State Of Maharashtra vs Mishri Lal Tarachand Lodha And Ors.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 24 October, 1963

Coram: J.C. Shah, K. Subba Rao, K.N. Wanchoo, P.B. Gajendragadkar, Raghubar Dayal

In the matter titled State of Maharashtra versus Mishri Lal Tarachand Lodha and others, decided on 24 October 1963, the Supreme Court of India heard the case with Justice Raghubar Dayal authoring the judgment. The bench comprised Justices J.C. Shah, K. Subba Rao, K.N. Wanchoo, P.B. Gajendragadkar and Raghubar Dayal. Justice Dayal observed that the appeal, taken by way of special leave, sought to determine whether the interest amount awarded for the period after the suit was instituted fell within the phrase “amount or value of the subject‑matter in dispute” as used in Article 1 of Schedule I of the Bombay Court‑fees Act, 1959 (hereinafter the Act), for the purpose of calculating the court‑fee payable on the memorandum of appeal.

The plaintiff‑respondent, designated as No. 1, had instituted Special Suit No. 5 of 1957 before the Civil Judge (Senior Division) at Ahmednagar, seeking recovery of Rs 13,205 representing the principal lent to defendant No. 7 together with interest calculated up to the filing date at nine per cent per annum. On 18 July 1960 the trial court decreed in favour of the plaintiff a sum of Rs 13,033‑6‑6 and ordered that future interest be payable from the date of the suit until realisation at four per cent per annum on a principal amount of Rs 10,120. Defendant No. 7 appealed the decree to the High Court. In his memorandum of appeal he valued the claim for jurisdictional and court‑fee purposes at Rs 13,033‑6‑6 and relied on two specific grounds: first, that the lower court erred in granting the decree; and second, that the decree was otherwise erroneous, unjust and illegal and therefore should be set aside. The remaining forty‑six grounds dealt solely with the merits of the plaintiff’s claim and did not challenge the trial court’s decision to award pendente‑lite interest at the prescribed rate. The Taxing Officer held that the appeal contested the entire decree and therefore the amount or value of the subject‑matter in dispute for court‑fee calculation was Rs 14,036.80, having added the interest of Rs 1,033.40 that accrued on Rs 10,120 from the suit’s inception to the decree date. Accepting the defendant’s conceded position that the subject‑matter of the appeal was the decree itself, the officer directed the defendant‑appellant to pay a deficit court‑fee of Rs 70 on the memorandum of appeal and to amend the claim accordingly. The defendant‑appellant subsequently filed a revision under Section 5(2) of the Act before the High Court. The learned judge upheld the objection, stating that “the subject‑matter in appeal is the real matter in dispute between the parties and not something which must stand or fall with the decision on it; in other words, it must mean the right which is in dispute between the parties.” Acting on this view, the judge set aside the Taxing Officer’s order.

In this matter, the Court set aside the order issued by the Taxing Officer, holding that the court‑fee that had been paid on the memorandum of appeal constituted the correct fee. The State of Maharashtra subsequently filed the present appeal by way of special leave against that Taxing Officer’s order. Counsel for the State, identified as Mr. Gupta, argued that the view expressed by the learned Judge was erroneous and relied principally upon the way courts have interpreted the phrase ‘value or subject‑matter in dispute’ in the statutory provisions that govern the High Court’s power to grant leave to appeal to the Privy Council. The Court referred to the decision in Gooroopersad Khoond v. Juggutchunder (8 M.I.A. 166). In that case the Judicial Committee explained that leave to appeal would be granted only when the value of the matter in dispute in the appeal reached the stipulated amount of Rs 10,000. It further held that, for the purpose of determining that value, any interest awarded up to the date of the decree had to be added to the principal sum. The Court also cited Doorga Doss Chowdry v. Ramanauth Chowdry (8 M.I.A. 262) as authority for the principle that the costs of a suit do not form part of the subject‑matter in dispute. Their Lordships of the Privy Council warned that allowing costs to be added to the principal claim would enable any litigant to inflate the claim by increasing the cost component to meet the appealable threshold. The Court observed that a litigant’s conduct might prolong the trial, thereby raising pendente lite interest, which could increase the value of the subject‑matter in dispute to the appealable level.

