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State of Rajasthan & Anr. Versus J.K. Synthetics Ltd. & Anr.

2011 (7) TMI 1300 - SUPREME COURT OF INDIA

Civil Appeal No. 4927 of 2011 [Arising out of SLP [C] No. 15621/2007] - Dated:- 4-7-2011 - R. V. Raveendran, P. Sathasivam And A. K. Patnaik, JJ. C.A. No. 4928 of 2011 (Arising out of SLP [C] No.15259/2007); C.A. No. 4929 of 2011 (Arising out of SLP [C] No.15260/2007); C.A. No. 4931 of 2011 (Arising out of SLP [C] No.15407/2007); C.A. No. 4930 of 2011 (Arising out of SLP [C] No.15873/2007), and C.A. No. 4932 of 2011 (Arising out of SLP [C] No.6417/2010) JUDGMENT R. V. Raveendran, J. Leave grante .....

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, 1957 ( Act for short) deals with Royalties in respect of mining leases. Sub-section (2) thereof requires the holder of a mining lease to pay royalty in respect of any mineral removed or consumed by him from the leased area at the rate for the time being specified in the Second Schedule to the Act, in respect of that mineral. Sub-section (3) thereof empowers the Central Government, by notification published in the official gazette, to amend the Second Schedule so as to enhance the rates at whic .....

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to ₹ 25/- per tonne. 5. The respective first respondent in these appeals (together referred to the contesting respondents ) filed writ petitions challenging the constitutional validity of section 9(3) of the Act and the notification dated 17.2.1992 increasing the rate of royalty from ₹ 10 to ₹ 25 per tonne. In all the cases (except in the case of J. K. Udaipur Udyog Ltd), the High Court issued interim orders directing the state government not to take coercive steps to recover .....

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ioner shall be recovered with interest at the rate of 18% per annum. 6. Ultimately, the several writ petitions filed by the contesting respondents challenging the section 9(3) of the Act and the notification dated 17.2.1992 increasing the royalty, were dismissed in the year 1996 following the decision of this Court in State of Madhya Pradesh vs. Mahalaxmi Fabric Mills Ltd.,- 1995 Supp (1) SCC 642, wherein this Court had upheld the validity of section 9(3) of the Act and the notification revising .....

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e rules, charge simple interest at the rate of 24% per annum on any rent, royalty or fee, other than the fee payable under sub-rule (1) of Rule 54, or other sum due to that government under the Act or these rules or under the terms and conditions of any prospecting licence or mining lease from the sixtieth day of the expiry of the date fixed by that government for payment of such royalty, rent, fee or other sum and until payment of such royalty, rent, fee or other sum is made." 8. The State .....

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. 6,98,54,031 6.11.1997 2. Birla Corporation Ltd. WP No. 6008/1992 5,99,81,784 24.7.1997 3. J. K. Udaipur Udyog Ltd. WP No. 3871/1993 1,12,76,364 12.3.1997 4. J. K. Synthetic Ltd WP No. 5300/1992. 20,04,474 24.7.1997 5. J. K. Corporation Ltd WP No. 5202/1992. 1,83,10,418 4.11.1996 6. Shree Cement Ltd. WP No. 5004/1992 2,91,89,622 21.1.1997 9. The contesting respondents at this stage again filed a second round of writ petitions challenging the notices demanding interest, contending that they were .....

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n reducing the rate of interest from 24% per annum to 12% per annum making it clear that the same shall not however be treated as precedent in any other case. After the said decision, what remained to be considered in the writ petitions filed by the contesting respondent was the rate of interest. The contesting respondents as writ petitioners submitted before the learned Single Judge that the claim for interest at 24% per annum was harsh, excessive and inequitable, and interest should not be cha .....

