1988 INSC 0568
                                        SUPREME COURT OF INDIA

                                                 State Bank of India

                                                           Vs.

                                                  State of Rajasthan

                     Petns.for S.L.A.(C) Nos. 2604-96 and 3879, 4937, 5581 of 1988

                     (R. S. Pathak, C.J.I., S. Natarajan and M. N. Venkatachaliah, JJ.)

                                                      22.09.1988

                                                   JUDGEMENT

VENKATACHALIAH, J.:-

1. The point in these appeals is the recurring and vexed theme of the policy and legality of the levy
of Courtfees - 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 Courtfees and Suits
Valuation Act, 1958 (,Karnataka Act for short). The Rajasthan Courtfees and Suits Valuation Act,
1961 (Act 23 of 1961) (,Rajasthan Act, for short) and the Bombay Courtfees 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(l) read with entry 10 of the First- Schedule to
the ,Bombay Act which, without reference to the upper limit of Courtfee of Rs. 15,000/- prescribed
for all other suits and proceedings, requires payment of ad valorem Courtfee 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 way of courtfee, which is common to other appeals as well. The other contention
against the validity of Section 29(l) read with Entry 10 of the First-Schedule to the Bombay Act is
based on Article 14 of the Constitution on the ground of discrimination as between the proceedings
for grant of Probate and Letters of Administration on the one hand and all other suits and
proceedings respecting which an upper limit of Rs. 15,000/- is fixed under the statute, on the other.

2. The present batch of appeals and Special Leave Petitions comprise of a large number of cases
arising under the said three statutes. We may, however, refer to the facts of some of the cases which
could be taken to be typical and representative of all other cases of each group.

3. Special Leave Petition 13344 of 1988 typifies, and is representative of the appeals and Special
Leave Petitions that arise out of the Rajasthan Courtfees and Suits Valuation Act, 1961. The petition
arises out of and is directed against the common order dated 16th October, 1987 of the Division
Bench of the Rajasthan High Court in Division Bench Civil Writ Petition No. 474 of 1984 and a
large number of writ petitions involving the same question. In Writ Petition No. 474 of 1984, the
present appellant The State Bank of India challenged before the High Court the constitutional
validity of the provisions of Section 20 read with Article I Schedule I of the ,Rajasthan Act, which
prescribed and authorised the levy of Courtfees on plaints or written-statements pleading a set-off or
counter claim or memoranda of appeals presented to Courts an uniform ad valorem impost of Rs. 5/-
for every hundred Rupees or part thereof on the amount or value of the subject-matter in excess of
Rs. 5000/-. On the first slab of Rs. 5000/-, however, certain rates are also prescribed.

We, may, briefly, trace the course of development of the law as to Court-fee in Rajasthan. The
Rajasthan Ordinance 9 of 1950, adapted and extended to the territories of Rajasthan, with effect
from 1-3-1950, the Courtfees Act, 1870 (Central Act, 1870). The provisions of the Central Act, as
adapted and extended to Rajasthan, were amended from time to time till 1-11-1961 when the present
,Rajasthan Act, was enacted and promulgated. Prior to 1-11-1961, as the law then stood, the levy of
court-fee was subject to the maximum of Rs. 7,500/-. This 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 of District Judge, Jaipur City, a suit for
recovery of a sum of Rs. 5,04,75,826/from the defendant in the suit viz., The Jaipur Spinning and
Weaving Mills Ltd. The Courtfee payable on the said plaint under Section 20 read with Article I of
Schedule I of the 'Rajasthan Act' was stated to be Rs. 25,23,860/-. Incidentally, 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 Rs. 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 6-1988 of the Division Bench
of the Karnataka High Court upholding the validity of the corresponding provisions of the
Karnataka Courtfees and Suits Valuation Act, 1958 Karnataka Act far short) which similarly impose
an ad valorem court fee on the plaints, written statements, pleading, set off or counter claims, or
memoranda of appeals presented to any court, an ad valorem court fee at the uniform rate of Re.
10/- for every Rs. 10/- of the amount or value of the subject matter in dispute without prescribing
any upper limit.

The Bank of Baroda, the petitioner in the Special Leave Petition 832 of 1988, questions the
correctness of the view taken by the Karnataka High Court in the large batch of cases disposed of by
it upholding the constitutionality of the provisions in the 'Karnataka Act'.

Appellant-bank had brought, in one of the civil courts in Karnataka, a suit for recovery of Rs.
16,97,811.57 from the defendants therein and was called upon to pay a court fee of Rs. 1,69,792/-
on the plaint. The provisions of section 20 read with article I of Schedule I of the 'Karnataka Act'
are in pari materia. with Section 20 read with Article 1, Schedule I of the 'Rajasthan Act' except for
the rate of fee which is substantially higher under the 'Karnataka Act'. The questions that arise in the
appeals and Special Leave Petitions from Karnataka and Rajasthan are substantially similar.

5. In Civil Appeal No. 1511 of 1983, the State of Maharashtra has come up in appeal against the
judgment dated 1-2-1988 of the Division Bench of the Bombay High Court affirming the order
dated 20-11-1987 of the learned single Judge striking down the provisions of S. 29(l) read with
Entry 10 of Sch. 1 of the Bombay Act, in so far as they purport to prescribe an ad valorem courtfee,
without any upper limit, on grants of probate, Letters of Administration etc., while in respect of all
other suits, appeals and proceedings an Lipper limit of court fee of Rs. 15,000/- is prescribed under
the Bombay Act,. The Bombay High Court has, by its judgment now under appeal, held this
prescription of ad valorem court-fee without any upper limit on this class of proceedings alone
constitutionally impermissible in that it seeks to single out this class of litigants to share a
disproportionately higher share of the burden of fees while all other litigants, whatever the value of
their claim or complexity of the question raised in their cases be, are not required to pay beyond .Rs.
15,000/- which is fixed as the 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 Mikul 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 23-7-1985 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 Rs. 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. Nariman, Sri K. K. Venugopal, Sri Shand Bhushan, Sri
B. R. L. Iyengar, learned senior Advocates for the appellants in Karnataka and Rajasthan batch of
cases and Sri Kuldip Singh, Additional Solicitor General and Sri Badridas Sharma, Senior Advocate
for the States of Karnataka and Rajasthan respectively.

Sri Bobde, learned Advocate General, Maharashtra and Sri S. K. Dholakia, Senior Advocate
appeared in support of the appeals of the State of Maharashtra.

