Kalpesh Cotton Industries Private ... vs State Of Gujarat & 2 on 6 May, 2014

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Gujarat High Court

Kalpesh Cotton Industries Private ... vs State Of Gujarat & 2 on 6 May, 2014

1. In this petition filed under Article 226 of the Constitution of India, the petitioner company has prayed to quash and set aside the order dated 17th December, 2013 passed by the Joint Secretary (Appeal) Cooperation Department, State of Gujarat in Revision Application No. 53 of 2013 and further prayed to direct respondent No.3 - Agriculture Produce Market Committee , Botad to grant licence to it

2. As stated in the petition, the petitioner and its other two sister concerns deal in business of cotton and cotton seeds. The application of the petitioner for renewal of licence for the year 2011-12 was not accepted on the ground that the petitioner did not pay outstanding market fees of Rs.19,30,559.00+late payment interest for the period from October, 2002 to December, 2010 and that the petitioner did not supply requisite information as regards market fee inspite of repeated requests to the petitioner. The petitioner, therefore, sought to know vide letter dated 9.4.2011 as to for which transactions and for which years, demand of market fee of Rs.19,30,559.00 was made. The market committee vide letter dated 13.4.2011 gave details as regards non payment or deficit in the payment of market fees for respective years from 2002 to 2011. By the said letter, the market committee also asked the petitioner to remain present with ledger books and other material like purchase register and details of return submitted in Commercial Tax Department, failing which, necessary action was stated to be taken by the market committee. By letter dated 15.4.2011, requested the market committee to recall the decision of refusing to renew the licence and to follow the procedure known to law. By further letter dated 19.4.2011, the petitioner requested the market committee to provide necessary data to the petitioner on which the market cess was demanded.

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3. The petitioner then challenged the decision of the market committee of refusal to renew the licence before the respondent No.2 - the Director of Agriculture Market and Rural Finance by filing appeal no.125 of 2011. Pending the appeal, since the market committee felt that the petitioner might dispose of stock of agriculture produce placed in its godowns to evade the market cess, it applied seal to the godown of the petitioner. The Director then decided the appeal of the petitioner by order dated 24.10.2011 and directed that on petitioner producing its books of accounts and of other sister concerns before the market committee for its inspection and assessment of market cess and after payment of market fees by the petitioner, the market committee shall decide the application for renewal of licence. As regards seal applied by the Market Committee, the Director ordered that the Market Committee should take appropriate decision by exercising its discretion.

4. The above said order of respondent No.2 was challenged before the Deputy Secretary (Appeal), Agriculture and Cooperation Department by filing Revision Application No.528 of 2011 who initially passed interim order to open the seal from the godown of the petitioner but subsequently it was vacated by order dated 16.11.2011, and the revision application was fixed for final hearing. Such order vacating interim order was the subject matter of challenge before the learned Single Judge of this Court in Special Civil Application No. 17192 of 2011. Pending the said petition, the petitioner withdrew the revision application No. 528 of 2011. In the above said petition, the learned Single Judge passed interim order directing the market committee to open the seal from the godown which was challenged before the Hon'ble Division Page 3 of 16 C/SCA/2330/2014 JUDGMENT Bench of this Court in Letters Patent Appeal No. 2102 of 2011 but in the mean time, the petitioner also filed Special Civil Suit No. 199 of 2011 challenging the notice of recovery issued by the Market Committee wherein the recovery was stayed on condition of petitioner depositing the cheque for the amount under recovery notice.

5. However, in the Letters Patent Appeal, Hon'ble Division Bench passed order providing that out of the total goods under seal, the goods for the market value of approximately 1,10,00,000.00 shall be segregated and the petitioner was permitted to lift the goods excluding the goods valued at Rs.1,10,00,000.00 by further directing the petitioner not to sell the goods allowed to be lifted within the market area. Since the above said amount of Rs.1,10,00,000.00 was secured, the petitioner was permitted to withdraw the cheque deposited with the Civil Court and the parties were left to move the learned Single Judge for the decision in the pending petition.

6. It appears that the petitioner again filed appeal no.21 of 2012 seeking direction to the market committee to grant licence. The market committee objected to such appeal by pointing out that the petitioner did not comply with the earlier orders made by this court and also by the Director and it was pointed out that unless the petitioner deposited the market fees and produced the books of accounts for inspection of the market committee, the petitioner was not entitled for reconsideration of its application for renewal of licence. The Director rejected the appeal by observing that since the petitioner did not comply with the earlier orders, no interference was called for.

