Andhra HC (Pre-Telangana)
A.P. Small Scale Granite Industries ... vs The Government Of A.P. Industries & ... on 9 September, 2002
Equivalent citations: 2002(5)ALT674
Author: Ar. Lakshmanan
Bench: Chief Justice
JUDGMENT Ar. Lakshmanan, J.
1. Whether the action of the Andhra Pradesh Mineral Development Corporation (for short "APMDC") in demanding and/or collecting Mineral Franchise Fee (MFF) from the petitioners herein for the extraction of Black Galaxy Granite from the lands leased out to them or proposed to be leased out in Chimakurthy Mandal in Prakasham district is in accordance with the provisions of Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter referred to as "the Act") and Article 265 of the Constitution of India is the question which arises for consideration in these Writ Petitions.
2. Having regard to the common questions of fact and law involved, we have heard all the Writ Petitions together and are being disposed of by this Common Judgment.
3. The common facts leading to the controversy may briefly be noted from Writ Petition No.11088 of 2002 filed by M/s Midwest Granite Private Limited, Hyderabad.
4. The Government of Andhra Pradesh having identified an extent of Ac.268.70 cts. of land belonging to the Animal Husbandry Department situated in R.L. Puram village, Chimakurthy Mandal, Prakasham district where a Cattle Breeding Farm was located, as having rich deposits of black galaxy granite, proposed to Government of India that two Mandals viz., Chimakurthy and Tallur in the said district should be reserved for APMDC. It appears that the same was the subject matter of litigation before this Court in a batch of writ petitions. The Writ Petitions were disposed of by a learned single Judge with a direction to keep the quarry lease applications pending with the Director of Mines and Geology until such time the Government of India took a decision on the issue. Subsequently, the proposal was, however, withdrawn by the Government. Thereafter, the government issued G.O.Ms.No.23, Animal Husbandry (AH.III) Department dated 22.2.1999 directing handing over of the aforesaid extent of land to APMDC, out of which, an extent of 100 acres of land was directed to be handed over to the Corporation immediately for exploration purpose.It was mentioned in the order that the terms of transfer will be decided separately by the Revenue Department. According to the petitioners, such ownership rights have not been conferred on APDMC so far.
5. The Corporation thereafter issued tender notifications on 7.8.2000, 6.1.2002 and 12.1.2002 inviting tenders from persons having minimum qualifying criteria for prospecting and quarrying galaxy granite in certain parts of the aforesaid extent of land. Petitioner is the successful bidder with respect to an extent of Ac.25.00 of land in S.NO.55/3C(P) of R.L. Puram Village, Chimakurthjy Mandal, designated as Block No. VIII. The petitioner had entered into an agreement known as Project Cooperation and Investment Agreement (for short "Project Agreement") with APDMC on 22.9.2001. According to the agreement, the investor as stipulated in the Bid Documents has agreed and undertaken to incorporate a new company with limited liability.The APMDC was required to transfer the Prospecting Licence and Quarry Lease for galaxy granite in the offered block to the new company to be incorporated. The APDMC was to be allowed 26% of the paid up share capital in the new company in lieu of transfer of prospecting licence. The petitioners were required to provide modern technology, necessary finance, research and development facilities, good international market share, access to technicians, engineers, geologists etc. to undertake the project. Pursuant thereto, a new Company in the name and style of Ongole Mineral Exports Private Limited" (OME) - 5th respondent came into being. The New company has an authorised share capital of Rs.50,00,000 out of which 74% of the shares are held by the petitioner and the remaining by the APMDC.There was provision for enhancement of the paid up share capital. Clause 2.1(c) of the agreement provides that the Investor shall ensure the New Company enters into Mining Franchise Fee (for short "MFF") agreement with APMDC for payment of Mining Franchise Fee within twenty one (21) days from the date of incorporation of the New Company. Clause 4 of the agreement, which provides for MFF reads as follows:
4.0 MINING FRANCHISE FEE:
4.1 The Investor shall cause the New Company to pay APMDC the committed Mining Franchise Fee by the New Company, in the manner stipulated @ Rs.44,900/- (Rupees Forty four thousand Nine hundred only) per CBM of Galaxy Granite mined and despatched from the Licence/Lease or minimum Mining Franchise Fee per annum for a minimum production of 100 CBM for the first year and annum for a minimum production of 300 CBM for the remaining years, whichever is higher. It is clarified for the removal of doubt that such payment shall be over and above all the statutory levies and any other charges etc. as may be payable by the New Company from time to time, under the applicable laws.
4.2 The Investor shall cause the New Company to increase the Mining Franchise Fee a minimum of 15% for every three years on compounding basis.However, depending on the market conditions and other factors prevailing at that time, APMDC is at liberty to negotiate for further increase with mutual consent. The Mining Franchise Fee shall be paid during the entire term of Prospecting Licence/Quarry Lease including the periods of renewal thereof.
4.3 The Investor shall ensure that the New Company enters into Mining Franchise Fee Agreement with APMDC for payment of Mining Franchise Fee within twenty one (21) days from the date of incorporation of the New Company. The payment of Mining Franchise Fee shall be governed by the Mining Franchise Fee Agreement.
4.4 The minimum Mining Franchise Fee per annum will be calculated from the date of execution of Licence transfer deed. The Investor shall ensure the New Company deposits the 50% of the minimum Mining Franchise Fee per annum of Rs.22,45,000/- (Rupees Twenty two lakhs and forty five thousand only) for the first year with APMDC on or before the date of execution of Licence Transfer deed.
4.5. The New Company shall inform the production and despatch details to APMDC on monthly basis along with the proof of permits for transport issued by the authorities concerned.
6. Therefore, according to the agreement, MFF is payable over and above all the statutory levies and any other charges payable from time to time under the laws applicable and shall be increased by 15% for every three years on compound basis.
7. Clause 6 of the agreements deals with obligations of the investor. Clause 6.4 reiterates the obligation of the investor to enter into MFF agreement with APMDC for payment of MFF within twenty-one days from the date of incorporation of the New Company.
8. It may be appropriate at this stage to note that pursuant to the aforesaid agreement, MFF agreement was entered into on 6.11.2001 between the APDMC and the petitioner company and the New Company. The agreement says that in consideration of consent for surface rights given by APMDC to OME to enter into the lands for Prospecting/Quarrying of Galaxy Granite in the block, the OMC has agreed to pay MFF at Rs.44,900/- per cubic meter of galaxy granite mined and despatched from the area held under the Licence/Lease. It also provides for increase of MFF at 15% for every three years. Clause 2 of the said agreement dealing with MFF provides thus:
2.1 In consideration of consent for surface rights given by APMDC to OME to enter into the land for Prospecting/Quarrying of Galaxy Granite in the Bock, OME hereby agree to pay the MFF of Rs.44,900/- (Rupees forty four thousand and nine hundred only) per cubic meter of Galaxy Granite mined and despatched from the area held under Licence/Lease. OME and the Investor hereby acknowledges that the MFF is in addition to all the statutory taxes, levies etc. payable by OME under the applicable laws.
2.2 M/s OME hereby agree to increase MFF a minimum of 15% for every three years on compounding basis commencing from the date of execution of Licence transfer deed. However, depending on the market conditions and other factors prevailing at that time APMDC is at liberty to negotiate for their increase with mutual consent. M/s OME hereby agree that the Mining Franchise Fee is payable during the entire term of Licence/Lease including the renewal s thereof.
2.3 M/s OME hereby agree to pay the minimum MFF @ Rs.44,900/- (Rupees forty four thousand and nine hundred only) per cubic meter of Galaxy Granite mined and despatched or minimum mining franchise fee per annum for minimum production of 100 cubic meters for the First year and for a minimum period of 300 cubic meters for the remaining years whichever is higher.
2.4 OME shall pay the MFF for the actual quantities of Galaxy Granite produced and despatched from the area held under Licence/Lease during the respective year or minimum Mining Franchise Fee per annum as specified at Clause 2.2 to APMDC whichever is higher.
9. Clause 3 provides for the manner and mode of payment of MFF. It reads thus:
3.1 The minimum MFF per annum shall be paid to APMDC in 2 equal half year instalments. However, if the Mining Franchise Fee payable on despatches exceeds the first half yearly instalment amount, during the first six months, M/s Ongole Mineral Exports Private Ltd., shall deposit the balance half year instalment immediately before effecting despatches. The minimum MFF per annum shall be calculated from the date of execution of Licence transfer deed.