7. Though a number of contentions covering a wide field appears to have been raised and argued
before the High Courts, [he submissions of learned Counsel before us were, however, less expansive
and centred around what was stated to belong to certain basic values and ideals of administration of
justice in a welfare-State and to the importance of access to justice and what the context of the
concept of a ,fee, - is likely to happen to the concept if an ad valorem exaction without any upper
limit whatsoever is pushed to a point where the correlationship between the levy and the service
very nearly breaks down. It ceases, it is said, to be a service and becomes a disservice. Emphasis
was also placed on the basic obligations of the State to administer justice within its territories and on
the Directive Principles of State Policy in Art. 39A which enjoins the State to ensure that
opportunities of securing justice are not denied to any citizen by reason of economic or other
disabilities.

It was contended that in a system of Administration of Justice which was already encumbered by
heavy expenses and long delays, the imposition of Courtfees at nearly 10% of the value of the
subject matter in each of the Court through which the case sojourns before it reaches a finality,
would seriously detract from fairness and justness of the system. The levy ad valorem irrespective
of the nature and quality of the adjudicative process the case attracts and without reference to the
demands that it makes on the judicial time - would be, it is urged, demonstrably unfair and it would
be legitimate to acknowledge that somewhere in the trail of this unlimited levy the sustaining
correlation between the levy and the service rendered is bound to snap. It was urged that the
exaction of ad valorem fee uniformly at a certain percentage of the subject-matter without an upper
limit or without the rates tapering down after a certain stage onwards would negate the concept of a
fee and partake of the character of a tax outside the boundaries of the State's power.
8. It is true that the twin evils that bedevil the legal system and the administration of justice are the
laws, delays and expenses of litigation which have become almost proverbial. Court-fee 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 inexpensive legal remedies must also
as a logical corollary receive 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 justice, at least the fee should be like the fee for postage : that is
to say, it should be the same, however long the journey may be. For it is no fault of one litigant that
his plea to the King's judges raises questions more difficult to determine than another and will
require a longer hearing in Court. He is asking for justice, not renting house- property."

There is also in the following exchanges between the Attorney- General and the Judge the echo of
the argument that State whose primary duty is to administer justice should do so out of public
revenues and not put justice up for sale :

The Attorney- General: As to that, Milord, may I suggest one possible line of thought ? The Crown,
in this connection, means the whole body of tax-payers. Would it be fair and equitable if the general
taxpayer had to provide all the facilities of the Courts for the benefit of the litigant ?

The Judge : Why not ? Everybody pays for the police, but some people use them more than other.
Nobody complains. You don't have to pay a special fee every time you have a burglary, or ask a
policeman the way. I don't follow you, Sir Anthony.

I will go further. I hold that the Crown not merely ought not, but is unable, to act in this way, by
reason of the passage in the Great Charter which I have quoted. The Rules of Court, then, which
purpose to impose these charges are ultra vires, unconstitutional and of no effect : and Mr. Hogby
may continue to decline to pay them."

9. The fortieth clause of the Great Charter of Runnymede declared that Justice shall not be sold,
denied or delayed : "Nulli Vendemus, nulli negabimus, aut differemus rectum aut justiciam." What
was implicit in the need for this promise was that royal justice was, otherwise, popular; but the
complaint was that it was too dear and it was slow in coming. The subsequent course of history of
the administration of justice in England shows that the Magna-Carta did not wholly stop the evils of
delays in, and expansiveness of, Royal Justice but it did, after all, do something. perhaps something
substantial, to cheapen justice and stop the abuses which were rampant in King John's Reign : (See
History of English Law 57-58).

Dr. R. M. Jackson [ Machinery of Justice in Enland "Fifth Ed.. 324 ] points out the dependence of
Royal Justice in England in part at least, on the profits of its administration 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 a
profit for the King. It is sometime since justice has been a substantial source of income, but the old
idea 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 intertwined 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 by reason of his no, affording or is deterred from, access to justice. The need
for access to justice, recognises the primordeal need to maintain order in society as disincentive of
inclinations towards extra-judicial and violent means of settling disputes. On this a learned author
["Access to Justice" by Cappellbtti, Vol. 1. Book 1, 419 ] says :

"The need for access to justice may be said to be two fold; first, we must ensure that the rights of
citizens should be recognised and made effective for otherwise they would not be real but merely
illusory; and secondly we must enable legal disputes, conflicts and complaints which inevitably
arise in society, to be resolved in an orderly way according to the justice of the case, so as to
promote harmony and peace in society, lest they foster and breed discontent and disturbance. In
truth, the phrase itself, "access to justice", is a profound and powerful expression of a social need
which is imperative, urgent and more widespread than is generally acknowledged."

10. The stipulation of court-fee is undoubtedly a deterrent to free "access to justice", but one of the
earlier avowed objects of court-fee was stated to be - as was done in the preamble of the Bengal
Regulation which in 1795 imposed high Courtfees discouragement of litigation, particularly the
speculative and the frivolous variety. Lord Macaulay called that Preamble "the most eminently
absurd Preamble, that was ever drawn". The view of Macaulay [ "The Crisis of the Indian Legal
System" by Upendra Baxi, 54] on the subject are worth recalling :

"If what the Courts administer be justice, is justice a thing which the Government ought to grudge to
the people ?. . . . . . . . It is undoubtedly a great evil that frivolous and vexatious suits should be
instituted. But it is an evil for which the Government has only itself and its agents to blame, and for
which it has the power of proving a most efficient remedy. The real way to prevent unjust suits is to
take care that there shall be just decision. No man goes to law except in the hope of succeeding. No
man hopes to succeed in a ,bad cause unless he has reason to believe that it will be determined
according to bad laws or by bad judges. Dishonest suits will never be common unless the public
entertains an unfavourable opinion of the administration of justice. And the public will never long
entertani such, an opinion without good reason............(The imposition of courtfees) neither makes
the pleadings clearer nor the law plainer, nor the corrupt judge purer, nor the stupid judge wiser. It
will no doubt drive away 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 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
Courtfees 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 cost a litigant has to foot is not so gloriously foreseeable.

