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TMI Blog1971 (11) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... hanji, 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, referred to as the lessee, of the other part, the lessor granted to the lessee for a term of 30 years, in consideration of payment of rents and royalties therein mentioned, a mining lease of an area measuring 5.25 sq. miles delineated on the plan annexed thereto, with liberties, powers and privileges and on terms and conditions therein set out. By cl. (2) of that Indenture, the lessee agreed to pay during the subsistence of the lease royalties at the rates and on dates set out therein. The rates of royalty varied from 5% to 25% according to the price of coal per ton extracted from the leased area, that is to say, from 4 ans. per ton if the price was ₹ 51/- per ton to 25% of the price per ton at the pit's head if that price was ₹ 20/- or more. On the merger of the Korea State with Madhya Pradesh, into the events of which it is not necessary for the purposes of this appeal to go, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Government, however, was not agreeable to modify the terms of the said lease and to bring the royalty payable thereunder in consonance with r. 41 of 1949 Rules and the First Schedule thereto. On December 28, 1957, Parliament passed the Mines and Minerals (Regulation and Development) Act, 67 of 1957 under its power under Entry 54 of List I of the Seventh Schedule to the Constitution. Before the Act was brought into force by a notification as provided by S. 1(3) thereof, an amending Act, being Act 15 of 1958, was passed on May 15, 1958, By a notification dated May 29, 1958, the Central Government brought into force the Act with effect from June 1, 1958. As its long title recites, the Act was passed to provide for the regulation of mines and the development of minerals under the control of the Union. Sec. 2 declared that it was in the public interest that the Union should take under its control the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns (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 operation of sections 9(1) and 16(1) was suspended as far as pre-1949 mining leases for coal were concerned. The second part, however, empowered the Central Government, on its satisfaction that it was expedient to do so, to direct that all or any of those provisions, including rules made under sees. 13 and 18, should apply to such leases subject to such exceptions and modifications, if any, as might be specified in that or any subsequent notification. The "exceptions and modifications" which might be so specified in the notification would obviously be in regard to the application, when such application was decided upon, of sees. 9(1) and 16(1) and the relevant rules. As a result of the suspension of the operation of sec. 9(1), and consequently of the Second Schedule, the respondent company remained liable to pay under its lease royalty at the graded rates provided therein which, in consequenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 Collector to charge royalty at that rate with effect from 1st of January, 1966. The controversy between the parties, therefore, is confined to the rate of royalty at which the company was liable to pay royalty for the period between December 29, 1961 and December 31, 1965. On January 25, 1966, the Collector served upon the respon- dent-company demand notices to pay the arrears of royalty for the aforesaid period at the rates provided in the lease. The company thereupon filed a revision before the Central Government under the Mineral Concession Rules, 1960. That revision was pending when the company filed a writ petition in March 1966 in the High Court of Madhya Pradesh for quashing the said order, dated October 1, 1965, the rejection of its representation by the State Government, dated November 19, 1965 and the said demand notices. The respondent-company urged that the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 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 September 1961 at the rate stipulated in the lease granted to it but only at the rate of 5 per cent of f.o.r. price per ton specified in the Second Schedule." The High Court also rejected the State's contention as regards its order dated September 23, 1963 that once the said notification was issued, the State Government could not charge royalty at a rate lower than the one prescribed in the said notification, and that therefore, the State acted properly in rescinding its said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provisions with regard to the persons to whom prospecting licences and mining leases should be granted (ss. 4 and 5), the maximum area for which such licences and leases should be granted (s. 6), and the period for which a mining lease should be granted (S. 8). In order that uniformity in leases granted before and after the commencement of the Act could be attained, power was also conferred to bring all mining leases granted before October 25, 1949 into conformity with the provisions of the Act and the Rules made thereunder. (ss. 16, 17 and 18). As regards royalty payable by the lessees under diverse kinds of leases for different minerals granted before October 25, 1949 uniformity was sought to be brought about sec. 9(1). In the 1948 Act the Central Government had the power to make rules for, regulating the grant of mining leases, or for prohibiting the, grant of such leases in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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., Part 2, Sec. 2, Jan.-July, 1958, p. 507. that coal, as the basic fuel, occupied a unique position in the country's economy and had always, therefore, been treated differently from other minerals. It also acknowledged that operation of secs. 9 and 16 would have "numerous desirable consequences" such as unsettling coal industry as a whole and retarding the programme of coal production estimated in the, Second Five Year Plan on account of the sudden and automatic rise in the royalty payable by lessees, who under their leases granted before October 25, 1949 generally had to pay royalty "much below the rate" prescribed under the Second Schedule. A similar anxiety was also expressed during the passage of the Amendment Bill by the concerned Minister stating that if the automatic enhancement under sec. 9(1) in the rate of royalty at 5% were to be implemented, the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 agreed to between the lessor ,and the lessee or at 2-1/2% whichever was higher. Since, the agreement in the present case provided for royalty at graded rates which were higher than 21%, the company had to pay royalty at such agreed rates. The argument, in our opinion, is untenable :as it is not borne out by the language of the notification itself and of sec. 30A and was therefore rightly repelled by the High Court. The notification was issued, as it recites, in exercise of the powers conferred by sec. 30A. That power was to apply, by issuing a notification thereunder, sees. 9(1) and 16(1) and the rules made under sees. 13 and 18. The notification in terms directed the application of sec. 9(1) which meant that on and from December 29, 1961 the company would have to pay royalty as prescribed under that sub-section read with the Second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that it was entitled to recover royalty at the rates agreed to in the lease instead of at 5 %. It was only in 1965 that it changed its mind and cancelled its previous order. On the construction placed by us on sec. 30A and the said notification, it was not entitled so to do. The High Court, in our view, was right in quashing that order as also the demand notices issued in pursuance of that order. In view of our decision on the question of construction of the notification and sec. 30A, it becomes unnecessary to consider the second contention raised by the company's counsel that the order of 1963 amounted to a modification of the terms of the lease, and that therefore, the State Government could not unilaterally supersede such modification by issuing a subsequent order in 1965. For the reasons aforesaid, we are in agreement wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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