3.2 For the First year M/s Ongole Mineral Exports Private Ltd., shall pay the first half year instalment of Rs.22,45,000/- on or before execution of the Licence transfer deed and second half yearly instalment shall be paid 15 days before expiry of the first six months period or immediately before commencement of despatches, if the amount deposited is already adjusted, whichever is earlier. For the succeeding years M/s Ongole Mineral Exports Private Ltd., shall pay the first half yearly instalment of the minimum MFFF per annum 15 days before expiry of the preceding year and second half yearly instalment shall be paid 15 days before expiryof the first six months period or immediately before commencement of despatches, if the amount deposited is already adjusted, whichever is earlier.
3.3 If the despatches exceed the annual minimum Mining Franchise Fee amount deposited, OME shall despatch the Galaxy Granite on prior payment of required MFF.
3.4 OME shall obtain written permission of the Controlling Officer nominated by APMDC before despatch of the Galaxy Granite blocks from the area held under Licence/Lease.
10. Clause 4 of MFF agreement provides for measurement and computation of volume for arriving MFF.Clause 8 provides that the default to pay MFF in the manner stipulated in the agreement will result in termination of the agreement with forfeiture of security deposits etc.
11. While things stood thus, the APMDC by their letter dated 29.5.2002 called upon the 5th respondent to pay Rs.22.45 lakhs towards MFF for the second half yearly instalment of the first year on or before 2.6.2002. It reads:
In the proceedings 1st cited, the PL transfer deed in respect of the subject area was executed on 18.12.2001. As per clause 3.2 of the MFF agreement 2nd cited, you are required to pay Rs.22.45 lakhs towards MFF for the second half year instalment ie from 18.6.2002 to 17.12.2002 on or before 2.6.2002 ie 15 days before expiry of the first six months period.
We therefore request you to pay Rs.22.45 lakhs towards MFF for the second half yearly instalment for the first year on or before 2.6.2002.
12. Challenging the same, the petitioner filed the writ petition seeking the following relief:
It is prayed that the Hon'ble Court may be pleased to issue a writ, direction or order especially in the nature of writ of mandamus declaring the Mineral Franchise Fee which the A.P. Mineral Development Corporation the 3rd respondent herein is demanding and or collecting for the extraction of the back granite in respect to an extent of Ac.25.00 in Survey No.55/3C(P) of R.L. Puram village, Chimakurthy Mandal, Prakasam District designated as Block No. VIII to be unconstitutional, illegal, void and violative of Article 265 of the Constitution and provisions of Mines and Mineral (Regulation and Development) Act, 1957 and the rules made thereunder, and if necessary by striking down the Project cooperation and Investment Agreement in part and Mining Franchise Fee Agreement in part entered into by and amongst the petitioners, Respondent No.3 and Respondent.
13. The above is the factual matrix on which the writ petitions are based.We may, however, notice that in some cases, petitioners have challenged the very tender notifications itself providing the clause for payment of MFF even before they enter into project agreements with APMDC.
14. The petitioners challenge the proceedings on the ground that the demand issued is illegal, unauthorised and contrary to the provisions of the Act and the A.P. Minor Mineral Concession Rules, 1966, (for short "the Rules") made thereunder. It is contended that in view of Section 17A(3) and Section 24A of the Act and Rule 6 of the Rules, the demand and collection of MFF is illegal and unlawful. The MFF is not of the nature that Section 17A(3) contemplates. The MFF is not in the nature of a compensation for sub-soil rights or share in the quarrying fees as contemplated under Rule 6 of the rules. Nor it is in the nature of compensation contemplated under Section 24A of the Act. The compensation contemplated thereunder is only for loss or damage arising as a consequence of reconnaissance, mining or prospecting. The MFF is in the nature of an additional royalty or seigniorage levied on the mineral and, therefore, is contrary to Rule 10 of the rules. The APMDC in whose favour the lands have been transferred cannot be on a higher footing than the Government. It is further contended that what the Central Government or the State Government has to pay under section 17A(3) to a private person when they undertakes mining operations in an area where the minerals vest in a private person, the same are only required to be paid to APMDC and it cannot be paid anything more than what the Government itself or the private person would have received. The collection of MFF is also not authorised by Article 265 of the Constitution of India.
15. W.P.No.3999 of 2002 is filed by A.P. Small Scale Granite Industries Association seeking similar relief.
16. We may now briefly refer to the individual facts of the other cases.
17. W.P.No.3082 of 2002: This petition has been filed by M/s Nova Granites (India) Ltd. having their registered Officer at Bangalore. In this writ petition the petitioner has not so far entered into any agreement with the APMDC and at the threshold it challenged the tender notification issued by APMDC NO.APMDC/BG-4/2002 dated 10.1.2002 providing for collection of MFF in Project Cooperation and Investment Agreement and MFF agreements as illegal, unlawful and contrary to the provisions of the Act.
18. W.P.No.2660 of 2002: This Writ Petition has been filed by Garvee Granite Ltd., having their Registered Office at Malkapur village, Choutappal Mandal, Nalgonda district challenging the tender Notification No.APMDC/BG/2002 dated 10.1.2002.
19. W.P.No.11089 of 2002: This petition is also filed by M/s Midwest Granite Private Ltd., with respect to an extent of Ac.22.64 cts. in S.No.55/3C(P) of R.L. Puram village, Chimarkuthy Mandal. The P.L agreement was entered on 22.9.2002 and MFF agreement on 6.11.2001. RLP Granites Ltd., is the incorporated company. No demand has so far been issued in this case.
20. W.P.No.6777 of 2002: M/s Alif Granites (P) Ltd., Hyderabad, M/s Faiza Exports, Bangalore and M/s M.S. Enterprises, Bangalore are the petitioners in this case. The petitioners are the successful bidders with respect to an extent of Ac.31,37 cts. of land in Survey Nos.29/1C2C, 29/2C etc. of R.L. Puram village, designated as Block No. III. They entered into project agreement with APDMC on 27.3.2001 and MFF agreement on 1.5.2001. Isra Mineral Exports Private Ltd., is the incorporated company. By letter dated 6.4.2002 of APDMC they were asked to pay Rs.5.05 lakhs towards MFF for the second half yearly instalment for the first year.
21. W.P.No.6714 of 2002: This is again filed by the petitioners in W.P.No.6777 of 2002 with respect to the extent of Ac.20.70 cts. of land in S.NO.55/4A (P) of R.L. Puram village, designated as Block No. X. The project agreement and MFF agreements were entered into on 27.4.2001 and 1.5.2001 respectively.The incorporated company is Arham Mineral Exports Private Ltd. By the impugned letter dated 6.4.2002 the APMDC made demand to the extent of Rs.12.25 lakhs towards MFF for the second half yearly instalment of the first year.
22. A common counter-affidavit has been filed on behalf of the Government of Andhra Pradesh. It is contended that the Writ Petitions are not maintainable as the dispute arose out of contract agreed upon by the Joint venture companies with the APMDC pursuant to the tender agreement. The petitioner in W.P.No.3999 of 2002 being an association has no locus standi to file the writ petition. The land in question has been transferred to APMDC by reason of G.O.Ms.No.23 dated 22.2.1999 on payment of Rs.256 lakhs to the Endowments and Animal Husbandry and Fisheries Departments for shifting of the existing cattle breeding centre to Chadalavada, Prakasham district. The possession of the land has been handed over to APMDC and formalities of transfer of title is under process and for all practical purposes APMDC is the owner of the land in question. In W.P.No.20609 of 2000 and batch filed by some persons whose applications for grant of licence were rejected by Director of Mines and Geology, this Court by order dated 29.8.2001 upheld the Prospecting Licence granted in favour of APMDC by the Director of Mines and Geology and the ownership of the land by APMDC which was confirmed by the Division Bench by Judgment dated 11.2.2002 in W.A.Nos.2047 and 2048 of 2001. Thereafter the Director of Mines and Geology granted prospecting licence to the APMDC for exploring the mineral wealth available in the land.
