Holding

An ad‑valorem levy without an upper limit can be a valid fee if there is a broad correlation between total fees and the total cost of administering civil justice, and it does not violate Article 14, except where a class is singled out without rational basis as in the Bombay Act provision.

Summary

The petitioners challenged the constitutional validity of ad‑valorem court‑fee provisions without an upper limit in the Karnataka Court Fees and Suits Valuation Act, 1958, the Rajasthan Court Fees and Suits Valuation Act, 1961 and the Bombay Court Fees Act, 1959, arguing that such levies amount to a tax, violate Article 14 and discriminate against certain classes of litigants. The Court examined the distinction between a fee (a charge for a special governmental service) and a tax, and held that a broad correlation between total fees collected and total expenses of civil‑justice administration suffices to sustain a fee even if the distribution among individual litigants is not perfectly proportional. Accordingly, the Karnataka and Rajasthan statutes were upheld as valid fees, while the Bombay provision that singled out probate and letters of administration for an unlimited ad‑valorem fee was struck down as discriminatory. The appeals and writ petitions were dismissed, with the Bombay provision declared unconstitutional and the other statutes left intact.

Issues considered

The levy of court‑fees on an ad‑valorem basis without an upper limit – does it constitute a fee or a tax?
Whether such a levy violates Article 14 of the Constitution by arbitrary discrimination.
Whether the absence of an upper limit on court‑fees infringes the Directive Principles (Art 39A).
Whether the specific provision in the Bombay Act that exempts probate proceedings from the Rs 15,000 ceiling is constitutionally valid.

Legislation cited

Bombay Court Fees Act, 1959s. Entry 10 Schedule I, s. Section 29(1)
Constitution of Indias. Article 14, s. Article 39A
Karnataka Court Fees and Suits Valuation Act, 1958s. Article 1 Schedule I, s. Section 20
Rajasthan Court Fees and Suits Valuation Act, 1961s. Article 1 Schedule I, s. Section 20

Subjects

court feead valoremfee vs taxArticle 14discriminationconstitutional validityKarnataka Court Fees ActRajasthan Court Fees ActBombay Court Fees Actdirective principlesaccess to justice

Judgment

P.M. ASHWATHANARAYANA SETIY & ORS. ETC. ETC.
A
v.
STATE OF KARNATAKA & ORS.

SEPTEMBER 22, 1988

[R.S. PATHAK, CJ., S. NATARAJAN AND B
M.N. VENKATACHALIAH, JJ.]

Bombay Court Fees Act, 1959-Ad valorem Court fee without
any upper limit had to be paid on grants of probate etc. discriminatory.

Constitution of India. 1950: Court fees-Levy of uniform
ad valorem Levy without prescribing any upper limit-Whether alters c
character of levy and converts if from 'fee' into 'tax'-Whether legal and
permissible.

Karnataka Court Fees and Suits Valuation Act, 1958--Rajasthan
Court Fees and Suits Valuation Act, 1961-Bombay Court Fees Act, D
1959-Constitutional validity of.

'Tax' and 'fee'-Distinction between governmental agencies
imposing fee to justify impost and its quantum as return for special
services.
E
Courts cannot compel State to bring forth legislation to implement
and effectuate Directive Principles-Doubt as to constitutionality of
law-To be resolved in favour of constitutionality of the law.

Karnataka Court Fees and Suits Valuation Act, 1958--Section 20
and Article 1 Schedule I Court Fees-Imposition of-Uniform F
ad valorem levy at rate of Re.1for every Rs.10-0fthe amount or value
of the subject matter without prescribing any upper limit-Whether
valid, legal and constitutional.

Rajasthan Court Fees And Suits Valuation Act, 1961: Section 20
and Article 1. Schedule I-Court fees-Uniform advalorem impost of G
Rs.5-For every Rs.100-0r part thereof without any upper limit-
Whether valid, legal and constitutional.

These three groups of special leave petitions/appeals/writ
petitions concern the policy ·and legality of the levy of Court fees under
the provisions of the Karnataka Court Fees and Suits valnation Act, H
155
156 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

1958, the Rajasthan Court Fees and Suits Valuation Act, 1961 and the
A Bombay Court Fees Act, 1959.

The petitioners from Rajast!tan had challen~ed before the High
Court the constitutional validity of the provisions of section 20 read
with Article 1 Schedule I of the Rajasthan Act which prescribed and
a authorised the levy of court-fees on an uniform ad valorem basis with-
out the prescription of any upper limit. The High Court upheld the
constitutionality of the impugned provision .
.'
The appeal and the special leave petitions from Karnataka are
directed against the common order of the ' Karnataka High Court
upholding the validity of the corresponding provision of the Karnataka
C Act which similarly imposed an ad-valorem court fee without pres-
cribing any upper limit. The writ petitions have challenged the provi-
sion directly in this Court.

So far as. the Bombay Act is concerned, the State of Maharashtra
D has come up in appeal against the judgment of the Division Bench of the
Bombay High Court affirming the order of the learned Single Judge
striking down the provisions of section 29(1) read with entry 10 of
Schedule I of the Act in so far as they purport to prescribe an ad-
valorem court fee, without any upper limit, on grants of probate, letters
of administrative etc., while in respect of all other suits, appeal and
IE proceedings an upper limit of court-fee of Rs.15,000 is prescribed. The
High Court held this pre~cription of ad-valorem court-fee without any
upper 'Umit on this class of proceedings alone was constitutionally impermis-
sible in that it sought to single out this class of litigants. · -

It was contended on behalf of the peuuoners/appellants that (i)
F the imposition of court fees at nearly 10% of the value of the subject
matter in each of the courts through which the ·case sojourns1 before it
reaches a finality would seriously detract from fairness and justness of
the system; (ii) the exaction of ad-valorem fee uniformally at a certain
percentage of the subject matter without an upper limit or without the
tapering down after a certain stage onwards would negate the concept
d of a fee and part-take of the character of a tax outside the boundaries of
the State's !lower; (iii) the ad-valorem yardstick, which is relevant and
appropriate .to taxation, is wholly inappropriate because the principle
or basis or' distribution in the case of a fee should be the proportionate
cost of services inter-se amongst the beneficiaries; (iv) in the very nature
of the judicial process, a stage is reached beyond which there could be
H no proportionate or progressive increase in the services rendered to a
P.M.A. SETTY v. STATE OF KARNATAKA 157

litigant either qualitatively or quantitatively; (v) in the process of A
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; (vi) 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; and (vii) though India is a federal B
polity, the judicial system, however, is an integrated one and that there-
fore different standards of court fee in different States would be
unconstitutional.

The contentions of the State were that (i) as long as their power to
raise the funds to meet the expenses of administration of civil justice
was not disputed and as long as the funds raised show a· correlation to C
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;
(ii) it would, quite obviously, be impracticable 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 work- D
able basis which, though may not be an ideal or the most perfect one,
would at least be the least hostile; (iii) if 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; (iv) ifthe value of the subject matter
is a relevant factor in proportioning the burden of the court fee, where E
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; and (v) courts cannot-compel the State to bring-forth
any legisliltion to implement and effectuate a Directive Principle.