The Evershed Committee Report said:

"It is notoriously impossible to count the costs of litigation beforehand. It is difficult enough for
either party to forecast what his own costs are likely to be, since much depends on the manner in
which the other side conducts the case. It is utterly impossible to forecast what the other side cost
will be, and this means that no litigant can have the least idea of what he will have to pay if he loses
the case."
Small claims and the small litigants are at a special disadvantage in the matter of costs. The
expenses of litigation very nearly consume the claim itself. This imparts to the policy formulation
behind the levy of courtfee the imperatives of having lower fees of lesser claims. This is an analysis
of costs in small claims : ["Access to Justice", Vol. 1, Book 1; 13 ]

"Claims, involving relatively small sums of money suffer most from the barrier of cost. If the
dispute is to be resolved by formal Court processes, the costs may -exceed the amount in
controversy or, if not, may still eat away so much of the claim as to make litigation futile. The data
assembled for the Florence Project show clearly that the ratio of costs to amount in controversy
steadily increases as the financial value of the claim goes down. In Germany, for example, the cost
of litigating a claim for about U.S. $ 100 in the regular Court system is estimated to be roughly U.S.
$ 150, even though only a Court of first instance is involved, while the cost for a U.S. $ 5,000
claim, involving two instances, would be about U.S. $ 4,200 - still very high but a substantially
smaller proportion of the claim, s value. Examples need not be multiplied in this area; clearly, small
claims problems require special attention if access is to be obtained." (Emphasis supplied).

Conversely, those who are endowed with considerable financial resources that can be utilised for
litigation have obvious advantages in pursuing or defending claims by or against them. It is said :
["Access to Justice", Vol. 1, Book 1, 15. ]

"Persons or organisations possessing considerable, or relatively considerable, financial resources
than can be utilized for litigation have obvious advantages in pursuing or defending claims. In the
first place they can afford to litigate. They are, in addition, able to withstand the 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 may be able
to outspend the other and, as a result, present his argument more, effectively; Passive decision-
makers, 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 background of which the impact of courtfees is to be 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 met entirely by public revenue or whether the litigants should contribute and if
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 acknowledgement
should be made of the Government's power to raise the resources for providing the services from
those who use and benefit from the services. The idea that there should be uniform fixed fee for all
cases, instead of the ad valorem system, has its own nettling problems and bristles with anomalies.
How far these policy Considerations have an adjudicative 1 disposition and how far Courts can
mould and give direction to the policy is much debated. The Directive Principles in Art. 39A are, no
doubt, fundamental in the governance of the country, though not enforceable in Courts of law. The
following observations of Chinappa Reddy, J. in U.B.S.E. Board v. Hari Shanker, AIR 1979 SC 65
at p. 69 recognise the limitations of Courts :

":..........the principles are ,nevertheless fundamental in governance of the country, and ,it shall be
the duty of the State to apply these principles in making laws. Addressed to Courts, what an
injunction means is that while Courts are not free to direct the making of legislation, Courts are
bound to affirm and adopt principles of interpretation which will further and not hinder the goals
Set out in the Directive Principles of State Policy." (Emphasis supplied).

It is in the light of these conflicting claims and interests that the propositions in the case would
require to be resolved.

13. On the contentions urged at the hearing,, the following points fall for determination, the first
three in Karnataka and Rajasthan cases, and the last in the appeals arising under the Bombay Act, :

(a) Whether the levies of court-fee under the "Karnataka Act" and the "Rajasthan Act" do not satisfy
the requirements of the concept of a fee but partake the character of a tax,, inasmuch as that the
correlationship between the fee and the value of the services by way of quid pro quo is not
established.

(b) Whether, even if the totality of the expenses on the administration of civil justice and the totality
of the court-fee collected show a broad correlation, the levy of courtfees on ad valorem basis,
without an upper limit. renders the impost a tax, inasmuch as having regard to the very nature of the
services, which consists of adjudication of disputes, a stage is inevitably reached after and above
which an ad valorem levy, the proportionate increase in the value of the subject-matter ceases to be
a fee, and becomes a 'tax'.

(c) Whether, at all events, the distribution of the burden of the fees amongst those on whom the
burden falls as the ad valorem principle, 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 Art. 14,Of the Constitution.

(d) Whether, insofar as the provisions of S. 29(i) read with Entry 20, Schedule I of the 'Bombay Act'
arc 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 Rs.
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 Art. 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 Commr., Hindu Religious Endowments,
Madras v. Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, 1954 SCR 1005: (AIR 1954 SC 282)
up to Om Prakash Agarwal v. Giri Raj Kishori, AIR 1986 SC 726.

Of 'Fees and Taxes' a learned author [ first Principles of Public Finance, by De Marco, 78] says:

"Levies are divided into two large categories: fees and taxes. To this division corresponds the
differentiation of public services as special or general."

"A fee" says another author [ Public Finance, Third Ed., by Fuehler, 519] :

"is a charge for a particular service of special benefit to individuals or to a class and of general
benefit to the public, or it is a charge to meet the cost of a regulation that primarily benefits society."

"Fees must be paid to secure the enjoyment of a particular government service such as the
provisions for patents, copyrights, or the registration of mortgages, and the services of a Court or a
public official." [ Public Finance, Third Edn., P. 51.1

Another review of all the earlier pronouncements of this Court on the conceptual distinction
between a 'fee' and a 'tax' and the various contexts in which the distinction becomes telling is an idle
parade of familiar learning and unnecessary. What emerges from these pronouncements is that if the
essential character of the impost is that some special service is intended or envisaged as a quid pro
quo to the class of citizens which is intended to be benefited by the service and there is a broad and
general correlation between the amount so raised and the expenses involved in providing the
services, the impost would partake the character of a ,fee, notwithstanding the circumstance that the
identity of the amount so raised is not always kept distinguished but is merged in the general
revenues of the State and notwithstanding the fact that such special services, for which the amount
is raised, are, as they very often do, incidentally or indirectly benefit the general public also. The
test is the primary object of the levy and the essential purpose it is intended to achieve. The
correlationship between the amount raised through the ,fee, and the expenses involved in providing
the services need not be examined with a view to ascertaining any accurate, arithmetical equivalence
or precision in the correlation; but it would be sufficient that there is a broad and general
correlation. But a fee loses its character as such if it is intended to and does go to enrich the general
revenues of the State to be applied for general 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 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 it shares in common
with the concept of a tax as the class of persons intended to be benefited by the special services has
no volition to decline the benefit of the services. A fee is, therefore, a charge for the special service
rendered to a class of citizens by Government or Governmental agencies and is generally based on
the expenses incurred in rendering the services.

16. The extent and degree of the correlation required to support the fees have also been considered
in a number of pronouncements of this Court. It has been held that it is for the governmental
agencies, imposing the fee to justify its impost and its quantum as a return for some special services.

