Patna High Court
Pradip Kumar Joshi vs State Of Bihar And Ors. on 11 September, 2007
Author: Mridula Mishra
Bench: Mridula Mishra
JUDGMENT Mridula Mishra, J.
Page 0062
1. Petitioner is the lessee in whose favour four different plots were awarded by way of lease by the department of Mines for extraction of stone for a period of five years. The Department of Mines had advertised for auction, an open bid was held on 7.10.2002. Petitioner participated in this bid and declared successful bidder as such lease was awarded in his favour. Two lease deeds were executed in his favour on 24.1.2003 and other two lease deeds on 24.3.2003. The petitioner was discharging his liabilities in capacity of lessee as per the lease deed but the State Government vide its Memo No. 283/M dated 14.2.2002 Page 0063 issued a direction that all such lease which have been auctioned taking Rs. 11,50,000/-as the minimum reserve deposit for 2.00 acres of land proportionately are liable to pay royalty for the excess stone extracted/mined out beyond their auction amount and they are required to pay royalty amount in addition to their auction amount. The State Government vide Memo No. 2418/M Patna dated 29.11.2004 issued clear direction for realisation of additional royalty from those bidders in whose favour settlement of stone plots have been made in open bid taking Rs. 11.50 lakhs as the minimum reserve jama. By this letter direction was issued to Collector that cases in which minimum reserve deposit was fixed without prior reference to the Departmental Technical Committee regarding available quantity of minerals on site, royalty should be collected and charged for the excess stone mined out beyond their auction amount. Such bidders were held liable to pay amount of royalty for mining, that amount of royalty which exceeds the amount of auction value. However, it was directed that bidders in whose case auction took place on the basis of minimum reserve deposit fixed after assessment of the quantity of the minerals by departmental technical committee, royalty will be limited to amount obtained in auction, provided the lease holder has executed the agreement. In compliance of letter No. 2418/M Patna dated 29.11.2004 the District Mines Officer, Rohtas at Sasaram issued demand notices (Annexure-3 series) to the petitioner for payment of royalty on the basis of extracted mineral in excess of auction money. The demand notices as well as the Government letter No. 2418 dated 29.11.2004 were challenged by the petitioner by filing Revision case No. 35 of 2005 before the Mines Commissioner, which was allowed in part, but so far realisation of royalty is concerned finding was recorded that as per Section 26(4) of Bihar Minor Mineral Concession Rule is concerned the department is justified in demanding additional royalty from the petitioner on the basis of Government letter No. 2418 dated 29.11.2004. The Commissioner is directed to realise the dues and for charging the royalty from the lease holder in excess of the quantity of the auctioned amount. Direction was also to amend the circular(s) in the light of the order.
2. The petitioner has filed this application for following reliefs:
(i) for quashing of order dated 6.7.2006 passed by the Mines Commissioner in Revision Case No. 35 of 2005 directing payment of additional royalty in excess of bid amount.
(ii) For quashing the order contained Memo No. 2418/M dated 29.11.2004 issued by Deputy Secretary of the Government.
(iii) For quashing the proceeding of Certificate case No. 1 off 2005-06 initiated against the petitioner for realisation of additional amount of royalty.
3. Petitioner has challenged the impugned orders on the ground that these letters have been issued in violation of the Mines and Minerals (Regulation & Development) Act 1957 (hereinafter referred to as the Development Act) as well as Bihar Minor Minerals Concession Rule 1972 (hereinafter referred to as Concession Rules). It has also been stated that the impugned letter dated 29.11.2004 is without jurisdiction as by issuing this letter the Deputy Secretary, Mines has Exercised the rule making power of the government, which is vested only in the State Government under Rule 15 of the Development Act.
4. The Bihar Minor Mineral Concession Rules 1972 (shortly to be termed as Concession Rules) came into force from 22.6.1972. It has been framed under Page 0064 Section 15 of the Mines and Minerals (Regulation & Development) Act, 1957 which gives power to the State Government to make rules in respect of Minor Minerals. "Minor minerals" have been defined under Section 3(e) of the Development Act, 1957. 3(e) "Minor Minerals" means building stones, gavel, ordinary clay, ordinary sand other than sand used for prescribed purposes and any other mineral which the Central Government may by notification in the Official Gazette, declare to be a minor mineral. Chapter IA of Concession Rules deals with the application for grant and renewal of certificate of approval. Chapter III deals with the application for grant of mining leases which has to be submitted in prescribed form and there are different provisions for disposal of such application. Rule 9 is applicable for the purpose of granting mining lease. Under Rule 9 the applicant for a mining lease had to file application accompanied by required fee and relevant extracts of the Record of rights. Rule 9A was inserted in the year 2001 by notification in the official gazette dated 24.3.2001. After coming into force of Rule 9A any mineral may be termed out or settled by public auction / tender in the manner prescribed in Rule 52. Under Rule 52 provides procedure for the grant of quarrying lease by auction. Bids for settlement have to be held every year and the settlement is to be made for five years. Rule 25A provides that the lease granted under Rule 52, lease deed shall be executed in Form D as contained under Rule 21 of the Rules. Rule 26 deals with the assessment of rent, royalty and penal rent. Rule 26 reads as follows:
(1) where a lease is granted or renewed:
(a) Dead rent, shall be charged at the rate specified in Schedule I.
