Judgment :- A.R. Lakshmanan, J. W.As. 737, 742, 754, 758, 763, 767, 1042 and 1043 of 1997 were filed by the Kerala Small Financiers' Association and other private financiers, who have taken the licence under the Kerala Money Lenders Act, 1958 (for short 'the Act') for the purpose of carrying on the business of money lending. All the Writ Petitions, out of which the above appeals arise, were filed for a declaration that the amendments to Ss.4(2)(i) and 4(2B) of the Act by the Kerala Finance Bill 1996 and the Kerala Finance Act, 1995 respectively are unconstitutional and void. By the amendment effected to S.4(2)(i) of the Act, the licence fee was enhanced from Rs. 2,000/-to Rs.10,000/-, The learned single judge, by judgment dated 9.4.1997 in O.P,16126 of 1996 and connected cases, has allowed the Original Petitions setting aside the enhancement of licence fee from Rs. 2,000/- to Rs. 10,000/-. Since in the Finance Bill 1997 licence fee was proposed to be reduced to Rs. 5,000/-, the learned judge was pleased to hold that for the year 1996 alone there cannot be a licence fee of Rs. 10,000/-. Hence, the learned judge has ordered that licence fee for the year 1996-97 may be collected at Rs. 5000/-and if any excess amount is collected, that may be adjusted against the licence fee for future years. The above judgment of the learned judge is challenged in the above appeals. 2. The Government of Kerala also filed a Writ Appeal (WA 1825 of 1997) questioning the correctness of the order of the learned judge ordering that licence fee for 1996-97 may be collected at the rate of Rs. 5000/-. By consent of all the parties, the main Writ Appeals themselves were taken up for final hearing. 3. Ai! the Writ Appeals were admitted by then Chief Justice and Sankarasubban, J. considering the question of law that is raised in the appeals. The Bench, as an interim measure, directed all the licensees, who have not paid the licence fee of Rs. 5000/- as indicated in the judgment, shall pay the licence fee of Rs. 5000/-by 30.6.1997positively. 4. 3. Ai! the Writ Appeals were admitted by then Chief Justice and Sankarasubban, J. considering the question of law that is raised in the appeals. The Bench, as an interim measure, directed all the licensees, who have not paid the licence fee of Rs. 5000/- as indicated in the judgment, shall pay the licence fee of Rs. 5000/-by 30.6.1997positively. 4. The Kerala Money Lenders Act, 1958 was enacted by the Kerala Legislature in the year 1958 with the object of providing for the regulation and control of the business of money lenders in the State, Under S.3 of the Act, the money lenders were to obtain licences for carrying on the business of money lending. Licence fee is prescribed in Section 4(2)(i) of the Act. It was Rs. 100/- in 1958, ie., at the time of enactment of the Act. Subsequently, in 1983, after a lapse of 25 years, the licence fee was enhanced to Rs. 1000/-. Again, after a lapse of 10 years in 1993, it was enhanced to Rs. 2,000/-. In 1996, Government have introduced the new Finance Bill by which S.4(2)(i) of the Act was amended and the licence fee was enhanced from Rs. 2,000/- to Rs. 10,000/-. According to the appellants, most "of the members of the Association are finding in difficult to remit Rs. 2000/- towards licence fee. Hence, they filed the Original Petitions contending that the enhancement of licence fee from Rs. 2000/- to Rs. 10,000/- is highly arbitrary and unreasonable. The members of the Association are mainly depending on the income derived from the money lending business for their livelihood and alter deducting all expenses the net profit received from the business is very low. As per S.4(2A) of the Act, a licensee who lends less than Rs.1 lakh in an year has to furnish a security deposit of Rs. 5000/- and for those who lend more than Rs.1 lakh, but less than Rs. 5 lakh, have to deposit Rs. 10,000/- as security deposit. Hence the members of the Association are finding it difficult to continue the business after remitting such a huge amount towards licence fee and also the specified amounts as security deposit. According to them, in the State of Karnataka, the licence fee fixed for lending business is Rs. 50/- only per annum and for renewal of licence every year, they have to remit only Rs. 25/-. According to them, in the State of Karnataka, the licence fee fixed for lending business is Rs. 50/- only per annum and for renewal of licence every year, they have to remit only Rs. 25/-. For every branch of their business, they have to remit only Rs. 25/-. Similarly, in the State of Tamil Nadu, the yearly licence fee fixed for money lending business is only Rs. 100/- whereas as per the amendment now brought in by the Government of Kerala, the members of the Association have to remit a sum of Rs. 10,000/- per annum towards licence fee and for every branch, an additional payment of Rs. 10,000/- has also to be made. This i s in addition to the security deposit to be made under S.4(2A) of the Act. 5. It is contended by Mr. T.R.G, Wariyar, Senior Advocate, who advanced principal argument on behalf of all the appellants, that the licence fee collected are not earmarked for utilisation of any service to the members of the Association. In every district, only the Inspecting Assistant Commissioner of Agricultural Income Tax and Sales tax and the Sales tax Inspector working under him are handling the files relating to money lenders and they devote only a part of their time to handle these files apart from their other duties. Hence it is contended that the enhancement of licence fee to Rs. 10,000/- without rendering any service to the members of the Association is highly arbitrary and unreasonable. It amounts to imposition of levy without the authority of law and is void. There is also no proposal to spend major portion of the fee collected for any special services to be rendered to the money lenders or even to the borrowers. 