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Report No. 128

3.11. A society governed by rule of law with a written Constitution and an ingrained bill of rights must have regulatory measures called Statutes or delegated legislation adopted by authorities having the power to do so. Violation of regulation or regulatory measures is generally made punishable. A political society, in order to grow and develop, must have internal peace and security against external aggression. The internal peace can be ensured by laws properly enforced and, when violated, by imposition of punishment. To determine whether law is violated or a contravention has taken place, a forum has to be set up which would adjudicate the charge brought by enforcement machinery against the alleged violator of law who should be permitted to defend himself.

The forum must adjudicate and decide whether a law in fact has or has not been violated and, if violated, determine the degree of criminality and impose proportionate punishment. This is broadly and briefly stated the function of criminal justice. It is the State which must ensure internal peace. It is part of its duty to adopt regulatory measures and it is equally part of its duty to set up forum for determining whether a violation of regulatory measure has or has not taken place and a punishment need or need not be imposed. This is the obligatory duty of the State as part of its sovereign functions.

This can be broadly comprehended in the expression 'administration of criminal justice'. Ordinarily this being the part of the sovereign functions of the State, no fee can be levied for performing the same and also because the system does not render any service to the litigant. To put it brusquely, the litigant in criminal court does not need service of a court for punishing himself. Therefore, administration of criminal justice is not a service rendered by the State but it is performance of sovereign function of the State and in enforcement of its duty to provide internal peace conducive to growth and development.

3.12. When it cones to civil justice, the approach has to undergo a change. Civil disputes include disputes between an individual and individual, between individual and groups of individuals, between group of individuals on one-hand and group of individuals on the other hand and between individuals and group of individuals on one hand and State on the other. A written Constitution with an in-built chapter on fundamental rights and division of powers amongst Federation and States provide a fruitful ground for disputes coming into existence. These disputes have to be resolved because a continuous simmering dispute is not conducive to growth and development of society.

However, when the disputes are between two individuals, say an employer and an employee, a husband and a wife, or between members of the same family, it is open to them choose their own forum to get the dispute resolved. An arbitrator appointed by the parties for resolution of dispute partakes the character of the court because parties agree to treat its decision binding. The costs of such arbitrator has to be met by the parties who agree to refer disputes to arbitrator. The arbitrator renders service to the disputes and charges fee, the position of the State is identical to that of an arbitrator. All parties cannot go continuously in search of an arbitrator. Parties to a dispute may not agree to go for arbitration.

The State, therefore, sets up courts for administration of civil justice which term will comprehend all disputes other than those comprehended in administration of criminal justice. The court would be a readily accessible forum for a party complaining of violation of his right or a threatened invasion of his right or denial of his right and he may approach the court and seek redress of his right grievance. The court enjoys the judicial power of the State and can force the attendance of the other side to the dispute and adjudicate the dispute. None-the-less, the court renders service. And to the extent this is service, fees, for service is chargeable. The raison d'etre for levy of court fee is on account of service rendered by courts and, as it is a fee, there is art element of quid pro quo in it. This is what the Supreme Court said in this behalf:

"But even if the meaning is the same, what is 'fees' in a particular case depends on the subject-matter in relation to which fees are imposed. In this case we are concerned with the administration of civil justice in a State. The fees 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 Article 14. 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."1

Elaborating this position, a Full Bench of the Gujarat High Court, while examining the constitutional validity of Article 15 in the First Schedule of the Bombay Court Fees Act, 1959 in its application to the State of Gujarat, observed that it is for the State to establish that what has been levied is court fees properly so called and if there is any enhancement, the State must justify the enhancethent. Upholding the validity of the levy, the court examined the broad relationship between the levy of court fee and the cost of administration of civil justice in order to determine whether it is a fee or a pretence and not a fee in reality.

The ratio of the case is that the court fee can be validly levied as the fee is levied for service rendered. The only thing to be examined is whether there is a broad relationship between the levy of court fee and the cost of administration of civil justice. It unquestionably follows that by setting up forum for rendering civil justice, the State renders service and is entitled to charge fee for rendering the service. Therefore, levy of court fees in civil justice system cannot be dubbed as tax on justice.

1. Government of Madras v. Zenith Lamp and Electrical Ltd., AIR 1973 SC 724.

3.13. In a peculiar set of circumstances, the Supreme Court of India had occasion to pronounce on the wisdom and rationality of levy of court fee. It even took upon itself some day in future to decide the constitutionality of price for access to court justice as being either just or legal. Without expressly stating so, the court possibly gave vent to its feeling by stating that when court fee becomes a barrier in access to justice, the constitutionality of the levy is open to question. But while giving vent to its feeling, it did not finally pronounce on the subject.1 The difference between tax and fee has come into sharp focus by a catena of decisions.