(b) Royalty shall be charged at the rate specified in Schedule II, and
(c) Surface rent shall be charged at the rate specified by the Collector from time to time for the area occupiedor used by lessee. (2) on and from the date of commencement of this rules, the provisions of Sub-rule (1) shall also apply to the lease grantedor renewed prior to the date of such commencement and subsisting on such date.
Rule 26(4) is as follows:
"who ever remove or uses minor minerals or on whose behalf ouch removal or use is made otherwise than in accordance with the provisions of these rules, shall be liable to pay royalty up to from times of the date of royalty specified for the minior and mineral in schedule II without prejudice to other action being taken against him under these rules.
5. Counsel for the petitioner states that after insertion of Rule 9A any mineral may be leased out or settled by public auction in the manner prescribed in Rule 52A wherein detailed procedure has been indicated and conditions formulated vide Rule 21 of the concession Rule 1972. Government after insertion of Rule 9A categorised the minor mineral plots for leasing out into two categories. For interior category mines reserved deposit was fixed at 7.10 lacs and for the superior category stone plots the minimum reserve deposit is fixed at Rs. 11.50 lacs for an area of excess. In cases of settlement by way of public auction additional royalty is also charged from the settlee for additional extraction of stones which is included in the rent and that is equivalent to the settlement amount. In case of the petitioner all four sand plots were settled in his favour not only on the basis of the minimum reserve deposit of Rs. 11.50 lacs but on much higher rate considering the quantity of minerals available at the site. The settlements were made Page 0065 at the rate of Rs. 22 lacs, Rs. 21,01,500/-, Rs. 3,25,00,500/- and Rs. 2,44,000/- for an area of 0.25 acres. In the given circumstances considering the auction amount, State Government letter No. 2418/M Patna dated 29.11.2004 has no application in the case of the petitioner. The demand notices have been issued against him without any rhyme and reason.
6. The special prosecutor representing Department of Mines has submitted that as per Rule 26(4) of the Bihar Minor Minerals Concession Rules, 1972, petitioner is liable to pay the royalty in respect of entire stone extracted or removed by him. The royalty amount has been calculated on the basis of monthly returns submitted by the petitioner and on that basis demand letters have been issued. Demand notices are fully justified and legal. Certificate proceeding has been initiated for realisation of the due royalty for the Minerals extracted in excess of the auction amount as per Rule 26(4) of Concession Rules. Further it was contended that it is not correct that the State Government added Rule 9A and Rule 52 to the Concession Rules with a view to totaly replace all other old provisions as out lined in Rule 9 of the Concession Rules. By inserting Rule 9A read with Rule 52 of the Concession Rules, a new method of settlement was provided for some specified minor minerals. It's role is only supplemental. The provisions of Rule 26(4) of the Concession Rule is fully applicable in cases of settlement made under Rule 9A of Concession Rule.
7. Counsel for the petitioner has submitted that in case its is held that the impugned letter No. 2418/M Patna dated 29.11.2004 has been issued by the State under Rule 26(4) of the Concession Rules in that case also no royalty is chargeable from the petitioner. Petitioner's case comes under the category in which settlement under Rule 9A has been made on the basis of auction held on the minimum reserve deposit fixed after assessment of the quantity of the minerals. In such cases the royalty is to be limited to the auction amount as per letter No. 2418/M Patina dated 29.11.2004. Arbitrarily demand notice has been issued against the petitioner for realisation of royalty and a certificate proceeding has illegally been initiated for realisation of such amount.
