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Consumer Fora have Jurisdiction to decide the legality of Statutory Fees; Supreme Court

Three Judges Bench comprising Honble Mr. Justice V. Ramana, Honble Mr. Justice Mohan M. Shantanagoudar & Honble Mr. Justice Ajay Rastogi while deciding SLP (C) No. 5237 of 2015 titled Punjab Urban Development Authority & Anr. Vs Ram Singh, over-ruled the Judgment in HUDA Vs Sunita, (2005) 2 SCC 479 holding that the Consumer Fora have the jurisdiction to deal with the legality of the Statutory Fees imposed by the Statutory Authorities.

A Two Judge Bench of Supreme Court while expressing doubt as to the correctness of the Judgment rendered in the case of HUDA Vs. Sunita, (2005) 2 SCC 479 Vide Order dated 13.09.2018 referred the same to Three Judge Bench. Supreme Court therein held that the National Consumer Disputes Redressal Commission had no jurisdiction to adjudicate the legality behind the demand of composition fee and extension fee made by HUDA, as the same being statutory obligation, does not qualify as deficiency in service.

The opinion expressed by the Two Judge Bench comprising Honble Mr. Justice D. M. Dharmadhikari & Honble Mr. Justice B. N. Srikrishna regarding the decision in the case HUDA Vs. Sunita, (2005) 2 SCC 479 while passing the referral order held as under:
We are, prima facie, of the view that this sixparagraph order, which does not, prima facie, contain any reason for the conclusion reached, requires a relook in view of the fact that the Consumer Protection Act, 1986 is a beneficent legislation

Petitioners submitted that the order in HUDA Vs. Sunita, (2005) 2 SCC 479 is well reasoned, as it validly holds that the NCDRC lacks jurisdiction to decide the legitimacy behind the demand of composition fee and extension fee. Relying on the aforesaid holding, the counsel further stated that statutory dues cannot be claimed as deficiency in services. Lastly, the learned counsel submitted that although the Consumer Protection Act, 1986 (hereinafter referred to as the Act) is beneficial in nature, demanding a liberal construction, the same cannot be used to extend the ambit of the Act by bringing in remedies or benefits which were not intended by the legislature.

However, Senior Counsel appointed as amicus curiae to assist and appear on behalf of the respondent claimed that the order passed in HUDA Vs. Sunita, (2005) 2 SCC 479, is an aberration in a series of longstanding Judgments by Supreme Court. Amicus Curiae thereafter placed strong reliance upon the Judgments of Supreme Court in Lucknow Development Authority Vs M. K. Gupta, (1994) 1 SCC 243, and Ghaziabad Development Authority Vs Balbir Singh, (2004) 5 SCC 65, wherein, it was held that the NCDRC has the jurisdiction to protect Consumers against defective services rendered even by a statutory body. Further, the Amicus Curiae, while supporting the view that the Sunita case (supra) was per incuriam, citing various judgments of Supreme Court submitted that the statutory authorities come under the ambit of the Act.

Coming back to the Sunita case (supra), Supreme Court held that the NCDRC had no jurisdiction to adjudicate the legality behind the demand of composition or extension fee by a developmental authority. It further observed that the statutory obligations of a developmental authority and the plot holder under the authority’s statutory framework cannot be construed as acts or omissions resulting in a deficiency in service.
The Hon’ble Supreme Court while overruling the decision in Sunita Case (Supra) and upholding the law laid down earlier in Lucknow Development Authority and Ghaziabad Development Authority (Supra) held that the service provided by the petitioner herein squarely comes under the ambit of ‘service’.

Relevant Paras are reproduced as under:
17. Moreover, we also need to note that the distinction between statutory liability which arise generally such as a tax, and those that may arise out of a specific relationship such as that between a service provider and a consumer, was not considered by this Court in the case of Sunita (supra). For instance, a tax is a mandatory imposition by a public authority for public purpose enforceable by law; and is not imposed with respect to any special benefit conferred, as consideration, on the tax payer. There is no element of quid pro quo between the tax payer and the public authority.

However, the above is not the only form of due charged by a statutory authority. In a catena of judgments, this Court has recognized that certain statutory dues may arise from services rendered by a statutory authority. In the case of Commissioner, Hindu Religious Endowments, Madras Vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, 1954 SCR 1005, a seven Judge Bench of Supreme Court held that;
46. Coming now to fees, 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 supposed 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 [ Vide Lutz on Public Finance, p. 215]. These are undoubtedly some of the general characteristics, but as there may be various kinds of fees, it is not possible to formulate a definition that would be applicable to all cases.

47. …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. Fees confer a special capacity, although the special advantage, as for example in the case of registration fees for documents or marriage licences, is secondary to the primary motive of regulation in the public interest [Vide Findlay Shirras on Science of Public Finance, Vol. I, p. 202]. Public interest seems to be at the basis of all impositions, but in a fee, it is some special benefit which the individual receives.

18. A Five Judge Bench of Supreme Court, in the case of Kewal Krishan Puri & Anr. Vs State of Punjab & Anr., (1980) 1 SCC 416, also took note of the fact that certain statutory dues can arise from a quid pro quo relationship between the authority and an individual upon whom the liability falls.

23. …(6) That the element of quid pro quo may not be possible, or even necessary, to be established with arithmetical exactitude but even broadly and reasonably it must be established by the authorities who charge the fees that the amount is being spent for rendering services to those on whom falls the burden of the fee.

19. Therefore, it is a clearly established principle that certain statutory dues, such as fees, can arise out of a specific relation. Such statutory dues might be charged as a quid pro quo for a privilege conferred or for a service rendered by the authority. As noted above, there are exactions which are for the common burden, like taxes, there are dues for a specific purpose, like cess, and there are dues in lieu of a specific service rendered.