Dismissing the appeals, writ petitions and the special leave peti- p
tion, this Court,

HELD: (1) 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 G
the litigants should contribute and if so, to what extent, are matters of
policy. [170G]

(2) A fee is a charge for the special service rendered to a class of
citizens ~y Government or Government agencies and is ~enerally based
on the expenses incurred in rendering the services. ll74B] H
158 SUPREME COURT REPORTS (1988] Supp. 3 S.C.R.

A The Commissioner, Hindu Religious Endowments, Madras v.
Lakshmindra Thirtha Swamiar of Shirur Mutt., (1954] SCR (1) 1005
and Om Prakash Agarwal v. Guni Ray, AIR 1986 (SC) 726 referred to.

(3) It is for the governmental agencies imposing the fee to justify
its impost and its quantum as a return for some special services. '
B
(4) 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
the funds raised by way of the fee, on the other, is established, it would
be no part of the legitimate exercise in the examination of the constitu-
tionality of the concept of the impost to embark upon its effect in indi·
vidual cases. Such a grievance would be one of disproportionate nature
C of.the distribution of the fees amongst those liable to contribute and not
one touching the conceptual nature of the fee. [184A-B]
(5) The test is one of the comprehensive level of the value of the
totality of the service_~, set off against the totality of the receipts. If the
character of the 'fee' is thus established, the vagaries in its Distribution
D 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 limitations. [185G]
Municipal Corporation of Delhi & Ors. v. Mohd. Yasin., (1983] 3
..
SCC 233; H.H. Sudhundra Thirtha Swamiar v. Commissioner for
E Hindu Religious & Charitable Endowments., (1963] Supp. 2 SCR 302;
Sreenivasa General Traaers & Ors. v. Andhra Pradesh & Ors., li983J l
AIR (SC) 1248; State of Maharashtra & Ors. v. The Slllvation Army,
Western India Territory, (1975] 3 SCR 485; Kewal Krishan Puri & Anr.
v. State of Punjab & Ors .. _(1979] 3 SCR 1244; Secretary, Government
of Madras, Home Department & Anr. v. Zenith Lamp & Electrical
F Ltd., ll973] 2 SCR 973; Ram Bahadur Thakur & Co. & Anr. v. State of
Karnataka, AIR 1979 (SC) 119; The Commissioner Hindu Religious
Endowments Madras v. Sri Lakshmindra Thirtha Swamiar of Sri
Shirur Mutt., (1954] SCR 1005; Om Prakash Agarwal v. Giri Raj
Kishori, (1986] SCC 1 730; N.M. Desai v. The Teesteels Ltd. & Anr.,
AIR 1980 (2) SC 2125; Lady Tanumuti Girijaprasad & Anr. v. Special
Rent Acquisition Officer, Western Railway Special Civil Application
G No. 979 of 1970 with Special Civil Application 287 of 1967; The City
Corporation of .Calicut v. Thachambalath Sadasivan & Ors., (1985]
2 sec 115, rererred to.
Indian Organic Chemicals v. Chemtax Fibres, [1983] Born LR
406; Secretary, Uovernment of Madras Home Department v. ·zenith
H Lamp & Electrial Ltd., ILR 1968 (Madras) 247 overruled.
P.M.A. SETTY v. STATE OF KARNATAKA 159

(6) Though legislative measures dealing with economic regulation
are not outside article 14, it is well reco_gnised that the State enjoys the A
widest latitude where measures of economic regulation are, concerned.
These measures !'or fiscal and economic regulation involve an evalua-
tion of diverse and quite often conflicting economic criteria and adjust-
ment ..and balancing of various conflicting social and economic values
and interests. It is for the State to decide what economic and social B
policy it should pursue and what discriminations advance those social
and economic policies. In view of the inherent complexity ...f 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. [IS7G-H; ISSA-Bl

East India Tobacoo Co. v. State of Andhra Pradesh, (1963] 1 c
SCR 411; The State of Gujarat & Anr. v. Shri Ambica Mills Ltd.
Ahmedabad, (1974] 3 SCR 764 referred to.

(7) The lack of perfection in a legislative measure does not
necessarily imply its unconstitutionality. It is rightly said that no D
economic measure has yet been devised which is free from all dis-
criminatory impact and that is 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. [1S9F-GJ
E .
G.K. Krishnan etc. v. The State of Tamil Nadu, (1975] 2 SCR 715
730; San Antonie Independent School District v. Bodriguer, 411 U.S. 1
at p. 41. ·

Income Tax Officer, Shillong & Anr. v. N. Takim Roy Rymbai
etc., (1976] 3 SCR 413, referred to. F

S. It is trite that for purposes of testing a law enacted by one State
in exercise of its own independent legislative powers for tis alleged viola-
tion of Article 14 it cannot be contrasted -with laws enacted by other
States. (192C]
G
The State of Madhya Pradesh v. G.C. Mandawar, (1955] 1 SCR
599, referred to.

(9) Having regard to the nature and complex,ity of this matter it
is, perhaps, difficult to say tnat the ad-valorem principle which may not
"' be an Ideal basis for distribution of a fee can at the same time be said to H
160 SUPREME·COURT REPORTS [1988] Supp. 3 S.C.R.

be so irrational as to incur any unconstitutional infirmity. The
A presumption of constitutionality of laws requires that any doubt as to
the constitutionality of a law has to he resolved in favour of constitution-
ality. Though the scheme cannot be upheld, at the same time, it cannot
be struck down either. [192E-F)

B (IO) 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. [ 192G)

(11) The High Court has struck down the provisions of section
29(1) read with entry IO of Schedule I of the Bombay Court Fees Act,
c 1959 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 is discriminatory. 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
D singling out this proceeding for an ad-valorem impost without the be-
nefit of some upper limit prescribed by the same statute respecting all
other litigants. {!9~A-8; F]

(12) The Directive Principles of State Policy though not strictly
enforceable in courts of law, are yet fundamental in the governance in
E the country. They constitute fons-juris in a Welfare State. [194E]
'
U.B.S.E. Board v. Hari Shanker, AIR 1979 SC 69 referred to.

(13) The power to raise funds through the fiscal tool of a 'fee' is
not to be confused with a compulsion to do so. While 'fee' meant to
p 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 a substantial part, the expenses on the administration of
civil justice. [194G-HJ

G (14) The prescription of such high rates of court-fees even in
small claims as also without an upper limit in larger claims is perilously
close to arbitrariness, an inconstitutionality. [194E)

(15) Though the Court has abstained from striking down the
legislation, yet, it appears to the Court that immediate steps are called
H for·and are imperative to rationalise the.levies. [195C]
P.M.A. SETIY v. STATEOFKARNATAK.A [VENKATACHALIAH, J.] 161

CIVIL APPELLATE JURISDICTION: Special Leave Petition
A
(Civil) Nos. 2604-06 of 1988 etc.

From the Judgment and Order dated 6.11.1987 of the Kamataka
High Court in W.P. Nos. 3138 of 1987, 12784 and 18359of1986.

