Tax and Fee – The Imbroglio
By S. Nikhil Sankar, Advocate, Kochi
28/02/2011
Tax and Fee – The Imbroglio ?
(By S. Nikhil Sankar, Advocate, Kochi)
Abstract
(The author through this article ponders over and deliberates upon clear and appropriate distinctive analysis of ‘Tax’ vis-a-vis ‘Fee’).
(A). Prologue
“In this world nothing can be said to be certain, except death and taxes” (Benjamin Franklin, See Simon James & Chantal Stebbings “A Dictionary of Legal Quotations.” Universal Law Publishing Co. Pvt. Ltd., Delhi (Fifth Indian reprint) 2004 at P165.)
“All thieves who could my fees afford
Relied on my orations
And many a burglar I’ve restored
To his friends and relations” (Sir W.S.Gilbert See ibid at P.491.)
The history of collection of Tax can be traced back to millions of years, more leculently to the items when human civilization sprouted its roots and edified towards the establishment of a Governmental/Authoritarian regimes. As years passed by so does the Dynamic weather with the off shot in living conditions and status of the citizens, it became a ponderous task on the regnant regime to interpolate more fiscal measures suffice to the perennial developments in its day to day affairs.
The terms Tax and Fee are engrossed with fiscal power of the State and decorously constitute a indispensable touchstone in augmenting to the revenue of State vis-a-vis. Exchequer of the Government to be adroitly utilized in the day to day administrative affairs, policy decisions and measures undertaken for the welfare of its citizens.
Though Tax and Fee belong to same order and delineate their lineage propensitively to a general platform, yet they are distinctive in one way or the other.
(B). Intermediate
It would be now apposite to bestow our attention to some of the definitive clauses that would up to some extent conspicuously serve as a catalyst to expound the same.
The well renowned and well acclaimed American Jurisprudential Encyclopedia i.e. Corpus Juris Secondum would palpably place tax to be “ a rate or sum of money assessed on the person or a property of a citizen by government for use of nation or State (See Corpus Juris Secondum: A complete restatement of the entire American law as developed by All reported cases by Francis J.Ludes and Harold J.Gilbert St.Paulminn, West Publishing Co. New York Vol.84 P30, 1954.). In Contrariety, it would hold fees to be “the compensation for particular acts or services rendered in the line of official duties”.(See Corpus Juris Secondum: A complete restatement of the entire American law as developed by All reported cases by Francis J.Ludes and Harold J.Gilbert St.Paulminn, West Publishing Co. New York Vol.36A (P.248-250), 1961.)
To be suffice a more authoritative and exhaustive definition for former would be “an enforced contribution exacted pursuant to legislative authority for the purpose of raising revenue to be used for public or governmental purposes, and not as payment for a special privilege or service rendered”(See “Words and Phrases”, Table – Terror, St.Paul Minn West Publishing Co. Vol.41 1965 (Permanent edn.) (P.170).) and later would be “charge fixed by the law for the service of a public officer”(See “Words and Phrases”, Table – Terror, St.Paul Minn West Publishing Co. at Fabric – Femur, Vol.16 (P.535), 1959 (Permanent edn.).)
(C) Epilogue
The analysis so far done brings out certain Homogeneity with Tax and Fee
(I) Both are accumulated as money
(II) Both are accounted through statutory organs/authority of the State.
The contrariety betwixt both are broad and it would be pertinent to be poignantly observed as
(I) Absence of ‘quid pro quo’ doctrine in tax as regards fee.
(II) No specific service nor any special benefits are conferred on a tax Payer. In contrast fee contemplates for return of specific services, specific benefits on its payee.
(III) Payment of tax are a mandatory obligation cast upon the citizen, whereas payment of fee is rather obligatory.
(IV) Fee collected would compositively add up as revenue towards the specific purpose sought to be accomplished, per contra Tax doesn’t have any earmarked slot towards its utilization.
The Distinctive classification of Tax would be dual in nature, namely where payment is sought directly from Assessed by the competent authority would be termed as ‘Direct tax’ (Eg. Income Tax, Wealth Tax) and where payment is sought indirectly, to be more precise as a circumstance where there would be shifting of shoulders, as upon the burden pitched on the payer, would amount to ‘Indirect tax’ (Eg. Sales tax). Fees are also classified two fold cogmently observed as those which encompasses the ‘quid pro quo’ doctrine to compensate an authority for services granted termed as ‘Compensatory’, juxtaposed is ‘Regulatory” where ‘quid pro quo’ is neither applicable rather no services are contemplated in return.
Though it beholds hazyness as regards the texture of Tax and Fee, in reality and in operative sense both stand detached from each other. A deeper and broader delving is the requisite of the day to unearth the distinctiveness of both the revolving globules, which can amptly be undertaken through guidance of Judicial interpretations and authoritative opinions.
II. Constitutional Provisions
The Constitution of India 1950, has specifically dealt with, Articles namely 264 to 290 enshrined in Part XII, pertaining to matters Tax/Fee which inter alia provides the authority to impose, levy and utilize the proceeds as regards their concerned subject matter enunciated and envisaged through their concerned lists1 in Seventh Schedule, contemplated in their respective entries. The quantum/nature of tax/fees that may be imposed and levied may vary subjectively and duly.
III. Judicial Ratiocination
The essence and true object of a legislative enactment is an arduous task of great concern and devotion is to discern the intent of the Law makers in enacting the Rule. As is permissible and well understood fact, Law cannot remain static and inactive to the changing circumstances but rather Dynamic and Progressive with the change of time and circumstances.