6. Out attention was invited to S.4(2B) of the Act which was amended by the Finance Act of 1995. There is also no proposal to spend major portion of the fee collected for any special services to be rendered to the money lenders or even to the borrowers. 6. Out attention was invited to S.4(2B) of the Act which was amended by the Finance Act of 1995. The Section reads as follows: "(2B) For the purpose of sub-s.(2A), the amount lent by a licensee for the year for which the security is to be paid shall be deemed to be (a) the maximum aggregate loan amount outstanding on any day during the previous year; or (b) the amount, invested by the licensee including all deposits received by him during the previous year, if the maximum aggregate loan amount outstanding is not ascertainable from his accounts; Provided that in the case of a new licensee or a person who was a licensee only for a portion of the preceding year, the amount of security shall be determined on the basis of a declaration in the prescribed form as to the amount which he is likely to lend during the year, filed before the licensing authority in the prescribed manner." It is submitted that the above provisions made through the amendment are arbitrary and unreasonable. The original provision which provided for security being furnished on the aggregate amount lent by him during the previous year, as interpreted by this Court and the Supreme Court, can alone be the logical safeguard for demanding security. There is no rationale in demanding security for the maximum amount lent. 7. Mr. Wariyar submitted that the appellants are small financiers/pawn brokers who carry on the business of taking gold ornaments in pawn for a loan. As per Chapter IIIC R.455 of Banking Laws (Amendment) Act, an individual pawn broker cannot collect deposit from more than 25 persons. In view of the above prohibition, the appellants/ pawn brokers cannot increase their capital and thereby earn more profit by increasing the turnover. Government have brought in several amendments in the Act to safeguard the interest of the public and to regulate money lending business. It is seen from the amendments brought into Ss.4(2)(i), 4(2A),1,4(2) (ii), 11(a), 11 and 18 of the Act that so many regulatory measures were taken since 1983 in order to safeguard the interest of the public and to regulate the business of money lending. It is seen from the amendments brought into Ss.4(2)(i), 4(2A),1,4(2) (ii), 11(a), 11 and 18 of the Act that so many regulatory measures were taken since 1983 in order to safeguard the interest of the public and to regulate the business of money lending. Hence, the money lending being carried on by the appellants under the Act is not injurious or dangerous to the public. Appellants submit these provisions are beyond the competence of the State Legislature and arc violative of Arts.14 and 19(1)(g) of the Constitution of India and are void. It is contended that S. 4(2)(i) of the Act prior to its amendment in 1995 provided for the grant of licence on a condition of payment of Rs. 2,000/- as licence fee. By the amendment, the licence fee has been increased from Rs. 2000/- to Rs. 10,000/- which would result the business of money lending impossible. There is no quid pro quo justifying the licence fee now imposed. No services are rendered by the State to the money lenders. Imposition of a high rate of licence fee on a uniform scale without any regard to the nature and volume of the business of various money lenders is discriminatory and offends Art.14 of the Constitution of India. The provisions in Sections 4(2)(i) and 4(2B) of the Act place unreasonable restrictions on the right of the appellants to carry on business. 8. Mr. Wariyar further submitted that the amendments are beyond the competence of the State Legislature. If the levy is to be understood as a provision which imposes a tax, then it would be clearly outside the legislative competence and the constitutional restrictions on the State Government. Viewed as a tax, the levy could only be justified as a tax on the practice of a profession, trade or calling. Such levy can be made only subject to Art.274(2) which mandates that the total amount payable in respect of any one person to the State or to any one Municipality. District Board or other local authority in the State by way of taxes on professions, trades, callings and employments shall not exceed Rs. 2,500/- per annum. Even the proposals placed by the Minister before the Legislature merely states that 'by increasing the licence fee from Rs. 2,000/- to Rs. 10,000/- the Government expects a revenue of Rs. 5 crores'. District Board or other local authority in the State by way of taxes on professions, trades, callings and employments shall not exceed Rs. 2,500/- per annum. Even the proposals placed by the Minister before the Legislature merely states that 'by increasing the licence fee from Rs. 2,000/- to Rs. 10,000/- the Government expects a revenue of Rs. 5 crores'. It is, therefore, clear that the levy would fall under Art.276(2) since the proposal is merely to impose a levy for the general purposes of the State. In determining whether the levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specific area or classes. 