Badar Durrez Ahmed, J.
1. The Petitioner, Delhi Race Club Limited, was initially a Club formed in 1926 known as the Delhi Race Club. It was subsequently registered as a Company with limited liability taking over the assets and liabilities of the erstwhile club in 1940. The Petitioner was established with the primary object of encouraging Indian bred horses and Indian Jockies and also to confer upon horse racing the status of a game/sport.
2. In this Petition we are concerned with the challenge to :- (1) Notification dated 19th October, 1984 whereby the Central Government extended the Mysore Race Course Licensing Act 1952 (hereinafter referred to as the Act) to the Union Territory of Delhi; and (2) the Notification dated 7th March, 2001 issued by the Lt. Governor in purported exercise of Section 2 of the Mysore Race Course Licensing Act, 1952 and (3) Delhi Race Course Licensing Rules 2001 and (4) the demands dated 31.1.2002 whereby the Respondent No. 3 (Commissioner of Excise, Entertainment & Luxury Tax, New Delhi) has called upon the Petitioner to pay the enhanced/amended license Fee of Rs.17,80,000/- for the year 2001-2002 and Rs.18,00,000/- for the year 2002-2003.
3. By the first Notification i.e. the Notification dated 19th October, 1984 the Central Government in exercise of the powers conferred on it by Section 2 of the Union Territories (Laws) Act, 1950 extended to the Union Territory of Delhi, the Mysore Race Courses Licensing Act, 1952 as in force in the State of Karnataka on the date of the said notification subject to the modifications mentioned therein. The said Act as extended to Union territory of Delhi provided for licenses being granted by the Government for horse racing and also provided that a license Fee be charged in respect of the license so granted. However, no quantum of the fee was specified in the said Act as extended to Delhi. Under Section 11 of the said Act as extended to Delhi the Government had the power to make rules inter alias providing for the fees payable for such licenses. Accordingly, on 1st March, 1985 by a notification the Administrator of the Union territory of Delhi notified the Rules there under which were known as the Delhi Race Course Licensing Rules 1985 (hereinafter referred to as the said Licensing Rules). Rule 6 of the said Delhi Licensing Rules inter alias provided that the license fee for horse racing on the race course (i.e., venue racing) shall be a sum of Rs.2000/- per race day on which the race is held and that the license fee for arranging for wagering or betting on a horse race run on any other race course (i.e., inter-venue racing) shall be a sum of Rs.500/- per race day on which the race is held. The second notification i.e. The Notification dated 7th March, 2001 in effect amended the aforesaid Rule 6 of the said Delhi Licensing Rules and, inter alia, the license fee has been enhanced from Rs. 2000/- to Rs. 20,000/- per day on which the race is held for venue races and from Rs.500/- to Rs.5000/- per day on which the race is held for inter-venue races. The demand dated 31st January, 2002 is based on the enhanced license fee as per the second notification of 7th March, 2001.
4. In the petition several grounds of challenge are mentioned. However, at the time of hearing of the case the petitioner limited itself to two points of challenge to the said notifications and demand. The first point of challenge was that the license fee being charged was a misnomer inasmuch as it was not a fee as there was no quid pro quo and as such was bad in law and was liable to be struck down. The second point of challenge was that the Act had not fixed any fees and left it to the Rules and that this amounted to excessive delegated legislation and was thereforee, bad and liable to be set aside. A corollary to these points was the issue that, in any event, the ten-fold enhancement of fees from Rs.2000/- and Rs.500/- in 1984 to Rs. 20,000/- and Rs.5000/- in 2001 was too excessive particularly when the fee under the parent Act as applicable to Karnataka had remained at Rs.4000/- through out.
5. On behalf of Respondent No. 1 (UOI) the said notifications were defended on the ground that the license fee being charged under the said Act and the said Licensing Rules was in fact a fee and that it is not at all essential that there must be a quid pro quo for a charge or a levy to be designated as a fee. It was further submitted that license fee can be of two types: (a) compensatory and (b) regulatory. In the former case the presence of a quid pro quo in the form of services rendered would be necessary whereas in the latter case there need not be any quid pro quo. It was contended that in the present case the license fee was a regulatory fee and, thereforee, the absence of a quid pro quo did not take it out of the purview of a fee. It was further contended that in the case of regulatory license fee the only question to be asked is whether the fee is excessive or not. If it is excessive it is liable to be struck down. If not, it cannot be interfered with. The alternative argument on behalf of the Respondent (UOI) is that even if the license fee was regarded to be a tax and not a fee, there were reasonable and sufficient guidelines in the said Act itself which would save it from being hit by the vice of excessive delegation of legislative powers.