In Municipal Corporation of Delhi v. Mohd. Yasin, (1983) 3 SCC 229at p. 233: (AIR 1983 SC 617
at p. 619) this Court held :

"If with a view to provide a specific service levy is imposed by law and expenses for maintaining
the service are met out of the amounts collected there being a reasonable relation between the levy
and the expenses incurred for rendering services, the levy would be in the nature of a fee and not in
the nature of a tax ........."

(Emphasis supplied)

In Sreenivasa General Traders v. State of Andhra Pradesh, AIR 1983 SC 1246 this Court observed
(at pp. 1261-62):
"Correlationship between the levy and the services rendered/ expected is one of general character
and not of mathematical exactitude. All that is necessary is that there should be a "reasonable
relationship" between the levy of the fee and the services rendered."

A fee which at the inception is supportable as one might shed its complexion as a fee and assume
that of a tax by reason of the accumulation of surpluses or the happening of events which tend to
affect and unsettle the requisite degree of correlation.

In State of Maharashtra v. The Salvation Army, Western India Territory, (1975) 3 SCR 475 at p. 485
: (AIR 1975 SC 846 at p. 854) this Court generally indicated what, broadly, is the requisite degree
of correlationship:

".........This Court has expressly stated in the Delhi Cloth and General Mills case (AIR 1971 SC 344)
(supra) that services worth per cent of contribution would be sufficient quid pro quo to make a levy
a fee. So, when we find that in this case the organisation has been rendering services worth 62 per
cent of the contribution, it cannot per se be said that there is no correlation between the fee levied
and the services rendered."

(Emphasis supplied)

In Kewal Krishan Puri v. State of Punjab, (1979) 3 SCR 1217 at p. 1244: (AIR 1980 SC 1008 at p.
1023) 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 certainty 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 v. Zenith Lamp and Electrical Ltd., (1973) 2 SCR 973 at
pp. 981-82: (AIR 1973 SC 724 at pp. 729-30) this Court after referring to the legislative entries
pertaining to the legislative fields distributed over the three lists of the Seventh Schedule to the
Constitution, repelled the contention that, fees taken in Court occurring in Entry 3 of List 11 are
really in the nature of a tax, or at any rate constitute an impost sui generis. This Court held :

"It seems to us that the separate mention of "fees taken in Court" in the Entries referred to above has
no other significance than that they logically come under Entries dealing with administration of
Justice and Courts. The draftsman has followed the scheme designed in the Courtfees Act, 1870 of
dealing with fees taken in Court at one place ........"It seems plain that "fees taken in Court are not
taxes, for if it were so, the word ,taxes, would have been used or some other indication given It
follows that "fees taken in Court" cannot be equated to 'Taxes'. If this is so, is there any essential
difference between fees taken in Court and other fees ?............."

"But one thing the Legislature is not competent to do, and that is to make litigants contribute to the
increase of general public revenue. In other words, it cannot tax litigation, and make litigations pay,
say for road building or education or other beneficial schemes that a State may have. There must be
a broad correlationship with the fees collected and the cost of administration of civil justice."

In the present cases, the concerned State Government have filed in the proceedings before the High
Court statements of the receipts and expenses on the administration of Justice in their effort, to
establish the requisite correlation. It is not necessary to go, in any particular detail, into the break-up
of these figures. Both High Courts, after an examination of the statistics felt no hesitation in
upholding the correlation. We did not also understand the learned counsel for the appellants as
questioning the correctness of the figures and the inference as to correlation suggested thereby.
Ledrned counsel for the respective States submitted that if the outlays on capital expenditure are
also taken into account, there will be no shadow of doubt that the expenditure would be further
higher than the fee receipts. So far as the Karnataka State is concerned, similar exercise was done in
an earlier case also in Ram Bhadur Thakur and Co. v. State of Karnataka, AIR 1979 Kant 119).

In the Karnataka cases the relevant figures ,,for the 5 years from 1980-81 to 1984-85 -respectively
are: (the figures in brackets indicate expenditure) 1980-81 Rs. 5,22,08,513 (Rs. 6,80,33,119); 1981-
82 Rs. 6,69,10,019 (Rs. 7,97,76,852); 1982-83 Rs. 8,28,46,359 (Rs. 9,41,19,16 1); 1983-84 Rs.
8,21,49,626 (Rs. 9,44,61,594); 1984-85 Rs. 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 Rs. 101.42 (Rs. 264.56); 1978-79 Rs.
95.50 (Rs. 286.90); 1979-80 Rs. 114.63 (Rs. 3 23.04); 1980-81 Rs. 134.92 (Rs. 379.89); 1981-82
Rs. 159.62 (Rs. 444.83); 1982-83 Rs. 179.87 (Rs. 544.76); 1983-84 Rs. 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 figures, 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 appellants is insubstantial.

17-18. Re : Contention (b):

The basic argument is that having regard to the very nature of the judicial process of resolution of
disputes in Civil Courts, the postulate that judicial time and the service of the machinery of justice is
consumed and utilised in direct proportion to the amount or value of the subject-matter is the first
and fundamental error. The rationale of the imposition of court-fee on an increasing scale. according
as the value or the amount of the subject-matter is, it is urged, an error which is the logical result
and outcome of the first. In the distribution of, the burden of the court- fee amongst the litigants, it
is urged, the ad valorem yardstick, which is relevant and appropriate to taxation,. is wholly
inappropriate because the principle or basis of distribution in the case of a fee should , be the
proportionate cost of services inter se amongst the beneficiaries. Reliance is placed, on The Commr.,
Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt,
1954 SCR 1005: (AIR 1954 SC 282).

Reliance is also placed on the following observations of Chinnappa Reddy, J. in Om Prakash
Agarwal v. Giri Raj Kishori, (1986) 1 SCC 722 at p. 730 : (AIR 1986 SC 726 at p. 731).

"Coming now to fees, a "fee" is generally defined to be a charge for a special service rendered to
individuals by some governmental agency. The amount of fee levied is supposed to be based on the
expenses incurred by the government in rendering the service, though in many cases the costs are
arbitrarily assessed. "Ordinarily the fees are uniform and no account is taken of the varying abilities
of different recipients." (Emphasis supplied)

The following observations of krishna Iyer, J in N. M. Desai v. The Testeels Ltd., AIR 1980(2) SC
2125* are also relied upon :
* Or Central Coal Field Ltd. V. Jaiswal Coal Co., AIR 1980 SC 2125 at p. 2125 - Ed.

