judgement:
etition (Civil) Nos.
12676 77 of 1985 etc.
(Under Article 32 of the Constitution of India) R.F. Nariman, P.H. Parekh, N.N. Keshwani, Mrs. H. Wahi and R.N. Keshwani for the Petitioners.
408 G.A. Shah, M.N. Shroff, K.M.M. Khan and T.U. Mehta for the Respondents.
The Judgment of the Court was delivered by VENKATARAMIAH, CJ.
The petitioners in these petitions have questioned the validity of a notification issued by the Government of Gujarat on June 26, 1985 in exercise of its powers conferred by Section 15 of the (67 of 1957), herein after referred to as the Act, amending the Gujarat Minor Mineral Rules 1966, hereinafter referred to as the Rules, with effect from 1 7 1985 substituting the original rule 21 of the Rules by a new rule which reads as follows: "21.
Rate of Royality: The holder of a quarry lease or any other mineral concession granted under these rules shall pay royalty in respect of minor minerals, specified in column 2 of the schedule, removed or consumed by him or by his agent, manager, employee, contractor or sub lessee from the leased area at the rates respectively specified against them in column 3 of the said schedule.
Provided that: (i) the holder of a Parwana granted under these rules shall pay royalty at the rate of fifty percent of the rate of royalty specified in the said schedule.
(ii) no royalty shall be charged from Nimbha das of village potters who manufacture upto one lakh bricks per year.
(iii) no royalty shall be charged from Nimbha das of village potters if their annual produc tion is not exceeding two lakhs bricks and they supply at least one lakh bricks to the Rural Housing Board or Panchayats.
(iv) Royalty shall be recoverable in whole rupees, fraction fifty paise and above to be rounded upwards to a whole rupee and fraction below fifty paise shall be ignored" and fixing the royalty payable by the lessees in respect of minor minerals known as Black Trap and Hard Murrum at Rs.7 per metric tonne by amending schedule of the Rules which was being levied at Rs. 4 till the date of the said amendment.
409 In order to understand the case of the petitioners it is necessary to set out some other provisions of law governing the case.
The Act was passed in the year 1957 by Parliament to provide for the regulation of mines and development of minerals under the control of the Union and it was made applicable to the whole of India.
Under section 3A of the Act the word 'minerals ' is defined as including all minerals except mineral oils.
Clause (e) of the said section defines 'minor minerals ' as building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes and any other mineral which the Central Government may.
by notification in the Official Gazette, declare to be a minor mineral.
It is not disputed that Black Trap and Hard Murrum are notified as minor minerals.
The Act has made provision with regard to the issue of prospecting licences and mining leases in respect of various kinds of minerals other than minor minerals and the procedure to be followed in that connection in the matter of issue of prospecting licences and mining leases.
Section 9 of the act empowers the Central Government to levy royalty in respect of the minerals which are won by the mining lease holders under the Act at the rates prescribed in the Second Schedule to the Act.
It empowers the Central Government to enhance or reduce the rate of royalty prescribed by the Second Schedule in respect of any mineral subject to the condition that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of three years.
Section 14 of the Act provides that sections 5 to 13 (inclusive) shall not apply to quarry leases, mining leases or other mineral concessions in respect of minor minerals.
Section 15 as it stood during the relevant time read thus: "15.
(1) The State Government may, by notifi cation in the Official Gazette, make rules for regulating the grant of (quarry leases, mining leases or other mineral concessions) in re spect of minor minerals and for purposes connected therewith.
(2) Until rules are made under sub section (1), my rules made by a State Government regulating the grant of (quarry leases, mining leases or other mineral concessions) in re spect of minor minerals which are in force immediately before the commencement of this Act shall continue in force.
(3) The holder of a mining lease or any other mineral concession granted under any rule made under sub section (1) 410 shall pay royalty or dead rent, whichever is more in respect of minor minerals removed or consumed by him or by his agent, manager, employee, contractor or sub lessee at the rate prescribed for the time being in the rules framed by the State Government in respect of minor minerals; Provided that the State Government shall not enhance the rate of royalty in respect of any minor mineral for more than once during any period of three years.
" It is seen from section 15 that the State Government is empowered to make rules for regulating the grant of quarry leases, mining leases or other mineral concessions in re spect of minor minerals and for purposes connected there with.
In exercise of the said power under section 15 the Government of Gujarat promulgated the Gujarat Minor Minerals Rules, 1966 which are referred to as the Rules as stated above.
Rule 21 of the Rules provides for the determination of the rate of royalty payable in respect of minor minerals.
The original rule 21 was substituted by new rule 21 by the issue of impugned notification on 26 6 1985 which provides that a holder of a quarry lease or any other mineral conces sion granted under the Rules shall pay royalty in respect of minor minerals provided in column 2 of the Schedule, removed or consumed by him or by his agent, manager, employee, contractor or sub lessee from the leased area at the rates specified in column 3 of the said Schedule.
It is under this notification the rate of royalty in respect of black trap and Hard Murrum was increased from Rs. 4 to Rs.7 per metric tonne.
The rule also provides that the holder of a Parwana granted under the Rules shall pay royalty at the rate of 50 per cent of the rate of royalty specified in the said Sched ule and that no royalty shall be charged from Nimbhadas of village Potters who manufacture upto one lakh bricks per year.
It further provides that no royalty shall be charged from Nimbhadas of villages potters if the annual production is not exceeding two lakh bricks and they supply at least one lakh bricks to the Rural Housing Board or Panchayats.
The validity of rule 21 as it existed prior to the issue of the impugned notification was considered in B.K. Trivedi & Sons and Ors.
vs State of Gujarat and Ors.
