Skip to content


Dadabhoy's New Chirimiri Ponri Hill Colliery Co. Private Ltd. Vs. State of Madhya Pradesh and Ors. (20.12.1966 - MPHC) - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Petn. No. 139 of 1966
Judge
Reported inAIR1967MP184
ActsMines and Minerals (Regulation and Development) Act, 1957 - Sections 2, 9(1), 9(3), 10 and 30A; Constitution of India - Articles 73 and 226
AppellantDadabhoy's New Chirimiri Ponri Hill Colliery Co. Private Ltd.
RespondentState of Madhya Pradesh and Ors.
Appellant AdvocateA.K. Sen, Sr. Adv., ;R.K. Thakur, ;N.C. Mishra and ;P.C. Naik, Advs.
Respondent AdvocateK.A. Chitaley, Adv. and ;K.K. Dubey, Govt. Adv.
DispositionPetition allowed
Cases Referred and Amalgamated Coalfields v. State of M.P.
Excerpt:
- - 2,47,000 per annum and directing that from 29th december 1961 the company would be liable to pay royalty according to rates specified in the lease granted to it, (2) an order dated 19th november 1965 of the state government rejecting the petitioner's representation for a revision of the decision of the government dated 1st october 1965 and (3) a notice of demand issued by the collector, sarguja, on 25th january 1966 to the petitioner asking it to pay all the arrears of royalty within one month of the receipt of the notice and informing it that in the event of failure to pay the arrears of royalty within one month of the receipt of notice, action for the recovery of the amount as arrears of land revenue would be taken. notwithstanding anything contained in this act, the provisions.....dixit, c.j.1. by this application under articles 226 and 227 of the constitution the petitioner 'dadabhoy's new chirimiri ponri hill colliery' a private limited company (hereinafter referred to as the company,) having its registered office in bombay and its administrative office at nagpur and holding a lease for the mining and obtaining coal from a colliery situated in chirimiri seeks a writ of certiorari for quashing (1) an order passed bythe state government on 1st october 1965 making it liable for payment of royalty at the rate of 5 per cent of f. o. r. price for the period from 1st july 1958 to 28th december 1961 subject to a minimum of rs. 2,47,000 per annum and directing that from 29th december 1961 the company would be liable to pay royalty according to rates specified in the lease.....
Judgment:

Dixit, C.J.

1. By this application under articles 226 and 227 of the Constitution the petitioner 'Dadabhoy's New Chirimiri Ponri Hill Colliery' a private limited Company (hereinafter referred to as the Company,) having its registered office in Bombay and its administrative office at Nagpur and holding a lease for the mining and obtaining coal from a colliery situated in Chirimiri seeks a writ of certiorari for quashing (1) an order passed bythe State Government on 1st October 1965 making it liable for payment of royalty at the rate of 5 per cent of F. O. R. price for the period from 1st July 1958 to 28th December 1961 subject to a minimum of Rs. 2,47,000 per annum and directing that from 29th December 1961 the Company would be liable to pay royalty according to rates specified in the lease granted to it, (2) an order dated 19th November 1965 of the State Government rejecting the petitioner's representation for a revision of the decision of the Government dated 1st October 1965 and (3) a notice of demand issued by the Collector, Sarguja, on 25th January 1966 to the petitioner asking it to pay all the arrears of royalty within one month of the receipt of the notice and informing it that in the event of failure to pay the arrears of royalty within one month of the receipt of notice, action for the recovery of the amount as arrears of land revenue would be taken.

The applicant also prays that an appropriate writ, direction or order be issued to the opponents commanding them to cancel and withdraw the aforesaid orders and the notice of demand and that they be also restrained by a suitable direction or order from taking any steps or proceedings in pursuance, compliance, furtherance or implementation of the said orders and the notice of demand. It is also prayed that the opponents be restrained from recovering from the petitioner any royalty in excess of 2 1/2 per cent for the period from 29th December 1961 to 31st December 1965 in accordance with the Central Government's notification No. S. O. 3094, dated 29th December 1961, issued by the Ministry of Steel, Mines and Fuel.

2. The matter arises thus. The Ruler of the former Korea State in the Eastern States Agency granted a mining lease for coal in respect of 5.25 square miles of area to the late Sir M. B Dadabhov The period of the lease was 30 years commencing from 30th September 1941. During the period from 1944 to 1950 the lease-hold rights were taken over by the Government of India under a sub-lease But they were retransferred to the lessee Dadabhoy on 1st October 1950 Thereafter, by an agreement dated 6th November 1952 Dadabhoy transferred the lease-hold rights to the petitioner-Company The indenture of Lease contains a clause for payment of royalty by the lessee, which is now the petitioner-Company, on coal and rubble on the following slab system and rates:

'If the price is less than Rs. 5 per ton--four annas per ton.

If the price is Rs. 5 per ton or more but less than Rs. 7-8 per ton--eight annas per ton. If the price is Rs. 7-8 per ton or more but less than Rs. 10 per ton--twelve annas per tonIf the price is Rs. 10 per ton or more but less than Rs. 15 per ton--one rupee per ton.If the price is Rs. 16 per ton or more but less than Rs. 20 per ton--two rupees per ton. If the price is Rs. 20 per ton or more, the royalty will be twenty five per rent of the sate value of the coal or rubble at the pit's mouth '

3. In 1957, the Mines and Minerals(Regulation and Development) Act, 1957,(hereinafter referred to as the Act) wasenacted with a view, inter alia, to bring aboutuniformity in the terms and conditions of allmining leases as also to achieve the object ofbringing uniformity in the rates of royalty inall mining leases, whether they were grantedbefore or after 25th October 1949 Section 9of the Act is as follows:

'9. Royalties in respect of mining leases.