23. According to the counter, a party which has chosen ultimately through the process of tendering or otherwise to enter into an agreement with the Corporation for carrying on prospecting operations and later mining operations, will have to enter into two types of contracts with the Corporation. The first agreement provides for the transfer of the PL in favour of Joint venture company, in which the corporation will also have a shareholding. The second agreement deals with the surface rights. In consideration of the Joint Venture company enjoying the surface rights of the land in question, which stands transferred to the Corporation by the Government, it is required to pay certain fee, which is quid pro quo for the right being transferred under that agreement. The two agreements are separate and distinct though they broadly relate to the same enterprise. The purpose of these two agreements relates to transfer of statutory rights under a licence granted to the Corporation. The second agreement is purely in the realm of property rights under the general law pertaining to property and no permission of the government or other condition precedent is required. Therefore, it is not permissible for the petitioners to challenge the terms of the contract to be entered into or already entered by a party on the ground that the Act does not provide for such a charge. The Act does not purport to regulate the rights of the land owner or the mode of enjoyment of his surface rights and therefore absence of a provision does not disable a person from collection of MFF. The true nature of levy is quid pro quo for utilising the surface of the land belonging to a private owner.
24. It is categorically stated in the counter that by reason of G.O.Ms.No.23, the APMDC has taken possession of the land from Animal Husbandry department by paying 256 lakhs (70 lakhs to Endowments department for 200 acres and 186 lakhs for infrastructure facilities and lift irrigation scheme at Chadalwada for shifting the cattle breeding farm). The MFF is being collected by APMDC as a consideration for the use of the surface of the land belonging to it in terms of the contract entered into between the parties. If the Joint Venture companies are not willing to pay the MFF they ought not to have participated in the tenders itself. The APMDC was granted PL by the Government of A.P., vide G.O.Ms.No.11 Industries & Commerce (M.II) Department, dated 5.01.2000 prior to the delegation of powers to the Director of Mines and Geology in an extent of Ac.70.70 cts. and after the delegation of powers, prospecting licenses were granted by the Director of Mines and Geology, vide proceedings dated 5.8.2000 and 22.9.2000 and the lease deeds were also executed. In the case of individual petitioners, the prospecting licences have been transferred on their joint venture companies by the Director of Mines and Geology. There is no provision in Rules or the Act, which prohibits the collection of MFF. It is purely a private transaction between APMDC and the joint Venture companies.
25. The A.P.M.D.C. has filed a separate counter affidavit in W.P.No.3999 of 2002.It is stated that the writ petition is not bona fide public interest litigation and has been filed on behalf of the unsuccessful tenderers. MFF is not being collected as a statutory levy but is based upon contract. The Act does not purport to regulate the rights of the land owner or the mode of enjoyment of his surface rights. It however recognised the surface rights of the landowner in some of the provisions of the Act. It is well settled that the mineral belongs to the State while the surface rights belong to the landowner whoever he is. Therefore, in the case of private land no objection certificate is required to be produced before grant of PL. The validity of the contract between the Corporation and the person who proposes to enjoy the surface cannot reasonably be challenged. In consideration of the Joint Venture Company enjoying the surface rights of the land in question, which belongs to the Corporation, it is required to pay certain fee, which is quid pro quo for the right being transferred under that agreement. Units having gang size saws can profitably exploit the Galaxy Granites deposit and the large blocks are not suitable to the small-scale units.The contention that MFF is in the nature of additional royalty or seiginorage is not correct. The counter has reiterated the stand taken by the State in their counter-affidavit.
26. We have heard Mr. Dushyanth A Dave, learned Senior Counsel appearing on behalf of Mr. S. Ravi and Mr. Dhananjaya Reddy, learned counsel appearing for the petitioners in W.P.Nos.6714 and 11088 of 2002, Mr. S. Ravi, Mr. LK. Ravichander, Mr. A. Ramakrishna and Mr. Dhananjaya Reddy, learned counsel appearing for the respective petitioners and the learned Advocate General and Sri A. Sudershan Reddy, learned Government Pleader appearing for the respondents.
27. Mr. Dushyanth A. Dave, learned Senior Counsel has made the following submissions:
1. By virtue of the provisions of sub-section (2) of Section 17 of the Act the State Government may reserve any area for undertaking prospecting or mining operations through a Government company or Corporation owned or controlled by it, however, with the prior approval of the Central Government. It is submitted that in the present case the State Government has not obtained such prior approval from the Central Government and, therefore, the State Government could not have undertaken prospecting or mining operations through the APMDC and that the entity of APMDC is only a camouflage.
2. Learned counsel would further submit that under Section 17A(3) of the Act, even the Central Government or the State where they actually undertakes mining operation in an area where the minerals vest in a private person, they will be liable to pay only prospecting fee, royalty, surface rent or dead rent as the case may be from time to time "at the same rate at which it would have been payable under the Act if such prospecting or mining operation had been undertaken by a private person under prospecting licence or mining lease". Therefore, the owner of such land is not entitled to any additional return. In the same way, mere use of surface rights by the petitioners cannot entitle the APMDC to claim anything more than what the government itself or the private person would have received.
3. What is provided under sub-section (2) of Section 24A of the Act is only liability of the holder of a reconnaissance permit or prospecting licence or mining lease to pay compensation to the occupier of the land for any loss or damage which is likely to arise or has arisen as a consequence of such reconnaissance, prospecting or mining operations.It is, therefore, submitted that since the mineral franchise fee is not to be paid for the reason of any damage or loss on account of the prospecting or mining operations, the same cannot be demanded under Section 24A of the Act. Further, even if it is to be construed as compensation for the owner, such amount has to be fixed by the Government in the manner prescribed and not by APMDC.
4. The Government of Andhra Pradesh can only charge seigniorage fee or dead rent from the holder of a prospecting licence or mining lease as per the Rules and that any person in possession of sub-soil rights is entitled to a share in the quarrying fee as per Rule 6 of the Rules. It is submitted that in the present case even according to the agreement, the quarrying fee is required to be paid directly to the Government of Andhra Pradesh. Therefore, it is contended that once the liability to pay such quarrying fee to the Government of Andhra Pradesh is fastened on the holder of mining lease, the Government of Andhra Pradesh, much less the APMDC, cannot collect any other fee from such holder of mining lease. Hence, collection of fee in the name of mineral franchise fee by the APMDC over and above the quarrying fee payable to the Government of Andhra Pradesh is illegal.
5. Apart from the liability to pay prospecting fee, royalty, surface rent or dead rent as contemplated under sub-section (3) of Section 17A of the Act, or, loss or damage as contemplated under Section 24A of the Act, or, the quarrying fee as contemplated under Rule 10 of the Rules, no other liability can be fastened on the holder of a prospecting licence or mining lease. Thus, according to Mr. Dave, the MFF which does not fall in any of the above liabilities and which is not at all contemplated by any of the above provisions is certainly in addition to and over and above what is provided under the above provisions of law.Either the Government of Andhra Pradesh or a private person and even the APMDC cannot charge any fee other than the fee as stated above. Further, in the present case, the holder of mining lease is required to pay the seigniorage fee or dead rent directly to the Government of Andhra Pradesh. Therefore, collection of such MFF is clearly illegal, more especially by the APMDC. Reliance in this connection has been placed on the decisions of the Hon'ble Supreme Court reported in INDIA CEMENTS LTD v STATE OF T.N.1 and RAMLAL & SONS v STATE OF RAJASTHAN2.
6. In the light of the provisions of Sections 17A and 24A of the Act the liability of the holder of reconnaissance permit, prospecting licence or mining lease to pay compensation would arise if the prospecting or mining operations are undertaken in any area in which the minerals vest in a private person. It is submitted that in the present case the area in which the mining operations are being undertaken is Government land and the Government alone is the owner but APMDC is not the owner. By virtue of G.O.Ms.No.23 the Government of Andhra Pradesh has only handed over the land to the APMDC for mineral exploration purposes and our attention has been drawn to Paragraph 4(f) of the G.O. It is also submitted that the Government having withdrawn the request to reserve the area in question from the Central Government, cannot levy any fee in terms of Section 17A of the Act.
7. No material has been placed by the respondents that any transfer of ownership was made by the Government of Andhra Pradesh in favour of APMDC. Hence, APMDC has no authority to collect any fee in the name of mineral franchise fee. It is also contended that even the Government also cannot collect such fee. The Government of Andhra Pradesh has adopted the method of subterfuge to collect such mineral franchise fee through APMDC as it cannot directly collect such fee.
8. The Government cannot claim any fee other than the one contemplated under Sections 17A and 24A of the Act and Rule 10 of the Rules.If any fee is so collected it would only be fee in addition to the liability contemplated either under Section 17A or Section 24A of the Act or under Rule 10 of the Rules and, therefore, it is violative of Article 265 of the Constitution of India. Alternatively, it is contended that even if the ownership in the land in question stood transferred to APMDC, which is nothing but an instrumentality of the State, it cannot collect such a fee.