9. A counter affidavit was filed on behalf of the State through its Under Secretary, Taxes Department. Smt. Molly Jacob, Senior Government Pleader submitted that licence ie is fixed not only for the purpose of regulating the business but also for the purpose of restricting or discouraging the trade in public interest. A higher licence fee is fixed in public interest to keep out of business those who are undesirable and to keep within reasonable limits the number of those engaged in the business of money lending. As such, the licence fee of Rs. 10,000/- has been fixed as a regulatory measure and is justified for the proper functioning of the private financial enterprises. The impugned amendment of S.4(2B) was made taking into account of the decision rendered by this Court and the Supreme Court. The security deposit is demanded as a condition for the grant of renewal of the licence for enabling the money lender to do the business. Security thus is insisted as an assurance for the fill ment of the obligation of the money lender and as a protection against the economic vicissitudes inherent in this business. The enhancement of the licence fee has been made as a regulatory measure and the same is within the competence of the State Legislature, A fee is a compulsory payment by the person and it is charged for the special services rendered to the payer. The amount of licence need not be in terms of the volume of service. The levy is not a tax. but only a fee. The levy is within the jurisdiction of the Legislature. 10. Mr. The amount of licence need not be in terms of the volume of service. The levy is not a tax. but only a fee. The levy is within the jurisdiction of the Legislature. 10. Mr. P.V, Mohanan, counsel for the appellants in W.A. 75 8 of 1997, at the time of 'his arguments, invited our attention to some of the rulings of this Court wherein the enhancement of licence fee of Rs. 1000/- and other amendments of the Act were challenged before this Court on the ground that fixation of uniform licence fee of Rs. 1000/- under S.4(2) of the Act is arbitrary and that the insistence of security on a graduated scale under S.4(2) is unreasonable and the forfeiture of security as additional penalty under S.16A is arbitrary. A Division Bench of this Court in Monarch Investments v. State of Kerala (1989 (1) KLT 51) declared that S.16A of the Act is ultra vires and unconstitutional. This judgment has been upheld by the Supreme Court in State of Kerala v. M. Investments (1992 (1) KLT 58 3). He also invited our attention to I.M. & M. Industries v. State of Bihar (AIR 1971 SC 1182), All India Judges' Association, v. Union of India (AIR 1992 SC 165) and Secretary, Government of Madras v, P.R. Srimmulu (AIR 1996 SC 676). He has also drew our attention to the seven principles formulated by the Supreme Court in Kewal Krishan v. State of Punjab (AIR 1980 SC 1008), which was also relied on by Mr. Warriyar, for satisfying the test for a valid levy. In the light of the aforesaid judicial pronouncements, Mr. Mohanan submitted that the enhancement of licence fee to Rs. 10,000/- i s unreasonable and arbitrary. 11. Counsel appearing on behalf of other appellants have adopted the same arguments of Mr. Wariyar. 12. Mr. Wariyar relied on the following judgments: - I.M. & M. Industries v. State of Bihar (AIR 1971 SC 1182) -Kewal Krishan v. State of Punjab (AIR 1980 SC 1008) -State of Kerala v. M. Investments (1992 (1) KLT 583) Monarch Investments v. State of Kerala (1989 (1) KLT 51) -All India Judges' Association, v. Union of India (AIR 1992 SC 165) Krishi Upaj Mandi Samiti v. Orient Paper & Industries Lid. ((1995) 1 SCC 655) Secretary, Government of Madras v. P.R. Sriramulu (AIR 1996 SC 676) - Bhagwan Dass Sood v. State of H.P. (AIR 1997 SC 1549) In I.M. & M. Industries case (supra) the Supreme Court held that to uphold a levy as a fee it must be shown that it has a reasonable co relationship of a general character (though not with arithmetical exactitude), with the service rendered by the Government, and that the co-relationship between the services rendered and the fee levied is essentially a question of fact. The above principle was followed by another Constitution Bench of the Supreme Court in the decision in Kewal Krishan v. State of Punjab (supra). In the said case the validity of certain provisions of the Punjab Agricultural Produce Markets Act and the rules framed thereunder by the State as also the validity of the fixation of market rates from time to time by the various market committees in the State under the directions of the Punjab Agricultural Produce Marketing Board and the Haryana Agricultural Produce Marketing Board fell for determination by the Supreme Court. The Supreme Court, in paragraph 23 of the judgment, held as follows: "23, From a conspectus of the various authorities of this Court we deduce the following principles for satisfying the tests for a valid levy of market fees on the agricultural produce bought or sold by licensees in a notified market area: (1) That the amount of federalized must be ear marked for rendering services to the licensees in the noticed market area and a good and substantial portion of it must be shown to be expended for this purpose. (2) That the services rendered to the licensees must be in relation to the transaction of purchase or sale of the agricultural produce. (3) That while rendering services in the market area for the purpose of facilitating the transactions of purchase and sale with a view to achieve the object of the marketing legislation it is not necessary to confer the whole of the benefit on the licensees, but some special benefits must be conferred on them which have a direct, close and reasonable correlation between the licensees and the transactions. (4) That while conferring some special benefits on the licensees, it is permissible to render such service in the market which maybe in the general interest of all concerned with transactions taking place in the market. (5) That spending me amount of market fees for the purpose of augmenting the agricultural produce, its facility of transport in villages and to provide other facilities meant mainly or exclusively for the benefit of the agriculturists