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ent was entitled to interest at 18% per annum. The learned Single Judge noted that the trend of directions by the Supreme Court showed that State should get interest at least at the rate of 12% per annum on the delayed payments. Consequently, he upheld the demand for interest only to an extent of 12% per annum and set aside the demand for the interest at the higher rate of 24% per annum, with a condition that if interest at 12% per annum on the delayed payments was not paid within three months, .....

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.2007, 14.11.2006 and 4.11.2009, on the ground that the order of the learned Single Judge was based on an admission/concession by the learned Advocate General and therefore, the order did not call for interference. The said orders are challenged in these appeals by special leave by the state government. 11. On the contentions raised, the following questions arise for consideration : (i) Whether the Advocate General appearing for the State had consented to award of interest at 12% per annum? (ii) .....

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awarded at 12% per annum requires to be increased? Re : Question (i) 12. The first question is whether the order of the learned Single Judge is based on any consent and whether the learned Advocate General appearing for the state had conceded that the state government is entitled to interest at only 12% per annum. We extract below the relevant portion of the order of the learned Single Judge, where there is a reference to the submission made of the learned Advocate General : "On the other .....

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sent case, the demand of interest @ 12% per annum would meet the ends of justice in the light of the Apex Court judgement in South Eastern Coalfields case (supra)." The only submission of the Advocate General before the learned Single Judge was that the State Government was entitled to interest at the rate of 18% per annum. The further observation that as per the trend of Supreme Court decision, the state government should get interest at least at the rate of 12% per annum on the delayed pa .....

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made a concession and the order of the learned Single Judge was a consent order and therefore, it was not open for the State Government to challenge the order of the learned Single Judge, is obviously erroneous. The order of the Division Bench cannot therefore be sustained. 13. Even if it is assumed that the learned Advocate General had submitted that "looking to the present trend of the decision of Supreme Court", Government should at least get interest at the rate 12% per annum on th .....

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ntitled to get a higher rate of interest. Re : Question (ii) 14. The contesting respondents filed the second round of writ petitions before the High Court challenging the demand for interest and the validity of Rule 64A, on two grounds : that Rule 64-A was invalid; that the rate of interest was excessive. The learned Single Judge negatived the first contention in view of the decision of this South Eastern Coalfields. He however accepted the second contention and restricted the rate of interest t .....

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challenge to the increase and order of interim stay of the High Court. It was submitted by the contesting respondents, that even if the writ petitions challenging the notification dated 17.2.1992 revising the royalty rate were ultimately dismissed, in the absence of any specific direction by the High Court to pay interest on the difference in royalty amount, they were not liable to pay any interest during the period of operation of stay. This question is no longer res integra. We may refer to t .....

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interim stay, if and when the writ petitions are dismissed ultimately. The said principle was based on the following reasoning : "Holding otherwise would mean that even though the Electricity Board, which was the respondent in the writ petitions succeeded therein, is yet deprived of the late payment surcharge which is due to it under the tariff rules/regulations. It would be a case where the Board suffers prejudice on account of the orders of the court and for no fault of its. It succeeds i .....

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think that any such unfair and inequitable proposition can be sustained in law....... It is equally well settled that an order of stay granted pending disposal of a writ petition/suit or other proceeding comes to an end with the dismissal of the substantive proceeding and that it is the duty of the court in such a case to put the parties in the same position they would have been but for the interim orders of the court. Any other view would result in the act or order of the court prejudicing a p .....

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uch argument was urged by the appellants. It is ununderstandable how the enhanced rates can be said to be payable but not the late payment surcharge thereon, when both the enhancement and the late payment surcharge are provided by the same Notification - the operation of which was stayed." (emphasis supplied) The above principles have been followed and reiterated by this Court in Rajasthan Housing Board vs. Krishna Kumari - 2005 (13) SCC 151 and Nav Bharat Ferro Allays Ltd vs. Transmission .....

