The fee charged under the Kerala Panchayat Raj Act had a large element of regulatory character for monitoring the activity of the licensees to ensure compliance with the terms and conditions of the licence. The fee was found not to be excessive, exorbitant, or disproportionate to the services rendered.

Headnote:
Panchayat Raj Act - Licence Fee - Sections 232, 233, 234 and 254 - The court discussed the increase in the licence fee under the Kerala Panchayat Raj Act (Issue of licences to Dangerous and Offensive Trades and Factories) Rules, 1996. The court found that the fee charged had a large element of regulatory character for monitoring the activity of the licensees to ensure compliance with the terms and conditions of the licence. The court also found that the fee was not excessive, exorbitant, or disproportionate to the services rendered.
Fact of the Case:

The petitioner, a public limited company engaged in the manufacture of Petroleum and related products, challenged the increase in the licence fee under the Kerala Panchayat Raj Act (Issue of licences to Dangerous and Offensive Trades and Factories) Rules, 1996. The petitioner contended that the fee was illegal, unsustainable, and ultra vires the provisions of the Act as it lacked quid pro quo and was excessive and disproportionate.
Finding of the Court:

The court found that the fee charged had a large element of regulatory character for monitoring the activity of the licensees to ensure compliance with the terms and conditions of the licence. The court also found that the fee was not excessive, exorbitant, or disproportionate to the services rendered.
Issues: The main issues were whether the fee charged lacked quid pro quo, was excessive, exorbitant, or disproportionate to the services rendered.
Ratio Decidendi: The court held that the fee charged had a large element of regulatory character for monitoring the activity of the licensees to ensure compliance with the terms and conditions of the licence. The court also found that the fee was not excessive, exorbitant, or disproportionate to the services rendered.
Final Decision: The Original Petitions and the Writ Appeals were rejected with no order as to costs. Consequently, all pending stay/direction petitions were also dismissed.

Judgment :-

H.L. Dattu, C.J.

The law makers realising the importance of local self governance units in building the nation, brought to the fore by the 73rd amendment to the Indian Constitution the role of Village Panchayats or Village Councils. The 73rd amendment incorporated Part IX in the Constitution and required the States to bring into existence laws for implementation of three tiers Panchayat Raj system. After this amendment, the Kerala Panchayats Act, 1960 is repealed and the Kerala Panchayat Raj Act, 1994 is enacted and has been in force for the last 13 years. The Act and the Rules together provide for almost all contingencies arising in the implementation of the Scheme for Local Self Government. The local self governments need funds for the development of village panchayat and grama panchayats. The State Government has framed several rules and regulations, by enforcement of which the local self governments may generate funds for their developmental activities.

2. In these proceedings, the petitioners/appellants are primarily challenging the increase in the licence fee under the provisions of the Kerala Panchayat Raj Act (Issue of licences to Dangerous and Offensive Trades and Factories) Rules, 1996, hereinafter for the sake of brevity referred to as "Rules, 1996".

3. Since common questions of facts and law are involved in all these writ appeals and original petitions, they are all clubbed, heard and disposed of by this common order.

4. For the purpose of narration of facts, we take up the facts stated in O.P.No.5764 of 1997. The petitioner is a public limited company registered under the Companies Act, and having its registered office at Ambalamughal, Cochin. The company is engaged in the manufacture of Petroleum and related products. It is situated within the jurisdiction of Vadavukode Puthencruz Grama Panchayat area. It has installed several plant and machinery for the purpose of manufacture of its products. At the time of erection and installing plant and machinery, it had taken the permission of the Panchayat. The petitioner has been operating the plant and machinery after obtaining licence from the Panchayat on payment of licence fee prescribed under the Kerala Panchayat Act, 1960 and Rules framed there under. The company had commenced its commercial production in the year 1966.

5. The company for the renewal of licence granted earlier had made an application for the renewal of licence for the period 1996-97. The Panchayat had issued a licence to the petitioner company for operating its oil refinery and storing gas and petroleum components and the period of licence is to expire on 31.3.1997 and the fee levied for the issuance of licence was Rs.487/-. Even before the expiry of the licence issued by the Panchayat dated 8.4.1996, the petitioner was asked by the Panchayat to furnish information regarding the total capacity in horse power of motors/machinery functioning in the company for the purpose of levying licence fee under the provisions of the Dangerous and Offensive Trades and Factories Rules which has come into force with effect from 1.4.1996. Pursuant to the letter so issued, the petitioner furnished the information sought for by the Panchayat and also had made an application for renewal of licence for the period commencing from April 1997 to March 1998. After receipt of the information, the Panchayat had issued a letter, directing the petitioner to pay a sum of Rs.3,27,607/- towards the licence fee and the revision of licence fee is purported to be done under the Kerala Panchayat Raj Act (Licencing of Dangerous and Offensive Trade and Practices) Rules 1996. The petitioner being aggrieved by the demand so made by the Panchayat has filed the Original Petition, inter alia seeking the various relief’s, viz., to declare the Rules to the extent it contravenes Sections 232, 233, 234 and 254 of the Kerala Panchayat Raj Act, 1994 as illegal and ultra vires; to call for the records leading to issuance of demand notice (Ex

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Judicial Analysis