Holding

The inspection fee for renewal of a money‑lender's licence is a valid regulatory fee, not a tax, and is not excessive or arbitrary.

Summary

The appellants, licensed money lenders, challenged the inspection fee levied under Section 9‑A of the Bombay Money‑Lenders Act, 1946 for renewal of their licences, contending that it was a tax in disguise, excessive and violative of Article 14. The State argued that the fee was a regulatory charge necessary for inspection of accounts, which is a service rendered by the State and essential to protect debtors. The Court examined the nature of the fee, the quid pro quo requirement, and the relationship between the levy and the service rendered. It held that the inspection fee is a regulatory fee, not a tax, and that it is neither arbitrary nor excessive. Consequently, the appeal was dismissed and the fee upheld.

Issues considered

Whether the inspection fee under Section 9‑A of the Bombay Money‑Lenders Act, 1946 is a tax in disguise.
Whether the fee is excessive, arbitrary or violative of Article 14 of the Constitution.
Whether a fee must be linked to a direct quid pro quo service to be valid.
Whether the levy based on maximum capital/annual turnover is permissible.

Legislation cited

Bombay Money Lenders Act, 1946s. 18, s. 19, s. 2(5‑A), s. 2(7), s. 2(8), s. 6, s. 8, s. 9, s. 9‑A
Constitution of Indias. Article 14, s. Article 265

Subjects

inspection feemoney lendersfee vs taxArticle 14regulatory feelicence renewalBombay Money‑Lenders Actconstitutional law

Judgment

SONA CHANbI OAL COMMITTEE AND ORS. A
v.
STATE OF MAHARASHTRA

DECEMBER 16, 2004

[ASHOK BHAN AND A.K. MATHUR, JJ.]
B

Bombay Money-Lenders Act, 1946-Section 9-A-Bombay Money-
lenders Rules, 1959-Renewal of money lender's licence-Levy of inspec-
tion fee-Nature of, fee or tax in the guise offee-Held : Levy of inspection
fee for renewal of licence depends upon inspection of books of accounts C
of money lenders-Inspection of records, by itself, is direct service rendered .
by the State to money lenders-Furthermore, fee charged is regulatory in
nature to control and supervise the functioning of money lending business
to protect debtors-Thus, fee imposed in nature of fees-Also, inspection
fee and licence fee obtained under the Act is not sufficient to meet the D
expenses incurred on staffperforming duties under the Act, thus, fee imposed
is neither arbitrary nor excessive so as to lose the character of fee-
Constitution of India, 1950-Article 14.

The question which arose for consideration in these appeals was
whether the imposition of inspection fee for the renewal of money E
lenders licence under the amended provisions of Section 9-A of the
Bombay Money Lenders Act, 1946 is a tax in the guise of fee and
whether it is so excessive or unreasonable as to lose the character of fee.

Appellant-licensed money lenders contended that quid pro quo is F
a must in the case of fee and in the absence of the same, the levy would
be deemed to be a tax; that in the instant case there is no quid pro quo
and no benefit is being rendered to the person paying the fee and as such
the levy imposed is in the nature of tax though described as fee; that
the fees have to be unif'orm; and that the fee could not be imposed on
the basis of the annual turnover of the money lenders as it would amount G
to a tax on turnover.

Dismissing the appeal, the Court

HELD: 1.1. Under section 9-A of the Bombay Money-Lenders Act, H
971
972 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A 1946 inspection fee is levied for renewal of licence. Section
2(5-A) of the Act defines 'inspection fee' as fee leviable under Section 9A
in respect of inspection of books of accounts of a money-lender. For
grart,ting renewal of licence it is necessary and must th~t the records
maintained by the money lenders should be thoroughly examined in
B order to satisfy whether all the registers are maintained property in
accordance with the provisions of the Act and Ru:les and:it is only after
satisfying that no irregularities are committed, the money lender be-
comes entitled to get the renewal of his licence. Renewal of licence is not
automatic and can be refused on the grounds specified in Section 8. Rule
11 of the Bombay Money-Lenders Rules, 1959 provides that on receipt of
C any application for renewal of a licence, Assistant Registrar would call
upon the applicant to produce his accounts for inspection and then assess
the inspection fee payable under Section 9A in respect of inspection of
books ofaccounts and call upon the applicant to pay the inspection fee in
the manner prescribed in Rule 10. Under Section 18 of the Act read with
D Rules 16 and 17 of the Rules, every money lender is required to keep and
maintain a cash book and a ledger in such form and in such manner as
may be prescribed. Thus, the inspection of records, by itself, provides for
service rendered by the State to the money lenders which is done in
connection with their request to renew the licence. This is the direct
service rendered to the money lenders as the renewal of licence depends
E upon the inspection of their accounts which is required to be carried out
under the Act. [983-G-H; 985-A; 984-A-B]