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7. The above said order was challenged by the petitioner before the Joint Secretary (Appeal) Agriculture and Cooperation Department by preferring Revision Application No.53 of 2013 under section 48 of the Gujarat Agricultural Produce Markets Act, 1963 ("the Act" for short). The revisional authority observed that the petitioner did not act as per the orders made by this court and the Director and the year of 2011-12, for which the application was made for renewal of licence was also over, it would be open to the petitioner to make fresh application for licence according to the rules. With these observations, the revision application of the petitioner was rejected by the impugned order.

8. This petition is opposed on behalf of the market committee by filing affidavit in reply with various documents to justify the action of the market committee of refusing to renew the licence of the petitioner.

9. At the first hearing of the petition before this Court, learned Senior Advocate Mr. Mihir Thakore appearing with learned advocate Mr.V.C.Vaghela for the petitioner submitted that for the initial demand of Rs. 19,30,559.00, the market committee did not provide any data/material to the petitioner and still the demand was raised to Rs.27 lakhs and further to Rs. 1.10 crore without any basis. Mr. Thakore submitted that the petitioner was justified in asking for data/details from the market committee for such huge demand of market cess from the petitioner. Mr. Thakore submitted that on one hand such data was not being provided to the petitioner and on the other hand the petitioner was being asked to submit the books of accounts for the last nine years by the market committee for assessment of the market cess simply on suspicion that the petitioner had evaded payment of market cess. Mr. Page 5 of 16 C/SCA/2330/2014 JUDGMENT Thakore submitted that the licence granted by the market committee is always for one year and therefore, the market committee was not justified in asking the petitioner to produce books of account for its inspection for a period beyond one year. Mr. Thakore submitted that every licence issued by the committee to the petitioner contained condition that as and when the market committee asked for accounts from the licence holder, the same shall be provided by the licensee. Such condition is to be complied with for the period for which the licence is issued and non compliance of such condition might be taken as breach of condition of licence for the said period. Mr. Thakore submitted that non submission of the books of accounts for previous years cannot be made a ground to refuse renewal of licence.

10. As against the above arguments, learned Senior Advocate Mr. Mihir Joshi appearing with learned advocate Mr. Dipen Desai for the respondent No.3 market committee submitted that the issues as regards demand of market cess by the market committee and for submission of accounts for nine years stood concluded by the earlier order made by the Director in the appeal of the petitioner and by withdrawal of revision application preferred by the petitioner and, therefore, now, it is not open for the petitioner to raise the same issues by another round of appeal before the Director, by revision application before the State Government and even in this petition before this Court. Mr. Joshi submitted that the market committee had already provided details to the petitioner as regards either less or non payment of market fees for the years from 2002 to 2011. Mr.Joshi submitted that the petitioner has no intention to pay any amount towards the outstanding dues of the market committee and therefore it has been litigating before different forums including this Court without any cause. At this Page 6 of 16 C/SCA/2330/2014 JUDGMENT stage, after some discussion, the matter was adjourned at the request of Mr. Thakore.

11. At the next hearing, learned Senior Advocate Mr. Thakore drew attention of the Court to the conditions of licence and some provisions of the Act and Rules to press his point that it is not open to the market committee to ask for production of the books of accounts and other material for the period beyond one year preceding the year for which the application for renewal of licence is made and that non submission of such accounts for inspection of the market committee cannot be a ground to refuse renewal of licence if the petitioner is, otherwise, complying with the other requirements for getting the licence renewed. Mr. Thakore submitted that since the interest of the market committee is already secured by the order made by the Hon'ble Division Bench by permitting the market committee to continue with the seizure of the goods worth Rs.1.10 crores, the market committee is under obligation to consider the application of the petitioner for renewal of licence irrespective of the petitioner not complying with demand of production of accounts for nine years made by the market committee. At this stage, the Court sought to know from the learned advocate Mr. Dipen Desai whether it would be possible for the market committee to agree for inspection of the books of accounts of the petitioner for six years instead of nine years. Mr. Desai therefore requested to adjourn the matter to take instruction from the market committee in that regard. Accordingly the matter was adjourned.