, ; as under the said rule the royalty payable in respect of some of the minor minerals had been enhanced.
Originally all lessees had to pay a minimum dead rent in respect of the area covered by a minor mineral lease issued in respect of any minor mineral or the royalty prescribed in respect of quantity of minor minerals owned by him, which ever was higher.
The history of the legislation of the Rule from the year 1986 is set out in detail in the said 411 decision.
Hence it is not necessary to refer to it in detail here.
By the said decision the constitutionality of section 15 of the Act and the validity of a notification issued on June 18, 1981 under which the rate of royalty had been raised was upheld and the writ petitions in which the said validity had been questioned were dismissed.
That decision was rendered on March 5, 1986.
During the pendency of the said petitions in the High Court the impugned notification was issued increasing the royalty payable in respect of Black Trap and Hard Murrum from Rs.4 to Rs.7.
In these petitions the impugned notification issued in the year 1985 is questioned.
Since many of the contentions raised by the parties in respect of the constitutionality of section 15 of the Act and the validity of Rules made thereunder had been considered and the contentions urged by the petitioners against the said rule in those petitions had been rejected, in the present case the petitioners have confined their case only to the following points which according to them had not been considered in the said decision.
Shri R.F. Nariman, learned counsel for the petitioners in some of the petitions had two contentions: 1. that the royalty levied and covered under the Rules should be applied only for mineral development and since the said royalty is being treated as part of the consolidated fund of the State and used for other purposes by the State the levy was bad; and 2.
that the impugned notification in question was in contravention of clause (b) of Article 304 of the Constitution.
The contention of the learned counsel was that under Entry 50 of List II of the 7th Schedule to the Constitution, the royalty recovered by the State Government had to be used only for mineral development and could not be used for any other purpose.
According to him the Act had been passed for purposes of regulation and development of minerals.
He depended upon the language of Entry 50 which reads thus: "taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development" We do not find much substance in this contention.
Re cently a Constitution Bench of this Court has held in The India Cement Ltd. etc.
vs The State of Tamil Nadu etc., [1989] 4 S.C. Judgments Today 190 that the royalty levied on the extracted mineral was in the nature of a tax and it was not in the nature of a fee which could be used 412 only for specific purposes.
Any tax realised by the State Government forms part of the consolidated fund of the State and the said tax can be used by the State Government for any of the purposes to which its executive powers extend subject to any law made by the State Legislature in that regard.
We do not, therefore, find any substance in the above conten tion.
It is no doubt true that the Act is passed for devel opment of minerals, but while discharging its functions relating to development, if the State incidentally allows mining to be carried on in the public interest and levies in that connection a tax, it does not mean that the said tax should be used only for development of minerals and not for other purposes sanctioned by law.
In support of the second contention the learned counsel Shri Nariman argued that notwithstanding anything contained in Article 301 or Article 303 the Legislature of a State may by law impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as required in the public interest.
Provided that no Bill or amendment for the purpose of sub clause (b) shall be intro duced or moved in the legislature of a State without the previous sanction of the president.
We do not find that clause (b) of Article 304 has any relevance on the point in question.
No restriction is being imposed on the freedom of trade of the petitioners by the levy of royalty.
The minerals belong to the Government and if anybody wants to have the right as a lessee to exploit the mines in question to the exclusion of all others and to remove the minerals with a view to making profit, he has to pay a royalty imposed in accordance with law.
In the instant case the levy is made under a law made by the Central Gov ernment.
It is not an imposition made by a law made by the State Legislature on which alone the restriction contemplat ed under Article 304(b) applies.
We do not also find much substance in the contention that the levy in question is unreasonably heavy and has been imposed in an arbitrary manner.
The burden of establishing that the levy is unreasonably heavy, is on the petitioners.
It is urged that in the other States the royalty is being levied at the rate of Re. 1 per metric tonne of Black Trap and Hard Murrum and Rs.7 levied in the notification is excessive.
The fact that in other States the royalty is fixed at Re. 1 is not by itself sufficient to hold that Rs.7 per metric tonne is unreasonably high rate of royalty.
In Trivedi 's case (supra) this Court had upheld the levy of Rs.4 per metric tonne which had been fixed in 1981 and in 1985 it was increased to Rs.7.
Having regard to the depreci ation in the value of 413 the rupee and the increase in the cost of ' administration of the State, which is ever increasing, as a welfare State we cannot say that Rs.7 is an unreasonably high rate.
We have taken this view after going through the observations made by this Court in Trivedi 's case (supra) at page 544 where this Court has observed that where a statute confers discretion ary powers upon the executive or an administrative authori ty, the validity or constitutionality of such power cannot be judged on the assumption that the executive or such authority will act in an arbitrary manner in the exercise of the discretion conferred upon it.
If the executive or the administrative authority acts in an arbitrary manner, its action would be bad in law and liable to be struck down by the courts but the possibility of abuse of power or arbi trary exercise of power cannot invalidate the statute con ferring the power or the power which has been conferred by it.
We do not find that the levy is arbitrarily imposed.
It is obvious that the petitioners are lessees who are exploiting the mining areas for purposes of business and that the royalty in question is ultimately passed on to the consumers.
It is not shown that the business ,of the peti tioners has been adversely affected in such a way that it is liable to be struck down on the ground of arbitrariness.
We do not, therefore, find any substance in the contention urged by Shri Nariman.
In Civil Writ Petition No. 618 of 1987 filed by Jai Sholanath Quarry Works and another, Mr. Keswani, learned counsel for the petitioners contended that the impugned rule 21 which was substituted in the place of the former rule 21 was invalid as it was discriminatory in character.