(1) The holder of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in the instrument of lease or in any law in force at such commencement, pay royally in respect of any mineral removed by him from the leased area after such commencement, at the rate for the time being specified in the Second Schedule in respect of that mineral.

(2) The holder of a mining lease granted on or after the commencement of this Act shall pay royalty in respect of any mineral removed by him from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral.

(3) The Central Government may, by notification in the Official Gazette, amend the Second Schedule so as to enhance or reduce the rate al which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification:

Provided that the Central Government shall not-

(a) fix the rate of royalty in respect of any mineral so as to exceed twenty per cent of the sale price of the mineral at the pit's head, or

(b) enhance the rate of royalty in respect of any mineral more than once during any period of four years.'

Section 16(1) is in the following terms:

'All mining leases granted before the 25th day of October, 1949, shall, as soon as may be after the commencement of this Act, be brought into conformity with the provisions of this Act and the Rules made under Sections 13 and 18:

Provided that it the Central Government is of opinion that in the interest of mineral development it is expedient so to do, it may for reasons to be recorded, permit any person to hold one or more such mining leases covering in any one Slate a total area in excess of that specified in Clause (b) of Section 6 or for a period exceeding that specified in Sub-section (1) of Section 8.'

The Act came into force on 1st June 1958. Rut before it came into force it was amended by inserting Section 30A which is as follows:

'Notwithstanding anything contained in this Act, the provisions of Sub-section (1) of Section 9 and of Sub-section (1) of Section 16 shall not apply to or in relation to mining leases granted before the 25th day of October, 1949, in respect of coal, but the Central Government, if it is satisfied that it is expedient so to do may by notification in the Official Gazette, direct that all or any of the said provisions (including any rules made under Sections 13 and 18) shall apply to or in relation to such leases subject to such exceptions and modifications, if any as may be specified in that or in any subsequent notification.'

On 29th December 1961 the Central Government issued the following notification in the exercise of its powers under Section 30A of the Act:

'Ministry of Steel. Mines and Fuel. (Department of Mines and Fuel)

NOTIFICATION

NEW DELHI, the 29th December, 1961. SO 3094: In exercise of the powers conferred by Section 30A of the Mines and Minerals (Regulation and Development) Act, 1957 (67 of 1957), the Central Government hereby directs that the provisions of Sub-section (1) of Section 9 of the said Act shall apply, with immediate effect, to or in relation to mining leases in respect of coal, granted before the 25th day of October 1949, subject to the modification that the lessee shall pay royalty at the rate specified in any agreement between the lessee and lessor or at 2 1/2 p.c. of F.O.R. price, whichever is higher, in lieu of the rate of royalty specified in respect of coal in the Second Schedule to the said Act.'

5. At the lime when the lease was granted to Dadabhoy in 1941 there were no restrictions on the price, movement or distribution of coal and coal was not a controlled commodity. It became a controlled commodity after the promulgation of the Coal Control Order in 1944 and under similar Orders promulgated thereafter from time to time. When the price of coal was raised by the Government of India in 1956 and the petitioner-Company was asked to step up its production of coal to 40,000 tons per month, the applicant-Company, apprehending that the price of coal would in due course exceed Rs. 20/- per ton and then it would have to pay 25 per cent royalty according to the slab system in the Indenture of Lease, made representation to the Government of India and the State Government for making applicable to it the Mineral Concession Rules, 1949, so that it may be placed on par with other collieries in the matter of payment of royalty of 5 per cent with a minimum of -/8/- per ton and for bringing the royalty clause in the mining lease in conformity with the Mineral Concession Rules, 1949. These representations resulted in the making of an order by the State Government on 23rd September 1963 in the following terms:

'The State Government have been pleased to reduce the rate of royalty specified in the mining lease held by M/s Dadabhoy's New Chirimiri Ponri Hill Colliery Company Ltd., over an area of 5.25 sq. miles in Surguja district to five per cent of F.O.R. price per ton prescribed in the Second Schedule of the Mines and Minerals (Regulation and Development) Act, 1957. with effect from 1st July, 1958, subject to the condition that the amount of royalty thus payable by the Company in respect of this lease shall not be less than Rs. 2,47,000/-(Rupees Two Lakhs fortyseven thousand) per annum. The amount of Rs. 2,47,000/ is the minimum royalty recoverable per annum from the said company in case royalty, at the revised rate of 5 p.c. f.o.r. works out to less than the aforesaid amount.

The outstanding royalty dues from 1st July, 1958 from the above company at the rate prescribed above may please be recovered early under intimation to this department. Outstanding dues prior to the period of 1st July, 1958, will be recoverable according to the old rates prescribed in the original lease deed.'