B.S.E. Brokers' Forum, Bombay and Other v. Securities and Exchange
Board of India and Others, (2001) 3 SCC 482; Corporation of Calcutta and
F Anr. v. Liberty Cinema, [1965) 2 SCR 477; The Commissioner, Hindu
Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri
Shirur Mutt, [1954] SCR 1005; Chief Commissioner, Delhi v. Delhi Cloth
~

& General Mills Co. Ltd., [1978) 2 SCC 367; Om Parkash Agarwal v. Giri
Raj Kishori, [1986) 1 SCC 722 and Commissioner of Central Excise,
Lucknow, U.P. v. Chhata Sugar Co. Ltd., [2004) 3 SCC 466, referred to.
G
1.2. The object of the 1946 Act is to serve a larger public interest.
It is to control the money lending business and protect the debtors from .
the malpractices in the business by detecting illegal money lending for
which lot of infrastructure is required. The duty of the staff and the
H officers of the Department is to visit the places of money lending busi-
SONA CHAND! OAL COMMITTEE v. ST ATE 973

ness, inspect the accounts and other matters relating to the business, to A
find out illegal money lending, carry out raids in suspicious cases and
do regular inspection as provided in the Act. Therefore, the fee charged
is regulatory in nature to control and supervise the functioning of the
money lending business to protect the debtors, majority of them are
poor peasants, tenants, agricultural labourers and salaried workers who
are unable to repay their loans. (985-B-C)
B

1.3. The strength to the staff looking after money lending work has
considerably and significantly increased in the recent past. The. total
receipts from insection fees and licence fees under the Act are very
meagre in the range of 25 to 30 lakhs every year forming a very small C
... part of the total receipts of the Co-operative Department which are to
the tune of Rs. 21 crores. Since the Act is a social legislation with the
intention to protect the debtors from the malpractices in the business,
the State is performing its duties even though the revenue under the Act
is not even sufficient to meet the expenditure on the staff performing
duties under the Act. Therefore, it cannot be held that the fees are either
r:
arbitrary or excessive. (985-D-E-F)

1.4. It cannot be said that the fees have to be uniform. Fees are
ordinarily uniform but absence of uniformity is not the sole criterion
on which it can be said that the levy is .in the nature of tax. (986-D-E] E

Secunderabad Hyderabad Hotel Owners' Association v. Hyderabad
Municipal Corporation, Hyderabad, [1999] 2 SCC 274; State ofMaharashtra
v. The Salvation Army, Western India Territory, [1975] 1 SCC 509 and
Sreenivasa General Traders v. State ofAndhra Pradesh, [1983) 4 SCC ·353,
relied on.
F

1.5. The submission that fee could not be levied on the basis of the
annual turnover of the money lenders because such levy would amount
to a tax on turnover cannot be accepted. The annual turnover is not the
subject matter of fee but only a measure of levy. (986-B] C

B.S.E. Brokers' Forum, Bombay and Others v. Securities and Ex-
change Board of India and Others, (2001) 3 SCC 482, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 992 of2003. I-
974 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A From the Judgment and Order dated 23.8.2002 of the Bombay High
Court at Nagpur Bench in W.P. No. 314of1993.

G.L. Sanghi, Vipin Sanghi, E.C. Agrawala, Rishi Agarwala, Mukesh
Agarwal and Manu Krishnan for the Appellants.

B Mukesh K. Giri and Ravindra Keshavrao Adsure for the Respondent.

