Dismissed

M/S S.A. Rawther Spices (P) Ltd., v. the Director

Karnataka HC18 Apr 2024WP/9985/2017

Case brief

AI extract

What is this about?

The High Court held that an importer selling imported spices within a market yard is a 'trader' liable to pay market fees under the Karnataka Act. While market fee liability is confirmed, recovery is subject to the moratorium provisions of the IBC.

What did the court decide?

Petitions dismissed; liability for market fee confirmed but recovery subject to IBC moratorium provisions.

M/S S.A. Rawther Spices (P) Ltd., Vs the… — Contract and Commercial Disputes | Karnataka HC (2024)

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NC: 2024:KHC:15610 WP No. 9985 of 2017 C/W WP No. 48877 of 2015 WP No. 48878 of 2015

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 18^TH DAY OF APRIL, 2024

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BEFORE

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THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR

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WRIT PETITION NO. 9985 OF 2017 (APMC)

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C/W

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WRIT PETITION NO. 48877 OF 2015 (APMC) WRIT PETITION NO. 48878 OF 2015 (APMC)

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IN W.P.No.9985/2017

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BETWEEN:

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M/S. S.A. RAWTHER SPICES (P) LTD., NO.17, 2^ND FLOOR, 4^TH MAIN, 4^TH BLOCK, GORAGUNTEPALYA, BANGALORE – 560 022.

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BY ITS MANAGING DIRECTOR, SRI.ANISH M.RAWTHER.

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…PETITIONER

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Digitally signed by B K MAHENDRAKUMAR Location: HIGH COURT OF KARNATAKA

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(BY SRI. A NAGARAJAPPA., ADVOCATE)

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AND:

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THE DIRECTOR, AGRICULTURAL MARKETING BOARD, NO.16, RAJ BHAVAN ROAD, BENGALURU – 560 001.

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THE JOINT DIRECTOR, THE LEGAL ENFORCEMENT CELL, OFFICE OF THE JOINT DIRECTOR, SOUTH ZONE,

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NC: 2024:KHC:15610 WP No. 9985 of 2017 C/W WP No. 48877 of 2015 WP No. 48878 of 2015

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DEPARTMENT OF AGRICULTURAL MARKETING, RMC YARD, YESHWANTHPUR, BENGALURU – 560 022.

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THE AGRICULTURAL MARKETING COMMITTEE, RAMANAGARA,

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RAMANAGAR DISTRICT – 577 216. REPRESENTED BY ITS DIRECTOR.

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…RESPONDENTS

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(BY SMT.HEMALATHA V, AGA FOR R1 AND R2; SRI.T.SWAROOP, ADVOCATE FOR R3)

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE NOTICE DATED 27.1.2017 ISSUED BY THE R-1 VIDE ANNEXURE – W AND ETC,

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IN W.P.No.48877/2015

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BETWEEN:

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S.A. RAWTHER SPICES (P) LTD., NO.17, 2^ND FLOOR, 4^TH MAIN, 4^TH BLOCK, GORAGUNTEPALYA, BANGALORE – 560 022.

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BY ITS MANAGING DIRECTOR, SRI.ANISH M.RAWTHER.

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…PETITIONER

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(BY SRI. A NAGARAJAPPA., ADVOCATE)

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AND:

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THE DIRECTOR AND APPELLATE AUTHORITY, AGRICULTURAL MARKETING BOARD, NO.16, 2^ND RAJ BHAVAN ROAD, BENGALURU – 560 001.

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NC: 2024:KHC:15610 WP No. 9985 of 2017 C/W WP No. 48877 of 2015 WP No. 48878 of 2015

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THE ADDITIONAL DIRECTOR, THE LEGAL ENFORCEMENT CELL, DEPARTMENT OF AGRICULTURAL MARKETING, OFFICE OF THE ADDITIONAL DIRECTOR OF AGRICULTURAL MARKETING, NO.16, 11^TH RAJ BHAVAN ROAD, BANGALORE – 560 001.

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THE AGRICULTURAL MARKETING COMMITTEE, RAMANAGARA,

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RAMANAGAR DISTRICT – 562 159.

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…RESPONDENTS

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(BY SMT.HEMALATHA V, AGA FOR R1 AND R2; DR.NANDA KISHORE, ADVOCATE FOR R3)

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER PASSED BY R-1 DATED 30.09.2015 VIDE ANNEXURE - W AND ETC,

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IN W.P.No.48878/2015

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BETWEEN:

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S.A. RAWTHER SPICES (P) LTD., NO.17, 2^ND FLOOR, 4^TH MAIN, 4^TH BLOCK, GORAGUNTEPALYA, BANGALORE – 560 022.