F.S. Nariman, B.R.L. Iyengar, L.N. Sihna, K.K. Venugopal, B
Soli J. Sorabjee, Dr. Y.S. Chitale, U.R. Lalit, M.S. Nesargi, S.K.
Dholakia, A.s. Bobde, Adv. Genl., Aruneshwar Gupta, B.P. Gupta,
Sudhir Gupta, lnderbit Singh, L.R. Singh, Rakesh Khanna, R.P.
Singh, P.H. Parekh, Sanjay Bhartary, S.S. Javali, R. Ramachandran, ·
P.G. Gokhale, Raja VenkatappaNaik, N.N. Sharma, P. Mahale, S.K.
Kulkarni, D.L. N. Rao, Surya Kant, E.C. Vidvasagar, R.B.
Mehrotra, D.N.N. Reddy, N. Nettar, Kailash Vasdev, G.L..Rawal, c
S.C. Birla, Miss C.K. Sucharita, Mohan Katarki, Mrs. Kiran Suri,
K.M.K. Nair, S.N. Bhat, R.P. Wadhwani and A.S. Bhasme for the
Petitioners.

Kuldip Singh, Additional Solicitor General, K.N. Bhat, D.R. D
Dhanuka, Anil Mehta, P.R. Ramasesh, Badri Das Sharma, K.R.
Dhanuka, R.C. Misra and Dr. Meera. Agarwal for the Respondents.

The Judgment of the Court ~as delivered by

VENKATACHALIAH, J. The point in these appeals is the E
recurring and vexed theme of the policy and legality of the levy of
Court fees-ad-valorem on the value or amount of the subject-matter of
suits and appeals without the prescription of any upper limit-under the
provisions or the Karnataka Court Fees and Suits Valuation Act, 1958
('Karnataka Act' for short). The Rajasthan Court Fees and Suits Valu-
ation Act, 1961 (Act 23 of 1961) ('Rajasthan Act' for short) and the F
Bombay Court Fees Act, 1959 ('Bombay Act' for short).

So far as the 'Bombay Act' is concerned, the point raised in the
concerned appeals is a limited one, confined to the question of the
validity of Section 29(1) read with entry 10 of the First-Schedule to the
'Bombay Act' which, without reference to the upper limit of Court Fee G
of Rs.15,000 prescribed for all other suits and proceedings, requires
payment of ad-valorem Court fee on proceedings for grants of probate
and letters of administration. One of the grounds of challenge so far as
this provision in the 'Bombay Act' is concerned, is the constitutional
impermissibility of an unlimited exaction by way of court fee, which is
common to other appeals as well. The other contention against the H
162 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

validity of Section 29(1) read with Entry 10 of the First-Schedule to the
A
'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 ail other suits and
proceedings respecting which an upper limit of Rs.15 ,000 is fixed
under the statute, on the other.
B
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 tak~n to be typical and representative of all other cases
of each group.
c 3. Special Leave Petition 13344 of 1988 typifies, and is rep-
resentative of the appeals and Special Leave Petitions that arise out of
the Rajasthan Court Fees and Suits Valuation Act, 1961. The petition
arises out of and is directed against the common order dated 16th
Octoher, 1987 of the Division Bench of the Rajasthan High Court in
D 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 1 Schedule I.of the 'Ra jasthan i\ct' which
prescribed and authorised the levy of court-fees on plaints or written-
E statements pleading a set-off or counter-claim or memoranda of ap-
peals 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.5,000. On the first slab of Rs.5,000,
however, certain rates are also prescribed.

F 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 Court Fees Act, 1870 (Central Act, 1870). The provi-
sions of the Central Act, as adapted and extended to Rajasthan, were
amended from time to time till 1.11.1961 when the present 'Rajasthan
G Act' was enacted and promulgated. Prior to 1.11.1961, at 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.

H On 25.4.1984 the appellant-bank instituted, in the Court of
P.M.A. SETTY v. STATE OFKARNATAKA [VENKATACHALIAH, J.) 163

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 A
Spinning and Weaving Mills Ltd. The Court-Fee payable on the said
plaint under Section 20 read with Article 1 of the Schedule I of.the
'Rajasthan Act' was stated to be Rs.25,23,860. Incidently, it was
pointed out by Shri F.S. Nariman, learned Senior Advocate for the
appellant that the court-fee payable on this plaint alone would amount B
approximately to l/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 6.1.1988 of the Division
Bench of the Karnataka High Court upholding the validity of ihe c
corresponding provisions of the Karnataka Court Fees and Suit Valua-
tion' Act, 1958 ('Karnataka Act' for short) wnich 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. 1 for every D
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 o_f the view taken by the
Karnataka High Court in the large batch of cases disposed of by it E
upholding the constitutionality of the provisions in the 'Kamataka
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 defenda.nts
therein and was called upon to pay a court fees of Rs.1,69,792 on the F
plaint. The provisions of section 20 read with Article 1 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 Ra jasthan are substantially similar. G

5. In Civil Appeal No. 1511 of 1988, 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
Section 29( 1) read with entry 10 of Schedule I of the 'Bombay Act' in H
164 SUPREME COURT REPORTS J1988] Supp. 3 S.C.R.

A so far as they purport to presc~ibe an ad-valorem court fee, without
any upper limit, on grants of probate, letters of Administration etc.,
while in respect of all other suits, appeals and proceedings an upper
limit of court-fee of Rs.15,000 is prescribed under the 'Bombay Act'.
The Bombay High Court has, bx its judgment now under appeal, held
this prescription of ad-valorem bourt-fee without any upper limit on
B 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.
c In W.P. No. 1105/86 .before the High Court of Bombay, from
which C.A. No. 1511/88 now before us arises, Mrs. Jyoti Nikul
Jariwala and Jaiprakash Mungaturam Bairajra, Respondents herein,
in their capacity as Executrix and Executor respectively as also the
Trustees, under the Last WiH and Tesiament dated 5.3.1985, said.to
D have been executed by a certain Harihar Jethalal Jariwala alias Sanjiv
Kumar had sought probate of the said will. They challenged, in the
writ-petition before the High Court, the order dated 23.7.1986 of the
Prothonotary and Senior Master of the High Court of Bombay made in
the said probate proceedings requiring from the said Executors a pro-
bate court-fee of Rs.6,15,814.50 as a condition for the grant of the
E probate. The said Executors and Tn.stees 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
F impugned provi.;ions 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 Shanti Bhushan, Sri B.R.L. iyengar, learned Senior
Advocates for the appellants in Karnataka and Rajasthan· batch of
G cases and Sri Kuldip Singh, Additional Solicitor General and Sri
Badridas Sharma, Senior Advocate for the State 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
H State of Maharashtra. ·
P .M.A. SETfY v. STATE OF KARNA TAK.A [VENKATACHALIAH, J.] !65

7. Though a number of contentions covering a wide field
A
appears to have been raised and argued before the High Courts, the
submissions of Learned Counsel before us were, however, Jess expen-
sive 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-in the context of the
concept of a 'fee'-is likely to happen to the concept if an ad-valorem B
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 dis-
service. Emphasis was also placed on the basic obligations of the State
to administer j.ustice within its territories and on the Directive Princi-
ples of St&te Policy in Article 39A which enjoins the State to ensure
that opportunities of securing justice are not denied to any citizen by c
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 court fees at nearly 10% of the value of the subject D
matter in each of the courts through which the case sojourns before it
reaches a finality, would seriously detract from fairness and justness of
the system. The levy-ad-va/orem irrespective of the nature and qua-
lity 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 E
that somewhere in the trail of this unlimited levy the sustaining corre-
lation between the levy and the service rendered is bound to snap. It
was urged that the exaction of ad-valorem fee uniformally at a certain
percentage of the subject matter without an upper limit or without the
rates tapering down after a certain stage onwards wou.ld negate the
concept of a fee and par-take of the character of a tax outside the F
boundaries of the Stat~'s power.