6. The petitioner says that acting on this order it paid the first instalment of royalty which became due on 16th January 1964 for the half-year ending 31st December 1963 and thereafter paid the half-yearly instalments at 6 per cent up to the date of this petition. According to the petitioner, on 5th October 1965 it received a copy of the impugned order of the Government passed on 1st October 1965 modifying its earlier order dated 23rd September 1963. This order of 1st October 1965 is as follows:

'In supersession of this department memo No. 7034-4783/XII dated 23rd September, 1963 the State Government are pleased to reduce the rate of royalty specified in the Mining Lease held by M/s Dadabhoy's New Chirimiri Ponri Hill Colliery Co. Ltd. over an area of 5.26 sq. miles in Surguja district to five per cent of F.O.R. price per ton prescribed in the Second Schedule of the Mines and Minerals (Regulation and Development) Act. 1957 with effect from 1st July, 1958 to 28-12 1961 subject to the condition that the amount of royalty thus payable by the company in respect of this lease shall not be less than 2,47,000/- (Rupees Two Lakhs fortyseven thousand) per annum.

From 29-12-1961 onwards the company will pay royalty according to the rates perscribed in the original lease deed, in accordance with Government of India's notification No. S. O. 3094 dated 29th December, 1961.'

The petitioner-Company represented to the State Government against the order dated 1st October 1965 complaining that the State Government had unilaterally revoked the earlier order of 23rd September 1963 and discriminatory treatment had been meted out to the petitioner in the matter of payment of royalty. The State Government by its order dated 19th November 1966 rejected this representation. The applicant has preferred a revision petition before the Union of India under rule 54 of the Mineral Concession Rules, 1960, against the orders dated 1st October 1966 and 19th November 1966 of the State Government That revision petition is still pending.

7. On 1st January 1966 the Central Government issued a notification in the exercise of its powers under Section 30A of the Act directing that Section 9(1) of the Act shall apply with immediate effect to or in relation to mining leases granted before 25th October 1949 This notification runs thus:

'Whereas the Central Government is satisfied that it is expedient so to do; now, therefore, in exercise of the powers conferred by Section 30A of the Mines and Minerals (Regulation and Development) Act, 1957 (67 of 57) and in supersession of the notification of the Government of India in the late Ministry of Steel, Mines and Fuel (Department of Mines and Fuel) S. O. No. 3094, dated 29th December, 1961 the Central Government hereby directed that the provisions of Sub-section (1) of Section 9 of the said Act shall apply, with immediate effect, to or in relation to mining leases in respect of coal, granted before the 25th day of October, 1949.'

Copies of this notification were sent by the State Government to all the Collectors and they were requested that the notification 'should be brought to the notice of all concerned who are paying royalty at rates lower than specified in the Second Schedule of the Mines and Minerals (Regulation and Development Act, 1957'

8. The controversy in this case centres round the question of the rate at which the petitioner is liable to pay royalty for the period from 29th December 1961 up to 31st December 1965. The petitioner's contention is that it cannot be called upon to pay for this period royalty at the rates specified in the Indenture of Lease dated 12th January 1944; that whether under the notification issued by the Central Government on 29th December 1961 in the exercise of its powers under Section 30A of the Act or under the order passed by the State Government on 23rd September 1963, royalty at the rate of 5 per cent of F. O. R. price per ton could only be demanded from it for period from 29th December 1961 to 31st December 1965; and that the State Government, having as a result of the representations made by the petitioner reduced the rate of royalty and waived or remitted the performance of the petitioner's obligation under the Indenture of Lease by making an order on 23rd September 1963, had no power to withdraw or revoke this reduction in the rate of royalty or the waiver or remission of the petitioner's obligation under the lease, subsequently and unilaterally without the consent of the petitioner as it purported to do by its order dated 1st October 1965.

On the other hand, the stand of the State is that under the Central Government's notification dated 29th December 1961 issued under Section 30A of the Act the petitioner was liable to pay royalty at the rate specified in the lease as that rate exceeded 2 1/2 per cent of F. O. R. price per ton: that this notification was overlooked by the State Government when it passed the order dated 23rd September 1968; that after the issue of notification dated 20th December 1061 the State Government had no power to vary the rate of royalty contrary to the notification; and that the order it passed on 1st October 1066 only rectifies the error it had committed while making the order dated 28rd September 1968 and the direction contained therein that from 20th December 1961 the Company would be liable to pay royalty at the rate specified in the original lease was in consonance with the Government of India's notification dated 29th December 1961.

9. Shri Ashok Sen, learned counsel appearing for the petitioner, first contended that Section 30A empowered the Central Government to apply Section 9(1) and section 16(1) to coal mining leases granted before 26th October 1949 'subject to such exceptions and modifications' as may be specified in the notification issued for the application of Section 9(1) or section 16(1) or in any subsequent notification; this power of 'modification' could not be used for altering or changing the essential features of Section 9(1) or 16(1) or for enhancing the rate of royalty, namely, 6 per cent of F.O.R. price per ton specified in the Second Schedule of the Act which could be done only in accordance with Section 9(3).

It was said that the effect of application of Section 9(1) to coal mining leases granted before 26th October 1949 was to make the holder of such a mining lease liable to pay royalty at the rate specified in the Second Schedule notwithstanding anything contained in the terms of the lease granted to him in respect of any mineral removed by him from the leased area after 1st June 1958, that is the date on which the Act came into force; this was the essence of Section 9(1) and any notification issued under Section 30A must keep intact this essential feature; that the 'exceptions and modifications' permissible in the exercise of powers under Section 30A could only be for varying the liability of holders of coal mining leases granted before 25th October 1949 within the limit of the rate specified in the Second Schedule.