The Judgment of the Court was delivered by

BHAN, J. : This appeal by grant of leave is directed against the
C judgment and order of the High Court of Bombay, Bench at Nagpur, in Writ
Petition No. 314 of 1993. The High Court in the impugned judgment has
upheld the validity of provisions of Section 9-A of the Bombay Money
Lenders Act, 1946 (hereinafter referred to as 'the Act') as amended by
Maharashtra Act No. 7 of 1992 which, according to the appellants, who are
D licensed money lenders, is ultra vires. the provisions of the Constitution of
India insofar as it seeks to levy inspection fee for the renewal of money
lender's licence. Appellants therefore seek striking down of Section 9-A of
the Act and consequent thereto the quashing of the demand notice for
payment of inspection fee. <
E Under Section 3 of the Act, the State Government has the power to
appoint Registrar General, Registrars and Assistant Registrars for the pur-
pose of exercising powers and performing duties under the Act. Under
Section 6 every money lender has to submit an application in the prescribed
form to the Assistant Regist~ar of the area, within the limits of which he
carries on or intends to carry on his business, for the grant oflicence to carry
F
on business of money lending every year on or before such date as may be .
prescribed by the State Government. The money lender is required to deposit
licence fee [which has been fixed at Rs. 200] as per the provisions of sub-
section (4) of Section 6 of the Act. The application so made is required to

G
be processed under Section 8 of the Act. Section 9 prescribes the term of
licence to be up to 31st July from the date on which the licence is granted.
The licence is made valid until the application for renewal of licence, if
-
H
made to the Registrar within the prescribed time, is disposed of.

Section 9-A, in respect of levy of inspection fee, was introduced by
Bombay Act No. 50 of 1959 which came into force w.e.f. 26.9.1959. The
-
SONA CHANDI OAL COMMITTEE v. STATE [BHAN, J.J 975

first amendment to Section 9-A was made by the Maharashtra Act No. 76 A
of 1975 which came into force from 26.7.1976. Section 9-A was amended
for the second time by Maharashtra Act No. 7of1992 which came into force
w.e.f. 28.4.1992. The amended provisions of Section 9-A, with which we
are concerned in this appeal, are as under :-
B
"9-A. Levy of inspection fee :-

(1) An inspection fee shall, in addition to the licence fee leviab\e
under Section 6, be levied from a money lender applying fqr
a renewal of a licence at the rate of one per cent uf th~
maximum capital utilised by him during the period of the C
licence sought to be renewed or rupees five thousand, which-
ever is lesser.

(2) In default of payment of an inspection fee leviable under sub-
section (I), it shall be recoverable from the defaulter in the D
same manner as an arrears of land revenue.

Explanation - For the purposes of this section, "maximum capital"'
means the highest total amount of the capital sum which may
remain invested in the money lending business on any day during
the period of a licence." E
Rule 11 of the Bombay Money Lenders Rules, 1959 (hereinafter
referred to as 'the Rules') deals with the levy of inspection fees and the same
reads as under :-
F
"11. Levy of inspection fee :-

(I) On receipt of an application for the renewal of a licence, the
Assistant Registrar to whom the application has been made,
shall call upon the applicant to produce his accounts for
inspection. He shall then assess the inspection fee payable G
under Section 9-A in respect of inspection of books of ac-
counts and call upon the applicant to pay the inspection fee

-- in the manner prescribed in Rule IO. The inspection fee shall
be paid within ten days of the receipt of the order in this behalf
by the applicant or within such further period not exceeding H
976 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A thirty days in the aggregate of the receipt of the order as the
Registrar may grant in that behalf.

(2) The Registrar may suo motu or on an application made in that
behalfrevise the order of assessment made under sub-rule ( l)
if he thinks fit."
B
Inspection fee is payable at the time of renewal of licence and the
charge of inspection fee is @ 1% of the maximum capital utilized by the
money lender during the period oflicence sought to be renewed or Rs. 5,000
whichever is less. The term 'maximum capital' has been explained in
C explanation to Section 9-A to mean highest amount of capital sum which
may remain invested in the money lending business on any day during the
yeriod of the licence. Therefore, according to the appellants, amount of
inspection fee differs from money lender to money lender and depends upon
-
the utilization of the maximum capital on any day during the period of
D licence.

Money lenders are required to maintain books of accounts under
Section 18 of the Act read with Rule 16 and 17 of the Rules. Section 18
deals with the duty pf the money lender to keep accounts and maintain cash
books and the ledger in such form and in the manner as may be prescribed
E as also to furnish copies to debtors as well as Assistant Registrars. The
section also provides that money lender upon repayment ofloan in full shall
make entries indicating payment or cancellation and discharge every mort-
gage, restore every pledge, return every note and cancel or reassign every
assignment given by the debtor as security for loan. Rules 16 and 17 read
F as under :-

"Rule 16~Forms ofcash book, ledger and ofstatement and receipt
under Section 18 - The cash book and ledger to be maintained by
a money lender under sub-section ( l) of Section 18 shall be either
in Form Nos. 4 and 7 respectively or in Form Nos. 5 and 6 respec-
G tively. The statement under clause (a) of sub-section (2) of Section
18 shall be in Form No. 8. The receipts under sub-sections (3) and
(4) of Section 18 shall be in Form Nos. 9 and 10 respectively.

