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TMI Blog1988 (9) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... Judgment of the Court was delivered by VENKATACHALIAH, .J. The point in these appeals is the recurring and vexed theme of the policy and legality of the levy of Court fees--ad-valorem on the value or amount of the subject-matter of suits and appeals without the prescription of any upper limit--under the provisions of the Karnataka Court Fees and Suits Valuation Act 1958 ( Karnataka Act' for short). The Rajasthan Court Fees and Suits Valuation Act, 1961 (Act 23 of 19f)]) (`Rajasthan Act' for short) and the Bombay Court Fees Act, 1959 (`Bombay Act' for short). So far as the `Bombay Act' is concerned, the point raised in the concerned appeals is a limited one, confined to the question of the validity of Section 29(1) read with entry 10 of the First-Schedule to the `Bombay Act' which, without reference to the upper limit of Court Fee of ₹ 15,000 prescribed for all other suits and proceedings, requires payment of ad-valorem Court fee on proceedings for grants of probate and letters of administration. One of the grounds of challenge so far as this provision in the `Bombay Act' is concerned, is the constitutional impermissibility of an unlimited exaction by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his ceiling was done away with under the present Rajasthan Act and Court fee ad-valorem at 5%, without any upper limit was imposed under the impugned provisions. On 25.4.1984 the appellant-bank instituted. in the Court PG NO 163 of District Judge, Jaipur City, a suit for recovery of a sum of ₹ 5,04,75,826 from the defendant in the suit viz., The Jaipur Spinning and Weaving Mills Ltd. The Court-Fee payable on the said plaint under Section 20 read with Article 1 of the Schedule 1 of the `Rajasthan Act' was stated to be ₹ 25,23,860. Incidently, it was pointed out by Shri F.S. Nariman, learned Senior Advocate for the appellant that the court-fee payable on this plaint alone would amount approximately to 1/7th of the total estimated collection of court-fee for the year 1983-84 which was estimated at ₹ 176.41 lakhs in the State. 4. Special Leave Petitions 832 of 1988 and 833 of 1988-- which are representative of the Karnataka cases--arise out of and are directed against the common order dated 6.1.1988 of the Division Bench of the Karnataka High Court upholding the validity of the corresponding provisions of the Karnataka Court Fees and Suit Valuation Act, 1958 (` ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upper limit in all other cases. In W.P. No. 1105/86 before the High Court of Bombay, from which C.A. No. 1511/88 now before us arises, Mrs. Jyoti Nikul Jariwala and Jaiprakash Mungaturam Bairajra, Respondents herein, in their capacity as Executrix and Executor respectively as also the Trustees, under the Last Will and Testament dated 5.3.1985, said to have been executed by a certain Harihar Jethalal Jariwala alias Sanjiv Kumar had sought probate of the said will. They challenged, in the writ-petition before the High Court, the order dated 23.7.1986 of the Prothonotary and Senior Master of the High Court of Bombay made in the said probate proceedings requiring from the said Executors a probate court-fee of ₹ 6,15 814.50 as a condition for the grant of the probate. The said Executors and Trustees challenged the legality and validity of this Memo and also the relevant provisions of the `Bombay Act' pursuant to and under the authority of which the said order came to be made. Learned Single Judge of the High Court struck down the impugned provisions and the Division Bench has upheld the decision of the Learned Single Judge. 6. We have heard Sri l .N. Sinha. Sri F.S. Nari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er a certain stage onwards would negate the concept of a fee and par-take of the character of a tax outside the boundaries of the State's power. It is true that the twin evils that be devil the legal system and the administration of justice are the laws' delays and expenses of litigation which have become almost proverbial. Court-tee should not become another stifling factor aggravating an already, explosive situation. Constitutional ethos and the new social and economic order grimly struggling to be born lay great store by the peaceful social or economic change to be achieved through the processes of law. If social and economic change is of high constitutional priority, then, their effectuation and realisation which are directly proportional to the availability and efficacy of expeditious and unexpensive legal remedies, must also as a logical corollory, receive PG NO 166 the same emphasis in priorities: The public importance of the question and the public interest the policy of court-fee evokes are reflected in the trenchant humour of A.P. Herbert's More Uncommon Law from the words of the Judge in the fictional Hogby v. Hogby, That if the Crown must charge for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation earned: In the past the growth of royal justice was partly due to the profits that accrued from exercising jurisdiction. The early itinerant justices were more concerned with safeguarding the King s fiscal rights than with the trial of ordinary actions. A law court was expected to pay for itself and show profit for the king. It is some time since justice has been a substantial source of income, but the old survives in the idea that the courts ought not to be run at a loss. (Emphasis supplied) The court-fee as a limitation on access to Justice is inextricably inter-twined with a highly emotional and even evocative subject