8. It is true that the twin evils that be devil the legal system an.d
the administration of justice are the laws' delays_ anc;l;_expenses of litiga-
tion which have become almost proverbial. Court-fee should not be-
come :anotherstifling factor aggravating an alreaci; explosive situation. G
· 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 effectua-
tion and realisation which are directly proportional to the availability
and efficacy of expeditious and unexpensive legal remedies, must also H
166 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.

A as a logical corollory, 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. Hogt;y,
B
"That if the Crown must charge for jusiice, 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's, and
will require a longer hearing in court. He is asking for
c 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: ·
D
The Attomey-
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 tax-payer had to provide all the facilities of the
E courts for the benefit of the litigant? ·
·The Judge:
"Why not? Everybody pays for th~ 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,
F
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
G 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 Ven-
demus, nu/Ii negabimus, _aut differemus rectum aut justiciam." What
H was implicit in the need for this promise was that royal justice was,
P.M.A. SEITY v. STATE QF~ATAKA (VENKATACHALIAH, J.] 167

otherwise, popular; but the complaint was that it was too dear and it
A
was slow in coming. The subsequent course of history of the administ-
ration of justice in England shows that the Magna-Carta did not wholly
stop the evils of delays in, and expensiveness of, Royal Justice but it
did, afterall, do something, perhaps something substant;al, to cheapen
justice and stop the ab~ses which were rampant in King John's Reign:
(See History of English Law 57-58). B

Dr. R.M. Jackson "Machinery of Justice in England" Fifth Ed.,
324, points out the de.pendence of Royal Justice in England in part
atleast, on the profits of its administration earned:

"In the past the growth of royal justice was partly due to
the profi~s that accrued from exercising jurisdiction. The c
early itinerant justices were more concerned with safe-
guarding the King's fiscal rights than with the trial of ordi-
nary actions. A law court was expected to pay for itself and
show a projit for the king. It is some tin\e since justice has
been a subs.tantial source of income, but the old idea sur- D
vives in the idea that the courts ought not to be run at a loss."
(Emphasis supplied)

The court-fee as a limitation on access to justice is inextricably
inter-twined with a "highly emotional and even evocative subject
stimulating visions of a social order in which justice will be brought E
within the reach of all citizens of all ranks in society, both those bles-
sed 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 not
affording or is deterred from, access to justice. The need for access to F
justice, recognises the primordeal need to maintain order in society as
disincenti~e of inclinations towards extra-judicial and violent means of
settling disputes. On this a learned authority "Access to Justice" by
Cappellbtti, Vol. 1, Book I, 419, says:

"The need for access to justice may be.said to be two fold; G
first, we ·nus! ensure that the rights of citizens should be
recognised at'!d 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 H
168 SUPREME COURT REPORTS [19881 Supp. 3 ,s.c.R.

harmony and peace in society, lest they foster and· breed
A 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 wide-
spread than is generally acknowledged~"

B 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 court-fees-discouragement of
litigation, particularly the speculative and the frivolous variety. Lord
Macaulay called that Preamble "the most eminently absurd Preamble,
:Uiat was ever drawn". The view of Macaulay "The Crisis of the Indian
C Legal System" By Upendra Baxi, 54, on the subject are worth
recaililii:

"If what the courts administer be justice, is justice a thing
which the Government ought to grudge to the people?·: ...
D 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 effii::ient 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 deter-
mined 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 entertain such an opinion without
good reason .... (The imposition of court fees) 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
H the State should not sell justice is an obvious proposition
P.M.A. SETTY v. STATE OF KARNATAKA lVENKATACHALIAH, J.] 169

but the high rate of court fee now levied leaves no valid
alibi is also obvious. The Fourteenth Report of the Law A
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 inde-
fensible and perilously near unconstitutional. If the legal
system is not to be undemocratically expensive, there is a B
strong case for reducing court fees and instituting suitors
fund to meet the cost directed to be paid by a party because
he is the loser but in the circumstances cannot bear the
burden."
(See P. 35)

11. The proverbial costs of litigation has its own dimensions of c
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, glorionsly foreseeable.

The Evershed Committee Report said: D

"It is notoriously impossible to count the costs of litigation
beforehand. It is difficult enough for either party to fore-
cast 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's cost E
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 p
of court-fee the imperatives of havir,g lower fees for lesser claims. This
is an analysis of costs in small claims: "Access to Justice", Vol. 1,
Book l; 13.

"Claims, involving relatively small sums of money suffer
most from the barrier of cost. If the dispute is to be resolved G
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, H
170 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

the cost of litigating a claim for about U.S. $100 in the
A 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 substan-
tially smaller proportion of the claim's value. Examples
B 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
c 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 rela-
tively considerable, financial resources than can be utilized
D for litigation have obvious advantages in pursuing or
defending claims. In the first place they can afford to liti-
gate. 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
E 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 exacetbate this problem by relying
on the parties for investigating and presenting evidence and
for developing and arguing the case."
F (Emphasis supplied).

12. These are the realities in the background of which the impact
of court-fees 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
G 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
aiticism of the policy acknowledgement should be made of the
Government's power to raise the resources for providing the services
Ji from those who use and benefit from the services. The idea that there
P.M.A. SETIY v. STATEOFKARNATAKA [VENKATACHALIAH,J.l 171

should be uniform fixed fee for all cases, instead of the ad-valorem
system, has its own nettling problems and bristles with anomolies. A
How far these policy considerations have an adjudicative disposition
and how far courts can mould and give direction to the policy is much
debated. The Directive Principles in Article 39A are, no doubt, funda-
. mental in the governance of the country, though not enforceable in
courts uf law. The following observations of Chinappa Reddy, J. in B
U. B.S.E. Board v. Hari Shanker, AIR 1979 SC 69 recognise the limi-
tations of courts:

" ..... the principles are 'nevertheless fundamental in the
governance of the country' and 'it shall be the duty of the
state to apply these principles in making laws'. Addressed
to courts, what the injunction means is that while courts are c
not free to direct the making of legislation, courts are bound
to evolve 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) D
~··
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 E
Rajasthan cases, and the last in the appeals ariging under the
·sombayAct'.: · ·

(a) Whether the levies of court-fee under the "Karnataka
Act" and the "Rajasthan Act" do not satisfy the re-
quirements of the concept of a 'fee' but par-take the F
character of a 'tax', in as much as that the correlation-
ship 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 G
court-fee collected show a broad correlation, the levy
of court-fees on ad-valorem basis, without an upper
limit, renders the impost a tax, in as much 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 H
172 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

proportionate increase in the value of the subject
A 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 principles, dependent merely on the
B amount or value of the claim in the case irrespective of
the nature, quality and extent of adjudicative services,
is arbitrary and violative of Article 14 of the Consti-
tution.