is not possible on the ground that such services in the long run go to increase the volume of transactions in the market ultimately benefitting the traders also. Such an indirect and remote benefit to the traders is in no sense a special benefit to them. (6 ) That the element of quid pro quo may not be possible, or even necessary, to be established with arithmetical exactitude but even broadly and reasonably it must be established by the authorities who charge the fees that the amount is being spent for rendering services to those on whom falls the burden of the fee. (7) At least a good and substantial portion of the amount collected on account of fees, may be in the neighbour hood of two-thirds or three-fourths must be shown with reasonable certainty as being spent for rendering services of the kind mentioned above." The decision reported in AIR 1971 SC 1182 was followed by the Supreme Court in the decisions reported in the decisions reported in (1995) 1 SCC 655, AIR 1996 SC 676 and AIR 1997 SC 1549. In the decision reported in (1995) 1 SCC 655 the Court held that the power of any legislature to levy a tee is conditioned by the fact that it must be by and large quid pro quo for the services rendered. However, co relationship between the levy and the services rendered/ expected is one of general character and not of mathematical exactitude. All that is necessary is that there should be reasonable relationship between the levy of the fee and the services rendered. The Supreme Court also distinguished fee from tax and also restated the principles with regard to the test of quid pro quo in paragraph 21 of the judgment. All that is necessary is that there should be reasonable relationship between the levy of the fee and the services rendered. The Supreme Court also distinguished fee from tax and also restated the principles with regard to the test of quid pro quo in paragraph 21 of the judgment. In the decision in AIR 1996 SC 676 the Supreme Court held thus: " If the essential characters of the levy is that some social service is intended as quid pro quo to the class of citizens which is intended to be benefited by the service and a broad and general correlation between the amount so collected and the expenses incurred in providing the services is found to exist. Then such levy would partake the character of a fee, irrespective of the fact that such social services for which the amount by levy of fee is collected incidentally and indirectly benefit the general public also. In order to establish the correlation between the amount recovered by way of "fee" and the expenses incurred in providing the service they should not be examined so minutely or be weighed in golden scale to discern any difference between the two. It is not necessary to ascertain the same with any mathematical exactitude for finding the correlation but the test would be satisfied if a broad and general correlation is found to exist and once such a broad correlation between the totality of the expenses on the services rendered as a whole, on the one hand and the totality of the amount so raised by way of the fee. On the other, if established, it would be no part of the legitimate exercise in the examination of the constitutionality of the concept of the impost to embark upon its effect in the individual cases. On the other, if established, it would be no part of the legitimate exercise in the examination of the constitutionality of the concept of the impost to embark upon its effect in the individual cases. If the aforesaid relation is found to exist in the levy of the fee, the levy cannot be said to be waning in its essential character of a fee on the ground that the measure of its distribution on the persons of incidence is disproportionate to the actual services made available to them." In Bhagwan Dass Sood v. State of Himachal Pradesh (AIR 1997 SC 1549) the Supreme Court held as follows: "It is not necessary that the imposition of levy of market fee is to be effected only on establishment of principal and sub-market yards by completing the infrastructures required for such establishment of market and sub-market yards. Such construction being time consuming and expenditure oriented it will be sufficient to justify valid imposition of levy if itis demonstrable that after notifying market area, effective steps not in contemplation but in realty have been taken to identify market and sub-market yards and schemes for establishment of such market or sub-market yards have in fact been put to action and the market fees levied and realised are being ploughed back for the advancement of the purpose for which market fees have been levied and realised. In deciding the question of rendering of a real and not illusory service in discharging the obligation emanating from quid pro quo, to levy of market fee, no straight jacket formulae can be evolved. Fact situation in the matter of establishment of principal and sub-market yards and the practical feasibility of construction of infrastructures, roads, pathways, etc. for establishment of such market yards within a time frame and in the light of financial constraints is bound to vary depending on various factors including imponderables. It is, therefore, essentially necessary to take a pragmatic approach to the problems associated with establishing market and sub-market yards with necessary infrastructures, etc. for establishment of such market yards within a time frame and in the light of financial constraints is bound to vary depending on various factors including imponderables. It is, therefore, essentially necessary to take a pragmatic approach to the problems associated with establishing market and sub-market yards with necessary infrastructures, etc. and accompanying facilities and amenities to be made