the market is fixed,
is deprived of his livelihood, which is an unreason- able restriction upon his right to do business. But in our view, such a provision is necessary for prevent- ing the local business being diverted to other places
and the object of the scheme being defeated. Further, in practice, it is seen that the GovernmenL fixes by notification under s. 5 (1) a radius of five miles around the building and occasionally ten miles. It is also not
likely that it would fix a longer distance in the present circumstances, having regard to the inadequate facili- ties for transporting commodities. That a.part, the establishment of a market does not prevent a. trader
from carrying on the business in the market established, '958 but he could not run a market_ for himself in respect M c v 5 only of the commodities declared to be commercial Arun;ch~l; N~dar crops within the radius prescribed.
Etc. While the object of the Act is to protect the growers, v. the argument proceeds, the small traders are compel- Th• State of led to resort to distant markets, with the result that
Madras" Others some of them would be forced to give up their business and others would have to incur unnecessary "xpend- Subb• Jlao f, iture which they could not afford. The Act is an
integrated one, and it regulates the buying and selling of commercial crops. If the small traders are exempt- ed, it creates loopholes in the scheme through which the big trader may operate, and thereby the object
itself would be defeated. That a part, the second proviso enables the Committee to exempt small traders in appropriate cases. The constitution of the Com- mittee, in which there will be represent,atives of the
traders and the buyers, is a sufficient guarantee against the implementation of the provisions of the Act to the detriment of all concerned. If a packed Committee abuses its powers, there is a further provi-
sion to enable the Government to supersede it. \Ve, therefore, hold that, having regard to the entire scheme of the Act, the impugned provisions of the Act con- stitute reasonable restrictions on a citizen's right to do business, and therefore, they are valid.
The next contention of the learned counsel for the appellants is that the G. 0. No. 356 dated 8-3-1952 directing the establishment of a market at Virudhu- nagar is an unreasonable restrict.ion on the appellants'
right to do business, and is, therefore, invalid. In Virudhunagar, there is already a well-established market which provides facilities for the purchase and sale of cotton and other goods. It. is stated that the
said market has been functioning for over fifty years, that it has been largely used by the merchants of the community, and that it contains stalls for effecting sales, godowns for stocking goods, halls, parks and
other amenities. Certain charges called ' mahimiti ' are collected on all transactions that take place with- in the market ; and they are constituted into a trust fund which is utilised for the maintenance of schools
and for religious purposes. The argument is that the z95B appellants in C. A. No. 169 of 1955 are running the .it. c. v. s. market as an occupation or business with high Arunachala Nndar standards and that the notification directing the con-
Etc. stitution of a market in the same locality, when v. admittedly the entire scheme of building a net work The 51•11• of Madras & Others of markets could not be finished within a predictable
time, is not a reasonable restriction on their right to subba Rao 1. do business. It is also said that the same advantages could be given to the growers by continuing the said market with suitable restrictions and controls as the
market established by the Market Committee would conceivably provide for them, and in those circum- stances, when two alternative methods would equally achieve the objects, the notification directing the con-
stitution of a market to the exclusion of the existing one would be an unreasonable restriction. The learned Advocate General of Madras contends that -the appel- lants have really two fundamental rights: one is to
carry on trade or business and the other is to hold their property, i.e., the market; that by reason of the notification they are not prevented from doing their busine.ss, for they can still do business in the market
established subject to the regulations and also do busi- ness outside the prescribed area; and that they are not prohibited from holding the market as property, for they could still utilise it for commodities other
than the notified crops. In respect of the contention that holding the market is only an incident of owner- ship of the property, reliance is placed upon the deci- sions in T. B. Ibrahim v. Regional Transport Autho·
rity, Tanjore (1); Ramunni K urup v. The Panchayat Board, Badagara (2); Captain Ganpati Singhji v. The State of Ajmer (3); and Valia Raja of Edappally v. The Commissioner for Hindu Religious & Charitable Endow-
ments, Madras (4). It is unnecessary to express an opinion on the question whether the right of the appellants falls under Art. 19(l)(f) or (g) of the Consti- tution of India, or under both the sub-clauses ; for, the
(1) [1953] S.C.R. 290. (2) I.L R [1954] Mad. 513. (3) [1955] l S.C.R. lo65. (4) l.L.R. [1955] Mad. 870. SUPREME COURT REPOR.TS [1959] Supp. '"-'°' yuestion whether the notification imposes an unreason-
_ able restriction on the appellants' right cannot be .i.,,~~.~;,! · ~~da, decided on the ma~rial placed before us. '-';hat r,,. question may convemently be left open to be decided
v. at the time when the market is established at Viru- The Slate oJ' dhunagar, pursuant t.o the notification issued b~· the Jtadra• & Othm Government. It does not appear from the record that there is any early prospect of such a mai·ket
Subf,,, Rr10 ]. d h bl being establishe in t at p ace. The reasona eness of t.he restrictions would depend upon the circum- stances obtaining at the t.ime the market is establish-
ed. It depends upon the comlitions then obtaining in the t,rade in commercial crops, t.he standards that will be maintained in the present market at that time, the comparative merits of the existing market and the
market to be built up and other relevant considera- tions which cannot now be Yisualized. ·we would, therefore, lea~-e open that question to be decided at the proper time by the authorities eoncerned when a
market is sought t.o be established in the manner pro- vided b.)' law. The next argument relates to ' mahimai · allowances eollected by the" appellants from the sellers and buyers
of the orops in the market. The learned judges of the High Court held that the question relating to this allowance did not arise for decision at that stage, but. having heard full arguments on the question, they
expressed the view that 'mahimai' could not be claimed as a trade allowance. They concluded their discussion on the subject in the following words : " It has nothing to do with the transaction as
such and is really a contribution levied at the time of the transaction for a purpose unconnected with it. It cannot therefore be properly regarded as a trade allowance, and bye-law 25(b) is perfectly valid."