9. The mineral franchise agreement is a tri-partite agreement among the petitioner, 5th respondent and the APMDC. Condition No.2 (c) of the Project Agreement stipulates that the petitioner who is the investor shall ensure that the 5th respondent enters into MFF agreement with APMDC for payment of MFF. Referring to the said condition it is submitted that ultimately it is the petitioners who are made responsible for payment of MFF and therefore the petitioners can maintain the writ petitions.
10. Condition No.9.2(c)(iv)(i) of the Project Agreement provides that no resolution shall be passed to commence, institute, defend, settle, compromise or abandon any legal or arbitration proceedings, claims, actions or suits relating to the new company (the 5th respondent herein) unless an affirmative vote of at least one Director appointed by the Investor and one Director appointed by APMDC is obtained. Having regard to this condition the petitioners or the incorporated companies, as the case may be, cannot institute any proceeding without an affirmative vote of at least one Director appointed by APMDC. As the agreement contains such a condition, which is ex facie unreasonable, the petitioner can question the same by invoking the writ jurisdiction of this Court.
Mr. Dave further contended that merely because there is a concluded contract, a party cannot be non-suited when constitutional rights are violated and in such circumstances, the affected party has every right to approach the Court. In support of the said contention, reliance has been placed on the decisions of the Supreme Court reported in KUMARI SHRILEKHA VIDYARTHI v STATE OF UTTAR PRADESH3 and MOTI RAM v N.E. FRONTIER RAILWAY4.
11. The facts and circumstances of the present case require reading down some of the conditions of agreement and that when a part of the contract ie.MFF is void being against statute or against public policy; the Court can remove the clog by moulding the relief. Reliance in this connection has been placed on the decision of the Supreme Court reported in SUDARSHAN MINERAL CO LTD v UNION OF INDIA5.
28. It is also submitted that the condition with respect to payment of MFF could be severed in the light of the above facts and circumstances of the case as being against the statute, and the petitioner can invoke the jurisdiction of this Court under Article 226 of the Constitution seeking such a relief and the fact of the agreement being concluded between the parties does not stand in the way of the petitioner invoking the writ jurisdiction of this Court. Reliance has been placed on the decisions of the Supreme Court reported in D.K.TRIVEDI v STATE OF GUJARAT6 and M/S TAXI OWNERS UNITED TRANSPORT v STATE TRANSPORT AUTHORITY7. The MFF not authorised by any law or by the Act or the Rules is ultra vires the Act and the rules.
29. Where there is a total absence of any law, any attempt to levy a fee called the MFF would be without any authority of law and therefore would be wholly impermissible and would be violative of Article 265 of the Constitution of India. The mere transfer of the lands to APMDC, a wholly owned Corporation of the State Government, cannot place APMDC on a higher footing. When the state itself cannot levy any amount over and above the statutory levies, the APMDC cannot demand such fee.
30. In India Cements Ltd. vs. State of Tamilnadu, the Supreme Court held that the Parliament has fixed the limits of royalty on mining rights and, therefore, the cess under Section 115 cannot be sustained under any entry in List II. In the said case, it was held that the cess, which was proposed to be levied, was nothing but an additional tax and hence would be wholly outside the competence of the State Legislature.
31. Mr. S. Ravichander, learned counsel appearing for the petitioner in W.P.No.3999 of 2002 while adopting the submissions of Mr. Dave would submit that the Writ Petition has been filed both in the interests of the members of the petitioner-society and also in public interest Mr.A.Ramakrishna, learned counsel appearing for the petitioner in W.P.No.6777 of 2002, while adopting the arguments advanced by the learned senior counsel has invited our attention to clause 9 of the licence and submitted that once the licence is granted question of surface rights does not arise. Grant of licence includes surface rights also that flow in favour of the petitioner. He placed reliance upon the decision of the Supreme Court in LIC OF INDIA vs. CONSUMER EDUCATION AND RESEARCH CENTRE8.
32. The learned Advocate General submits that W.P.No.3999 of 2002 has been filed by A.P. Small Scale Granite Industries Association and there is no element of public interest involved and the Association cannot maintain the writ petition, hence it is liable to be dismissed in limini Referring to the decisions relied on by the learned counsel appearing for the petitioners in regard to matters relating to statutory contracts he would submit that the same do not directly touch upon the issues for consideration in these matters since the present matters deal with a private contract which is not controlled by any provision of law or statute. The mere fact that it has a particular statutory background does not convert it into a statutory contract.
33. Since payment has been made to Animal Husbandry and Endowment departments and possession of the said land had been handed over to APMDC and only formalities of transfer of title is under process, in law, APMDC is the owner of the property. Further, this Court in W.P.No.20609 of 2000 and batch cases upheld the prospecting licence granted on the basis of G.O.Ms.No.23 and the ownership of APMDC, which has been affirmed by a Division Bench in W.A.Nos.2047 and 2048 of 2001.
34. The learned Advocate General would submit that the MFF agreement deals with the surface rights and in consideration of the Joint venture company enjoying the surface rights of the land in question has to pay MFF. Such fee is in the form of quid pro quo for the right being transferred under that agreement. The MFF agreement is purely in the realm of property rights under the general law pertaining to property and no permission of the government or other condition precedent is required for the same. It is, therefore, not permissible for the petitioners to challenge the terms of the contract to be entered into or already entered by a party on the ground that the Act does not provide for such a charge. Section 17A has no relevance.
35. The learned Advocate General then submits that the petitioners having participated in the tender proceedings and competed with others cannot now complain that there was abnormal demand of fee. Whatever terms and conditions are agreed upon are between the A.P. Mineral Development Corporation Limited and Joint Venture Companies for getting transfer of prospecting licenses. Neither the Government nor the Director of Mines and Geology are concerned with this. Neither the Act nor the Rules made thereunder stipulated any such condition nor it prohibits the A.P. Mineral Development Corporation Limited to collect the Mining Franchise Fee from the Joint Venture Companies. It is purely a private transaction between the A.P. Mineral Development Corporation Limited and the Joint Venture Companies. This position is clear from the decision decided in Y.S.RAJA REDDY vs. A.P. MINING CORPORATION9 which is to the effect that the transaction of sub-lease between A.P. Mineral Development Corporation Limited and the contract is purely a private contract since there is no statutory power or flavour involved in implementing the conditions of sub-lease.
36. Referring to the decisions relied upon by Mr. Dave, the learned Advocate General would submit that those cases relate to the action of the State Government in the capacity of owner of the land where levy was sought to be made more than what was allowed to be levied by the Statute. Those judgments are rendered dealing with separate situations and in different contexts and they cannot be precedents to be applied to the facts of the present case. Reliance is placed on the decisions of the Apex Court in STATE OF ORISSA vs. NARAYANA PRASAD10, ASSISTANT EXCISE COMMISSIONER vs. ISSAC PETER11 and LIC OF INDIA vs. ESCORTS LTD.12.
37. In reply, Mr. Dave submitted that when there is no provision in the A.P. Minor Mineral (concession) Rules providing for any compensation that itself is a concession against the State. When according to the learned Advocate General no rule is framed by the Government, then charging anything outside the realm or making any demand for payment does not arise at all in law.
38. Rule 6 of the A.P. Minor Mineral Concession Rules provide that the Government may, on application from any person possessing sub-soil rights, grant a share in the quarrying fees. It is a definition, which has wider scope, wider than Rule 72 of Central Rules. Possessor of sub-soil rights is also the owner. There is wider provision so far as A.P. Rules are concerned. Section 24A(2) of the Act also clearly provides for compensation to the occupier of the surface of the land granted for any loss or damage which is likely to arise or has arisen from or in consequence of the reconnaissance, mining or prospecting operations.
39. Regarding the question raised that the petitioner has no locus standi to maintain the writ petition, it is stated that the petitioner is a party to both the agreements besides being an investor. Therefore, the petitioner has every right to maintain this writ petition.
40. Referring to the contention of the learned Advocate General that Section 17-A of the 1957 Act is not relevant, he would submit that what all he would like to submit is that by subterfuge, the state Government is attempting to give a go-bye to the provision relating to prior permission of the Central Government. There must be a positive provision authorizing collection and in the absence of such an express provision the collection of franchise fee is illegal. According to the scheme of the Act every thing is under control of the Central Act.State cannot enter upon the field without express authority. Thus, the State has no power to collect the franchise fee. The State is denuded of legislative competence so far as this field is concerned. The State cannot travel outside the scope of the statutory provisions.
