Holding

The enhanced registration fee and the fee for filing audited balance‑sheets are valid fees having a sufficient nexus with the regulatory services, and the High Court’s striking down of the amendments was erroneous.

Summary

The Supreme Court examined amendments to the Tamil Nadu Chit Fund Rules, 1964 that raised the registration fee for chit‑fund bye‑laws (Article 1) and introduced a fee for filing audited balance‑sheets (Article 8‑A). The respondents argued that the fees were disproportionately high, lacked a quid‑pro‑quo relationship with any service and were therefore taxes, not fees, and that the High Court should strike them down. The Court held that the enhanced registration fee is justified because the regulation of chit funds entails substantial expenditure on the Registrar, staff and supervision, which is funded from the fee‑fund, establishing a live nexus. It also upheld the fee for filing audited balance‑sheets, noting that verification of accounts is a necessary regulatory function. The Court rejected the High Court’s view that the number of subscribers or instalments bore no relation to the fee, emphasizing that more subscribers increase supervisory burden. Consequently, the appeals were allowed, the High Court judgment set aside and the writ petitions dismissed.

Issues considered

The validity of the enhanced registration fee under Article 1 as a fee versus a tax
The validity of the fee for filing audited balance‑sheets under Article 8‑A as a fee versus a tax
Whether a quid‑pro‑quo relationship exists between the fees and the regulatory services rendered
Whether the number of subscribers or instalments has a nexus with the registration fee
Whether the fee structure violates constitutional principles of equality and non‑arbitrariness

Legislation cited

Tamil Nadu Chit Fund Rules, 1964s. Appendix II, s. Rule 3, s. Rule 42
Tamil Nadu Chit Funds Act, 1961s. 12, s. 16, s. 3, s. 37, s. 51, s. 53, s. 63, s. 7

Subjects

Chit fundFee versus taxQuid pro quoRegulatory feeTamil Nadu Chit Funds ActConstitutional validityAdministrative lawFee nexus

Judgment

COMMISSIONER AND SECRETARY TO GOVERNMENT A
..... ~ COMMERCIAL TAXES AND RELIGIOUS ENDOWMEl'l1S
DEPARTMENT AND ORS.
v.
SREE MURUGAN FINANCING CORPORATION COIMBATORE
AND ORS. B
-( APRIL 23, 1992

[KULDIP SINGH AND M. FATHIMA BEEVI,JJ.)

Tamil Nadu Chit Fund Rules, 1964: Rule 4r-Appendix II-Articles 1 c
and 8-A.

Chit Fund-Enhancement of fees for registration of bye-laws-Levy of
x fees for filing audited and certified Balance sheets-Validity of-Held levy of
fe_es has live nexus with expenditure incu"ed for benefit of "chit fund'~evy
held valid.
D

'Tax' and 'fee'-Distinction between-What is.

Under the Tamil Nadu Chit Funds Act, 1961 no person can start or
conduct any chit unless he registers With the Registrar the proposed
E
, bye-laws of the chit. An application for registration of b)e-laws is to be
a¢companied by fees set out in Appendix II of the Tamil Nadu Chit Fund
Rules, 1964. Article 1 of Appendix JI was amended and the fees payable for
regi~tration of bye-laws of the chit was enhanced. Simultaneously Article
8-A was inserted by which fees for filing audited and certified balance sheet
by the Chartered Accountants was levied. F

The respondents challenged the validity of the amendments on the
ground that the rates of fees fixed in Article 1 and Article 8-A were
~ y- dispr~portionately high having no nexus to the nature of service rendered
and the levy was in fact not a fee but a tax.
G
The High Court of Madras struck down the amendments holding

..
that (i) the necessary element of quid pro quo was absent; (ii) the number
of the subscribers. or the instalments to the chit has no nexus with the
j._ registration fee, and (iii) that since no scrutiny or examination of balance
· sheets was required to be done under the Rules therefore no expenditure H
735
736 SUPREME COURT REPORTS [1992] 2 S.C.R.

A need be incurred and as such no fees could be levied for that purpose.
Against the decision of the High Court appeals were filed in this Court.