12. Thereafter, at the next hearing, before learned Senior Advocate Mr. Mihir Joshi appearing with learned advocate Mr. Dipen Desai for the market committee could respond to the Page 7 of 16 C/SCA/2330/2014 JUDGMENT suggestion made by the court, learned advocate Mr. V.C.Vaghela for the petitioner stated before the Court that the petitioner would not like to agree for the submission of books of accounts even for six years. Mr. Vaghela submitted that this court may decide whether the petitioner could be asked to submit the books of accounts for more than one year for inspection by the market committee for the purpose of deciding the application of the petitioner for renewal of licence. Mr. Vaghela submitted that the provisions of the Act and the Gujarat Agriculture Produce Market Rules, 1965 ("the Rules") do not permit the market committee to insist for inspection of books of account for more than one year as a pre-condition for grant of renewal of licence. Mr. Vaghela submitted that the petitioner has been unnecessarily harassed and victimized just because the petitioner did not surrender to the demands of some of the members of the market committee and valuable rights of the petitioner to carry on its business are infringed on the grounds not germane to taking of decision on the application of the petitioner for renewal of its licence. Mr. Vaghela submitted that once this court has secured the interest of market committee as regards its alleged outstanding dues of Rs.1.10 crore against the petitioner, there is no good reason with the market committee not to renew the licence of the petitioner. Mr. Vaghela thus urged to entertain and allow this petition and to direct the market committee to grant/renew the licence to the petitioner by quashing and setting aside the impugned orders made by the State Authorities.

13. Learned Senior Advocate Mr. Mihir Joshi then submitted that the petitioner is not entitled as a matter of right to have its licence renewed. Mr. Joshi submitted that every application for renewal of licence is to be decided as if it is for fresh licence and unless the Page 8 of 16 C/SCA/2330/2014 JUDGMENT person applying for such licence satisfies all requirements for grant of licence, he is not entitled to have the licence to trade in the market area. Mr. Joshi submitted that in the present case, the petitioner has been found evading payment of market cess for last more than nine years and though the petitioner has been asked to pay the outstanding market cess, it has deliberately not paid such market cess. Mr. Joshi submitted that there is no prohibition either in the Act or Rules against the market committee in demanding production of books of accounts from a person applying for renewal of licence for more than one year. Mr. Joshi submitted that the market committee is established under the Act with avowed purpose of regulating sale and purchase of agriculture produce and it has to manage its affairs from the cess it receives from the licensees and other persons dealing in the agriculture produce in market area and in such circumstances, the market committee is always justified in asking inspection of books of accounts for any number of years from any person applying for renewal of licence if it wants to satisfy itself as to whether such person has been complying with requirement of regular payment of market cess. Mr. Joshi submitted that if such power of market committee is not read in the provisions of the Act and the Rules, there will be no control of the market committee on the persons who cleverly avoids payment of market cess. Mr. Joshi submitted that simply because the licence is issued for one year with one of the conditions to submit books of account for inspection by market committee by the licensee it cannot take away powers and authority of the market committee to ask for the books of accounts for inspection beyond one year. Mr. Joshi submitted that if the petitioner has been bona fide maintaining the books of accounts as regards transactions made by it in the market area, the petitioner should not feel shy in submitting such books of account. Mr. Joshi Page 9 of 16 C/SCA/2330/2014 JUDGMENT thus urged not to entertain the petition in exercise of the powers under Article 226 of the Constitution of India.

14. Having heard the learned advocates for the parties, it appears that when the decision of the market committee to refuse renewal of the licence for the year 2011-12 was initially challenged by the petitioner before respondent No.2-Director, the Director ordered that on petitioner getting its books of accounts inspected and on getting the assessment of market cess done and further on payment of the outstanding amount of market cess, the market committee to take decision on the application of the petitioner for renewal of licence in accordance with the Rules. This order of the Director dated 24.10.2011 placed with the affidavit in reply was challenged by the petitioner before the revisional authority by filing revision application no. 528 of 2011. It appears that in the revision application, the petitioner submitted purshis copy whereof is placed at page 65A stating that for the same subject matter, the petitioner had preferred writ petition being special civil application no. 17192 of 2011 before the High Court and since at two places, proceedings could not be continued, without prejudice to the rights of the petitioner in the writ petition and without prejudice to the proceedings of the writ petition and to continue the right to take further proceedings after disposal of the writ petition, revision application be permitted to be withdrawn.