(d) Whether, in so far as the provisions of section 29(i)
read with Entry 20 Schedule I of the 'Bombay Act' are
c 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 with-
out the benefit of the upper limit of Rs.15,000
prescribed in respect of all other suits and proceedings
D is, as declared by the High Court, exposes that class of
litigants to a hostile discrimination and is violative of
Article 14 of the Constitution.

14. Re: Contention (a):

E The concept of a 'fee' as distinct from that of a 'tax' in the
Constitutional scheme has been considered in a series of pronounce-
ments starting from The Commissioner, Hindu Religious Endowments,
Madras v. Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954]
SCR 1 1005 upto Om Prakash Agarwal v. Guni Ray, AIR 1986 SC,
726.
F
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 divi.sion corresponds the differentiation of
G public services as special or general".

"A. Fee" says another author, Public Finance, Third Ed., by
Buehler, 519:

"is a charge for a particular service of special benefit to
H individuals or to a class and of general benefit to the public,
P.M.A. SETTY v.,STATE OFKARNATAKA (VENKATACHALIAH, J.] 173

or it is a charge to meet the cost of a regulation that pri-
A
marily 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, B
Third Edn., p. 519.

Another review of all the earlier pronouncements of this court
on the conceptual distinction between a 'fee' and a 'tax' and the vari-
ous contexts in which the distinction becomes telling is an idle parade
of familiar learning and unnecessary. What emerges from these pro-
11.ouncements is that if the essential character of the impost is that some c
special service is intended or envisaged as a quid pro quo to the class of
citizens which is intended to be benefitted 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 par-take
the character of a 'fee' notwithstanding the circumstance that the D
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 E
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 F
Government. Conversely, from this latter element stems the sequen-
tial 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 trom those activities of G
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-
reguire for its sustenance the requirement that every member of the H
r.;J
174 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.
class on whom the fee is imposed, must receive a corresponding
A
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
B element of a compulsory exaction which it Shares in common with the
concept of a tax as the class of persons intended to be benefitted by the
special services has no volition to decline the benefit of the services. A
fee is, therefore, a charge for the special services rendered to a class of
citizens by Government or Government at agencies and is generally
based on the expenses incurred in rendering the services.
c 16. The extent and degree of the correlation required to support
the fees, has 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.
D
In Municipal Corporation of Delhi and Others v. Mohd. Yasin,
,[1983] 3 S,CC; 233 this court relied on H.H. Sudhundra Thirtha
Swamiqr v. Commissioner for Hindu Religious and Charitable endow-
.ments, [1963] Suppl. 2 S.C.R. 302 which 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 ....... "
F (Emphasis supplied)

In Sreenivasa General Traders and others etc. v. Andhra Pradesh
and Others ere., [1983] 1 AIR (SC); 1248 this court observed:

"Correlationship between the levy and the services ,,..
G rendered/<:xpected 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
H complexion as a fee and assume that of a tax by reason of the accumu-
P.M.A. SETfY v. STATEOFKARNATAKA [VENKATACHALIAH,J.] 175

lation of surpluses or the happening of events which tend to affect and A
unsettle the requisite degree of correlation.

In State of Maharashtra & Ors. v. The Salvation Army, Western
India Territory, [1975] 3 SCR; 485 this court generally indicated what,
broadly, is the requisite degree of correlationship:
B
" ... This court has expressly stated in the Delhi Cloth and
General Mills case (supra) that services worth 61 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 con-
tribution, it cannot per se tJe said that there is no correlation c
between the fee levied and the services rendered."
(Emphasis supplied)

In Kewal 1<.rishan Puri and another v. State of Punjab and other,
[ 1979] 3 SCR 1244 this court said:
D
"That the element of quid pro quo may not be possible, or
even necessary, to be established with arithmetical exac-
titude but even broadly and reasonably it must be estab-
lished 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. E

At least a good and substantial portion of the amount col-
fecied on account of fees, may be in the neighbourhood of
two-thirds or three-fourths must be shown with reasonable
certainly as being spent for rendering s.ervices of the kind
mentioned above."
F
(Emphasis supplied)

In regard to the nature of court-fee we have the pronouncement
of this court in Secretary, Government of Madras, Home Department
and Another v. Zenith Lamp & Electrical Ltd., [1973] 2 SCR; p. 973
(1981-82). This court after referring to the legislative entries pertain- G
ing 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 II are really in "the
nature of a 'tax' or at any rate constitute an impost sui-generis. This
Court held: H
176 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

"It seems to us that the separate mention of "fees taken in
A Court" in the Entries referred to above has no other signifi-
cance than that they logically come under entries dealing
With administration of Justice and courts. The draftsman
has followed the scheme designed in the Court Fees Act,
1870 of dealing with fees taken in r,ourt at one place
B "
"It seems plain that "fees taken in court" are not truces, for
if it were so, the word 'taxes' would have been used or
some other indication given ....... It follows that "fees
taken in court" cannci be equated to 'Taxes'. If this is.so, is
c >
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 gen:
era! public revenue. In other words, it cannot tax litigation,
D 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 that
the cost of administration of civil justice."

In the present cases, the concerned State Governments have
E 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
:F appellants as questioning the cprrectness of the figures and the infe;.
ence as to correlation suggested thereby. Learned 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
G case also in Ram Bhadur Thakur & Co. and another v. State of
Karnataka, AIR 1979 (SC); 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
H Rs.6,69,10,019

r
P.M.A. SETfYv. STATEOFKARNATAKA [VENKATACHALIAH,J.] 177

(Rs. 7,97,76,852); 1982-83 Rs.8,28,46,359
(Rs.9,41,161); 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 B
lakhs) by way of court fee and expenditure incurred for the services
(furnished in brackets) arc respectively: 1977-78 Rs.101.42.
(Rs.264.56); 1978-79 Rs.95.50 (Rs.286-90); 1979-80 Rs.114.63
(Rs.323.04); 1980-81 Rs.134-92 (Rs.379-89); 1981-81 Rs.159.62
(Rs.444.83); 1982-83 Rs.179-87 (Rs.544. 76); 1983-84 Rs.176.41
(Rs.692.11). C
It is true that in the Rajasthan statements there was no break up
of the figures between expenditure on administration of civil justice
and criminal justice; but having regard to the figure, a reasonable
estimate of the proportion of the former is possible and the figures do
indicate and establish the requisite correlationship.
D
The contention (a) of the appellants is insubstantial.

18. Re: Contention (b)

The basic argument is that having regard to the very nature of
the judicial process of resolution of disputed in civil courts, the postu- E
late 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 F
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 Commissioner,
Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha G
SwamiarofSri Shirur Mutt, [1954] SCR, 1005.

