State of Maharashtra vs Mishri Lal Tarachand Lodha and Others

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

Court: supreme-court

Case Number: Civil Appeal No. 587 of 1962

Decision Date: 15 November 1963

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

In the matter titled State of Maharashtra versus Mishri Lal Tarachand Lodha and others, the Supreme Court of India rendered its judgment on 15 November 1963. The bench comprised Raghubar Dayal, P. B. Gajendragadkar, K. N. Wanchoo and J. C. Shah, and the decision was reported in 1964 AIR 457 and 1964 SCR (5) 230, with subsequent citations in RF 1976 SC1503 and RF 1978 SC1765. The case concerned the interpretation of the Bombay Court Fees Act, 1959 (Act 36 of 1959), specifically Article 1 of Schedule I, which deals with the “value of the subject‑matter in dispute in appeal” and the circumstances under which interest awarded pendente lite may be included in that valuation.

The plaintiff, identified as respondent No. 1, had instituted a suit seeking recovery of a sum of money that he had lent to the defendant, together with interest accruing up to the date the suit was filed. The trial court decreed that the plaintiff was entitled to a total of Rs. 13,033‑6‑6, which included future interest calculated at a rate of four per cent per annum on a principal amount of Rs. 10,120, to be payable from the date of the suit until the time of realisation. Dissatisfied with the decree, the defendant appealed to the High Court, valuing the appeal at the same amount of Rs. 13,033‑6‑6 and paying the court fee that corresponded to that valuation. All of the appellant’s grounds of appeal pertained to the merits of the plaintiff’s claim and did not contest the trial court’s method of calculating the pendente‑lite interest.

The Taxing Officer, however, directed the appellant to pay an additional court fee of Rs. 70, holding that the appeal was effectively against the entire decree and that the value of the subject‑matter in dispute for fee purposes should be taken as Rs. 14,036.80. This larger figure was derived by adding the interest that had accrued from the filing of the suit to the date of the decree, amounting to Rs. 1,033.40 on the principal of Rs. 10,120. The appellant challenged this assessment by filing a revision under Section 5(2) of the Bombay Court‑fees Act, 1959, before the High Court.

The High Court set aside the Taxing Officer’s order. In doing so, the learned Judge expressed the view 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.” The State of Maharashtra, now the appellant before the Supreme Court, disputed this interpretation and relied primarily on prior judicial constructions of the phrase “value of the subject‑matter in dispute” as applied in cases concerning the High Court’s authority to grant leave to appeal to the Privy Council.

The Supreme Court held that the expression “amount or value of the subject‑matter in dispute” in Article 1 of Schedule I of the Act cannot be understood through the lens of constructions applicable to similar expressions in the context of granting leave to appeal to the Privy Council. The Court clarified that claims which are not based on an asserted right but depend wholly on the court’s determination of a disputed right, and for which the relief sought lies within the court’s discretion, do not fall within the ambit of “subject‑matter in dispute” as contemplated in a plaint or memorandum of appeal. Furthermore, the Court ruled that pendente‑lite interest awarded by the trial court should not be included in the valuation of the subject‑matter in dispute for fee purposes unless the appellant expressly challenges the correctness of that interest amount independently of the broader claim to set aside the decree. In the present case, the appellant had not specifically contested the pendente‑lite interest, and therefore it was excluded from the fee calculation.