The acumenic perception of the soul and life of legislation could be appropriatively under taken through the task of Interpretation. Judiciary one of the three sanctified pillars in a democratic system has been bestowed with the sagacious responsibility of interpreting the Laws/Rules enacted by the Legislature vis-à-vis Executive, to be examined on the touchstone and basic principles shed out per se by the Constitution i.e. “Organic Law” of our country. In Jurisprudential Scenaria its an old adage that “Interpretation is to be derived from common sense(See Glanville Williams “Learning the Law”, Strevens and Sons, London (Eleventh edition) 1982 P.98.). Laws offending constitutional limitations can be invalidated by courts, but when they decry basic notions of justice and disregard constitutional morality a mobilized public opinion is essential to rectify the same (See N.A.Palkhivala “We the people” Strand Book Stall Bombay, (Second impression) 1984 P.177.).
The wisdom of the legislature is not questionable before any court of Law, only the competency and validity thereto can be impugned. It would be staggering to note that there were a time when tax laws were considered not amenable even to the price less fundamental rights(Ramjilal ITO Mohindargarh (1951) SCR 127.) guarantees in Part-III of our constitution. This could be termed as nothing but a birds eye view on the cardinal aspects of fundamental rights in tune to laws on Taxation(See H.M.Seervai “Consitutional Law of India”, N.M.Tripathi Pvt Ltd, Bombay, (Silver Jubilee Edition, Fourth edition) 1991 P.479.). But thanks to a vibrant and dynamic Judiciary, the erstwhile Nelson’s eye towards Tax and Fundamental rights was overturned subsequently. The Honourable Apex Court has set the clock straight by holding that tax laws are subjective to fundamental rights(Purushottam Govindji Halaiv B.M. Desai (1955) 2 SCR 887.) and this view has perpetuated such.
To discern as to the real criterion as regards Tax/Fee, the Judicial interpretation on the above could be used effectively as the apt tool to show the light to the right direction.
The Apex Court in Hindu Religious Endowments, Madras v. Sri.Lakshmindra Thritha Swamiar(AIR 1954 SC 282.) wherein the issue which sprout up for consideration was whether the services rendered therein under S.76(1) of the Madras Hindu Religious and Charitable Endowments Act 1951, (herein after referred to as ‘Act) amounted to tax or fee. The court went on to discuss the matter elaborately, speaking through Mukherjea J., it opined “The distinction between a tax 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, the former is coupled with public interest whereas latter confers some special benefit on the individual”(AIR 1954 SC at P.295 & 296.).
The court held that payment under S.76 (1) of the Act amounted to levy of tax which was beyond ultra vires the legislative competence and struck down it as unconstitutional.
A Constitutional Bench of the Supreme Court in Sri.Jaganath v. State of Orissa(AIR 1954 SC 400.), wherein challenge was raised against S.49 of the Orissa Hindu Religious Endowments Act 1939, that authorized collection to be levied from religious denominations, vitiated the competence of legislature with respect to Art. 27 of the Constitution of India. ‘Speaking through Mukherjea J, while upholding the impugned section opined that a tax is undoubtedly the compulsory extraction of money by public authority for public purposes without any special benefits thereon and they merge on to the general revenue of the State. Fees on the other hand are payments in public interest but there is special service/work done, moreover the amount thus collected constitute a specific fund and can only be utilized for the specific purpose.’(AIR 1954 SC 403.) This view was further reiterated by the Learned Judge in a subsequent case(Ratilal Panachand Gandhi & Orsv State of Bombay & Ors (AIR 1954 SC 388) at P.395.).
A six Judge Bench of the Supreme Court(Hingir Rampur Coal Co.Ltdv State of Orissa (AIR 1961 SC 459).) with Gajendragadker J. (as his Lordship then was) speaking for majority opined that the Cess levied under Orissa Mining Areas Development Fund Act 1952 to be “ a fee rather than excise duty, as there was a quid pro quo element between the person who pays the fee and public authority which imposed it”(AIR 1961 SC at P.467.).
In the case of Corporation of Calcutta v. Liberty Cinema((1965) 2 SCR 477.) the respondent was charged by the Calcutta Corporation a very high licence fee assessed according to the sanctioned seating capacity of cinema house. The same was quashed by the Hon’ble High Court. Before the Apex Court, it was contended by appellant that it amounted to tax within purview of proper delegation of legislative powers. The Majority speaking through Sarkar J. upheld it as a tax. The minority opinion by Ayyangar J., made a classic distinctive analysis pertaining in fee/tax by holding on to the necessary correlation between the fee charged and service rendered therein. The minority opinion though held the imposition to be a tax but struck its validity, as unconstitutional delegation of legislative powers.
A three Judge Bench of the Court in Nagarpalika, Varanasi v. Durga Das(AIR 1968 SC1119.) speaking through Ramaswami J. was pleased to rule that there must be sufficient ‘quid pro quo’ element on the annual licence fee collected by the Municipality from Rickshaw owners and drivers. The fee if thus collected after deduction of various other expenditures would not be suffice to satisfy the ‘quid pro quo’ as contemplated, would result in it to be turned down as illegal and ultra vires(AIR 1968 SC at P.1125.).
The Apex Court in The Indian Mica and Micanite Industries Ltd v. The State of Bihar & Ors. (AIR 1971 SC 1182.) speaking through Hegde J.opined as “For a levy to be upheld as a fee, it must be shown that the levy has reasonable correlationship with the services rendered by the Government. In other words, the levy must be proved to be a ‘quid pro quo’ for the services rendered. But in these matters it will be impossible to have an exact correlationship. The correlationship expected is one of a general character and not of arithmetic exactitude”(AIR 1971 SC at 1186.).