Reliance is also placed on the following observations of Mukher-
jea J., in Commissioner Hindu Religious Endowment, Madras v. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954] S.C.R.
1005, relied on by Venkataramiah, J. in Om Prakash Aggarwal etc. etc. H
178 SUPREME COURT REPORTS [ 1988] Supp. 3 S.C.R.

v. ·Giri Raj Kishori and others etc. etc. [1986] SCC (1); 730.
A
"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 sup-
posed to be based on the expenses incurred by the govern- "
B ment 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 recepients to pay."
(Emphasis supplied)

The following observations of Krishna Iyer J. in N.M. Desai v.
The Teestee/s Ltd. and another, AIR 1980 (2) SC: 2125 are also relied
upon:

"It is more deplorable that the culture of the magna carta
notwithstanding the anglo-Indian forensic system-and
currently free India's court process-should insist on pay-
ment of court-fee on such a profiteering scale without cor-
relative 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 !Jy Article 39A "to ensure that opportunities for
securing justice are not denied to any citizen by reason of
economic ..... disabilities." The right of effective access
to justice has emerged in 'the Third World countries as the
first among the new social rights what with public interest
litigation, community based actions and pro bono public
f proceedings. "Effective access to justice can thus be seen
as the most basic requirement-the most basic 'Human
Right'-of a system which purports to guarantee legal
rights."

However, the observations in Shirur Mutt's case as to the
G uniformity of the. levy must b~ understood in the light of the next
sentence in that very passage which says:

" .... These are undoubtedly some of the general charac-
teristics, but as there may be various kinds of fees, it is not
possible to formulate a definition that would be applicable
H to all cases."
P.M.A. SETTY v. STATEOFKARNATAKA [VENKATACHALIAH, J.l 179

The criticism of Krishna Iyer J. as to the 'profiteering scale' A
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 II, B
1958 that court-fee should not be a weapon to stifle suits or proceed-
ings and that though in fixing the court-fees 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 1 percent for suits
involving Rs.1 lack or more with a maximum of Rs.15,000
c
or Rs.20,000 may be justified; 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 court fees render disservice
by rendering the cost of litigation prohibitive." D
(Emphasis supplied)

Learned counsel also referred to and relied upon the decision of
the Bombay High Court in Indian Organic Chemicals v. Chemtax
Fibres, [1983] Bombay LR; 406 upon certain observations of the
Madras High Court in Secretary, Government of Madras, Home E
Department, And Another v. Zenith Lamp & Electrical Ltd., ILR 1968
(Madras); 247 and on a judgment dated 22.12.1972 of the Full Bench
of the Gujarat High Court in La(iy Tanumati Girijaprasad and another
v. Special Rent Acquisition Officer, Western Railway, Ahemdabad,
Special Civil Application No. 979 of 1970 with Special Civil Applica-
tion 287 of 1967. F

19. The submissions on this point, in some areas, overlap con-
tention (c) but the point sought to be emphasised so tar as the present
contention is concerned, is that the essence and the planitude of the
concept of 'fee' requires not only that there should be a broad correla-
tionship between the impost and the services but also a requirement, G
inherent in and as a part of the concept itse°If, 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 dis- H
180 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A tribution of the burden would, it is urged, produce two distinct legal
consequences: 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 Governments would, however, say that this is merely
B 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
c 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
.D appellants contention-for whatever it is worth in the ultimate
analysis-are to be found in the Judgment of the Madras High Court in
the Zenith Lamp Case, (1LR1%8 Mad .. 247) which came up before
this court in 1973(2) SCR, 973. Those observations sum up the matter
succinctly:

E "Irrespective of the magnitude of the claim arid the comp-
lexity of the case and the anxiety of the suitor, a limit will be
reached so Jar 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 ques-
tion involved. That appears to be the reason behind the
F 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 equit-
ably on all suitors, that no particular class or section of
G 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
H more and more unrelated to the object of the levy. A few

•
P.M.A. SETIY v. STATE OFKARNATAKA [VENKATACHALIAH, l.l 181

suitors would be made to bear a heavy share of the expen-
A
diture 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 B
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, Mad., 1968 (368-372).

-:~ This is the crux. of the matter and a fair summing-up of the C
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, [1983) LR
Bombay, 406, one of the cases relied upon by the appellants.
D
22. We may, briefly, refer to the setting in which the matter
arose before the Bombay High Court. In the proceedings, the plain-
tiffs challenged the provisions of the Bombay Court Fees (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 conse-
quence was that ad-valorem court fee, without any upper limit, had had to E
·be paia. The matter arose out of what was allegea as the 'Backbay
Scandal' in which various plots of land reclaimed from the Sea in South
Bombay were disposed of by Government, according to pfaintiffs'
allegation, in violation of the prescribed rules and for a pittance in
orutr u confer a largesse on the chosen. The allotment of plots
appears initially, to have been challenged in writ proceedings; but F
ultimately· a suit had had to be filea _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.

1 The amendment was challenged on three grounds. The first was G
that the legislation was itself ma/a fide and was ushered in with oblique
motives of stifling the very suit and the challenge to the impugned
allotments. The second was that levy of court-fees ad-valorem without
any upper limit would alter the character of the levy and convert it
from 'fee' into a 'tax'. The third contention was that the amendment
was a colourable piece of legislation and was not a legitimate exercise H
182 SUPREME COURT REPORTS [ 1988] Supp. 3 S.C.R.

A 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 ac-
cepted the second and held that even if the Government had satisfied
itself that there was necessity for collection of enhanced quantum of
B 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
20,000 or even 25,000 in which event the court would not be able to
hold that the levy had become so excessive and so grossly dispro-
portionate and unreasonable qua a particular suitor as to cease to be a
fee and become a tax. The High Court held:
c " ..... In the case before us the fact that the plaintiff on its
claim is called upon to pay after the amending Act of 1974
court-fees of Rs.5,60,000 eloquently testifies to the harsh-
ness, the excessive character and the unreasonableness of •
the levy and once such conclusions are reached, it will have
D to be held that this levy at the higher figure which is
secured by the impugned Act has converted exation 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." (!LR), Born.; 1981, Vol. 83;
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
F Court in Lady Tanumati Girijaprasad and another v. Special Rent
Acquisition Officer, Western Railway, Ahemdabad, Special Civil Ap-
plication No. 979 of 1970 with Special Civil Application 287 of 1967, is
concerned, that decision, even to the extf;nt it goes, is not on tne
aspects emphasised in these appeals. The decision really turned on the
question whether correlation between the services and the fee had
G taken 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'de,monstrative of the arbitrariness and inequities
inherent in the imposition of the ad-valorem impost without an upper
H limit. In that case the appellant was called upon to pay on his plaint
P.M.A. SETIY v. STATE OF KARNATAKA [VENKATACHALIAH, J.) 183

almost }/7th of the entire estimated court-fees receipts of the year and
it would be inconceivable that, proportionately, 1/7th of the judicial- A
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 B
impost qua the particular litigant, it is urged, would shed its comple-
xion as a fee and would par-take of the nature of an exaction more
resembling a tax than a fee. Learned counsel submitted that in the
process of adjudication of disputes before courts, judicial-time and the
machinery of justice are not utilised in direct proportion to the value
or the amount of the subject matter of the controversy. Cases involv-
ing very small claims might raise difficult questions of fact and law c
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 D
and a prescription of a corresponding upper limit of court fee shou!a
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 in proportionate to the judicial t]!e 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 E
alternatives could save a legislation imposing a fee. One such was to fix
an upper limit commensurate with conceptionalised outer most limit of
the money value of the maximum possible services, hypothetically so
conceived. The second was to stipulate after a particuhr stage, prog-
ressively lower rates on correspondingly increasing slabs of the value
of the subject matter or in other words, after a certain stage, to make F
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
an.ct outside courts. The anomalies that the policy behind the impugned
provisions can produce in conceivable cases could, indeed, be inequit- G
• able 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 insistance
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 H
184 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

is the peccan.t part of the argument. Once a broad correlation between
A the totality of the expenses on the services, conceived as a whole, on
the one hand and the totality of the funds raised by way of the fee,
on the other, is established, it would be no part of the legitimate
exercise in the examination of the constitutionality of the concept of
the impost to embark upon its effect in individual cases. Such a grie-
vance would be one of disproportionate nature of the distribution of
the fees amongst these liable to contribute and not one touching the
conceptual nature of the fee. Indeed this position was clearly recog-
nised by the Madras High Court in Zenith Lamp's case itself in the
following passage of the Judgment:

"If, in substance, the levy is not to raise revenues also for
c the general purpose of the State the mere absence of
uniformity of the fact that it has no direct relation to the
actual services rendered by the authority to each individual
who obtains the benefit of the service, or that some of the
contributories do not obtain the same degree of service as -
other may, will not change the essential. character of the
levy. ",ILR Mad., 1968; 340-41.

