A Testament to a Towering Judge : Justice P.T. Raman Nayar

(By T.P. Kelu Nambiar B.A., M.L.)

He asked me, casually though: At this stage of your law practice, when you are, verily, getting older, but, sure, not old, what are you proud of? I answered too pat, with little hesitation: I am proud of having had the opportunity of appearing, and arguing, before Mr. Justice P.T. Raman Nayar, when I was a fledgling lawyer.

Justice P.T. Raman Nayar, pushing 92 now, was a great Judge; not a Judge wearing the cloak of greatness as a second skin. He was a Chief Justice who symbolized the institution dignity of the State Judiciary. He was one of the great seminal minds of the twentieth century. He was the voice of justice triumphant. I cannot think of him without an elevation. Nobody has followed him even at a modest distance.

Sri. Raman Nayar stands high in his own. In his brave judgments, he set Government in its right place. He is a profound portrait of a full man/Judge. He is a Judge of permanent popularity and reputation. There is no blot on his escutcheon. He stands out as the greatest judicial figure of the second half of the twentieth century, of a stature beyond controversy.

Seemingly a remote and authoritative personality, Sri. Raman Nayar is verily an uninhibited person. He conceals a goodness of heart beneath a haughty posture. Without tarrying for an expression to describe him, I say, he is a 'Colonel Newcome' gentleman. To guests and friends, he seemed a gentleman of leisure, though he was crowded with official and judicial duties. In character, he is an example of a man of great knowledge and wisdom, un-diverted by anybody from the task he had set himself.

Justice Raman Nayar is the one Judge who had understood the underlying meaning of Dr. Samuel Johnson's famous passage in The Rambler: "Reticence and submission are very carefully to be distinguished from cowardice and indolence". He knew the meaning of lawyers' proud submission and dignified obedience. What the lawyer abandoned, he defended. He knew that a Judge is not a 'justice police'. He used to disclose his mind at the hearing of a case, for he knew for certain that the court is not playing chess with the lawyer. His Court was not a professional blackhole for lawyers. He is never a braggart or an egoist. He is a consummate gentleman, who does not wear the I tag. He never behaves beyond the rules of politeness. He never brought about the situation: "Bar Bleeds; Bench Smiles". The search for another Raman Nayar - like, would certainly be elusive.

Born to Krishnan Nayar - Lakshmi Amma couple, in January 1910, at Mangalore, Sri. Raman Nayar had his primary, secondary and tertiary education at Mangalore, Kakkinada, Calicut and Madras, following his father's official displacements. After obtaining Degree in Law, he was apprentice-at-law, in the High Court of Judicature at Madras, under the great lawyer Sri. O.T.G. Nambiar. It was while so, he was selected for the I.C.S. (Indian Civil Service) in 1932; from 1932 to 1934, he underwent probation for the I.C.S. at St. Chatherine's College, Cambridge; and he was covenanted in 1934. He worked in diverse capacities, as Assistant Collector, Sub Collector, City Magistrate, Additional District and Sessions Judge, District and Sessions Judge, Registrar, High Court of Judicature at Madras, Joint Secretary to Government of India in the Ministry of Law; and Special Secretary, Law Department, Government of Kerala. In 1957, Sri. Raman Nayar was appointed Judge, High Court of Kerala; and he retired as Chief Justice in 1972. He was Judge for fifteen years and counting; and was simply the best address in the Kerala High Court during the period. As a Judge, he made his reputation suddenly and easily. He was the first and the last I.C.S. - Judge of the High Court of Kerala.

Mr. Justice Raman Nayar considered events greater than men; and that, he thought was his business, his duty, the thing he came into the judiciary to do, - and he did it, with a mind richly stored with detail, and brutally clear in its convictions, unmindful of applause or indignation. His judgments were aggressively original. He always dealt with legal aspects by the book. Courage was his greatest virtue. That mighty law giver never made the law stand on its head. You can hear his soliloquy in some of his judgments: "Justice is always right, not the Judge". He wrote judgments with a minimum of revision, for he was sure of the position. His energy was phenomenal. He was a Judge in whom intellect came to terms with genius, and both worked together. He was extracting from himself perfection. When he retired in 1972, something had gone out of the Kerala High Court that was irreplaceable, as the change was profounded when he was Chief Justice. That "old, learned, respectable bald head" (to borrow the respectful expression from W.B Yeats), broke through the judicial flaccidity and deadness, and succeeded in enlivening the entire system. And, when Mr. Justice RT. Raman Nayar departed from the High Court, what he had established also departed with him.

Raman Nayar's judgments remain the most durable element in his judicial achievement. They also reveal his strong originality, specialised vocabulary and dominant, even arrogant, control of his medium. His sentences, though labyrinthine, are comprehensible, lucid and powerful. Overall, though, he delivered judgments of contemporary urgency, - major period pieces, of masterful magnificence.