"It is more deplorabe that the culture of the magna carta notwithstanding the AngloIndian forensic
system It and currently free India's Court process It should insist on payment of court-fee on such a
profiteering scale without correlative expenditure on the administration of civil justice that the
levies often smack of sale of justice in the Indian Republic where equality before the law is
guaranteed constitutional fundamental and the legal system has been directed by Art. 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 probono publico proceedings. "Effective access to justice can thus be seen as the
most basic requirement It the most basic 'Human Right' It of a system which purports to guarantee
legal rights."

However, the observation in Shirur Mutt, s case (AIR 1954 SC 282) as to the uniformity of the levy
must be understood in the light of the next sentence in that very passage which says (at p. 295) :

"............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."

The criticism of Krishna lyer, 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
civil justice."

Reference was also made to certain observations of the learned author H. M. Seervai [Constitutional
Law of India, Third, Edn., Vol. 11, 19581 that court-fee should not be a weapon to stifle suits or
proceedings and that though in fixing the Courtfees regard may be given to the amount involved, "a,
stage is reached when an increasing amount, ceases to be justified".

".....Thus, an ad valorem court-fee of per cent for suits involving Rs. 1 lac or more with a maximum
of Rs. 15,000/- or Rs. 20,000/- may be justified It but a court-fee without limit cannot be justified,
for after a certain amount is reached no greater service can be rendered to whole classes of litigants;
on the contrary, such increased Courtfees render disservice by rendering the cost of litigation
prohibitive." (Emphasis supplied)

Learned counsel. also referred to and relied upon the decision of the Bombay High Court in Indian
Organic Chemicals v. Chemtax Fibres, (1981) 83 Bom LR 406; upon certain observations of the
Madras High Court in Zenith Lamp and Electrical Ltd. v. The Registrar, High Court, Madras, ILR
(1968) 1 Mad247andonajud mentdated22-12-1972 19of the Full Bench of the Gujarat High Court.
in Lady Tanumati Girijaprasad v. Special Rent Acquisition Officer, Western Railway, Ahemdabad,
Special Civil Appln. No. 979 of 1970 with Special Civil Appln. 287 of 1967 (reported in (1973) 14
Guj LR 537).

19. The submissions on this point, in some areas, overlap contention (c) but the point sought to be
emphasised so far as the present contention is concerned, is that the essence and the plenitude of the
concept of ,fee, requires not only that there should be a broad correlationship between the impost
and the services but also a requirement, inherent in and as a part of the concept itself, that the
expenses for the services must also be distributed in an equitable manner amongst those constituting
the class receiving the services. This aspect, it is urged, is distinct from the susceptibility of the
impost to be declared unconstitutional on the ground that the distribution of its burden is arbitrary.
The same event demonstrating the unfairness of the distribution of the burden would, it is ,urged,
produce two distinct legal consequences It first, detracting from the fundamental concept of a fee
and secondly, by reason of the invidious discrimination wrought by it is violative of the
constitutional pledge of equality.

20. State Government 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 appellant's 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, ILR (1968) 1 Mad 247 which came up before this Court in (1973) 2 SCR 973 :
(AIR 1973 SC 724). Those observations sum up the matter succinctly :

"Irrespective of the magnitude of the claim and the complexity of the case and the anxiety of the
suitor, a limit will be reached so far as the service that could be rendered in, Courts is concerned.
Judicial time is not spent in direct proportion to the value of the claim. It may have relation to the
question involved. That appears to be the reason behind the maximum court-fee originally prevalent
and even now found in some States".

"..........The problem is in the distribution of the levy in a practical and reasonable manner so as to
fall fairly equitably on all suitors, that no particular class or section of them is disproportionately hit
and made to bear more than their fair share of the expenditure on the administration of justice, on
considerations not germane in the context of the levy authorised by law."

"As it is, as the value of the claim goes up, the levy becomes more and more unrelated to the object
of the levy. A few suitors would be made to bear---a any share of the expenditure unrelated to the
services required by them with the result that, when the claims are high, only one of the two
essential elements of a levy to be regarded as a fee is left. While the occasion for the levy is the
demand of special service by the suitor that is, one element is present, there is no reasonable
correlation between the levy and the-services that is, the second element is lacking. The levy
becomes excessive, grossly disproportionate and unreasonable qua the particular suitor it ceases to
be a fee and becomes a tax for him." (Emphasis supplied) ILR (1968) 1 Mad 247 (368-372)

This is the crux of the matter and a fair summing-up of the arguments of the learned counsel for the
appellants.

This again, is what the High Court of Bombay adopted in the case of Indian Organic Chemicals v.
Chemtax Fibres, (1981) 83 Bom LR 406, one of the cases relied upon by the appellants.

22. We may, briefly, refer to the setting in which the matter arose before the Bombay High Court. In
the proceedings, the plaintiffs challenged the provisions of the Bombay Courtfees (Second
Amendment) Act, 1974 by which, inter alia, the upper limit of the court-fee, of Rs. 15,000/- then
obtaining was done away with. The consequence was that ad valorem court-fee, without any upper
limit, had to be paid. The matter arose out of what was alleged as the Backbay Scandal, in which
various plots of land 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 Rs. 5,56,30,731.87 and the
court-fee payable was Rs. 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 Courtfees 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 cloak of a fee, a tax to augment the general public revenues.

The Bombay High Court rejected the first contention; but accepted the second and held that even if
the Government had satisfied itself that there was necessity for collection of enhanced quantum of
court-fee, it could have done so on the basis of a rationalised structure which might result in the
enhancement of the ceiling from Rs. 15,000/to Rs. 20,000/- or even Rs. 25,000/- in which event the
Court would not be able to hold that the levy had become so excessive and so grossly
disproportionate and unreasonable qua a particular suitor as to cease to be a fee and become a tax.
The High Court held :

".........In the case before us the fact that the plaintiff on its claim is called upon to pay after the
amending Act of 1974 Courtfees of Rs. 5,60,000 eloquently testifies to the harshness, the excessive
character and the unreasonableness of the levy and once such conclusions are reached, it will have
to be held that this levy at the higher figure which is secured by the impugned Act has converted
exaction from a ,fee, into a ,tax,. If that be the result secured through the enactment, which has
brought about this result would be liable to be struck down." ILR (1981) 83 Bom 406 at pp. 415-16.

On the third ground also the Court upheld the challenge, being of the view that the Government had
not established the quid pro quo to the requisite extent.