Allowing the appeals and setting aside the judgment of the High
Court, this Court,

B HELD : 1. The enhanced fee is justified on the legal as well as the
factual anvil of quid pro quo. Apart from the appointment of Registrar, its ~
staff and various other functionaries, the scheme of the Act in its operation
involves huge expenditure which is entirely met out of the Fee-fund. The
fees collected under the Act have, therefore, live nexus with the expenditure
incurred for the benefit of the "chit fund" business. [746 G-H, 747 A]
c
2. The scheme of the Act and the Rules shows that there is effective
supervision and control at every stage of the functioning of the "chit fund"
business. The High Court grossly erred in holding that the number of the
x
subscribers or the instalments has no nexus with the registration fee. Every
D subscriber has to enter into an agreement with the Foreman who conducts
the business on behalf of the proprietors. The object of the Act and Rules
obviously is to protect the interest of the subscribers. More the subscribers
more burden on the authorities and as a consequence more fee is required
to meet the expenditure. [745 G-H, 746 A]
E It is no doubt correct that after registration of bye-laws fees are
payable under Section 53 of the Act for the performance of various other ~
functions by the Registrar and his staff, but that is justified in view of the
scheme of the Act. The expectation of winning a draw or a bid at the

F
auction and becoming rich over-night lures the lower-middle class and the
poor to subscribe to the chit fund out of their savings or even by borrowing
.......
money. In such a situation apart from regulatory measures it is necessary
to have strict control and supervision over the "chit fund" business. The
Act and the Rules are operating with that objective. [746 A-C]
-...,,- ~
3. It cannot he said that it was not required under the Rules to
G scrutinise and investigate the contents of the balance sheets submitted
through the chartert:d accountants and as such it was not necessary to do
so and that since no scrutiny or examination of balance-sheets was required
t~ be done, no expenditure need be incurred and as such no fee for that
purpose could be levied. The Registrar is justified rather duty-bound to act _J._ ..-
H in furtherance of the objects of the Act and the Rules. Even otherwise when
COMMR. COMMERCIAL TAXES v. FlNANONG CORPN. [FATIDMA BEEVI, J.] 737

the Rules provide for filing of balance-sheets by the Chartered Accountants, A
-'
~ it is necessary in the context of the rules and the Act to provide machinery
to examine and verify the contents of the balance-sheets. No fault can be
found with the reasons given by the State for bringing in Article 8-A in
Appendix II to the Rules. The High Court fell into error in quashing the
impugned amendments. [747 F-H, 748 A, 746 HJ
B
-( Kewal Krishan Puri v. State of Punjab, [1979] 3 SCR U17; Sreenivasa
General Traders and Ors. v. State ofAndhra Pradesh and Ors., [1983) 4 SCC
353; Commissioner of Hindu Religious Endowments, Madras v. Shri
Lakshmindra Thirthya Swamiyar, [1954) SCR 1005; H.H. Sudhandara v.
......._ Commissioner for Hindu Religious and Charitable E;ndowments, [1963] c
Suppl. 2 SCR 302; Hingir Rampur Coal Co. Ltd. and Anr. v. State of Orissa
l and Anr., [1961) 2 SCR 537; H.H. Swamiji v. Commissioner, Hindu
Religious and Charitable Endowments Department and Anr., [1980) 1 SCR
x..
368; Southern Phannaceuticals Chemicals Trichur and Ors. etc. v. State of
Kera/a and Ors, etc., [1982) 1 SCR 519, referred to.
D
Municipal Corporation of Delhi and anr. v. Mohd. Yaseen etc., [1983)
2 SCR 999, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 582 to
625 'of 1988.
E
From the Judgment and Order dated 20.3.1985 of the Madras High
y- Court in W.P. Nos. 9471, 9472, 9615, 9616, 9668, 9669, 9670, 9671, 9809,
10067, 10082, 10083, 10297, 10391, 10397, 10400, 10430, 10461, 10547, of
1982, W.P. Nos. 73, 74, 75, 655, 1509, 1510, 1511, 1714, 1802, 1939, 1970,
1971,2504,2519,2520,3446,3447,3448,3449,3752,3764and 7767of1983 F
and W.P. -Nos. 573, 1426, 6093 of 1984.