10. Learned counsel proceeded to say that the notification dated 29th December 1961 could not be read as directing that the holder of a mining lease granted before 25th October 1949 shall, notwithstanding anything contained in the instrument of lease or in any law in force at the commencement of the Act, pay royalty in respect of any coal removed by him from the leased area after the commencement of the Act at the rates specified in the Second Schedule with immediate effect 'subject to the modification that the lessee shall pay royalty at the rate specified in any agreement between the lessee and the lessor or at 2 1/2 of F.O.R. price, whichever is higher, in lieu of the rate of royalty specified in respect of coal in the Second Schedule of the laid Act'. In such a reading one part, of the direction would be utterly inconsistent with the other and the entire notification would be meaningless.

It was suggested that the proper reading of the notification is to direct that the holder of a mining lease in respect of coal grantedbefore 25th October 1949 shall, notwithstanding anything contained in the instrument of lease or in any law in force at the commencement of the Act, pay royalty in respect of coal removed by him from the leased area after the commencement of the Act at the rates specified in the Second Schedule, with immediate effect, subject to the modification that, where the rate of royalty specified in any agreement between the lessee and the lessor is less than 5 per cent, the lessee shall pay royalty at the rate specified in such agreement or at 2 1/2 per cent of F.O.R. price, whichever is higher, in lieu of the rate of royalty specified in the Second Schedule of the said Act.

So read, the effect of the notification was that in regard to coal mining leases granted before 25th October 1949 if the royalty specified in the lease was higher than 6 per cent of F. O. R. price per ton, then the royalty payable from 29th December 1961 would bit the one specified in the Second Schedule, namely, 6 per cent of F. O. R. price per ton: in relation to leases where the rate of royalty stipulated was less than 5 per cent but more than 21/2 per cent of F.O.R. price per ton, the rate of royalty would he the one specified in the lease agreement; and in respect of leases where the rate of royalty specified was less than 2 1/2 per cent of F.O.R, price per ton, the rate of royalty would be 2 1/2 per cent of F. O. R. price per ton from 29th December 1961.

11. Learned counsel further said that this was the proper construction of the notification dated 29th December 1961 in keeping with the object of Section 9(1) and Section 30A, namely, to bring about uniformity in the matter of royalty payable by holders of leases granted before 25th October 1949 and in conformity with the construction of those provisions according to settled rules, maintaining their constitutionality. Any other construction, it was said, would result in conflict with the provisions of Section 9(1) and Section 9(3) of the Act on the one hand and the exercise of power under Section 30A on the other and would also lead to unconstitutional discrimination between leases of the same type. It would also ignore the effect of the words 'subject to occurring in Section 30A which was to Introduce a proviso and make the exercise of power under Section 30A for the application of Section 9(1) 'subject to exceptions and modifications' outside the permissible limits of delegation of legislative power

12. In reply, Shri Chitale, learned counsel for the State of M. P., urged that the non obstante clause with which Section 30A opened indicated that its amplitude was in no way controlled by any provisions Including Section 9(3) of the Act; that on the issue of a notification under Section 80A applying Section 9(1) to mining leases granted before 25th October 1940 subject to exceptions and modifications specified in the notification, Section 9(1) applied to those leases not in the form enacted but with the 'exceptions and modifications' set out in the notification and royalty in accordance with the modified form of Section 9(1) became payable in respect of any mineral removed not from 1st June 1968, that is the date of the coming into force of the Act, but from the date of the issue of the notification.

Learned counsel said that the notification dated 29th December 1961 was only to raise royalty rate to a minimum of 2 1/2 per cent of F.O.R. price per ton leaving untouched mining leases where the agreed rate of royalty fixed was higher than 21/2 per cent; and that such a modification in regard to the application of Section 9(1) could be made under Section 30A Learned counsel further argued that the notification dated 29th December 1961 must be read as a whole and could not be split up; and that if there was any inconsistency between the first part of the notification and the other setting out the 'modification', then the latter being the paramount clause would prevail over the first part.

It was also said that if on the application of Section 9(1) by the notification dated 29th December 1901 different rates of royalty in respect of mineral leases of the same type remained operative, then that would not be any result of any action taken under the Act or of the notification dated 29th December 1961 but the difference would be because of the terms in the leases themselves in regard to the rate of royalty, and consequently it could not be urged that the notification dated 29th December 1961 brought about 'unconstitutional discrimination' between leases of the same type. Learned counsel pointed out that it would be of no assistance to the petitioner if the notification dated 29th December 1961 were to be held totally invalid.

13. The question raised by the argument presented by learned counsel for the parties is as regards the true construction of Section 30A and of the notification dated 29th December 1961. Before turning to that question, it is necessary to consider first the provisions of Section 9 of the Act. The first subsection makes the holder of a mining lease granted before the commencement of the Act, that is before 1st June 1958, liable to pay royalty in respect of any mineral removed by him from the leased area after that date at the rate for the time being specified in the Second Schedule, notwithstanding anything contained in the instrument of lease or in any law in force on 1st June 1958. The holder of a mining lease granted on or after 1st June 1958, is also made liable by Sub-section (2) to pay royalty in respect of any mineral removed by him from the leased area at the rate for the time being specified in the Second Schedule.

The last sub-section gives to the Central Government the power to amend the Second Schedule and vary the rate of royalty subject to the limitations prescribed by the proviso to that sub-section. It is easy to see that the first two sub-sections are intended to bring about uniformity in regard to the rate of royalty payable by holders of a mining leases granted before or after 1st June 1958. If Section 30A had not been incorporated in the Act. Section 9(1) would have applied to mining leases for coal granted before 25th October 1949. The effect of the application would! have been that holders of all such mining leases would have been required to pay royalty at the rate of 5 per cent of F. O. R. price per ton, irrespective of the stipulated rate of royalty in the mining leases.