23. So far as the decision of the Full Bench of the Gujarat High Court in Lady Tanumati
Girijaprasad v. Special Rent Acquisition Officer, Western Railway, Ahemdabad, Special Civil
Appln. No. 979 of 1970 with Special Civil App In. 287 of 1967 : (reported in (1973) 14 Guj LR
537) is concerned, that decision, even to the extent it goes; is not on the aspects emphasised in these
appeals. The decision really turned on the question whether correlation between the services and the
fee had been established or not. The High Court was of the view that it had not.

24. Sri F. S. Nariman submitted that the facts of the Rajasthan appeal were itself demonstrative of
the arbitrariness and inequities inherent in the imposition of the ad valorem impost without an upper
limit. In that case the appellant was called upon to pay on his plaint almost 1/7th of the entire
estimated Courtfees receipts of the Year and it would be inconceivable that, proportionately, 1/7th of
the judicial-time would be spent on this suit. Learned counsel submitted 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 partake 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 should be made, lest the levy,
in excess of that conceptual limit, becomes a tax. The ideal measure or yardstick of court- fee,
learned counsel said, was a fee proportionate to the judicial time expended over a case and if this
measure or yardstick is difficult of application owing to its practical difficulties in its effectuation,
either of the two further alternatives could save a legislation imposing a fee. One such was to fix an
upper limit commensurate with conceptualised outermost limit of the money value of the maximum
possible services, hypothetically so conceived. The second was to stipulate after a particular stage,
progressively lower rates on correspondingly increasing slabs of the value of the subject- matter or
in other words, after a certain stage, to make the rates go down according as the value goes up.

25. We have given our careful and/ ,,anxious consideration to this vexed problem which is a subject-
matter of considerable debate both in and outside Courts. The anomalies that the policy behind the
impugned provisions can produce in-, conceivable cases could, indeed, be inequitable or even quite
startling. But, the argument, in the last analysis, becomes indistinguishable from the contention that
the correlation of the services to the fee would have to be decided on the basis of how the
correlation operates in each individual case. It would be an insistence on testing the conceptual
nature of the fee on the basis of the degree of the quid pro quo in the case of each individual payer
of the fee., That is the peccant part of the argument. Once a broad correlation between the totality of
the expenses on the services, conceived as a whole, on the one hand and the totality of funds raised
by way of the fee, on the other established, it would be no part of t legitimate exercise in the
examination of constitutionality of the concept of the impost to embark upon its effect in individual
cases. Such a grievance would be one of disproportionate nature of the distribution of the fees
amongst those liable to contribute and not one touching the conceptual nature of the fee. Indeed this
position was clearly recognised by the Madras High Court in Zenith Lamp's case (ILR (1968) 1 Mad
247) itself in the following passage of the, judgment :

"If, in substance, the levy is not to raise revenues also for the general purpose of the State the mere
absence of uniformity of the fact that it has no direct relation to the a ,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 (1468)Mad 247 340-41).

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 he , is he 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 doe s 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 Art. 14, the levy does not fail as
violative of Art. 14.

In H. H. Sudhindra Thirtha Swamiar v. Commr. for Hindu Religious and Charitable Endowments,
Mysore, (1963) 2 SCR Suppl 302 at p. 323 (AIR 1963 SC 966 at p. 975) this Court held:
"........ Nor is it a postulate of a fee that, must have direct relation to the actual services rendered by
the authority to individual who obtains the benefit of the service. If with a view to provide a specific
service, levy is imposed by law and expenses for maintaining the service are met out of the amounts
collected there being a reasonable. relation between the levy and the expenses incurred for rendering
the service, the levy would be in the nature of a fee and not in the nature of a tax." (Emphasis
supplied).

In The City Corporation of Calicut v. Thachambalath Sadasivan, (1985) 2 SCC 112 at p. 115 : (AIR
1985 SC 756 at p. 758) this Court held:

"It, is not, necessary to establish that those who pay the fee must receive direct benefit of the
services rendered for which the fee is being paid. If one who is liable to pay receives paid general
benefit from the authority levying the fee the element of service required for collecting fee is
satisfied. It is not necessary .that the person liable to pay must receive some special benefit or
advantage for payment of the fee." (Emphasis supplied)

27. What emerges from the foregoing discussion is that when a broad and general correlation
between the totality of the fee on the one hand and the totality of the expenses of the services on the
other is established, the levy will not fail in its essential character of a fee on the ground alone that
the measure of its distribution on the persons of incidence is disproportionate to the actual services
obtainable by them. The argument that where the levy, in an individual case, far exceeds I the
maximum- value, in terms of money, or the services that could at all be possible,, then, qua that
contributor, the correlation breaks down is a subtle and attractive argument. However, on a proper
comprehension of true concept of a fee the argument seems to us to be more subtle the accurate. The
test of the correlation is not in: the context of individual contributors. The test is on the
comprehensive level of the value of the totality of the services, set-off against the totality of the
receipts. If the character of the 'fee' is thus established, the vagaries in its distribution amongst the
class, do not detract from the concept of a 'fee' as such, though a wholly arbitrary distribution of the
burden might violate other constitutional limitation. This idea that the test of the correlation is at the
"aggregate" level and not at the "individual" level is expressed thus [First Principles of Public
Finance by De Marco, 831] :

"The fee must be equal, in the aggregate to the cost of 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
(1981-83 Bom LR 406) and the view of the earlier Madras High Court in Zenith Lamp's case (ILR
(1968) 1 Mad 247) 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 burden so irrational and so divorced from relevant criteria that the impugned provisions violate
Art. 14. It is urged that a litigation, on which a litigant might have paid a mere Rs. 50/- by way of
court-fee, might involve far more substantial questions and take up judicial time in a measure far
greater than a litigation on which a litigant is called upon to pay Rs. 25 lacs by way of court-fee.

It is urged that the ad valorem principle which is appropriate to taxation would be inapposite in the
context of an impost which is meant as a contribution towards the costs of services.