available to traders and producers coming to such yards, in order to decide whether concrete steps have been translated into action with reasonable sincerely in implementing the scheme envisaged under the Marketing Act and the Rules framed thereunder." Money lenders including pawn brokers of Kerala filed Writ Petitions in this Court contending that the fixation of a uniform fee of Rs. 1000/- under S.4(2) of the Money Lenders Act was arbitrary; that the insistence of security on a graduated scale under S.4(2A) of the Act was unreasonable and arbitrary, violating Arts.19(1)(g) and 14 of the Constitution of India; and that forfeiture of security as an additional penalty under S.16A of the Act with no guidelines for the exercise of that power was arbitrary. The learned single judge rejected the plea and dismissed the Writ Petition. A Division Bench of this Court (Malimath, C.J. and Bhaskaran Nambiar, J.) in Monarch Investments v. State of Kerala (1989 (1) KLT 51), after adverting to the object and the scheme of the Act and to the relevant statutory provisions and amendments, rejected the case of the appellants that the implementation of S.4(2A) and 4(2B) of the Act will seriously affect their business. The Bench held that those provisions cannot be characterised as unreasonable restrictions on the right to carry on the business of money lending. The Bench also held that the licence fee need not be geared to the volume of business carried on by the money lender and a fixed licence fee for all money lenders, whether he advances loans or receives deposits or he is only a pawn broker, is well within the permissible limits of classification. In so far as S.16(a) empowering forfeiture of security is concerned, it was held by the Bench that the said provision was unreasonable restriction vitally affecting the large number of persons dealing with the money lenders, unnecessary for the regulation of the business of money lending and had no rational basis for the object sought to be achieved under the Act. The Bench has observed that the forfeiture of security under S.16A is arbitrary and unreasonable. The Bench, therefore, held that S.16 A is arbitrary and violative of Art.14 of the Constitution of India and unreasonable, offending Art.19(1)(g) of the Constitution. In the result, the Bench declared that S.16A of the Act is ultravires and unconstitutional and rejected the challenge against sub-ss.(2)(ii), (2A) and (2B) of S.4 of the Act. That was taken up in appeal before the Supreme Court by the State and the Supreme Court in the judgment reported in State of Kerala v. Monarch Investments (1992 (1) KLT 583) confirmed the judgment of this Court and rejected the appeal filed by the State observing in paragraph 6 of the judgment as follows: "6. For the purpose of regulation of money lending business, and to ensure compliance with the conditions of the licence, the licence fee is collected; the penalty is imposed; the prosecution is ordered and the licence is cancelled etc. Even security is demanded and additional security is called for. All these measures seem to be regulatory in nature. The demand of security and additional security may also be justified in the social interest and to ensure financial stability of the money lender who is accountable to the public in money-lending transactions. But there seems to be little legitimacy of the power conferred byS.16A to forfeit the security deposit made under S.4(2A). It has no relation with the need for protection of the public interest or for effectuating the objects sought to be achieved by the Act. Nor it is necessary for the due observance of the conditions of the licence. There are adequate provisions in the Act to ensure compliance with the conditions of the licence. The grounds for forfeiting the security deposit are not different from the grounds available for cancellation of licence. S.16A, in our opinion, is wholly unreasonable and arbitrary." It is seen from the above judgment that the State can, for the purpose of regulating money lending business and to enquire compliance with the conditions of the licence, demand security or additional security, which may be justified in the social interest and to ensure financial stability of the money lender who is accountable to the public in money lending transactions. 13. 13. Before appreciating the contentions of the learned special Government Pleader, it is useful to advert to certain statutory provisions in the Money Lenders Act, which is intended to regulate the business of money lending, restrict the interest to be charged by the money lenders and to safeguard the interests of the borrowers. The object of the Act is to provide for the regulations and control of the business of money lenders in the State of Kerala. The Act was amended by the Kerala Money Lenders (Amendment) Act of 1963 and 1974, Kerala Finance Act 1983, Kerala Money Lenders (Amendment) Act of 1986 and 1987 and the Kerala Finance Act of 1993 and 1995. The amendment made to this Act by the Kerala Finance Act were challenged in a number of Writ Petitions before this Court and this Court while dismissing the writ petitioners held that the regulations introduced by the amendments were only measures necessary to safeguard both depositors and borrowers from the free dealing of money lenders. In this context we have already referred to the decision reported in 1989 (1) KLT 51 which was confirmed by the Supreme Court in the decision reported in 1992 (1) KLT 583 =1992 Supp. (3) SCC 208. In this State, the business of money lending can be conducted only on the strength of licence granted under the Act. Therefore, the Supreme Court has said that a higher degree of regulation is justified for the smooth functioning of the private financing enterprises. As per S.5 of the