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BY ITS MANAGING DIRECTOR, SRI.ANISH M.RAWTHER.

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…PETITIONER

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(BY SRI. A NAGARAJAPPA., ADVOCATE)

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4 - NC: 2024:KHC:15610 WP No. 9985 of 2017 C/W WP No. 48877 of 2015 WP No. 48878 of 2015

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AND:

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THE DIRECTOR, AGRICULTURAL MARKETING, NO.16, 2^ND RAJ BHAVAN ROAD, BENGALURU – 560 001.

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THE SECRETARY, AGRICULTURAL PRODUCE MARKETING COMMITTEE, RAMANAGAR DISTRICT, RAMANAGAR – 562 159.

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…RESPONDENTS

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(BY SMT.HEMALATHA V, AGA FOR R1; DR.NANDA KISHORE, ADVOCATE FOR R2)

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THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER PASSED BY R-1 DATED 30.09.2015 VIDE ANNEXURE - F AND ETC,

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THESE PETITIONS, COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioner claims to be the importer/exporter of spices. The respondent-Market Committee initiated proceedings against the petitioner for recovery of market fee for having sold the spices imported by him in the market yard to the third party as per Section 65(2-a) of the Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966. The petitioner objected to the same contending that he is the importer of the spices and as such he is exempted from payment of market fee. Thereafter, the

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NC: 2024:KHC:15610 WP No. 9985 of 2017 C/W WP No. 48877 of 2015 WP No. 48878 of 2015

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Market Committee passed the impugned order calling upon the petitioner to pay a sum of Rs.10,94,010/- in W.P.No.9985/2015 and a sum of Rs.1,09,13,076/- in W.P.No.48877/2015 and a sum of Rs.4,53,95,636/- in W.P.No.48878/2015.

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The challenge to the order passed by the Market Committee was negated by the second respondent directing the Agriculture Market Committee to exercise the power under Section 132 of the Act 1966. Against which, these petitions are filed.

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Learned counsel for the petitioner contends that the petitioner which is a company incorporated under the Companies Act is under liquidation, and the National Company Law Tribunal, Bengaluru Bench vide order dated 21.08.2019 in exercise of the power under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short 'the IBC) has passed an order of moratorium. Therefore, respondent/market committee is estopped from recovering the market fee from the petitioner. He further submits that the importer of the spices is exempted from payment of market fee under the provisions of the Act 1966.

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Learned counsel for the respondent/Market Committee contends that although the importer of the spices is exempted from the payment of market fee, however, the petitioner who imported the spices sold the spices within the market area, and is liable to pay market fee as stated under Section 65(2-A) of the Act, 1966 . In support of the same he places reliance on the decision of the Hon'ble Supreme Court in the case of APMC

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NC: 2024:KHC:15610 WP No. 9985 of 2017 C/W WP No. 48877 of 2015 WP No. 48878 of 2015

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YASHWANTHAPURA Vs. SELVA FOODS reported in (2022) 3 SCC 313 .

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Learned AGA for the respondent-State would reiterate the submissions of learned counsel for the respondent/Market Committee.

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Considered the submissions made by the learned counsel for the parties.

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Admittedly, the petitioner is the importer of the spices and the spices imported by him were sold to the third party within the market yard. The issue as to whether the importer who sold the agricultural produce within the market area after importing, is liable to pay market fee as stated under Section 65 (2-a) of the Act, 1966 was examined by the Apex Court in the case of APMC YASHWANTHAPURA Vs. SELVA FOODS (supra) wherein at paragraph Nos.12 to 15 it is ruled as follows:

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"12. A harmonious reading of Section 65(2) of the Act, its second proviso, and Explanation to the same and subsection (2-A)(i-a), makes it clear that if any dealer imports agricultural produce from outside the State into any market area within the State of Karnataka for the purpose of processing and sale, the applicability of the second proviso to sub-section (2) of Section 65 of the Act stands excluded. The Explanation to sub-section (2) of Section 65 of the Act makes it clear that even the processed items from the agricultural produce imported from outside the State of Karnataka, attract market fee on sales within the market area of the appellant — Market Committee. It is also clear from the aforesaid section, it is the obligation of the importer to realise the market fee from the purchaser and pay the same to the Market Committee.