\.Ye cannot share the opinion. of the learned judges that the question does 11ot '1¥tise for decision at this stage. The appellants pra.yeafor issue of a writ of mandamus directing the respondents to forbear from enforcing
any or all the provisions of the Act as amended and the Rules and bye-laws framed thereunder by the Ramanathapuram Committee ; and, the provisions of the Act read with the bye-laws prohibited the collec-
19J8 tion of ' mahimai ' by the appellants. The question .u. c. v. s. whethe1· the bye-law prohibiting the collection of .4r1machala Nadar ' mahimai ' allowance is valid or not does directly
Etc. arise for consideration in this case. There is also some v. ambiguit,y in the conclusion arrived at by the learned Th• state of .111111'-ns 0· Of/1ers judges of the High Court. They stated that the allow-
ance had nothing to do with t,he transaction as such Subba Rao ]. and could not therefore be properly regarded as a trade allowance. The learned counsel for the appel- lants contends that if it is not a trade allowance, it is
not covered either by s. 14 of the Act or by bye-laws framed thereunder, as s. 14 prohibits the deQuction of trade allowance and . does not operate upon any other payments made which are not trade allowances. There
is considerable force in this argument, but we think that the learned judges meant only that the said allowance is not an admissible or a permissible trade allowance prescribed by the bye-law. The question,
therefore, is whether the allowance described as 'mahimai' is a trade allowance and if so, whether the allowance is permitted to be received by the rules or bve-laws made under that section. The relevant
p~ovisions may be noticed at this stage. Section L! says : " Xo trade allowance, other than an allowance prescribed by rules or by-laws made under this Act, shall be made or received in a notified area by any
person in any transaction in respect of the commercial crop or crops concerned and no Civil Court shall, in an,Y suit or proceeding arising out of any such transac- tion, have regard to any trade allowance not so pre-
scribed. Explanation : Every deduction other than deduc- tion on account of deviation from sample, when the purchase is made by sample, or of deviation from standa1·d, when the purchase is ma.de by reference to
a known standard, or on account of difference between the actual weight of the sacking and the standard weight, or on account of the admixture of foreign matter, shall be regarded as a tracle allowance–for the
purposes of this Act". '958 Section 19: "(1) Subject to any rules made by the M. ~. s. State Government under section 18 and with the Arunach,.la Nadar previous sanction of the Director of Agriculture, Etc.
Madras, a market committee may in respect of the notified area for which it was established make by- MThe State 01 laws for the regulation of the business and the condi- adras ©·0th .. -.; t'
ft d' th . ,, _ 10ns o ra mg erem. Subba Rao J. By-law 25: Trade allowance applying to the market and the notified area : (a) ……………………………………………………. . "(b) Deductions such as' mahimai' are prohibit-
ed. The weight of alien substance such as mud and stone, if any, contained in the lint or kapas borahs or in the bags of groundnut pods or kernels shall be deducted." The· gist of the aforesaid provisions may be stated
thus : Trade allowance cannot be received in any notified area by any person in any transaction in respect of commercial crop or crops. Every deduction in any transaction in respect of the said crop other
than those specified in the explanation is trade allowance for the purpose of the Act. A market committee generally may make bye-laws for the regulation of the business and conditions of trading
therein and particularly it can make bye-laws pre- scribing what are permissible trade allowances under the section. Such allowances as are prescribed by a bye-law can be deducted in any transaction notwith-
standing the fact that they are trade allowances. The argument of the learned counsel is that that bye-law is bad, because the market committee did not name the allowance or allowances taking them out of the pro-
hibition under s. 14 which they are entitled to do under that section, but made the bye-law mentioning the 'mahimai' allowance as one not deductible in anv transaction. The validity of that part of the bye-la~
prohibiting the deduction of' mahimai' as trade allow- ance depends upon the nature of that deduction. If 'rnahimai' is not a trade allowance, the said part of the bye-law would obviously be invalid as inconsistent
with the provisions of s. 14. If, on the other hand, ' mahimai ' is a trade allowance, the said part of the bye-law will be superfluous, as the allowance falls with- '958 in th~ terms of the ~ectioJ? it~e,lf.. This leads us to the M. c. v. s.