The result would have been to reduce the rate of royalty to 5 per cent in cases of leases for coal providing for a higher rate and to enhance the rate in relation to those leases where the rate of royalty agreed was less than 6 per cent. By virtue of Section 30A, Section 9(1) was, however, not made applicable from 1st June 1968 to mining leases for coal granted before 25th October 1949. It was left to the Central Government to determine the time of application of Section 9(1) to such mining leases and to issue a notification for its applicability whenever it thought to expedient so to do. It would be pertinent to note here that the expression 'pay royalty in respect of any mineral removed by him from the leased area after such commencement' occurring in Section 9(1) presupposes that Section 9(1) has been made applicable to a holder of a mining lease from 1st June 1958, that is the date when the Act came into force.

If the application of that provision is deferred until a notification under Section 30A is issued, then the payment of royalty can only be in respect of any mineral removed by the holder of a mining lease from the leased area after the date when Section 9(1) is applied and not in respect of any mineral removed before Section 9(1) was made applicable even if 'the removal period' it was one falling after 1st June 1958. This is the only reasonable construction of the words 'after such commencement' to be found in Section 9(1) when clearly there can be no liability for payment of royalty under Section 9(1) for any period falling before the date on which the provision is actually made applicable if, under the notifications dated 29th December 1961 and 1st January 1966, the payment of royalty is held to be in regard to mineral removed from the leased area after 1st June 1958, an absurdity would result in that the effect of the notification dated 29th December 1961 would be altogether wiped off by the subsequent notification issued on 1st January 1966.

14. Now, Section 30A consists of two parts. The first part, overriding other provisions in the Act, excludes mining leases for coal granted before 26th October 1949 from the purview of Section 9(1) and Section 16(1). The second part gives to the Government the power to apply by issuing a notification all or any of the said provisions (including any rules made under Sections 13 and 18) to such leases subject to 'exceptions and modifications whenever it thinks it expedient so to do. It is important to note that the application of Section 9(1) and of Section 16(1) including any rules made under Sections 13 and 18 by the issue of a notification under Section 30A must be to all mining leases for coal granted before 26th October 1949.

Section 30A does not give to the Central Government the power to pick and choose the leases to which in its opinion the aforesaid provisions should be made applicable. This becomes clear from the use of the words 'such leases' in the latter half of Section 30A. 'Such leases' clearly refer to all the coal mining leases granted before 25th October 1949 in regard to which the first part of Section 30A says that Section 9(1) and Section 16(1) shall not apply. The expression 'mining leases granted before the 25th day of October, 1949, in respect of coal' means all mining leases for coal and not any particular kind of leases.

15. Section 30A does not require that whenever by a notification issued thereunder Section 9(1) is applied to mining leases granted before 25th October 1949, the application of that provision must be subject to certain exceptions and modifications to be specified in the notification. It is open to the Government to apply Section 9(1) to such leases as it is enacted or to make the applicability of the provision subject to 'such exceptions and modifications, if any, as may be specified in that or in any subsequent notification.' But if certain exceptions and modifications are specified in the notification applying Section 9(1) or in any subsequent notification, then their effect is to except the clause covered by 'exceptions' from the provision of Section 9 (1) or to qualify the operation of the provision in some particular or particulars covered by 'modifications'.

16. The effect of the words 'subject to' is to introduce a proviso. To read the words 'subject to' as meaning that the application of Section 9(1) is conditional upon compliance of requirements of the 'exceptions and modifications', would make Section 30A wholly meaningless. If, as we think, the effect of the words 'subject to' is to introduce a proviso, then, according to the settled rules of construing a proviso, the words 'direct that all or any of the said provisions (including any rules made under Sections 13 and 18) shall apply to or in relation to such leases subject to such exceptions and modifications, if any as may be specified in that or in any subsequent notification' can only mean that when a notification applying the aforesaid provisions subject to certain exceptions and modifications is issued, then the relevant provision is to apply but the generality of its applicability is limited or qualified by the specified exceptions and modifications.

17. The power of introducing 'exceptions and modifications' cannot be used for nullifying the provision made applicable or adding to it anything which is foreign to the provision. It is not permissible to alter the essential character or feature of Section 9(1) or to change it in material particulars by exercising the power of 'modification'. Various meanings are no doubt attached to the words 'modify' or 'modification'. The meaning of these words has been considered by the Supreme Court in In re, The Delhi Laws Act, (1912) etc. 1961 SCR 747 : AIR 1951 SC 332 and Rajnarain Singh v. Chairman, Patna Administration Committee, (1965) 1 SCR 290: AIR 1954 SC 569 and many other cases. It seems to us unnecessary to refer to all these cases. It was pointed out by Kama C. J. in In re, the Delhi Laws Act, 1912, etc. 1951 SCR 747 AIR 1951 SC 332 (supra) that the word 'modify' also means 'to limit, restrain, to assuage, to make less severe, rigorous, or decisive; to tone down'. In our judgment, having regard to the object with which Section 30A was introduced in the Act, namely to soften the rigour of the payment of royally at the rate of 5 per cent of F. O. R. price per ton specified in the Second Schedule, the word 'modification' in the context of Section 30A has the meaning just adverted to.

