Supreme Court Upholds Validity of Punjab Agricultural Marketing Rules: Walaiti Ram Charan Dass vs. State of Punjab (2019)

Introduction

Date of the Judgment: October 16, 2019

Citation: 2019 INSC 1172

Judges: Deepak Gupta, J., Aniruddha Bose, J.

Can a government body impose conditions on existing licensees when allotting plots in a newly developed agricultural market? The Supreme Court of India recently addressed this question, examining the balance between protecting established businesses and ensuring fair market practices. This case revolves around challenges to the Punjab State Agricultural Marketing Board Rules concerning the allotment of plots to existing licensees in newly established market yards, specifically focusing on the criteria for eligibility. The judgment was delivered by a two-judge bench comprising Justice Deepak Gupta and Justice Aniruddha Bose.

Case Background

The case involves licensed traders of agricultural produce in Punjab who conduct their business in designated Mandis (markets) as per the Punjab Agricultural Produce Markets Act, 1961. As towns and cities expanded, older grain markets were de-notified, and new ones were established. Traders operating in the old markets applied for plots in the new markets. Their applications were rejected, leading to writ petitions before the High Court. The High Court’s decisions were appealed, resulting in the present case before the Supreme Court. The core issue revolves around the validity of the rules governing the allotment of plots in new markets to existing licensees from de-notified markets.

Timeline:

Legal Framework

The case is primarily governed by the following legal provisions:

• ✓ The Punjab Agricultural Produce Markets Act, 1961: This Act regulates the establishment and operation of agricultural markets in Punjab.
• ✓ The Punjab New Mandi Townships (Development and Regulation) Act, 1960: This Act deals with the development and regulation of new market townships.
• ✓ The Punjab State Agricultural Marketing Board (Sale and Transfer of Plots) Rules, 1999: These rules govern the sale and transfer of plots in markets developed by the Board.
• ✓ The Punjab State Agricultural Marketing Board (Sale and Transfer of Plots) (First Amendment) Rules, 2008: These rules amended the 1999 Rules, introducing changes to the allotment process.
• ✓ The Punjab Agricultural Produce Markets (General) Rules, 1962: These rules specify the procedures for maintaining records and returns by licensees.

The 1999 Rules, as amended in 2008, provide for the allotment of plots to licensed dealers of old, de-notified markets in new markets. Rule 3 of the 1999 Rules, as amended by the 2008 Rules, specifies the terms and conditions for such allotments.

The key provisions of the 1999 Rules, as amended by the 2008 Rules, are:

• ✓ A maximum of 50% of available plots can be allotted to existing licensees.
• ✓ The allotment price is fixed at 5% above the reserve price.
• ✓ Only licensees with a minimum of three years of licensing in the old market are eligible.
• ✓ Licensees must have a minimum annual turnover of Rs. 5 lakhs in the last three years.
• ✓ Licensees must submit returns in Form M or provide proof of working through Forms H and J.

Arguments

The appellants (old licensees) argued that the 2008 Rules violate the principles laid down in previous Supreme Court judgments, specifically Labha Ram and Sons vs. State of Punjab [(1998) 5 SCC 207], which emphasized the obligation of the government to provide sufficient accommodation to existing licensees in new markets. They contended that all old dealers should be provided shops at concessional rates without stringent conditions.

The appellants’ main submissions can be broken down into the following sub-arguments:

• ✓ The rules should not impose conditions that make it difficult for existing licensees to obtain plots in new markets.
• ✓ The requirement of a three-year license and a minimum turnover of Rs. 5 lakhs per year is arbitrary and unfair to long-standing businesses.
• ✓ The rules should prioritize the rights of existing licensees over new entrants.

The respondents (Market Board) argued that the 2008 Rules are valid and necessary to ensure that only genuine traders are allotted plots at concessional rates. They contended that the conditions of three years of licensing and a minimum turnover of Rs. 5 lakhs are reasonable and prevent misuse of the allotment process.

The respondents’ main submissions can be broken down into the following sub-arguments:

• ✓ The rules are necessary to prevent the allotment process from becoming a lottery for those not genuinely engaged in the business.
• ✓ The conditions of three years of licensing and a minimum turnover are reasonable and ensure that only established businesses are given preference.
• ✓ The rules do not violate the principles laid down in Labha Ram and Sons vs. State of Punjab [(1998) 5 SCC 207], as they provide for preferential allotment to existing licensees.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the Punjab State Agricultural Marketing Board (Sale and Transfer of Plots) (First Amendment) Rules, 2008 and Rule 3(iii) and (iv) of the Punjab State Agricultural Marketing Board (Sale and Transfer of Plots) Rules, 1999 are constitutionally valid?
2. Whether the High Court was correct in holding that a person can furnish adequate proof of working in the de-notified market yard even if he did not hold a license on the cut-off date?

