Madhya Pradesh High Court
Powermesh Projects Limited vs The State Of Madhya Pradesh on 11 December, 2024
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NEUTRAL CITATION NO. 2024:MPHC-JBP:60084
IN THE HIGH COURT OF MADHYA PRADESH
AT JAB A L PUR
BEFORE
HON'BLE SHRI JUSTICE SURESH KUMAR KAIT,
CHIEF JUSTICE
&
HON'BLE SHRI JUSTICE VIVEK JAIN
WRIT PETITION No. 25052 of 2022
VISTA SALES PVT. LTD. BEING REPRESENTED
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WITH
WRIT PETITION No. 24733 of 2022
SHISHIR KHANDAR
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WRIT PETITION No. 25725 of 2022
R.K TRANSPORT AND CONSTRUCTION LTD.
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WRIT PETITION No. 26085 of 2022
RSI STONE WORLD PVT. LTD.
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WRIT PETITION No. 26087 of 2022
SAINIK INDUSTRIES PVT LTD
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 12-12-2024
12:34:33
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NEUTRAL CITATION NO. 2024:MPHC-JBP:60084
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WRIT PETITION No. 26245 of 2022
UJJAWAL CHAUHAN
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WRIT PETITION No. 27268 of 2022
K.G. DEVELOPERS
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WRIT PETITION No. 27304 of 2022
M/S VANSHIKA CONSTRUCTIONS
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WRIT PETITION No. 27310 of 2022
M/S ASHTVAKRA IT SOLUTION LTD
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WRIT PETITION No. 28596 of 2022
M/S RAJESH PATHAK
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WRIT PETITION No. 28767 of 2022
POWERMESH PROJECTS LIMITED
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
WRIT PETITION No. 13901 of 2023
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 12-12-2024
12:34:33
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NEUTRAL CITATION NO. 2024:MPHC-JBP:60084
M/S DHANLAXMI MERCHANDISE PVT.
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri Naman Nagrath - Senior Advocate assisted by Shri Shoeb Hasan Khan, Shri
Shreyash Dharmadhikari, Shri Teerath Bharliya, Shri Siddharth Sharma and Shri
Shekhar Sharma - Advocates for the petitioners.
Shri Prashant Singh - Advocate General with Shri Amit Seth - Additional Advocate
General for the respondents/State.
Shri Anvesh Shrivastava - Advocate for respondent - M.P. State Mining
Corporation.
Shri Sahil Sonkusale - Advocate for the respondents in respective petitions.
........................................................................................................................................
Reserved on - 19.11.2024
Pronounced on - 11.12.2024
........................................................................................................................................
ORDER
Per: Hon'ble Shri Justice Suresh Kumar Kait, Chief Justice:
1. The facts and issues involved in the present petitions are same and similar, therefore, present petitions are being disposed of by this common order. The facts and annexures shall be discussed with reference to Writ Petition No.25052 of 2022, however, facts of other petitions shall not be repeated for the sake of brevity being similar.
2. The petitioners have filed these petitions under Article 226 of the Constitution of India praying for the following reliefs:
"(i) To issue a writ/orders/directions more particularly in the nature of certiorari quashing the order no.sand/Katni/2022/399 dated 13.10.2022 passed by Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..4..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 respondent No.4 purportedly in terms of Rules, 10(4) and amended Rule 27 of Madhya Pradesh Sand (Mining, Transportation, Storage and Trading) Rules, 2019 being without competence and non-reasoned and a non-speaking order with total non-application of mind and therefore is manifestly arbitrary as being violative of Article 14 and 19 of the Constitution.
(ii) To hold that the action of respondents in demanding extra amount in an ongoing tender that was accepted pursuant to acceptance of highest bid of petitioner is illegal and arbitrary.
(iii) To issue a writ/order/directions more particularly in the nature of mandamus to hold that the impugned demand even if is on account of increase royalty is illegal as the petitioner is already depositing such higher royalty of @ 401 Cub Mtr to the Respondents pursuant to bid and highest royalty offered by the petitioner vide bid invited for this purpose;
(iv) Pass such further or other orders as this Hon'ble Court may deem fit and proper in the circumstances of the case."
3. By way of instant petitions, the petitioners are challenging the order dated 13.10.2022 passed by the respondent No.4 - the Chief General Manager, Madhya Pradesh State Mining Corporation Limited, Bhopal whereby in view of the Rule 10(4) and amended Rule 27 of the Madhya Pradesh Sand (Mining, Transportation, Storage and Trading) Rules, 2019 (hereinafter to be referred to as "the Sand Rules of 2019") vide Gazette Notification dated 14.07.2021, the demand of royalty has been levied on the petitioners, the details of which showing amount of royalty to be recovered from the respective petitioners, are as under:-
Writ Petition Name of Petitioners/ Contract Amount Amount of Number of No. Recovery of Quarry/name of Successful Bidders (Rs.) royalty by the District, for which S.No. impugned notice sand quarry was (Rs.) contracted/ awarded Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..5..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084
1. 25052/2022 Vista Sales Pvt. Ltd. 56,17,50,000/- 16,28,74,285/ 49 mines/Katni
2. 24733/2022 Shishir Khandar 27,27,27,557/- 13,02,72,339/- 58 mines / Chhindwara
3. 25725/2022 R.K.Transport and 36,33,30,000/- 30,37,36,930/- 58 mines /Singrauli Construction Ltd.