18. This, in our judgment, is the true construction of Section 30A having regard to its scope and its purpose. If that is so, then the notification dated 29th December 1961 must be read in the way Shri Sen, learned counsel for the petitioner, read excluding his suggestion that the payment of royalty thereunder would be in respect of coal removed from the leased area after 1st June 1958. The notification in question first categorically says that the provisions of Section 9(1) of the Act shall apply, with immediate effect, to or in relation to mining leases in respect of coal granted before 25th October 1949.

If this direction is paraphrased by reading into it what Section 9(1) provides, then the direction means that the holder of a mining lease in respect of coal granted before 25th October 1949 shall, notwithstanding anything contained in the instrument of lease or in any law in force at the commencement of the Act, pay royalty in respect of coal removed by him from the leased area after the date of the notification at the rate specified in the Second Schedule, that is at the rate of 5 per cent of F. O. R. price per ton, which was the specified rate when the notification was issued. This direction, standing by itself, makes all holders of mining leases for coal granted before 25th October 1949 liable to pay royalty at the rate of 5 per cent regardless of the term contained in the mining lease about the rate of royally.

19. It is clear that under this direction the holder of a mining lease providing for payment of royalty at a rate higher than 5 per cent is, from the date of the notification, liable to pay royalty not at the stipulated rate but at the rate of 6 per cent only. The holder of a mining lease where the rate of royalty stipulated is less than 6 per cent would have also been liable to pay royalty at the rate of 5 per cent from 29th December 1961 but for the modification set out in the latter part of the notification. That part makes the application of Section 9(1) 'subject to the modification that the leases shall pay royalty at the rate specified in any agreement between the lessee and the lessor or at 2 1/2 of F O R. price, whichever is higher, in lieu of the rate of royalty specified in respect of coal in the Second Schedule'.

20. As already indicated by us the modification specified in the notification must he read as a proviso to the direction contained in the earlier portion of the notification and bearing in mind the meaning of the word 'modification' in the context of Section 30A, namely, 'to limit, to restrain, to assuage, to make less severe, to tone down' Set read, the latter part of the notification specifying the modification can only meant that where the rate of royalty specified in any agreement between the lessee and the lessor is less than 5 per cent. the lessee shall pay royalty at the rate specified in such agreement or at 2 1/2 per cent of F.O.R price, whichever is higher, in lieu of the rate of royalty specified in the Second Schedule.

If under the substantive direction contained in the notification royalty is payable only at the rate of 5 per cent notwithstanding anything contained in the instrument of lease and the modification of this direction is in the nature of a proviso intended to cushion or make less severe the effect of that rate, then it would follow as a necessary consequence that the leases referred to in the latter portion of the notification are those under which royalty is payable at a rate less than 5 per cent. To take leases providing for payment of royalty at a rate higher than 5 per cent as also included in the 'modification' part of the notification is to make the two parts of the notification inconsistent with each other

It would be altogether inconsistent and meaningless to say first that notwithstanding anything contained in an instrument of lease royalty would be payable at the rate of 6 per cent and to say further at the same time that royalty at the rate specified in the lease agreement or at 2 1/2 per cent, whichever is higher, would be payable in lieu of the rate of 5 per cent specified in the Second Schedule. This inconsistency is avoided if the leases spoken of in the second part of the notification are taken to mean leases where the stipulated rate of royalty is less than 5 per cent. It is manifest that the object of the modification Is to relieve the holders of mining leases for coal where the rate of royalty agreed is less than 5 per cent. of the burden and inconvenience of a sudden rise or royalty to 5 per cent.

21. We are unable to construe the notification dated 29th December 1961 in the way suggested by Shri Chitale, learned counsel for the State of M. P. He contended that all that the notification did was to step up the rate of royalty to 2 1/2 per cent where the mining leases provided for payment of royalty al a lower rate and that the notification did not touch other leases That construction totally disregards the earlier portion of the notification and the object and the purpose of Section 9(1), Section 30A and the notification itself, namely to bring about uniformity in the matter of payment of royalty and at the same time In avoid a sudden rise of the rate of royalty to the rate specified in the Second Schedule.

That apart. Section 30A does not give to the Central Government any independent power of fixing the rate of royalty. What it does is to delegate to the Central Government the power of applying Section 9(1) by issuing a notification whenever it is satisfied that it is expedient so to do Shri Chitale's reading of the notification makes it altogether outside the scope of Section 30A to say that notwithstanding the terms of a mining lease royalty shall be paid at the rate of 5 percent but that if the stipulated rate is lower than 5 per cent. then royally at the rate specified in the lease agreement oral 2 1/2 per cent, whichever is higher, shall be paid, is to apply Section 9(1) of the Act subject to modification. But to say that royalty at the rate specified in any agreement between the lessee and the lessor or at 2 1/2 per cent. whichever is higher, shall be paid in lieu of the rate of royalty specified in the Second Schedule is not to apply Section 9(1) at all but is to fix the rate or royalty de hors it.

22. In our view, the true construction and effect of the notification dated 29th December 1961 is that in regard to coal mining leases granted before 25th October 1949 if the rate of royalty stipulated in the lease was higher than 5 per cent of F.O.R. price per ton, then the royalty payable, from 29th December 1961 in respect of coal removed from the leased area after that date would be the one specified on that date in the Second Schedule, namely. 5 per cent of F. O. R, price per ton: in relation to leases where the rate of royally stipulated is less than 5 per cent but more than 2 1/2 per cent of F.O.R. price per ton, the rate of royalty would be the one specified in the lease agreement: and in respect of leases where the rate of royalty specified was less than 2 1/2 per cent of F.O.R. price per ton, the rate would be 2 1/2 per cent of F.O.R. price per ton from 29th December 1961.