He con tended that the concession shown in favour of Parwana hold ers was discriminatory and violative of Article 14.
Under clause 1 of the proviso to the impugned rule 21, a holder of a Parwana granted under the Rules has to pay royalty at the rate of 50 per cent of the royalty payable by the lessees and no royalty is payable by village potters who manufacture upto one lakh bricks per year and by the village potters whose annual production was not exceeding two lakh bricks and who supply at least one lakh bricks to the Rural Housing Board or Panchayats.
His contention was that section 15 of the Act which authorised the State Government to make rules in respect of minor minerals does not specifically authorise the State Government to make such discrimination.
We find no substance in this contention too.
It is obvious that a valid classification of persons and things for 414 purposes of imposing any obligation on them would not be violative of Article 14 provided the classification is a reasonable one.
It is well settled that a classification to be valid has to satisfy two conditions: (1) that there is an intelligible differentia between those who are included in the class which is affected by any law or rule and those who are placed outside the said rule; and (2) that there is a reasonable nexus between the classification and the object to be achieved by the rule or law in question.
The Act under the Rules was made for purposes of regu lation and development and conservation of minerals.
It is equally clear that while levying a tax the authority con cerned is entitled to grant concessions and exemptions wherever necessary having regard to the purpose of the Act, the levy of royalty is incidental to the regulation and development of minerals.
Many a time absence of such classi fication may itself result in the invalidation of the law or rule.
Whoever is given an exclusive right to exploit a mine will have to pay some amount by way of return to the Govern ment of India as authorised by entry 50 of List II of the 7th Schedule to the Constitution.
Having regard to the broad policy underlying the Constitution if a concession is shown in favour of the poor and the down trodden, it cannot be said that the exemption or concession is invalid.
According to rule 2(vi)(a) of the Rules a "quarrying Parwana" means a quarrying Parwana granted under these rules to extract and remove any minor mineral from land not exceeding a specified area.
Rule 33 A provides that the competent officer may notify areas of limestone, Black Trap, sand stone and build ing stones for the purpose of grant of quarrying parawana, as he deems fit.
When any area is so notified, no quarry lease shall be granted for such notified area.
Rule 33 B of the Rules reads thus: "33.B. Grant of quarrying Parwana On an application made to the competent officer, he may grant a quarrying Parwana to extract and remove from the specified area within his jurisdiction the minor mineral from a plot not exceeding 2,000 square meters, as may be specified by the competent officer.
The compe tent officer may grant such Parwana in the following priorities: (a) Individual families to Khanias belonging to the Scheduled Castes or the Scheduled Tribes, who do physical work I of excavating minor mineral in the area applied for. 415 (b) Individual families of 'Khanias ' who do physical work in excavating minor minerals in the area applied for.
(c) New individual Khanias who do physical work in excavating minor minerals in any other areas.
" Rule 33 C provides that the lease shall be granted for one year ending 31st December on a payment of a fee of Rs.50 for an area upto 1,000 square meters and Rs. 100 for an area above 1,000 square meters and upto 2,000 square meters.
Thus it is seen that a Parwana can be given only respect of plots not exceeding 2,000 square meters and for a limited period of one year.
It is only in the case of such people who are described in the Rules and who invariably belong to the weaker sections of society the concession is shown under rule 21, whereas the mining lease may be given to persons mentioned in rule 9.
Under rule 18 of the Rules the period of lease in the case of the minor minerals can be for a much longer period, it can be upto 10 years in respect of minor minerals except in the case of ordinary sand, Kankar, Mur ram, Gravel and in the case of Kankar, Murram and gravel a lease can be granted upto three years, and the area or land covered by a mining lease is governed by rule 15 which says that no quarry lease shall be granted for an area exceeding 10 hectares in case of specified minor mineral and 20 hec tares in the case of other minerals.
So a comparison of the relevant rules would show that a larger restriction is imposed both on the area in respect of which a Parwana could be issued and the duration of the Parwana right and as also stated that the persons who take quarrying Parwana are persons belonging to the weaker sections of society and if under rule 21 a concession is shown in their favour it cannot be said that there is no reasonable nexus between the classification for purposes of the proviso to rule 21 to show concession in the matter of payment of royalty and the social policy underlying the Constitution, the statute and the Rules.
The fact that section 15 of the Act does no authorise the State Government to show such concession while promulgating the Rules which are in the nature of subordi nate legislation is also of no consequence.
Since the power exercised is legislative in character the authority which is exercising the said power has the power to make rules equi table by necessary implication.
No express power need to conferred on such subordinate authority in order to make a classification for purposes of implementing the policy of the Act under which the Rules are made.
We do not also agree with the contention that levying of royalty in the State of Gujarat on the minor minerals would impose in any way 416 the freedom guaranteed under Article 301 of the Constitution regarding movement of goods from one State to another for the activity of quarrying does not involve any movement as such.
The mineral may be consumed inside the State and in some cases may latter on be taken outside the State.
But the movement outside the State is not the direct consequence of quarrying.
We do not, therefore, find any substance in any of the contentions urged before us.
These petitions are dismissed with costs.
Each of the petitioners shall pay a sum of Rs.2,000 by way of costs to the State of Gujarat.
Y. Lal Petitions dis missed.

summary/full:
The Petitioners in these petitions have challenged the validity of a Notification issued by the Government of Gujarat on June 25, 1985 whereby the Gujarat Minor Mineral Rules were amended with effect from 1.7.1985.
By the said notification, original Rule 21 of the Rules was substituted by a new Rule 21 which provided that a holder of a quarry lease or any other mineral concession granted under the Rules shall pay royalty in respect of minor minerals provid ed in column 2 of the Schedule.