6. While adopting the argument of Respondent No. 1, it was urged on behalf of Respondent No. 3 that the enhancement of fees from Rs.2000/- and Rs.500/- per race day in 1984 to Rs. 20,000/- and Rs.5000/- per race day in 2001 after a gap of about seventeen years was not at all excessive and did not in fact amount to much of an enhancement in real terms keeping in view the rates of inflation in the intervening years. As such, the second notification and the demand raised therein were not arbitrary and excessive but were reasonable and are not liable to be interfered with by this Court under writ jurisdiction.
7. In order to appreciate the rival contentions of the parties, it would be necessary to examine some of the provisions of the said Act as extended to Union Territory of Delhi (now, the National Capital Territory of Delhi NCT). The preamble provides that 'it is expedient to make provision for the licensing regulation, control and management of horse racing on race course and all matters connected therewith.........' Section 2(2) defines 'horse race' as under:-
(2) 'Horse -race' means any race in which any horse, mare or gelding runs, or is made to run, in competition with any other horse, mare or gelding for any price of whatsoever nature or kind, or for any bet or wager made or to be made in respect of any such horse, mare or gelding or the riders thereof, and at which more than twenty persons shall be present.'
Section 3 provides that no horse- race shall be held save on a race-course for which a license for horse-racing granted in accordance with the provisions of this Act is in force.
Section 4, so much as is the relevant for our purposes reads as under:-
4. licenses for horse-racing -
(3) In particular and without prejudice to the generality of the foregoing power, such conditions may provide for-
(a) the payment of a license fee:
.............................................
.............................................
(g) the utilisation of the amount collected by the licensee in the conduct and management of horse-racing;
...................................'
Section 11 prescribes power to make Rules and reads as under:-
'11. Power to make rules - (1) The Government may, by notification in the Delhi Gazette make rules for the purpose of carrying into effect the provisions of this Act.
(2) In particular and without prejudice to the generality of the foregoing powers, such rules may provide for all or any of the following matters, namely:-
(i) the form and manner in which applications for licenses are to be made;
(ii) the fees payable for such licenses;
(iii) the period for which licenses are to be granted;
(iv) the removal, modification and cancellation of licenses.
8. From the above provisions of the said Act it is clear that a horse race can be held only in a licensed race course for which a license is granted under Section 4 of the said Act. While granting the license the Government, i.e., the Administrator of the Union Territory of Delhi [ now the Lt. Governor after the insertion of Article 239AA in the Constitution of India by the Constitution (69th Amendment ) Act 1991 with effect from 1.2.1992],may impose conditions specified under Section 4 of the said Act which include the payment of a license fee. The exact quantum of the fees payable for such license was left to be fixed by the Government under the rule making power of Section 11 of the said Act. In the present case, it is in exercise of this power that the said Licensing Rules have been made which, in 1984, initially prescribed a license fee for Rs.2000/- and Rs.500/- per day on which the race is held and which was subsequently enhanced in 2001 to Rs.20,000/- and Rs.5000/- per day on which the race is held.
9. The petitioner, it must be noted, did not approach the Court in 1984 when the first notification extending the Mysore Act to Delhi was published nor did it then challenge the imposition of the license fee of Rs.2000/- and Rs.500/- per day on which the race is held under the said Licensing Rules as it originally stood from 1984 onwards till 2001. The petitioner has now come to Court essentially challenging the second notification of 7th March, 2001 whereby the license fee has been enhanced from Rs.2000/- to Rs.20,000/- for venue races and from Rs.500/- to Rs.5000/- for inter-venue races. The petitioner, however, has not limited his challenge to the present enhancement but has also challenged the original notification and rules.
