Constitutionality of Payment of Ad Valorem Court Fees (Without an Upper Limit) for Issuance of Succession Certificates

When it comes to payment of court fee vis a vis issuance of succession certificates (See Schedule I of Art. 12, The Court Fees Act as amended for Assam) it is apparent to all that the burden is heavy on the litigant. A meaningful and responsive, a reconcilable and gracious approach in the matter of payment court-fee in this regard is found to be absolutely necessary. There must be broad correlation with the fees collected and the cost of administration of civil justice.

Now, if we refer to the Constitution, we find that payment of Court-fees in High Courts and other Subordinate Courts, falls under Entry 3 of List II (State List). It is necessary to mention here that the entry relating to the ‘administration of justice’ was originally in Entry 3 of List II. But by virtue of the Constitution (Forty-Second) Amendment Act, 1976, the said entry has been shifted to List III with effect from 3.1.1977. Though administration of justice now falls under Entry 11A of List III, the subject of ‘fees taken in any court’, which may be said to be related to administration of justice, does not fall under List III in view of the explicit bar under Entry 47 of List III mentioned above. The effect of this Constitutional amendment still remains the same i.e., the power to legislate on matters of court-fees remains in the competence of the State Legislatures, so far as the High Courts and Courts subordinate thereto are concerned.

In other words, for High courts and other subordinate Courts exercising jurisdiction in any State, laws relating to Court-fees can only be made by the Legislature of a State as per Art.246(3) read with Entry 3 of List II.

Ashwathanarayana Setty's case (AIR 1989 SC 100) is a very significant case on the legality of the exaction of ad-valorem court fee uniformly at a certain percentage of the subject matter without an upper limit or without the tapering down after a certain stage onwards. Therein special leave to appeal was preferred against the order of the High Court upholding the provisions of the Karnataka Court Fees and Suits Valuation Act, 1958. Similar appeals were filed from the States of Rajasthan and Bombay assailing the respective Court Fees Acts. The Supreme Court, disposed of all the three appeals together in Ashwathanarayana Setty's case.

So far as the Bombay Act was concerned, the point raised in the appeal was confined to the question of the validity of Section 29(1) read with Entry 10 of the First Schedule which, without reference to the upper limit of court fee of Rs 15,000 prescribed for all other suits and proceedings, required payment of ad valorem court fee on proceedings for grants of probate and letters of administration.

The constitutional validity of the provisions of Section 20 read with Article 1 Schedule I of the Rajasthan Act was also under challenge which prescribed and authorised the levy of court fees on plaints or written statements pleading a set-off or counter-claim or memoranda of appeals presented to courts an uniform ad valorem impost of Rs 5 for every Rs 100 or part thereof on the amount or value of the subject-matter in excess of Rs 5000.

The validity of the corresponding provisions of the Karnataka Court Fees and Suit Valuation Act, 1958 was also challenged which similarly imposed 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 Rs 10 of the amount or value of the subject-matter in dispute without prescribing any upper limit.

The Supreme Court observed therein:

“…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 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 criticism of the policy acknowledgement should be made of the Government's power to raise the resources for providing the services from those who use and benefit from the services. The idea that there should be uniform fixed fee for all cases, instead of the ad valorem system, has its own nettling problems and bristles with anomalies. How far these policy considerations have an adjudicative disposition and how far courts can mould and give direction to the policy is much debated.”

On the contention that the levies of court fee under the Karnataka Act and the Rajasthan Act did not satisfy the requirements of the concept of a ‘fee’ but partook the character of a ‘tax’, inasmuch as that the correlationship between the fee and the value of the services by way of quid pro quo, was not established. the Supreme Court found no substantial merit in the contention. It observed:

“In regard to the nature of court fee we have the pronouncement of this Court in Secretary, Government of Madras v. Zenith Lamp & Electrical Ltd. (1973) 1 SCC 162. This Court after referring to the legislative entries pertaining 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:

“It seems to us that the separate mention of ‘fees taken in court’ in the entries referred to above has no other significance 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 court at one place .......