Rule 17~Capital Account - Every money lender shall open a
H capital account in Form No. 11 for the purpose of Section 9-A."
SONA CHAND! OAL COMMITTEE v. STATE [BHAN, J.] 977

All these accounts are required to be verified before the grant of A
renewal of the licence.

The State Legislature is competent to make laws for such State or any
part thereof with respect to any of the matters enumerated in List II Qf
Seventh Schedule of the Constitution oflndia. Under Entry 30 of List II the B
State Legislature can make laws on the subjects of money lending, money
lenders and relief of agricultural indebtedness. The same reads:-

"30. Money lending and money lenders; relief of agricultural in-
debtedness."
c
Entry 66 which reads:

"66. Fees in respect of any of the matters in this List, but not
including fees taken in any court."
..
D•
authorises the State Legislature to levy fees in respect of any of the matters
enumerated in List II excluding the fees taken in any court. Appellants' case:
is that under Article 265 of the Constitution there is a prohibition for
imposition or levy or collection of tax by the State, except by authority of'
law, and that fee can be imposed only in respect of the subjects specified
in List II of the Seventh Schedule to the Constitution. Under the List II, State E
Legislature is not competent to levy any tax in respect of subject matters
of money lending or money lenders. Thus, according to them, the State
Legislature is competent to make laws laying down fees only in respect of
items enumerated in Entry 30 of List II and not the tax. Though the
provisions of Section 9-A are styled as inspection fee, it is in fact the F
collection of tax by the State without any authority oflaw. According to the
appellants, there is a difference between tax and fee and fees are levied
essentially for the services rendered and as such there is an element of quid
pro quo between the person who pays the fee and the public authority which
imposes it. Quid pro quo is an essential element in a fee and since there is
no quid pro quo, the levy is in the nature of tax which the State Government G
is not competent to impose.

Another submission made on behalf of the appellants is that the work
of inspection is required to be done by foe respondent authority to see that
the terms of licence granted earlier are observed and the accounts required H
978 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A are properly maintained as per the provisions of the Rule. Therefore, there
is no question of co-relation of the amount of levy with the inspection fee
or Iicence fee to cost of any service. The inspection of books of accounts
of money lenders can by no stretch of imagination be considered service
rendered to the money lenders either for the grant of Iic.ence or for renewal
B of the same. Levy of licence fee or inspection fee is, in fact, a tax which
the State Government is not empowered to impose. It is also alleged by the
appellants that maximum levy of Rs. 5,000 is arbitrary and violative of
fundamental rights granted under Article 14 of the Constitution inasmuch
as it has no reference whatsoever to any service and no inspection fee is
liable to be imposed or recovered from money lenders when already Section
c 6 provides for levy oflicence fee. Appellants cannot be made to pay licence
fee as well as inspection fee as inspection of books is for renewal of the
licence. Licence fee would cover the charges for inspection as well. Since
the levy is credited in the General Public Funds Account and not appropri~
ated towards any specific service rendered, goes to show that the levy is in
D fact in the nature of a tax. The levy is arbitrary and disproportionate to the
so-called services rendered.

Another point raised by them is that inspection fee could not be
charged for the period 1.8.1991 to 31. 7 .1992 as the amendment came into
force w.e.f. 28.4.1992 by which time more than half of the licence period
E had already expired. There was no justification whatsoever to recover the
inspection fee retrospectively w.e.f. 1.8.1991. The notices which have been
received by the appellants for recovery of inspection fee for the years 1992-
1993 were also put to challenge.