4. 26085/2022 RSI Stone World 37,00,00,000/- 11,47,18,710/- 27 mines /Umaria Pvt. Ltd.
5. 26087/2022 Sainik Industries 35,35,00,000/- 21,22,74,438/- 24 mines /Sidhi Pvt. Ltd.
6. 26245/2022 Ujjawal Chauhan 27,27,60,786/- 6,73,98,780/- 16 mines /Harda
7. 27268/2022 K.G.Developers 13,63,00,000/- 8,59,11,815/- 22 mines /Anuppur
8. 27304/2022 M/s Vanshika 44,55,00,000/- 15,21,01,457/- 50 mines /Shahdol Constructions
9. 27310/2022 M/s Ashtvarka IT 40,00,00,786/- 3,79,63,406/- 26 mines/Mandla Solution Ltd.
10 28596/2022 M/s Rajesh Pathak 34,99,44,441/- 18,36,24,930/- 67 mines/Balaghat
11. 28767/2022 Powermesh Projects 108,99,99,999/- 43,32,15, 844/- 30 mines/Sehore Ltd.
12. 13901/2022 M/s Dhanlaxmi 63,05,00,045/- 29,87,68,174/- 36 mines/ Merchandise Pvt. Narsinghpur Ltd.
4. The facts, in brief, as narrated in W.P.No.25052/2022 are that the petitioners companies constituted under the provisions of the Companies Act, 1956 are engaged in the business of mining. The petitioners being a legal entity represented through their Directors enjoy protection under Articles 14, 19 and 21 of the Constitution of India to be treated fairly and reasonably at the hands of the respondent-authorities. The petitioners have also a fundamental right to carry out the business of their choice subject to and being governed by the provisions of the relevant Act and the Rules.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33..6..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084
5. The case of the petitioner is that the respondent M.P. State Mining Corporation invited tenders for the purpose of sand mining for the quarry situated in district Katni and E-tender notice in this regard was published on 08.10.2019. The tender was issued for total 49 sand quarries having available quantity of 14,00,000 cubic meter and offset price was determined at Rs.17,50,00,000/- by the respondent No.6/State Mining Corporation at the rate of Rs.125 per cub.m. This offset price was the minimum royalty that was payable and tender was invited to offer such highest amount. The quantity of sand was also specified in cubic meter for each of such 49 quarries. The petitioner was declared successful bidder for amount of Rs.56,17,50,000/- per year for quantity of 14,00,000 cubic meter of sand at the rate of Rs.401 per cub.m. as highest offered royalty, which could be excavated by the petitioner from 49 quarries notified by respondent- State Mining Corporation. After being declared as successful, the petitioner was required to pay Rs.56,17,50,000/-per year as instalment of highest royalty offered for sand and advance security deposit of Rs.14,04,37,500/-. The petitioner deposited the amount as directed by the Corporation. Thus, a letter of intent dated 21.01.2020 (Annexure P/5) and agreement dated 08.03.2020 (Annexure P/6) were executed. The period of lease was extended to 30.06.2023 due to Covid pandemic. Thus the petitioner started excavating sand from quarries and started paying the royalty each month in instalment as per terms upto 12.10.2022. He further submitted that there cannot be change in the consideration amount mentioned in the contract as the same is in violation to rule 10(1) of Rules of 2019 or clause 5 of the agreement. The Rule 10(4) of Rules of 2019 cannot be made a source for charging additional royalty as the annual Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..7..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 contract/tender/royalty amount is only the royalty that the State charges by calling highest bids.
6. The further submission of the petitioners is that the respondent authorities illegally and arbitrarily issued impugned order dated 13.10.2022 in terms of Rule 10(4) and amendment incorporated in Rule 27 of the Rules of 2019 raising recovery of royalty against the petitioners. The said order has been passed in blatant disregard to principles of natural justice as no opportunity of hearing was afforded before passing of such order.
7. Learned senior counsel appearing for petitioners' counsel inter alia submits that even though all the petitioners have paid royalty of the mineral (sand), the impugned demand has been made for making payment of the same again. The entire case of the respondents is that because of the judgment of the Division Bench dated 03.08.2021 passed in W.P.No.8613/2020 of the Gwalior Bench, an amendment was carried out in Rule 27 of the Rules of 2019 and only after this amendment, the Madhya Pradesh Minor Mineral Rules, 1996 (hereinafter to be referred to as "the Rules of 1996") were made applicable to the Rules of 2019 i.e. on and from 14.07.2021 and prior to this amendment as stated in the reply dated 22.11.2023 filed by the respondents vide para 15 and 22, no royalty was being charged from the petitioners. The decision dated 03.08.2021 of the Gwalior Bench is not applicable to the present case as the said judgment is not on the question of royalty but on the issue of confiscation of vehicles involved in illegal transportation.