15. Such purshis of the petitioner was accepted and the revision application was disposed of accordingly. Thus, the petitioner remained bound by the order of the Director whereby the petitioner was required to submit the books of accounts for the inspection of the market committee and to get the assessment of the market cess done by the market committee and then to pay Page 10 of 16 C/SCA/2330/2014 JUDGMENT the market cess as per the assessment and only thereafter to get the application for renewal of licence decided by the market committee according to the rules. In such view of the matter, unless the order passed by respondent No.2 - Director in the appeal of the petitioner was interfered with by the higher authority or the Court of competent jurisdiction, there was no question of reconsideration of the application of the petitioner for renewal of licence and, therefore, second round of litigation of appeal preferred by the petitioner being appeal no.21 of 2012 was not permissible. The respondent No.2-Director therefore rightly rejected the said appeal by order dated 15.12.2012 and the revisional authority also rightly not interfered with the said order of the Director and thus committed no error in passing the impugned order dated 17th December, 2013.

16. Learned advocate Mr. Vaghela however submitted that when the act of the market committee of asking the petitioner to submit the books of accounts for its inspection for the period beyond one year is without the authority of law and when the demand of the market committee for payment of the outstanding cess has been well secured by the orders made by the Hon'ble Division Bench, the order made by the Director in the earlier appeal and withdrawal of the revision application by the petitioner would not come in the way of the petitioner in asking for the relief against the market committee to reconsider its decision on the application for renewal of licence by the petitioner without insisting for inspection of the books of accounts of the petitioner for more than one year and without insisting for payment of outstanding dues of market cess.

17. As stated above, though the Court finds that the petition is Page 11 of 16 C/SCA/2330/2014 JUDGMENT required to be rejected on the ground that the petitioner cannot be permitted to re-agitate the issues concluded in the earlier round of proceedings before the State authorities, however, since learned advocate Mr. Vaghela raised contention that the market committee is not authorized to ask for inspection of the books of accounts for a period of more than one year, the Court is of the view that such contention needs to be dealt with.

18. As per the provisions of section 9 of the Act, the market committee is established for every market area by the Director for efficient regulation of purchase and sale of specified kind of agricultural produce in the market area. Such market committee is to maintain and manage the market and standardization of agricultural produce and to provide such facilities in the market as the Director may, from time to time,direct and to enforce in the market area the provisions of the Act, Rules, Bye-laws and conditions of licence granted under the Act in connection with the purchase and sale of the agricultural produce with which it is concerned. The market committee is authorized to grant or renew the general licence or a special licence for the purpose of any specific transaction or transactions to a trader, general commission agent and other persons to operate in the market area. The market committee is also authorized to refuse any licence after recording its reasons. Thus, for any person to do the business and trade in the market area, a licence is required from the market committee and such person who is issued the licence by the market committee is to deal in any transaction of sale and purchase in the market area as per the conditions of licence as also according to the provisions of the Act, Rules and the Bye-laws. Nobody as a matter of right can do transaction of sale and purchase of agricultural produce in the market area except under Page 12 of 16 C/SCA/2330/2014 JUDGMENT the licence. The question, therefore is whether a person applying for renewal of licence is entitled to get his licence renewed though he is found not complying with the requirements of law.

19. From the record of the petition, it appears that the petitioner though called upon to deposit the outstanding market cess has not deposited the same with market committee. The petitioner has been taking stand that there is no material with the market committee to demand such outstanding cess. Rule 53 of the Rules authorizes the market committee to realize the market cess by selling the seized agricultural produce, however, in respect of the seized goods of the petitioner, since no action for sale of such seized goods was taken, at the best the petitioner could contend that the demand of the outstanding market cess was secured by the order of Hon'ble Division Bench but if the market committee is otherwise of the view that the petitioner is not the person who deserves renewal of licence under the rules, it can certainly refuse to grant or renew the licence to the petitioner. Whether such decision of refusal to renew the licence could be said to be reasonable and valid is to be examined in the context of the rules providing for grant or refusal of the licence. Rule 56 of the Rules provides for grant or refusal of licence. It reads as under:

"56. Licensed traders and general commission agents.-

(1) Any person desiring to obtain a licence to do business as a trader or a general commission agent in agricultural produce in any market area or part thereof shall make a written application in such form as the market committee may determine to the market committee and shall pay such fees as may be determined by the market committee subject to a maximum of Rs.200;

Provided that a person residing out side the market area and desiring to operate in a Page 13 of 16 C/SCA/2330/2014 JUDGMENT market area or any part thereof only for a specific transaction or transactions which may not exceed four in a year may be granted a special licence on payment of such fees as may be determined by the market committee subject to a maximum of Rs.20.