8. Petitioner has also challenged the validity of the government letter No. 2418/M Patna dated 29.11.2004 on the ground that by issuing this letter the Deputy Secretary of the Government has exercised the power vested in State as provided under Section 15(g) of Development Act 1957. Under Section 15 of the Development Act the State government has been vested with the power to make rules inrespect of minor minerals by notification in the official gazette, for regulating the grant of querry leases and mining leases or other mineral concessions in respect to minor minerals and for purposes connected therewith. Section 15(A)(g) of Development Act authorises the State Government to make rules relating to fixation and collection of rent, royalty, fees, dead rent, fines or others charges and the time within which and the manner in which these shall be payable. Rule 26 of the Concession Rule is the charging provision under which dead rent, royalty, surface rent can be charged at the rates specified in Schedule-I and Schedule-II. So far the royalty is concerned, it can be charged at the rate specified in Schedule-II.
In the present case without making any amendment in Rules by way of gazette notification as provided under Rule 15 of the Development Act the Deputy Secretary has issued direction for realisation of royalty from those lessee in whose favour settlement has been made under Rule 9A of the Concession Rules. The impugned Page 0066 letter has been issued without amending the provisions under Schedule II of the Concession Rule. Amendment in Schedule II should not have been brought by way of government circular or resolution but it should have been brought only by way of amendment as provided under Section 15 of the Development Act 1957. In this view of the matter this letter is wholly without jurisdiction and fit to be quashed. Any consequential order or action based on this letter is also liable to be quashed.
9. The Special Prosecutor representing the Mines Commissioner, has submitted that such objections are not sustainable. The impugned letter dated 29.11.2004 has been issued under the provision of Rule 26(4) of the Concession Rules which reads as follows:
Notwithstanding anything contained in any instrument of lease the lessee shall pay rent/royalty in respect of any minor mineral on, extracted and removed at the rate specified from time to time in Schedules I and II." It has also been submitted that the demand notice contained in Annexure-3 series of the writ application are fully justified and legal.
10. Considering the submissions of the counsel for the petitioner respondent Mines Commissioner I am of the view that the provisions under Rule 9A and Rule 26(4) of the Concession Rules have totally been misunderstood by the Respondents. Rule 9A was inserted in the year 2004, introducing provisions for settlement on the basis of auction with the highest bidder. Minimum reserve jama was fixed for which specific provisions were mentioned under Rule 52. Minimum jama was to be fixed considering the rate of rent and royalty provided under Schedule I and II. The Collector was authorised to assess the quantity, quality and area of the plots and on that basis the areas were to be categorised as per rule. So far Rule 26(4) is concerned, the language "Notwithstanding anything contained in any instrument of lease" refers to such lessee of lease referred at 26(2) of the Rules and in whose favour settlement was made prior to insertion of Rule 9A. There were old continuing leases mentioned at Rule 26(2) which were settled without assessment and fixation of rent and royalty. In such cases considering the loss incurred to the State specific provision under Rule 26(4) was provided that such lessee shall pay rent, royalty inrespect of any minor mineral extracted and removed at the rate specified from time to time in Schedule I and II. In case of lessee like petitioner in whose favour settlement was made under the provision of Rule 9A there is no application of Rule 26(4). Their cases will have to be governed by Rule 9A read with Rule 52. The respondents can not take assistance of Rule 26(4) for realisation of additional royalty from the petitioner.
11. So far the petitioner's case is concerned, he cannot be asked to make payment of any royalty, as in terms of lease deed executed in his favour rent includes royalty. One of the lease deed has been annexed with the writ petition. Part I of the lease deed refers the area of the lease. Part II refers liberties, powers and privilege to be exercised by the lessee subject to the restrictions and conditions in Part III. Part III provides restrictions and condition's as to the exercised of the liberties, power and privileges in Part II. Part IV refers liberties, powers and privileges reserved to the State Government. In this part it has not been mentioned that schedule of payment of rent and royalty can be changed by the lessor during the continuation of period of lease. Part V refers the rate and mode of payment of auction amount and surface rent. In part VI provision relating to the rents and royalties haves been mentioned. Paragraph 2 of Part VI provides of computation of royalty and under this provision Page 0067 total royalty for the entire lease period of five years has been fixed at Rs. 19,56,000/- only i.e. the amount fixed through auction. Counsel for the petitioner has rightly submitted that the auction amount includes rent and royalty. Once the royalty has been made chargeable from the petitioner they cannot be penalized by asking to make payment of total royalty.