Act, change of place of business cannot be made by the money lenders without previous notice to the licensing authority and without having the address of the new place of business duly endorsed on his licence. S.10 deals with appointment of Inspectors and their powers, and provides that the Government may, by notification in the Gazette, appoint one or more persons possessing such qualifications as may be prescribed to be Inspectors for the purpose of the Act and specify in such notification the local limits of their jurisdiction. Under S.10A an Inspector, licensing Authority and Appellate Authority are given power to order production of accounts and the power of entry, inspection and search of the place of business of money lenders. S.10B deals with the power to summon witnesses and to cause production of documents, and S.10C deals with Assistance of Police. Under S.10A an Inspector, licensing Authority and Appellate Authority are given power to order production of accounts and the power of entry, inspection and search of the place of business of money lenders. S.10B deals with the power to summon witnesses and to cause production of documents, and S.10C deals with Assistance of Police. Under Section 11, money lenders advancing smaller amounts of securing higher interests than that specified in the accounts, etc. are punishable. S.11A gives the power to demand additional security and S.14 deals with cancellation of licence by the licensing authority at any time during the term of the licence, if the licensee carries on the business in contravention of any of the provisions of the Act or the rules made thereunder or of the conditions of the licence or if the licensee is convicted for an offence under Ss.9, 11,13 of the Act or if the licensee maintains false accounts, etc. S.14(2) provides that before cancellation of the licence under S.14(2) the licensing authority shall give the licensee a notice in writing stating the ground on which it is proposed to take action and requiring the licensee to show cause. S.16A deals with forfeiture of security. S.17 provides for penalty for carrying on business without licence or in violation of the conditions of licence. S.18 deals with penalties. Ss.18A and 18B deals with certain acts of pawn brokers. S.18C gives power to the authorities and officers for imposition of penalties. S.20A deals with the power of revision by the Government and S.21 enables the Government to make Rules. 14. The decision reported in Vam Organic Chemicals v. The State of U.P. UT 1997 (1) SC 625) was cited by the Government Pleader for the proposition that in the case of regulatory fees, like the licence fees, existence of quid pro quo is not necessary although the fee imposed must not be, in the circumstances of the case, excessive. In that case, the Court held that keeping in view the quantum and nature of the work involved in supervising the process of denaturation and the consequent expenses incurred by the State, the fee of 7 paise per litre was reasonable and proper. The High Court's view was affirmed by the Supreme Court. 15. The learned Special Government Pleader further cited the decision reported in Delhi Municipality v. Mohd. The High Court's view was affirmed by the Supreme Court. 15. The learned Special Government Pleader further cited the decision reported in Delhi Municipality v. Mohd. Yasin (AIR 1983 SC 617) wherein the enhancement of fee for slaughtering animals in slaughter houses was upheld by the apex Court. In the above case, the Supreme Court held that the increase from 50 paise to Rs. 21- and from Re. I/- to Rs. 8/- in the case of small animals and large animals respectively was wholly justified in the circumstances of the case. The Supreme Court allowed the appeal by the Delhi Municipality and set aside the judgment of the High Court. Relying on the above decision the Special Government Pleader submitted that merely because the sum actually to be realised by way of enhanced fee would exceed the direct expenditure to be incurred for that purpose the enhancement of the fee cannot be held to be illegal and that the expenditure need not be incurred directly or even primarily in connection with the advantages conferred under it. It was contended that there need not be any direct relation between the fee and the services rendered but a mere casual relation may be enough. She again relied on the decision in Sreenivasa General Traders v. State of Andhra Pradesh (AIR 1983 SC 1246). In that case, the Supreme Court was considering the constitutional validity of the increase in the rate of interest fete levied by the market committees in the State of Andhra Pradesh under S.12(1). of the Andhra Pradesh Agricultural Produce and Livestock Markets Act, 1966 from 50 paise to Re. I/- on every hundred rupees of the aggregate amount for which the notified agricultural produce/ livestock are purchased or sold in the respective notified market area. The Supreme Court, in paragraph 38 of its judgment, rejected the contention that since there was no correlation between the increase in the rare of market fee and the services rendered, the increase in the rate of market fee was illegal. 