Supreme Court settles if Ghee is a livestock product under the Andhra Pradesh Agricultural Produce and Livestock Markets Act, 1966: Sangam Milk Producer Company Ltd. vs. The Agricultural Market Committee & Ors. (2024) INSC 174 (05 March 2024)

Introduction

Date of the Judgment: 05 March 2024

Citation: (2024) INSC 174

Judges: Justice Sudhanshu Dhulia and Justice S.V.N. Bhatti

Is ghee a product of livestock, and can its sale be regulated under agricultural market laws? The Supreme Court of India recently addressed this question, clarifying the scope of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966. This judgment examines whether “ghee,” a common dairy product, falls under the definition of “products of livestock” and whether the government followed the correct procedure in regulating its sale. The bench comprised Justice Sudhanshu Dhulia and Justice S.V.N. Bhatti.

Case Background

The case revolves around the regulation of “ghee” under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966. The Act aims to regulate the purchase and sale of agricultural produce, livestock, and products of livestock to ensure fair prices for producers. The core dispute arose from a 1994 government notification that included “ghee” as a product of livestock, which subjected it to market regulations.

The appellants, various milk producer companies, challenged this notification, arguing that “ghee” is not directly a product of livestock and that the notification was not issued following the proper procedure under the Act. They contended that the government had not followed the mandatory process of publishing a draft notification, inviting objections, and then issuing a final notification for regulating “ghee”. The primary relief sought by the appellants was to declare the 1994 notification invalid and to exempt them from paying market fees on the sale of ghee.

Timeline

Course of Proceedings

The producers of livestock products challenged the 1994 notification before the Andhra Pradesh High Court on two grounds: first, that “ghee” is not a “product of livestock,” and second, that the notification was issued without following the procedure under Section 3 of the Act. The matter was referred to a Full Bench of the Andhra Pradesh High Court.

The Full Bench of the Andhra Pradesh High Court, by a 2:1 majority, rejected the arguments of the appellants and upheld the 1994 notification. The High Court held that the notification was issued under Section 4 of the Act and that “ghee” is a “product of livestock.” The High Court also dismissed the writ petitions filed by the appellants based on this judgment.

Aggrieved by the decision of the Full Bench, the appellants approached the Supreme Court of India, challenging the validity of the 1994 notification and the imposition of market fees on ghee.

Legal Framework

The Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966, was enacted to regulate the purchase and sale of agricultural produce, livestock, and products of livestock. The Act aims to ensure fair prices for producers by eliminating middlemen and unethical trade practices.

Key provisions of the Act include:

• Section 2(v) defines ‘livestock’ as:
  
  ‘livestock’ means cows, buffaloes, bullocks, bulls, goats and sheep, and includes poultry, fish and such other animals as may be declared by the Government by notification to be livestock for the purposes of this Act;
• Section 2(xv) defines ‘products of livestock’ as:
  
  ‘products of livestock’ means such products of livestock as may be declared by the Government by notification, to be products of livestock for the purposes of this Act.
• Section 3 outlines the process for declaring a ‘notified area’ where the purchase and sale of agricultural produce, livestock, and products of livestock are regulated. This involves publishing a draft notification, inviting objections, and then issuing a final notification.
• Section 4 provides for the constitution of market committees and the declaration of ‘notified market areas’ for specific products.

The Act empowers the government to regulate the sale and purchase of livestock products through notifications and to levy market fees to support the functioning of market committees.

Arguments

The appellants, primarily milk producer companies, presented the following arguments:

• Ghee is not a direct product of livestock: They argued that “ghee” is a derivative product obtained from milk, which in turn is a product of livestock. Therefore, it should not be considered a “product of livestock” under the Act. They contended that the Act should only apply to primary products directly derived from livestock.
• Procedure under Section 3 was not followed: The appellants contended that the 1994 notification was issued without following the mandatory procedure under Section 3 of the Act, which requires the publication of a draft notification, invitation of objections, and consideration of those objections before issuing a final notification. They argued that this procedural lapse renders the notification invalid.

The respondents, the Agricultural Market Committee and the State, countered with the following arguments:

• Ghee is a product of livestock: They argued that “ghee,” being derived from milk, which is a product of cows and buffaloes (defined as livestock under the Act), is indeed a “product of livestock.” They emphasized that the definition of “products of livestock” is broad enough to include derivative products.
• Notification under Section 4 does not require Section 3 procedure: The respondents argued that the 1994 notification was issued under Section 4 of the Act, which does not require the same procedural steps as Section 3. They contended that Section 3 applies to the initial declaration of a “notified area,” while Section 4 applies to the declaration of a “notified market area” for specific products.
• Market Committees provided facilities: The respondents argued that the Market Committees had provided facilities for the purchase and sale of notified products.

The appellants relied on the strict interpretation of the definition of “products of livestock” and the mandatory nature of the procedure under Section 3. The respondents relied on a broader interpretation of the definition and the distinction between the procedures under Sections 3 and 4 of the Act.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for determination:

1. Whether “ghee” is a “product of livestock” under the provisions of The Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966.
2. Whether the Government notification (G.O. Ms. No.286 dated 05.07.1994), which inter alia notifies “ghee” as one of the products of livestock for the purpose of regulation of purchase and sale of “ghee” in all notified market areas was published after due compliance of the procedure contemplated under the provisions of the Act?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court analyzed the submissions made by both parties and the authorities cited. The following tables summarize the court’s treatment of these submissions and authorities:

What weighed in the mind of the Court?

The Supreme Court’s reasoning was primarily driven by a logical interpretation of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966. The Court emphasized that the definition of “products of livestock” is broad enough to include derivative products like ghee. The Court also focused on the distinction between the procedures under Sections 3 and 4 of the Act, clarifying that the 1994 notification was correctly issued under Section 4. The Court’s reasoning was also influenced by the need to ensure that the objectives of the Act, which are to regulate the market and ensure fair prices for producers, are achieved.

Logical Reasoning

Key Takeaways

• Ghee is a product of livestock: The Supreme Court has affirmed that “ghee” falls within the definition of “products of livestock” under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966. This means that the sale and purchase of ghee can be regulated under the Act.
• Distinction between Sections 3 and 4: The Court clarified that the procedure for declaring a ‘notified area’ under Section 3 is different from the procedure for declaring a ‘notified market area’ under Section 4. Notifications under Section 4 do not require the same procedural steps as Section 3.
• Market fees: The Court upheld the imposition of market fees on ghee and directed the appellants to pay the accumulated fees in installments.

The judgment has significant implications for the regulation of dairy products and other derivative products under agricultural market laws. It clarifies the scope of the term “products of livestock” and provides guidance on the procedural requirements for issuing notifications under the Act.

Directions

The Supreme Court directed the appellants to deposit the accumulated market fees with the Market Committees within two years from the date of the judgment, in four equal installments.

Development of Law

The ratio decidendi of this case is that “ghee” is a “product of livestock” under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966, and that notifications under Section 4 of the Act do not require the same procedural steps as Section 3. This judgment clarifies the interpretation of the Act and provides a precedent for future cases involving the regulation of derivative products under similar agricultural market laws. There is no change in the previous position of the law, but a clarification of the interpretation of the existing law.

Conclusion

The Supreme Court dismissed the appeals and upheld the majority decision of the Andhra Pradesh High Court. The Court affirmed that “ghee” is a “product of livestock” and that the 1994 notification was validly issued under Section 4 of the Act. The Court also directed the appellants to pay the accumulated market fees in installments. This judgment provides clarity on the scope of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966, and its application to derivative products like ghee.