stimulating visions of a social order in which justice will be brought within the reach of all citizens of all ranks in society. both those blessed with affluence and those depressed with their poverty. It is, it is said, like a clarion call to make the administration of civil justice available to all on the basis of equality, equity and fairness with its corollary that no-one should suffer injustice be reason of his not affording or is deterred from access to justice. The need for access to justice, recognises the primordeal need to maintain orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the honest plaintiffs who cannot pay the fee. But it will also drive away dishonest plaintiffs who are in the same situation . (Emphasis supplied). The Krishna Iyer Committee on Legal aid also said: Something must be done, we venture to state, to arrest the escalating vice of burdensome scales of court fee. That the State should not sell justice is an obvious proposition PG NO 169 but the high rate of court fee now levied leaves no valid alibi is also obvious. The Fourteenth Report of the Law Commission, the practice of 2 per cent in the socialist countries, and the small standard filing fee prevalent in many Western Countries make the Indian position indefensible and perilously near unconstitutional. If the legal system is not to be undemocratically expensive, there is a strong case for reducing court fees and instituting suitors fund to meet the cost directed to be paid by a party because he is the loser but in the circumstances cannot bear the burden . (See P. 35) 11. The proverbial costs of litigation has its own dimensions of unpredictability. Even as the outcome of a litigation is said to depend on the glorious uncertainties of the Law the size of the bill of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delays of litigation. Each of these capabilities, if in the hands of only one party, can be a powerful weapon; the threat of litigation becomes both credible and effective. Similarly one of two parties to a dispute ma be able to outspend he other and, as a result present his arguments more effectively. Passive decision makes, whatever their other, more admirable, characteristics, clearly exacerbate this problem by relying on the parties for investigating and presenting evidence and for developing and arguing the case ( Emphasis supplied). 12 These are the realities in the back ground of which the impact of court-fees is to he considered. Indeed all civilised Governments recognise the need for access to justice being free. Whether the whole of the expenses of administration of civil justice also--in addition to those of criminal justice--should be free and not entirely by public revenue or whether the litigants should contribute and it so. to what extent, are matters of policy. These ideals are again to be balanced against the stark realities of constraints of finance before any judicial criticism of the policy acknowledgment should be made of the Government's power to ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether, at all events, the distribution of the burden of the fees amongst those on whom the burden falls as the ad-valorem principles, dependent merely on the amount or value of the claim in the case irrespective of the nature, quality and extent of adjudicative services, is arbitrary and violative of Article 14 of the Constitution. (d) Whether, in so far as the provisions of section 29(i) read with Entry 20 Schedule I of the `Bombay Act' are concerned, singling out of a class of litigation viz., applications for grant of probate and letters of administration for levy of ad-valorem court-fee without the benefit of the upper limit of ₹ 15,000 prescribed in respect of all other suits and proceedings is, as declared by the High Court, exposes that class of litigants to a hostile discrimination and is violative of Article 14 of the Constitution. 14. Re: Contention (a): The concept of a 'fee' as distinct from that of a `tax' in the Constitutional scheme has been considered in a series of pronouncements starting from The Commissioner, Hindu Religious Endowments, Madras v. Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954] SCR 1 1005 upto Om Prakash Aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral purposes of Government. Conversely, from this latter element stems the sequential proposition that the object to be served by raising the fee should not include objects which are, otherwise, within the ambit of general governmental obligations and activities. The concept of fee is not satisfied merely by showing that, the class of persons from whom the fee is collected also derives some benefit from those activities of Government. The benefit the class of payers of fee obtain in such a case is clearly not a benefit intended as special service to it but derived by it as part of the general public. 