(2) On receipt of such application together with the proper amount of the fee, the market committee may, after making such inquiries, as may be considered necessary and on the applicant agreeing to abide by the provisions of the Act; rules and bye-laws and such other conditions as may be laid down by the market committee for holding such licence grant to him the licence applied for.

(3) Notwithstanding anything contained in sub- rule (2), the market committee may refuse to grant or renew a licence to any person who in its opinion is not solvent or whose operations in the market area are not likely to further efficient working of the market or are likely to impede the smooth working of the market under the control of the market committee.

(4) The licence shall be granted for a period of one year after which it may be renewed on a written application in such form as may be determined by the market committee, and after such inquiries as are referred to in sub-rule (2) as may be considered necessary and on payment of full fees as payable for fresh licence.

Provided that all licenses shall remain in force from the date of issue till 30th September following unless suspended or cancelled earlier.

(6) No person shall be entitled to do business other than that for which he holds a licence."

20. Sub-rule (2) authorizes the market committee to make such inquiries as may be considered necessary and to ensure whether the person applying for licence is agreeable to comply with the provisions of the Act, Rules, Bye-laws and other conditions as may be laid down by market committee. Sub-rule (3) starts with non-

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C/SCA/2330/2014 JUDGMENT obstante clause to suggest that the market committee has full discretion to refuse to grant or renew a licence to any person who in its opinion is not solvent or whose operations in the market area are not likely to further efficient working of the market or are likely to impede the smooth working of the market under the control of the market committee.

21. The inquiries contemplated by sub-rule (2) may also include the inquiry to find out as to whether the person applying for renewal of licence has been complying with the provisions of the Act, Rules and Bye-laws and the conditions of licence granted. Such inquiry would therefore authorize the market committee to ask such person to make available the books of accounts to the market committee to find out whether in due compliance of the provisions of the Act, Rules, Bye-laws and conditions of licence, he has been discharging his obligation of paying full market cess for the all periods for which he has undertaken transactions of sale and purchase in the market area. In fact, rule 58 and 59 of the rules make it obligatory on the part of the licensee to submit books of accounts or render such periodical returns at such time as the market committee may from time to time direct. From these provisions of the Rules, it could be said that it is always open to the market committee to ask the person applying for renewal of licence to render books of accounts for any period to the market committee for its inspection to find out whether such person has evaded payment of market fees for any period. Therefore, it appears that the market committee is not prohibited from asking inspection of books of accounts of the persons applying for renewal of licence for the period beyond one year. In fact, only those acts which are not authorized by the provisions of the Act and the Rules could be said to be prohibited. However, as Page 15 of 16 C/SCA/2330/2014 JUDGMENT discussed above, not only sub rule (2) gives wide powers to the market committee to make all inquiries as may be required for grant of licence but sub rule (3) of rule 56, rule 58 and 59 of the Rules further empower the market committee to exercise the requisite discretion including for inspection of books of accounts of a person applying for renwal of licence even for the period beyond one year.

22. In such view of the matter, contention that the condition in the licence for inspection of the books of accounts could be read as limiting the power or authority of the market committee to inspect books of accounts of a person applying for renewal of licence only for one year cannot be accepted. There is no specific prohibition in the Act or the Rules restraining the market committee from asking inspection of books of accounts of person applying for renewal of licence for a period of more than one year and therefore, it is always open for the market committee to ask for inspection of accounts for any period as it thinks proper. Therefore, in the present case, the Court does not find any unreasonableness or arbitrariness in the action of the market committee in asking the petitioner to submit its accounts for the period of nine years for its inspection for deciding the application of the petitioner for renewal of licence.

23. For the reasons stated above, the petition is dismissed. Notice is discharged.

(C.L.SONI, J.) anvyas Page 16 of 16

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Gujarat High Court