10. In this background, it is clear that the key questions are :-
(1) Is the license fee under Rule 6 of the said license Rules a fee or not?
(2) If it is a fee, is it excessive or not?
11. Mr. B. Sen, Learned Senior Counsel appearing on behalf of the Petitioner argued that the fees under Rule 6 of the said Rules could not qualify as fees understood in law and in support thereof he relied heavily on a Constitution Bench decision of the Supreme Court in The Corporation of Calcutta and another Vs . Liberty Cinema , : [1965]2SCR477 . The other decisions cited by him, which, he has candidly agreed, did not apply were:- Rajnarain Singh vs . Chairman, Patna Administration Committee, Patna and another, : [1955]1SCR290 , Hari Chand Sarda vs . Mizo District Council and another, : [1967]1SCR1012 , Balaji Vs . Income -tax Officer, Special Investigation Circle, Akola, : [1961]43ITR393(SC) , M/s. Devi Das Gopal Krishnan vs . State of Punjab and others, : [1967]3SCR557 and D.K. Trivedi and Sons vs. State of Gujarat, AIR 1986, SC 1323.
12. Mr. Sen, learned senior Counsel relied upon and drew support from the observations in paragraph 20 of the Supreme Court decision in the Liberty Cinema's case (supra) which read as under:-
'(20) The conclusion to which we then arrive is that the levy under S. 548 is not a fee as the Act does not provide for any services of special kind being rendered resulting in benefits to the person on whom it is imposed. The work of inspection done by the Corporation which is only to see that the terms of the license are observed by the licensee is not a service to him. No question here arises of correlating the amount of the levy to the costs of any service. The levy is a tax. It is not disputed, it may be stated, that if the levy is not a fee, it must be a tax.'
According to Mr. Sen if a charge or levy does not entail any service of a special kind being rendered to the person on whom it is imposed then such charge or levy could not be regarded as a fee. In other words, if there is no element of quid pro quo then it cannot be a fee. In reply to this contention on behalf of the petitioner, Mr. Jayant Bhushan, learned counsel for the respondent (UOI) submitted that existence of a quid pro quo is not necessary for any charge or levy to be considered to be a fee. He submitted that there has been a change and development in the position of law as regards the understanding of the nature of a fee. He states that it is now well recognized that fee can be compensatory or regulatory. In the former case there will be quid pro quo (although mathematical equivalence is not necessary) whereas in the latter case the absence of a quid pro quo will not render it not to be a fee. He relied upon the following recent decisions of the Supreme Court :- Secunderabad Hyderabad Hotel owners' Association and others vs . Hyderabad Municipal Corporation, Hyderabad and Another, : [1999]1SCR143 , A.P Paper Mills Limited v. Government of A.P. And Another, 2000 (8) SCC 167. In Secundrabad's case (supra) the Supreme Court held as under (para 9):-
'It is, by now, well settled that a license fee may be either regulatory or compensatory. When a fee is charged for rendering specific services, a certain element of quid pro quo must be there between the service rendered and the fee charged so that the license fee is commensurate with the cost of rendering the service although exact arithmetical equivalence is not expected. However, this is not the only kind of fee which can be charged. license fee can also be regulatory when the activities for which a license is given require to be regulated or controlled. The fee which is charged for regulation for such activity would be validly classifiable as a fee and not a tax although no service is rendered. An element of quid pro quo for the levy of such fees is not required although such fees cannot be excessive.'
