TMI Blog1971 (11) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... if gte mso 10]> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0cm; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-fareast-language:EN-US;} <![endif]--> SHELAT, J.M., SIKRI, S.M. (CJ), REDDY, P. JAGANMOHAN AND MITTER, G.K., JJ. I. N. Shroff, for the appellant S. V. Gupte, Suresh A. Shroff, R. K. Thakur, Bhuvanesh Kumari, K. S. Cooper, M. K. Cooper, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, B. P. Maheshwari, S. P. Nayar, for the respondent JUDGEMENT Shelat, J. By an Indenture of Lease, dated January 12, 1944, made between the then Ruler of Korea State of the one part, referred to as the lessor therein, and Sir Mukherji B. Dadabhoy, ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia proportionately increased the controlled coal price. A representation made by the respondent-company to the Government of India, dated October 5, 1956 shows that the increase in respect of the coal extracted by the respondent- company was from 14.6.0 and ₹ 15.6.0 to ₹ 17.6.0 and ₹ 18.6.0 per ton. That increase, however, resulted in the respondent-company having to pay royalty at an increased rate since the rate of royalty payable by the company was on graded slabs varying according to the price of coal at the pit's head. The company's representation, therefore, was that the royalty payable by it should be modified so as to bring it in consonance with that payable under the 1948 Act read with the Mineral Concession Rules, 1949 and the First Schedule thereto, namely, at a fixed rate of 5% of the f.o.r. price subject to the minimum of 8 ans. per ton. (rule 41 (1) (a)). The Government of India referred the respondent-company to the State Government and advised it to make a similar representation to that Government. Thereafter correspondence went on between the Government of Madhya Pradesh and the respondent-company for a considerable time. The State, Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reduced, rate of 5 % instead of at the rates varying from 5 % to 25 % according as the price fluctuated from time to time. Sec. 1 6 provided that all mining leases granted before October 25, 1949 should, as soon as may be, after the commencement of the Act, be brought into conformity with the provisions of the Act and the Rules made under sees. 13 and 18. The Amending Act, 15 of 1958, by its sec. 2, inserted into the Act sec. 30A with retrospective effect. That section reads as under 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. The section falls into two parts. Under the first part, the operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order, dated September 23, 1963 to the Collector, Surguja, directing him to recover from the respondent- ,company royalty at the rate of 5% with effect from July 1, 1958 subject to the condition that the royalty amount should not be less than ₹ 2,47,000/- per year. The Government, however, directed the Collector to recover the outstanding royalty due for the period prior to July 1, 1958 at the old rates, that is, as provided by the lease. The State Government, however, changed its mind later on, for, by its order dated October 1, 1965 it partially suspended its order of September 23, 1963 and directed the Collector to recover royalty as from December 29, 1961 at the rates prescribed under the lease in accordance with the Government of India's notification No. S.O. 30, dated 29th December, 1961 . Representations by the respondent-company to the State Government to charge royalty at 5% proved futile. However, on January 1, 1966, the Central Government issued a notification under which it directed the lessees of pre-1949 leases to pay royalty at 5% of the f.o.r. price. Thereupon, by its order, dated February 11, 1966, the State Government issued instructions to the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction of the words of the notification, the respondent-company was bound to pay royalty at the rates provided in its lease, that being higher than the minimum of 2-1/2% provided in the notification. The High Court rejected the contention raised by the State as being inconsistent with the purpose for which sec. 30A was introduced. The High Court observed : 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% 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 royalty stipulated in 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 cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e complied with. It is well-known that prior to the enactment of the 1948 Act,' leases of mining areas had been granted by diverse authorities on different terms and conditions. The rate of royalty under those leases were inevitably divergent and were often fixed at very low rates. The purpose of enacting the 1948 Act was to bring about uniformity in such leases and with that lend that Act had made provisions for power to modify the terms and conditions both in regard to the area and the period under such leases. The object of such provisions was to regulate in a systematic and scientific manner development of mining and minerals. Though under the Constitution that subject was left to the States, a power was carved out by entry 54 in List I for the exclusive exercise of it by the Centre. The consequence was 'the enactment of Act 67 of 1957 which was brought into operation from June 1, 1958. The purpose of passing that Act is clearly seen from the declaration required under entry 54, List I, in sec. 2, namely, that it was necessary for the Union to take under its control regulation of mines and the development of minerals. In pursuance of that object the Act made provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commencement of that Act, were liable to pay royalty at 5% under r. 41 of the 1949 Concession Rules, sec. 9 did not make any difference to them as it prescribed the same rate. But so far as lessees under the pre1949 leases were concerned, the new rate affected them, inasmuch as those, who, under their leases were paying at a lesser rate became liable to pay royalty at 5%, while those who were paying at a higher rate had to pay at, the lower rate of 5% only. Besides, the change in the rate of royalty under sec. 9, pre-1949 leases were liable to be modified in respect of the area and the period under sec. 16 and the rules made under secs. 13 and 18. Even before the new Act was brought into force, consequences of enforcing such uniformity and the resultant automatic spurt in the rate of royalty, especially in respect of coal, had been realised. The Central Government, therefore, itself sponsored the insertion of sec. 30A by sec. 2 of the Amendment Act, 15 of 1958, with retrospective effect. The consequences flowing from the attempted uniformity were set out in the Statement of Objects and Reasons(1) for amending the Act. The statement acknowledged (1) Gazette of India, Extra., Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of 5% as prescribed for the time being in the Second Schedule, and even if the Government were, in the meantime, to enhance the rate as authorised by sec. 9(3) upto the maximum rate of 20% at such rate but never more than 20%. The second part thus contemplated payment of royalty, on sec. 9(1) being made applicable, at the most, at the rate of 5% only, as no increase had till. then been-made under sec. 9(3). (1) Rajya Sabha Proceedings, dated November On December 29, 1961, the Central Government in exercise of the powers conferred by sec. 30A issued the notification directing that the provisions of sub-sec. (1) of sec. 9 of the said Act shall apply with immediate effect to or in relation to pre-1949 coal mining leases, subject to the modification that such lessees shall pay royalty at the rate specified in the agreements between the lessees and the lessors or at 2-1/2% of f.o.r. price, whichever was higher, in lieu of the rate of royalty specified in respect of coal in the Second Schedule to the said Act . The argument urged on behalf of the State both before the .High Court and before us was that the notification clearly envisaged payment of royalty at the rate agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible, the one which sustains its validity must be preferred. On a plain reading of the notification, however, it is clear that what it meant was that instead of the rate flowing from the application of sec. 9(1) and the Second Schedule, a modified rate should be applied, that is, in lieu of the rate of royalty specified in the Second Schedule, royalty at the agreed rate should be charged if it was lower than 5%, or at 2-1/2% minimum, whichever was higher. The notification, thus, did not -empower the State Government to recover royalty at a rate higher than 5% in lieu of the rate chargeable under sec. 9(1) and the Second Schedule which provided 5% only. It appears that the State Government itself understood such a construction as proper, for, if it had understood otherwise, it would not have issued its order dated September 23, 1963 directing the Collector to recover royalty at 5% pursuant to the correspondence which had ensued between the company, the Central Government and the State Government. If it had understood the notification in the manner now urged by its counsel, it would have at once pointed out both to the company and the Central Government in that correspondence th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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