41. Mr. Dave would further submit that the judgment of the Supreme Court in ESCORT's case relates to different circumstances. There, a private party questioned the convening of Annual General Body meeting of the Company. The Supreme Court held that a private Party cannot invoke the jurisdiction of Article 226 to question the convening of Annual General Meeting of the Company. In those circumstances, the Supreme Court held that the Writ Petition is not maintainable. Learned Senior Counsel would submit that the question here relates to exercise of statutory power. He contends that it would not be correct to say that these are not statutory contracts. Lease deeds are in existence.
42. Referring to the condition imposed in the agreement regarding initiation of legal proceedings, he relied upon the decision of the Supreme Court in CENTRAL INLAND WATER TRANSPORT CORPORATION LTD. Vs. BORJA NATH13 wherein the Apex declared a clause as unconscionable and against the public policy and held that such a clause is bad in law.
43. He would also submit that the petitioners herein were compelled to sign at the dictates of the authorities for grant of lease and they having no other alternative signed the agreements. When the authorities chose a particular method, the petitioners at the receiving end have no other option but to sign the documents.The method adopted by the authorities is against the law. When the State is entering into trading activity, it is bound to follow the statutory provisions. He would submit that the judgment of the Full Bench of the Kerala High Court in THRESSIAMMA JACOB vs. DISTRICT OFFICE OF THE DEPARTMENT OF MINING AND GEOLOGY14 as well as the decision of the Apex Court in SUPERINTENDENT AND REMEMBRANCER OF LEAL AFFAIRS, WEST BENGAL vs. CORPORATION OF CALCUTTA15 support his submission that if the statutory scheme is followed then it is a good action, violated then liable to be set aside.
44. On the above contentions, the following points arise for consideration:
1. Whether the demand made by the APMDC for payment of MFF is contrary to the provisions of the Mines and Minerals (Regulation and Development) Act, 1957 and A.P. Miner Mineral (Concession) Rules, 1966 and whether APMDC can demand MFF in their capacity as owner of the land for the use of surface rights by the lessees and whether the transfer of the property by lease includes surface rights?
2. Whether the Project Agreements and MFF agreements in question are statutory in nature and are governed by the provisions of the Act and the Rules made thereunder?
45. Before we deal with the contentions of the parties, let us have a brief analysis of the relevant provisions of the Act, 1957 and Mineral Concession Rules, 1966 made thereunder for the purpose of the case.
46. The Mines and Minerals (Development & Regulation) Act, 1957 (Act No.67 of 1957) has been enacted to provide for the development and regulation of mines and minerals under the control of the Union. Clause (c) of Section 3 of the Act defines "Mining lease" to mean a lease granted for the purpose of undertaking mining operations, and includes a sub-lease granted for such purpose. Section 3(d) defines "mining operation" to mean any operation undertaken for the purpose of winning any mineral. Section 3(e) defines "minor minerals" to mean building stones, gravel, 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. Section 3(h) defines "prospecting operations" to mean any operations undertaken for the purpose of exploring, locating or proving mineral deposits and Section 3(g) defines "prospecting licence" to mean a licence granted for the purpose of undertaking prospecting operations. Clause (ha) defines "reconnaissance operations" to mean: any operations undertaken for preliminary prospecting of a mineral through regional, aerial, geophysical or geochemical surveys and geological mapping, but does not include pitting, trenching, drilling (except drilling of boreholes on a grid specified from time to time by the Central Government) or sub-surface excavation; Section 3(hb) defines "reconnaissance permit' to mean a permit granted for the purpose of undertaking reconnaissance operations. Section 4 provides that prospecting or mining operations to be under liccence or lease. Section 4-A provides for termination of prospecting licences or mining leases. Under section 7(1) reconnaissance permit can be granted for a period not exceeding three years and under section 8(1) a mining lease can be granted for a period not exceeding thirty years. Section 9 provides for royalties to be paid in respect of any mineral removed or consumed by thelessee or sub-lessee from the leased area in respect of mining leases at such rate for the time being specified in the Second Schedule in respect of the mineral. Section 9-A provides for payment of dead rent by the lessee at such rate for the time being specified in Third Schedule. Section 10 provides for application for prospecting licences or mining leases. Section 13 empowers the Central Government to make rules in respect of minerals. Section 15(1) empowers the State Governments to make rules in respect of minor minerals for regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minerals and for purposes connected therewith. Sub-section (1A) enumerates the list of matters, which the rules may deal with. Items (d), (h) and (j) relevant for the purpose reads as follows:
(d) the terms on which, and the conditions subject to which and the authority by which quarry leases, mining leases or other mineral concessions may be granted or renewed;
(h) the manner in which rights of third parties may be protected (whether by way of payment of compensation or otherwise) in cases where any such party is prejudicially affected by reason of any prospecting or mining operations;
(j) the manner in which and the conditions subject to which, a quarry lease, mining lease or other mineral concession may be transferred;
47. Sub-section (3) of Section 15 provides:
The holder of a mining lease or any other mineral concession granted 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.
48. It may be noticed that the words 'royalty" and "dead rent" are not defined in the Act. Section 17 confers special powers on the Central Government to undertake prospecting or mining operations in respect of lands in which the minerals vest in the Government of a State or any other person. Section 17-A provides for reservation of area for purposes of conservation. It reads thus:
Reservation of areas for purposes of conservation:
17A (1): The Central Government, with a view to conserving any mineral and after consultation with the State Government, may reserve any area not already held under any prospecting licence or mining lease and where it proposes to do so, it shall, by notification in the Official Gazette, specify the boundaries of such area and the mineral or minerals in respect of which such area will be reserved.
(1A): The Central Government may in consultation with State Government, reserve any area not already held under any prospecting licence any area not already held under any prospecting licence or mining lease, for undertaking prospecting or mining operatioins through a Government company or corporation owned or controlled by it, and where it proposes to do so, it shall, by notification in the Official Gazette, specify the boundaries of such area and the mineral or minerals in respect of which such area will be reserved.
(2) The State government may, with approval of Central Government, reserve any area not already held under any prospecting licence or mining lease, for undertaking prospecting or mining operations through a Government company or corporation owned or controlled by it and where it proposes to do so, it shall, by notification in the Official Gazette, specify the boundaries of such area and the mineral or minerals in respect of which such areas will be reserved.
49. Where in exercise of the powers conferred by sub-section (1A) of sub-section (2) the Central Government or the State Government as the case may be undertakes prospecting or mining operations in any area in which the minerals vest in a private person, it shall be liable, to pay prospecting fee, royalty, surface rent or dead rent, as the case may be, from time to time at the same rate at which it would have been payable under this Act if such prospecting or mining operations had been undertaken by a private person under prospecting licence or mining lease.
50. Section 19 provides that any reconnaissance permit, prospecting licence or mining lease granted, renewed or acquired in contravention of the provisions of the Act or any rules or orders made thereunder shall be void and of no effect. Section 21 provides for penalties. Section 24A which deals with rights and liabilities of a holder of reconnaissance permit, prospecting licence or mining lease reads as follows:
24A (1) On the issue of a reconnaissance permit, prospecting licence or mining lease, under this Act and the rules made thereunder, it shall be lawful for the holder of such permit, licence or lease, his agents or his servants or workmen to enter the lands over which such permit, lease or licence had been granted at all times during its currency and carry out all such reconnaissance, prospecting or mining operations, as may be prescribed.
Provided that no person shall enter into any building or upon an enclosed court t or garden attached to a dwelling house (except with the consent of the occupier thereof) without previously giving such occupier at least seven days notice in writing of his intention to do so.
(2) The holder of a reconnaissance permit, prospecting licence or mining lease referred to in sub-section (1) shall be liable to pay compensation in such manner as may be prescribedto the occupier of the surface of the land granted under such permit, licence or lease for any loss of damage which is likely to arise or has arise from or in consequence of the reconnaissance, mining or prospecting operations.
(3) The amount of compensation payable under sub-section (2) shall be determined by the State government in the manner prescribed.
51. The Governor of Andhra Pradesh in exercise of the powers conferred by sub-section (1) of Section 15 of the Act framed the Rules known as Andhra Pradesh Minor Mineral concession Rules, 1966, vide G.O.Ms.No.1172, Industries (B1) dated 4.9.1967. Under Rule 5 quarrying of any minor mineral in any area shall be undertaken only in accordance with quarrying lease or permit to be granted under the rules. Rule 6 of the Andhra Pradesh Minor Mineral Concession Rules, 1966 dealing with Non-Government lands provides thus:
6. Non-Government lands: The government may, on application from any person possessing sub-soil rights, grant a share in the quarrying fees.