F The respondent-State in its response has pointed out that the Act was
enacted to regulate and control money lending business so as to eradicate
the mal practices in the money lending business and to protect the interest
of debtors. Thus, according to the respondent, the purpose of the Act is not
limited to providing services to the money lenders but it is also regulatory
in nature for the protection of the interests of the debtors as well. The work
G under the Act is to regulate and ~ontrol the money lending business and to
protect the debtors from mal practices in the business by detecting illegal
money lending etc. Since the fee was regulatory in nature, quid pro quo for
the service rendered to the person on whom the fee was imposed was not
required to be proved. Relying upon some judgments of this Court, it was
H averred that in case the fee w?.s :·egulatory in nature there need be no direct
SONA CHAND! OAL COMMITTEE r. STATE [BHAN, J.] 979

advantage or service rendered to the person on whom the fee is imposed, A
a mere casual relation or indirect service may be sufficient. The special
benefit or advantage to the payers of fees may even be secondary as
compared with the primary object of public interest. That primary object of
the Act is to regulate the money lending business in public interest to protect
and improve the economic conditions of bulk of rural population and poorer B
sections of population of towns and cities and to protect them frotl! exploi-
tation.

It is further submitted that though the upper limit of Rs. 500 has been
llllt.,
increased to Rs. 5,000 by the impugned amendment, the rate of 1% of
maximum capital utilised by the money lender has been kept the same. It c
is stated that there are about 5600 money lenders in the State of Maharashtra
~
out of which about 2200 money lenders are from Bombay and Greater
Bombay. Even in Bombay in case of more than 50% money lenders the
maximum capital as defined in the Act is below Rs. 50,000. The same in
case of 20% is between Rs. 1 Jae to Rs. 3 Jae and for 10% above Rs. 3 .00 D
lac. In the remaining parts of Maharshtra about 70 to 75 per cent money
lenders are having maximum capital below Rs. 50,000. Since the fees are
to be collected at the rate of I per cent subject to the maximum of Rs. 5,000
in majority of the cases there will be no difference in the inspection fee.
... payable by them. In the case of money lenders who have invested capital .
of Rs. 50,000 there will be no increase in the inspection fee payable by them. E
It is, therefore, submitted that the contention raised by the appellants that
the increase was arbitrary or excessive are devoid of any substance.
~
The staff and the officers of the Department have to visit the places
of money lending business, inspect accounts and other matters relating to F
business. According to them, the inspection fee is charged not for rendering
services only but also for regulating and controlling money lending busi-
ness. The increase in the levy is justified on the ground of heavy increase
in the Pay and Allowance of the Government Servants after 1991 who are
employed for regulating and controlling the activities under the Act. The
respondent has also pointed out that the strength of the staff looking after G
the money lending business has been considerably and significantly in-
creased in the recent past and receipts from the inspection fee and licence
fee are very meagre in the range of Rs. 25 to 30 lakhs every year which are
'> not sufficient to meet the expenses incurred for the staff looking after the
money lending business. H
980 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A The High Court came to the conclusion that there was no merit in the
contentions raised by the appellants. It was held that there was nexus
between the fee charged and the service rendered. The fee charged was
regulatory in nature to further the objects of the Act so as to control and
supervise the functioning of the money lenders in order to protect the
B debtors. Such an exercise was a must for fulfilling the purpose of the Act
for which infrastructure was required. Taking note of the heavy increase in
the Pay Jnd Allowances of Establishment and the receipt from inspection
and licence fee, it was observed that the same were meagre and not even
sufficient to meet the expenses incurred for the staff looking after the money
lending business.
c
The basic question which we are called upon to decide is whether the
fee of the nature impugned before us is, as a matter of fact, a tax in the guise
of fee and whether it is so excessive or unreasonable as to loose the character
of fee.
D
Shri G.L. Sanghi, learned Senior Counsel, placing heavy reliance on
the Constitution Bench judgment of this Court in Corporation of Calcutta
& Anr. v. Liberty Cinema; [ 1965] 2 SCR 4 77 in support of his submission
contended that quid pro quo is a must in the case of fee and in the absence
of the same, the levy would be deemed to be a fax. Since in the present case
E there is no quid pro quo and no benefit is being rendered to the person
paying the fee, the levy imposed is in the nature of tax though described
as fee. Facts of the case were, under the Calcutta Municipal Act, 1951, a
person was required to take a licence from the Corporation to run a cinema
house for public amusement. Under Section 548(2), for every licence under
F the Act, a licence fee could be charged at such rate as fixed from time to
time by the Corporation. In 1948 the Corporation fixed fees on the basis of
the annual valuation of the cinema halls. The assessee who was the owner
and licensee of the cinema theatre had been paying licence fee @ Rs. 400
per year. In 1958 the Corporation by a resolution changed the basis of
assessment of the fee. Under the new method the fee was to be assessed at
G rates prescribed per show according to the sanctioned seating capacity of
the cinema houses and the assessee had to pay a fee of Rs. 6,000 per year.
The assessee filed a petition in the High Court for the issuance of a writ for
quashing the resolution. The writ petition was allowed. The Corporation
came up in appeal to this Court, which was accepted. The case of the /