In Government of Madras v. Zenith Lamp and Electrical Ltd ((1973) 1 SCC 162.) the question which came up for consideration was whether Court fees were in the nature of a ‘fee’ or a ‘tax’. Though after perusing various lists in the Schedule VII, it was decided that ‘court fee’ was the in the nature of fee envisaged therein, Sikri.C.J, further cemented the stand holding that “Fees levied must have relation to the administration of Justice. They can be varied according to subject matter of dispute, various steps to be complied therein, the up keep of courts and officers administering civil Justice. However the legislature is incompetent to tax litigation to increase the general public revenue”((1973) 1 SCCat P.170).
A three Judge Bench of Apex Court speaking through Chandrachud J. (as his Lordship then was) in Government of A.P. v. Hindusthan Machine Tools Ltd. ((1975) 2 SCC 274.) opined that the house tax imposed was lawful, whereas the levy of permission fee is illegal as there was obscurity in the nature of services to be rendered for the fees collected ((1975) 2 SCC at P.282 & 283.).
In Municipal Council v R.Narayan (1975 (2) SCC 497.) a four Judge bench reiterated the view in Varanasi case(1975 (2) SCC at n. 21.).
The decision of the Apex Court in Kewalkrishnan v. State of Punjab (AIR 1980 SC 1008.) has ornated extensively on the aspect of Tax and Fee. The five Judge Bench speaking through N.L.Untwalia J. held as:-
(a) The point must be ascertained with a cogent amount of certainty, reasonableness, preponderance of probability, that the lumpsome part of fee thus collected is utilized for special benefits as envisaged.
(b) As fees are levied for special purposes, further it must be coupled with ‘quidpro quo’ between the payer and the imposer.
(c) Broadened the definition of ‘service’ so as to include within its ambit the elements (transaction, property or institution) assimilated towards the fee imposed. (AIR 1980 SC 1020 to 1022.)
The court in Sreenivasa General Traders and Ors v. State of A.P & Ors ((1984) 4 SCC 353.) has took a diagonally wider view ushering a sea change to the doctrine of ‘quid pro quo’ from its traditional view point. The reasoning adopted was “fee collected should be utilized for substantiating the primary and essential purpose by rendering the specific services to a specified area or class”. If the utilization is for a general purpose the levy would be termed as ‘Tax’. Moreover it was summed up as what would amount tax/fee should be done by critical analysis of the facts of each specific case.
A Seven Judge of the court in Synthetics and Chemicals Ltd v. State of UP ((1990) 1 SCC 109.) while dealing with the question as to whether levy on Industrial alcohol is justifiable, inter alia, held that when revenue earned out of the same is substantial it can’t be termed as a fee.
In Union of India v. Purna Municipal Council ((1992) 1 SCC 100.), the respondent’s demand for ‘service charges’ from the Petitioner (Indian Railways) were negatived by the court on the ground of inter play of constitutional as well as legal provisions. The stand was cemented by stating that there existed an interlinking connectivity between Article 285 (which exempts property of Union from Taxation) and S.135 of Railways Act, 1890.
However the Court in M/s.Kishan Lal Lakhmi Chand & Ors v State of Haryana (JT 1993 (4) SC 426.) though reiterating stand in Sreenivasa’s case elaborated the aspect by viewing both Tax/Fee as legally enforceable compulsive extraction of Money by public authorities. A levy in nature doesn’t cease to lose the character as fee though it may be collected compulsorily or coercively, not it can be assured of lieu of specific service contemplated therein.
In the case of P.Kannadasa v. State of Tamilnadu(1996 (7) JT 16.) the petitioner challenged the constitutionality of the Cess and other Taxes on Minerals (Validation) Act, 1992, a central enactment as ultra vires the constitution. The court speaking through B.P.Jeevan Reddy J. repelled their contentions, upholding the validity of statute, the learned Judge opined that “element of ‘quid pro quo’ cannot be considered as the epitome for distinction of tax/fee. In case of Regulatory fees the criteria of ‘quid pro quo’ is indecorous.” (1996 (7) JT at P.37)
The reasoning adopted in Purna Municipal Council case was further reiterated in Union of India v. Ranchi Municipal Corporation((1996) 7 SCC 542 at P.543.).
In State of U.P. v. Sitapur Packing Wood Supplier ((2002) 4 SCC 566.), the court while dealing with issue pertaining to transit fee opined that it was regulatory in nature and doctrine of ‘quid pro quo’ was not attracted.
The view in ‘Ranchi case’ was latter pursued in Municipal Corporation. Amritsar v. Senior Supdt. of Post Offices.( (2004) 3 SCC 92.).
The Court in Sona Chandioal Committee v. State of Maharashtra((2005) 2 SCC 345) was confronted with the question as to whether levy of inspection fee for levy of money lender’s licence was valid or not. The Lordships held that fee being regulatory in nature, service to be rendered is not a condition precedent, coupled with existence of reasonable relationship between levy of fees and services rendered in the context.
The Apex Court in Calcutta Municipal Corporation v. Shrey Mercantile (P) Ltd, ((2005) 4 SCC 245) wherein the impugned legislation Calcutta Municipal Corporation (Taxation) Regulations 1989 which authorized collection of ‘fees’ (known as ‘mutation fees’) for changing ownership of land on an ‘ad valorem’ basis amounted to ‘tax’ or ‘fee’. The court speaking through S.H. Kapadia J. (as his Lordship then was) held that levy was in the nature of garbing of ‘tax’ in the guise of a ‘fee’ and no substantial service was rendered in return. The court accordingly held the provisions to be invalid and unconstitutional.
In Vijayalakshmi Rice Mill v. C.T.O.((2006) 6 SCC 763) the court adopted herein distinctive analysis existing between the Tax, cess and fees. It was observed that the traditional doctrine of ‘fees’ envisaged has undergone a sea change, giving it a wider amplitude that there is requisite of only a broader and general correlationship between totality of fee imposed and the totality of the expenses rendered therein.