The Court stated that it was incorrect to interpret the expression in the Act by reference to the construction applied to a similar phrase. That construction was used for determining whether a case fell within the rule that allows High Courts to grant leave to appeal to the Privy Council. The Court emphasized that the Act is a taxing statute and therefore its provisions must be construed strictly in favour of the litigant who is subject to the tax. Conversely, the other statutory provisions that permit an aggrieved party to approach the Privy Council were to be given a liberal construction. In the present matter, the Court explained that the phrase ‘value of the subject‑matter in dispute in appeal’ must be interpreted solely for the purpose of ascertaining the court‑fee payable on the appeal memorandum. That interpretation does not apply to the valuation needed to obtain leave to appeal to this Court in a higher forum. Finally, the Court noted that the provision governing the court‑fee payable on a memorandum of appeal filed in a Civil Court is contained in Article 1 of the Schedule to the Act. Thus, the appellate fee calculation must follow the strict tax‑assessment principles laid down in the statute, without borrowing criteria used for appellate jurisdiction.

Article I of the Act provided that the court‑fee was to be paid ad valorem, meaning that the fee was calculated according to the amount or value of the subject‑matter that was in dispute. The schedule attached to the Act set out the rates that applied to various monetary ranges, and it also fixed a ceiling of fifteen thousand rupees for the maximum fee that could be imposed. Consequently, the quantum of court‑fee that a party was required to remit depended entirely on the amount or value of the subject‑matter that was contested in the appeal. In the present matter, the defendant‑appellant placed his claim at thirteen thousand, thirty‑three rupees, six annas and six paise, and he paid the appropriate fee calculated on that valuation. By doing so, it was clear that he was challenging the portion of the decree that had awarded him that sum—comprising principal and interest up to the date on which the suit was instituted. He did not, however, contest, as far as his valuation was concerned, the interest that could be computed for the interval between the filing of the suit and the issuance of the decree, which had been assessed at four per cent per annum on a principal of ten thousand, one hundred and twenty rupees as ordered by the decree. Whether his appeal remained competent without the inclusion of that interest amount was a separate issue from the question of the value of the subject‑matter in dispute. Because he did not dispute the decree with respect to that interest, the Court had no occasion to pass upon it, and therefore that interest could not be folded into the amount that constituted the subject‑matter in dispute for the purpose of the fee calculation. Moreover, none of the appellant’s grounds of appeal addressed that specific interest for the period between the suit and the decree, indicating that he did not challenge the correctness of the future interest awarded, the rate applied, or even the base sum on which it was calculated. In these circumstances, it could not be said that the value of the subject‑matter in dispute should be deemed to include that interest amount. Counsel for the respondent correctly observed that it was well settled that a plaintiff must value an appeal against the dismissal of his suit on the basis of the claim placed in the plaint, without adding the interest that accrued on the claimed amount up to the date of filing the appeal. Likewise, a defendant does not have to incorporate the future interest that accrued after the decree up to the date of filing the appeal when determining the value for fee purposes, and no court‑fee is payable on the amount of costs decreed in the suit when the aggrieved party files an appeal against that decree. The principle underlying the exclusion of these amounts from the valuation was that the value should be measured by the substantive allegations contained in the plaint or, in the case of an appeal, by the specific points of dispute articulated in the memorandum of appeal that directly affect the rights of the parties and are to be adjudicated by the Court.

The memorandum of appeal listed the matters that were contested between the parties and that the appellate court was asked to determine. These matters necessarily involved the rights of the parties that required adjudication by the court, as they directly affected the legal position of each side. Claims that did not arise from any asserted legal right, but depended on how the disputed right would be decided, fell outside the expression “subject‑matter in dispute” in the plaint or the appeal memorandum. Similarly, reliefs that were left to the court’s discretion and were not based on an enforceable right were also excluded from that definition. The court observed that no valid reason existed to treat the decreed costs and the pendente lite interest differently when assessing the value of the subject‑matter in appeal. Although costs of suit arise independently of the claim because they are expenses incurred by the plaintiff, the decree for pendente lite interest is linked to the plaintiff’s claim, even though its award remains discretionary. Nevertheless, this distinction does not justify assigning different treatment to the two amounts for fee‑assessment purposes, because both arise from the same substantive claim. Costs, especially court‑fee and counsel’s fees, are incurred because of the claim presented before the court, and therefore reflect the value of the right asserted. Consequently, the expression ‘amount or value of subject‑matter in dispute’ in Article 1 of Schedule I of the Act refers to the value of the right claimed, not to any amounts the plaintiff may obtain. The same reasoning applies to the decree of pendente lite interest, because that amount is also awarded at the court’s discretion and the plaintiff has no enforceable right to recover it from the defendant.