Rule 8 provides that lease should be executed in Form "G" and the lease deed shall be executed in Form "O". Rule 9 deals with the authority to grant quarry lease or permit. Rule 10 dealing with seigniorage fee or dead rent reads as follows:
10. Seigniorae fee or dead rent:
(1) When a quarry lease is granted under Rule 9, the seigniorage fee or dead rent whichever is higher shall be charged on all minor minerals dispatched or consumed from the land at the rates specified in Schedule I and Schedule II as the case may be.
(2) when quarry lease is granted, the assessment on the land together with the seigniorage fee or dead rent, whichever is higher, shall also be charged.
(3) When the quarry lease is granted -
(a) the dead rent for the 1st year shall be paid by the lessee at the time of execution of lease deed and for the subsequent years, every year in advance.
(b) the seigniorage fee shall be paid before the mineral is removed from the leased area.
52. The words 'seigniorage fee" and 'dead rent" have not been defined under the rules, 1966. Rule 12(5)(a)(i) deals with the grant of Prospecting Licence or Quarry Lease for granite useful for cutting and polishing lease and the procedure prescribed therefor and each application for grant of P.L. or Q.L shall be made in Form N/P to the Director of Mines and Geology concerned. Rule 12(5)(b) of the rules mandates that an application for grant of prospecting licence or quarrying licence for granite shall be disposed of by the Director in the order of their receipt. Whenever, more than one application is received on the same day, the Director shall grant licence or lease to the deserving applicant on merits to be recorded in writing. The first proviso to Rule 12(5)(b) says that the Director may grant a P.L. or Q.L. to an applicant whose application is received later, in preference to earlier application with the prior approval of the government for any special reasons to be recorded in writing. The second proviso thereto provides that where a P.L. has been granted in respect of any land, the Licence shall have a preferential right for obtaining a quarry lease in respect of the land over any other person in case he has undertaken prospecting operations to establish mineral resources and submitted a prospecting report in such land and such right can be exercised only once over the entire prospected area. Rule 12(5)(e) provides that the prospecting licence of granite shall be in Form "O". Rule 13 deals with disposal of applications and Rule 15 provides for period of lease. Rule 20 deals with rights of a lessee under a lease. It reads thus:
20. Rights under a Lease: Subject to a contract to the contrary, a quarry lease granted under the rules shall confer on the lessee, the right to quarry, carry away, sell or dispose of the minor mineral or minerals specified in the lease deed and found upon under the lands specified therein.
Rule 31 deals with conditions of permit or lease and renewal.
Points 1 and 2:
We have earlier noticed that in some cases petitioners have challenged the very tender notifications providing the clause of payment of MFF even before they enter into Project agreements/MFF agreements with APMDC. The preamble of the tender notification states that pursuant to the New Industrial Policy of Government of Andhra Pradesh, the APMDC obtained surface rights over certain galaxy granite bearing the area in question and obtained Prospecting licences. APMDC, therefore, invited Bids through sealed tenders-cum-auction for prospecting and quarrying of galaxy granite in three blocks in the area from the interested parties having the minimum qualifying criteria. Clause 1.2.1 of the tender notification provides the condition that prospecting and quarrying shall be undertaken through a Joint venture company to be incorporated in Hyderabad with APMDC. Pursuant to the same, in some cases, Joint Venture companies have been incorporated. In such incorporated companies, the tender notification provides that the APMDC is entitled to have 26% share in the paid up equity share capital in consideration of transfer of prospecting licence for galaxy granite in favour of the new company and such per centage shall be maintained at all times. Initially the bidder shall subscribe Rs. Fifty lakhs and 26% of the of the same be allotted to APMDC within 21 days from the date of incorporation of the New company and the same shall be increased to Rs. 165 lakhs within one year from the date of execution of quarry lease. Clause 1.3.5 provides that the bidder shall agree and undertake to process a minimum 25% of the galaxy granite produced by the new company from the allotted block within the State of Andhra Pradesh or sell a minimum 25% of the galaxy granite produced by it from the allotted block to the processing units within the State. Clause 1.4 deals with commercial bid. Clause 1.4.1 provides that the bidder shall offer the MFF (in rupees) per cubic meter of galaxy granite mined and dispatched from the allotted block and he shall have the option to offer the MFF in the sealed bid or participate in the auction or avail both the options. The minimum bid amount fixed per cubic meter of galaxy granite mined and dispatched is Rs.10,000/- It is clarified in sub-clause (a) of Clause 1.4.1 that the methodology adopted by Assistant Director of Mines and Geology for taking measurements and computation of volume for the purpose of levying Royalty payable by the Licensee/Lessee from time to time will be adopted for the purpose of arriving MFF payable by the new company. Clause (b) provides that the bidder shall agree to increase the MFF a minimum of 15% for every three years on compounding basis. Clause (c) provides that the company shall produce and dispatch a minimum 100 CBM of galaxy granite in the first year and a minimum of 300 CBM per annum during the remaining years. Clause (d) provides that the new company is required to pay the minimum MFF for the minimum production. Clause (e) provides that the company is required to pay the MFF for actual quantities of galaxy granite despatched or the minimum MFF per annum, whichever is higher to APMDC. It was clarified that payment of MFF shall be governed by the MFF agreement as per the draft provided at Section X of the Bid document. These are the essential ingredients of Section I of the Tender Notification. From these it is clear that APMDC by reason of transfer of prospecting licence in favour of the new company it is having 26% share in the paid up equity share capital and it is claiming MFF for utilizing the surface rights by the new company. THE APMDC has no concern with the seigniorage or dead rent or any other fees payable under the provisions of the Act and the rules. Therefore, the very nature of the tender notification is for MFF only.
53. As per Clause 2.18.2 a successful bidder who was issued Letter of Intimation shall enter into Project Agreement within 21 days. Section IV of the tender notification deals with commercial criteria regarding MFF. Section V deals with Letter of Offer and Section VIII provides for Letter of Intimation.Section IX provides for the form of Project Agreement.
54. Clause 1.9 of the Project Agreement defines licence to mean "the Prospecting Licence to be transferred by APMDC to the New Company under the Act and the Rules to undertake the prospecting for galaxy granite in the block." Clause 1.10 of the Project Agreement defines "Lease" to mean "the quarry lease to be applied for and obtained by the New Company under the MMDR Act, 1957 and the rules made thereunder to undertake commercial Quarrying of Galaxy Granite in the Block". Therefore, it is incumbent upon the new company to be incorporated to obtain quarry lease from the Governmental authorities as required under the Act and the Rules and it is also incumbent upon it to pay all the fees and charges as required under the Rules. We have earlier extracted clause 4.0 of Project Agreement providing for payment of MFF by the new company. Clause 6.0 deals with obligations of the investor. The relevant clauses for our purpose read thus:
6.1 The investor shall ensure that the New Company undertakes and executes the Project strictly in accordance with the Licence, the Lease applicable laws, regulations, guidelines, the Bid Documents and the directions of GOI and GOAP. This will also include ensuring construction of required infrastructure within AP for undertaking the Project.
6.3 The investor shall ensure that the new Company pays all the statutory levies and other applicable taxes and dues with respect to its activities, within the time stipulated for such payment.
Clause 6.4 deals with payment of MFF. Clause 6.5 provides:
The Investor shall ensure that the new Company despatches Galaxy Granite from the leasehold, only on payment of Mining Franchise Fee to APMDC and abides by the Mining Franchise Fee Agreement.
Clause 6.6 says that the Investor shall ensure that the new company abides by the provisions of prevalent and relevant laws, policies, procedures, and guidelines of GOAP and GOI as may be in force from time to time. Clause 7 deals with role of APMDC. Clause 7.1 says that the APMDC shall give consent to the New Company to apply and obtain grant of PL/QL for galaxy granite. Clause 7.3 provides that APMDC shall endeavour to assist the new company to the extent possible in the matter of obtaining licence and other related consents and approvals from governmental and regulatory authorities required for the purpose. Clause 9 deals with management of the new company.
55. Section X of the Tender Notification deals with MFF agreement. It is not necessary to refer to the said agreement as we have already extracted the relevant clauses earlier while summarizing the case of the petitioners.
