Judgment :- 1. These writ petitions are by four traders of the Alwaye Municipality seeking to quash by writs of certiorari or other appropriate writs the amended bye-laws of the Municipality increasing the rates of license fees in the trades, in which they are engaged. The amended schedule came into force on 23rd December 1958. The petitioner in O.P. 62 of 1959 is a Cotton Mill running a Spinning Mill by electrical machinery within the limits of the Municipality. For the purposes of its business the Mill stores cotton and yarn in a godown within the Municipal limits and also conducts a workshop for repairing the machinery in the Mill. The Mill runs a canteen for the use of its employees in its premises. O.P. No. 110 of 1959 is by the proprietor of a Saw Mill situated within the Municipality. The Mill stores timber in its premises. The third writ, petition, we mean O.P. 292 of 1959, is by the manager of a Wood and Metal Industries, which also owns a Saw Mill run with machinery having over 111 H.P. The said concern is storing timber in its premises. The last of these writ petitions is by a dealer in textile goods plying his trade within the limits of the respondent-Municipality and he necessarily stores textile goods in his shop premises. All the aforesaid premises have to be licensed. 2. The allegations in the several affidavits in support of these writ petitions are mostly on the same lines and we would narrate the relevant allegations. The respondent-Municipality is governed by the Travancore District Municipalities Act, 1116 [Travancore Act XXIII of 1116 M.E.]. Under S.261 of the Act premises may not be used without licence for the purpose enumerated in Schedule III of the Act. The general provisions regarding licences are contained in S.342 of the Act and bye-laws are framed by the Municipality to regulate the issue of such licences and under these bye-laws licence fees are also prescribed. Under S.261 of the Act premises may not be used without licence for the purpose enumerated in Schedule III of the Act. The general provisions regarding licences are contained in S.342 of the Act and bye-laws are framed by the Municipality to regulate the issue of such licences and under these bye-laws licence fees are also prescribed. The schedule of licence fees was first notified on 25th April, 1945 Thereafter, with the avowed object of giving relief to small and petty traders, but to argument its resources, the Municipal Council decided to increase the licence fees A draft of the proposed new rates was passed by the Council at its meeting held on 27th December, 1956 and these rates were subsequently adopted and later on published in the Kerala Gazette dated 26th March 1957. These rates came into force on 1st April, 1957 There was some agitation consequent on the increase in the licence fees and therefore the Municipal Council by its resolution No. 27 dated 31st May, 1957 appointed a sub-committee to report and recommend regarding the amendment of the bye-laws relating to levy of licence fees. The committee submitted a report detailing the principles, on which revision was to be effected. The recommendations of the Committee with minor variations were subsequently adopted by the Council and the principles enumerated by the sub-committee are (1) that the petty traders or those who follow their occupations merely for the sake of their living without having a margin of savings should be given their licences free or on payment of some nominal fees; (2) that, with this exemption, the total amount which the Municipality might incur for the purpose of regulation and supervision of the various trades should be recovered from other traders and businessmen, who should pay fees on the basis of the quantity of their business; [3] that in distributing this sum among persons engaged in various trades and occupations care should be taken that such fees levied should not hit hard on those who could not afford to pay and (4) that provision should be made for the possible expansion of business. The Municipal Council accepted the recommendations and revised the schedule of licence fees and such revised schedule was published in the Gazette dated 23rd December, 1958. This notification is produced in the case and marked as Ext. The Municipal Council accepted the recommendations and revised the schedule of licence fees and such revised schedule was published in the Gazette dated 23rd December, 1958. This notification is produced in the case and marked as Ext. PI and the petitioners in the several writ petitions attack the relevant items in Ext. P1, under which licence fees are levied on them. 3. The main grounds of attack are that the licence fees levied are really not licence fees but only taxes, for, they do not bear any fair relation to the services rendered by the Municipality and that the Municipality is collecting taxes in the guise of licence fees and is including these collections in its general revenues and spending them for general public purposes, which the Municipality is not entitled to do. 4. The Municipality filed separate counter-affidavits in these writ petitions, denying the several allegations contained in the affidavits in support of the writ petitions. When the writ petitions came up for hearing before us, we discovered that the averments in one of the counter-affidavits were not reconciliable with the averments in the others. Therefore we directed the Municipality to file a supplementary counter-affidavit. We also directed the Municipality to show in such supplementary affidavit how the fees collected from the writ petitioners have been spent and whether the amounts have been separately kept, out of which payments are made for the services rendered to those from whom the licence fees are collected. In pursuance to this direction a supplementary affidavit has also been filed and the relevant allegations in the several affidavits may be briefly referred to. The allegation in the petitioners' affidavits that the increase in the rates of licence fees was effected with the avowed object of giving relief to small and petty traders