It seems plain that ‘fees taken in court’ are not taxes, for if it were so, the word ‘taxes’ would have been used or some other indication given.... It follows that ‘fees taken in court’ cannot be equated to ‘taxes’. If this is so, is 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 general public revenue. In other words, it cannot tax litigation, and make litigations pay, say for road-building or education or other beneficial schemes that a State may have There must be a broad correlationship with the fees collected and the cost of administration of civil justice.”

It was also contended therein that even if the totality of the expenses on the administration of civil justice and the totality of the 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, inasmuch 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 proportionate increase in the value of the subject-matter, ceases to be a ‘fee’ and becomes a ‘tax’.

The Supreme Court unsubstantiated this contention as well and observed:

“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 or incidence is disproportionate to the actual services obtainable by them. The argument that where the levy, in an individual case, far exceeds the maximum value, in terms of money, of the services that could at all be possible, then, 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 to us to be more subtle than accurate. The test of the correlation is not in the 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 distribution of the burden might violate other constitutional limitation….”

The Supreme Court also considered the proposition that insofar as the provisions of Section 29(i) read with entry 20 Schedule I of the Bombay Act are 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 without the benefit of the upper limit of Rs 15,000 prescribed in respect of all other suits and proceedings exposes that class of litigants to a hostile discrimination and is violative of Article 14 of the Constitution

The Supreme Court agreed to this contention and observed:

“…where a proceeding for grant of probate 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 whatever nature and complexity an upper limit of Rs 15,000 on the court fee is fixed, there is no logical justification for singling out this proceeding for an ad valorem impost without the benefit of some upper limit prescribed by the same statute respecting all 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.

The discrimination brought about by the statute, in our opinion, fails to pass the constitutional muster as rightly pointed out by the High Court.”

And on the point as to whether, at all events, the distribution of the burden of the fees amongst those on whom the burden falls as the ad valorem principle, dependent merely on the 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 Constitution, the Supreme Court observed:

“It was then argued that various States have different 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 without 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 unconstitutional. But it is trite that for purposes of testing a law enacted 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…..

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. Subject to certain observations and suggestions we propose to make in regard to the rationalisation 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 down the law.”

Though the Supreme Court declined to strike the relevant provisions of the Karnataka Act and the Rajasthan Act, it did lay down certain guidelines to rationalize the court fees. It observed:

".....Though we have abstained from striking down the legislation, yet, it appears to us that immediate steps are called for and are imperative 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 2½ % so 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 valorem levy at rates which preferably should not exceed 7½ % subject further to an upper limit which, having regard to all circumstances, could be envisaged at Rs. 75,000/-. The upper limit even prior to 1974 under the Bombay Act was 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 to 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 7½ % down to ½ % in graduated scales. The Governments concerned should bestow attention on these matters and bring about a rationalisation of the levies.”

Additionally, the Supreme Court observed:

"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 presumption of constitutionality of laws requires that any doubt as to the constitutionality of a law has to be resolved in favour of constitutionality. Though the Scheme cannot be upheld, at the same time it cannot be struck down either".

Now, if we examine Schedule I of Art. 12 of The Court Fees Act, as amended for Assam by the Assam Court Fees (Amendment) Act of 1950, we find the same too does not come with an upper limit.

But having considered the observations of the Supreme Court in the context of the Bombay, Karnataka and Rajasthan Acts, it is seen that though ad valorem court fees may not be ideal at times, an inference of unconstitutionality cannot be made altogether.

In State of Madhya Pradesh v. G.C. Mandawar, AIR 1954 SC 493 the Supreme Court observed:

“Article 14 does not authorise the striking down of a law of one State on the ground that in contrast with a law of another State on the same subject its provisions are discriminatory. Nor does it contemplate 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 the two enactments.”

Thus, the fact that the provisions of the Bombay Act were struck down on the ground of being in the teeth of Art. 14 would not necessarily imply that Schedule I of Art. 12 of The Court Fees Act, as amended for Assam would fail too.

The fact that the ad valorem court fee for succession certificates has no upper limit does not necessarily knock on the door of unconstitutionality and arbitrariness. There is, of course, a need for rationalizing the rates which are egregiously high. But it is for the State Legislature to amend the law in this regard. Courts must 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.

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