16. The next decision relied on by the learned Special Government Pleader is City Corporation of Calicut v. T. Sadasivan (AIR 1985 SC 756). Levy of licence fee for the use of premises or the land for soaking coconut husks was under challenge in the said case. 16. The next decision relied on by the learned Special Government Pleader is City Corporation of Calicut v. T. Sadasivan (AIR 1985 SC 756). Levy of licence fee for the use of premises or the land for soaking coconut husks was under challenge in the said case. The Supreme Court held that the levy of licence fee was valid as fee and that if one who is liable to pay receives general benefit from the authority levying the fee, the element of service required for collecting the fee is satisfied and that it is not necessary that the person liable to pay must receive some special benefit or advantage in the payment of fee. The Supreme Court held that as soaking coconut husks emit foul odor and contaminates environment and the Corporation by rendering scavenging services, carrying on operations for cleanliness of city, to make habitation tolerable, renders general service of which amongst others users of premises for soaking coconut husk are beneficiaries, levy of licence fee by Corporation on use of premises and land for soaking coconut husk was justified. In that view of the matter, the Supreme Court felt that it was unnecessary to consider the alternative submission that the levy as a tax was illegal. 17. O.K. Krishnan v. State of I .N. ((1975) 1 SCC 375 deals with the case of regulations like rules of traffic which facilitate freedom of trade and commerce whereas restrictions impede that freedom. The Supreme Court said that the collection of toll or tax for use of roads, bridges or aerodromes etc do not operate as barriers or hindrance to trade. For a tax to become a prohibited tax, it has to be a direct tax, the effect of which is to hinder the movement part of the trade. If the tax is compensatory or regulatory, it cannot operate as a restriction on the freedom of trade or commerce. In the above case, the question came up for consideration then was whether the tax is a compensatory tax or not. Mathew, J. speaking for the Bench, considering the circumstances of the case, held that there is a presumption that the classification is reasonable, especially in the light of the fact that the classification is based on local conditions of which the Government was fully cognizant. Mathew, J. speaking for the Bench, considering the circumstances of the case, held that there is a presumption that the classification is reasonable, especially in the light of the fact that the classification is based on local conditions of which the Government was fully cognizant. Since the petitioners and appellants in that case have not discharged the burden of proving that the classification is unreasonable, the Supreme Court held that the levy of an enhanced rate of vehicle tax on contract carriages was not hit by Art.14 and dismissed the writ petitions and appeals. 18. In State of Tripura v. Sudhir Ranjan Nath ((1997) 3 SCC 665), R.3 of the Transit Rules of Tripura imposing restrictions by the State Government regulating transit of timber and other forest produce was under challenge. The Supreme Court held that it is not violative of Art.301 nor is it required to comply with the proviso to clause (b) of Art.304 of the Constitution as it is saved by Art.302. Under the Transit Rules, Rr. 3(3) and 3(4) provide for the movement of various produce. Application fee of Rs. 1000/- under sub-r.(3) and licence fee of Rs. 2000/- under sub-r.(4) were levied. Under R.3(1) any person importing, exporting or moving into, from or within, or who has imported, exported or moved into from or within the State of Tripura any forest produce obliges him to present the same to the appropriate officer for examination and :heck and also to pay the amount, if any, due thereon and obtain a transit pass in form Z as per the rules. The High Court has declared that the levy of application fee of Rs. 1000/- and licence fee of Rs. 2000/- amounts to levy of tax and is bad. The High Court has also held that sub-r.(5) which levies export duty on export of timber from the States beyond the rule making power conferred upon the State Government by S.14. The correctness of the above ruling was challenged before the Supreme Court by the State if Tripura. The Supreme Court held that the levy of licence fee and application fee is n the nature of regulatory fees for which no quid pro quo is necessary. Hence Rr. 3(3) nd 3(4) were held to be valid. 19. The correctness of the above ruling was challenged before the Supreme Court by the State if Tripura. The Supreme Court held that the levy of licence fee and application fee is n the nature of regulatory fees for which no quid pro quo is necessary. Hence Rr. 3(3) nd 3(4) were held to be valid. 19. Corporation of Calcutta v. Liberty Cinema (AIR 1965 SC 1107) was cited y learned Senior Government Pleader to say that the expression'quid pro quo' should a read not in the narrow and restricted sense, but in a somewhat wider sense as including cases where the function of the licence is to impose control upon an activity, is cost incurred for effectuating that control and thus on the basis that the industry or activity is placed under regulation and control not merely in public interest but in the interest and for the benefit of the licensees as a whole as well. In this case, the Supreme Court held that the levy of licence fee from Rs. 400/- to Rs. 6,000/- per year in 1958 is not invalid. 20. In State of TamilNadu v. Hind Stone ((1981) 2 SCC 205), the Supreme Court held that the word 'regulation' has not got that rigidity of meaning as never to take in'prohibitionl and in modern statutes concerned as they are with economic and social activities, 'regulation' must of necessity, receive so wide an interpretation that in certain situations, it must exclude competition to the public sector from the private sector; and more so, in a welfare State. Much depends on the context in which the expression is used in the statute and the object sought to be achieved by the contemplated legislation. 