V. Krishnamurthy and V.R. Karthllceyan for the Appellants.
-f ·y K.V. Mohan, Smitha Singh and Chari for the Respondents.

The Judgment of the Court was delivered by
G

FATHIMA BEEVI, J. These appeals arise out of the common judg-

- ~-
ment of the Madras High Court in a batch of writ petitions in which the
respondents challenged the validity of the amendments effected to Article
1 and insertion of Article 8-A to Appe~dix II of the Tamil N~du Chit Fund H
738 SUPREME COURT REPORTS [1992) 2 S.C.R.

A Rules, 1964 (for short 'the Rules'). The High Court in its judgment dated
20.3.1985 has struck down as invalid the impugned amendments.

The Tamil Nadu Chit Funds '\ct, 1961 (The Act) provides for the
regulation of chit fund in the State of Tamil Nadu. 'Chit' is a transaction
by which its foreman enters into an agreement with a number of subscriber~
B that every one of them shall subscribe certain sum by instalments for a
definite period and that each subscriber in his turn as determined by lot
or by auction, shall be entitled to a prize amount. The sum total of the
subscription payable by all the .subscribers for any instalment of a chit

c
without any deduction for discount or otherwise is chit amount.

It is useful ·to summarise the scheme of the Act and the rules. The
-
Registrar of chit funds is appointed by the Government under section 51.
No per.son can start or conduct any chit unless he registers with the
Registrar the proposed bye-laws of the chit. Section 7 provides that the
D Registrar, on being satisfied that the bye-laws have been registered, the chit
agreement has been filed, and the security required under section 12 has
been furnished by the foreman, grants "certificate of commencement". The
auction or drawing of any chit com~ences only on obtainitlg such certifi-
cate. The security furnished under section 12 can only he released by
Registrar in accordance with the prescribed procedure.
E
Under sectfon 16 every foreman has to prepare and file with the
registrar a duly audited balance-sheet. The defaulting non-prized sub-
scriber is lial?le to be remov~d and the -aggrieved person has a right of
appeal to the Registrar whose order in the matter is final. Any substitution
F in place of a defaulting subscriber has to be recorded and copy filed with •
the Registrar. The rights of the prized or non-prized subscribers in the chit
cannot be transferred or interfered with without the previous sanction in
.writing of the Registrar. The foreman is required to maintain all the
records pertaining to a chit for a specified period. The Registrar is em-
powered under section 37 to inspect the chit books and all records after
G giving due notice. If the Registrar is of the opinion that the accounts of any
chit are not properly maintained and that such account should be audited,
it shall be lawful for him under section 51(4) to have such account audited
by a chit auditor. The foreman· has a right of appe111 against the order of
the Registrar refusing to register bye-laws. or to grant a certificate of
H commencement or refuse to accept the security or refusing to release the
COMMR COMMERCIAL TAXF.s v. FINANCT.1'/G CORPN. (FATil'MA BEEVI, J.) 739

property charged by way of security as provided under section 54. Penalty A
~
4

for the contravention of the provisions is provided under section 56.

The provisions of the Act impose duties on the Registrar and are
intended to regulate the conduct of the business. The Registrar has to take

- ~
adequate security and keep the same intact until the claims of all sub-
scribers are satisfied and till the termination of the chit, the Registrar is
required to discharge several duties.
B

Section 63 ·empowers the Government to make rules for carrying out
all or any of the purposes of the Act. Section 53 which provides for levy of
;-- fees reads:-
iC
f "53. (1) There shall be paid to the Registrar such fees as the
Government may from time to time, prescribi:: for-
"-
(a) the registration of the bye-laws of a chit under section 3;

(b) the grant of a certificate of commencement under section D
7·
'
(c) filing with the Registrar of the chit agreement and copies
of documents under sections 11, 20, 21, 29 and 32;

( d) the inspection of documents under section 52; E
T
(e) the certificate, copy of or extract of documents under
section 52;

(t) the audit of accounts of the foreman and the issue of an
audit certificate;
F

(g) such other matters as may appear necessary to give effect
~ --,..--- to the purposes of this Act.

(2) A table of fees payable under sub-section (1) shall be
published in the Fort St. George Gazette." (Now the Tamil
G
Nadu Government Gazette).