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NC: 2024:KHC:15610 WP No. 9985 of 2017 C/W WP No. 48877 of 2015 WP No. 48878 of 2015

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13. In G. Giridhar Prabhu [G. Giridhar Prabhu v. Agricultural Produce Market Committee, (2001) 3 SCC 405] while interpreting the provisions of the Karnataka Agricultural Produce Marketing Regulation Act, 1966 this Court has held that a person purchasing raw cashew nuts, then extracting cashew kernels by means of manufacturing process for the purpose of sale in domestic and international market, is held to be a trader within the meaning of sub-section (2) of Section 48 or importer under Section 2(14-A) of the Act, therefore, would be liable to collect the market fee from his buyers and to pay such fees to the Market Committee.

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14. In Gujarat Ambuja Exports Ltd. [Gujarat Ambuja Exports Ltd. v. State of Uttarakhand, (2016) 3 SCC 601] while considering the provisions of the Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, this Court has held that agricultural produce which is brought into market area not for the purpose of sale, but only for the purpose of manufacture or further processing activities, cannot be subjected to market fees. Similarly, in ITC Ltd. [ITC Ltd. v. State of Karnataka, 2005 SCC OnLine Kar 86 : 2005 AIHC 2950] , the learned Single Judge of the High Court of Karnataka has held that mere activity of stocking and processing of even the imported notified agricultural produces, which are imported into the market area do not attract payment of market fees.

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15. We also endorse the view in the aforesaid judgments but in the case on hand the respondent is a buyer as defined under sub-section (2) of Section 65 of the Act and we cannot ignore the second proviso and Explanation to Section 65(2) of the Act. It is not a case where the respondent is denying sale of the imported agricultural produce within the market area of the appellant after processing. In that view of the matter it is not entitled for exemption from payment of market fees. At the same time we make it clear that if one merely imports notified agricultural produce from outside the State for the purpose of cleaning and processing without selling the processed produce within the market area is not liable to pay market fee."

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The Apex Court has categorically ruled that the raw spices imported from outside State, cleaned, processed and sold within market area of the Market Committee by the respondent is

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8 - NC: 2024:KHC:15610 WP No. 9985 of 2017 C/W WP No. 48877 of 2015 WP No. 48878 of 2015

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defined as "trader" under the Act, 1966 and therefore liable for payment of market fee under Section 65(2) of the Act, 1966 and the importer should realise the market fee from the purchaser and pay the same to the Committee. Therefore, the petitioner who has imported the spices and sold the same within the market area is liable to pay market fee as stated under Section 65(2-a) of the Act, 1966.

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The Hon'ble Supreme Court in the case of PASCHIMANCHAL VIDYUT VITRAN NIGAM LTD., Vs. RAMAN ISPAT PRIVATE LIMITED & ORS reported in 2023 LIVELAW(SC)534 has ruled that the provisions of IBC would prevail over the Customs Act, to the extent that once moratorium is imposed in terms of Sections 14 or 33(5) of the IBC as the case may be, the respondent authority only has a limited jurisdiction to assess/determine the quantum of customs duty and other levies. The respondent authority does not have the power to initiate recovery of dues by means of sale/confiscation, as provided under the Customs Act.

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In the instant case, the National Company Law Tribunal in exercise of power under Section 7 of the IBC read with Rule-4 of the IBC Rules, 2016 has passed an order of moratorium.

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The Hon'ble Supreme Court in the case of ANAND RAO KORADA Vs. VARSHA FABRICS PRIVATE LIMITED AND OTHERS reported in (2020) 14 SCC 198 has ruled that the moratorium having been declared by NCLT on 04.06.2019, the High Court was not justified in passing the orders dated 14.08.2019

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9 - NC: 2024:KHC:15610 WP No. 9985 of 2017 C/W WP No. 48877 of 2015 WP No. 48878 of 2015

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and 05.09.2019 for carrying out auction of the assets of the Company.

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Therefore, in view of the moratorium imposed by the Company/Tribunal, the respondent-Marketing Committee can proceed to recover the market fee due from the petitioner in accordance with the provisions contained in IBC.

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It is made clear that the liability imposed on the petitioner towards payment of market fee is confirmed. However, the recovery is subject to the provisions contained in the IBC.

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Accordingly, petition in disposed of.

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Sd/JUDGE

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RKA

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List No.: 1 Sl No.: 30

M/S S.A. Rawther Spices (P) Ltd., v. the Director

Case brief

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M/S S.A. Rawther Spices (P) Ltd., v. the Director

Case brief

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