26. There might, conceivably, be cases where a particular
individual-contributor may not derive any benefit at all, though as a
member of the class he ha; no option but to make the contribution.
It: The principle underlying the contention that beyond a point the
impost ceases to have the quality of a fee, if valid, can be visualised
and applied even to cases where, despite the uniformity in the distribu-
tion of the burden, a particular individual does not obtain any service
at all. This cannot be a legitimate and permissible ground of
invalidation.

This is, however, not to say that if the scheme of distribution of
the burden is so arbitrary, so unreasonable and disproportionate as to
offend the requirements of Article 14, the levy does not fail as viola-
tive of Article 14.

G In H.H. Sudhundra Thirtha Swamiar v. Commissioner For
Hindu Religious & Charitable Endowments, Mysore, [1963] 2 SCR
Suppl. 323 this court held:

" .... Nor is it a postulate of a fee that it must have direct
relation to the actual services rendered by the authority to
H individual who o.btains the benefit of the service. If with a
)_" '~'·"'i;'

P.M.A. SETIY v. STATEOFKARl'iATAKA [VENKATACHALIAH,J.] 185

view to provide a specific service, levy is imposed by law
A
and expenses for maintaining the service are met out of the
amounts collected there being a reasonable relation bet-
ween 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) 13

In The City Corporation of Calicut v. Thachambalath Sadasivan
and others, [1985] 2 sec, 115 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 t
the fee is ·being paid. If one who is liable to pay receives
general benefit from the authority levying the fee the ele-
men! 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.
D
(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 E
incidence is disproportionate to the actual services obtainable by
them. The argument that where the levy, in a.n individual case, for
exceeds the maximum value, in terms of money, of the services that
could at all.be ·possible, them, qua that contributor, the correlation
breaks down is a subtle and attractive. argument. However, on a
proper comprehension ·of the true concept of a fee the argument seems F
to us to be more subtle than accurate. The test of the correlation is not
in 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 distribution1of G
the burden might violate other constitutional limitation. This idea that
the test of the correlation is at the "aggregate" level and not at "indi•
vidual" level is expressed thus. First Principles of Public Finance by
De Marco, 83.
H
'The fee must be equ_al, in_the aggregate to the cost of

....
+,o,o,
186 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

production of the service. That is the aggregate amount of
A
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
B Indian Organic Chemicals case and the view of the earlier Madras
High Court in Zenith Lamp's case do not commend themselves as
sound, having regard to the accepted tests to determine the nature of a
'fee'.

Contention (b) is not substantiated.
c 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 legisla-
tions, by distributing the burden on the .ad-valorem principles based
O merely on the value of the subject matter, independently of considera-
tions 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 Article 14. It is urged that a litigation, on which a
litigant might have paid a mere Rs.50 by way of court fee, might
E 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 lakhs'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
F 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 as raised show a correlation to
such expenses, the States should have sufficient play at the joints to
G work-out the incidents of the levy in some reasonable and practical
way. It would, quite obviously, be impracticable, so proceeds the argu-
ment, 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.
H Perfection in any system of imposition of monetary exactions is an
P.M.A. SETIY v. STATEOFKARNATAKA [VENKATACHAL!AH,J.] 187

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 A
whether any serious vice of blatant discrimination without any rational
basis whatsoever vitiates the system. It will, obviously, be unreason-·
able, says the States' learned counsel, to distribute the total expenses
amongst all the litigants uniformally irrespective of the amount or
value of the subject matter of the litigation. If, contends counsel, an B
upper limit is fixed and the collection fell short of what the Govern-
ment 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 c
relevant factor in proportioning the burden of the court fee, is indeed
it has been so held, where the line should be drawn in applying the
principle it is more a matter of legislative wisdom and preference than
of the strict judicial evaluation and adjudication. There might possibly
be better methods of administering the collections but that by itself, it D
is contended, is no ground to strike down what might appearing to be a
less perfect system particularly when economic measures and regula-
tions are concerned.

So far as the Directive Principles in Article 39A are concerned,
the learned Solicitor General said that the directive principles are E
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 grie-
vance in these petitions is by the class of the litigants consisting of big
financial institutions with superior economic power. The superiority of
the economic power is not, it is urged, irrelevant in making them share F
a higher burden of a public impost. At all eve.nts, it is urged, courts can
not 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 G
economic regulation are not outside Article 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 H
188 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A. what economic and social policy it should pursue and what discrimina-
tions advance those social 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
B 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
c well.

31. This Court in East India Tobacco Co. v. State of Andhra
Pradesh, [ 1963] 1 SCR 411 referred to with approval the following
passage in Rottschaefer's "Constitutional Law", p. 668:
b
"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."
E
The Legislature has to reckon with practical difficulties of adjust-
ments 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 is best suited to the felt needs. The complexity of economic
matters and the pragmatic solutions to be found for them defy and go
F beyond conceptual mental models. Social and economic problems of a
policy do not accord with preconceived stereotypes so as to be amen-
able to pre-determined solutions. In The State of Gujarat and_ Another
v. Shri Ambica Mills Ltd., Ahemdabad Etc., [1974] 3 SCR 764 this
court observed:

0 " .... 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
fu1ly about the peculiarities df a p_articular local situation, a
P.M.A. SETIY v. STATE OF KARNATAKA [VENKATACHALIAH, J.] 189

court should hesitate to dub the legislative classification as
A
irrational ...... "·

" ..... The question whether, under Article 14, a classifi-
cation 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 B
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 c
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."
D
','Laws regulating economic activity should be viewed diffe-
rently 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 E
local conditions about which local legislative or administra-
tive bodies would be better informed than a court;"

The lack of perfection in a legislative measure does not necessary
imply its unconstitutionality. It is rightly said that no economic mea-
sure has yet been devised which is free from all discriminatory impact F
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,
un,der the equal protection clause, reviewing fiscal services. In G.K.
Krishnan etc., etc., v. The State of Tamil Nadu and Anr. etc., [1975) 2
SCR, 715 (730) this Court referred to, with approval, the majority
view in San Antonio lndependend School District v. Bodrigues speak- G
ing through Justice.Stewart, ; 411 US .. I at page 41):

"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 ff--
190 SUPREME COURT REPORTS [1988] Supp. 3 .S.C.R.

exist, the court does well not to impose too rigorous a
A
standard of scrutiny lest all local fiscal schemes become
subjects of criticism under the Equal Protection Clause."

and also to the dissent of Marshall, J. who summed up his conclusions
thus:
B
"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
c 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 a healthy revulsion from the
D court's earlier excesses in using the Constitution to protect
interests that have more than enough power to protect
themselves in the legislative halls." Dandridge'v. Williams,
397 US at 520.