The Rules have been framed under section 63. Rule 3 states that the
~ bye-laws shall provide for the matters specified thereunder. lf the Registrar
refuses to the register the bye-laws of a chit, he shall record his reasons H
740 SUPREME COURT REPORTS [1992] 2 S.C.R.

A for such refusal in writing and communicate a copy of the order to. the
applicant. Rule 11 prescribes the particulars to be contained in the chit
agreement, rule 14 prescribes the form of minutes of the proceedings and
rules 15 to 22 regulate the acceptance and release of security. In the case
of cash deposited in an approved bank and transferred in favour of
B Registrar, intimation has to be given by the Registrar to the bank . Under
rule 22 the Registrar before releasing the security may call upon the
foreman to produce register and books of accounts maintained and issue
-
a notice to the subscribers. Registrar has to hear objections, if any, and
inquire into the same and record the decision in writing. On the application
of the foreman, the Registrar shall cause the balance-sheet and profit and
c loss account to be audited by the chit auditor as expeditiously as possible.
Rule 42 states that the fees payable to the Registrar for the matters
specified under section 53 shall be as set out in Appendix II and shall be
paid in cash. Appendix II contains the table of fees for the registration of
bye-laws of chit under section 3 as Article 1 and for the audit of accounts
D under sub-section (4) of section 51 as Article 8.

The impugned amendments are to the following effect:-

AMENDMENT
E
In the said Rules, in Appendix II, in the Table of Fees (1) for
Article I and the entries relating thereto, the following Article
and entries shall be substituted, namely:-

1. For the Registration of bye-laws of a chit under section 3.
F
Rates of Fees.

(a) for chits for a term of less than Re.1 per subscriber or instalment
one year Rs.1 which-ever is higher subject to a
G (b) for chits for a term of one year minimum of Rs.50 per subscriber or
and above Re.2.50 instalment whichever is higher sub-
ject to a minimum of Rs.50

(i) chit amount of value upto Per subscriber or instalment which-
Rs.5,000 Rs.5 ever is higher subject to a minimum ·1
H of Rs.SO
COMMR COMMERCTAL TAXES v. FINANCING CORPN. (FATillMA BEEVI, J.] 741

(ii) for chit amount of value Per subscriber or instalment which- i A
between Rs. S,001 and ever is higher subject to a minimum
Rs.10,000 Rs.S of Rs.SO

(iii) for chit amount of value Per subscriber. or instalment which-
between Rs.10,001 and ever is higher subject to a minimum
Rs.20,000 Rs.5 of Rs.SO B
(iv) for chit amount of value Per subscriber or instalment which-
between Rs. 20,001 and ever is higher subject to a minimum
Rs.30,000 Rs.10 of Rs.SO

---f (v) for chit amount of value
between Rs.30,001 and
Per subscriber or instalment which- C
ever ic; higher subject to a minimum '
Rs.40,000 Rs.12 of Rs.SO

(vi) for chit amount of value Per subscriber or instalment which-
between Rs.40,001 and ever is higher subject to a minimum D
Rs.50,000 Rs.lS of Rs.50

(vii) for chit amount of value Per subscriber or instalment which-
exceeding Rs.50,000 ever is higher subject to a minimum
Rs.20 of Rs.SO
E
(2) ......... ..

(3) after Article 8, as so amended, the following Article and entries ,
shall be inserted, namely:-

- "8A. For filing Balance-sheets audited and certified by
Chartered Accountant.
F

(a) When the chit amount does not exceed Rs.500-Rs.10.00

(b) When the chit amount exceeds Rs.500 for the first Rs.500
as under sub-clause (a) and for every Rs.500 or part thereof in · G
excess of Rs.500 subject to the maximum of Rs.2SO. The fee
leviable under this clause shall not exceed Rs.250".

The challenge was mainly on the ground that the rates of fees fixed i
in Article 1 and Article 8-A in Appendix II to the RUles were dispropor-
tionately high having no nexus to the nature of services rendered and H
742 SUPREME COURT REPORTS (1992) 2 S.C.R.