The Court observed that the rule permitting High Courts to grant leave for appeal to the Privy Council was not relevant to the present dispute. It stressed that the Bombay Court‑fees Act is a taxing statute and that its provisions must be interpreted narrowly and in favour of the party who is seeking to be taxed. The decisions in Gooroopersad Khoond v. Juggutchunder, 8 M.I.A. 166 and Doorga Doss Chowdry v. Ramanauth Chowdry, 8 M.I.A. 262 were relied upon as authority for this approach. The Court further explained that a claim which does not arise from an asserted right but is merely dependent on the court’s decision regarding a disputed right, and for which the relief lies within the court’s discretion, does not fall within the meaning of “subject‑matter in dispute in plaint or memorandum of appeal”. Regarding pendente‑lite interest, the Court held that the amount of such interest decreed by a trial court is not to be included in the “amount or value of the subject‑matter in dispute in appeal” under article 1 of Schedule 1 of the Act unless the appellant specifically contests the correctness of the decree concerning that interest, independently of the main claim sought to be set aside. In the case before it, the decree for pendente‑lite interest had not been separately challenged; consequently, the Court affirmed the view taken by the High Court. The Court also referred to the authorities Mitthu Lal v. Chameli, 57 All. 71, Keolapati Mst. v. B.N. Varma, I.L.R. 12 Luck. 466, and Ashutosh v. Satindra Kumar, 54 C.W.N. 380, in support of its reasoning.

The appeal under consideration was Civil Appeal No. 587 of 1962, taken by special leave from the judgment and order dated 12 April 1961 of the Bombay High Court in Civil Revision Application No. 441 of 1961. Counsel for the appellant included the Additional Solicitor‑General of India and another senior counsel, while the respondent was represented by two advocates. The matter before the Court concerned whether interest awarded for the period after the institution of a suit should be counted as part of the “amount or value of the subject‑matter in dispute” for the purpose of determining the court‑fee payable on the memorandum of appeal under article 1 of Schedule 1 of the Bombay Court‑fees Act, 1959. The plaintiff‑respondent No. 1 had instituted Special Suit No. 5 of 1957 before the Civil Judge (Senior Division) at Ahmedabad, seeking recovery of Rs 13,205 consisting of the principal amount loaned to defendant No. 7 together with interest calculated at nine per cent per annum up to the date of the suit. On 18 July 1960 the trial court decreed a sum of Rs 13,033‑6‑6, also directing that future interest be payable from the date of the suit until realization at forty per cent per annum on a principal of Rs 10,120. Defendant No. 7 appealed the decree to the High Court. In the appeal memorandum, the appellant valued the claim for jurisdictional and fee purposes at Rs 13,033‑6‑6 and raised two principal grounds: first, that the trial court erred in granting the decree, and second, that the decree was otherwise erroneous, unjust and illegal. The remaining grounds dealt with the merits of the plaintiff’s claim and did not address the correctness of the trial court’s award of future pendente‑lite interest.

The Court observed that the appellant relied on two grounds, namely that the decree was illegal and therefore ought to be set aside. The remaining forty‑six grounds dealt with the merits of the plaintiff’s claim and did not challenge the trial Court’s decision to award future pendente‑sit interest at the rate it had fixed. The Taxing Officer held that the appeal was directed against the whole decree and that, for the purpose of assessing court‑fee, the value of the subject‑matter in dispute amounted to Rs 14,036.80 nP. This figure was derived by adding the interest accrued from the filing of the suit to the date of the decree, which on a principal of Rs 10,120 amounted to Rs 1,033.40 nP. It had been conceded by the counsel for the defendant‑appellant that the subject‑matter of the appeal was indeed the decree rendered by the trial Court. Consequently, the Taxing Officer directed the defendant‑appellant to pay the shortfall of Rs 70 as court‑fee on the memorandum of appeal and ordered that the claim be amended accordingly. Dissatisfied with this order, the defendant‑appellant filed a revision before the High Court under section 5(2) of the Act. The learned Judge entertained the revision and expressed the view 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 oil 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 and held that the court‑fee already paid on the memorandum of appeal was the correct amount.

The State of Maharashtra then instituted a special leave appeal against the revision order. Counsel for the State argued that the learned Judge’s interpretation was erroneous and relied primarily on earlier constructions of the phrase “value of the subject‑matter in dispute” found in decisions concerning the High Court’s power to grant leave to appeal to the Privy Council. The judgment in Gooroo Persad Khoond v. Juggutchunder (8 M.I.A. 166) was cited, where the Judicial Committee explained that, for the purpose of the Order‑in‑Council dated 10 April 1938, leave to appeal required that the value of the matter in dispute in the appeal reach the stipulated sum of Rs 10,000, and that, in determining such value, the interest decreed up to the date of the decree must be added to the principal. The case of Doorga Doss Chowdry v. Ramanauth Chowdry was also referred to, which held that the costs of a suit do not form part of the subject‑matter in dispute, with the Privy Council observing that a litigant could inflate the claim by swelling costs to bring a suit within the appealable value. It was further noted that a litigant’s conduct might cause a prolonged trial and consequently increase pendente‑sit interest, thereby raising the value of the subject‑matter in dispute for appeal purposes.

In this matter the Court observed that the wording of the Act should not be interpreted by reference to a similar expression that had been used to decide whether a case fell within the rule permitting High Courts to grant leave for appeal to the Privy Council. The Court emphasized that the Act is a taxing statute and therefore its provisions must be construed strictly and in favour of the litigant who is required to pay the tax. By contrast, other provisions of the Act are intended to enable a party who is dissatisfied with a decision of the High Court to bring the matter before a higher Court, and consequently those provisions must be given a liberal construction. The Court explained that in the present case the phrase “value of the subject‑matter in dispute in appeal’’ had to be understood solely for the purpose of fixing the court fee payable on a memorandum of appeal, and not for the purpose of determining whether the appeal could be preferred to this Court.

The Court pointed out that the rule governing the court fee on a memorandum of appeal filed in a civil court is contained in article 1 of Schedule 1 of the Act, which requires the fee to be paid ad valorem according to the amount or value of the subject‑matter in dispute. The applicable rates for different value bands are listed in that article, and the maximum fee that may be levied is Rs 15,000. Accordingly, the amount of fee depends on the value of the subject‑matter in dispute in the appeal. In the present case the defendant‑appellant valued his claim at Rs 13,033‑6‑6 and paid the required court fee on that amount. The Court observed that by doing so the appellant clearly contested the portion of the decree that awarded him Rs 13,033‑6‑6, which represented principal together with interest due up to the date of institution of the suit. However, the appellant did not dispute the amount of interest that could be calculated for the period between the filing of the suit and the decree, which was computed at four per cent per annum on a sum of Rs 10,120 as awarded by the decree. The Court noted that the question of whether the appeal is competent without including that interest amount in the claim is separate from the question of the value of the subject‑matter in dispute for fee purposes. Since the appellant did not challenge the decree with respect to that interest, the Court held that it need not adjudicate on it, and the interest cannot be added to the value of the subject‑matter in dispute as defined by the relevant expression. Moreover, none of the appellant’s grounds of appeal specifically referred to the interest earned between the date of the suit and the date of the decree, which further indicated that he was not contesting the propriety of that amount.

The judgment observed that the appellant had not disputed the award of future interest, the rate at which it was awarded, or even the amount on which such interest could be calculated. Consequently, the court could not conclude that the value of the subject‑matter in dispute in the appeal must include the interest that accrued between the date of the suit and the date of the decree. Mr. Gupta correctly acknowledged the well‑settled position that a plaintiff must value an appeal against the dismissal of his suit on the basis of the claim stated in the plaint, without adding the interest due on that claim up to the date of instituting the appeal. Likewise, the defendant is not required to incorporate the amount of future interest accruing after the decree but before the institution of the appeal when assessing the value of the appeal for the purpose of court‑fee, and no court‑fee is payable on the amount of costs decreed in the suit when the aggrieved party files an appeal against the decree. The principle underlying the exclusion of these amounts from the value of the subject‑matter in dispute is that such value is determined by the substantial allegations made in the plaint or the pleas set out in the memorandum of appeal, relating to the points that are actually in dispute between the parties and that the court is called upon to determine. Those points are necessarily the issues that affect the parties’ rights and that the court must adjudicate. Claims that do not rest on any asserted right but are merely dependent on the court’s decision regarding a disputed right, and reliefs that are within the court’s discretion, do not fall within the expression “subject‑matter in dispute in plaint or memorandum of appeal.” There is no sound reason to draw a distinction between the decreed amount of costs and the pendente‑lite interest for the purpose of calculating the value of the subject‑matter in dispute in an appeal. Although costs of suit arise independently of the claim and represent expenses incurred by the plaintiff, the decree for pendente‑lite interest is directly linked to the plaintiff’s claim, even though its award is at the court’s discretion; this link does not justify a separate treatment. Moreover, costs, particularly those relating to court‑fee and counsel’s fee, arise directly because of the claim presented before the court. Ultimately, the expression “amount or value of subject‑matter in dispute” in Article 1, Schedule 1 of the Act refers to the value of the right claimed in the suit or appeal, and the plaintiff has no entitlement to obtain any of these amounts from the defendant, although the court may, in accordance with sections 34 and 35 of the Code of Civil Procedure, allow future interest and costs at its discretion depending on the circumstances of the suit.

In this case, the Court observed that the rule which excludes the amount of pendente lite interest from the calculation of the subject‑matter in dispute on appeal applies in the same manner as the rule that excludes the decreed principal sum. The interest awarded in pendente lite is granted by the Court in the exercise of its discretion, and the plaintiff does not acquire any enforceable right to that interest against the defendant. Consequently, the interest amount cannot be treated as part of the value of the subject‑matter in dispute for purposes of Article 1 of Schedule 1 of the Act. The Court further explained that if the defendant‑appellant succeeds in showing to the satisfaction of the appellate Court that the decree for the principal sum and the interest accruing up to the date of the suit is wholly or partially defective, the appellate Court will consequently have to exercise its own discretion in determining the quantum of costs and any future interest. In such a circumstance, should the plaintiff’s claim be completely dismissed, the appellate Court would not award any future interest or any costs of the suit or the appeal. If, on the other hand, the plaintiff’s claim is sustained in part, the Court would appropriately adjust the amounts of future interest and costs that were originally decreed in his favour. Accordingly, the defendant‑appellant does not have a legitimate ground to challenge the decree of costs or the decree of future interest unless he disputes those particular amounts, either in whole or in part, for specific reasons. The Court clarified that when the appellant expressly contests the propriety or correctness of the decree concerning costs or pendente lite interest, and does so independently of the dispute over the principal subject‑matter in the trial Court, the appellant is required to pay court‑fee on the amounts that are being challenged. In such a scenario, the challenged amounts become part of the “value of the subject‑matter in dispute in appeal.” The Court cited several decisions that support this principle, noting that the requirement to levy court‑fee on the amount of costs or future interest has been upheld in earlier cases. In Mitthu Lal v. Chameli (1) the Court held that no court‑fee is payable on pendente lite interest granted by the lower Court unless the appellant specifically challenges that award in the 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 also referred to the decision in Keolapati, Mst. v. B.N. Varma, which affirmed 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 to the date of filing the appeal. These authorities collectively establish that pendente lite interest decreed is not to be included in the “amount or value of the subject‑matter in dispute in appeal” for the purposes of Article 1 of Schedule 1 of the Act, unless the appellant expressly challenges that component of the decree.

In this case, the Court observed that future interest does not attract any court‑fee on the amount of interest that accrues from the date the suit was filed until the date the appeal is filed. The Court then referred to the decision in Ashutosh v. Satindra Kumar (2) and quoted the passage appearing at p. 382, which stated: “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 this passage, the Court held that the pendente‑lite interest awarded by decree is not to be counted as part of the “amount or value of the subject‑matter in dispute in appeal” for the purpose of article 1 of Schedule 1 of the Act, unless the appellant specifically challenges the correctness of the decree regarding the amount of interest pendente‑lite independently of any claim to set aside that decree. The Court noted the relevant authorities, namely (1) I.L.R. 12 Luck. 466 and (2) 54 C.W.N. 380. The appellant in the present matter had not made a specific challenge to the decree on that ground, and consequently the High Court was correct in finding that the memorandum of appeal had been sufficiently stamped. Accordingly, the Court dismissed the appeal, ordered the appellant to pay costs, and entered an order of dismissal of the appeal.