It is under this Notifica tion that the rate of royalty in respect of Black trap and Hard Murrum was increased from Rs.4 to Rs. 7 per metric tonne.
The validity of Rule 21 as it stood prior to its amend ment by the aforesaid impugned notification was considered and upheld by this Court on March 6, 1986 in D.K. Trivedi & Sons & Ors.
vs State of Gujarat & Ors.
, ; The impugned notification was issued at a time when the Writ Petitions in the aforesaid case were pending in the High Court.
The increase in the levy of royalty effected by the impugned notification is now questioned in these petitions.
The Petitioners raised the following contentions viz; (1) That the royalty levied and covered under the Rules should be applied only for mineral development and since the royalty is being treated as part of the consolidated fund of the State and used for other purposes by the State, the levy was bad; and (2) That the impugned notification in question was in contravention of clause (c) of article 304 of the constitution.
(3) That the impugned notification is discriminatory in character.
407 Dismissing the Writ Petitions, this Court, HELD: That Act is no doubt passed for development of minerals but while discharging its functions relating to development, if the State incidentally allows mining to be carried on in the public interest and levies in that connec tion a tax, it does not mean that the said tax should be used only for development of minerals and not for other purposes sanctioned by law.
[412B] The India Cement Ltd. etc.
vs The State of Tamil Nadu etc., [1989] 4 SC Judgment Today 190.
No restriction is being imposed on the freedom of trade of the petitioners by the levy of royalty.
The minerals belong to the Government and if anybody wants to have the right as a lessee to exploit the mines to the exclusion of others and to remove the minerals with a view to making profit, he has to pay a royalty imposed in accordance with law.
[412E] In the instant case, the levy is made under a law made by the Central Government.
It is not an imposition made by a law made by the State Legislature on which alone, the re striction contemplated under article 304(b) applies.
[412F] If the Executive or the administrative authority acts in an arbitrary manner, its action would be bad in law and liable to be struck down by the Courts but the possibility of abuse of power or arbitrary exercise of power cannot invalidate the statute conferring the power or the power which has been conferred by it.
[413B C] Since the power exercised is legislative in character, the authority which is exercising the said power has the power to make Rules equitable by necessary implication.
No express power need be conferred on such subordinate authori ty in order to make a classification for purposes of imple menting the policy of the Act under which the Rules are made.
[415G]


judgement:
: Criminal Appeal No. 8 18 of 1979.
From the Judgment & Order dated the 27.10.1979 of the Madras High Court in Crl.
A. No. 4 of 1977.
A.S. Nambiar and K.R. Nambiar for the Appellant.
V. Krishnamurthy for the Respondent.
The Judgment of the Court was delivered by FATHIMA BEEVI, J.
This appeal is directed against the judgment dated 27.10.1979 of the High Court of Madras con firming the conviction of the appellant under section 161, I .P.C. and under section 336 5(2) read with section 5(1)(d) of the Prevention of Corrup tion Act.
The appellant had been sentenced to undergo R.I. for 15 months under section 5(2) read with section 5(1)(d) of the Prevention of Corruption Act with no separate sen tence under section 161 I.P.C.
The brief facts of the case are as under.
The appellant, Sunderamoorthy was an Accountant cum Headclerk in the Tamil Nadu Forest Training School at Vaigai Dam.
He took charge of the office on 6.10.1975 and had been residing in a house opposite the training school.
PW 3, the Principal of the training school issued exhibit P 2 show cause notice to the PW 1, Venkataswamy, the canteen contractor, as to why his licence for running the canteen should not be cancelled.
This was on the basis of a complaint made by the appellant that the food served in the canteen was substand ard.
The appellant had taken food in the canteen for two days and being dissatisfied discontinued the practice before the notice was issued.
The prosecution case is that the accused thereafter sent for PW 1, informed him that he would help him in restoring the licence and demanded a bribe of Rs. 100.
On 21.10.1975, the appellant is stated to have pressed the demand to PW 1.
The latter made a complaint to PW 6 who thereupon arranged a trap.
As instructed, PW 1 was ready with ten rupees currency notes.
PW 6 after drawing up a mahazar in the presence of PW 2, Jaganathan, Assistant of the Office of the Special Tehsildar, Usilampatti directed PW 1 to give the notes to the appellant.
PW 1 handed over the money to the appellant who received the same.
When PW 1 emerged, PW 6 along with PW 2 confronted the appellant.
The appellant produced the currency notes.
PW 6 conducted the phenolphthalein test with reference to the fingers of the appellant.
The test was positive, the currency notes were seized and the appellant arrested.
PW 3, the Principal produced the concerned file relating to show cause notice, from the house of the appellant on the same day.
Finally, the appellant was chargesheeted.
At the trial, the prosecution witnesses supported the case.
PW 1 affirmed the fact that the appellant made the demand and had also received the amount on 22.10.
The recovery of the currency notes from the appellant was not challenged.
The plea of the appellant was that PW 1 had returned the amount due to him and there had been no demand for a bribe as there had been no occasion for doing so.
The Trial Court accepted the prosecution evidence, rejected the plea of the appellant and recorded the conviction.
Before the High Court, the .contentions of the appellant were that there was no independent evidence regarding the demand, the messenger who had contacted PW 1 at the 337 behest of the appellant had not been examined, the solitary evidence of PW 1 is insufficient, the explanation offered by the appellant was probable and there is no conclusive evi dence to hold that the appellant.
was guilty.
It was also urged that the appellant being new in the office could exert little influence on the Principal and the whole story is, therefore improbable.