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 Court’s view on the authorities:

• ✓ Labha Ram and Sons vs. State of Punjab [(1998) 5 SCC 207]:* The Court distinguished this case, stating that it was decided when there were no rules for preferential allotment. The current rules address the concerns raised in this case.
• ✓ Prem Chand Trilok Chand and Others vs. State of Haryana and Others [1989 Supp(1) SCC 286]:* The Court cited this case for similar observations regarding the obligation to provide sufficient accommodation to existing licensees.
• ✓ Crawford’s Interpretation of Laws:* The Court approved the passage on implied exceptions from mandatory statutes, emphasizing that laws should be read reasonably and with considerations of justice.

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by a combination of factors, primarily focusing on the need to balance the rights of existing licensees with the need to ensure fair and transparent market practices. The Court emphasized the importance of preventing misuse of the allotment process while also ensuring that genuine traders are not unduly disadvantaged.

The Court’s reasoning was influenced by a mix of factual and legal considerations.

The Court’s logical reasoning can be summarized as follows:

The Court considered alternative interpretations, such as the High Court’s view that a person could provide proof of working without a valid license. However, the Court rejected this interpretation, holding that a valid license is mandatory. The Court also considered the argument that the conditions were too stringent but found them to be reasonable and necessary to prevent misuse of the allotment process.

The Court’s decision was based on a balanced approach, upholding the validity of the rules while also providing a window for condoning minor deviations for justifiable reasons.

The Court’s reasoning was supported by the following quotes from the judgment:

“We find that these conditions are salutary in nature. These are necessary to ensure that only those dealers who have been in the trade for 3 years or more will be eligible for allotment of plots/shops.”

“The allotment of shop cannot be made a bounty or lottery for those who are transacting no or very little business but want to get shops/plots at concessional rate.”

“Every law must be read in an equitable and humane manner. Only technical violations can be condoned and not violations which go to the root of the matter.”

Key Takeaways

• ✓ The Punjab State Agricultural Marketing Board (Sale and Transfer of Plots) Rules, 1999 and the 2008 amendment rules are valid.
• ✓ A valid license is mandatory for allotment of plots in new markets.
• ✓ Minor deviations from the rules may be condoned for justifiable reasons, such as the death of the licensee or other incapacitating events.
• ✓ The conditions of a three-year license and a minimum turnover of Rs. 5 lakhs per year are reasonable and necessary to ensure only genuine traders benefit.
• ✓ The primary evidence for turnover is Form ‘M’, and in its absence, Form ‘H’ and ‘J’ can be considered.

The judgment clarifies that while existing licensees have a right to preferential allotment, this right is not absolute and is subject to reasonable conditions. The judgment also sets a precedent for how rules should be interpreted, emphasizing the need for a balanced approach that considers both the letter and the spirit of the law.

Directions

The Supreme Court gave the following directions:

• ✓ The Rules of 1999 and 2008 are legally valid.
• ✓ Any person obtaining a license for the first time must have a valid license for a period of more than 3 years.
• ✓ In case of renewal of license, the Rules provide a window of 3 months. If a complete application for renewal was submitted before expiry and the license was not renewed for no fault of the dealer, that period can be counted as a period of license.
• ✓ A dealer must have a license, and a person who has not renewed their license without justifiable cause cannot get any benefit.
• ✓ The primary evidence for proof of turnover is Form ‘M’, and in its absence, Form ‘H’ and ‘J’. No other document can be considered.
• ✓ The Board/Committee should reconsider cases with marginal deficiencies that occurred due to reasons beyond the control of the dealer within 3 months.

Development of Law

The ratio decidendi of the case is that the Punjab State Agricultural Marketing Board (Sale and Transfer of Plots) Rules, 1999 and the 2008 amendment rules are valid and do not violate the rights of existing licensees, provided that the rules are interpreted reasonably and with consideration of justice. The Court clarified that while existing licensees have a right to preferential allotment, this right is not absolute and is subject to reasonable conditions.

The judgment also clarifies that while the previous judgments in Labha Ram and Sons vs. State of Punjab [(1998) 5 SCC 207] and Prem Chand Trilok Chand and Others vs. State of Haryana and Others [1989 Supp(1) SCC 286] emphasized the need to protect existing licensees, they did not lay down an absolute rule that all existing licensees should be provided shops at concessional rates without any conditions. The present judgment clarifies that such conditions are valid if they are reasonable and necessary to prevent misuse of the allotment process.

Conclusion

In summary, the Supreme Court upheld the validity of the Punjab State Agricultural Marketing Board Rules, emphasizing the need for a balance between protecting the rights of existing licensees and ensuring fair market practices. The Court’s decision provides clarity on the conditions for preferential allotment of plots in new agricultural markets, setting a precedent for future cases involving similar issues. The Court also emphasized that while the letter of the law is important, it should be interpreted with considerations of justice and equity.