8. It is further contended by the petitioners that the royalty provision is part of Section 15(3) of the Mines and Minerals (Development and Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..8..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 Regulation) Act, 1957 read with Rule 29 of the Madhya Pradesh Minor Mineral Rules, 1996 and same were made applicable to the Rules of 2019 from the very inception because there is no specific provision for charging royalty in the Rules of 2019 and as such there was no transgression of Rules of 1996 in the Rules of 2019 from the very beginning and there was no eclipse of the provisions. It is further submitted that royalty by way of E-TP (Electronic Transit Pass) was being charged along with the contract amount by the respondents from the day one.
9. The learned counsel for petitioners further submits that in the reply of the State Government, there is no counter to the fact that the petitioners have paid royalty as stated in para 5.8 and ground raised in para 6.5 of W.P.No.25725/2022 and others, where documentary evidence of payment of royalty has been brought on record i.e. E-TP by the petitioners which clearly stipulates that royalty has been charged by the State Government on the mineral sand. The contention of the petitioners was that E-TP is issued by the Department of Mineral Resources, Government of Madhya Pradesh and the portal through which the E-TP are issued is owned, controlled and operated by the respondent No.1 which clearly leaves no scope and iota of doubt of the fact that the royalty has not been charged by the respondents even before the amendment of Rule 27 of Rules of 2019.
10. It is further argued by the petitioners that as per document No.2 (at page 12 of the written submission) that in the Letter of Acceptance dated 27.02.2020 in clause 8 of Note of the details of Mines and Amount in the E-Auction, it is clearly mentioned that the contractual amount includes royalty and there is no denial of the same in the reply Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..9..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 filed by the respondents which again solidifies the stand that royalty has been paid and as such the impugned order deserves to be set aside on this ground alone.
11. Further contention of the petitioners is that the amendment in the Rule 27 carried out vide notification dated 13.07.2021 has no relevance, as the same does not deal with royalty provisions more so it was only a typographical error which has been rectified and the respondents have misinterpreted the aforesaid rule and for this very reason, the rule is not required to be challenged and it is just to mislead the Court. It is pertinent to mention here that the GST department has acknowledged that royalty has been paid and on which they have imposed the tax and the other department i.e. Mining Department even though have charged royalty are taking a stand that no royalty has been paid, which cannot be sustained. The same is fortified by the notice issued to the petitioner in W.P.No.25725/2022 which clearly shows that the GST department has specifically acknowledged imposition of 18% tax on deposited royalty.
12. Learned counsel for the petitioners ultimately submit that the petitioners have paid royalty to the State Government and on this very reasons, the impugned order dated 13.10.2022 deserves to be set aside and the security deposit being illegally and arbitrarily withheld by the respondents may be directed to be released.
13 Per contra, the stand of the respondents is that the Rules of 2019 particularly Rule 10 only deals with the determination of the contract price for grant of license/lease to excavate and exploit the mineral sand in a particular district. The same does not deal with imposition of royalty. Clause 3.2 of the statutory Form-III of Letter of Intent appended Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..10..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 to the Rules of 2019 specifically provides that the grant of license is subject to the Rules and any change in the Rules would automatically be applicable on the ongoing contract agreement. Clause 2 of the statutory Form-V of the contract agreement of sand quarry specifically provides contract amount, royalties, rents and other payments independently and therefore, the contract agreement itself provides for payment of contract amount as well as royalty separately.
14. Shri Prashant Singh, learned Advocate General appearing on behalf of the respondents submitted that a reading of clauses 6, 7 and 8 of the statutory contract agreement reveals that the contract amount and other dues of the State Government are distinct and separate.
15. Learned Advocate General inviting attention of this Court to amendment of Rule 27 of the Rules of 2019, submits that Rules of 2019 do not deal with the royalty and therefore, to that extent, the Rules of 1996 are applicable on the mineral sand. Since the amendment is by substitution and clarificatory, the same would have retrospective applicability. He further contends that the petitioners have not challenged the amendment made in Rules 27 of the Rules of 2019 vide Gazette Notification dated 14.07.2021 in the instant petitions and in the absence of challenge to the validity of the said rules, the same remains binding and enforceable.
16. It is further contended that the impugned demand notice is by virtue of amendment in the statutory rules and therefore, the question of grant of opportunity of hearing does not arise and no prejudice has been caused to the petitioners by non-grant of opportunity of hearing prior to passing of the impugned demand notice.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33..11..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084
17. The further contention of the learned Advocate General is that as per clause 3.2 of the Letter of Intent dated 21.01.2020 (Annexure P/5 at page 117 of the writ petition) as well as various clauses of the contract in question, the amendments made in the statutory rules are automatically applicable on the ongoing contracts.