It would be also relevant to notice paragraphs 11 and 12 of the said decision of the Supreme Court which reads as follows:-
'11. In the case of Corpn. Of Calcutta v. Liberty Cinema3 (SCR at p. 483) this Court after referring to the constitutional provisions making a distinction between a fee and a tax, also went on to say that in our Constitution, fees for license and fees for services rendered are contemplated as different kinds of levy. The former is not intended to be a fee for services rendered. This is apparent from a consideration of Article 110(2) and Article 199(2) where both the expressions are used indicating thereby that they are not the same. In other words, a distinction was made between fees for services rendered and fees which are regulatory. In Indian Mica Micanite Industries v. State of Bihar4 (SCC at p. 241: SCR at p. 324), Om Parkash Agarwal v. girl Raj Kishori5 and Municipal Council, Madurai v. R. Narayanan6 (SCC pp. 503 to 505: SCR at pp.339 to 340) the Court had considered a fee which was charged for services rendered. In all these cases, the Court observed that when a fee is charged for services rendered, an element of quid pro quo is necessary and there has to be a co- relationship of a general character between the cost of rendering such service and the fee charged. A number of other decisions were also cited in this connection. The position in respect of fees for services rendered is summed up in the case of Krishi Upaj Mandi Samiti v. Orient Paper & Industries Ltd.7 (SCC in para 21)
12. In the present case, however, the fees charged are not just for services rendered but they also have a large element of a regulatory fee levied for the purpose of monitoring the activity of the licensees to ensure that they comply with the terms and conditions of the license. Dealing with such regulatory fees, this Court in Vam Organic Chemicals Ltd. v. State of UP8 (SCC at p. 726) observed that in the case of a regulatory fee, no quid pro quo was necessary but such fee should not be excessive. The same distinction between regulatory and compensatory fees has been made in the case of P. Kannadasaan v. State of T.N9. (SCC in para 36) as well as State of Tripura v. Sudhir Ranjan Nath. (SCC at p.673).'
In A.P. Paper Mills Ltd's case (supra), the Supreme Court after noticing several of its decisions including the decision in the Liberty Cinema's case (supra) concluded as follows:-
'32. From the conspectus of the views taken in the decided cases noted above it is clear that the impugned license fee is regulatory in character. thereforee, stricto sensu the element of quid pro quo does not apply in the case. The question to be considered is if there is a reasonable correlation between the levy of the license fee and the purpose for which the provisions of the Act and the Rules have been enacted/framed. As noted earlier, the High Court has answered the question in the affirmative. We have carefully examined the provisions of the Act and the Rules and also the pleadings of the parties. We find that the High Court has given cogent and valid reasons for the findings recorded by it and the said findings do not suffer from any serious illegality. It is our considered view that the license fee has correlation with the purpose for which the statute and the rules have been enacted.'
13. In rejoinder Mr. Sen argued that the decisions in the Secundrabad's case (supra) and the A.P. Paper Mills's case (supra) no doubt showed that the presence of a quid pro quo was not essential for a fee, yet, these decisions were not rendered by a Bench larger than the Constitution Bench decision in the Liberty Cinema's case (supra), which according to him was an authority for the proposition that if there was no quid pro quo in the form of some special service then the charge or the levy could not be a fee but would qualify as a tax. thereforee, he submitted that as there was an apparent conflict between the two decisions on the one hand and the decision in the case of Liberty Cinema (supra) on the other the Liberty Cinema's decision will prevail being a Constitution Bench decision. At first glance this argument on behalf of Mr. Sen may appear to be appealing. However, if the Liberty Cinema decision (supra) itself is looked into it will be apparent that the observations and/or conclusions of the Constitution Bench of the Supreme Court referred to in paragraph 20 of the said Liberty Cinema's case(supra) were with reference to the question that had been posed in paragraph 6 of the said judgment itself. It would, thereforee, be instructive to set out the said paragraph No. 6.
'The second challenge to the levy was put in this way: The levy authorised by Ss. 443 and 548 was a fee in return for services to be rendered and not a tax and it had thereforee to be commensurate with the costs incurred by the Corporation in providing those services. The present levy of Rs.6000/- per year was far in excess of those costs and was for that reason invalid. The Corporation's answer to this contention is that the levy was a tax and not a fee taken in return for services and no question of its being proportionate to any costs for services and no question of its being proportionate to any costs for services arose. The Corporation does not dispute that if the levy was a fee in the sense mentioned, it would be invalid. The only question on this part of the case, thereforee, is, was the levy a fee in return for services? Another subsidiary question is, what is the nature of the service which makes a levy in respect of them, a fee? It is not disputed that a levy made in return for services rendered would be a fee. It is, thereforee, unnecessary to consider what a fee is or the tests by which it is to be determined. Nor is it necessary to discuss whether in order that a levy may be a fee the statute imposing it must intend primarily to confer the benefits of the services on those who pay it and benefits received from those services by the public at large, if any, must be secondary. A discussion of these aspects of fees, will be unprofitable and will only cloud the point really in issue.'(underlining added).