29. The contention of the States is that as long as their power to raise the funds to meet the expenses
of administration of civil justice is not disputed and as long as the funds so raised show a correlation
to such expenses, the States should have sufficient play at the joints to work-out the incidents of the
levy in some reasonable and practical way. It would, quite obviously, be impracticable, so proceeds
the argument, to measure-out the ,levy directly in proportion to the actual judicial time consumed in
each individual case; hence the need to tailor some rough and ready workable basis which, though
may not be an ideal or the most perfect one, would at least be the least hostile. Perfection in any
system of imposition of Monetary exactions is an unattainable goal and that therefore, the
satisfaction of high positive virtues in the scheme is not to be expected but what is to be seen is
whether any serious vice of blatant discrimination without any rational basis whatsoever vitiates the
system. It will, obviously, be unreasonable, says the States, learried counsel, to distribute the total
expenses amongst all the litigants uniformly irrespective of the amount or value of the subject-
matter of the litigation. If, contends counsel, an upper limit is fixed and the collection fell short of
what the Government intends and is entitled to collect, this would eventually result in the
enhancement of the general rates of court-fee for all categories. The ad valorem principle is a well
recognised principle; it may not provide the best or the most perfect answer; but it can, it is urged,
reasonably be expected to provide the least hostile and workable basis of distribution of the burden.
If the value of the subject-matter is a relevant factor in proportioning the burden of the court-fee, as
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 appear to be a less perfect system particularly
when economic measures and regulations are concerned.
So far as the Directive Principles in Art. 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 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 cannot compel the State to bring-forth any legislation to
implement and effectuate a Directive Principle.

30. The problem is indeed, a complex one not free from its own peculiar difficulties. Though other
legislative measures dealing with economic regulation are not outside Art. 14, it is well recognised
that the State enjoys the widest latitude where measures of economic regulation are concerned.
These measures for fiscal and economic regulation involve an evaluation of diverse and quite often
conflicting economic criteria and adjustment and balancing of various conflicting social and
economic values and interests. It is for the State to decide what economic and social policy it should
pursue and what discriminations advance those special and economic policies. In view of the
inherent complexity of these fiscal adjustments, Courts give a larger discretion to the Legislature in
the matter of its preferences of economic and social policies and effectuate the chosen system in all
possible and reasonable ways. If two or more methods of adjustments of an economic measure are
available, the Legislative preference in favour of one of them cannot be questioned on the ground of
lack of legislative wisdom or that the method adopted is not the best or that there were better ways
of adjusting the competing interests and claims. The legislature possesses the greatest freedom in
such areas. The analogy of principles of the burden of tax may not also be inapposite in dealing with
the validity of the distribution of the burden of a ,fee, as well.

31. This Court in East India Tobacco Co. v. State of Andhra Pradesh, (1963) 1 SCR 404 at p. 411 :
(AIR 1962 SC 1733 at pp. 1735-736) referred to with approval the following passage in
Rottschaefer,s "Constitutional Law", p. 668 :

"The decisions of the Supreme Court in this field have permitted a State legislature to exercise an
extremely wide discretion in classifying property for tax purposes so long as it refrained from clear
and hostile discrimination against particular persons or classes."

The Legislature has to reckon with practical difficulties of adjustments of conflicting interests. It has
to bring to bear a pragmatic approach to the resolution of these conflicts and evolve a fiscal policy it
thinks it best suited to the felt needs. The complexity of economic matters and the pragmatic
solutions to be found for them defy and go beyond conceptual mental models. Social and economic
problems of a policy do not accord with preconceived stereotypes so as to be amenable to pre-
determined solutions. In The State of Gujarat v. Shri Ambica Mills Ltd., Ahemdabad, (1974) 3 SCR
760 (764) : (AIR 1974 SC 1300) 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 classification as
irrational ...........

"..........The question whether, under Art. 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 not to reconstruct. When to this are added the complexity of economic
regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the
number of times the judges have been overruled by events, self limitation can be seen to be the path
to judicial wisdom and institutional prestige and stability."

"Laws regulating economic activity should be viewed differently from laws which touch and
concern freedom of speech and religion, voting procreation, rights with respect to criminal
procedure etc. Judicial deference to legislature in instances of economic regulation is explained by
the argument that rationality of a classification depends upon local conditions about which local
legislative or administrative bodies would be better informed than a Court."

The lack of perfection in a legislative measure does not necessarily imply its unconstitutionality. It
is rightly said that no economic measure has yet been devised which is free from all discriminatory
impact and that in such a complex arena in which no perfect alternatives exist, the Court does well
not to impose too rigorous a standard of criticism, under the equal protection clause, reviewing
fiscal services. In G. K. Krishnan v. State of Tamil Nadu, (1975) 2 SCR 715 (730) : (AIR 1975 SC
583, 592-93) this Court referred to, with approval, the dissent of Marshal, J. in San Antonio School
District v. Bodrigues, (1973) 411 US 1 :

"No scheme of taxation, whether the tax is imposed on property, income or purchases of goods and
services, has yet been devised which is free of all discriminatory impact. In such a complex arena in
which no perfect alternatives exist, the Court does well not to impose too rigorous a standard of
scrutiny lest all local fiscal schemes become subjects of criticism under the Equal Protection
Clause."

"In summary, it seems to me inescapably clear that this Court has consistently adjusted the care with
which it will review state discrimination in light of the constitutional significance of the interests
affected and the invidiousness of the particular classification. In the context of economic interests
we find that discriminatory state action is almost always sustained, for such interests are generally
far removed from constitutional 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 be
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, (1970) 397 US 471 at p. 520).

The observations of this Court in Incometax Officer Shillong v. N. Takim Roy Ryabai, (1976) 3
SCR 413 : (AIR 1976 SC 670) made in the context of taxation laws are worth recalling : (at p. 674)
:

"The mere fact that a tax falls more heavily on some 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 Art. 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 (AIR 1973 SC 724 at p. 730) this court observed :

"The fee must have relation to the administration of civil justice. While levying fees the appropriate
legislature is competent to take into account all relevant factors, the value of the subject-matter of
the dispute the various steps necessary in the prosecution of a suit or matter, the entire cost of the
upkeep of courts and officers administering civil justice, the vexatious nature of a certain type of
litigation and other relevant matters. It is free to levy a small fee in some cases, a large fee in others,
subject of course to the provisions of Art. 14."

(Emphasis supplied).

