Report No. 127
5.23. Situations not infrequently arise where the State collects some levy which is subsequently declared by the court to be ultra vires. Levy of sales tax on certain items frequently comes for such treatment at the hands of the court. The State has already collected the levy to which subsequently. It is shown to be not entitled. Fairness and justice demands that it must refund the same. Original payer is not traceable. The State is not entitled to retain the amount collected under invalid levy. This problem has confronted the courts and the courts have solved this problem in different ways.
5.24. Section 23 of Punjab Agricultural Produce Markets Act enables the Market Committee to levy an ad valorem basis fee on agricultural produce bought or sold by licenses in a notified market area. The fee was raised from Rs. 2 per transaction of Rs. 100 to Rs. 3. This enhancement was challenged on the ground that the raise is not commensurate with the service rendered. A Constitution Bench of the Supreme Court held that increase beyond Rs. 2 per Rs. 100 lacked justification. The question which then arose was: Wore the Market Committees to be permitted to retain excess amounts which they had already recovered? Or had it to be refunded to the traders notwithstanding the fact that they had already passed on the burden to next purchasers?
In other words, were the traders to be allowed to get a refund from the Market Committees and unjustly enrich themselves as it was not possible to trace individual consumers who bore the burden? section 23A was introduced in the Act permitting the fee already received to be retained by Market Committees and prevented refund of the same to the dealers who had already passed on this burden to the consumers then not traceable, on the ground that the Market Committees, who were representing the interests of consumers and public, may retain the amount and use it for benefit of public from whom this was collected.
The constitutional validity of section 23A was challenged. The Court held that section 23A prevents unjust enrichment by means of refund of which the person claiming it has no moral or equitable entitlement. It gives to the public through the Market Committee what it has taken from the public and is due to it. It does not validate an illegal levy.1 In another case,2 unpaid accumulations, that is, refunds due to the employees but not claimed by them from the company were directed to be transferred to Labour Welfare Fund for utilizing the same for the welfare of labour in general.
1. Amar Nath v. State of Punjab, AIR 1985 SC 218.
2. State of Gujarat v. Shri Ambica Mills, AIR 1974 SC 1300.
5.25. In all such cases, the effort has been that even if some recovery is shown to be invalid, refund should not be ordered in favour of persons who have no moral or equitable entitlement to the same and who would enjoy unjust enrichment in the event refund is ordered. In such a situation, the legislature devised and the court affirmed that such funds instead of being refunded giving unjust enrichment be used for the benefit of people closely connected with the activity concerned. But, in a complex society, other cases may come to surface where it is difficult to trace the original payer and also not possible to use the same for the benefit of the general public at large involved in allied activity.
In such cases, instead of appropriating the money to the State, it can be transferred to a fund, called 'Judicial Development Fund'. The money transferred to this Fund could be used for providing better public services in the court and for streamlining the administration of courts. In approaching the matter from this angle, the Commission is guided by the consideration that most cases of the unjust enrichment arise out of court proceedings. Therefore, what has been made available by the court process must be utilised for improving administration of justice.
5.26. To conclude, the haphazard manner in which administration of courts is conducted has contributed its own mite to the problem. The recommendation regarding streamlining of staffing patterns, introduction of management experts and new technology will ensure that courts will be able to carry out their functions more efficiently. Its needs at a particular time will be much more defined and specific. This would reduce the present long winding process of presenting inflated estimates and subsequent bargaining and wrangle. The introduction of 'Finance Consultative Committee' would reduce bureaucratic bottlenecks. The computation of court fees and fines by realistic assessment according to cost of living index and the utilisation of alternatives mentioned for additional resources would help to ease the financial constraints.
5.27. On an overall view, this report, read with report on Manpower Planning in Judiciary, would constitute a blueprint for totally modernizing the court system with its own self-financing arrangements.
5.28. We recommend accordingly.
V.S. Rama Devi,
Dated: 14th June, 1988.