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2004 (3) TMI 794

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....mpany owns and possesses certain coal mines in the State of Bihar. The Coal Board was constituted under the provisions of the Coal Mines (Conservation and Development) Act, 1974, hereinafter 'the Act' for short. However, the said Coal Board was dissolved with effect from April 1, 1975 and all rights, privileges, liabilities and obligations of the Board have come to vest in the Central Government. There are cross-demands between the parties. It is not necessary to set out the details and particulars of the demands. It would suffice for our purpose to notice that the Coal Company is liable to pay royalty on account of sand extracted by it for the purpose of carrying out stowing operations in the coalfields. We would not enter into yet another controversy which we will briefly set out hereinafter at an appropriate place as to whether it is the Central Government as successor of the Coal Board or the State of Bihar which is entitled to recover the royalty. For the purpose of the present appeal we proceed on an assumption that the amount of royalty on the sand extracted by the Coal Company is due and payable by it to the Central Government. The fact remains that such obligation....

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....ection 10 of the Act including, inter alia, the acquisition of stowing and other materials needed for stowing operations in coal mines and the execution of stowing and other operations in furtherance of the objects of the Act amongst others. Under Section 18 the Central Government is empowered to make rules. In exercise of the power, conferred by the Coal Mines (Conservation and Safety) Act, 1952 on the Central Government, the Central Government has framed the Coal Mines (Conservations and Safety) Rules 1954. Rule 49 provides as under: "49. Purposes for which assistance may be granted   (1) The Board may grant assistance from the Fund to any owner, agent or manager of coal mine   (a) for stowing or other protective measures which are required to be undertaken by an order issued under sub-section (3) of Section 13 or sub-rule (2) of Rule 35 or sub-rule (3) of Rule 40; (b) for any measures which in the opinion of the Board are essential for the effective prevention of the spread of fire to or the inundation by water of any coal mine from an area adjacent to it; (c) for stowing for conservation of coal or washing coal which is required to be undertaken by ....

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....sported. Other charges included in the amount of stowing assistance are wages of labour employed in and associated with stowing charges, certain charges related to sand pumps and so on, as stated in the Rules. Thus, it appears that while the Coal Company has to pay royalty on the amount of sand extracted by it for the purpose of carrying out stowing operations, the amount of royalty actually paid is reimbursed by the Central Government to the Coal Company as one of the constituents of the stowing assistance. So far as the current amount of royalty is concerned there cannot possibly be any dispute as to adjustment or set off inasmuch as the amount of royalty on the quantum of sand extracted by the Coal Company for carrying out stowing operations, shall be actually paid by the Coal Company to the Central Government or anyone else entitled and it is only on such actual payment that the Coal Company would be entitled to be reimbursed for the amount as a constituent of the stowing assistance. So long as the Coal Company does not actually pay the amount or royalty, the question of its being reimbursed would not arise. If the amount of royalty is payable by the Coal Company to the Centra....

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....: whether the Central Government can withhold the release of stowing assistance, which is its statutory obligation to do, for the purpose of satisfying its demand of money arising under the contractual obligation (i.e. in mining lease) incurred by the Coal Company qua it? Though Shri N.N. Goswami, the learned Senior Counsel for Union of India, has urged that the Coal Company had entered into a contract by correspondence with the Central Government, supported by company resolutions, whereby the Coal Company had agreed for such satisfaction of cross demands but we are not satisfied if such a plea can be successfully urged by the Union of India from the documents and materials available on record. We cannot hold that the Coal Company had agreed to its demand of stowing assistance being set-off against the demand by the Central Government on account of royalty. No statutory provision has been brought to our notice at the Bar to sustain the claim of the Central Government for such adjustment and satisfaction of cross-demands. We are called upon to decide if such an adjustment is permissible in equity. Shri Goswami, the learned Senior Counsel, has vehemently urged that the right of the....

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....n volition, nevertheless, the validity of such action shall be called in question and decided by a Court of law wherein the creditor would seek enforcement of his claim while the debtor would raise in defence the plea of adjustment or set-off. Though there is no specific provision of law or settled rule of procedure governing decision of such dispute arising for adjudication in exercise of writ jurisdiction, yet being a money-claim, there is nothing wrong in borrowing the principles underlying Order 8 Rule 6 of the Code of Civil Procedure and applying the same as governing the discretion of the writ Court. Sub-rule (1) of Rule 6 of Order 8 of the CPC provides as under : "6. Particulars of set-off to be given in written statement.   (1) Where in a suit for the recovery of money the defendant claims to set-off against the plaintiff's demand any ascertained sum of money legally recoverable by him from the plaintiff, not exceeding the pecuniary limits of the jurisdiction of the Court, and both parties fill the same character as they fill in the plaintiff's suit, the defendant may, at the first hearing of the suit, but not afterwards unless permitted by the Court, pre....

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....ich would have the effect of withholding the release of stowing assistance and appropriating the amount thereof for the recovery of dues not arising out of the same transaction. Shri Jaideep Gupta, the learned senior counsel for the Coal Company, has rightly relied on the decision of Calcutta High Court in Coal Products Pvt. Ltd. and Anr. Vs. Income-Tax Officer, "M" Ward, Companies District II, Calcutta, and Ors.   (1972) 85 ITR 347, wherein a garnishee order was quashed. It was held that the money which is payable by the Coal Board to a Coal Company as and by way of stowing assistance was not available to be paid by the Coal Board to Income-tax Department for recovery of income-tax dues as that would result in breach of statutory obligation of the Board with regard to the utilization of its fund as laid down in Section 12 of the Act as also in breach of statutory obligation of the Coal Company attaching to the grant of assistance from the Coal Board. Rule 49 referred to hereinabove came up for the consideration of this Court in Industrial Supplies Pvt. Ltd. and Anr. Vs. Union of India and Ors.   (1980) 4 SCC 341, in some other context. Vide para 32, this Court....