and to augment there sources of the Council is denied. It is alleged in the counter-affidavits that the rates were enhanced to meet the increased cost of the licensing system and the services rendered by the Municipality. It is further alleged that the licence fees adopted by the Municipal council are based upon reasonable classification consistent with the different purposes, for which the fees are levied. The counter-affidavits admit that the amounts collected by way of licence fees are not separately kept or earmarked for defraying the expenses incurred by the Municipality in performing services to the licensees. The counter-affidavits admit that the amounts collected by way of licence fees are not separately kept or earmarked for defraying the expenses incurred by the Municipality in performing services to the licensees. But it is averred that the expenses incurred on account of the salary and allowances paid to the staff employed for the supervision of the licensed premises and rendering proper and necessary services to the licensees as well as for the licensing and collection of fees can be separated and ascertained from the books of accounts of the Municipality. It is also alleged that the expenses by way of salary and allowances paid to the staff in 1958-59 far exceeded the amounts collected by way of licence fees in the said year. The further allegation in the counter-affidavits is that the premises used for the purposes specified in Schedule.3 of the Act require special care and attention and the fees levied from persons for licensing such premises are intended to meet the costs of regulating such activities and rendering such services. According to the counter-affidavits the rates of licence fees collected from these persons are only commensurate with the expenses necessary for working the licensing system and for rendering services and amenities to the persons and premises concerned. The Municipality alleges further that, as a matter of fact, the licence fees collected are hardly sufficient to meet the said expenses. The Municipality has also filed a copy of their budget estimate of receipts and expenditures for the year 1958-59, which document is marked as Ext. R1. 5. Originally the Municipal Council issued a notification fixing the licence fees on 26th April, 1945, which was later on amended by another notification dated 28th March, 1957. These rates were again revised and the new schedule was notified on 23rd December, 1958. When the previous schedule, notified on 26th March, 1957, was in force, one of the licensees affected by the said schedule filed a writ petition before this Court and a Division Bench of this Court allowed the same and quashed the notification as against the petitioner in the said writ petition. The said decision is M/s. K.P. Estthapanose & Sons v. Commissioner, Alwaye Municipality [1958 KLJ. 409]. In that decision this Court pointed out that as a general feature there was an increase in the amount of fees levied as regards most of the items covered by the schedule. The said decision is M/s. K.P. Estthapanose & Sons v. Commissioner, Alwaye Municipality [1958 KLJ. 409]. In that decision this Court pointed out that as a general feature there was an increase in the amount of fees levied as regards most of the items covered by the schedule. This court also pointed out another striking feature appearing in the schedule, which was the exemption from any levy of petty traders in respect of all articles. A cursory glance at the several items in the schedule notified on 23rd December 1958, which is the subject of attack in the present writ petitions, reveals the same features as indicated above in the aforesaid decision of this Court. It also appears from the recommendations of the Committee, which were accepted by the Municipal council that the policy behind the present schedule of licence fees is that the petty traders or those who follow their occupations merely for the sake of their living without having a margin of savings should be given their licences free or on payment of nominal licence fees; that the amount which the Municipality might incur for the purpose of regulation and supervision of the various trades should be recovered from other traders and businessmen, who should pay the fees on the basis of the quantity or volume of their business and that the distribution of this sum among persons engaged in the various trades and occupations should be made in such a way as not to hit bard those who could not afford to pay. These appear to be the avowed object or the basis of the new schedule of licence fees and the question for us to consider is whether the levy of the licence fees on the several petitioners can be sustained on the aforesaid grounds. 6. Several decisions have been cited before us by the learned counsel appearing on both sides, but we would confine ourselves to the more relevant of them. In The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar (AIR 1954 SC. 6. Several decisions have been cited before us by the learned counsel appearing on both sides, but we would confine ourselves to the more relevant of them. In The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar (AIR 1954 SC. 282), B.K. Mukherjea, J, delivering the judgment of the Court, considered the distinction between tax and fees and the learned judge observed: "If the money thus paid is set apart and appropriated specifically for the performance of such work and is not merged in the public revenues for the benefit of the general public, it could be counted as fees and not tax". The learned judge in another part of the same judgment observed: "The amount of fee levied is supposed to be based oh the expenses incurred by the Government in rendering the service, though in many cases the costs are arbitrarily assessed. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay". Another relevant passage in the same judgment runs: "As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of 'quid pro quo' between the tax-payer and the public authority". "Another feature of taxation is that as it is a part of the common burden, the quantum of imposition upon the tax payer depends generally upon his capacity to pay". The Supreme Court had occasion to consider the question in another case, namely Ratillal Panachand Gandhi v. State of Bombay [AIR 1954 SC 388) and in that case the same learned judge observed: "Thus in fees there is always an element of 'quid pro quo' which is absent in tax It may not be possible to prove in every case that the fees that are collected by the Government approximate to the expenses that are incurred by it in rendering any particular kind of service or in performing any particular work for the benefit of certain individuals. But in order that the collections made by the Government can rank as fees, there must be correlation between the levy imposed & the expenses incurred by the State for the purpose of rendering such services. But in order that the collections made by the Government can rank as fees, there must be correlation between the levy imposed & the expenses incurred by the State for the purpose of rendering such services. This can be proved by showing that on the face of the legislative provision itself, the collections are not merged in the general revenue but are set apart and appropriated for rendering these services. Thus two elements are essential in order that a payment may be regarded as a fee. In the first place, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly and in the second place, the amount collected must be earmarked to meet the expenses of rendering these services and must net go to the general revenue of the Stale to be spent for general public purposes". Yet in another case, namely, Sri. Jagannath Ramanuj Das v. State of Orissa [AIR. 1954 SC. 400], the same question came up before the Supreme Court. Therein also B.K. Mukherjea, J. observed: "Thus, in fees there is always an element of 'quid pro quo' which is absent in a tax Two elements are thus essential in order that a payment may he regarded as a fee. In the first place, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly. But this by itself is not enough to make an imposition a fee, if the payments demanded for rendering of such services are not set apart or specifically appropriated for that purpose but are merged in the general revenue of the State to be spent for general public purposes". 7. These decisions of the highest court of the land clearly lay down that the amounts collected as fees should bear a reasonable connection with the services rendered to the licensees so as to have an element of 'quid pro quo' present in the levy. They also lay down in clear and unambiguous terms that the licence fees collected should not be merged in the general revenues to be spent for general public purposes, but should be earmarked to meet the expenses of rendering the particular services. In following these decisions a Division Bench of the Andhra Pradesh High Court consisting of Subba Rao, C. J. & Satyanarayana Raju, J., in Commissioner, Municipal Council, Gundur v. Basu Venkateswara Rao (AIR. In following these decisions a Division Bench of the Andhra Pradesh High Court consisting of Subba Rao, C. J. & Satyanarayana Raju, J., in Commissioner, Municipal Council, Gundur v. Basu Venkateswara Rao (AIR. 1957 A.P. 103) observed that a fee must be levied in consideration of certain services and it should be set apart or specially appropriated for that purpose, whereas a tax was a common burden for public purpose. 8. We would now refer to an early decision of the Madras High Court in Corporation of Madras v. Spencer & Co., Ltd., wherein Philips & Reilly, JJ. held that roughly speaking if the fees brought in much more than the cost of necessary operations, or if the fees were so fixed that the whole cost incurred by the Corporation in connection with all the licences or a grossly disproportionate part of it was imposed on one particular trade or a few particular trades, then the Court could interfere on grounds of unreasonableness. 9. A consideration of the aforesaid decisions leads to the conclusion that the fees must bear a reasonable proportion to the services rendered so as to constitute a 'quid pro quo', though the rate is arbitrarily fixed; that the fee collection should be earmarked for the services to be rendered and should not be merged in the general revenues and that the amount should not be distributed among the several trades in such a way that a grossly disproportionate part of the burden is imposed on one particular trade or a few particular trades or on a particular section of the trade so as to base the levy on the capacity of the licensees to pay. Tested in the light of the aforesaid propositions, it has to be held that licence fees Collected by the Municipality from the petitioners in these writ petitions do not answer the tests satisfactorily. The Municipality has no case that they are keeping a separate account of the licence fee collections. Nor does the resolution of the Municipality indicate that the levies are intended to meet the expenses incurred by it in rendering services to the several licensees. The Municipality has no case that they are keeping a separate account of the licence fee collections. Nor does the resolution of the Municipality indicate that the levies are intended to meet the expenses incurred by it in rendering services to the several licensees. The several items in the schedule point more in the direction of their being based on the capacity of the licensees to pay rather than their being any 'quid pro quo' for the services rendered In other words it is not possible to reasonably correlate the levies with the expenses incurred in performing such services. 10. In the above circumstances, we are inclined to allow these writ petitions. The writ petitions are allowed with costs in favour of the petitioners in these cases and the notification dated 23rd December, 1958, as against the petitioners and in so far as it relates to the trades and occupations involved in these petitions, is quashed. The respondent-Municipality will pay Rs. 100/- as counsel's fee in each of these writ petitions.