Plea In Kerala High Court Challenges Levy Of Court Fee In Cases U/S 138 Negotiable Instruments Act

The Finance Bill, 2024 tabled before the Legislative Assembly introduces certain amendments in Court Fees and Suit Valuation Act, 1959. This includes provisions relating to the levy of court fees on complaints under Section 138 of the Negotiable Instrument Act. Though the Bill has not yet been passed by the Assembly, the Official Memorandum has brought into effect the new charges proposed.

Sections 3 & 4 of the Kerala Provisional Collection of Revenue Act reads as follows:

Section 3. Power to make declarations under this Act: Where a Bill to be introduced in the Legislative Assembly on behalf of the Government provides for the imposition or increase of any tax, duty, cess, fee or other revenue, the Government may cause to be inserted in the Bill a declaration that it is expedient in the public interest that any provision of the Bill relating to such imposition or increase shall have effect from the 1^st day of April following the date of introduction of the Bill (or shall have immediate effect from the date of introduction of the Bill).

Section 4. Effect of Declaration under this Act and duration thereof: (1) A declared provision shall have the force of law on the 1^st day of April following the date on which the Bill containing it is introduced in the Legislative Assembly (or on the date on which the Bill containing it is … Assembly as the case may be)

A declaration under Section 3 of the Act is made in the case of the Finance Bill enabling the collection of the fees from 01.04.2024.

The petitioner argued that these provisions defeat Articles 196 and 200 in the Constitution regarding the passing of the Bill, as through these sections Government can bring into effect provisions of a Bill not yet passed by the Legislature. Thereby, the Government can collect tax without a provision to that effect.

Further, the petitioner argues that the Finance Bill itself has no sanction of the Constitution as it is not moved on the recommendation of the Governor. Article 207 requires that a Bill or Amendment making provision for any of the matters mentioned in clause (a) to (f) of Article 199(1) shall not be introduced or moved except with the recommendation of the Governor. The petitioner contended that the word 'tax' in Article 199 includes fees, cess, and duty imposed for the purpose of generating money from the public.

The petitioner further argued that the State has no power to impose court fees for complaints under Section 138 of the Negotiable Instruments Act or for the appeal of decisions taken in such complaints. The Negotiable instruments, particularly promissory notes, bills of exchange and cheques are contained in the Union List in the Constitution.

Section 138 of the Negotiable Instrument Act was brought into the book by a Central Act – Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act 1988. The manner in which cognizance can be taken of a complaint related to Section 138 of the Negotiable Instrument Act is provided under Section 142 of the Negotiable Instrument Act. The State by imposing a condition of payment of court fee has nullified the provisions of Section 142. This is in effect a transgression of the law-making power of the Union Government.

The next ground on which the petitioner challenged the levy of the fee was that it would defeat the purpose of the Act. Section 138 of the Negotiable Instruments Act was introduced to bring credibility to negotiable instruments. Earlier, the remedy available to a person to a holder of a cheque when it was dishonoured was to move under Section 420 of the Indian Penal Code (cheating).

To get a conviction under this was difficult as the prosecution had to prove dishonest intent at the inception of the transaction. Taking note of how this would impact commercial transactions, Section 138 of the Negotiable Instruments Act was introduced making dishonour of cheques an offence. The petitioner argued that a levy of court fees would deter the holder of the cheque from filing a complaint. This would result in the non-acceptance of cheques in commercial transactions and thereby would cause a decline in commercial activities.

The plea further argued that if a person moves for the dishonour of a cheque under criminal and civil law, he has to pay a court fee twice. This is double taxation. However, if the complainant does not have money to initiate civil proceedings, he can file as an indigent person (pauper). If the decision is against him, he can file the appeal also as a pauper. 

However, in the case of proceedings under the Negotiable Instrument Act, there is no provision to file the complaint as a pauper. He also cannot file the appeal as a pauper. Further, there is a provision to get back the court fee paid in civil court as costs from the defendant at the end of the proceedings if the decree is favourable to the petitioner. There is no such provision when a person is initiating prosecution under the Negotiable Instrument Act.

According to the petitioner, a court fee is levied in complaints regarding Section 138 in Kerala only. This will cause problems in inter-state transfers or where elements of the offence took place in multiple places. The complainant will prefer to file the case in other States. Further, this would deter people from transacting business with people in Kerala on post-dated cheques.

The petitioner finally argued that the administration of criminal justice is the very purpose of the formation of the State. Levy of court fee for taking cognizance of offences is against the fundamental philosophy behind the formation of the State, it was argued.

The petitioner prayed before the Court to strike down Sections 3 And 4 of the Kerala Provisional and Revenue Act and the provisions in the Finance Bill, 2024 levying court fees on private complaints under Section 138 of the Negotiable Instruments Act.

The petition was admitted by the Division Bench comprising Chief Justice V. G. Desai and Justice V. G. Arun.

The plea is moved by Advocates T. J. Seema, C. P. Udayabhanu, Anhishek M. Kunnathu, M. R. Arunkumar, Bhavana Velayudhan

Case Title: Dineshan K. K. v The Registrar (General) High Court of Kerala and Others

Case No.: WP(C) 16650/ 2024