KOLUTHARA EXPORTS LTD. versus ST ATE OF KERALA AND ORS.

Citation: [2002] 1 S.C.R. 775 · Decided: 01-02-2002 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

KOLUTHARA EXPORTS LTD. 
A 
v. 
~ 
ST ATE OF KERALA AND ORS. 
-
FEBRUARY l, 2002 
[S.P. BHARUCHA, C.J., SYED SHAH MOHAMMED QUADRI, 
B 
UMESH C. BANERJEE, S.N. VARIAVA AND 
SHIVARAJ V. PATIL, JJ.] 
" 
Constitution of India-Articles 39, 4 I, Seventh Schedule, List III. Entry c 
23-Kerala Fishermen's Welfare Fund Act, 1985-Section 4(2) read with 
Section 2{d)-Fisherman's Welfare Fund Scheme-Contribution to--Welfare 
Fund Act requiring the dealer to contribute one per cent of sale proceeds to 
the fund-Validity of-Held, impost by way of contribution can be levied only 
when there exists the relationship of:employer and employee between the 
contributor and the beneficiary under the Act and the scheme-The contribution D 
envisaged under Section 4(2) of the Act is clearly outside the ambit of Entry 
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23 of List Ill-Thus, Section 4(2) of the Act is unconstitutional-However, 
amount of contribution a/Jeady collected not liable to be refunded 
Words and Phrases: 
E 
"dea/er"-Meaning of in the context of Section 2(d) of the Kera/a 
Fishermen's Welfare Fund Act, 1985. 
The issue involved in the present appeal was whether the provisions 
., 
of Section 4(2) read with Section 2(d) of the Kerala Fishermen's Welfare 
Fund Act, 1985 requiring a dealer to contribute one per cent of sale F 
proceeds towards the welfare fund scheme is constitutional. 
Appellant-Company engaged in purchase and export of fish was 
served with a notice under Section 4(2) of the Act and order of assessment 
was passed. Appellant-Company filed a writ petition challenging the G 
constitutional validity of the assessment order and Section 4(2) of the Act. 
High Court upheld the constitutional validity of the Section on the ground 
that there was very intimate nexus between the fisherman and an exporter 
of the marine products like the appellant and the employee-employer 
relationship was not necessary in such cases. Hence the present appeal H 
775 
\ 
776 
SUPREME COURT REPORTS 
(2002] I S.C.R. 
A which has been referred to the Constitution Bench since the question 
involved was touching the interpretation of the Constitution. 
Allowing the appeal, the Court 
~ ..... 
HELD : 1.1. Section 4(2) read with Section 2(d) of the Kerala 
B Fishermen's Welfare Act, 1985 requiring a dealer to contribute one per 
cent of the sale proceeds to the welfare fund scheme is declared to ·be 
unconstitutional. Consequently, the order of High Court under challenge 
is set aside. However, the amount of contributions, already paid by persons 
falling under Section 4(2); will not be liable to be refunded to the dealers-
c 
contributors by the Board. [780-G; 785-C-E) 
" 
1.2. There can be no doubt that Entry 23 enables the State 
Legislature to enact a law in respect of social security and social insurance 
or dealing with employment and unemployment. But, the State cannot, in 
an Act under Entry 23 of List III, place the burden of an impost by way 
D of contribution for giving effect to the Act and the scheme made 
thereunder for the social security and social welfare of a section of society 
upon a person who is not a member of such section of society nor an 
employer of a person who is a member of such section of society. The 
burden of such impost may be placed only when there exists the 
relationship of employer and employee between the contributor and the 
E beneficiary of the provisions of the Act and the scheme made thereunder. 
[783-D-E] 
1.3. In the instant case, the only nexus between the categories of 
persons covered by the sweep of Section 2(d) of the Act, including the 
F 
appellant, who carry on the business of buying or selling or processing 
• 
fish or exporting fish (in raw or processed form) or fish products, including 
- (i) a commission agent, broker or any other mercantile agent and (ii) a 
non-resident dealer or an agent or a non-resident dealer or a local branch 
of a firm or company or association situated outside the State and the 
beneficiaries under the Act and th'! scheme - the fisherman - is that the 
G former are the purchasers and the latter are the catchers and sellers of 
fish. Such a nexus, is not sufficient to burden a purchaser/exporter with 
the impost or levy of the contribution under Section 4(2) of the Act, which 
will clearly be outside the ambit of Entry 23 of List Ill of the Constitution 
and, therefore, lacking legislative competence. (784-H; 785-A-B) 
H 
Gasket Radiators Pvt. Ltd. v. Employees' State Insurance Corporation 
) 
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