18. To strengthen the arguments on the aforesaid issue, learned Advocate General has placed reliance upon the judgments of the Supreme Court in the cases of Chandavarkar Sita Ratna Rao Vs. Ashalata S.Guram, (1986) 4 SCC 447; Brij Mohan Parihar Vs. M.P. State Road Transport Corporation and others (1987) 1 SCC 13; State of M.P and others Vs. Lalit Jaggi (2008) 10 SCC 607; Soma Isolux NH One Tollway Pvt. Ltd Vs. Harish Kumar Puri & ors (2014) 6 SCC 75; NOVA ADS Vs. Metropolitan Tansport Corporation & Ors. (2015) 13 SCC 257; and Sree Sankaracharya University of Sanskrit and others Vs. Dr. Manu & another 2023 SCC Online SC 640 to contend that non-obstante clause has an overriding effect over some particular provision of the Act or even in any contract, if it is contrary to the Act. No mandamus under Article 226 of the Constitution of India can be issued to any State authority to enforce an agreement violating a statutory provision. It is further contended that contract price and excise duty are entirely different. Therefore, the present petitions are liable to be dismissed.
19. We have heard the learned counsel for the parties and perused the record.
20. At the outset, learned counsel for the respondents argued that the instant writ petitions are not maintainable because the petitioners did not Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..12..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 avail the alternative remedy and directly filed the writ petitions. In view of the clause 25 of the contract agreement dated 08.03.2020 (Annexure P/6) and clause 40 of the NIT dated 08.10.2019 (Annexure P/4), the petitioners have efficacious and alternative remedy of filing a dispute before the respondent-authority. Clause 25 of the contract agreement dated 08.03.2020 reads as under:
25. य द इस ठे के के संबध ं म और/या उसके संबध ं म और/या कोई िववाद होने क ि थित म, रा य शासन का िनणय अंितम एवं बंधनकारी होगा ।
Clause 40 of the NIT dated 08.10.2019 (Annexure P/4) shows for resolution of any dispute arising out of the contract between the parties, which reads as under:-
40. िववाद का िनपटारा- ठे के के संबंध म और/या उसके संबंध म और/या कोई िववाद होने क ि थित म ठे केदार ारा कले टर को औपचचा रक प से िलिखत म िववाद का सारभूत िववरण सूिचत कया जावेगा। तदुपरांत कले टर ारा व तु ि थित से रा य शासन को अवगत कराया जायेगा। रा य शासन का िनणय अंितम एवं बंधनकारी होगा।
21. The learned counsel for the respondents contended that Clause 25 of contract agreement dated 08.03.2020 (Annexure P/6 at page 132) provides for reference of the dispute pertaining to the contract to the State Government, without exhausting the said dispute redressal mechanism, the instant writ petitions are not maintainable. He further contended that Clause 40 of the NIT dated 08.10.2019 (Annexure P/4 at page 101 of the writ petition) also provides for decision of the dispute arising out of the contract by the State Government, which remedy has also not been exhausted by the petitioners.
22. The Supreme Court in the case of PHR Invent Education Society Vs. UCO Bank and others SLP(C) No. 8867 of 2022 decided on 10.04.2024 in para 29 has carved out certain exceptions as to when a petition Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..13..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 under Article 226 of the Constitution could be entertained in spite of availability of an alternative remedy, which are as under:
"29. ....
(i) where the statutory authority has not acted in accordance with the provisions of the enactment in question;
(ii) it has acted in defiance of the fundamental principles of judicial procedure;
(ii) it has resorted to invoke the provisions which are repealed; and
(iv) when an order has been passed in total violation of the principles of natural justice.
23. In view of above, it is settled principle of law that generally, a writ petition should not be entertained when an efficacious alternate remedy is provided by law, but in an appropriate case, an alternate remedy by itself does not deprive the High Court of its powers under Article 226 of the Constitution.
24. Regarding the issue involved in these petitions, it is apposite to consider the legal provisions. Section 15(3) of the Mines and Minerals (Development and Regulation) Act, 1957 is as under:-
"15. Power of State Governments to make rules in respect of minor minerals *** *** ***.
(3) The holder of a mining lease or any other mineral concession granted under any rule made under sub-section (1) shall pay royalty or dead rent, whichever is more in respect of minor minerals removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee at the rate prescribed for the time being in the rules framed by the State Government in respect of minor minerals:Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33
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NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 Provided that the State Government shall not enhance the rate of royalty or dead rent in respect of any minor mineral for more than once during any period of three years."
25. As stated by the respondents, the levy of royalty is by virtue of Rule 29(3) of the Madhya Pradesh Minor Mineral Rules, 1996, which reads as under:-
"29. Rent, Royalty and other payable amounts etc. - (1) When a quarry lease is granted or renewed-
xxx xxx xxx
(3) Notwithstanding anything contained in any instruments of
the lease, in cases of minerals specified in Schedule-I and Schedule II, the lessee shall pay royalty/rent in respect of minerals dispatched and/or consumed at the rate specified from time to time in Schedule III and Schedule IV:
Provided that notwithstanding anything contained in any instruments of the lease in cases of minerals specified in Schedule V; the lessee shall pay royalty and additional payable amount/rent under these rules at the rates specified in Schedule VI and Schedule VII from time to time in respect of any minerals dispatched and /or consumed ."