Lastly the Court in Union of India & Ors. v. State of Uttar Pradesh & Ors.(2007) 11 SCC 324), the court speaking through A.K.Mathur.J took a deviant view from its earlier decisions and held that ‘service charges’ are leviable from the Union vis-a-vis the tax exempted therein under Article 285.
IV . The Golden Eye
The quality in regard to quantity of effort undertaken in possession of things of imperative value by the Heterogeneous class, capitulated to its duration of usufructous enjoyment could be the appropriate criterion in imposition/levy of tax /fee. In an organizational set-up, the tax/fee must be imposed based on four relevant criteria.
(a) Productivity and efficiency of the organization.
(b) The distribution of wealth/rewards
(c) The enrichment achieved to the society
(d) The effective co-ordination between the persons who controls the authoritarian regimevis-à-vis on whom the authority reforms are imposed.
The tantamountal equipoise of power (Justice H.G.Balakrishna “New Dimensions of Law and Justice “ Snow White Publications, Delhi, First edn 1992 (p.210 & 211).), should be imperatively assured and ascertained, investments though to be encouraged, should be vigilantly monitored, and secured not to be counterproductive to interests of State encompassing its people. The perspicaciousness should be assiduously towards the principles of proportionate equality and the basis of apportionment of liability (Morris Ginsberg “on Justice in Society” Penguin Books, England, 1965 (P.95).)..
The succulent part of the liability to be imposed should be in response to the clearly formulated Peristroikian principles of societal and sentiments needs (W.Friedmann “Law in a Changing Society”, University Book House, New Delhi (Abridged edn) First Indian Reprint, 1970 (p.19).).
The imposition/liability must be enured properly in tune to the gain/loss principle with congenial regards to public welfare and excellence to overall development of the society.
V. The Final Point
The analysis of various judicial interpretations and authorities beholds the truth that in a strict sense there exists no generic difference between Tax and Fee. Both of them account themselves in one way or another in synonymity with that of alternatively towards the revenue of the State.
The doctrine of ‘quid pro quo’ can’t be relied on as the sole criterion for distinguishing betwixt between tax and fee. The contrariety lies in the purpose of collection and utilization of the proceeds therein. If the major proceeds of the ‘fee’ collected are utilized for general purposes of the Government, the later amounts to ‘tax’ which shall be permitted subjective to Judicial discretion, moreover it can’t be assured of granting special benefits/privileges individually but from a wider amplitude of analytical reasoning coupled with establishment of correlationship between totality of fees imposed and totality of services rendered.
To be succinct as to the semantical nuances pellucidly regarding the etymology of Tax/fee, would always have to be discerned from Judicial analysis and logical reasonings. Subjective to the facts and circumstances of each specific Case Law.
1. (1) (a) List-I Union to impose taxes. Entries mentioned in 82 to 90, 92, 92 A & B
(b) Imposition of fees except Court Fees – Entry 96.
(2) (a) List II – State to impose taxes on entries mentioned 46 to 62
(b) Imposition of Fees except Court Fees – Entry 66
(3) (a) List III – Union/States to impose Fees on respective subjects except Court Fees.
T.G.N. Kumar v. State of Kerala -- 2011 (1) KLT 362 (SC) -- Whether Reversing Direction No. IV in Jain Babu's Case 2008 (4) KLT 16 -- A Decision Per Incuriam
By Aboo T.P., Advocate, Manjeri
28/02/2011
T.G.N. Kumar v. State of Kerala -- 2011 (1) KLT 362 (SC) --
Whether Reversing Direction No. IV in Jain Babu's Case
2008 (4) KLT 16 -- A Decision Per Incuriam
(By Aboo T.P., Advocate, Manjeri)
A Division Bench consisting of three Hon’ble Judges of Supreme Court has reversed the Order containing general directions to the Lower Court in Jain Babu’s case (2008 (4) KLT 16).
In Jain Babu v. Joseph (supra) the Hon’ble Mr. Justice Basant had laid down general directions to Criminal Courts which are called upon to hold trials, particularly an offence under section 138 N.I. Act as also in all other cases involving offences which are technical in nature and do not constitute moral turpitudes. Reversing directions I and IV the Supreme Court held (i) that satisfaction whether or not an accused deserved to be exempted from personal attendance has to be of Magistrate (ii) discretion of Magistrate under section 205 Cr.P.C.cannot be circumcised by laying down general directions (iii) in summons cases when personal appearance of accused has been dispensed with under section 205, a discretion is vested in Magistrate to dispense the rigour of personal examination of accused under 313 as well.
Direction IV of Jain Babu’s case reads (IV) “examination under 313 Cr.P.C. can be dispensed with under proviso to 313 (1) and if the accused files a statement explaining his stand, the same can be received by the court notwithstanding the absence of a provision similar to Ss.233 and 243 Cr.P.C. in the procedure for trial in summons case. The power and the obligation to question the accused to enable him to explain the circumstances appearing in evidence against him must oblige the court in such a situation to accept and consider the written statement made by the accused.”
My purpose here is to examine whether reversing direction IV of “Jain Babu’s case by the Apex Court is correct or not in the light of the amendment brought in to section 313 Cr.P.C. by Act 5 of 2009. A new sub section is inserted in Section 313 Cr.P.C. which reads “the court may take help of prosecutor and defense counsel in preparing relevant questions which are to be put to the accused and the court may permit filing of a written statement by the accused as sufficient compliance of the section’.’ The sub-section was made effective from 31.12.2009.