It follows from this that the petitioner-Company, which was, under the terms of its lease, liable to pay royalty at a rate higher than 5 per cent of F.O.R. price per ton for the period from 29th December 1961, is rightly entitled to claim that under the notification dated 29th December 1961 it cannot be called upon to pay royalty from 29th December 1961 at the rate stipulated in the lease granted to it but only at the rate of 6 per cent of F.O.R. price per ton specified in the Second Schedule.

23. Learned counsel for the petitioner next contended that even on the assumption thatthe construction put by the State on the notification dated 29th December 1961 was correct and the petitioner was liable to pay royalty from 29th December 1961 at the rate specified in its lease agreement, still the petitioner-Company's liability for payment of royalty was at the rate of 5 per cent of F. O. R. price per ton. The argument was that the order dated 23rd September 1963 of the State Government reduced the rate of royalty originally specified in the mining lease to 5 per cent of F. O. R. price per ton with effect from 1st July 1968 subject to the condition of the Company paying a minimum sum of Rs. 2,47,000/- per annum as royalty; there was thus an alteration of the terms of the lease contract, the consideration being the obligation taken by the petitioner for payment of minimum sum of Rs. 2,47,000/- per annum as royalty and thus under the order dated 23rd September 1968 the contractual liability of the petitioner for payment of royalty could, under Section 62 of the Contract Act, only be at the rate of 6 per cent of F. O. R. price per ton, subject, of course, to the condition of payment of the minimum amount of royalty.

It was further said that the condition in the lease in regard to the payment of royalty was solely for the benefit of the lessor, namely the State, and the State was entitled to waive it under Section 68 of the Contract Act in the manner it did by reducing the rate of royally to 6 per cent of F. O. R. price per ton and, having done so, the State could not rescind the remission by its order dated 1st October 1966 and claim to recover from the petitioner royalty at the original rate specified in the mining lease. Thus, according to learned counsel, when the notification dated 29th December 1961 was issued, the rate of royalty specified in its lease agreement was only 6 per cent of F. O. R. price per ton, and consequently even on the construction put on the said notification by the State, the petitioner-Company could not be called upon to pay royalty at a rate higher than 5 per cent of F. O. R. price per ton.

24. Shri Chitale, learned counsel for the State, did not dispute the proposition that if the parties to a contract agree to alter it, the original contract need not be performed and that a promisee can dispense with or remit, wholly or in part, the performance of the promise made to him; and where remission is made and communicated to the promisor, the amount remitted cannot be demanded. He, however, urged that after the issue of the notification dated 29th December 1961 by the Central Government, the State Government had no power at all to grant any remission in the rate of royalty originally specified in the lease by reducing to 5 per cent of F.O.R. price per ton. On this point learned counsel formulated his argument thus:

Under Article 73 of the Constitution the executive power of the Union extends to the matters with respect to which Parliament has power to make laws; the Mines and Minerals (Regulation and Development) Act, 1967, wasenacted by Parliament exercising its legislative powers under Entry No. 64 of List I of the Seventh Schedule to the Constitution which gives to Parliament the power to pass any legislation with respect to regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest. When the declaration contemplated by Entry No. 54 is made, the Union Government has exclusive executive power in the matter of 'regulation of mines and mineral development.' Learned counsel referred to Section 2 of the Act containing the declaration as to expediency of Union control in these terms:

'It is hereby declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent hereinafter provided.

He also pointed out that under Section 6(2) of the Act no mining lease in respect of coal be granted except with the previous approval of the Central Government and that under Section 10(3) of the Act the State Government could grant a mining lease only after having regard to the provisions of the Act and any rules made thereunder. It was said that all these provisions, as also Section 61(1), Indicated that on the issue of the notification dated 29th December 1961 under Section 80A of the Act the State Government had no power whatsoever to make any variation in the terms incorporated in the petitioner's mining lease about payment of royalty, and consequently the remission given in the rate of royalty for the period beyond 29th December 1961 by the State Government's order dated 23rd September 1968 was rightly revoked by the Government by its order dated 1st October 1966.

25. We are unable to accede to the contention of Shri Chitale that on the issue of the notification dated 29th December 1961 the State Government had no power to grant any remission in the rate of royalty for any period beginning from 29th December 1961. It is quite true that under article 78 the executive power of the Union extends to the matters specified in entry No. 54, List I; and to the extent that there is declaration by Parliament in ex-exercise of the power conferred by that entry, the Union Government has exclusive executive power over the matters with respect to which Parliament has power to make laws under Entry No. 64. The declaration embodied in Section 2 of the Act is limited to the control and regulation of mines to the extent provided by the Act.

Now, though the executive power relating to matters included in Entry No. 84 vests in the Union to the extent of the declaration made under Section 2, the Act itself entrusts to the State specific executive functions. Section 10 gives to the State Government the power to entertain applications for mining leases and grant mining leases having regard to the provisions of the Act and any rules made thereunder. The executive authority of the State under Section 10(3) would no doubt be limited by the terms of the notification dated 29th December 1961 issued under Section 30A if the notification is regarded as a part of the Act. Even if it is so regarded, then on the construction put by the State on the said notification, the State's power to vary the terms of a mining lease providing for payment of royalty at a rate higher than 2 1/2 per cent is not affected.