A intended to augment revenue and partake character of tax and as such the
levy suffered from the vice of arbitrariness, hostile discrimination and
unreasonable restriction on trade. The High Court crune to the conclusion.
that the necessary element of quid pro quo was absent and as such struck
down the amendment on the said ground.
B
The High Court declared the amendment by which the registration
fee was enhanced, as ultra vires, on the following reasoning:-

c
"When a. Foreman starts a chit, unde_r section 3 he has to apply
for registration of the bye-laws. It is only thereafter, _he can
approach the subscriber and get the chit agreements as
prescribed under Section 5 executed and file them under Sec-
~
-
tion 6. He cannot commence the business till he secures the >
certificate under section 7(2). Therefore, when an application
is made for registration of bye-laws, at that stage, section 3(3)
D authorises the Registrar to find out as to whether the bye-~aws
are in accord with the provisions of the Act or the rules made
thereunder. As to what the bye-laws should provide, Rule 3
enum~rates them. An application for registration is to be in
Form No.I accompanied by fees set out in Appendix II. Hence,
E the number of the subscribers or the instalments, has no nexus
with what are required to be done under section 3(3) by the -~
Registrar. Whether they are more or less, it was only a question
of furnishing particulars and recording them and no more. If

F
for the entire period of the chit except the registration fee no
other fee is demanded and the entire services rendered is
covered by this demand alope, then the correlation claimed
could be available. Section .53 enables imposition of fees in
--
respect of almost each one of the subsequent stages of the
conduct of the chit whenever the authorities are to be ap- ..,- r

proached or they are to exercise their powers. In the context
G of such provisions having been made in the Act, the registration
fees claimed has to be restricted to what are required to be
done under section 3(3)."

....
The High Court held Article 8-A to be invalid on the following 1
H reasoning:-
COMMR COMMERCIAL TAXES v. FlNANONG CORPN.. [FATIIIMA BEEVI, J.) 743,

"When rules themselves do not contemplate production of A
registers, books of accounts and other records, the claim made
that pursuant to the filing of the balance-sheet, records have
to be verified and that the whole matter has got to be thorough-
ly examined is unacceptable. In such of those matters where
irregularities are noticed, the Registrar can call for all the B
records and scrutinise them and thereafter initiate prosecution ,
or take such other action. Such instances would arise in both
categories. Hence, when the rules themselves contemplate a
different type services to be rendered when Chartered Ac-
countant's Certificates are filed, the fee impossable under Ar-
ticle 8-A cannot be the same as in Article 8 which contemplates C
more comprehensive services to be rendered. Therefore as
rightly pleaded by the petitioners, the necessary element of quid
pro quo is not existing and furthermore this is an unreasonable
restriction on right of trade and the rate fixed is aimed at
increasing general revenues."
D
The High Court relied upon the judgment of this Court in Kewal
Krishan Puri v. State of Punjab, (1979] 3 SCR 1217 wherein it was observed
that a substantial portion of the amount collected on account of fees, must
be shown with reasonable certainty as being spent for rendering services
to justify the quid pro quo which is a distinguishing feature of "fee" from ·E
"tax".

This Court in Sreenivasa General Traders & others v. State of Andhra
Pradesh & others, (1983) 4 SCC 353 COQsidered Kewal Krishan Puri's case
and observed as under:- F

"The decision in Kewal Krishan Puri case does not lay down
-i~.- any legal principle of general applicability. The observation
made therein seeking to quantify the extent of correlation
between the amount of fee collected and the cost of rendition
of service, namely, "At least a good and substantial portion of G
the amount collected on account of fees: may be in the neigh-
bourhood of two-thirds or three-fourths, must be shown with
reasonable certainty as being spent for rendering services in
the market to the payer of fee", appears to be an obiter. It was
not intended to lay down a rule of universal application but it H
SUPREME COURT REPORTS [1992] 2 S.C.R.

A was a decision which must be confined to the special facts of
that case".