12. Counsel for the respondents has submitted that once the petitioner has duly accepted the terms and conditions of lease deed and signed it with open eyes, he can not raise any objection if additional royalty is demanded. The provision under Part V Clause 4 of the lease deed makes the petitioner liable for payment of all cess, taxes and local dues in respect of leased area in addition to rent and royalty being in the nature of public demands. On perusal of Clause 4 of Part V of the lease deed, I find that the respondents have wrongly interpreted the provision under the lease deed. Clause 4 Part V provides that the lessee shall duly and regularly will pay to the appropriate authority all cess, taxes and local dues in respect of the leased area, in addition to the rent and royalty so payable. This clause only mentions about payment of local cess and taxes besides the rent and royalty which is already fixed. In fact this clause indicates that the rent includes royalty but so far cess and local taxes are concerned, they may not be treated as royalty.
The term royalty has not been defined either in the Development Act or the Concession Rules but the dictionary meaning of word "royalty" according to Mozley and Whiteley's is "A pro rata payment to a grantor or lessor, on the working of the property leased, or otherwise on the profits of the grant of lease. The word is specially used in reference to mines, patents and copyrights."
Considering the dictionary meaning royalty is a payment to land owner by the lessee of the mines in return for the privilege of working it. It is different from rent. It is a kind of levy proportionate to the mineral work. Royalty according to concession Rule is compulsory and recoverable in the event of non payment of arrears of land revenue.
Part V Clause 4 deals with cess, taxes and local dues, which is not related to land revenue. I am of the view that royalty is not covered under Part V Clause 4 of the lease deed. The respondents taking help of this provision can not demand any royalty from the petitioner.
13. So far Clause 1 of Part VII of the lease deed is concerned it reads as follows:
Lessee to pay rents, royalties, taxes, etc. The lessee shall pay the rents and royalties reserved by this lease at such time land in the manner provided in parts V and VI of these presents and shall also pay and discharge all taxes, rates, assessments and impositions whatsoever being in the nature of public demands which shall from time to time be charged, assessed or imposed by the authority of the State government upon or in respect of the premises and works of the premises and works of the Lessee in common with other premises and works of a like nature except demands for the land revenue.
Under this clause the lessee is bound to pay rent and royalties reserved by the lease at such time and in the manner provided in Part V and VI of the lease deed. Items which have been mentioned in Clause I do not include demand for the land revenue. So far the royalty is concerned, it is arrears of land revenue as such Clause I of Part VII of the lease cannot be made applicable for demanding royalties from the settlee. Further, I find, that under Clause 2 Part VI of lease deed, the mode Page 0068 for complete royalty has been provided and the total royalty for the entire lease period of five years has been fixed. In violation of terms of lease deed, additional royalty cannot be charged.
The above made discussion makes it clear that stand taken by the respondents that royalty can be demanded under the provisions of Clause 4 of part V and Clause I part VII of the lease deed is misconceived Any demand in excess of the amount mentioned in the lease deed is in violation of the terms of the lease deed which is not maintainable.
14. Counsel for the petitioner has made another submission that application of the impugned letter dated 29.11.2004 cannot be made retrospective. Its application can be made for future settlement but so far settlements made prior to the date of its issuance, are concerned, it can not be made applicable. In the case of the petitioner advertisement for auction of stone plots were published on 4.9.2002, auction was held on 7.10.2002 and the lease deed was executed on 24.1.2003 much prior to the date of issuance of government letter No. 2418/M Pat dated 29.11.2004. The letter do not indicate that it is applicable with retrospective effect. This statement has not been replied/denied.
On perusal of the impugned order I find that the language used in this letter makes it prospective and it cannot have retrospective effect. The Deputy Commissioner by the impugned order directed the Collector which have application for future settlement. This can be done by incorporating such terms and conditions at the time of execution of future lease deeds. The settlement made in favour of the petitioner do not come within the purview of this letter as such any demand made on the basis of this letter from the petitioner is illegal and all subsequent consequential actions on the basis of this letter is also illegal and arbitrary.
15. Petitioner has submitted that certificate case No. 1 of 2005-06 has been initiated against the petitioner for realisation of royalty.
Considering the discussions made above, the initiation of certificate proceeding vide Certificate Case No. 1 of 2005-06 is also without jurisdiction as such entire proceeding of certificate Case No. 1 of 2005-06 is quashed.
16. The letter No. 2418/M Pat dated 29.11.2004 is not being quashed for the reason that it is a direction to the District Magistrate for future purposes. Now on the basis of this resolution of the government amendment has been brought in Schedule II of the Concession Rules as such quashing of this letter is not required.
17. The demand notice issued to the petitioner annexed as Annexure-3 series of this writ application as well as the order dated 6.7.2006 passed by the Mines Commissioner in Revision case No. 35 of 2005 directing the petitioner to deposit the amount excess of bid amount is quashed.
18. This application is allowed.