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Supreme Court Says Tolls Must be Fair - International Law Office

International Law Office

Construction - India

Supreme Court Says Tolls Must be Fair

November 27 2000

In the recent case of UP v Devi Dayal Singh, the Supreme Court of India examined important concepts relating to tolls, which are often used to recoup the costs of constructing (and maintaining) roads and bridges in India.

The Supreme Court's judgment states that the law relating to tolls is derived from English jurisprudence. A 'toll' is defined as a sum of money taken in respect of a benefit arising out of the temporary use of land. It implies some consideration moving to the public either in the form of liberty, privilege or service. In other words, for the valid imposition of a toll, there must be a corresponding benefit to those who pay the tax.

The Supreme Court also mentioned that the public benefit envisaged under Section 2 of the Tolls Act of 1851 is the making or repairing of roads or bridges at the expense of the state government. Therefore, for the advantage obtained by the public by the construction of roads and bridges, the state government is entitled to be reimbursed for providing such infrastructure.

Although Section 2 empowers state governments to levy taxes (as tolls) as they deem appropriate, the rate of toll must bear a reasonable relationship to (i) the benefit provided and (ii) the compensatory nature of the toll. Neither of these conditions set a limit on the amount of toll that may be recovered. Therefore, not only the cost of construction may be recuperated, but also the cost of keeping roads and bridges in good condition.

For further information on this topic please contact Shubhada S Bhave at Advani & Co by telephone (+91 22 281 8380) or by fax (+91 22 286 5040) or by e-mail (advani.co@bol.net.in).

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