In Para 12 of T.G.N Kumar v. State the Hon’ble Mr. Justice Jain observed “As regards direction IV supra to accept and consider the written statement made by the accused, in our opinion, it is again not in accord with the language of Section 313 of the case, as also the dictum laid down by this court in Basava Raj R Patil and other v. State of Karnataka & Ors. 2000 (3) KLT S.N. 69 (C.No. 74) = (2000) 8 SCC 740.
The judgement in the T.G.N. Kumar’s case was pronounced by SC on 14th January 2011. The new amendment to S.313 in Act 5 of 2009 was made effective from 31.12.2009-one year before the judgement. So I must submit that the reversal of direction IV in Jain Babu’s case by the Apex Court was pronounced per incuriam as the statutory provision was not brought to the attention of the Apex court, so it is not binding See, Mmleshwar v. Khaniala (AIR 1975 SC 907).
In Basava Raj R Patil case SC through Thomas J. was attempting a way out to relieve the hardship of the accused who could not be present in court for 313 questioning. As the Parliament in its wisdom has prescribed a procedure giving a discretion to the trial court for accepting the written statement by the accused under 313 (5) Cr.P.C, according to me, the cumbersome procedure of issuing questionnaire and submitting answers on affidavits on these matters have become infrutuous. The trial courts are to apply the new sub-section (5) of Section 313 Cr.P.C. in letter and spirit.
The Briefless Barrister
By John Godfrey Saxe (1816-1887
21/02/2011
*The Briefless Barrister
(John Godfrey Saxe (1816-1887)
An Attorney was taking a turn
In shabby habitments drest ;
His coat, it was shockingly worn
And the rust had invested his vest
His breeches had suffered a breach,
His linen and worsted were worse.
He had scarce a whole crown in his hat
And not half a crown in his purse
And thus as he wandered along
A cheerless and comfortless elf.
He sought for relief in a song
Or complainingly talked to himself :-
“Unfortunate man that I am,
I’ave never a client but grief;
The case is I’ve no case at all
And in brief, I’ve never had a brief
I’ve waited and waited in vain
Expecting an opening to find,
Where an honest young lawyer might gain
Some reward for the toil of his mind
I’t is not that I’m wanting in law
Or lack an intelligent face,
That others have cases to plead
While I have to plead for a case.
Oh, how can a modest Youngman
E’r hope for the smallest progression
The profession’s already so full
Of lawyers full of profession”
While thus he was strolling around
His eyes accidentaly fell
On a very deep hole in the ground.
And he sighed to himself ‘it is well’
To curb his emotions he sat.
On the curbstone, the space of a minute
Then cried ‘ Here is an opening at last’!
And in less than a jiffy was in it
Next morning twelve citizens came
(I’t was the coroner, bade them attend)
To the end that it might be determined
How the man had determined his end !
“The man was a lawyer, I hear”
Quoth the Foreman who sat on the corse
“A lawyer, Alas !” said another
“Undoubtedly died of remorse”
A third said “I know the deceased,
An Attorney well versed in the laws
And to the cause of his death,
'T was no doubt for the want of a cause”
The jury decided at length
After solemnly weighing the matter
“That the lawyer was drowned because
He could not hold his head above the water."
* Compiled by K. Gopalakrishnan, Advocate, Mavelikara.
Essence of Co-operative Law Enunciated by Kerala High Court in 2010
By R. Muralidharan (Deputy Registrar (Planning & Legal), Co-operative Department, Puducherry
21/02/2011
Essence of Co-operative Law Enunciated by Kerala High Court in 2010
(By R. Muralidharan, Deputy Registrar (Legal) Office of Co-operative Societies, Puducherry 605 009)
It is always the Kerala High Court that leads when it comes to path-breaking decisions and opening new vistas in the field of co-operative law. Perhaps for a change 2010 it was on a low profile. Not many decisions were decided or reported. This articles is a compendium of judgments of Kerala High Court on co-operative law, reported in Kerala Law Times, during the year 2010, arrayed chapter-wise to facilitate better reading and learning.
On membership
Until the Registrar issues a written requisition in terms of R. 27(2), the member admitted in violation of R.27(1) will continue as a member, as decided in Subash v. Joint Registrar of Co-operative Societies (2010 (1) KLT 352). R.27(1) provides that a person applying for admission as a member of any credit society shall be admitted as such member only with the previous sanction, in writing, of the Registrar, if on the date of such application, such person is a member of any other such credit society. The bar is not on the application but on the admission which could be granted, if sanction is accorded by the Registrar. When a person has become a member in contravention of R.27(1) such society shall remove him from membership upon a written requisition from Registrar. Unless there is a written requisition from Registrar, the inhibition in R.27(1) will not make the admission to membership is void.
On Election
In Mahalingam v. State Co-operative Election Commission ( 2010 (1) KLT 46), it was held that the procedure for conducting election to co-operative societies has been elaborately detailed in Rr. 35 and 35A in respect of societies which come within the purview of the Kerala State Co-operative Election Commission. The Act and Rules do not contemplate any power on the Government or the Registrar to issue directions in the matter of conduct of election to co-operative societies. In fact, elections to the co-operative societies should be conducted by an independent statutory authority uninfluenced by any directions from either the Government or the Registrar in any manner, so as to ensure transparency in election to co-operative societies. If at all anybody has any power to issue directions to the electoral officer in the matter of printing ballot papers, it is State Co-operative Election Commission and nobody else. When the provisions contained in the Act and the Rules confer jurisdiction in certain matter solely on another authority, the powers of the Registrar in respect of that matter is excluded.