These contentions did not find favour with the High Court.
It took the view that the evidence of PW 1 find corroboration in the testimony of PW 2 and 6 and the contemporary records.
The recovery of the currency notes from the appellant proves the guilty conduct of the appel lant in view of the presumption arising under section 4(1) of the Prevention of Corruption Act which has not been rebutted.
The decisions of the Court in State of Rajasthan vs Mohamed Habeeb, ; C.I. Ernden vs State of Uttar Pradesh; , and Lohana Kantilal vs State, AIR 1954 Saurashtra 12 1 were referred to.
The High Court thought that though the conviction under section 161 I.P.C. and section 5(2) of the Prevention of Corruption Act is to be maintained, no separate sentence need be award ed under section 161 I.P.C.
The appellant has reiterated the contentions before us.
The learned counsel appearing for the appellant, however, maintained that the appellant had a consistent case even from the earliest opportunity that the currency notes found in his possession was the money returned by PW 1, the cir cumstances of the case would probabalise this case of the appellant and the presumption, if any, arising under section 4 is rebutted and the conviction cannot therefore be sus tained.
PW 6 has stated at the time of the seizure the explanation offered by the appellant was that PW 1 had returned the loan and that he had given the money for the Dipawali.
The case that has been developed in the course of the trial is not that of a loan transaction but payment of an advance of Rs. 125 in the canteen when the appellant started to take food there.
The case of Dipawali gift or return of a loan given to PW 1 has not been even suggested.
It cannot, therefore, be said that there had been consistent explanation for the appellant.
PW 3, the Principal has averred in unequivocal terms that Ex.
P 2 memo had been issued on the basis of the complaint received from the appellant that on getting the explanation from PW 1 he on 18.10.1975 itself passed orders and closed the file.
The order made was not disclosed to PW 1 and till 22.10.1975, the file itself was kept by the appellant in his personal custody.
He had thereafter received the amount of Rs. 100 from PW 1.
This conduct of the appellant is clearly incon sistent with the transaction of loan or return of money by PW 1. 338 This Court observed in Dhanvantrai Balwantrai Desai vs State of Maharashtra, AIR 1964 SC 575 as under: "Where any gratification (other than legal gratification) or any valuable thing is proved to have been received by an accused person the court is required to draw a presumption that the person received that thing as a motive of reward such as is mentioned in section 161, I.P.C. Therefore, the Court has no choice in the matter, once it is established that the accused person has received a sum of money which was not due to him as a legal remuneration.
Of course, it is open to that person to show that though that money was not due to him as legal remuneration it was legally due to him in some other manner or that he had received it under a transaction or an arrangement which was lawful.
The burden resting on the accused person in such a case would not be as light as it is where a presumption is raised under section 114 of Evidence Act and cannot be held to be discharged merely by reason of the fact that the explanation offered by the accused is reasonable and probable.
it must further be shown that the explanation is a true one.
The words 'unless the contrary is proved ' which occur in this provision make it clear that the presumption has to be rebutted by 'proof ' and not by a bare explanation which is merely plausible.
A fact is said to be proved when its existence is directly established or when upon the material before it the Court finds its existence to be so probable that a reasonable man would act on the supposition that it exists.
Unless, there fore, the explanation is supported by proof, the presumption created by the provision cannot be said to be rebutted.
" On a careful consideration of the facts and circum stances, we are not satisfied that the appellant had even by preponderance of probability succeeded in rebutting the presumption.
The argument that clause (d) of section 5(1) of the Prevention of Corruption Act is not attracted on the proved facts is also not impressive.
We find no merit in the appeal.
It is accordingly dismissed.
N.V.K. Appeal dismissed.

dataset_name: IN-Abs

summary/full:
The appellant was an Accountant cum Headclerk in the Forest Training School, PW 3 the Principal of the training school, and PW I the canteen contractor.
The prosecution alleged that on the basis of a complaint made by the appel lant that the food served in the canteen was substandard, PW 3 issued a show cause notice to PW I, as to why the licence for the canteen should not be cancelled and that thereafter the appellant sent for PW I and demanded a bribe of Rs. I00.
As the appellant pressed the demand from PW 1, the latter made a complaint to PW 6, the inspector, who arranged a trap.
The trap was arranged.
PW I handed over the money to the appellant, who received the same.
PW 6 conducted the phe nolphthalein test with reference to the fingers of the appellant.
The test was positive.
The currency notes were seized, and the appellant arrested chargesheeted.
The Trial Judge accepted the prosecution evidence, rejected the pleas of the appellant that PW 1 had returned the amount of Rs. 100 due to him, that there had been no demand for a bribe as there had been no occasion for doing so, and recorded conviction.
The appellant appealed to the High Court and contended that there was no independent evidence regarding the demand, the messenger who had contacted PW 1 at the behest of the appellant had not been examined, the solitary evidence of PW I is insufficient and that the explanation offered by the appellant was probable and that there is no conclusive evidence to hold that the appellant was guilty.
The High Court took the view that the recovery of the currency notes from the appellant prove his guilty conduct, in view of the presumption arising under section 4(1) 01 ' the Prevention of Corruption Act and that the same has not been rebutted and held that though the conviction under 335 section 161 I.P.C. and section 5(2) of the Prevention of Corruption Act, 1947 is to be maintained, no separate sen tence need be awarded under section 161 I.P.C. It, accord ingly, confirmed the conviction of the appellant and sen tenced him to undergo rigorous imprisonment for 15 months.
In the appeal to this court, it was contended that the appellant had a consistent case even from the earliest opportunity, that the currency notes found in his possession was the money returned by PW I, and that the presumption, if any, arising under section 4 was rebutted, and the convic tion cannot therefore be sustained.