56. From the tender notification it is clear that MFF is sought to be claimed in consideration of consent for transfer of surface rights of APMDC to the petitioners. It is true that the statute and the Rules, 1966 do not provide for MFF. But, it cannot be denied that APMDC is the absolute owner of the property having purchased the same for consideration from Animal Husbandry and Fisheries Department. It may be that the execution of deeds are at the final stages at the time the tender notifications were issued. But the fact remains that it enjoys the surface rights over the land in question. It is pertinent to note that some of the applicants whose applications were rejected by Director of Mines and Geology on the ground that APMDC has got the ownership over the said land by virtue of G.O.Ms.No.23, A.H. Department dated 22.2.99 have filed W.P.No.20609 of 2000 and batch (Hampi Enterprises vs. Director of Mines and Geology, Hyd.16) which were dismissed by this Court on 29.8.2001 upholding the prospecting licence granted in favour of APMDC on the basis of G.O.Ms.No.23. It may also be noticed that in exercise of the power conferred under section 18 of the Act, 1957, the Central Government has made the Granite Conservation and Development Rules, 1999. Rule 4 of 1999 Rules ordains that no lease shall be granted by the State Government unless it is satisfied that there is evidence to show that the area for which the lease is applied for has been prospected earlier for granite or the existence of granite therein has been established otherwise. In regard to the grant of Prospecting licence, the learned single Judge held thus:
In the light of these regulatory dynamics and the amendment of the rules, 1966 consequent on the 1999 Rules, applications for grant of prospecting licences would have to be made afresh after the coming into fore of the Amended State Rules (i.e. after 23.3.2000).None of the applications frog rant of quarry lease as made either by the petitioners herein or by the A.P. Mineral Development Corporation in the years 1990, 1991, 1994 could be considered automatically as applications for grant of prospecting licences under the changed regulatory environment brought about by the 1999 Rules or the amended State Rules. It also needs to be noticed that the land earlier belonging to the Animal Husbandry and Fisheries Department in the tghree Sy.Nos., in R.L. Puram village, Cheemakurthy Mandal, stood transferred to the A.P. Mineral Development Corporation with the issuance of G.O.ms.No.23 dated 23.2.1999, prior to the 1999 Rules and the amended State Rules. The claims of the respective petitioners founded on their earlier quarry lease applications in 1990 and 1991, are thus seen to be misconceived. None of the petitioners have either pleaded or shown to this Court that they have made applications for prospecting licences under the current regulatory environment consequent on the 1999 rules or that any applications were made prior to applications for prospecting licences by the A.P. Mineral Development Corporation. There is thus nothing on record, pleaded, urged or demonstrated substantiating the petitioner's claim to a prioritized consideration vis-a-vis A.P. Mineral Development Corporation, for the grant of a prospecting licence in their favour in respect of the lands in Sy.Nos.53/3A, 55/3C and 55/3 of R.L; Puram village, Cheemakurthy Mandal, Prakasham district.
57. The aforesaid judgment of the learned Single Judge was affirmed by a Division Bench of this Court consisting one of us viz., Dr.AR. Lakshmanan, CJ andI. Venkanarayana, J on 11.2.2002 in Writ Appeal Nos.2047 and 2048 of 2002. The Division Bench also found that many applications for grant of lease have been rejected as the Animal Husbandry Department to which the land belongs have refused to give consent and subsequently the land has been alienated to APMDC for consideration.
58. It is well settled principle of law that the State Government is the owner of the mineral and the owner of the land has no subsoil rights over the land unless such rights are specifically conferred by any document.The surface rights belong either to the Government or private party whoever is the owner of the land. Both the rights vest in the same party, if the government owns the land. In all other cases, the owner of the land is recognized as having surface rights. That is the reason why before mining lease and prospecting licenses are granted by the Government, a no objection certificate from the owner of the land is required to be produced.In PALLAVA GRANITES INDUSTRIAL INDIA (p) LTD vs. GOVT. OF A.P.17 the Apex Court has taken a similar view. It was held.
59. The right to excavate the mines from the land of private owner is based on the agreement; unless the lessor gives his consent, no lessee has a right to enter upon his land and carry on mining operations. The right to grant mining lease to excavate the mines beneath the surface is subject to the agreement of the landowners. Therefore, with a view to ensure that there will not be any obstruction in the working of the mining lease and also for the peaceful operation of the excavation of the mines, insistence on the consent of the land is necessary. Therefore, we do not find any illegality in the view taken by the High Court warranting interference.
60. Therefore, it is incumbent on the part of a person seeking prospecting licence or mining lease where the land belongs to a private person to enter into an agreement with the landowner before he enters upon the land and carry on mining operations.The terms of the agreement may be as agreed to by both the parties.
61. The Act, 1957 does not purport to regulate the rights of the land owner of the mode of enjoyment of his surface rights. Form G referred to in Rule 8 of the Rules, 1966 provides for grant of lease to private persons for the purpose of quarrying of minor minerals.Under Clause 5 of the lease deed, the lessee has to pay dead rent and seigniorage fee whichever is higher and also cesses which may, from time to time, be imposed by the government. Under Clause 8(2) the lessee has to pay all the existing and future rates, taxes, assessments, duties, impositions imposed or charged upon the demises pieces of land or the produce thereof or the bid amount, dead rent and seigniorage fee reserved or upon the owner or occupier in respect thereof or payable by either in respect thereof. Clauses (3), (4) and (6) provides:
(3): Before digging or opening any part of the said demised pieces of land for carefully to remove the surface soil to a depth of at least metres and lay aside and store the same in some convenient part of the said demised pieces of land until the land from which it has been removed is again restored to a state fit for cultivation as hereinafter provided.
(4) To effectually fence off the said demised pieces of land from the adjoining lands and to keep the fences in good repair and conditions.
(6) After working out any part of the said demised pieces of land forthwith to level the same and replace the surface soil thereof and slope the edges, where necessary, so as to afford convenient connection with the adjoining land.
62. Clause 8(11) provides that the lessee shall not cut down or injure any timber or trees on the lands without the express sanction in writing from the authority concerned.
63. From the above it is clear that though sufficient safeguards are sought to be provided under the lease with respect to surface soil rights held by the occupiers of the land, no provision has been made specifying the guidelines for transfer of surface rights to a lessee where the lands belongs to a private person.
64. It may also be relevant to refer to Clause 8(12) of From G, which provides thus:
That wherever necessary, pay to the person concerned, compensation for any loss or damage which may be caused by the lessee to the surface of the demised pieces of land or to anything growing or situated therein in exercise of the rights granted and shall not commence operations until such compensation has been paid.The lessee shall further always keep the lessor indemnified against any claim by any person for any loss or injury caused to him or to his property by lessee.The Deputy Director shall be the competent authority to assess and fix any compensation payable by the lessee for any loss or injury done to him or his property.
65. To the same effect is Form "O" provided for grant of prospecting license of granite.
66. At this stage, we may also refer to the proforma Application for Quarry Prospecting Licence for Granite in Form N referred to in Sub-Rule (5) of Rule 12 of the State Rules. Under Clause 3(ix) of From N the applicant is required to file the written consent obtained by the applicant from the owner and the occupier of the land for transfer of surface rights over the land for undertaking mining operations for which an application for grant of a mining lease is required. Similarly, the application for quarry lease for granite in Form "P" also require the applicant to file written consent obtained from owner and the occupier of the land for undertaking quarry operations.
67. We may also notice some of the provisions contained in Mineral Concession Rules, 1960 issued by the Government of India in exercise of the powers conferred by Section 13 of the Act. Rule 14(1)(xi) provide that the licensee shall pay to the occupier of surface of the land such compensation as may become payable under the rules. Rule 14(2)(i) empower the State government to impose the condition for compensation for damages to land in respect of which the licence has been granted. Rule 9 provides for application for prospecting licence in Form B where the mineral vests in Government. Under From B the applicant has to file in writing the consent of the owner and the occupier of the land obtained for undertaking prospecting operations about the consent and transfer of the surface rights. Rule 22 provides for applications for grant of mining leases and Rule 22(1) says that an application for the grant of a mining lease in respect of land in which the minerals vest in the Government shall be made to the State Government in Form I through such officer or authority as the State Government may specify in that behalf. Clause 3(X)(a) of Form I requires the applicant to file in writing the consent obtained by the applicant from the owner and the occupier of the land for transfer of surface rights over the land for undertaking mining operations for which an application for grant of a mining lease is required.
68. The ambit of power under section 13 and Section 15 is the same, the only difference being that in one case it is the Central Government which exercises the power in respect of minerals other than minor minerals while in the other case it is the State Governments which do so in respect of minor minerals. Minor minerals are mostly used in local areas and for local purposes while minerals other than minor minerals are those, which are necessary for industrial development on a national scale and for the economy of the country.