H Corporation was that th~ levy was a tax and not a fee. Accepting the plea '
SONA CHANDI OAL COMMITTEE v. STATE [BHAN, J.] 981

of the Corporation, it was observed that in order to make a levy a fee for A
services rendered, the levy must confer special benefits to the person on
whom it is imposed. The levy under Section 548(2) was not a "fee in return
for services" as the Act did not provide for any services of a special kind
being rendered, resulting in benefits to the person on whom it was imposed.
The levy was held to be a tax. B

In The Commissioner, Hindu Religious Endowments, Madras v. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954] SCR 1005 this
Court enumerated the different characteristics of tax and fee. It was held that
the tax was levied as a part of common burden while a fee was a payment
for special benefits or privilege to the person paying the same. Though it C
was not possible to formulate a definition of fee that cou!d apply to all cases
as there were different kinds of fee, but a fee may generally be defined as
a charge for special service rendered to individuals by some governmental
agency. It was observed that amount of fee levied is supposed to be based
on the expenses incurred by the Government in rendering the service. D
Pointing out the distinction between a tax and fee, it was observed that tax
is a compulsory exaction of money by a public authority for public purposes
enforceable by law and is not payment for services rendered.

In Chief Commissioner, Delhi v. Delhi Cloth & General Mills Co. Ltd.,
[ 1978] 2 sec 367' it was held by this Court that levy of fee should be in . E
consideration of certain services which the individuals accept either will-
ingly or unwillingly and that the collection from such levy should not be
set apart or merged with the general revenue of the State to be spent for
general public purpose but should be appropriated for the specific purpose
for which the levy is being made. F
In Om Parkash Agarwal v. Giri Raj Kishori, [ 1986] I SCC 722 it was
held that levy imposed could not be treated as a fee and was tax primarily
because the collection so made was being utilised not for fulfilling the
objects of the Act under which the collection is authorised, but for the
general requirement of the State's functions. G

Shri Sanghi also placed reliance on a recent judgment of this Court in
Commissioner of Central Excise, Lucknow, UP. v. Chhata Sugar Co. Ltd.,
[2004] 3 sec 466] wherein the question was whether administrative charges
collected by the sugar factory for molasses sold from the buyers/allottees H
982 SUPREME COURT REPORTS (2004] SUPP. 6 S.C.R.

A on behalf of the State Government in terms of Section 8(5) of the U.P.
Sheera Niyantran Adhiniyam, 1964 constituted a duty or impost in the
nature of a tax and consequently, not includible in the value as defined in
terms of Section 4(4)(d)(ii) of the Central Excise Act, 1944. The Court, after
analysing the provisic. ns of the Act, held that sugar factory was merely a
B collecting agent of administrative charges for the State Government. The
administrative charges were not a component of a consideration received
by the sugar factory and did not form part of the revenue of the sugar factory.
The administrative charges could not be appropriated to the revenue account
of the sugar factory and, therefore, there was no element of quid pro quo
as far as the administrative charges. in the hands of the sugar factory are
C concerned. The administrative charges were thus held to be a tax and not
a fee.

A three Judge Bench of this Court in B.S.E. Brokers' Forum, Bombay
and Others v. Securities and Exchange Board of India and Others, [2001]
D 3 SCC 482, after considering a large number of authorities, has held that
much ice has melted in Himalayas after the rendering of the earlier judg-
ments as there. was a sea change in the judicial thinking as to the difference
between a tax and a fee since then. Placing reliance on the following
judgments of this Court in the last 20 years, namely, Sreenivasa General
Traders v. State of Andhra Pradesh, (supra); City Corporation of Calicut
E v. Thachambalath Sadasivan, (1985] 2 sec 112; Sirsilk Ltd. v. Textiles
Committee, (1989] Supp. l SCC 168; Commissioner & Secretary to Gov-
ernment Commercial Taxes & Religious Endowments Department v. Sree
Murugan Financing Corporation Coimbatore, (1992] 3 SCC 488; Secretary
to Government of Madras v. P.R. Sriramulu, [1996] l SCC 345; Vam
F Organic Chemicals Ltd. v. State of U.P., (1997] 2 SCC 715; Research
Foundation for Science, Technology & Ecology v. Ministry of Agriculture,
(1999] 1 SCC 655 and Secunderabad Hyderabad Hotel Owners' Associa-
tion v. Hyderabad Municipal Corporation, Hyderabad, [1999] 2 SCC 274,
it was held that the traditional concept of quid pro quo in a fee has undergone
considerable transformation. So far as the regulatory fee is concerned, the
G service to be rendered is not a condition precedent and the same does not
loose the character of a fee provided the fee so charged is not excessive.
It was not necessary that service to be rendered by the collecting authority
should be confined to the contributories alone. The levy does not cease to
be a fee merely because there is an element of compulsion or coerciveness
H present in it, nor is it a postulate of a fee that it must have a direct relation
SONA CHANDI OAL COMMITTEE v. ST ATE [BHAN, J.] 983