Dismissing the appeal, this Court HELD: 1.
The appellant has not even by preponderance of probability succeeded in rebutting the presumption under section 4(1) of the Prevention of Corruption Act.
[338C] 2.
The Court has no choice once it is established that the accused person has received a sum of money which was not due to him as a legal remuneration, but to draw a presump tion that the person received the money as a motive of reward.
However, it is open to that person to show that though that money was not due to him as legal remuneration, it was legally due to him in some other manner or that he received it under a transaction or an arrangement which was lawful.
The explanation offered by the person should be a true one and not one which is merely plausible.
[339B C; F] Dhanvantrai Balwantrai Desai vs State of Maharashtra, AIR 1964 SC 575, referred to.


judgement:
Appeals Nos. 169 171 of 1955.
Appeals from the judgment and order dated July 10, 1953, of the Madras High Court in Writ Petitions Nos. 75, 87 and 135 of 1953.
R. Ganapathy Iyer and Shanmugavel, for the appellants.
V. K. T. Chari, Advocate General for the State of Madras, V. V. Raghavan and R. H. Dhebar, for the respondents.
93 H. N. Sanyal, Additional Solicitor General of India and R. H. Dhebar, for Intervener No. 1 T. M. Sen, for Interveners Nos. 2 and 3.
section B. Sen, Additional Government Advocate for the State of Madhya Pradesh and I. N. Shroff, for Intervener 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 thereunder, and certain notifications issued by the first respondent herein in pursuance thereof.
The Act was passed to provide for the better regulation of the buying and selling of commercial crops in the State of Madras and for that purpose to establish markets and make Rules for their proper administration.
On May 18, 1951, the State Government issued G. 0.
No. 1049 (Food & Agriculture 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 & Agriculture Department) ordering the constitution of a Market Committee at Koilpatti and Sankarankoil in Tirunelveli District.
By a similar G. O., viz., G. 0.
No. 356 (Food & Agriculture Department) dated March 8,1952, the Government directed the constitution 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 Ramanathapuram District on January 1, 1953, and requiring persons who did business in cotton 94 and groundnut to take out licences as provided therein.
A further notice dated January 17, 1953, stated that all the traders in cotton and groundnut, who failed to take out licences on or before February 15, 1953, were liable to prosecution.
Similar notices dated January 22, 1953, and February 14, 1953, were issued by the Chairman, Tirunelveli Market Committee at Koilpatti calling upon all traders, producers and weighmen dealing in cotton to take out licences before February 28, 1953, and threatening prosecution 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 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 Bylaws framed thereunder.
A Bench of the Madras High Court, consisting of Rajamanna C. J. and Venkatarama Aiyar J. by an order dated July 10, 1953, dismissed the applications.
The learned Judges held that section 5(4)(a) of the Act was void to the extent it conferred on the Collector authority to refuse a licence at his own discretion and rule 37 was void in so far as it prohibited persons whose names had not yet been registered as buyers and sellers, from carrying on business in the notified area.
Subject to that, the impugned Act and the Rules were upheld under article 19(6) of the Constitution as a valid piece of marketing legislation.
In the result, the applications were dismissed.
The aforesaid three appellants have filed these appeals 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 Rules framed thereunder constitute an 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 95 of the Act and the Rules made thereunder in an attempt to establish that the provisions cripple the business of the appellants, restrict the rights of the small traders, cause unnecessary and unintentional hardship to the growers and thereby exceed the purpose of the enactment and defeat its object.
Before we scrutinize the provisions of the Act, the law on the subject may be briefly noticed.
Under article 19 (1)(g) of the Constitution of India all persons have the right to practice any profession, or to carry on any occupation, trade or business.
Clause (6) of that Article 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 el.
It has been held that in order to be 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 vs The State of Madhya Pradesh) (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 vs 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 general pattern, of reasonableness 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 prevailing 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, and 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) ; (2) ; , 607. 96 all commercial countries.
The object of such legislation is to protect the producers of commercial crops from being exploited by the middlemen and profiteers and to enable them to secure a fair return for their produce.
In Madras State, as in other parts of the country, various Commissions and Committees have been appointed to investigate the problem, to suggest ways and means of providing 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 proper return for the produce 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 consideration of other Provinces the establishment of regulated markets on the Berar system 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 agricultural produce in the State is the predominant part played by middlemen.
" It is the cultivator 's chronic shortage of money 97 that has allowed the intermediary to achieve the prominent position he now occupies.
" The necessity for marketing legislation was stressed by other bodies also like the Indian Central Banking enquiry Committee, the All India Rural Credit and Survey Committee, etc.
Recently the Government of Madras appointed an expert Committee to review the Act.
In its report the Committee graphically described the difficulties of the cultivators and their dependence upon the middlemen thus: " The middleman plays a prominent part in sale transactions and his terms and methods vary according to the nature of the crop and the status of the cultivator.
The rich ryot who is unencumbered by debt and who has comparatively 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 the latter generally cannot afford to wait about until the sale is effected he leaves his produce 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 invariably disposes of his produce through the same agency but, unlike the rich ryot he is not free to choose his commission agent, because he generally takes advances from a particular commission agent 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 portion of their produce finds its way into the hands of the village money lender and whatever remains is sold to petty traders who tour the villages and the price at which it changes hands is governed not so much by the 13 98 market rates, but by the urgent needs of the ryot which are generally taken advantage of by the purchaser.
The dominating position which the middleman occupies and his methods of sale and the terms of his dealings have long ago been realized.