26. Rule 10(1) and (4) of the Rules of 2019 is as follows:-
"10. Fixation and Payment of Contract amount:-
(1) The highest amount received in the tender shall be the annual contract amount and in the first year of the contract the annual contract amount shall be payable only. In the second and third year of the contract, 10% more than the annual contract amount, shall be payable.
*** *** *** (4) In addition to the contract amount, all other taxes, fees and Government payment shall be payable separately".
27. Repealed Rule 27 of the Rules of 2019 as published in the Madhya Pradesh Gazette Notification dated 30.08.2019 is as under:-
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33..15..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 "27. Repeal:- The provisions related to mineral sand contained in Madhya Pradesh Minor Mineral Rules, 1996, Madhya Pradesh (Prevention of Illegal Mining, Transportation and Storage) Rules, 2006 and Madhya Pradesh Sand Rules, 2018 are repealed to the extent where it does not transgress to these rules."
28. The amended rule 27 of the Rules of 2019 as published in Madhya Pradesh Gazette Notification dated 14.07.2021 is as under:-
"27. Repeal.-
(1) The provisions related to mineral sand contained in Madhya Pradesh Minor Mineral Rules, 1996, Madhya Pradesh (Prevention of Illegal Mining, Transportation and Storage) Rules, 2006 are repealed to the extent where it transgresses to these rules.
(2) The Madhya Pradesh Sand Rules, 2018 are, hereby repealed"
29. It is not disputed that the royalty has to be paid for grant of license/lease on mining of mineral sand. However, the stand of the petitioners is that the contract amount deposited by the petitioners includes royalty whereas the case of the respondents is that the petitioners are required to pay the royalty separately and the impugned demand notice is just and reasonable. Admittedly the Sand Rules of 2019 does not deal with the royalty.
30. The further argument of the learned counsel for the petitioners is that without having a valid transit pass, the petitioners cannot transport the mineral sand from the mine to the destination, which is prohibited in Rule 3 of the Sand Rules of 2019. In case of breach of Rule 3, the contractors would be liable to be penalised in terms of Rules 15 and 20(2) of the Sand Rules of 2019. Therefore, the order dated 13.10.2022 issued by the respondent - M.P. State Mining Corporation is wholly Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..16..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 incorrect and baseless stating that the annual contract amount does not include royalty.
31. As contended by the petitioners that as per the communication made by the respondents at the time of the issuance of the Notice Inviting Tender, in the Letter of Acceptance and the agreement, which were in the prescribed format under the Sand Rules of 2019, it was categorically mentioned that the contract amount specified under Rule 10(4) of the Sand Rules of 2019 includes royalty charges. Therefore, subsequent demand of royalty from the petitioners by the impugned order dated 13.10.2022 is contrary to the aforesaid communication made by the respondents.
32. On perusal of Annexure P/4 to W.P.No.25725/2022 i.e. E-TP at page 76, it is clear from the note that the amount paid for the booked mineral quantity, includes royalty, DHF, NMET and income tax as applicable for the lease and on reading of the agreement, it is also clear that E-TP will be issued only after payment of all due amounts.
33. Now the question arises for consideration is as to whether the applicability of amendment in the Sand Rules of 2019 which came into force from 14.07.2021 is retrospective or prospective in nature.
34. Learned counsel for the respondents contends that the amendment in Rule 27 of the Sand Rules of 2019 vide Gazette Notification dated 14.07.2021 is by way of substitution, therefore the provisions of the Rules of 1996 have been made applicable on mineral sand as well to the extent, it transgresses to the Sand Rules of 2019 as the Rules of 1996 have been repealed only to the extent it transgresses the Rules of 2019. Admittedly Sand Rules of 2019 does not deal with the royalty, therefore, Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..17..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 to that extent, the Rules of 1996 are applicable on the mineral sand. Since the amendment is by substitution and clarificatory, the same would have retrospective application.
35. Per contra, learned counsel for the petitioners submits that the amended Rule 27 vide amendment dated 13.7.2021 cannot apply to ongoing contract.
36. It is well settled that until and unless there is a clear expression or manifest intention towards the applicability of rule or law, a rule or law cannot be construed as retrospective. The rule cannot apply retrospectively to the ongoing contract which was executed under an unamended Sand Rules of 2019. It is clear from bare reading of unamended rule 27 of the Sand Rules of 2019, it expressly repeals the earlier Rules of 1996 and Sand Rules of 2006 to the extent, these rules transgress the 2019 Sand Rules as regard the minor mineral of sand. The amended rule 27 of Rules of 2019 dated 13.07.2021 cannot be made source to charge additional royalty in ongoing contract, which is executed under unamended rule of 2019 Sand Rules.
37. The Supreme Court in the case Pernod Ricard (India) (P) Ltd. v. State of M.P., (2024) 8 SCC 742 : 2024 SCC OnLine SC 566 at page 751 has held as under:-
"16. In Zile Singh v. State of Haryana [Zile Singh v. State of Haryana, (2004) 8 SCC 1] , this Court referred to the legislative practice of an amendment by substitution and held that substitution would have the effect of amending the operation of law during the period in which it was in force : (SCC p. 12, paras 24-25) "24. The substitution of one text for the other pre-existing text is one of the known and well-recognised practices employed in legislative drafting. "Substitution" has to be distinguished from "supersession" or a mere repeal of an existing provision.Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33
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NEUTRAL CITATION NO. 2024:MPHC-JBP:60084
25. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (see Principles of Statutory Interpretation, ibid., p. 565). If any authority is needed in support of the proposition, it is to be found in West U.P. Sugar Mills Assn. v. State of U.P. [West U.P. Sugar Mills Assn. v. State of U.P., (2002) 2 SCC 645] , State of Rajasthan v. Mangilal Pindwal [State of Rajasthan v. Mangilal Pindwal, (1996) 5 SCC 60] , Koteswar Vittal Kamath v. K. Rangappa Baliga & Co. [Koteswar Vittal Kamath v. K. Rangappa Baliga & Co., (1969) 1 SCC 255] and A.L.V.R.S.T. Veerappa Chettiar v. I.S. Michael [A.L.V.R.S.T. Veerappa Chettiar v. I.S. Michael, 1962 SCC OnLine SC 318 : 1963 Supp (2) SCR 244 :
AIR 1963 SC 933] . In West U.P. Sugar Mills Assn. case [West U.P. Sugar Mills Assn. v. State of U.P., (2002) 2 SCC 645] , a three-Judge Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centring around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal case [State of Rajasthan v. Mangilal Pindwal, (1996) 5 SCC 60] , this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar case [Koteswar Vittal Kamath v. K. Rangappa Baliga & Co., (1969) 1 SCC 255] a three-Judge Bench of this Court emphasised the distinction between "supersession"
of a rule and "substitution" of a rule and held that the process of substitution consists of two steps : first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place."
17. A slight variation is noticed in a recent decision in Gottumukkala Venkata Krishamraju v. Union of India [Gottumukkala Venkata Krishamraju v. Union of India, (2019) 17 SCC 590 : (2020) 3 SCC (Civ) 519] wherein this Court held that : (SCC p. 599, para 18) "18. Ordinarily wherever the word "substitute" or "substitution" is used by the legislature, it has the effect of deleting the old provision and make the new provision operative. The process of substitution consists of two steps : first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place. The rule is that when a subsequent Act Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..19..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 amends an earlier one in such a way as to incorporate itself, or a part of itself, into the earlier, then the earlier Act must thereafter be read and construed as if the altered words had been written into the earlier Act with pen and ink and the old words scored out so that thereafter there is no need to refer to the amending Act at all. No doubt, in certain situations, the Court having regard to the purport and object sought to be achieved by the legislature may construe the word "substitution" as an "amendment" having a prospective effect. Therefore, we do not think that it is a universal rule that the word "substitution" necessarily or always connotes two severable steps, that is to say, one of repeal and another of a fresh enactment even if it implies two steps. However, the aforesaid general meaning is to be given effect to, unless it is found that the legislature intended otherwise. Insofar as present case is concerned, as discussed hereinafter, the legislative intent was also to give effect to the amended provision even in respect of those incumbents who were in service as on 1-9-2016."
38. On considering the aforesaid judgment, in the instant case, bare reading of amended rule 27 of the Sand Rules of 2019 makes it clear that the amendment is not clarificatory in nature. Though the amendment is by way of substitution, that cannot be applicable retrospectively unless and until there is clear and expressed intention shown by the legislation. However, there is no word to suggest that the legislative intent was to give retrospective application.
39. The language used in a rule and law should be interpreted strictly on the sense on which it was intended until and unless there appears contrary intention. It is well settled principle of interpretation of statute that a statute has to be construed without adding any word to it or subtracting any word from it and an interpretation which makes a part of the statute redundant has to be avoided. For the aforesaid reasons, we are of the considered view that the amendment in Sand Rules of 2019 which came into force on 14.07.2021 has no retrospective application.
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40. The Supreme Court in the case of Assistant Excise Commissioner, Kottayam & ors. Vs. Esthappan Cherian & anr. in Civil Appeal No.5815/2009 decided on 06.09.2021 has held as follows:-
"14. There is profusion of judicial authority on the proposition that a rule or law cannot be construed as retrospective unless it expresses a clear or manifest intention, to the contrary. In Commissioner of Income Tax v Vatika Township (2015) 1 SCC 1, this court, speaking through a Constitution Bench, observed as follows:
"31. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips vs. Eyre, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law.
32. The obvious basis of the principle against retrospectivity is the principle of 'fairness', which must be the basis of every legal rule as was observed in the decision reported in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co.Ltd.(4) Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..21..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later."
15. Another equally important principle applies: in the absence of express statutory authorization, delegated legislation in the form of rules or regulations, cannot operate retrospectively. In Union of India v M.C. Ponnose 1970 SCR (1) 678, this rule was spelt out in the following terms:
"The courts will not, therefore, ascribe retrospectivity to new laws affecting rights unless by express words or necessary implication it appears that such was the intention of the legislature. The Parliament can delegate its legislative power within the recognised limits. Where any rule or regulation is made by any person or authority to whom such powers have been delegated by the legislature it may or may not be possible to make the same so as to give retrospective operation. It will depend on the language employed in the statutory provision which may in express terms or by necessary implication empower the authority concerned to make a rule or regulation with retrospective effect. But where no such language is to be found it has been held by the courts that the person or authority exercising subordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect."
16. The principle has been affirmed in many decisions such as Hukum Chand v Union of India (1973) 1 SCR 896, Regional Transport Officer v Associated Transport Madras7; Federation of Indian Mineral Industries v Union of India8 and recently, in Union of India v G.S. Chatha Rice Mills 2021 (2) SCC 209.
20. This court had noticed that the Division Bench in Lucka, correctly reasoned that the amended Rule 13 was inapplicable to contracts previously awarded or entered into. The sequitur is that departmental management fee collected by the state, for the period the vend (or outlet) was in its direct management, could not be recovered again, and had to be adjusted. Apparently, the state had preferred appeals, by special leave from the common judgment in Lucka7. Those appeals were ultimately dismissed on 19.2.2008. In Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33 ..22..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 these circumstances, and having regard to the principle that retrospectivity cannot be presumed, unless there is clear intention in the new rule or amendment, it is held that there is no infirmity with the judgment of the High Court.
41. The impugned demand notice dated 13.10.2022 was issued by the respondent -State Mining Corporation asking for the petitioners to deposit additional royalty in terms of Rule 10(4) and amended Rule 27 of the Sand Rules of 2019, but the Rule 10(4) only deals with the payment of all other taxes, fees and government payment in addition to the contract amount, which shall be payable separately. This rule does not specifically mention additional royalty to be charged.
42. While issuing the Letter of Intent (Annexure P/5 at page 119), in clause 8, it was clearly mentioned the payment of contractual amount per cubic meter is with royalty. For ready reference, Clause 8 reads as follows:
... .... ....
8 ा दर के अनुसार ित घनमीटर देय 401.25
रािश (राय टी सिहत) चार सौ एक पये
प ीस पैसे ित
घनमीटर
... .... ....
43. On perusal of Letter of Intent dated 21.01.2020 (Annexure P/5 at page 119 to WP No.25052/2022) shows that in Clause 8, it is clearly mentioned that the contractual amount includes royalty. The respondents cannot charge additional royalty when the amount of royalty has already been paid in terms of Letter of Acceptance.
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44. The impugned demand notice does not specify that the demand made is with respect to the taxes or other fees payable to State. It only indicates additional royalty which cannot be imposed under the Sand Rules of 2019. Moreover, no reasonable opportunity of hearing was given to the petitioners regarding additional payment of royalty.
45. In a recent Nine-Judge's judgment of the Constitution Bench of the Supreme Court in the case of Mineral Area Development Authority and Anr. Vs. Steel Authority of India and Anr. reported in (2024) 10 SCC 1, it has been held as under:-
"130. On first principles, royalty is a consideration paid by a mining lessee to the lessor for enjoyment of mineral rights and to compensate for the loss of value of minerals suffered by the owner of the minerals. The marginal note to Section 9 states that royalties are "in respect of mining leases." The liability to pay royalty arises out of the contractual conditions of the mining lease. [See Mineral Concession Rules, 1960, Rules 27 and 45.] A failure of the lessee to pay royalty is considered to be a breach of the terms of the contract, allowing the lessor to determine the lease and initiate proceedings for recovery against the lessee.
131. Section 9 of the MMDR Act statutorily regulates the right of a lessor to receive consideration in the form of royalty from the lessee for removing or carrying away minerals from the leased area. Prior to the enactment of the MMDR Act, such a condition was treated as part of a mining lease. The object of empowering the Central Government to specify rates of royalty for major minerals was to ensure a certain level of uniformity in mineral prices in view of the domestic and international market.
132. The fact that the rates of royalty are prescribed under Section 9 of the MMDR Act does not make it a "compulsory exaction by public authority for public purposes" because:
(i) the compulsion stems from the contractual conditions of the mining lease agreed between the lessor and lessee;Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33
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(ii) the demand is not made by a public authority, but the lessor (which can either be the State Government or a private party); and
(iii) the payment is not for public purposes, but a consideration paid to the lessor for parting with their exclusive privileges in the minerals.
Moreover, the fact that Section 25 allows recovery of royalty due to the Government under the MMDR Act or "under the terms of the contract" as arrears of land does not make royalty "an impost enforceable by law". Section 25 is a standard recovery provision allowing the Government to recover any dues payable to it, flowing from statute or the terms of a contract. Pertinently, contractual payments due to the Government cannot be deemed to be a tax merely because the statute provides for their recovery as arrears.
133. There are major conceptual differences between royalty and a tax:
(i) the proprietor charges royalty as a consideration for parting with the right to win minerals, while a tax is an imposition of a sovereign;
(ii) royalty is paid in consideration of doing a particular action, that is, extracting minerals from the soil, while tax is generally levied with respect to a taxable event determined by law; [Goodyear (India) Ltd. v. State of Haryana, (1990) 2 SCC 71, para 27] and
(iii) royalty generally flows from the lease deed as compared to tax which is imposed by authority of law.
134. Under the MMDR Act, the Central Government fixes the rates of royalty, but it is still paid to the proprietor by virtue of a mining lease. In case the minerals vest in the government, the mining lease is signed between the State Government (as lessor) and the lessee in pursuance of Article 299 of the Constitution. Through the mining lease, the Government parts with its exclusive privilege over mineral rights. A consideration paid under a contract to the State Government for acquiring exclusive privileges cannot be termed as an impost. Since royalty is a consideration paid by the lessee to the lessor under a mining lease, it cannot be termed as an impost.
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135. This Court has held that royalty is not a tax, in several decisions. In State of H.P. v. Gujarat Ambuja Cement Ltd. [State of H.P. v. Gujarat Ambuja Cement Ltd., (2005) 6 SCC 499] , a three-Judge Bench of this Court held royalty not to be a tax. The subsequent decision in Indsil Hydro Power & Manganese Ltd. v. State of Kerala [Indsil Hydro Power & Manganese Ltd. v. State of Kerala, (2021) 10 SCC 165, para 56] brought out the distinction between tax and royalty in the following terms : (Indsil Hydro Power case [Indsil Hydro Power & Manganese Ltd. v. State of Kerala, (2021) 10 SCC 165, para 56] , SCC p. 209, para 56) "56. Thus, the expression "royalty" has consistently been construed to be compensation paid for rights and privileges enjoyed by the grantee and normally has its genesis in the agreement entered into between the grantor and the grantee. As against tax which is imposed under a statutory power without reference to any special benefit to be conferred on the payer of the tax, the royalty would be in terms of the agreement between the parties and normally has direct relationship with the benefit or privilege conferred upon the grantee."
(emphasis in original)
136. The principles applicable to royalty apply to dead rent because:
(i) dead rent is imposed in the exercise of the proprietary right (and not a sovereign right) by the lessor to ensure that the lessee works the mine, and does not keep it idle, and in a situation where the lessee keeps the mine idle, it ensures a constant flow of income to the proprietor;
(ii) the liability to pay dead rent flows from the terms of the mining lease; [See Mineral Concession Rules, 1960, Rules 27 and 45.]
(iii) dead rent is an alternate to royalty; if the rates of royalty are higher than dead rent, the lessee is required to pay the former and not the latter; and
(iv) the Central Government prescribes the dead rent not in the exercise of its sovereign right, but as a regulatory measure to ensure uniformity of rates.
137. In view of the above discussion, we hold that both royalty and dead rent do not fulfil the characteristics of tax or impost.
Signature Not Verified Signed by: CHRISTOPHER PHILIP Signing time: 12-12-2024 12:34:33..26..
NEUTRAL CITATION NO. 2024:MPHC-JBP:60084 Accordingly, we conclude that the observation in India Cement [India Cement Ltd. v. State of T.N., (1990) 1 SCC 12] to the effect that royalty is a tax is incorrect. J. Conclusions
365. In view of the above discussion, we answer the questions formulated in the reference in terms of the following conclusions:
365.1. Royalty is not a tax. Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights. The liability to pay royalty arises out of the contractual conditions of the mining lease. The payments made to the Government cannot be deemed to be a tax merely because the statute provides for their recovery as arrears."
46. The Supreme Court in above judgment in the case of Mineral Area Development Authority and Anr. (supra), has held that the royalty is a consideration paid by the lessee to the lessor for enjoyment of mineral rights and the liability to pay royalty arises out of the contractual condition of the mining lease. The royalty is different from tax. The lessee is liable to pay tax etc. separately.
47. In the instant case, the respondents floated e-tender notice on 08.10.2019 at the rate of Rs.125 per cubic meter. This was the minimum offset price, which was to be paid. On perusal of the Letter of Intent and agreement, it is clear that the contract amount includes royalty.
Therefore, the lessee is not liable to pay royalty separately. The rule 10(1) of the Sand Rules of 2019 provides that the tender shall be given to the highest bidder annually and it is clear that the contractor shall be liable to pay only contract amount and for the second and third year of contract, 10% more than the annual contract amount shall be payable.
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48. In view of the above discussion, we are of the considered view that impugned demand notice issued to the petitioners does not specify the basis and reasons for charging royalty and other taxes under Rule 10(4) of the Sand Rules of 2019 from the petitioners and therefore, the impugned demand notice is not sustainable in the eyes of law. Consequently, the writ petitions are allowed and the demand notice dated 13.10.2022 issued to the petitioners is hereby quashed.
(SURESH KUMAR KAIT) (VIVEK JAIN)
CHIEF JUSTICE JUDGE
C.
Signature Not Verified
Signed by: CHRISTOPHER
PHILIP
Signing time: 12-12-2024
12:34:33