Therefore, it is clear from the above discussion that not all statutory dues/exactions are amenable to the jurisdiction of the Consumer Forum, rather only those exactions which are exacted for a service rendered, would be amenable to the jurisdiction of the Consumer Forum.

20. At the cost of repetition, we may note that those exactions, like tax, and cess, levied as a part of common burden or for a specific purpose, generally may not be amenable to the jurisdiction of the Consumer Forum. However, those statutory fees, levied in lieu of service provided, may in the usual course be subject matter of Consumer Forum’s jurisdiction provided that there is a ‘deficiency in service’ etc.

21. We may also refer to the case of Ghaziabad Development Authority (supra) wherein this Court, relying upon Lucknow Development Authority case (supra), held that the power of the Consumer forum extends to redressing any injustice rendered upon a consumer as well as over any mala fide, capricious or any oppressive act done by a statutory body.

The relevant para of the judgment reads as under:
6. ….Thus, the law is that the Consumer Protection Act has a wide reach and the Commission has jurisdiction even in cases of service rendered by statutory and public authorities. Such authorities become liable to compensate for misfeasance in public office i.e. an act which is oppressive or capricious or arbitrary or negligent provided loss or injury is suffered by a citizen. … Where there has been capricious or arbitrary or negligent exercise or non-exercise of power by an officer of the authority, the Commission/Forum has a statutory obligation to award compensation.

If the Commission/Forum is satisfied that a complainant is entitled to compensation for loss or injury or for harassment or mental agony or oppression, then after recording a finding it must direct the authority to pay compensation and then also direct recovery from those found responsible for such unpardonable behaviour.

22. Therefore, in line with the law laid down by us, we hold that the determination of the dispute concerning the validity of the imposition of a statutory due arising out of a deficiency in service, can be undertaken by the consumer fora as per the provisions of the Act. The decision of this Court in the case of Sunita (supra), wherein, it was held that NCDRC has no jurisdiction to adjudicate the legitimacy of the aforementioned statutory dues, was rendered without considering any of the previous judgments of this Court and the objects of the Act. Consequently, the law laid down in the aforesaid case does not hold good before the eyes of law, and is thereby overruled.

The validity of interpretation furthered in the case of Sunita (supra) hinges on the interpretation of Section 2(1)(d), 2(1)(e), 2(1)(f), 2(1)(g) and 2(1)(o) of the Act
Section 2 (1) (g) deficiency means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service.

Thus, meaning of deficiency is explained as any fault, imperfection, shortcoming or inadequacy in quality, nature and manner of performance of any service or supply of goods, in terms of standards set by the parties themselves through contract or otherwise, or imposed by the law in force. The basis for application of the consumer laws hinges on the relationship between the service provider and consumer. The usage of ‘otherwise’ within the provision subsumes other modes of standard setting alternative instruments other than contracts such as laws, byelaws, rules and customary practices etc.

Service is defined under Section 2(1)(o) of the Act, which reads as under: (o) service means service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;

This definition is not exhaustive rather the legislature has left the task to expound the provision on a case to case basis to the judiciary. The purpose of leaving this provision open ended, without providing an exhaustive list indicates the requirement for a liberal interpretation.

Broadly speaking, it is inclusive of all those services performed for a consideration, except gratuitous services and contract of personal services. Moreover, aforesaid provision reflects the legislative intent of providing impetus to ‘consumerism’. It may be noted that such a phenomenon has had a benevolent effect on the Government undertakings, wherein a new dynamism of innovation, accountability and transparency are imbibed.

On perusal of the impugned precedent, it may be noted that it does not provide clear cut reasoning for the view held by the Court, except to the extent of pointing out that statutory obligations are not encompassed under the Act. Such broad proposition necessarily required further elaboration, as there is a possibility of over inclusivity.

Further, there is no gainsaying that all statutory obligations are not sovereign functions. Although all sovereign functions/services are regulated and performed under constitutional/statutory instruments, yet there are other functions, though might be statutory, but cannot be called as sovereign functions. These sovereign functions do not contain the consumer service provider relationship in them and are not done for a consideration.

Moreover, we need to be mindful of the fact that sovereign functions are undergoing a radical change in the face of privatization and globalization. India being a welfare State, the sovereign functions are also changing. We may note that the government in order to improve the quality of life and welfare of its citizens, has undertaken many commercial adventures.

Sovereign functions like judicial decision making, imposition of tax, policing etc, strictly understood, qualify for exemption from the Act, but the welfare activities through economic adventures undertaken by the Government or statutory bodies are covered under the jurisdiction of the Consumer Forums.

Even in departments discharging sovereign functions, if there are sub-units / wings which are providing services/supply goods for a consideration and they are severable, then they can be considered to come within the ambit of the Act. [refer to Standard Chartered Bank Ltd. v. Dr. B. N. Raman, (2006) 5 SCC 727], held the Supreme Court.

The Hon’ble Court also observed that if a Statutory Authority, other than the core sovereign duties, is providing services then, unless the Statute exempts or provides for alternative forum, the Consumer Forum would continue to have jurisdiction to deal with the same.

The Hon’ble Court, while differentiating different types of statutory fees for the purpose of bringing them within the jurisdiction of the Consumer Forums, observed that tax and cess are a form of exactions which are common burden or for specific purpose respectively and does not involve the element of quid pro quo and therefore, are not amenable to the jurisdiction of Consumer Fora however, the statutory fees which are exacted in lieu of a service rendered, would be amenable to the jurisdiction of Consumer Forums.

Written By: Damini Singh Chauhan - Semester 9th, The Law School, University of Jammu.
Email: [email protected]

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