" The aforesaid observations describe the pitiable 'dependence of the middle class and poor ryots on the middlemen and petty traders, with the result that the cultivators are not able to find 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 commercial 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 middlemen 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 exploitation 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 I commercial crop ' to mean cotton, groundnut or tobacco and includes any 99 other crop or product notified by the State Government in the Fort St. George Gazette as a commercial crop for the purposes of this Act.
Under section 3, the State Government issues a notification declaring their intention to exercise control over the purchase and sale of such commercial crop or crops in a particular area and calls for objections and suggestions to be made within a prescribed time.
After the objections are received, the State Government considers them and declares the areas to be specified in the notification or any portion thereof to be a notified area for the purpose of the Act in respect of commercial crop or crops specified in the notification.
Under section 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 section 16 for their supersession for the reasons mentioned therein.
In exercise of the powers conferred by section 18 of the Act the State Government made Rules which provide for the manner in which the members of Market Committees should be elected, and also for the constitution of sub Committees.
In exercise of the powers conferred by section 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 providing 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: "(1) 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 100 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 the grower and reliable market information provided regarding arrivals, stocks, prices, etc.
(7) Quality standards are fixed when necessary and contract forms standardized for purchase and sale.
" 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 accordance with the conditions of a licence granted to him by the Collector.
The first proviso to that section provides that after the establishment in such area of a market for the purchase and sale of a notified commercial 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 the State Government.
The second proviso enables 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 quantities not exceeding those prescribed by Rules made under the Act.
The third proviso authorizes the said Committee to exempt a person selling commercial crop which has been grown by him, or a cooperative 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 the exemption.
Sub section (2) of section 5 gives exemption to a person purchasing for his private use a commercial 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, 101 establishing or using, continuing or allowing to be continued, any place for the storage, weighment, pressing or processing of any notified commercial crop except under and in accordance with the conditions of a licence granted to him by the Collector.
Under proviso to sub section
(3) a person is exempted from the operation of that Rule in respect of any notified commercial crop grown by him.
Sub section (4) enables the Collector, on the report of the Market Committee and after such inquiry as he deems fit, to cancel or suspend 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 section 5(1) and section 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 poison to obtain more than one licence for setting up, establishing 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 section 5(1) and section 5(3), one licence is sufficient for different places and only small payments have to be made for every additional premises for the same purpose.
It is not necessary to notice the other provisions as nothing turns upon them in the present ease.
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 weigbment 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 102 established, the said provisions, by imposing licensing restrictions, enable the buyers and sellers to meet in licensed premises, ensure correct weighment, make available to them reliable market information and provide for them a simple machinery for settlement of disputes.
After the markets are built or opened by the marketing committees, within a reasonable radius 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 section 5 are not only unreasonable but tend to defeat the very purpose of the legislation.
Elaborating this argument, the learned counsel says that they are unreasonable from the standpoint of the big trader, the small trader and also the grower of crops.
The trader, his argument proceeds, can only buy or sell in the licensed premises paying heavy licensing fees under different beads and paying also heavy overhead charges, with the inevitable consequence that he will not be 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 be has to pay higher prices to the sellers.
The first argument rather exaggerates the situation; for, the rates of licence fees shown in the bye laws framed by the Marketing Committee at Virudhunagar do not appear to be so high as to cripple the trader 's business.
No material has been placed before 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 legislation ; for, what the learned counsel in effect says is that the trader is exploiting the small growers 103 and that he is prevented from doing so under the licensing regulations.
From the standpoint of the seller it is said that though he may be exempted from the operation of the said Act under the second proviso to section 5 (1) he is prevented from selling his produce by insisting that he should trade only with the licensed trader and in the licensed premises.
Assuming that that is the legal position under the Rules, nothing prevents the grower from selling his produce to another grower whose requirements are greater than what he produces or to a smaller trader exempted under the third proviso to section 5 (1).
After the market is established, it is contended, a grower will be obliged to carry the goods to a centralised place if he is to dispose of the goods, which can hardly be described as increasing the facilities for marketing the goods.
It is true that the growers may be under some difficulties in this regard, but that is counter balanced by the marketing facilities provided for them under the Act.
It is also said that when a market is established, no licence to purchase, or sell, commercial crops will be 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 Government 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 unreasonable restriction upon his right to do business.
But in our view, such a provision is necessary for preventing the local business being diverted to other places and the object of the scheme being defeated.
Further, ,in practice, it is seen that the Government fixes by notification under section 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 facilities for transporting commodities.
That apart, the establishment of a market does not prevent a trader from carrying on the business in the market established, 104 but he could not run a market for himself in respect only of the commodities declared to be commercial crops within the radius prescribed.
While the object of the Act is to protect the growers, the argument proceeds, the small traders are compelled to resort to distant markets, with the result that some of them would be forced to give up their business and others would have to incur unnecessary expenditure 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 exempted, it creates loopholes in the scheme through which the big trader may operate, and thereby the object itself would be defeated.
That apart, the second proviso enables the Committee to exempt small traders in appropriate cases.
The constitution of the Committee, in which there will be representatives 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 provision to enable the Government to supersede it.
We, therefore, hold that, having regard to the entire scheme of the Act, the impugned provisions of the Act constitute 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 Virudhunagar is an unreasonable restriction on the appellants ' right to do business, and is, therefore, invalid.
In Viradhunagar, 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 stockina goods, halls, parks and other amenities.
Certain charges called I mahimai ' are collected on all transactions that take place within the market; and they are constituted into a trust fund which is utilised for the maintenance of schools 105 and for religious purposes.