The observations of this court in Income Tax Officer, Shillong
E and Anr. Etc. v. N. Takim Roy Rymbai Etc. Etc. [1976] 3 SCR; 413
. made in the context of taxation laws are worih recalling:

"The mere fact that a tax falls more heavily on same in the
same category, is not by itself a ground to render the law
invalid. It is only when, within the range of its selection,
F the law operates unequally and cannot be justified on the
basis of a valid classification, that there would be a viola-
tion of Article 14."
(Emphasis supplied).

32. The question whether the measure of a tax or a 'fee' should
G be ad-valorem or ad-quantum is again a matter of fiscal policy.

In the Zenith Lamp's Case this court observed:

"The fee must have relation to the administration of civil
justice. While levying fees the appropriate legislature is
H competent to take into account all relevant factors, the

·-
P.M.A. SETIY v. STATE OF KARNATAKA [VENKATACHALIAH. J.] 191

value of the subject matter of the dispute, the various steps
necessary in the prosecution of a suit or matter, the entire A
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."
B
(Emphasis supplied).

In the context of levy of market fee, a similar argument was
advanced before a High Court that the imposition of m"rket 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 discrimi- c
nation. 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 is quantitatively and
D
qualitatively more than the services that may be envisaged to the class
of traders dealing with spices of equivalent money-value. The distribu-
tion of the burden of the fee on the basis of the value of the commo-
dity, 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 familiarity with
E
the arguments in the present case. But the High Court ILR 1982
(Karnataka); 399 (reserved 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
F
valorem" it might have attracted, quite legitimately
perhaps, the criticism of being arbitrary. By an advalorem
impost, the goods independently of their volume and
quality are treated equally in terms of their value. An
impost "advalorem" is a well accepted concept in taxation.
Indeed in Ganga Sagar Corporation's case (AIR 1980 (SC),
G
286 Supreme Court dealing, though in a different context
stated:

" ....... Article 14, a great right by any canon
by its promiscuous forensic misuse, despite the
Dalmia decision has given the impression of H
192 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

being the last sanctuary of losing litigants .....
Price is surely a safe· guide but other methods
are not necessarily vocational. It depends
,,
•
33. It was then argued that various States have different
B standards and that while some States have rightly recognised the need
for an upper limit to save the constitutionality of the levy, other States
like, Karnataka, Tamil Nadu, etc. envisaged an ad-valorem levy with-
out any upper limit. It is contended that though India is a federal
polity, the judicial system, however, is an integrated one and that
therefore different standards of court fee in different States would be
C unconstitutional. But it is trite that for purposes of testing a law enac-
ted by one State in exercise of its own independent legislative powers
for its alleged violation of Article 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 this court observed:

"Article 14 does not authorise the striking down of a law of
one State on the ground tbat in contrast with a law of
another State on the same subject its provisions are dis-
criminatory. 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
F presumption of constitutionality of laws requires that any doubt as to
the constitutionality of a law has to be resolved in favour of constitu-
tionality. Though the scheme cannot be .upheld, at the sametime, it
cannot be struck down either.

35. The State is in theory entitled to raise the totality of the
c&· expenses by way of fee. Any interference with the present yardstick
for sharing the b11rden might in turn produce a yardstick less
advantageous to litigants at lower levels. Subject to certain observa-
tions and suggestions we propose to make in regard to the rationalisa-
tion 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
Iii down the law,
P.M.A. SETJYv. STATEOFKARNATAKA [VENKATACHALIAH,J.] 193

36. Re: Contention (d)
A
In the appeal of the State of Maha!ashtra 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 pro-
ceedings for grant of probate and letters of administration.ad-valorem
without the upper limit prescribed for all other litigants-the court-fee B
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 diffe-
rentia between the two class of litigation 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:
c
"Petitioners next contend that the impugned clause dis-
criminates as between different types of suiters and that
there is no justification for this discrimination. Plaintiffs
who go to civil courts claiming decrees are not required to
pay court-fees in excess of Rs. 15,000. This is irrespective of D
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 pro- E
bate 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 whatev.er nature and complexity an upper limit of
Rs.15,000 on the court fe< is fixed, there is no logical justification for
singling out this proceeding for an ad-valorem impost without the be-
nefit of some upper limit prescribed by the same statute respecting all F
other litigants. Neither before the High Court-nor before us here-
was the impost sought to be supported or justified as something other
than a_ mere fee, levy of which is otherwise within the State's power or
as separate 'fee' from another distinct source. It is purported to be
collected and sought to be justified only as court fee and nothing else.
G
The discrimination brought about by the statute, in our opinion,
fails to pass the constitutional master as rightly pointed out by the
High Court. The High Court, in our opinion rightly, held:

"There is no answer to this contention, except that the
legislature has not thought it fit to grant relief to the seek- H
194 SUPREME COURT REPORTS [1988] Supp, 3 S.C.R.

ers of probates, whereas plaintiffs in civil smts were
A thought deserving of such an upper limit. The discrimina-
tion is a piece of class legislation prohibited by the
guarantee of equal protection of laws embodied in Article
14 of the Constitution. On this ground also item JO cannot
be sustainecj."
B '
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 unneces-
sary to be examined.

Contention (d) is accordingly held an answer against.the appe!-
C !ant 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 court-fees under the
D '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-
E juris in a Welfare State. The prescription of such high rates of court-
fees everi 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
F 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
G 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,
~arlier, statutory upper-limits fixed for the court fee. But later legisla-
tions has sought to do away with the prescription of an upper limit. The
H insistence on raising court fees at high rates recalls of what Adam
Smith Wealth of Nations said:
~>;::

P .M.A. SETTY v. STATE OF KARNATAKA [VENKATACHALIAH, J.I 195

"There is no art which one government sooner learns of · A
another than that of drawing money from the pockets of
the people:·

Fees are levied no doubt to defray the cost of services but as
observed by Findlay Shirras Science of Public Finance, Vol. II, 674-
675: B

"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) c
Though we have abstained from striking down the legislation,
yet, it appears to us that immediate steps are called for and are impera-
tive to rationalise the levies. In doing so the States should realise the
desirability of levying on the initial slab of the subject matter-say
upto Rs.15,000-a nominal court-fees not exceeding 2 to 2-1/2% so D
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-volorem levy at rates which, preferr-
ably, should not exceed 71/2% subject further to an upper limit which,
having regard to all circumstances, could be envisaged at Rs. 75,000.
The upper limit even piror to 1974 under the 'Bombay Ace was E
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 upto 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 F
bestow attention on these matters and bring about a rationalisation of
the levies.

With these observations and directions we dismiss the appeals,
writ petitions and special leave petitions, but in the circumstances,
witho.ut .an order a~ to costs. G

R.S.S. Appeals & Petitions dismissed.