This Court in several judgments over a period of 40 years has
authoritatively crystalised the contradistinction between "tax" and "fee". The
B judgments of this Court in Commissioner of Hindu Refgious Endowments,
Madras v. Shri Lakshmindra Thirthya Swaminyar, [1954] SCR 1005; H.H. ,.,._
Sudhandara v. Commissioner for Hindu Religious and Charitable Endow-
ments, [1963] Suppl. 2 SCR 302; Hingir Rampur Coal Co. Ltd. & another v.
State of Orissa & another, [1961] 2 SCR 537; H.H. Swamiji v. Commissioner,
C Hindu Religious and Charitable Endowment Department & another, [1980]
1 SCR 368 and Southern Phannaceuticals and Chemicals Trichur_& Others
etc. v. State of Kera/a and Others etc., [1982] SCR 519 were considered by
this Court in Municipal Corporation of Delhi and another v. Mohd. Yaseen
etc., [1983] 2 SCR 999 wherein the Court speaking through Chinnappa
Reddy, J held as under:-
D
"What do we learn from these precedents? We learn that there
is no generic difference between a tax.and a fee, though broadly
a tax is a compulsory exaction as part of a common burden,
without promise of any special advantages to classes of tax-
E payers whereas a fee is a payment for services rendered, benefit
provided or privilege conferred. Compulsion is not the hall-
mark of the distinction between a tax and a fee. That the money
collected does not go into a separate fund but goes into the
consolidated fund does not also necessarily make a levy a tax.
F Though a fee must have relation to the services rendered, or
the advantages conferred, such relation need not be direct: a
mere causal relation may be enough. Further, neither the in-
cidence of the fee nor the service rendered need be uniform.
That others besides those paying the fees are also benefitted
does not detract from the character of the fee. In fact the
G special benefit or advantage to the payers of the fees may even
be secondary as compared with the primary motive of regula-
tion in the public interest. Nor is the Court to assume the role
of a cost accountant. It is neither necessary nor expedient to
weigh too meticulously the ·cost of the services rendered etc.
H against the amount of fees collected so as to evenly balance the
COMMR COMMEROAL TAXES v. FINANONG CORPN. [FA'IHIMA BEEVI, J.] 745

• two. A broad correlationship is all that is necessary. Quid Pro
Quo in the strict sense is not the one and only true index of a
A

fee; nor is it necessarily absent in a tax."

In Mohd. Yaseen's case the Municipal Corporation of Delhi en-
hanced the slaughtering fee in respect of two categories of animals by eight
B
fold. Some Butchers of the city questioned the revision of rates on the
ground that the proposed enhanced fee was wholly disproportionate to the
cost of services and supervision and was in fact not a fee, but a tax. During
the pendency of the writ petitions in the High Court, by virtue ofan interim
arrangement, the Municipal Corporation of Delhi was permitted to collect
slaughter fee at dou6ie the rates (instead of 8 times) and as a result thereof c
the Corporation realised a sum of Rs.4,24,494. The budget of the Corpora-
tion showed a sum of Rs.2,56,000 as the expenditure involved in connection
with the slaughter house. The High Court came to the conclusion that even
if the original fee was doubled the amount realised would be more than
sufficient to meet the expenditure involved and, therefore, there was no D
reason at all for increasing fee eight fold and so the proposed fee was not
fee but a tax for which there is no legislative mandate. This Court allowed
the appeal and set aside the judgment of the High Court. This Court
clarified the concept of "fee" which we have quoted above. We respectfully
agree with the same.
E
The Act and the Rules provide complete mechanism for the control,
supervision and regulation of the "chit fund" business in the State of Tamil

- N:i.du. No person can start or conduct any "chit" unless he registers the
proposed bye-laws in accordance with the procedure prescribed. It is
common knowledge that there are large number of subscribers to the "chit
fund" business. The Act and the Rules primarily protect the subscribers
F

and in the process help the proprietors to run the "chit fund". business to
their advantage. There are elaborate provisions under the Act and the
Rules providing investigation into the functioning of the said business. The
scheme of the Act and the Rules as detailed in the 'earlier part of the G
judgment shows that there is effective supervision and control at every
stage of the functioning of the "chit fund" business. The High Court grossly
{
erred in holding that the number of the subscribers or the instalments has
A no nexus with the registration fee. Every subscriber has to enter into an
agreement with the Foreman who conducts the business on behalf of the H
746 SUPREME COURT REPORTS (1992) 2 S.C.R.