to the actual service rendered by the authority to each individual who obtains A
the benefit of the service. The quid pro quo in the strict sence was not always
a sine qua non for a fee. All that is necessary is that there should be a
reasonable relationship between the levy of fee and the services rendered.
It was observed that it was not necessary to establish that those ~ho pay
the fee must receive direct or special benefit or advantage of the services
B
rendered for which the fee was being paid. It was held that if one who is
liable to pay, receives general benefit from the authority levying the fee, the
element of service required for collecting fee is satisfied.

We need not refer to the law laid down by this Court in each of the
judgments which have been cited as the same have been analysed and c
discussed at length by this Court in B.S.E. Brokers' Forum, Bombay and
Others case (supra) ..

The Bombay Money-Lenders Act, 1946 was enacted during pre-inde-
pendence period by the elected Government to control and regulate money D
lending. Money lenders were fleecing the poor peasants, tenants, agricul-
tural labourers and salaried workers who were unable to repay loans. The
agricultural debtors were losing their lands, crops or other securities to the
money lenders. To arrest this exploitation, the Money-Lenders Act was
enacted to improve the economic conditions of the bulk of the rural popu-
lation and the poorer sections of the population in towns and cities. Under E
the Act it was made mandatory first to take a licence to do the business of
money lending on payment of a licence fee of Rs. 200. Inspection fee is
levied for renewal of licence and for that purpose it is necessary that the
records maintained by the money lenders should be thoroughly examined
in order to satisfy whether all the registers are maintained properly in F
accordance with the rules and it is only after the satisfying that no irregu-
larities are committed, the money lender becomes entitled to get the renewal
of his licence. 'Inspection fee' has been defined in Section 2(5-A) of the
Bombay Money-Lenders Act, 1946 to mean the fee leviable under Section
9A in respect of inspection of books of account of a money-lender. Section
2(7) defines the 'licence' to mean licence granted under this Act and G
according to Section 2(8) 'licence fee' means fee payable in respect of a
licence. Renewal of licence is not automatic and can be refused on the
grounds specified in Section 8. In order to ensure that the money lenders
comply with the provisions of the Act and the Rules on which renewal of
the licence can be refused under clauses (b) and (c) of Section 8, inspection H
984 SUPREME COURT REPORTS (2004] SUPP. 6 S.C.R.

A of the records maintained by the money lenders is absolutely necessary and
must. Rule 11 provides th&t on receipt of any application for renewal of a
licence, the Assistant Registrar, to whom the application has been made,
shall call upon the applicant to produce his accounts for inspection. He shall
then assess the inspection fee payable under Section 9A in respect of
B inspection ·of books of accounts and call upon the applicant to pay the
inspection fee in the manner prescribed in Rule 10. Under Section 18, every
money lender is required to keep and maintain a cash book and a ledger in
such form and in such manner as may be prescribed. Under sub-section (2)
every money lender has to deliver or cause to be delivered to the debtor
within 30 days from the date on which a loan is made, a statement in any
c recognised language saying in clear and distinct terms the amount and date
of loan and its maturity, the nature of the security, if any, for the loan, the
name and address of the debtor and of the money lender and the rate of
interest charged. Clause (b) of this sub-section provides that upon repayment
o( loan in full, the money lender is required to mark indelibly every paper
D signed by the debtor with words indicating payment or cancellation and
discharge every mortgage, restore every pledge, return every note and
cancel or reassign every assignment given by the debtor as security for the
loan. Sub-section (3) provides that no money lender shall receive any
payment from a debtor on account" of any loan without giving him a plain
E and complete receipt for the payment. Money lender under sub-section (4)
is debarred from accepting from a debtor any article as a pawn, pledge or
security for ~ loan without giving him a plain signed receipt for the same
with its description, estimated value, the amount of loan advanced against
it and such other particulars as may be prescribed. Under Section 19, every
money lender is required to deliver or cause to be delivered in every year
F to each of his debtors a legible statement of such debtor's accounts signed
by the money lender or his agent of any amount that may be outstanding
against such debtor. Rule 16 provide!: for the forms of cash book, ledger
and of statement and receipt under Section 18. Rule 17 provides for opening
of a capital account in Form 11 for the purposes of Section 9A. The
G inspection of records, thus by itself, provides for service rendered by the
State to the money lenders which is done in connection with their request
to renew the licences. It is necessary to find out before granting renewal of
the licence that the applicant has complied with the provisions of the Act
and the Rules and that he has not made any wilful default in complying with
.H or knowingly acted in contravention of any requirements of the Act.
SONA CHANDI OAL COMMITTEE v. STATE [BHAN, J.] 985