21. The Senior Government Pleader, on the basis of the above judgments, submitted that as per the enhancement of licence fee in this case is concerned, Art.276(2) of the Constitution has no application as the licence fee realised is only as a regulatory measure and it enables the licensee to carry out the business of money lending. Therefore, it cannot be equated to a tax and the question of quid pro quo also does not arise in this case. 22. It is thus seen from the above judgments that the Supreme Court has taken the view that in the case of regulatory measures, existence of quid pro quo is not necessary. Therefore, it cannot be equated to a tax and the question of quid pro quo also does not arise in this case. 22. It is thus seen from the above judgments that the Supreme Court has taken the view that in the case of regulatory measures, existence of quid pro quo is not necessary. However, in our opinion, the court must see that it should not be excessive. In this State, the licence fee was Rs. 100/- in 1958, ie., at the time of enactment of the Act. Subsequently in 1983, after a lapse of 25 years, the licence fee was enhanced to Rs. 1000/-. Again, in 1993, after a lapse of 10 years, the licence fee was enhanced to Rs. 2000/-. The aforesaid enhancements of hence fee were made after a considerable lapse of long time on every occasion. In 1996, the Government amended S.4(2)(i) of the Act and enhanced the hence fee from Rs. 2000/- to Rs. 10,000/-. This was done within three years from the last enhancement. Subsequently, the licence fee was reduced to Rs. 5000/- by amending S.4(2)(i) of the Act in 1997 and on that basis the learned single judge held that Rs. 5000/- is reasonable and fixed the licence fee at Rs. 5000/-. In our opinion, the licence fee even at Rs. 5000/- is excessive. In the State of Karnataka, the licence fee fixed for money lending business is Rs. 50/-per annum and for renewal of licence every year, money lenders have to remit only Rs. 25/-. For every branch of their business they have to remit only Rs .25/-. Similarly, in the State of Tamil Nadu, the yearly licence fee fixed for money lending business is only Rs. 100/-. It is to be noted that the licence fee collected are not earmarked for utilisation of any services to the members of the association. It is brought to our notice and not disputed by the State that in every district, only the inspecting Assistant Commissioner of Agricultural Income Tax and Sales Tax and the Sales Tax Inspector working under him are handling the files relating to money lenders ad they are devoting only a part of their time to handle those files. Thus, it is seen that the services rendered by the Department officials to the members of the Association are very limited and minimal. Thus, it is seen that the services rendered by the Department officials to the members of the Association are very limited and minimal. In our opinion, without rendering any service to the members of the Association, the enhancement of licence fee from Rs. 2000/- to Rs. 5000/- is arbitrary and unreasonable. As already noticed the proposals placed by the Honourable Minister before the State Legislature merely state that by increasing the licence fee to Rs. 10,000/-, the Government expects a revenue of Five crores of rupees. It is thus clear that the levy would fall under Art.276 (2) of the Constitution since the proposal is merely to impose a levy for the general purposes of the State. 23. The correlation ship between the amount raised through the fee and expenses involved in providing the services, as observed by the Supreme Court, need not be examined by a view to ascertaining any accurate, arithmetical equivalence or precision in the correlation; but it would be sufficient that there is a broad and general correlation. In this case, the appellants are not receiving any corresponding benefit or degree of benefit commensurate with or proportionate to the payment that a person individually makes. A fee loses its character as such if it is intended to and does go to enrich the general revenues of the State to be applied for general purposes of Government. The object to be served by raising the fee should not include objects which are, otherwise within the ambit of general governmental obligations and activities. An amount of fee levied is supposed to be on the expenses incurred by the Government in rendering the services. Ordinarily the fees are uniform and no account is taken of the varying liabilities of different recipients to pay. It is thus clear that for the levy to be upheld as a fee, it must be shown that the levy has a reasonable correlation between the services rendered by the Government and is also be reasonable and not excessive. As already noticed, the sudden enhancement of the fee from Rs. 2000/- to Rs. 10,000/- in the year 1996 is not warranted and the State Government has not proved that the fees collected are earmarked for the utilisation of any service rendered to the members of the Association. Such a levy cannot be upheld as a reasonable and just levy. 24. 2000/- to Rs. 10,000/- in the year 1996 is not warranted and the State Government has not proved that the fees collected are earmarked for the utilisation of any service rendered to the members of the Association. Such a levy cannot be upheld as a reasonable and just levy. 24. In the light of the aforesaid judicial pronouncements, the enhancement of licence fee from Rs. 2000/-to Rs. 5000/- is unreasonable and arbitrary and, therefore, the levy is illegal. In our opinion, fixation of a fee at Rs. 3000/- per annum would be sufficient and would meet the ends of justice. Any excess amount collected during the pendency of the Writ Petitions or Writ Appeals will be given credit to the Writ Petitioners by the State. We, therefore, modify the judgment of the learned single judge and allow the Writ Appeals filed by the writ petitioners to the extent indicated above. The Writ Appeal filed by the Government (WA 1825 of 1997) is dismissed. No costs.