Once the election is postponed by the competent authority, viz. the State Co-operative Election Commission and published it in the newspaper, election could not be validly held without a further publication and the date of holding the poll, as ruled by the Division Bench in George Kuruvilla v. Kerala State Co-operative Election Commission (2010 (1) KLT 967). Even though the Court was satisfied about the illegality, irregularity and impropriety in postponement of election, the Court should have fixed the date of poll only after ensuring that the date of poll is published in advance for the members to participate in the election. Once the Election Commission notified, postponement of date of poll, then without publishing the next date of poll, no election could be held in a fair and proper manner under the Rules.
On disputes
Whether Labour Court and the Co-operative Arbitration Court have concurrent jurisdiction to deal with the industrial dispute was decided by the Division Bench in Thodupuzha Taluk General Marketing Co-operative Society v. Michael Sebastian (2010 (1) KLT 938). Answering in affirmative and dismissing the appeal, it was held that in view of sub-ss. (1)(c) and 2(d) of S.69, it is clear that any dispute arising in connection with the employment of officers and servants of a Co-operative Society is a dispute, which can be resolved under S. 69 (1). But the office establishment of a Co-operative Society is an industry, as defined under S.2(j) of the Industrial Disputes Act. So the dispute regarding denial of employment will be an industrial dispute, as defined under S. 2(k) of the Industrial Disputes Act. The concerned worker can raise it as an industrial dispute. If S.69 of the Kerala Co-operative Societies Act was passed with the assent of the President, it may have overriding effect on central enactment, like the Industrial Disputes Act. The amendment of S.69 was notified without obtaining the assent of the President, as contemplated under Art. 254 (2) of the Constitution of India. If that be so, the amendment of S.69 cannot have the effect of overriding the provisions of the Industrial Disputes Act.
On inquiry and inspection
Whether Registrar acting on the dictates of Minister can order enquiry under S.68-A was the question in Calcut City Service Co-operative Bank Ltd., v. Registrar of Co-operative Societies (2010 (2) KLT 824). On a complaint being made before Minister, concerned Minister directing conduct of a vigilance enquiry. On the basis of the same, Registrar directed Co-operative Vigilance Officer to conduct an enquiry. Court held that Registrar has ordered enquiry merely acting on the direction of the Government without applying his mind and in obedience to the direction of the Minister. Hence it has been exercised without exercising the discretion vested in him and cannot be justified as a proper exercise of power under S.68-A. The question before the Division Bench in State of Kerala v. Aravindakshan Nair (2010 (3) KLT 11) was whether S. 66(5) contemplates any opportunity of being heard to be given to any society or any person except with regard to proposal of Registrar for ordering cost of inspection. Reversing the judgment of the learned single Judge it was held that the principle contemplated under R. 66(5) is only on orders imposing cost on the society and persons concerned referred to in S. 67 in terms of or in variance with the report of the inspecting officer contained in the inspection report. Wherever action is contemplated based on the inspection report, whether it is the supersession of the management of the society under S. 32 or whether it is the surcharge on the officers or employees concerned under S.68(2), separate opportunity of hearing specifically contemplated under the relevant sections has to be afforded. R. 66 (5) does not contemplate any opportunity being given by the Registrar before accepting any report or for initiating any action based on the report. The question was thus answered in negative.
On supersession
The Court has no jurisdiction under Art. 226 to direct the appellant to keep in abeyance the order to be passed by him under S.32 of the Act for a period of two weeks. The Court has no power to grant stay of an order which is yet to be passed. The Court has power to entertain writ petitions against notices provided the notice is issued without jurisdiction. It is unnecessary to undertake the exercise of granting anticipatory stay and give room for criticism that the Court is acting without jurisdiction, vide Joint Registrar of Co-operative Societies v. Krishnan Nair (2010 (1) KLT SN 15 (C. No.17) (D.B.)).
As per S. 65 (6), the Registrar had to enter a finding that there was a ‘major defect’ in the constitution or working or financial condition of the society. The finding regarding a ‘major defect’ and the ‘satisfaction’ contemplated by S.32 (1) of the Act has to be objectively arrived at and specifically entered. It is clear from the working of the provisions referred to above that the legislature in its wisdom has conferred the drastic power of supersession of the Registrar, hedged in by sufficient procedural safeguards aimed at ensuring that the power was not misused. When the statute provides that the exercise of a power shall be only in accordance with the procedure stipulated in the provision, it follows that the said power is not capable of being exercised in any other manner, as held in Mariyamma George vs. Joint Registrar of Co-operative Societies (2010 (4) KLT SN 14 (C.No. 15).
No managing committee could be proceeded against for the misdeeds of a previous managing committee. S. 32 can be invoked only against a committee which has committed the irregularities or defaults. Removal of a committee for the defaults and irregularities of a previous committee is not contemplated by S.32. This dictum was made in Ameer v. Deputy Director (2010 (4) KLT SN 59 (C.No. 69)..
On appeal
The questions decided in David vs. Kuruppampady Service Co-operative Bank Ltd. (2010 (4) KLT 901) are whether the Co-operative Arbitration Tribunal has power of issuance of Commission for examination of witness and whether proof affidavits can be permitted to be filed as is done in Civil Courts. Answering in affirmative, it was held that the powers of the Co-operative Arbitration Tribunal are referable to Ss. 69, 70 and 70A included in S.70(3). The same powers are vested in civil court as under the CPC while trying a suit in respect of summoning and enforcing the attendance of the defendant or witness and examining the witnesses on oath and also the power of issuance of any Commission for examination of any witness.
Co-operative Arbitration Tribunal should utilize this statutory rule including by issuing Commission for examination of witnesses. This could save a good load of time and the Tribunal could find more time for hearing matters rather than recording the evidence except in cases where it becomes abundantly necessary that the evidence has to be recorded by the court itself. The Co-operative Arbitration Court can also permit proof affidavits being filed as is done in Civil Courts.