If, as learned counsel for the State contended, the notification dated 29th December 1961 only raised the rate of royalty to 2 1/2 per cent in cases of leases providing for payment of royally at a lower rate and left other leases untouched then the notification could not be taken advantage of to contend that even in cases of leases providing for payment of royalty at a rate higher than 2 1/2 per cent. the State's power to vary the terms of those leases in regard to payment of royalty was controlled and limited by the notification. In this connection it is very important to note that the Union Government's executive power in regard to the matters specified in Entry No. 54 is limited to the control and regulation of mines to the extent of the declaration contained in Section 2, that is to say to the extent provided by the Act.

The control over payment of royalty in respect of mining leases for coal granted before 25th October 1949 is through the medium of Sections 9 and 30A. In effect, the argument of Shri Chitale that the notification dated 29th December 1961 left untouched mining leases for coal granted before 25th October 1949 where the rate of royalty stipulated was higher than 2 1/2 per cent. is, that Section 9(1) was not made applicable to such leases by the notification. If Section 9(1) was not made applicable, then the Union Government cannot be said to have taken under its control the matter of regulation of royalty in respect of such leases by virtue of section 2 or any other provisions of the Act. It follows, therefore, that the State's executive power to alter the rate or royalty in respect of mining leases for coal granted before 25th October 1949 where the rate of royalty specified was higher than 2 1/2 per cent is in no way fettered by the notification dated 29th December 1961 Section 5(2) and Section 16(1) are in no way concerned with the rate of royalty. They have, therefore, no bearing on the question of the power of the State to vary the rate of royalty in leases of the kind just referred to.

26. In our judgment, the notification dated 29th December 1961 in no way affected the power of the State to grant a remission in the rate of royalty to the petitioner for the period after 29th December 1961 by reducing the rate specified in the mining lease to 5 per cent of F. O. R. price per ton. The Stale Government was competent to reduce the rate of royalty to 5 per cent. even for the period after 29th December 1961 and having done so by its order dated 23rd September 1963, was not entitled to rescind the remission by its subsequent order dated 1st October 1965. The position then is that before the issue of the notification dated 29th December 1961 the rate of royalty specified in the petitioner's lease stood reduced to 5 per cent and this reduction was effective even for the period after 29th December 1961 and could not be resided by the State. That being so, even on the construction put on the notification on behalf of the State the petitioner's liability for payment of royally from 29th December 1961 would be at the reduced rate of 5 per cent of F. O. R. price per ton.

27. In this view of the matter, it is not necessary for us to consider the further submission of learned counsel for the petitioner that Section 30A is violative of Article 14 of the Constitution.

28. Shri Chitale for the State also urged that the controversy raised by the petitioner in this case related to enforcement or breach of the terms of its lease in regard to payment of royalty and, therefore, the petitioner could not be given any redress under Article 226 of the Constitution for the alleged breach. We do not agree. The questions raised by this petition are about the construction of Sections 9 and 30A of the Act, the notification dated 29th December 1961 issued thereunder and the effect of that notification on the orders passed by the Government on 23rd September 1963 and 1st October, 1965, and the validity of the demand purported to have been made against the petitioner under the terms of the notification dated 29th December 1961 for payment of royalty from 29th December 1961 upto 31st December 1965. These questions can clearly be gone into in proceedings under Article 226 of the Constitution.

29. It was also said by Shri Chitale that the petitioner should pursue the revision petition filed by it before the Union of India under Rule 54 of the Mineral Concession Rules, 1960, for seeking the relief claimed in this petition. There was some controversy at the bar whether the revision petition filed by the petitioner is or is not tenable. Leaving aside that question, we do not think that in the present case it would be right to compel the applicant to pursue the revision petition it has filed when the demand made against it by the State for payment of royalty at the rate originally specified in the lease for the period from 29th December 1961 to 31st December 1965 is manifestly without jurisdiction and illegal. The rule requiring exhaustion of statutory remedies before the grant of a writ of certiorari is a rule of policy, convenience and discretion rather than a rule of law. See State of Uttar Pradesh v. Mohammad Nooh 1958 SCR 595 AIR 1958 SC 86 and Amalgamated Coalfields v. State of M.P. AIR 1956 Madh Pra 215.

30. It may be staled here that Shri K. K. Dube, Government Advocate of the Slate, who appeared for the Union of India, adopted all the arguments advanced by Shri Chitale on behalf of the State.

31. For the foregoing reasons, this petition is allowed and the order dated 1st October 1965 of the State Government in so far as it directs that 'from 29th December 1961 onwards the company will pay royalty according to the rates prescribed in the original lease deed' is quashed. The order dated 19th November 1965 of the State Government rejecting the petitioner's representation for a revision of the aforesaid direction contained in the order dated 1st October 1965 is also quashed. It is declared that the petitioner-Company is liable to pay royalty for the period from 29th December 1961 to 31st December 1965 only at the rate of 5 per cent of F. O. R. price per ton in respect of coal removed by it from the leased area from 29th December 1961; and the notice of demand issued by the Collector, Surguja, on 25th January 1966 to the petitioner asking it to pay all the arrears of royalty calculated at a rate higher than 5 per cent is quashed. The respondents are restrained from taking any steps or proceedings for the recovery of any amount of royalty from the petitioner in pursuance of the aforesaid direction contained in the order dated 1st October 1965, the order dated 19th November 1965 and the notice of demand dated 25th January 1966 The petitioner shall have costs of this application. Counsel's fee is fixed at Rs. 500/-. The outstanding amount of the security deposit shall be refunded to the petitioner.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //