INCREASE of Court Fees as a Deterrent Factor: A Reality Check
Published: Oct 05, 2021
By Prashanth Shivadass & Sneha Philip*
The conundrum of maximizing utility vis-à-vis Court Fees
MAXIMIZATION of utility is the goal that drives human behaviour and in order to regulate the same, incentives and sanctions come a long way. The recent trend to promote out-of-court dispute resolution models has been on the rise. The reason given for such out-of-court settlements are lengthy, cumbersome and expensive court proceedings. The cost of opting for a court settlement includes a lawyer's pay and court fees. Under the 189th Law Commission Report 1, recommendations were made to decide on amending the fees payable in accordance with the powers of the Parliament. This enhancement was suggested to recover the cost of administration of Justice after considering the views of the concerned parties such as the Courts.
The question that now arises is whether this factor of court fee could be utilized as a disincentive to litigation and what concrete purpose does it seek to cover. This issue could be analysed from an economic angle to determine the efficiency of involving stamping in the litigation process as it isn't a primal source of funding the allowances. 2The case of Government of Madras v. Sriramulu 3forms the backdrop for the enactment of the Court Fees Act, 1870 4, that defined the objective of the legislation. It was observed that the gradual enhancement of court fees would prevent the institution of groundless litigation and would be an effective deterrent to the abuse of court procedure without causing an impediment to the institution of just claims.
Factor Of Economic Efficiency: 'Expected Penalty'
Justice M. Kirley (2005) stated "Just as other lawmakers would not dream of now performing their functions in disregard of the economic factor, so courts in their function of declaring, clarifying and extending legal principle must take seriously the economic consequences of what they are doing." 5Criminals are deterred by the penalties meted out by the law; hence, the society must decide on the type of penalties and the levels at which they should be set. Thus, to decrease the commission of a certain act, its cost must be raised. In other words, to reduce vexatious litigations, the cost factor involved, i.e., court fees must be efficiently deterrent. The expected penalty should, therefore, involve the following factors - severity of the sanction and the frequency with which it is imposed6.
As per the theory of 'expected penalty'7, if the penalty includes a fine of USD 200 and only 50% are apprehended, then the expected deterrence is USD 100. If litigants are risk neutral, the same level of deterrence can be achieved by reducing either the level of the cost or its certainty, provided that there is a compensating increase in the other. Therefore, the heavier the cost, the lower is the level of enforcement necessary to achieve the same level of deterrence.
Rationale behind Court Fees
As observed in the case of State of Madras v. Zenith Lamps, 8 the purpose of the fees collected is to directly reimburse the cost of administration of civil justice, and not for the states to make revenue. Nevertheless, the disincentive to crime shouldn't take the guise of an obstacle to approaching the judiciary for grievance redressal. In this regard, the Court Fees (Delhi Amendment) Act, 2012 was struck down and criticised by the judiciary for imposing exorbitant amounts as Court fees.
According to Gary Becker, an American economist who received the 1992 Nobel Memorial Prize in Economic Sciences, 9 to achieve the same level of deterrence, either the severity of sanction must be lowered and the frequency with which it is imposed be raised, or vice versa. The optimal combination of apprehension rate and the severity of costs to undertake it in the economic model is solely determined by the costs to society of using them. 10 As per this contention, the fees should be very high to deter vexatious petitions, however, the same cannot be employed as it would be an obstacle to accessing the justice system.
Legal Framework
In case Court fees are not paid sufficiently, the plaint is rejected as per the Civil Procedure Code. 11 Research conducted in the UK 12 revealed that the biggest factor in litigation was the emotional motivation. In all cases - saving family disputes, participants revealed that court fees were not separately considered as a factor to choose litigation, but an intrinsic part of the legal costs. More so, the participants eligible for legal aid from the government did not even consider the same.
As an anathema to the concept, various Law Commission reports have made comparisons with experiences of other countries. One such report 13 analysed whether there is a need to revise the court fee structure to build financial disincentives to discourage vexatious litigation, and the measures available for the same.
The Madras Government legislated the Act of Vexatious Litigation (Prevention) Act, 1949 14 which provided that upon filing of an application by the Advocate-General regarding the habit of a litigant of filing frivolous petitions, if the bench is satisfied that any person has habitually instituted vexatious civil or criminal proceeding, in any Court(s), it may pass an order that no proceeding shall be instituted by him without the leave of the Court. The constitutional validity of the said Act was upheld in the case of P.H. Mowle v. State of A.P . 15 Another similar Act is that of Madhya Pradesh Vexatious Litigation (Prevention) Act, 2015 that prevented vexatious litigants from instituting proceedings. 16 Additionally, Section 250 of CrPC 17 allows the magistrate to impose monetary costs on the complainant or informant if there is acquittal of all the accused on the ground that there was no reasonable cause established in the complaint, upon giving an opportunity to such complainant.
Effectiveness of Court Fees: Deterrent or Ambiguous?
The effectiveness of court fees being a deterrent factor is not materialised in reality. Thus, institution of penalties for frivolous petitions adds up to efficiently weaving out non-serious petitions, and at the same time not hurdling access to justice. The concept of increasing court fees to avoid vexatious litigations as a concept is not consistent with the Supreme Court Judgement of Central Coal Fields Ltd. v. Jaiswal Coal Co wherein it was held "effective access to justice is one of the basic requirements of a system and high amount of court fee may amount to sale of justice." 18 The bench in above judgement observed that Payment of fee on a profiteering scale undermines the effective access to justice enshrined under Article 39A. It can be established that Fees were a means to justify the improvement of the justice enforcement system. However, the effectiveness of this means to the end is ambiguous. Viewing the same through an economic lens, the increase in court fees as a deterrence for institution of a frivolous proceeding does not balance out the increase in hurdles of genuine cases being filed in the interest of justice.
[The authors are Partner and Associate respectively, with Shivadass & Shivadass (Law Chambers). The Authors would like to acknowledge the contributions of Ms. Lolita Delma Crasta, a 3rd Year law student from School of Law, Christ (Deemed to be University)].
1 Law Commission, Revision of Court Fees Structure (189, 2004).
2What is Consolidated Fund of India, Financial Express (last accessed on October 1, 2021) https://www.financialexpress.com/what-is/consolidated-fund-of-india-meaning/1762621/.
3Government of Madras v. Sriramulu, AIR 1996 SC 676.
4 The Court Fees Act, 1870.
5CRS Report, Statutory Interpretation: Theories, Tools and Trends (2018), available at https://www.everycrsreport.com/reports/R45153.html .
6 Keith N. Hylton, The Theory of Penalties and the Economics of Criminal Law, Review of Law and Economics Boston University of Law (2005).
7 Supra.
8State of Madras v. Zenith Lamps AIR 1970 SC 999.
9 Gary S. Becker - Facts, Nobel Prize Outreach AB 2021 (last seen on 30 Sep 2021) https://www.nobelprize.org/prizes/economic-sciences/1992/becker/facts/ .
10 Gary S. Becker and William M. Landes, eds., Essays in the Economics of Crime and Punishment 48 (1974), http://www.nber.org/books/beck74-1 .
11 Civil Procedure Code 1908, Order 7 Rule 11(c).
12 Isabella Pereira, Paul Harvey, William Dawes, and Helen Greevy, The role of court fees in affecting users' decisions to bring cases to the civil and family courts: A qualitative study of claimants and applicants 38 (2014).
13 Id at 1.
14Madras Vexatious Litigation (Prevention) Act, 1949.
15 P.H. Mowle v. State of A.P. AIR 1965 SC 1827.
16The Madhya Pradesh Vexatious Litigation (Prevention) Act, 2015.
17 Criminal Procedure Code 1973, Section 250.
18 AIR 1980 SC 2125