On execution of decree
Holding that the Civil Court acting under R. 84 is only an execution court and is not entitled to go into the correctness of the sale certificate, unless fraud is specifically pleaded and established, it was held in Thomas v. State of Kerala (2010 (4) KLT 909) that the course and events to be pursued by the purchaser of the property on obtaining the sale certificate is clearly discernible from the rule itself. R. 84 stipulates that on filing an application before the Court and on production of the certificate of sale referred in R. 83 (5) it is for the Court to issue proper process for the purpose of putting such purchaser in possession of the property in the same manner as if the immovable property purchased had been decreed to the purchaser by a decision of the Court. The sale certificate obtained by the purchaser is to be given effect as a ‘deemed decree’ and to be proceeded further so as to put the purchaser (deemed decree holder) in possession, of course, after issuing notice to the opposite side. Civil Court, while acting under R.84 is to act only as execution court to the extent as it is permitted and provided under the said rule, treating the sale certificate as a decree. It is settled law that the execution court cannot go behind the decree unless fraud is specifically pleaded and established.
It is relevant to note that R. 84 does not clearly specify ‘which Court’ is to be approached by the aggrieved party, i.e., the purchaser of the property. Going by the scheme of the statute it can only be the ‘civil court’.
On employees
The question before the Court in A.R. Nagar Service Co-operative Bank v. State of Kerala (2010 (1) KLT 55) is whether jurisdiction of Labour Courts and Industrial Tribunals under Industrial Disputes Act for adjudicating industrial disputes raising by workmen of co-operative societies can be excluded by Societies Act? Held, the Industrial Disputes Act is an earlier law made by the Parliament prior to the Societies Act and therefore, the amended S.69 of the Societies Act will prevail only if Presidential assent under Art. 254(2) has been received for amendment of S.69. Presidential assent should be obtained after the repugnancy comes into being. Without Presidential assent for Amendment Act 1 of 2000, the jurisdiction of the Labour Court and Industrial Tribunal under the I.D. Act for adjudicating industrial disputes raising by workmen of co-operative societies cannot be excluded by the Societies Act.
The prescription in amended R.182 B (1) is regarding the terms as to qualification of persons who could be brought together to be member of the Co-operative Service Examination Board which is to be constituted by the Government under S.80B. Being a member of a Board is not the same as holding a post. All that the rule authorizes is that the Government may, in the absence of Chairman, by order, authorize a member of the Board to discharge the functions of the Chairman during the period of such absence. By making the impugned amendment, the Government only prescribed condition in relation to the constitution of the Board. The challenge to the impugned amendment made in Sam Zacharias vs. State of Kerala (2010 (1) KLT 473) failed.
The action of the appellant Kodakara Farmers Service Co-operative Bank Ltd. v. Nenna ( 2010 (1) KLT 541) in not filling up the vacancies that arose during the validity of the list prepared pursuant to examination conducted by the Examination Board is not justified and Joint Registrar has rightly directed the appellant to appoint the first respondent, who was next in the list of selected candidates prepared by the appellant pursuant to examination conducted by the Board. The very purpose of keeping the list valid for two years prepared by society based on examination conducted by Examination Board is to enable society to fill up the vacancies arising during the currency of the validity of the list from out of such list. The eligibility of the first respondent for appointment is to be considered only when the vacancy arises and not when the matter was considered by the Joint Registrar pursuant to the direction issued by the Court. Therefore, the delay in passing orders for the first respondent’s appointment does not affect the validity of the order issued by the Joint Registrar, so held the Division Bench.
The question before the Division Bench in Hariharan v. Haneesa Beevi (2010 (2) KLT 144) is whether for taking a decision on relaxation of educational qualification by society, prior approval from the Registrar is necessary under Rule 185 (2). Held, under the scheme of R.185 (2) it is for the managing committee of the society to decide on relaxation of qualification of an employee for the purpose of promotion and while deciding this, they should record their reasons justifying the decision. It is for the society to send for approval the proposal for relaxation and promote the employee concerned only if and after Registrar grants approval for the decision on relaxation taken by the society. Even for taking a decision on relaxation of educational qualification by the society, it is not necessary for prior approval from the Registrar. The sequence of action should be first decision for relaxation by the society followed by reasons to be recorded and then get the same approved by the Registrar and promotion should follow thereafter.
For computing the pension, it is necessary to assess the qualifying service. The qualifying service in the case of an employee who was in service of the society as on the date of commencement of the Scheme is the length of service commencing from the date of joining the contributory fund, vide Sukumaran vs. Kerala State Co-operative Employees Pension Board ( 2010 (4) KLT SN 88 (C. No. 101).
Miscellaneous
The questions raised before the Division Bench in Cheranalloor Service Co-operative Bank Ltd. v. Alfred (2010 (1) KLT 749) were whether one time settlement scheme is meant for persons who have closed their loan accounts before issuance of the scheme and whether the amounts already collected can be refunded. Answering both the questions in negative, it was held that the scheme is meant for the benefit of persons who were in default as on 31.3.2005 and continued to be defaulters till the issue of the scheme of one time settlement. It is not meant for persons who have closed their loan accounts after 31.3.2005, but before the issuance of the scheme. One time settlement schemes are notified to collect the arrears due to banks and not to refund the amounts already collected. Going by the terms of the scheme, the respondents 1 and 2 are not entitled to get refund of the amounts already paid by them. Reversing the judgment of the learned single Judge the appeal filed by the bank was allowed.