It was once believed that to justify a levy as fee for service rendered, there must be an element of quid pro quo and that, when challenged, the Legislature must justify the levy by pointing out the receipt and the quantum of service rendered. Translating this dictum into administration of civil justice, it must be shown that the expenditure on service rendered by administration of civil justice must bear close relationship with the receipt from the court fees. However, this element of quid pro quo has recently undergone a change. Undoubtedly, though a fee must have relation to services rendered or the advantage conferred, such relation need not be direct a mere causal relation may be enough.

Further, neither the incidence of the fee nor the service rendered need be uniform. Quid pro quo in the strict sense is not the one and the only true index of a fee; nor is it necessarily absent in a tax.2 It would, therefore, be inappropriate to compare by statistics the receipt under the head 'court fee' with the quantum of service rendered evaluated by expenditure incurred in establishing and maintaining administration of civil justice. However, there must be some broad relationship between the two.

1. Central Coal Fields Ltd. v. Jaswal Coal Co., 1980 Suppl SCC 471.

2. Municipal Corporation of Delhi v. Mohd. Yasin, (1983) 3 SCC 229.

3.14. Those who advocate abolition of court fee appear to be unaware of the fact that there is a huge lay out on administration of civil justice. A developing country like India, continuously suffering the resource crunch, cannot afford to reach the ideal of abolition of court fee in administration of civil justice. Nor its total abolition can ever be appreciated. At the time of the 14th report of the Law Commission, it was found that the receipt under the head 'court fees' exceeded the expense on administration of justice though a contrary picture emerges from statistics obtained from the report of the Taxation Enquiry Commission, 1953-54.1

The situation today is entirely different. Even the expenditure incurred on administration of civil justice with the services available as of today is not reimbursed from the dreaded levy of court fees. What the emerging scenario would be, would shock anyone out of his wits if and when the recommendation of the present Law Commission to increase the present ratio of 10.5 Judges per million of Indian population to at least 50 Judges per million of Indian population is implemented.2

Once that recommendation is implemented, which of necessity must have to be done because at present the service from administration of civil justice due to heavy backlog of cases is virtually of no use to the litigant. Infrastructural services in administration of justice will have to be enlarged sufficiently making a further demand on the Exchequer.3 Therefore, the question of total abolition of court fees though it may be ideal according to protagonists of abolition as such does not merit consideration.

1. LCI, 14th Report; Report of the Taxation Enquiry Commission, 1953.

2. LCI, 120th Report on Manpower Planning in Judiciary: A Blueprint

3. LCI, 127th Report on Resource Allocation for Infra-structural Services in judicial Administration - (A Continuum of the Report on manpower Planning in judiciary : A Blueprint).

3.15. The whole approach, however, on court fees requires a radical change. Emphasis up till now has been on levying court fees on the value of the subject-matter in dispute or, what is called, ad valorem court fee. The man behind the litigation is of no consequence in determining what ought to be the measure of court fees, nor even the social evaluation of the subject-matter of court dispute. The easy and facile approach is look at the value of the subject-matter in dispute and a graded percentage of it should be the court fees. This approach bristles with a market economy concept.

It means that if A wants so much relief, he must pay so much court fees irrespective of whether A comes from the poorest strata of society or middle level strata or from the affluent class. In determining court fees, A is never in the picture. It is the value of the subject-matter in dispute which is the sole guiding criterion, something akin to sale and purchase of goods. This approach - ignoring the litigant and emphasizing the value of the subject-matter in dispute - has presented a distorted view of civil litigation. To illustrate, for a poor man the subject-matter of the dispute in terms of money value may be very small, yet may be a question of life and death for him.

On the other hand, a person in affluent circumstances may have no consideration for the value of the subject-matter in dispute because he can afford to pay any amount of court fees and that subject-matter of the dispute itself may be of little or no importance. But in both, the cases the present approach of looking at the value of the subject-matter in dispute, ignoring the man behind the subject-matter, has been the gravamen of the charge that court fee in some cases sets up economic barriers for a segment of the society in access to justice. Therefore, this emphasis requires to be shifted or suitably altered.