quest10n whether mahuna.i IS a trade allowance Arimachala Jlladar within the meaning of s. 14 of the Act. Etc. What is a trade allowance ? Trade involves ex- v. change of commodities for money, the bm~i11ess of buy-
11 Tdhe •0° 1~ d ll' d h l h I a ras "" ,,.,. mg an se mg an t e transaction mvo ves t. e _ seller, the buyer, the commodity sold and the price Subba Rao J. paid for the sale. Allowance means something given
as compensation, rebate or deduction. Under the section, the said deduction should be in a11v transac- tion in respect of commercial crops. The· deduction may he out of the commodity or out of the price. The
recipient may be the seller, the buyer or a third party. When A sells a quantity of cotton to B for a hundred rupees, B, the purchaser, may deduct one rupee from the sale price and pay ninety-nine rupees to A; he
may keep that amount for himself or pay the same to So too, A, the seller, may purport to sell one maund of cotton but in fact deduct a small part of it, retain that part for himself or give it to C; or both A
and B may fix the price of the 1Jommodity purchased at Rs. 102 but the purchaser pa.rs one rupee to C and . the seller retains or pays one rupee to C ; or it may be that payments have nothing to do with the price or
U1e transaction, but both the parties pay C a specified amount as consideration for the use1· of the premises or for the services rendered by him. The question whether a particular payment is a trade allowance or
not, depends upon t,he facts of each case. Firstly, it must be a deduction in auy transaction in respect of commercial crops. If it is a deduetion out of the price or commodity agreed to be paid or transferred, it would
be a trade allowance. On the other ha11d, if the pay- ment is de hors the terms of the transact.ion bnt made towards consideration for the use of the premises or sPrvices rendered, it would uot be a d(•duction from the
price or in any transaction. No material has been plac- ed before us to arrive at a definite finding in the present case whether 'mahimai' is a deduction from the price or commodity within the meaning of s. 14 of the Act.
The learned judges, having expressed the view that the llO '958 question did not arise for consideration at that stage, M. c. v. s. did ~ot also consi~er any material to support their
Ah .. achal• .vadar findmg. In the circumstances, the only reasonable Etc. course is to leave that question open so that it may v. be decided in appropriate proceedings. 1-he Slate of
Mad.as .s. Othm In the result, subject to the aforesaid observations, the appeals are dismissed but without costs. Subba Rao ]. Ootober 7. Appeals dismissed. COMMISSIONER OF INCOME-TAX, NAGPUR
v. RAI BAHADUR JAIRAM VALJI AND OTHERS (VENKATABAMA AIYAB, P. B. GAJENDBAGADKAB . and A. K. SABKAB JJ.) Income Tax-Capital or Revenue receipt-Compensation for premature termination of contract_..:.Whether trading reccipt-Liabi· lity to tax-Indian Income-tax Act, r922 (XI of r922).
The respondent had been carrying on business in the produc- tion and supply of limestone since 1920, and under an agreement entered into with the Bengal Iron Company was supplying all its requirements of limestone and dolomite.
Sometime later the Indian Iron and Steel Company took over all the assets and liabilities of the former company. Subsequently differences having arisen between the respondent and the Indian Iron and Steel Company they entered into an agreement on May 9, 1940, in settlement of all the disputes .between them whereby, inter alia, the respondent was to work a quarry of the company for a period of 25 years and to supply the limestone quarried there- from to the company according to its requirements and to get from the railway authorities facilities for transporting the lime- stone more economically; and it was agreed that till such facili- ties were given, the respondent was to be paid Rs. 4000/- every month. Under the agreement the respondent had the right to work other quarries of his own and supply limestone so quarried to other purchasers. The railway authorities having declined to grant facilities, it became impossible to carry out the agreement in the manner contemplated by the parties, who, thereupon, entered into a fresh agreement on August 2, 1941, terminating