Going by sub-clause (v) of S.2 (31) of the Income Tax Act, 1961 and also in view of the nature of and constitution of co-operative society, it is not necessary to have any second thought to arrive at a conclusion that it is a ‘body corporate’ given shape to, by the members of such society, whole functioning is controlled under the relevant provisions of the Co-operative Societies Act.Rules. This being the position the contention raised by the petitioners in Chala Service Co-operative Bank Ltd. v. Income Tax Officer (2010(1) KLT SN 77 (C. No.92)) that the notice under S. 133(6) is not attracted in the case of a Co-operative Society is rather wrong and misconceived.
The Ordeal Called Committal
By P. Rajan, Advocate, Thalasserry
21/02/2011
The Ordeal Called Committal
(By P. Rajan, Advocate, Thalassery)
The mandate of the Code of Criminal Procedure Code 1973 explicitly prescribes that trial of a Sessions Case before the Sessions Court, can be done only after committal of the case by a Magistrate Court, with certain expressive differences as in the old Code 1898 like committal of the case, not the accused, provision for discharge etc. Regarding Sessions trials coming under certain special enactments like - ND and PS Act,1985.(SC and ST), Prevention of Atrocities Act 1989, naming a few, Special Courts, are defined and notified, to try cases under these laws, no committal is needed, thus charge sheet can be filed directly in the special courts, for trial. The relevant provisions of committal are sections 193 and 209 Cr.P.C. The code does not define the expression ‘committal’ or ‘commitment’ and the word meaning, is 'sending to' or 'making over', as some judgements have interpreted and explained these expressions. The purpose of committal of a case by the Magistrate Court to the Sessions Judge, evidently is to see that the case diary or the relevant documents as the case may be are in order, also the material objects in connection with the case are produced by the prosecuting agency and after such over seeing by the Magistrate, the case is send up by way of a formal order of committal, after notice to the prosecutor and the accused. The reason, behind such a preliminary procedure presumably is to save Sessions Court's time, in order to make ready the matter for enquiry and trial by that Court as detailed under Chapter-XVIII of the Code.
Pre-committal proceeding by treating the matter by labelling it as committal proceeding by the Magistrate, no doubt is also time consuming. Under the old Code the Magistrate has got varying powers, different from the present procedure and even an order of discharge of the accused was permissible, so also recording of evidence. But under the present Code, the committal court’s powers are limited and a sort of supervisory power relating to the materials placed, generally is contemplated. Even under the earlier code though preliminary enquiry was prescribed no useful purpose it served often, by such cumbersome procedure and final outcome; even now is great deal of futile excercises, like purposeless appearance of the accused before the lower Court, causing delay for the trial. Needless to say, the procedure detailed, even now instead of solving problems give room for cropping up fresh ones. Preliminary enquiry by introduction of the new Code is dispensed with in Sessions matters, but by the present practice basing on relevant provisions, the steps to be taken by the committal court are trivial like verification of documents, giving copy to the accused, notifying the committal Order etc. Rarely one finds return of the documents submitted, being defective or incomplete, as incidental orders by a Magistrate Court in Sessions matters. Present day performance of prosecuting agencies mainly of the Police is beyond controversy, generally as are reasonably trained, to discharge the duties as such errors or omissions are not rampant. For time bound disposal of serious sessions offences even the procedure of Committal is a factor which effects adversely either side.
The judgment reported in 2011 (1) KLT 46, (Suo motu v. State) is a recent example of occurance of more delay, due to non-observance of the ritualistic procedure of committal, due to which the case discussed in the ruling, reached back to square one, so to say. In this judgment as facts disclose, the Sessions Court transferred a case under section 408 Cr.P.C. from the Magistrate Court, to be tried along with a sessions case on the request of the accused. High Court on reference held that, the procedure adopted by the Sessions Judge is contra to the provision of law and judgment on the subject. Evidently, patent difference in powers are detailed in sections 407 and 408 Cr.P.C, the former with more powers bestowed with the High Court. The Sessions Court’s order in this reported case cannot be termed as improper or caused prejudice to any side, but for the reason that the expression committal did not appear anywhere, being a transfer order while sending the matter before the Sessions Court, as virtually order appears to be U/s. 408 Cr.P.C. The reason behind transfer of the case, on motion by the accused is only for simultaneous trial and disposal by the sessions court being case and counter, to avoid conflicting verdicts. High Court strictly adhered to case law (2007 (1) KLT 592) to resolve the issue. The learned Sessions Judge allowed transfer petition to meet the ends of justice and also to avoid delay. If during trial, Sessions Judge invokes section 319 Cr.P.C, on evaluation of evidence, no committal is required, of the person proceeded with (AIR 1979 SC 339).
The procedure of committal is century old and present day justice delivery system underwent considerable changes, and are being changed. Time of type scripts and carbon copies gave way to ingenious electronic gadgetry; Resultently detection of crimes and preparation of charge sheets are not by man power only, rarely prolonged efforts of men and machine considering the nature of offence. Penal statute and procedural law are subjected to only peripheral perfume touches by way of amendments, but bone of contention and reason for concern from different corners, even suggestion of the Union Law Ministry for speedy Justice is procedural simplification. Clearing of arrears of cases is another area which deserves attention as number of cases pending is mind-boggling. Even a bill “Right to Justice Bill” is on the anvil. Rural courts and fund allocation, besides upgrade measures are also not insolent steps as the Law Commission report reveals. By recasting the law for avoiding procedure of committal of matters specified under different laws, no prejudice is presumable, if not; delay in disposal of cases will be the ultimate result, as is being experienced. Spawning of cases cannot be expected also if the procedure for trial and disposal of cases are made less time consuming on some re-work. It is desirable to scarp the procedure of committal as the same is just a formality, sans any logical purpose; for speedy justice delivery mode, which is the motto not only of the law makers.
To none will we sell Justice,
To none will we deny,
To none will we delay right or justice.
Magna Carta June 15 - A.D. 1215