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le for payment of interest so long as the money was withheld under the protective umbrella of the interim orders. It was further contended that merely because the writ petition was finally dismissed, it does not follow that the interim order becomes vitiated or erroneous, as it may still be a perfectly justified interim order. It was further argued that as they had shown their bona fides by paying the difference in royalty immediately after the validity of the notification dated 17.2.1992 was up .....

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rovision is wide enough so as to include therein almost all the kinds of variation, reversal, setting aside or modification of a decree or order. The interim order passed by the Court merges into a final decision. The validity of an interim order, passed in favour of a party, stands reversed in the event of final decision going against the party successful at the interim stage. Unless otherwise ordered by the Court, the successful party at the end would be justified with all expediency in demand .....

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ather defeat the same. Undoing the effect of an interim order by resorting to principles of restitution is an obligation of the party, who has gained by the interim order of the Court, so as to wipe out the effect of the interim order passed which, in view of the reasoning adopted by the court at the stage of final decision, the court earlier would not or ought not to have passed. There is nothing, wrong in an effort being made to restore the parties to the same position in which they would have .....

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tatute or contract specifies the rate of interest, usually interest will have to be paid at such rate. Even where there is no statutory or contractual provision for payment of interest, the court will have to direct the payment of interest at a reasonable rate, by way of restitution, while vacating the order of interim stay, or dismissing the writ petition, unless there are special reasons for not doing so. Any other interpretation would encourage unscrupulous debtors to file writ petitions chal .....

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t; charge simple interest at the rate of 24% per annum; that this being an enabling provision, there is no mandate or compulsion to charge interest at 24% per annum; and that therefore, the state government has the discretion to charge interest at a rate lesser than 24% in appropriate deserving cases. It is submitted that if the legislative intent was to provide for interest at the rate of 24% per annum in all cases of delayed payment of royalty/rent/fees without exception, the rule would have b .....

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rge interest, and if interest is to be charged, at any rate not exceeding 24% per annum. 19. A careful reading of the Rules makes it clear that no such discretion is given to the state government in regard to rate of interest. This will be evident from a combined reading of Rules 31 and 27 and the terms of the statutory form of lease deed (Form K), with Rule 64A. Rule 31 provides that where, an order has been made for the grant of a mining lease, a lease deed in Form K (or in a form as near ther .....

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-rule (1), the state government shall give notice to the lessee requiring him to pay the royalty or dead rent or remedy the breach, as the case may be, within sixty days from the date of the receipt of the notice and if the royalty or dead rent is not paid or the breach is not remedied within the said period, the state government may, without prejudice to any other proceedings that may be taken against him, determine the lease and forfeit the whole or part of the security deposit." The abov .....

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these Rules". As noticed above, Rule 45(iv) requires the lease deed to contain a condition that if there is any default in the payment of royalty, the lessor without prejudice to any proceeding that may be taken against the lessee, determine the lease. Therefore, the word "may" used with reference to the words "charge simple interest at the rate of 24% per annum" when read with the words "without prejudice to the provisions contained in the Act or any other Rule&qu .....

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on the outstanding dues. The word may is used in Rule 64-A not in the context of giving discretion in regard to rate of interest to be charged, but to give an option or choice to the State Government as to whether it should determine the lease, or charge interest at 24% per annum, or do both. Therefore, where the lease is not determined as a consequence of the default, the State will have to charge interest at 24% per annum on the outstanding amount. If Rule 64A is to be interpreted as giving a .....

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be flexible and that the rate of interest mentioned therein has to be applied in all cases of non-payment/default. When Rule 64A was amended by notification dated 20.2.1991, increasing the rate of interest to 24% per annum, clause (3) of Part IV of the standard form of lease (Form K) was also amended increasing the rate of interest payable on all dues as 24% per annum. We extract below clause (3) of Part VI of Form K for ready reference : "3. Should any rent, royalty or other sums due to th .....