15. Nor does the concept of a fee- and this is important-require for its sustenance the requirement that every member of the class on whom the fee is imposed, must PG NO 174 receive a corresponding benefit or degree of benefit commensurate with or proportionate to the payment that he individually makes. It would be sufficient if the benefit of the special services is available to and received by the class as such. It is not necessary that every individual composing the class should be shown to have derived any direct benefit. A fee has also the element of a compulsory exaction which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 62 per cent of the contribution, it cannot per se he said that there is no correlation between the fee levied and the services rendered. (Emphasis supplied) In Kewal Krishan Puri and another v. State of Punjab and other, [1979] 3 SCR 1244 this court said: That the element of quid pro quo may not be possible, or even necessary, to be established with arithmetical exactitude but even broadly and reasonably it must be established by the authorities who charge the fees that the amount is being spent for rendering services to those on whom falls the burden of the fee. At least a good and substantial portion of the amount collected on account of fees, may be in the neighbourhood of two-thirds or three-fourths must be Shown with reasonable certainly as being spent for rendering services of the kind mentioned above. (Emphasis supplied) In regard to the nature of court-fee we have the pronouncement of this court in Secretary, Government of Madras, Home Department and Another v. Zenith Lamp Electrical Ltd., [1973] 2 SCR; p. 973 (1981-82). This court after referring to the legislative entries pertaining to the legislative fields distributed over the three lists of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from 1980-81 to 1984-85 respectively are: (the figures in brackets indicate expenditure) 1980-81 ₹ 5,22,08,513 (Rs.6,80,33,119); 1981-82 ₹ 6,69,10.019 PG NO 177 (Rs.7,97,76,852); 1982-83 ₹ 8,28,46,359 (Rs.9,41,161); 1983-84 ₹ 8,21,49,626 (Rs.9,44,61,594); 1984-85 ₹ 8,00,18,673 (Rs .12,15,90,418). In the Rajasthan cases the financial-statements furnished before the High Court for the 7 years from 1977-78 to 1983-84, the receipts (in lakhs) by way of court fee and expenditure incurred for the services (furnished in brackets) are respectively: 1977-78 ₹ 101.42. (Rs.264.56); 1978-79 ₹ 95.50 (Rs.286-90); 1979-80 ₹ 114.63 (Rs.323.04); 1980-81 ₹ 134-92 (Rs.379-89); 1981-81 ₹ 159.62 (Rs.444.83); 1982-83 ₹ 179-87 (Rs.544.76); 1983-84 ₹ 176.41 (Rs. 692.11). It is true that in the Rajasthan statements there was no break up of the figures between expenditure on administration of civil justice and criminal justice; but having regard to the figure, a reasonable estimate of the proportion of the former is possible and the figures do indicate and establish the requisite correlationship. The contention (a) of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guaranteed constitutional fundamental and the legal system has been directed by Article 39A to ensure that opportunities for securing justice are not denied to any citizen by reason of economic......disabilities. The right of effective access to justice has emerged in the Third World countries as the first among the new social rights what with public interest litigation, community based actions and pro bono public proceedings. Effective access to justice can thus be seen as the most basic requirement- the most basic `Human Right'--of a system which purports to guarantee legal rights. However, the observations in Shirur Mutt's case as to the uniformity of the levy must be understood in the light of the next sentence in that very passage which says: .... These are undoubtedly some of the general characteristics, but as there may be various kinds of fees, it is not possible to formulate a definition that would be applicable to all cases. PG NO 179 The criticism of Krishna Iyer J. as to the `profiteering scale' would, as the passage relied upon itself indicates, be attracted only if the levy is without the correlative expenditure in the administration of civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimination wrought by it is violative of the constitutional pledge of equality. 20. State Governments would, however, say that this is merely two different ways of saying the same thing and that the concept of a `fee' never really depended for its validity, conceptually as a `fee', upon the requirement of a just and equitable distribution of its burden amongst the recipients of the service and that as long as a broad approximation between the expenses of the services and the amount raised by the fee is established, the impost would continue to retain and not shed its complexion as a fee If there is arbitrariness of inequitability in the distribution of the burden, that aspect would, it is submitted, not detract from basic concept of the levy as a `fee' but vitiates the levy for hostile discrimination. 21. Perhaps the most lucid formulation and presentation of the appellants contention- for whatever it is worth in the ultimate analysis-are to be found in the Judgment of the Madras High Court in the Zenith Lamp Case, (lLR 1968 Mad., 247) which came up before this court in 1973(2) SCR, 973. Those observations sum up the matter succinctly: Irrespective of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reclaimed from the Sea in South Bombay were disposed of by Government, according to plaintiffs' allegation, in violation of the prescribed rules and for a pittance in order to confer a largesse on the chosen. The allotment of plots appears initially, to have been challenged in writ proceedings; but ultimately a suit had had to be filed as disputed questions of facts were stated to have been involved. The value of the subject matter of the suit was ₹ 5,56,30,731.87 and the court fee payable was ₹ 5,60,000 under the amended Act which had, in the meantime, come into force. The amendment was challenged on three grounds. The first was that the legislation was itself mala fide and was ushered in with oblique motives of stifling the very suit and the challenge to the impugned allotments. The second was that levy of court-fees ad-valorem without any upper limit would alter the character of the levy and convert it from `fee' into a `tax'. The third contention was that the amendment was a colourable piece of legislation and was not a legitimate exercise to raise a fee but to impose, in the PG NO 182 cloak of a fee, a tax to augment the general public revenues. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in the very nature of the judicial process, a stage is reached beyond which there could be no proportionate or progressive increase in the services rendered to a litigant either qualitatively or quantitatively. Unless that limit is recognised and a corresponding ceiling of court fee fixed, the impost qua the particular litigant, it is urged, would shed its complexion as a fee and would par-take of the nature of an exaction more resembling a tax than a fee. Learned counsel submitted that in the process of adjudication of disputes before courts, judicial-time and the machinery of justice are not utilised in direct proportion to the value or the amount of the subject matter of the controversy. Cases involving very small claims might raise difficult questions of fact and law requiring the expenditure of judicial time wholly disproportionate to the court-fee paid in the case. Conversely, claims involving heavy financial sums might not, as in the case of suits on negotiable instruments generally, take much time of the court at all. That apart, it is urged, a recognition of the outer-most limit of the possible services and a prescription of a corresponding upper limit of court fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uniformity of the fact that it has no direct relation to the actual services rendered by the authority to each individual who obtains the benefit of the service, or that some of the contributories do not obtain the same degree of service as other may, will not change the essential character of the levy. ILR Mad., 1968; 340-41. 26. There might, conceivably, be cases where a particular individual-contributor may not derive any benefit at all, though as a member of the class he has no option but to make the contribution. The principle underlying the contention that beyond a point the impost ceases to have the quality of a fee, if valid, can be visualised and applied even to cases where, despite the uniformity in the distribution of the burden, a particular individual does not obtain any service at all. This cannot be a legitimate and permissible ground of invalidation. This is, however, not to say that if the scheme of distribution of the burden is so arbitrary, so unreasonable and disproportionate as to offend the requirements of Article 14, the levy does not fail as violative of Article 14. In H.H. Sudhundra Thirtha Swamiar v. Commissioner For Hindu Religious Charitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional limitation. This idea that the test of the correlation is at the aggregate level and not at individual level is expressed thus. First Principles of Public Finance by De Marco. 83. The fee must be equal, in the aggregate to the cost of PG NO 186 production of the service. That is the aggregate amount of the fees which the State collects from individual consumers must equal the aggregate expenses of production. (Emphasis supplied). The view taken of the matter by the Bombay High Court in the Indian Organic Chemicals case and the view of the earlier Madras High Court in Zenith Lamp's case do not commend themselves as sound, having regard to the accepted tests to determine the nature of a `fee'. Contention (b) is not substantiated. 28. Re Contention (c) It is urged that even if the requisite correlationship could be held to have been established, the Rajasthan and the Karnataka legislations, by distributing the burden on the ad-valorem principles based merely on the value of the subject matter, independently of considerations of the utilisation of Judicial time, are per-se irrational and bring about an arbitrary and disproportionate distribution of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee, is indeed it has been so held, where the line should be drawn in applying the principle it is more a matter of legislative wisdom and preference than of the strict judicial evaluation and adjudication. There might possibly be better methods of administering the collections but that by itself, it is contended, is no ground to strike down what might appearing to be a less perfect system particularly when economic measures and regulations are concerned. So far as the Directive Principles in Article 39A are concerned, the learned Solicitor General said that the directive principles are fundamental in the governance of the country cannot be gainsaid, but in implementing them, policy considerations and priorities will have to be duly evaluated, having regard to the financial constraints. The grievance in these petitions is by the class of the litigants consisting of big financial institutions with superior economic power. The superiority of the economic power is not, it is urged, irrelevant in making them share a higher burden of a public impost. At all events, it is urged, courts can not compel the State to bring-forth any legislation to implement and effectuate a Directive Princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ypes so as to be amenable to pre-determined solutions. In The State of Gujarat and Another v. Shri Ambica Mills Ltd., Ahemdabad Etc., [1974] 3 SCR 764 this court observed: ......The court must be aware of its own remoteness and lack of familiarity with the local problems. Classification is dependent on the particular needs and specific difficulties of the community which are beyond the easy ken of the court, and which the legislature alone was competent to