This is the direct service rendered to the money lenders as the renewal A
of licence depends upon the inspection of their accounts which is required
to be <.-arried out under the Act.

This apart the fee charged is regulatory in nature to control and super-
vise the functioning of the money lending business to protect the debtors B
the vast majority of which are poor peasants, tenants, agricultural labourers
and salaried workers who are unable to repay their loans. The object of the
Act is to control the money lending business and protect the debtors from
the malpractices in the business by detecting illegal money lending. This
exercise is a must to carry out the object of the Act for which lot of
infrastructure is required. The duty of the staff and the officers of the C
Department is to visit the places of money lending business, inspect the
accounts and other matters relating to the business, to find out illegal money
lending, carry out raids in suspicious cases and do regular inspection as
provided in the Act. The Act serves a larger public interest.
D
Respondent State in its counter affidavit has stated that the strength of
the staff looking after money lending work has been considerably and
significantly increased in the recent past. The total receipts from inspection
fees and licence fees under the Act are very meagre in the range of 25 to
30 lakhs every year. Receipts from inspection fees and licence fees under
the Act form a very small part of the total receipts of the Co-operative E
Department which are to the tune of Rs. 21 crores. The licence fees and
inspection fee under the Act are not even sufficient to meet out the expenses
incurred on the staff looking after the money lending business. Since the
Act is a social legislation with the intention to protect the debtors from the
malpractices in the business the State is performing its duties even though F
the revenue under the Act is not even sufficient to meet the expenditure on
the staff performing duties under the Act. In view of these submissions it
cannot be held that the fees are either arbitrary or excessive.

Contention raised by Shri G.L. Sanghi, senior counsel for the appel-
lants that the fees have to be uniform has no merit in view of the judgment G
of this Court in ~ecunderabad Hyderabad Hotel Owners' Association v.
Hyderabad Municipal Corporation, Hyderabad, (supra) and State of
Maharashtra v. The Salvation Army, Western India Territory, [1975] 1 SCC
509. It has been held in these judgments that fees are ordinarily uniform but
absence of uniformity is not the sole criterion on which it can be said that H
986 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A the levy is in the nature of tax.

Mr. Sanghi has also urged that the impugned fee has been imposed on
the basis of the annual turnover of the money lenders. It is contended that
assuming that the respondent had the authority in law to levy the fee under
B challenge, the same could not be levied on the basis of the annual turnover
of the money lenders because such levy would amount to a tax on turnover.
We do not find any force in this submission as well. This Court in B.S.E.
Brokers' Forum, Bombay and Others v. Securities and Exchange Board of
India and Others, (supra) held that annual turnover of a broker was not the
subject-matter of the levy but was only a measure of the levy. In this case
c as well the annual turnover is not the subject matter of fee but only a measure
of levy.

Relying upon the judgment of this Court in Sreenivasa General Trad-
ers v. State of Andhra Pradesh, [1983] 4 SCC 353, it was held that merely
D because the fees were taken to the Consolidated Fund of the State and not
separately appropriated towards the expenditure for rendering the service
by itself was not decisive to determine as to whether it was a fee or a tax.
It was also held that fees are ordinarily uniform but absence of uniformity
by itself was not a criterion on which alone it could be said that the levy
was in the nature of tax.
E
For the reasons stated above, we do not find any merit in this appeal
and the same is dismissed with no order as to costs.

N.J. Appeal dismissed.