A pr.oprietors. The object of the Act/Rules obviously is to protect the interest
of the subscribers. More the subscribers more burden on the authorities
under the Act/Rules and as a consequence more fee is required to meet
the expenditure. It is no doubt correct that after registration of bye-laws
fees are payable under Section 53 of Act for the performance of varioris
B other functions by the Registrar and his staff, but that is justified in view
of the scheme of toe Act. The expectation of winning a draw or a bid at
the auction and becoming rich over-night lures the lower-middle class and
the poor to subscribe to the chit fund out of their savings or even by
borrowing money. In such a situation apart from regulatory measures it is
necessary to have strict control and supervision over the "chit fund" busi-
C ness. The Act and the Rules are operating with that objective. The counter
affidavit filed by the State before the High Court justified the enhancement
of the registration fee inter alia on the following grounds:-

".....Considering that in respect of chits of longer duration and
D larger number of instalments, greater amount of service had to
be rendered in that, more minutes etc., were filed, it is equitable
and faii to fix the fees for registration of bye-laws with regard
to number of instalments of duration of chits. The fees were
revised taking these facts into consideration. It has also fo be
E verified whether the foreman has taken proper security for
future payment of subscription from the prized subscriber,
whether proper receipts were obtained. for the payment of prize
monies and on due dates, if not whether the prize amount has

F
been deposited in a Bank as required by the Act by verifying
receipts of deposit etc. The extracts filed in respect of removal,
substitution and assignment etc. have also to be verified and in
respect of higher chit amounts in long term chits for longer
--
~uration these transactions will be more and they impose
greater responsibility on the Chit Registrar. The work con-
nected with watching the filing of various documents by the
G Foreman on the due dates and in proper form also takes
considerable time ..... "

We are of the view that the High Court fell into error in quashing j
the .impugned Amendments. The enhanced fee, in this case, is justified on
H the legal. as well as the factual anvil of quid pro quo. Apart from the
,
COMMR COMMERCIAL TAXES v. FINANCING CORPN. [FA1HIMA BEEVI, J.] 747

appointment of Registrar, its staff and various other functionaries, the A
A scheme of the Act in its operation involves huge expenditure ·which- is
entirely met out of the Fee-Fund. The fees collected under the Act have
therefore, live nexus with the expenditure incurred for the benefit of the
"chit fund" business.

To justify Article 8-A prescribing fee for filing balance sheets by the
B
-{ chartered accountants it was stated as under:

"..... .I submit that pursuant to the filing of the balance-sheet,
records have to be verified. The balance-sheet has also got to
~ be examined in detail to find out whether it is in conformity c
1 with the objects of the chit and also whether the figures tally
with regard to the collections and payments of prize amounts

·" and whether the prize amount also correctly reflects the scope
of each chit and whether the commission of the Foreman has
been correctly worked out. In short, the whole matter has got
to be thoroughly examined to see whether that particular years' D
transactions fully reflects the scope of each chit and whether
the collections and disbursements including the commission
retained by the foreman have all been done in conformity with
the Act and the Rules, since it is the subscriber's interest which
is paramount. I submit that all these invowe the services of the E
staff of the office of the Registrar''.
r The High Court was wholly unjustified in rejecting the above quoted
reaso11iti.g. for levying fee under Article 8-A. The High Court reached the
~ conclusion that it was _not required under the Rules to scrutinise and
investigate the contents of the balance sheets submitted through the F
chartered accountants and as such it was not necessary to do so. The High
Court further found that since no scrutiny or examination of balance-sheets
• was required to be done, no expenditure need be incurred and as such no
fee for that purpose could be levied. We do not agree with the High Court
reasoning. The Registrar is justified rather duty-bound to act in furtherance G
of the objects of the" Act arid the Rules. Even otherwise when the Rules
provide for filing of the balance-sheets by the Chartered Accountants, it is
necessary in the context of the rules and the Act to provide machinery to
• ~ examine and verify the contents of the balance-sheets. No fault can be
found with the reasons given by the State for bringing in Ar.tide 8-A in H
748 SUPREME COURT REPORTS [1992] 2 S.C.R.

A Appendix II to the Rules.

We, therefore, allow the civil appeals and set aside the judgment of
the Mardras High Court dated March 20, 1985. The writ petitions filed by
the respondents-petitioners are dismissed with costs. We quantify the cost~
as Rs.20,000 to be paid jointly by all the respondents-petitioners in these
cases.

T.N.A. Appeals allowed.