The argument is that the appellants in C. A. No. 169 of 1955 are running the market as an occupation or business with high standards and that the notification directing the constitution of a market in the same locality, when admittedly the entire scheme of building a net work of markets could not be finished within a, predictable time, is not a reasonable restriction on their right to 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 circumstances, when two alternative methods would equally achieve the objects, the notification directing the constitution of a market to the exclusion of the existing one would be an unreasonable restriction.
The learned Advocate General of Madras contends that the appellants 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 business, for they can still do business in the market established subject to the regulations and also do business 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 ownership of the property, reliance is placed upon the decisions in T. B. Ibrahim vs Regional Transport Authority, Tanjore (1); Ramunni Kurup vs The Panchayat Board, Badagara (2); Captain Ganpati Singhji vs The State of Ajmer (3) ; and Valia Raja of Edappally vs The Commissioner for Hindu Religious Charitable Endowments, Madras (4).
It is unnecessary to express an opinion on the question whether the right of the appellants falls under article 19(1)(f) or (g) of the Constitution of India, or under both the sub clauses; for, the (1) ; (3) ; (2) I.L R. (4) I.L.R. [1955] mad.
14 106 question whether the notification imposes an unreasonable restriction on the appellants ' right cannot be decided on the material placed before us.
That question may conveniently be left open to be decided at the time when the market is established at Virudhunagar, pursuant to the notification issued by the Government.
It does not appear from the record that there is any early prospect of such a market being established in that place.
The reasonableness of the restrictions would depend upon the circumstances obtaining at the time the market is established.
It depends upon the conditions then obtaining in the trade in commercial crops, the 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 considerations which cannot now be visualized.
We would, therefore, leave open that question to be decided at the proper time by the authorities concerned when a market is sought to be established in the manner provided by law.
The next argument relates to I mahimai ' allowances collected by the appellants from the sellers and buyers of the crops 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.
" We cannot share the opinion of the learned judges that the question does not arise for decision at this stage.
The appellants prayed for 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 107 the Act read with the bye laws prohibited the collection of 'mahimai ' by the appellants.
The question whether the bye law prohibiting the collection off I mahimai ' allowance is valid or not does directly arise for consideration in this case.
There is also some ambiguity in the conclusion arrived at by the learned judges of the High Court.
They stated that the allowance had nothing to do with the transaction as such and could not therefore be properly regarded as a trade allowance.
The learned counsel for the appellants contends that if it is not a trade allowance, it is not covered either by section 14 of the Act or by bye laws framed thereunder, as section 14 prohibits the deduction 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 I mahimai ' is a trade allowance and if so, whether the allowance is permitted to be received by the rules or bye laws made under that section.
The relevant provisions may be noticed at this stage.
Section 14 says "No 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 any suit or proceeding arising out of any such transaction, have regard to any trade allowance not so prescribed.
Explanation:Every deduction other than deduction on account of deviation from sample, when the purchase is made by sample, or of deviation from standard, when the purchase is made 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 trade allowance for the purposes of this Act ".
108 Section 19: " (1) Subject to any rules made by the State Government under section 18 and with the previous sanction of the Director of Agriculture, Madras, a market committee may in respect of the notified area for which it was established make bylaws for the regulation of the business and the conditions of trading therein.
" By law 25: Trade allowance applying to the market and the notified area: (a). . . . . . . . . " (b) Deductions such as I mahimai ' are prohibited.
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 prescribing what are permissible trade allowances under the section.
Such allowances as are prescribed by a bye law can be deducted in any transaction notwithstanding 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 section 14 which they are entitled to do under that section, but made the bye law mentioning the ' mahimai ' allowance as one not deductible in any transaction.
The validity of that part of the bye law prohibiting the deduction of ' mahimai ' as trade allowance depends upon the nature of that deduction.
If ' mahimai ' is not a trade allowance, the said part of the bye law would obviously be invalid as inconsistent with the provisions of section 14.
If, on the other hand, mahimai ' is a trade allowance, the said part of the 109 bye law will be superfluous, as the allowance falls within the terms of the section itself This leads us to the question whether ' mahimai ' is a trade allowance, within the meaning of section 14 of the Act.
What is a trade allowance? Trade involves exchange of commodities for money, the business of buying and selling and the transaction involves the seller, the buyer, the commodity sold and the price paid for the sale.
Allowance means something given as compensation, rebate or deduction.
Under the section, the said deduction should be in any transaction in respect of commercial crops.
The deduction may be 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 Dine rupees to A; he may keep that amount for himself or pay the same to C.
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 commodity purchased at Rs. 102 but the purchaser pays 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 the transaction, but both the parties pay C a specified amount as consideration for the user of the premises or for the services rendered by him.
The question whether a particular payment is a trade allowance or not, depends upon the facts of each case.
Firstly, it must be a deduction in any transaction in respect of commercial crops.
If it is a deduction out of the price or commodity agreed to be paid or transferred, it would be a trade allowance.
On the other hand, if the payment is de hors the terms of the transaction but made towards consideration for the use of the premises or services rendered, it would not be a deduction from the price or in any transaction.
No material has been placed 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 section 14 of the Act.
The learned judges, having expressed the view that the 110 question did not arise for consideration at that stage, did not also consider any material to support their finding.
In the circumstances, the only reasonable course is to leave that question open so that it may be decided in appropriate proceedings.
In the result, subject to the aforesaid observations, the appeals are dismissed but without costs.
Appeals dismissed.

summary/full:
The Madras legislature enacted the Madras Commercial Crops Markets Act for providing satisfactory conditions for the growers 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 target 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 commercial 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 and are valid.
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 vs The State of Madhya Pradesh, [1950] S.C.R. 759 and State of Madras vs V. G. Rao, ; , referred to.