Constitutional Law

ITC Ltd. v. Agricultural Produce Market Committee

AIR 2002 SC 852; (2002) 9 SCC 232

Citation: AIR 2002 SC 852; (2002) 9 SCC 232
Court: Supreme Court of India
Date: 24 January 2002
Bench: S.P. Bharucha C.J.; G.B. Pattanaik; Y.K. Sabharwal; Ruma Pal; Brijesh Kumar

Facts

Several States enacted Agricultural Produce Market Acts regulating the purchase and sale of agricultural produce within notified market areas.
These laws authorised market committees to regulate transactions and collect market fees.
Tobacco was notified as agricultural produce under the State laws.
Parliament had enacted the Tobacco Board Act, 1975 after declaring under Entry 52 of List I that Union control of the tobacco industry was expedient in the public interest.
The Central Act regulated several matters involving tobacco, including:
growers;
dealers;
auction platforms;
marketing; and
the sale and purchase of Virginia tobacco.
ITC and other tobacco companies argued that Parliament had occupied the entire tobacco field.
They claimed that State market committees could no longer regulate tobacco sales or impose market fees.
A five-judge Bench reconsidered an earlier 1985 decision that had substantially accepted this argument.

Issue

Whether Parliament’s declaration under Entry 52 of List I removed State competence over tobacco markets.
Whether regulation of tobacco sales fell within:
the Union’s power over a controlled industry; or
the State’s power over agriculture, markets and fees.
Whether the Central and State statutes could operate together.
How the competing legislative entries should be harmoniously construed.

Rule

Entries in the Seventh Schedule must be construed broadly but harmoniously.
A declaration under Entry 52 of List I removes State power under Entry 24 of List II only to the extent of control assumed by Parliament.
Such a declaration does not automatically eliminate independent State powers under other entries.
Entry 28 of List II specifically assigns “markets and fairs” to the States.
Entries concerning agriculture and fees also remain independent fields.
Incidental encroachment is permissible, but one entry cannot be interpreted so widely that another express entry is completely erased.

Application

The judges delivered different opinions, but a majority upheld the State market laws.
Justice Sabharwal, joined by Justice Brijesh Kumar, reasoned that “industry” under Entry 52 principally concerned manufacture and production.
It did not automatically include every earlier or later activity connected with the product, such as:
cultivation;
sale in agricultural markets; and
use of State market facilities.
The State laws did not seek to control tobacco manufacture as an industry.
Their principal purpose was to:
establish regulated markets;
protect growers;
organise buying and selling; and
charge fees for market services.
These matters fell within Entries 14, 28 and 66 of List II.
Justice Ruma Pal agreed that the State laws were valid, though she considered that the Central and State statutes could generally operate in their distinct fields without conflict.
She emphasised that Entry 28 would become meaningless if Parliament could regulate all markets merely because the goods sold were products of a controlled industry.
Justices Pattanaik and Chief Justice Bharucha took the contrary view.
They considered the tobacco industry broad enough to include growing, marketing, sale and purchase where Parliament had legislated comprehensively.
In their opinion, the Tobacco Board Act occupied the relevant field and displaced State market regulation.
The controlling majority nevertheless concluded that the specific State power over markets could not be swept away by an excessively broad interpretation of the Union’s industry entry.

Conclusion

By a 3:2 majority, the Court upheld the constitutional competence of the State Legislatures to regulate tobacco as agricultural produce and levy market fees.
The earlier 1985 ITC ruling, which had treated the whole tobacco field as transferred to Parliament, was overruled.