If the defendant‑appellant succeeds in showing that the decree for principal and interest up to the suit date is wholly or partially void, the appellate court will consider the decree invalid. Consequently, the appellate court will exercise its discretion to adjust the amounts of costs and future interest in accordance with the revised finding on the principal claim. If the plaintiff’s claim is rejected in its entirety, the court will award no future interest and no costs for either the suit or the appeal. If the claim is only partially upheld, the appellate court will proportionately modify the decree of future interest and costs to reflect the partial success. Therefore, the defendant‑appellant has no reason to challenge the decree of costs or the decree of future interest unless he specifically disputes those amounts, either wholly or in part. If he expressly contests the correctness of the decree with. The appellate court’s authority to vary costs derives from Sections 34 and 35 of the Code of Civil Procedure, which permit adjustment of expenses in accordance with the final determination of liability. Thus, when the appellant does not expressly challenge the cost or pendente lite interest decree, those amounts stay outside the calculation of the appeal’s subject‑matter value for court‑fee purposes.

In this case the Court explained that when a party contests the decree for costs or pendente lite interest separately from the main claim to the subject‑matter before the Trial Court, that party must pay court‑fee on the amounts that are being challenged, because by disputing those amounts in appeal they become part of the “value of the subject‑matter in dispute in appeal.” The Court noted that this principle underlies several decisions in which court‑fee has been demanded on the sums awarded as costs or future interest. The Court then referred to the decision in Mitthu Lal v. Chameli (57 All. 71.) where it was held that no court‑fee was payable on pendente lite interest granted by the lower Court unless the award of that interest was specifically challenged in appeal. The judgment at page 76 stated: “Interest pendente lite is awarded under section 34 of the Civil Procedure Code. The Court may award it whether the plaintiff claims it or not. In this respect the court’s power stands on the same footing as its power to award costs to a successful party. It is a well‑settled rule that no court fee is payable on the amount of costs awarded by a decree appealed from, if no ground is specifically directed against the award of costs… The same principle is applicable to interest pendente lite which the Court may award in the exercise of its power under section 34. On a proper reading of the appellant’s grounds of appeal in the lower appellate court we are satisfied that the subject‑matter of his appeal to that court was the principal amount and interest up to the date of the suit.” The Court further cited Keolapati, Mst. v. B. N. Varma (I.L.R. 12 Luck. 466.) where it was held that unless the appellant expressly challenges the award of future interest, no court‑fee is payable on the interest accruing from the date of the suit until the filing of the appeal. It also referred to Ashutosh v. Satindra Kumar (54 C.W.N. 380.) wherein at page 382 it was observed: “Costs are not regarded as being any part of a subject‑matter in dispute either in the suit or in the appeal. In the appeal, the appellant does not in such an event really dispute the order as to costs for it is the natural order that is ordinarily made following the decision as to the main subject‑matter in dispute and if he himself succeeds in the appeal in regard to the main subject‑matter, automatically he will expect to succeed with regard to the costs.” Based on these authorities the Court held that the pendente lite interest decreed could not be treated as part of the “amount or value of the subject‑matter in dispute in appeal” for the purpose of Article 1 of Schedule I of the Act, unless the appellant specifically challenged the correctness of the decree for that interest independently of the claim to set aside the decree. The Court observed that the appellant had not specifically challenged the decree in that respect, and therefore concluded that the pendente lite interest should not be included in the valuation of the subject‑matter in dispute for court‑fee purposes.

In this part of the judgment, the Court observed that, with respect to the question of whether the memorandum of appeal had been properly stamped, the High Court had acted correctly. The Court therefore affirmed the High Court’s finding that the memorandum of appeal satisfied the requisite stamping requirement. Because the stamping issue was resolved in favor of the appellant, there was no basis to allow the appeal to proceed. Consequently, the Court ordered that the appeal be dismissed and that the costs of the proceedings be awarded against the appellant. The final order of the Court recorded that the appeal was dismissed, thereby concluding the matter. This dismissal with costs reflected the Court’s agreement with the High Court’s determination that the statutory requirement of a duly stamped memorandum had been met, and it resulted in the termination of the appeal without any further relief being granted.