3.16. The Committee on Rationalisation of Court Fee in its report has pointed out that the quantum of court fees varied from State to State and the Committee justified it on the ground that having regard to the level of difference in socio-economic conditions amongst States, the Committee feels that it may not be practicable to have uniform rate of court fee throughout the country in respect of all matters.1 This justification stems from the fact that the emphasis, as hereinabove discussed, is on the value of the subject-matter of the dispute, namely, the litigant, who has come to the court in search of relief. Once the emphasis is changed, this differential treatment in levy of court fees in different parts of the country will lack justification and will have to be abolished.

1. Report of the Committee of Law Ministers on Rationalisation of Court fee, section VII, para. 3, p. 40.

3.17. Therefore, the first thing that is required to be done is that certain classes of litigants shall be totally exempt from payment of court fees irrespective of the value of the subject-matter in dispute. The benefit of total exemption from court fees may be granted in the following manner:-

(i) No Court fee shall be levied in the proceedings before the Gram Nyayalaya;1 and

(ii) Marginal farmers, farm labourers, unemployed industrial workers and those whose annual income does not exceed Rs. 12,000 per annum shall be exempt from payment of court fees.

The Committee recommended that litigants having annual income up to Rs. 6,000 may be exempted from payment of court fee. It further recommended that if a State Government is in a position to exempt litigants having income higher than Rs. 6,000, it may do so keeping in view the overall impact such an exemption may have. As regards proof of income, an affidavit by the plaintiff may be accepted. Its further recommendation was that if a State Government finds it feasible to exempt

(i) Scheduled Castes or Scheduled Tribes litigants who have income higher than Rs. 6,000 a year;

(ii) Scheduled Castes or Scheduled Tribes as a class, from payment of court fee, it may do so.

1. For justification, see LCI, 114th Report on Gram Nyayalaya, para. 615.

3.18. The exemption from payment of court fees granted to litigants having an annual income of Ks. 6,000 is wholly illusory. During the Sixth Plan period, those in charge of integrated rural development programme, for purpose of identification of the beneficiaries of the programme, treat the poverty line for an average family of five at Rs. 3,500 per annum. It appears that the line drawn at Rs. 3,500 per annum for an average family of five was based on the 1977-78 thirty second round of National Sample Survey.

The inflationary inputs since then reflected in the depreciation in the value of the rupee, the poverty line could have been drawn during Sixth Plan period at Rs. 6,400 per annum and since then it must have gone much higher. Therefore, the line drawn for exemption at the income of Rs. 6,000 per year is wholly unreal. Accordingly, the Law Commission recommends that those who have an income up to Rs. 12,000 per annum will be exempt from paying court fee in any proceedings.

3.19. The Committee did not favour any differential rates of court fee as between individual and companies/corporate bodies and fixed a ceiling of Rs. 30,000 on court fee. An individual and a corporate body, even for the purpose of litigation and the capacity to pay court fee, would form two distinct and independent classes. To ignore the difference between an individual and a corporate body is to ignore the realities of the situation. Obviously,1 in the case of companies/corporate bodies, the court fee must be levied at a higher rate than in the case of an individual.

However, there must be a uniform rate of ad valorem court fees in all the States for the simple reason that justice should not cost more in one State and less in another State, the service being identical. The rate structure of ad valorem court fee on money suits may be worked out depending upon the cost of administration of civil justice and the court fees payable by those who have the cushion to pay the same, meaning thereby those who do not belong to the exempted class.

1. For detailed reasons and justification, see infra.

3.20. It is a sad experience that corporations and persons belonging to affluent strata of society use courts for their petty quarrels. In fact, there is a body of opinion that the maximum advantage of the writ jurisdiction has been taken by those trying to evade payment of tax - both direct and indirect, corporate and industrial magnates and members belonging to the affluent strata of society. And unfortunately, they have been treated on par in the matter of payment of court fees with the poorest amongst the poor when there was no exemption and only the relief from payment of court fees can be obtained after declaring oneself an indigent person under Order 33, rule 1 of the Code of Civil Procedure, 1976.

Now when exemption limit has been raised and when it is recommended that no court fee is payable in any proceeding before the Gram Nyayalaya, the shortfall in income to meet the expenditure on administration of civil justice must be made good by levy of higher court fees on companies, corporate bodies, those seeking relief from payment of tax and members belonging to affluent sections of society, that is, those who are in higher income bracket. What ought to be the court fees and other charges recoverable from them has been fully worked out by the Law Commission and it would be idle to repeat the same here.1 That recommendation may be treated as part of this report.

1. For a fuller and complete recommendation on this point, reference may be made to LCI, 127th Report, Chpater V, paras. 5.15 to 5.19 and especially, para. 5.18.

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