In the context of Ievy of: market fee, a similar argument was advanced before a High Court that the
imposition of market fee ad-valorem on different commodities irrespective of their weight or
volume and irrespective of the extent of the market services rendered in respect of their marketing
produced inequality and hostile discrimination. It was urged that the nature and extent of services
afforded by the Market Committees must necessarily vary having regard to the nature and volume
of the agricultural produce and therefore a blind ad-valorem levy would be arbitrary as the services
rendered to a buyer who buys say a quintal of cotton or tamarind are quantitatively and qualitatively
more than the services that may be envisaged to the class of traders dealing with spices of equivalent
money-value. The distribution of the burden of the fee on the basis of the value of the commodity, it
is argued, was arbitrary as it did not recognise, that the services are inherently different for different
classes of commodities but treated unequals equally. This argument has its ring of familarity with
the arguments in the present case. But the High Court; ILR 1982 (Karnataka) 399; (sic) (reversed by
the Supreme Court on another point), repelled this contention :

"We are unable to subscribe to this view. Indeed it appears to us that if the impost was "ad quantum"
and not "ad valorem", it might have attracted, quite legitimately perhaps, the criticism of being
arbitrary. By an ad valorem impost, the goods independently of their volume and quality are treated
equally in terms of their value. An impost ad valorem is a well accepted concept in taxation. .
Indeed in Ganga Sagar Corporation's case AIR 1980 SC 286, Supreme Court dealing, though in a
different context stated :

".......Art. 14, a great right by any canon, by its promiscuous forensic misuse, despite the Dalmia
decision has given the impression of being the last sanctuary of losing litigants Price is surely a safe
guide but other methods are not necessarily violational. 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 without 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 Courtfee 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 Art. 14 it cannot be contrasted with laws enacted by
other States. In The State of Madhya Pradesh v. G. C. Mandawar, (1955) 1 SCR 599 : (AIR 1954
SC 493) this court observed (at p. 496) :

"Art. 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 does it
contemplates a law of the Centre or of the State dealing with similar subjects being held to be
unconstitutional by a process of comparative study of the provisions of two enactments .

34. Having regard to the nature and complexity of this matter it is, perhaps, difficult to say that the
ad valorem principle which may not be an ideal basis for distribution of a-fee can at the same time
be said to be so irrational as to incur any unconstitutional infirmity. The presumption of
constitutionality of laws requires that an doubt as to the constitutionality of a law ha to be resolved
in favour of constitutionality Though the scheme cannot be upheld, at the same time, it cannot be
struck down either.

35. The State is in theory entitled to raise the totality of the expenses by way of fee. Any
interference with the present yardstick for sharing the burden might in turn produce a yardstick less
advantageous to litigants at lower levels. Subject to certain observations and suggestions we propose
to make in regard to the rationalisation of the levies in view of the general importance of the matter
to the administration of civil justice, we think we should decline to strike down the law.

36. Re. : Contention (d)

In the appeal of the State of Maharashtra arising out of the Bombay Court-fees Act, 1959, the High
Court has struck down the impugned provisions on the ground that the levy of Court-fee on
proceedings for grant of probate and letters of administration ad valorem without the upper limit
prescribed for all other litigants -- the Court-fee, in the present case amounts to Rs. 6,14,814 - is
discriminatory. The High Court has also held that, there is no intelligible or rational differential
between the two class of litigations and that having regard to the fact that what is recovered is a fee,
the purported classification has no rational nexus to the object. The argument was noticed by the
learned single Judge thus :

"Petitioners next contend that the impugned clause discriminates as between different types of
suitors and that there is no justification for this discrimination. Plaintiffs Who go to Civil Courts
claiming decrees are not required to pay Courtfees in excess of Rs. 15,000/-. This is irrespective of
the amounts claimed over and above Rs. 15 lacs. As against this, persons claiming probates have no
such relief in the form 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 Rs. 15,000/on the court-fee 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' for 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
muster as rightly pointed out by the High Court. The High Court, in our opinion rightly, held :

"There is no answer to this contention, except that the legislature has not thought it fit to grant relief
to the seekers of probates, whereas plaintiffs in civil suits were thought deserving of such an upper
limit. The discrimination is a piece of class legislation prohibited by the guarantee of equal
protection of laws embodied in Art. 14 of the Constitution. On this ground also item 10 cannot be
sustained."

We approve this reasoning of the High Court and the decision of the High Court is sustained on this
ground alone. In view of this any other ground urged against the constitutionality of the levy is
unnecessary to be examined.

Contention(d) is accordingly held an answer against the appellant and the appeals preferred by the
State of Maharashtra are liable to be and are hereby dismissed.

37. Now at the end of the day, what remains is the suggestion necessary in regard to the
rationalisation of the Courtfees under the, Rajasthan Act, and the, Karnataka Act,. The arguments in
the case highlight an important aspect. The levy of Court-fee at rates reaching 10% ad valorem
operates harshly and almost tends to price justice out of the reach of many distressed litigants. The
Directive Principles of State Policy, though not strictly enforceable in courts of law, are yet
fundamental in the governance in the country. They constitute fons-juris in a Welfare State. The
prescription of such high rates of Courtfees even in small claims as also without an upper limit in
larger claims is perilously close to arbitrariness, an unconstitutionality. The ideal is, of course, a
state of affairs where the state is enabled to do away with the pricing of justice in its courts of
justice. In this reach for the ideal it serves to recall the words of Robert Kennedy : "Some men see
things as they are and say why, I dream things that never were and say why not?"

The power to raise funds through the fiscal tool of a ,fee, is not to be confused with a compulsion so
to do. While ,fee, meant to defray expenses of services cannot be applied towards objects of general
public utility as part of general revenues, the converse is not valid. General Public revenues can,
with justification, be utilised to meet, wholly or in substantial part, the expenses on the
administration of civil justice. Many States including Karnataka and Rajasthan had, earlier, statutory
upper limits fixed for the Court-fee. But later legislation has sought to do away with the prescription
of an upper limit. The insistence on raising Courtfees at high rates recalls of what Adam Smith's
Wealth of Nations said :

"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. 11, 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 up to Rs. 15,000/- - a
nominal courtfees 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 Rs.
15,000/might admit of an ad valorem levy at rates which, preferably, should not exceed 7-1/2%
subject further to an upper limit which, having regard to all circumstances, could be envisaged at
Rs. 75,000/-. The upper limit even prior to 1974 under the ,Bombay Act, was Rs. 15,000/-and prior
to 1961 under the ,Rajasthan Act at Rs. 7,500/-. Having regard to steep inflation over the two
decades the upper limit could perhaps go up to Rs. 75,000/-. After that limit is reached, it is
appropriate to impose on gradually increasing slabs of the value of the subject matter, progressively
decreasing rates, say from 7-1/2% down to 1/2 % in graduated scales. The Governments concerned
should bestow, attention on these matters and bring about rationalisation of the levies.

With these observations and directions we dismiss the appeals, writ petitions and special leave
petitions, out in the circumstances, without an order as to costs.

         Appeals and writ petition and SLPs. dismissed.

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