From the above, it would be clear that the Constitution Bench in the Liberty Cinema Case (supra) did not at all consider what a fee is or the test by which it is to be determined. Nor did it discuss whether in order that a levy may be a fee the statute imposing it must intend primarily to confer the benefits of the services on those who paid it. It was made clear in the said paragraph itself that a discussion on these aspects of fees would be unprofitable and would only cloud the point really in issue.
14. It is, thereforee, clear that the Supreme Court decision in the Liberty Cinema Case (supra) did not delve into the aspects of fees which have been dealt with by the later decisions of the Supreme Court and in particular in the Secundrabad's case (supra) and A.P. Paper Mill's case (supra).
15. The development of the law with regard to the nature of a fee apparently started in the early 1980's. A Constitution Bench of the Supreme Court in Kewal Krishan Puri and another vs. State of Punjab and Another, : [1979]3SCR1217 , while analysing the concept of quid pro quo as an essential requirement of a levy to qualify as a fee in relation to the earlier decisions of the Supreme Court, observed as under (para 17):-
'The next case to be considered is the decision of this Court in Nagar Mahapalika, Varanasi v. Durga Das Bhattacharya in which it was held that the annual license fee charged from the rickshaw owners and the drivers by the Varanasi Municipal Board could be justified only on the basis of the element of quid pro quo. The fee was held to be ultra virus and illegal because after excluding certain items of expenditure the balance did not constitute sufficient quid pro quo for the amount of the license fee charged. It could not be sustained as a tax. Certain major items of expenditure incurred by the Municipal Board were attributable to the expenditure incurred by the Municipal Board were attributable to the discharge of its statutory duty and, thereforee, at page 386 it was said by Ramaswami, J. : 'It is manifest that the license fee cannot be imposed for reimbursing the cost of ordinary municipal services which the Municipal Board was bound under the statute to provide to the general public'. The expenditure incurred by the Municipal Board for the benefit of the licensees constituted 44 per cent of the total income of the Municipal Board and hence it was held that there was no sufficient quid pro quo established in the circumstances of the case. In Delhi Cloth & General Mills Co. Ltd. v. Chief Commissioner, Delhi the High Court had found that 60 per cent of services rendered to the factory owners. On that basis sufficient quid pro quo was found to exist and the impost was upheld by this Court also. We may, however, add that the rule of 60 per cent cannot be of universal application. It is not a static rule. The cases of license fee are, generally speaking, on some different footing. There is a substantial element of regulatory measure involved in them. Over and above that a good portion of the fee, may be in the neighborhood of 60 per cent or more, must be correlated to the service rendered to the person from whom the fee is charged. But there may be cases where, as in the instant one, the license fee charged by way of regulatory measure is not exorbitant or excessive. But the other kind of fee charged has got to be justified on the ground of existence of sufficient quid pro quo between the payer of the fee and the authority charging it. In such a case from a practical point of view it may be difficult to find out with arithmetical exactitude as to what amount of fee has gone in incurring the expenditure for the services. But, broadly speaking, a good and substantial portion of it must be shown as being spent for the services rendered.'
From the above observations it is clear that the Supreme Court was contemplating a hybrid kind of a fee, that is, a fee which had both a compensatory element and a regulatory element. Insofar as there was no quid pro quo for the regulatory element of the fee the Supreme Court held it yet to be a fee as long as there was a quid pro quo for the compensatory part of the fee.
16. Thereafter, several cases came up before the Supreme Court wherein this proposition was further developed. Those cases being Municipal Corporation of Delhi v. Mohd. Yasin, : [1983]142ITR737(SC) and M/s. Amar Nath Om Prakash and Others v. State of Punjab and Others, : [1985]2SCR72 . In City Corporation of Calicut v. T. Sadasivan, these three cases were noticed and the Supreme Court concluded as under:-
'It is thus well-settled by numerous recent decisions of this Court that the traditional concept in a fee of quid pro quo is undergoing a transformation and that though the fee must have relation to the services rendered, or the advantages conferred, such relation need not be direct, a mere casual relation may be enough. It is not necessary to establish that those who pay the fee must receive direct benefit of the services rendered for which the fee is being paid. If one who is liable to pay receives general benefit from the authority levying the fee the element of service required for collecting fee is satisfied. It is not necessary that the person liable to pay must receive some special benefit or advantage for payment of the fee.'