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d there is no discretions in the state government to charge interest at any lesser rate. 22. It is true that annual interest at 24% per annum appears to be marginally higher than the standard market lending rate of interest. But it is not penal in nature. Revenue from mining constitutes one of the major sources of non-tax revenue of the State Governments. Mining lessees are expected to pay the mining dues promptly and without default. If a lesser rate of interest is provided under the Rules, it .....

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e rate of interest. We have seen that Rule 64-A categorically provides that where a mining lessee who is liable to pay rent or any other dues, fails to pay the same, the state government will be entitled to charge simple interest thereon at 24% per annum. The validity of this rule has been upheld by this Court in South Eastern Coalfields. Therefore interest on all delayed payments should be 24% per annum. 24. The contesting respondents submitted that even if the rate of interest under Rule 64-A .....

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operation. 25. In South Eastern Coalfields which upheld the validity of Rule 64-A, this Court did not interfere with the decision of the High Court awarding interest at 12% per annum, on the following reasoning : "So far as the appeal filed by the State of Madhya Pradesh seeking substitution of rate of interest by 24% per annum in place of 12% per annum as awarded by the High Court is concerned, we are not inclined to grant that relief in exercise of our discretionary jurisdiction under Art .....

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titlement to payment of interest at the rate of 24% per annum would be excessive and it would meet the ends of justice if the rate of interest is reduced from 24% per annum to 12% per annum on the facts and in the circumstances of the case. We are not inclined to interfere with that view of the High Court but make it clear that this concession is confined to the facts of this case and to the parties herein and shall not be construed as a precedent for overriding Rule 64A of the Mineral Concessio .....

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t be treated as a precedent, for nullifying or overriding Rule 64-A of the Rules. 26. In Saurashtra Cement, while dismissing the appeals challenging the validity of the increase in royalty following the decision in Mahalaxmi Fabric Mills (Supra), this Court dealt with a case, where the High Court had granted interim stay of the notification regarding increase in royalty but however while vacating the interim order and discharging the rule, had directed the payment of interest at 18% per annum. P .....

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we, therefore, do not wish to interfere with the award of interest, as such though the rate at which it has been awarded needs some modification in the contextual facts and as such we direct that the rate of interest be 9% simple interest and not as directed by the High Court." (emphasis supplied) A careful reading of the said judgment shows that while deciding the issue of interest, this Court had overlooked Rule 64-A which is a statutory provision entitling the government to claim intere .....

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rease in electricity charges. The relevant provision specifically provided that in regard to delayed payments of the bills, the consumer shall pay additional charge per day of seven paisa per hundred rupees on the unpaid amount of the bill, which works out to 25.55% per annum. This Court reduced the same to 18% per annum on the following reasoning : "Sri Vaidyanathan then contended that the rate of "late payment surcharge" provided by clause 7(b) is really penal in nature inasmuch .....

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case and having regard to the fact that petitioners could possibly have understood the decision in Adoni Ginning as relieving them of their obligation to pay interest/late payment surcharge for the period of stay, we reduce the rate of late payment surcharge payable under clause 7(b) to eighteen per cent. But this direction is confined only to the period covered by the stay orders in writ petitions filed challenging the notification dated 21.4.1990 and limited to 1.3.1993 the date on which those .....

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the court proposes to award a higher or lower rate of interest, for special and exceptional reasons. 28. Let us consider whether there are any special or exceptional circumstances for reducing the statutory interest in this case. In the case of one of the contesting respondents (J. K. Udaipur Udyog Ltd.), there was a categorical direction while granting interim stay that in the event of failure in the writ petition the writ petitioner will have to pay interest at the rate of 18% per annum. That .....

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to pay the statutory rate of interest. More importantly, the learned Advocate General appearing for the State had made a submission before the learned Single Judge that state government was entitled to interest only at the rate of 18% per annum. In the peculiar and special circumstances of these cases, we are of the view that the appellants will be entitled to interest at 18% per annum in respect of royalty that became due between 17.2.1992 and the date of dismissal of their respective writ peti .....

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