I still store the memory of that great, unique event on the 5th day of December, 1960. It was on that day, immediately after the marathon arguments were closed, Mr. Justice Raman Nayar started pronouncing judgment extempore in the Palai Central Bank Case (Reserve Bank of India v. Palai Central Bank Ltd. -1961 KLT 54). "I lose count of the number, but, between them (counsel on both sides), they must have taken me to close on a hundred books, both text books and judicial decisions". (Paragraph 14 of the judgment) It was in such a case, the judgment, full of profundity and compelling intensity, was rendered extempore. I consider this judgment as the greatest of the Kerala High Court. If this judgment is forgotten, a precious possession will be lost. Mr. Justice Raman Nayar has rendered authoritative and great judgments in all branches of law; civil, criminal, personal, constitutional, administrative, company, banking, taxation and the rest. This is unique, indeed; yet to be achieved by any other; and this amazes me no end.

A severe lover of justice and a precise lover of truth, Justice Raman Nayar is a man 'constant and pertinacious, and not to be wearied with any pain,' to borrow the Clarendon expression. He continues a 'Justice' even after retirement, for he has not sought any other employment, or engaged in legal practice. 'Once a Justice always a Justice', he remains.

Choosing God's Middleman

(By T.P. Kelu Nambiar, B.A.M.L.)

A Judge is considered to be God's middleman. The judicature is the place where justice is, just as the bank is the only sure place where the money is. Therefore, we should have vetted Judges, judges possessing unitive consciousness, like seeing the thread in a cloth, clay in the pot, or water in the waves. Let me be painfully blunt. A candidate for appointment to the post of a Judge should be scanned from occiput to Achilles' heel. His entire life upto the moment of consideration of him for the post, should be carefully examined and studied. Mark, it is not enough that one should be great; but should be good too. There are Judges who represent a picture of a sense of superiority. Lawyers are made to take home insults by the court. A court is not an alms-house; nor a lawyer an alms-man. There is a pathetic dull in decision-making. Think of music without melody; learning without humility; speech without truth; knowledge without wisdom. In those situations, arrogance would become a creed, egoistic boast fashionable; sense of self respect will decline. A Judge enjoys an overwhelming conventional superiority over the lawyers. Therefore the necessity for choosing the right persons to the scat, remembering that Judges symbolise the institutional dignity of the Judiciary. Therefore. put an end to the constituency-wise selection of Judges.

When we speak of Higher Judiciary, meaning the High Courts and the Supreme Court, and consider the questions and aspects relating to the qualifications, mode and manner of appointment of Judges of the High Courts and the Supreme Court, we should not forget the fact that Judges of the Subordinate Courts are also constitutional appointees, meaning that the appointments of District Judges and of persons other than District Judges to the Judicial Service of the State are provided for in the Constitution itself - See Arts.233 to 237 of the Constitution. Moreover, under Art.217 of the Constitution, dealing with appointment and conditions of the office of a Judge of a High Court, a person who had held a judicial office in the territory of India for at least ten years, is also qualified for appointment as a Judge of the High Court. This has reference to judicial officers of the Subordinate Judiciary. Likewise, under Art.124 of the Constitution of India, a Judge of a High Court is qualified for appointment as a Judge of the Supreme Court. Therefore while considering questions relating to qualifications, manner and method of appointments to the High Courts and the Supreme Court, we should start from the grass-root level.

I am not going beyond the obvious when I venture the view that the entire judicial system needs overhauling from the grass-root level; and let me declare in general terms that the whole judicial system calls for a complete overhaul in this cyberspace era. Abolish caste-based or colour based selection of Judges. The Constitution of India does not prescribe the hue or the sex of a person to be selected as a Judge.

The judiciary is not intended for the Judges alone. Nor is it intended for the lawyers alone; or for the Judges and lawyers together only. The judiciary functions for the people of India, not for the litigants alone. As Justice Krishna Iyer has said: "The judiciary derives its power under the Constitution, not over it". The justicing system is too serious a business; and it is better not to leave it to the Judges and lawyers alone. Justice Pandian, in his Lordship's judgment in the Supreme Court Advocates-on-Record Association case ((1993) 4 SCC 441) posed questions only on Solomon's sovereignty; not on accountability. I say, the Indian Solomon is accountable to the people of India.

I should think, the qualifications for appointment of Judges of the High Courts and the Supreme Court need drastic changes; the procedure for appointment, as contained in Arts.124 and 217 of the Constitution of India, needs change; a well constituted Judicial Commission is needed; there should be transparency in the matter of consideration of candidates for appointment;-and the present procedure for removal of Judges needs change.

I am of the firm view that a person, on recruitment as a Judge of the High Court, should be subjected to training for a good period, of about six months at least. It is trite that one who declares that he knows everything, knows nothing; and only the one who says he knows nothing, knows something. Training on behavioural aspects should be especially imparted to him. He has to undergo, so-to-say, a drip system on the aspect of behaviour, so that the instructions will touch the root. That is necessary for maintaining the dignity of the institution. In a court of law; restraint should not be at a discount. Lessons in correct judicial prose should also be taught. The implicit message in short is, let us have judges, who know their lexicon.

I should also think that a minimum age for recruitment as a High Court Judge should be fixed. The age limit could be between 58 and 70. So that after retirement a Judge need not go in search of other assignments or legal practice. That would enable him to call himself Mr. Justice so-and-so even after retirement. Here I would like to pose the question as to whether an Indian Judge of a High Court or the Supreme Court could be called Mr. Justice so-and-so after retirement, as is the case in England. The Bar Council is to consider this aspect of the matter; especially, the Bar Council of India has to consider this aspect of the matter, because several retired Judges practicing in the Supreme Court as lawyers, are called Mr. Justice so-and-so Advocate. No Judge of the High Court or Court of Appeal in England practices law or takes up any other assignment after retirement. In fact, there even a retired Judge, continues to be a Judge. That is why they are called Mr. Justice so-and-so, even after retirement.

The bar being the feeder of the Judiciary, also needs upgradation, especially when solo law practice is the order of the day; and nobody works as a junior under a senior for the tariff period. If this be the state of affairs, we should be prepared to face a judicial earthquake.

Everybody concerned with the judicial system should endeavour to uphold justice; justice never dies; and that is why the Lord of Death is called the Lord of Justice also.

Judiciary has Shown the Way to Labour Reforms

Contract Labour system must be regularised

(By Advocate H.L. Kumar)

The Judgment relating to prospective engagement of contract labour by PSUs is shot in the arms for the Union Government which is intent on the labour market reforms but has not been able to take legislative measures.

The recent judgment of the Constitution Bench of the Supreme Court has come as a whiff of fresh air at a time when liberalisation has become a buzzword. There is a core question with regard to amendment of labour laws, whether it will be conducive for the survival of the industry and generating employment or not. Unfortunately the issue has been obfuscated with shibboleths'of vested interests and it is still on the hold.

Labour laws which allow easy 'hire and fire' may ex facie seem to be anti-labour. But on a careful analysis it would reveal that chey are, otherwise highly pro-labour more so in a developing country like India with mass availability of labour. When the employer would be able to increase or reduce the size of workforce depending upon the requirement, it would create more jobs in direction to utilize India's inherent advantage - abundance of labour which comes cheaper than in more developed economics.

It is a hard fact that after the Air India judgment of Supreme Court may Public Sector Undertakings got enmeshed and emaciated resulting into their unnatural death but the judgment will provide much needed oxygen for their survival as they will be free to employ workers through contractors for menial jobs like sweeping, dusting and watching etc.

The Public Sector Undertakings were severely hit by this judgment and their efforts for survival and restructuring were stifled in rationalising the high level labour costs under aggressive competitive environments which necessitated to control the cost. Thousands of contract workers became entitled for their absorption as regular employees. Even the sweepers working through the contractors in the parking areas of the airports were also held entitled to be absorbed. The Air India has absorbed over 2000 contract workers over the past five years whereas Airports Authority of India has been facing absorption of over 4000 contract workers. Also, for absorbing over 11000 contract labour, the extra burden on SAIL before wage revision was close to Rs.80 crores. Many over Public Sector Undertakings including Indian Oil Corporation, FCI and BHEL have been facing this problem of absorption of contract labour. The other blow came upon such undertakings in the case of Steel Authority of India Ltd. and Ors. etc., v. State of West Bengal and Ors. decided on 3rd July, 1998 by Division Bench of Calcutta High Court comprising of Chief Justice P.S. Mishra and Justice Barm Ghosh in directing absorption of around 350 contract labour in SAIL's Paharpur stockyard.

                       MONETARY BENEFITS TO PSU'S

                                             Contract labour     Annual cost of regularisation

                                                                              (Rs. crore)

                           FCI                130,000                                           303

                           IOC                7,571                                               137

                           SAIL              11,144                                             98

                           BHEL            7,500                                               75

                           ONGC           6,769                                               137

                           NTPC            7,923                                               35

                           HPCL            1,812                                               32

                           Total              172,719                                           817

                     Source :      Public Sector Units                   

Being aggrieved, the Steel Authority of India (SAIL) filed SLP in the Supreme Court, FCI too had followed SAIL after a similar direction by Bombay High Court for workers retention of 1.3 lakh contract labour. The ONGC, IFFC also followed the same. These SLP's were decided on 30th August, 2001 in Steel Authority of India Ltd. and Ors. etc. etc. v. National Union Water Front Workers and Ors. etc. etc., 2001 LLR961 (SC) by the Constitution Bench of the Supreme Court by reversing its own judgment in quashing the 1976 notification issued by the Central Government where it had also ruled on automatic absorption of contract labourers. Be it made clear that this judgment would be applicable in future and the contract labour already absorbed by Public Sector Undertakings would not be affected.

Although the Public Sector Undertakings will have no obligation to absorb contract labourers engaged for menial jobs, the Supreme Court has made it clear that the benefit will not be available to PSUs which make sham agreements with labour contractors. When there is a dispute over the status of the contract labourer, the Industrial Tribunal must check whether the agreement between the PSU and the contractor is a genuine one and not a "mere ruse/camouflage to evade compliance of various beneficent legislations so as to deprive the workers of the benefits."

"If the contract is found to be not genuine but a mere camouflage, the so-called contract labourer will have to be treated as an employee of the principal employer (PSU) who shall be directed to regularise the services of the contract labourer in the concerned establishment subject to conditions."

In the 130 - page judgments, the Apex court said that the notification did not satisfy the conditions laid down in the Contract Labour (Regulation & Abolition) Act.

Apart from sham contracts, there is another circumstance in which the contract labourers becomes direct employees of the PSU. This is when the contract labourer is employed in discharging the statutory duties of the PSU. One such example is running of canteens in their establishments. The Constitution Bench upheld the judgments which had ruled that contract labourers working in statutory canteens should be treated as workers of the PSUs.

Another important aspect decided by the present judgment is the identification of the "appropriate government" to deal with contract labour as PSUs are owned by the Central or State Governments and their establishments are spread over several states. The Court ruled that the appropriate government for the central undertakings would be those covered under S. 2(a) of the Industrial Disputes Act, 1947.

The judgment of the Apex Court is timely at this juncture because of rapid globalization and aggressive international competition as such the labour market flexibility is an integral part of competitiveness. That is the context in which contract workers have assumed importance.

The need for employment of contract labour is undisputed. The employment of contract labour is necessary for the following among other reasons:

(i) The employment of contract labour would relieve the principal employer of the need for direct supervision and control over the employees.

(ii) The contract labour will ensure speedy completion of the assigned work and according to the specifications.

(iii) The employment of contract labour would relieve the principal employer from the burden of looking after the non-essential things and concentrate only on his main activity/activities of manufacturing goods and/or rendering materials service.

(iv) The employment of contract labour would be comparatively cheaper labour, with lesser liability for supervision and control.

(v) There will be lesser industrial relations problems in respect of such contract labour.

(vi) The employment of contract labour is very common for the following jobs:

(a) construction, addition/modification to the structures of the factory or an establishment

(b) breakdown of machinery.

(c) Requiring periodical maintenance of machinery and equipment like the service contracts for maintenance of air conditioners, electrical gadgets and computers etc.

(vii) Other jobs which need to be carried out at regular intervals, like pesticide contract, jobs which can be done on weekly holidays/other holidays of the factory by the contract labour.

(viii) Project works requiring construction, erection work etc.

For the above reasons the principal employers are engaging contract labour on the premises of an undertaking for civil works, transport of the employees, watch and ward, gardening, house-keeping, maintenance of machines, electrical equipments etc.

All over the world, employment is recognised as a contract between employer and employee. Both the parties are supposed to honour it. That was the reason that even the Fifth Pay Commission headed by Justice Pandian has suggested that workers for certain jobs in the Government of India also should be engaged through contract system and that will unburden the Government to a great extent. However, some cases decided by the Supreme Court have sealed the fate of liberal interpretation of the law regarding contract labour.

Mr. Yashwant Sinha in his budget speech has proposed abolition of employment security by amending the Contract Labour (Regulation & Abolition) Act providing for outsourcing of certain activities so that the employers would be able to meet the fluctuations in demand of their products but such other amendment were vigorously opposed by the trade unions. The Union Government can succeed in the direction only if there is political consensus of the political parties. It is indeed a difficult task but most of the trade unions are adjunct of political parties. By this judgment the Supreme Court has stepped in setting the trend towards the directions of proposed amendment.

However, there has been no effective progress, perhaps such an amendment will have to be okayed by both the houses of Parliament. The ruling NDA coalition does not have the majority in Rajya Sabha and this is most likely to be cause of hindrance. Apart from this, labour is a subject of on the concurrent list of the Constitution of India. The Union Government will also have to consult the State Governments to secure their concurrence for the proposed amendment. The reference to Parliaments Standing Committee may also be imparative.

Unfortunately the authorities under the Contract Labour (Regulation & Abolition) Act are more occupied with the activities related to the abolition of the contract labour much less to its regulation. In many cases, it has been detrimental to the worker's interest. In fact, the Act may be named as Contract Labour Regulation Act and S. 10 of the Act providing for prohibition of employment of contract labour should be altogether deleted. The Government is also not insensitive. Even the Reserve Bank has called for measures to reform the labour legislation and now the judiciary has shown the way to labour reforms.

In these days of globalisation, for success the key word is competition. However, India is still carrying on the baggage of archaic labour laws which are impending productivity. The outdated labour laws have been adversely affecting the process of modernisation and competitive capability of the industry. The rigidities in labour legislation are biggest obstacles in successful implementation of structural adjustment programmes. An over staffed organisation, howsoever progressive it may be, will ultimately become sick and as a result the workers will be worst sufferer. More Industries would close if the Government does not take timely steps to amend labour laws providing flexibility in the labour market. By this judgments, the Supreme Court has stepped in setting the trend towards the direction of proposed amendments and reforms in labour laws.

The Law Relating to Contempt of Courts

(By K. Chandrasekharan, Sr. Advocate, Ernakulam)

Contempt of Courts is a difficult question and is a touchy question so far as Judges and other judicial officers are concerned. There is another field, difficult and touching and that relates to the executive and covers the field of official secrets. With imparting information and maintaining transparency in matters of Government the place for the Official Secrets Act gets limited to some aspects of defence and external affairs mostly. That is the reason why the freedom of information bill pending before Parliament has become necessary. Several provisions of the Official Secrets Act, 1923 will get obsolete once the bill is enacted into law, as there are alternative or new provisions of the Official Secrets Act, 1923, to that extent 1923 will not be law. The Official Secrets Act is not repealed as such, but large portions of it are replaced by the new enactment.

The field of Contempt of Court is however more difficult to tackle. The three wings of the Indian Constitution are the Executive, the Parliamentary and the Judicial Wings, Contempt of the Legislature or Parliament are to be dealt in accordance with rules framed by them. Contempt of the Executive can be punished by the ordinary law of defamation covered by Ss.499 to 502 of the Indian Penal Code, 1860. Contempt of Courts (of the Judiciary, the Judges, the Sub Judges, Munsiffs and Magistrates) were dealt with in periods past by the provisions of the Civil Procedure Code, the Criminal Procedure Code, the Indian Penal Code and under the inherent powers of Courts. There has been changes after the country became free. Art.129 with reference to the Supreme Court and Art.215 of the Constitution relating to High Courts, treat the two Courts as Court of record having all powers of such a Court including the power to punish contempt of itself. Parliament has since enacted the Contempt of Courts Act, 1971, Central Act 70 of 1971 and this covers both civil contempt and criminal contempt and also covers all Courts including the High Courts. It is also necessary to mention here that Art. 19(l)(a) of the Constitution which refers to all citizens having the right to freedom of speech and expression do not include Contempt of Courts in view of the various laws and Constitutional provisions sighted earlier. The Supreme Court has also held more than once that the prestige or authority of the Court cannot be lowered even in the garb of criticising a Judgment.

Inspite of the definition of Contempt of Court in the 1971 enactment and inspite of the fairly reserved manner in which the Supreme Court, the High Courts and other courts in the country have acted in the matter of contempt proceedings coming for an enquiry and decision, the subject of contempt remains a dicey question. The subject also has a large coverage on who can pursue contempt proceedings, what can be the subject matter, and what is the decision to be in particular cases. An element of controversy is inherent in all the above. One that came before the Delhi High Court recently is against the editor of a Magazine, 'Wah India'. The magazine published in its issue of April 16-30, 2001 a ranking given by fifty senior advocates about Delhi High Court Judges - their manners in Court, general reputation on personal integrity, quality of Judgment, knowledge of law, punctuality, receptiveness in the arguments addressed. With the Court ordering confiscation of copies of the particular issue of the magazine, reproduction of the contents is not possible. However, many had already read it, some others taken notes and some taken copies also. The credibility of the judiciary as such was not questioned and cannot be considered also. But there are certain side issues that arise. The petition against the magazine and its editor was filed in the High Court by the Bar Council of Delhi. The editor in chief of the journal rendered an apology to Court when the hearing started. The question arises as to how the Bar Council is aggrieved? Apart from the court Suo Moto taking up proceedings, any person or any public man for that matter can pursue the matter since the subject undoubtedly is one in the public interest. If the Bar Council as such is not a person particularly outraged or aggrieved, the Bar Council will be only in the nature of any person who in the public interest has acted. The Editor-in-chief of the Magazine tendered apology and the proceedings were terminated. Is the apology tendered in a genuine and bona fide manner? Do the apologies tendered in contempt cases flow from the heart or they are prompted by the need to escape from the consequences of conviction namely fine or imprisonment. There are suggestions that the provisions for tendering apology contained in S. 2(c)(i) of the 1971 Act should be deleted. Probably that cannot be because fine or imprisonment will then become mandatory.

There is another aspect in regard to Contempt of Court and that is the contempt of the Constitution or negation of the Constitution that is committed by the Executive, say taking away life under Art.21 of the Constitution. Can a mere Presidential proclamation of Emergency as in 1975 clear that way for acceptance by Court! Attorney General Niren De told the Supreme Court that Courts are helpless if life was taken away illegally, I would add, even as against the specific provision contained in Art.21. I believe that the statement by itself is a Contempt of Court. How can an executive act of the President negate an Article of the Constitution. Such situations cannot be repeated and some method has to be found out to fill up the loop holes in the law of Contempt. Blatantly submitting that a provision of the Constitution would become unimplementable, before court, whose duty is to implement the Article should be treated as Contempt of Court. Either 1971 Act should be amended or the Constitution amended and specific provisions included. There is no question of any interpretation of an Article of the Constitution, when a provision containing a basic feature of the Constitution is before Court. The Keshavananda Bharathi case has held that basic features cannot be taken away or nullified. Here an executive act like a Presidential proclamation has taken away the rights and jurisdiction of Courts is the plea. The plea itself is in Contempt of Court. The canvas of contempt should be available wherever the law is in danger on account of contempt, and thus it would include every authority and every person including Government dealing with law and the constitution.

Tax And Fee - The Distinction

(By Markose Thomas, Advocate, High Court of Kerala)

-----That the power to tax involves the power to destroy-----

Marshall John, in M'Culloch v. Maryland 17 US (4 Wheat) 316,431 (1810).

There is no generic difference between a tax and fee; both are compulsory extraction of money by public authorities. But whatever minute difference there is, it needs to be analysed in detail because the distinction is mainly ascertainable by analysing the various decisions of Supreme Court with regard to the principle of quid pro quo in relation to fee. It is also important to analyse the distinction as our Constitution itself provides for a distinction between the two.

The etymology of the two words is useful in understanding the distinction.

Fee

Fee is a word bequeathed to Modern English by the feudal system (and indeed it is closely related etymologically to feudal). It came via Anglo-Norman fee from Medieval Latin feodum or feodum Source also to feudal.

Tax

Tax originally denoted "assess an amount to be levied" the notion of "imposing such a levy" is a secondary development. The word comes via old French taxer from Latin taxare. From taxare was derived by the medieval Latin noun taxa 'tax, piece of work imposed' which passed into English through Anglo-Norman tasque as task.

The Distinction

There are a fairly large number of decisions of the Supreme Court dealing with the distinction between a tax and a fee and they indicate the essential characteristics of a fee1One of the most important decision in which there is a detailed and illuminating discussion on the above aspects is AIR 1954 SC 282. Mukherje, J. delivering the judgment of a Constitutional Bench of seven Judges of the Supreme Court stated that a neat definition of what tax means has been given by Latham C.J. of the High Court of Australia in Mathew 's v. Chicory Marketing Board, 60 CLR 263 and quoted the following passage from that decision-passage from that decision-

"A tax is a compulsory exaction of money by public authority for public purpose enforceable by law and is not a payment for services rendered".

The learned Judge then elaborated the matter as follows:-

"It is said that the essence of taxation is compulsion that is to say, it is imposed under statutory power without the tax payer's consent and the payment is enforced by law." Vide Lower Mainland Dairy v. Crystal Dairy Ltd., 1993 AC 168.

The characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. As the object of a tax is not to confer any special benefit upon any particular individual there is, as it is said, no element of 'quidpro quo' between the tax payer and public authority. Another feature of taxation is that as it is a part of the common burden, the quantum of imposition upon the taxpayer depends generally upon his capacity to pay.2

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 supported to be based on the expenses incurred by the Government 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 recipients to pay. A fee is paid for performing a function. A fee is not ordinarily considered to be a tax. If the fee is merely to compensate an authority for service rendered, it can hardly be called a tax.3

The Constitutional Perspective

Under the Indian Constitution, the Government's power to levy a tax is not identical with that of its power to levy a fee. While the powers to levy taxes is conferred on the State legislatures by the various entries in List II, in it there is Entry 66 relating to fees, empowering the State Government to levy fees in respect of any of the matters in this list, but not including fees taken in any Court. The result is that each Stale Legislature has the power, to levy fees, which is coextensive with its powers to legislate with respect to substantive matters and it may-levy a fee with reference to the services that would be rendered by the State under such law.

Clause (2) of Art.110 and Clause (2) of Art.199 of the Constitution, the former occurring in the Chapter of Parliament and the latter in relation to the State Legislature, are in identical terms as follows:

A bill shall not be deemed to be a Money Bill by reason only that it provides for the demand or payment of fees for licenses or fees for services rendered.....

The Constitution, therefore, clearly draws a distinction between the imposition of a tax by a Money Bill and the impost of fees by any other kind of Bill. So also in the Seventh Schedule both in List I and List II a distinction has been maintained in relation to the entries of tax and fees. In the Union List entries 82 to 92 A relate to taxes and duties and entry 96 carves out the legislative field for fees in respect of any of the matters in the said list except the fees taken in any Court. Similarly in the State List entries relating to taxes are entries 46 to 63 and entry 66 provides for fees in respect of any of the matters in the said list except the fees taken in any Court. Our Constitution, therefore, recognises a different and distinct connotation between tax and fee.

The Case Law

It is necessary to review some of the decisions of the Supreme Court to pin point the precise difference as far as practicable in order to resolve the distinction between a tax and fee.

The leading case of Supreme Court, which has been referred and followed in many subsequent decisions, is the case of Commissioner, Hindu Religious Endowments, Madras v. Sri. Lakshmindra Thirtha Swamiar of Shirur Mutt4. The point decided therein was that the provision relating to the payment of annual contribution contained in S.76(1) of the Madras Hindu Religious and Charitable Endowments Act, 1951 is a tax and not a fee and so it was beyond the legislative competence of the Madras State Legislature to enact such a provision.

There were some very useful and leading principles from the decision of the Supreme Court in5 pointing out the difference between tax and fee. At page 1042 says Mukherjee, J.

"The distinction between a lax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for a special benefit or privilege....public interest seems to be at the basis of all impositions, but in a fee it is some special benefit which the individual receives".

In the case of Hingir Rampur Coal Co. Ltd. v. State of Orissa6 the challenge was to the cess levied by the Orissa Mining Areas Development Fund Act, 1952. The petitioners stand was that the cess levied was not a fee but a duty of excise on coal and hence beyond the competence of the State Legislature. The cess imposed was upheld as a fee. Gajendragadkar, J. delivered the judgment on behalf of the majority and discussed the point at some length. At page 545 Says the learned Judge: "a fee is levied essentially for 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".

The Supreme Court in Nagar Muhapalika, Varanasi v. Durga Das Bhattachary7 held that the annual licence fee charged from the rickshaw owners and the driver of the Varanasi Municipal Board could be justified only on the basis of the element of quid pro quo. The fee was held to be ultra vires and illegal because after excluding certain items of expenditure the balance did not constitute sufficient quid pro quo for the amount of the licence fee charged.

In the case of Secretary, Government of Madras, Home Department v. Zenith Lamp & Electrical Ltd. 8the character of Court fees came up for consideration as to whether they are taxes or fees or whether they are sui generis. Although after referring to the various entries of the seventh schedule in the different lists it was noticed that court fees were not taxes and they were covered by separate entries of fees exclusively meant for courts, yet the broad principles of the requirement of quid pro quo were made applicable in the case of court fees also. Even so, Sikri, CJ. speaking for the court pointed out at page 982 (SCC p. 170 para 31).

"But even if the meaning is the same, what is 'fees' in a particular case depends on the subject matter in relation to which fees are imposed. The learned Chief Justice further observed at the same page: "In other words it cannot tax litigation, and make litigates pay, say for road building or education or other beneficial schemes that a Stale may have. They must be a broad correlationship with the fees collected and the cost of administration of civil justice".

Observations of Chandrachud, J. speaking for the Court in the case of Government ofA.P. v. Hindustan Machine Tools Ltd. 9at page 401 are quite apposite and may be usefully quoted here (SCC p. 282, para 22).

"One cannot take into account the sum total of the activities of a public body like a Gram Panchayat to seek justification for the fees imposed by it. The expenses incurred by a Gram Panchayat or a Municipality in discharging its obligatory functions are usually met by the imposition of a variety of taxes. For justifying the imposition of fees the public authority has to show what services are rendered or intended to be rendered individually to the particular persons on whom the fee is imposed. The Gram Panchayat here has not even prepared an estimate of what the intended services would cost it".

In Municipal Council Madurai v. R. Narayanan10 endeavour was made as in the case of Nagar Mahapalika, Varanasi11 to justify the impost by the Municipal Council as a tax. Krishna Iyer. J. speaking for the Court repelled that argument and since the impost could not be justified as fee the resolution of die Municipal Council was held to be invalid.

In Kewal Krishnan Puri case12 Untwalia, J. made the following observation.

1...it must be shown with some amount of certainty, reasonableness or preponderance of probability that quite a substantial portion of the amount of fee realised is spent for the special benefit of its prayers. (SCC p. 425)

2...a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the persons who pays the fee and the public authority which, imposes it. (SCC p. 426)

3…it (service) means service in relation to the transaction, property or the institution in respect of which he is made to pay the fee (SCC p.427).

But in Sreenivas General Traders & Ors. v. Slate of A.P.13the Supreme Court pointed out that the decision in Kewal Krishan Puri14 case does not lay down any legal principle of general applicability. The observation made therein seeking to quantify the extent of correlation between the amount of fee collected and the cost of rendering of services, namely, "At least a good and substantial portion of the amount collected on account of fees, may be in the neighbourhood of two third or three-fourths, must be shown with reasonable certainty as being spent for rendering services in the market to the payer of fee", appears to be an obiter. It was not intended to lay down a rule of universal application but it was a decision, which must be confined to the special facts of the case.

In M/s. Kishan Lai Lakasmi Chand v. State of Haryana15the Supreme Court restated the distinction between tax and fee and pointed out that quid pro quo is an essential element of fee. But in the case of P. Kanadasa v. State of Tamil Nadu 16B.P. Jeevan Reddy, J. speaking for the Court differentiated between tax and fee and pointed out that the element of quid pro quo need not be established in each and every case and in case of regulatory fee the element of quid pro quo is totally irrelevant.

Conclusion

The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is a payment for a specific benefit or privilege. If the element of revenue for general purpose of the State predominates, the levy becomes a tax. In regard to fee, there is, and must always be, correlation between the fee collected and the service intended to be rendered. In determining whether a levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area of class; it may be of no consequence that the State may ultimately and indirectly be benefited by it.

A levy in the nature of fee does not cease to be of that character merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have direct relation to the actual service rendered by the authority to each individual who obtains the benefit of the service. Merely because the collections for the services rendered or grant of a privilege or licence are taken to the consolidated fund of the State and not separately appropriated towards the expenditure for rendering the service is not by itself decisive.

If the object of the fee is to provide general revenue to the authority rather than to compensate it and the amount of fee has no relation to the value of the service, the fee will amount to a tax. Where it appears that under the guise of levying a fee the authority is attempting to impose a tax, the court has to scrutinise the claim to find out whether there is a real co-relationship between the service and the levy whether it is so co-extensive as to be a pretence of a fee but in reality a tax and whether a substantial portion of the fee collected is spent in rendering services.

The power of any legislature to levy a fee is conditioned by the fact that there must be 'by and large' a quid pro quo for the services rendered. Thus the element of quid pro quo in the strict sense is not always a sine qua non for a fee. However, correlationship between the levy and the services rendered or expected 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.

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1. (a) Commissioner, H.R.E. v. LT, Swamiar AIR 1954 SC 282. (b). Ratilal v. State of Bombay, AIR 1954 SC 388. (c). Jaganath V. State of Orissa, AIR 1954 SC 400. (d). Hingir-Rampur Coal Co. v. State of Orissa, AIR 1961 SC 459. (e). S.T. Swamiar v. Commr. H.R. and C.E. AIR 1963 SCC 966. (f) Corpn. of Calcutta v. Liberty of Cinema. AIR 1965 SC 1107. (g). Nagar Mahapalika v. Durga Das AIR 1968 SC 1119. (h). Lakhan Lai v. State of Bihar AIR 1968 SC 1408. (i). Commissioner H.R. & C.E. v. U. Krishna Rao, AIR 1970 SC 1114. (j). D.C. & G. Mills v. Chief Commr. Delhi, AIR 1971 SC 344 and (k). Indian Mica & Micarite Industries Ltd. v. State of Bihar, AIR 1971 SC 1182.

2. (a) Keural Krishna Pari v. state of Punjab, (1980) 1 SCC 416; (1973) 3 SCR 1217; (b) Sreenavas General Traders v. State of A.P. (1983) 4 SCC 353; (c) Subash Chander Kamalesh Kumar v. State of Punjab, AIR 1990 P & H 259.

3(a) Ram Chander v. State of U.P. 1980 Supp. SCC 27; (1980) 3 SCR 104; (b) Southern Pharmaceutical and Chemicals, Trichur v. Stale of Kerala (1981) 3 SCC 391; 1981 SCC (Tax) 320; (1982) 1 SCR 519, (c) Municipal Corporation of Delhi v. Mohd. Yasin (1983) 3 SCC 229; 1983 SCC (Tax) I54;(d) Ram Chander Kumar Co. v. State of UP. (1980) 2 SCR 104; 1980 Supp. SCC 27.

4. AIR 1954 SC 282; 1954 SCR 1005; 1954 SCJ 335.

5. Ibid.

6. (1961) 2 SCR 53; AIR 1961 SC 459.

7. (1968) 3 SCR 374; AIR 1968 SC 1119; (1968) 2 SCJ 836.

8. (1973) 2 SCR 973; (1973) 1. SCC 162; 1973 SCC (Tax) 203.

9. 1975 Supp. SCR 374: (1975) 2 SCC 274.

10. (1976) 1 SCR 333; (1975) 2 SCC 497; 1975 SCC (Tax) 386.

11. Supra 7.

12. (I979) 3 SCR myr (1980) 2 SCC 416, AIR 1980 SC 1008.

13. (1983) 3 SCC 354

14. Supra 12.

15. 1998 Supp (4) 46l

16. 1996 (7) JT 17.