make. Consequently, lacking the capacity to inform itself fully about the peculiarities of a particular local situation, a court should hesitate to dub the legislative PG NO 189 classification as irrational.... .....The question whether, under Article 14, a classification is reasonable or unreasonable must, in the ultimate analysis depend upon the judicial approach to the problem. The more complicated society becomes, the greater the diversity of its problems and the more does legislation direct itself to the diversities. In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not official deference to legislative judgment. The courts have only the power to destroy but n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitutional guarantees. Moreover, the extremes to which the court has gone in dreaming up rational bases for state regulation in that area may in many instances be described to a healthy revulsion from the court's earlier excesses in using the Constitution to protect interests that have more than enough power to protect themselves in the legislative halls. Dandridge v. Williams, 397 US at 520. The observations of this court in Income Tax Officer, Shillong and Anr. Etc. v. N. Takim Roy Rymbai Etc. Etc. [1976] 3 SCR; 413 made in the context of taxation laws are worth recalling: The mere fact that a tax falls more heavily on same in the same category, is not by itself a ground to render the law invalid. It is only when, within the range of its selection, the law operates unequally and cannot be justified on the basis of a valid classification, that there would be a violation of Article 14. (Emphasis supplied). 32. The question whether the measure of a tax or a `fee' should be ad-valorem or ad-quantum is again a matter of fiscal policy. In the Zenith Lamp's Case this court observed: The fee must have relation to the administration of civil justice. While ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Dalmia decision has given the impression of being the last sanctuary of losing PG NO 192 litigants Price is surely a safe guide but other methods are not necessarily vocational. It depends 33. It was then argued that various States have different standards and that while some States have rightly recognised the need for an upper limit to save the constitutionality of the levy, other States like, Karnataka, Tamil Nadu, etc. envisaged an ad-valorem levy with-out any upper limit. It is contended that though India is a federal polity, the judicial system, however, is an integrated one and that therefore different standards of court fee in different States would be unconstitutional. But it is trite that for purposes of testing a law enacted by one State in exercise of its own independent legislative powers for its alleged violation of Article 14 it cannot he contrasted with laws enacted by other States. In The State of Madhya Pradesh v. G.C. Mandawar. [ 1955] 1 SCR; 599 this court observed: Article 14 does not authorise the striking down of a law of one State on the ground that in contrast with a law of another State on the same subject its provisions are discriminatory. Nor D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of an upper limit to fee payable. This contention was accepted by the Learned Single Judge who has upheld the appeal. Indeed, where a proceeding for grant of probate and letters of administration becomes a contentious matter, it is registered as a suit and proceeded with accordingly. If in respect of all other suits of whatever nature and complexity an upper limit of ₹ 15,000 on the court fees is fixed, there is no logical justification for singling out this proceeding for an ad- valorem impost without the benefit of some upper limit prescribed by the same statute respecting all other litigants. Neither before the High Court--nor before us here-was the impost sought to be supported or justified as something other than a mere fee, levy of which is otherwise within the State's power or as separate 'fee' from another distinct source. It is purported to be collected and sought to be justified only as court fee and nothing else. The discrimination brought about by the statute, in our opinion, fails to pass the constitutional master as rightly pointed out by the High Court. The High Court, in our opinion rightly, held: There is no answer to this contention, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter legislations has sought to do away with the prescription of an upper limit. The insistence on raising court fees at high rates recalls of what Adam Smith Wealth of Nations said: PG NO 195 There is no art which one government sooner learns of another than that of drawing money from the pockets of the people. Fees are levied no doubt to defray the cost of services but as observed by Findlay Shirras Science of Public Finance, Vol. II, 674-675: Fees are levied in order to defray usually a part, in rare cases the whole of the cost of services done in public interest and conferring some degree of advantage on the fee payer. (Emphasis supplied) Though we have abstained from striking down the legislation, yet, it appears to us that immediate steps are called for and are imperative to rationalise the levies. In doing so the States should realise the desirability of levying on the initial slab of the subject matter--say upto ₹ 15,000--a nominal court-fees not exceeding 2 to 2-1/2% so that small claims are not priced out of Courts. Those who have less in life' it is said should have more in law . Claims in excess of ₹ 15,000 might admit of an ad-volorem l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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