This position in law has been recognized consistently by subsequent decisions of the Supreme Court including the decision in Secundrabad's case and A.P. Paper Mills's case (supra) cited by Counsel for Respondent No. 1/UOI.
17. In fact, in a recent decision of the Supreme Court in BSE Brokers Forum, Bombay and others v. Securities and Exchange Board of India and others, reported in : AIR2001SC1010 . The Supreme Court has concluded that as noticed in the City Corporation of Calcutta Case (supra), the traditional concept of quid pro quo in a fee has undergone considerable transformation and that as far as regulatory fee is concerned the service to be rendered is not a condition precedent and the same does not lose the character of fee provided the fee charged is not excessive. : AIR2001SC1010 . In the said decision the Supreme Court at page 1022 (para 37) has further remarked:-
'...........once it is held that the fee levied is also regulatory in nature then the requirement of quid pro quo recedes to the background and the same need not be confined to the contributories alone.'
18. So, from an examination of the aforesaid decisions of the Supreme Court it is clear that a fee may be of three kinds:-
1. Compensatory fee.
2. Regulatory fee.
3. A hybrid fee having both the compensatory and regulatory elements.
In the case of compensatory fee there must be a quid pro quo whereas the presence of quid pro quo is not a condition precedent in the case of a regulatory fee. Insofar as the hybrid situation is concerned the quid pro quo must be such as to be relatable to the compensatory element of the fee.
19. In the present case, the fee is admittedly not a compensatory fee and consequently there is no requirement of a quid pro quo. What we have to examine is whether it is a regulatory fee or not. The Act under which the license fee is levied itself discloses the purpose and guiding principle i.e. regulation, control and management of horse racing at race courses as set out in the preamble itself. The object of the license is to regulate horse racing for without the license there is a prohibition on horse racing on unlicensed race courses as per the provisions of Section 3 of the said Act. Clearly, then, the license is not compensatory but regulatory and as such the 'license fee' would not require any quid pro quo in the form of any special service.
20. This takes us to the next question viz whether the fee which is being charged as a regulatory fee is excessive? When the fee was introduced in Delhi in 1984, it was Rs. 2000/- per race day for venue races and Rs.500/- per race day for inter-venue races. This continued to be the position till 2001. Nobody complained. It is only when the fee was enhanced to Rs.20,000/- and Rs.5000/- per day on which the race was held that the petitioner came to the Court. It, thereforee, appears that the impost of Rs.2000/- and Rs.500/- was regarded by the Petitioner as not being excessive in 1984. The question, thereforee, is whether Rs.2000/- and Rs.500/- in 1984 and Rs.20,000/- and Rs.5000/- in 2001 represent a material change in real terms? Although in nominal terms there is a ten-fold increase in the license fee, in real terms the increase, if at all, would not be much keeping in mind the high rates of inflation and ever increasing costs of living in the intervening years, i.e., 1984 to 2001. So, in real terms, there is not much of an increase, if at all, and, thereforee, we are of the view that the enhanced fee is not excessive. In fact, apart from merely alleging that the enhancement in fee was excessive, the petitioner has not placed any material to back this allegation of theirs. It would not be out of place to mention that enhancement in license fees in the range of 4 to 30 times between 1981 and 1992 have been upheld by the Supreme Court in the Secunderabad Hyderabad Hotel owners case (supra). On the other hand in the case of A.P. Paper Mills (supra) the Supreme Court struck down an enhancement in license fee from Rs.10,000/- to Rs.18,00,000/- as being too high and excessive. The present case is one which is akin to the enhancement as in the Secunderabad Hyderabad Hotel owners' case (supra) and is, thereforee, not a case where the license fee is excessive.
21. In view of the discussions above, we find that there is no merit in the petitioner's contentions and we dismiss the writ petition. Parties are left to bear their respective costs.