69. Therefore while applying for grant of mining lease, it is incumbent upon the applicant seeking for mining lease to file written consent of the owner and the occupier of the land in regard to surface rights over the area for which he is making an application for grant of mining lease for undertaking mining operations.The Central Rules as well as the State Rules referred to above have recognized the same.
70. Rule 27 of the Rules 1960 provides for conditions of mining lease. Clause 27(1)(d) provides that the lessee shall pay for the surface area used by him for the purpose of mining operations, surface rent and water rate at such rate, not exceeding the land revenue, water and cesses assessable on the land, as may be specified by the State government in the lease. Clause 1(t) provides that the lessee shall pay to the occupier of the surface of the land such compensation as may become payable under the rules. Clause 2(b) of Rule 27 provides that the mining lease may contain the clause for compensation for damage to the land covered by the lease. At this stage it may also be relevant to refer to Chapter X of the Mineral Concession Rules, 1960. Rule 72 thereof provides for payment of compensation to owner of surface right etc. It reads thus:
(1) The holder of a prospecting licence or mining lease shall be liable to pay to the occupier of the surface of the land over which he holds the prospecting licence or as the case may be, the mining lease, such annual compensation as may be determined by an officer appointed by the State government by notification in this behalf in the manner provided in sub-rules (2) to (4).
(2) In the case of agricultural land, the amount of annual compensation shall be worked out on the basis of the average annual net income from the cultivation of similar land for the previous three years.
(3) In the case of non-agricultural land, the amount of annual compensation shall be worked out on the basis of average annual letting value of similar land for the previous three years.
(4) The annual compensation referred to in sub-rule (1) shall be payable on or before such date as may be specified by the State government in this behalf.
71. However, Rules, 1966 do not provide any annual compensation or damages as provided in Rule 72 of Rules 1960 to the owner or occupier of the surface of the land except Clause 8(12) of mining lease referred to above.
72. No doubt Rule 49 of the Rules 1960 provides that no person granting or transferring a prospecting licence or any right, title or interest in any such licence or lease shall charge or pay any premium in addition to, or in lieu of the prospecting fee, surface rent, dead rent or royalty payable, under the Act or such proportionate part of such fee, rent or royalty as is payable in respect of such right, title or interest.But what are the guidelines for payment of the amount payable to person holding surface rights for utilizing the surface rights of his land is not traceable either under the Act or the Central Rules, 1960 or the State Rules 1966 though some provisions in the Act viz., Section 15(1A)(h) refer the manner in which rights of third parties may be protected (whether by way of payment of compensation or otherwise) in case where any such party is prejudicially affected by reason of any prospecting or mining operations and Clause 8(12) of the mining lease refer to payment of compensation or damages.The seigniorage or dead rent and other statutory fees are payable on all minor minerals dispatched or consumed from the land at the rates specified in Schedules I and II of the State Rules, 1966. But the occupier of the land has to be paid some amount for utilizing the surface rights of his land. It is not the case of the petitioners that annual compensation or damages has been determined by the competent authority and the same is being paid to APMDC and in addition to the same, the APMDC is claiming fee in the form of MFF from the petitioners. So long as the petitioners are utilizing the surface rights, they have to pay certain amount for utilizing the surface rights. It may be by way of mutual agreement between them. Such amount payable has nothing to do with the other statutory amounts payable under the Act and the Rules. On a careful scrutiny of the various provisions contained under the Act and the Central and State rules made thereunder, we are of the view that though the Act and the rules do not regulate the rights of the land owner of the occupier of the land as regards the mode of enjoyment of his surface rights, it, however, recognized the surface rights of the owner or the occupier.From the various provisions referred to above, an inference can conclusively be drawn that unless an agreement is reached between the occupier or owner of the land as regards the utilization of the surface rights over the area in which an applicant seeking for grant of prospecting licence or mining lease and a written consent thereof is filed, the applicant cannot be granted prospecting licence or mining lease as the case may be. The true nature of such levy is quid pro quo for utilizing the surface of the land belonging to a private owner. The determination of quantum of amount is a matter between the owner of the land and the licensee. True Rule 72 of the Central Rules prescribed that the annual compensation may be determined by an officer appointed by the State Government by notification in that behalf in the manner provided in sub-rules (2) to (4) thereof. But, the State Rules, 1966 which are applicable to the instant case have not prescribed any method for determination of such annual compensation. In the absence of any compensation determined by the concerned authority, it cannot be said that MFF charged by the APMDC is contrary to the provisions of the statute. In the instant case the Assistant Director of mines in Form G has granted the mining lease.Since the land does not belong to the government and the same has been purchased by APMDC, the lease should have contained some clause regarding the surface rights being enjoyed by APMDC and transfer of the prospecting licence in favour of the petitioner-company.
73. Neither the Act nor the rules have specified as to what are the rights of transferor of a prospecting licence. The petitioners have not been able to substantiate how the tender notification is contrary to the provisions of the Act and the rules. In our considered opinion, the APMDC, which is the owner of the land, is competent to issue tender notification regarding the transfer of surface rights over the land in question and inviting bids through sealed terms-cum-auction for prospecting and quarrying of galaxy granite in the area from the interested parties having the minimum qualifying criteria. Clause 4.1 of the proforma Project Agreement mentioned in Section IX of the tender notification clearly clarified that the payment of MFF shall be over and above all the statutory levies and any other charges as may be payable by the New Company from time to time, under the applicable laws and in Clause 4.2 it was further clarified that such fee shall be paid during the entire term of prospecting licence/quarry lease including the periods of renewal thereof. The petitioners were therefore made aware of everything in the tender notification. In the absence of prescribing any procedure as to what are the guidelines and terms and conditions for transfer of surface rights in favour of an intending applicant seeking prospecting licence or mining lease by the statute, in our view, the procedure adopted by APMDC cannot be found fault with. In our considered opinion, the MFF can be equated to that of amount payable by the leaseholder for utilizing the surface rights of the galaxy granite bearing area and as such the tender notification cannot be termed as contrary to the provisions of the Act.
74. The contention of the petitioners that prior approval of the Government of India is required under sub-section (2) of Section 17 A of the Act where the State Government intends to reserve any area for undertaking prospecting mining operations through a Government company or corporation owned or controlled by it and since such approval has not been obtained the Government could not have undertaken prospecting or mining operations through the APMDC has no merit. The said provision has no application to the facts of the present case. Here the APMDC has purchased the land from Animal Husbandry and Fisheries Department and is the absolute owner of the land. Further, the Government has not undertaken any mining operation through the Corporation. The APMDC being the owner of land has surface rights over the galaxy granite bearing the area in question. Since the Government has not reserved the said land for APMDC, the question of application of Section 17A(2) does not arise. Further, this Court has upheld the ownership of the APMDC over the land in question.
75. It is true that MFF does not fall in any of the categories of fees under sub-section (3) of Section 17A. We find no merit in the contention of Mr. Dave that where the Central Government or the State undertakes mining operation in an area where the minerals vest in a private person, they will be liable to pay only prospecting fee, royalty, surface rent or dead rent as the case may be from time to time at the same rate at which it would have been payable under the Act if such prospecting or mining operation had been undertaken by a private person under prospecting licence or mining lease and therefore the owner of such land is not entitled to any additional return and in the same way mere use of surface rights by the petitioners cannot entitle the APMDC to claim anything more than what the government itself or the private person would have received. It is not the case of the petitioners that the minerals vest in APMDC exclusively and they have to pay the seigniorage fee or dead rent to the APMDC. If it were so, MFF would be an additional return and cannot be allowed to be demanded. The analogy sought to be putforth by the learned counsel has no relevance. As already stated, the APMDC is claiming MFF for utilizing the surface rights over the galaxy granite area.
76. Sub-section (2) of Section 24 of the Act provides that the holder of a reconnaissance permit, prospecting license or mining lease referred to in sub-section (1) shall be liable to pay compensation in such manner as may be prescribed to the occupier of the surface of the land granted under such permit, licence or lease for any loss or damage which is likely to arise or has arisen from or in consequence of the reconnaissance, mining or prospecting operations.It is vehemently contended that since the mineral franchise fee is not to be paid for the reason of any damage or less on account of prospecting or mining operations, the same cannot be demanded and even if it is to be construed as compensation for the owner, such amount has to be fixed by the government in the manner prescribed and not by APMDC. It is true that MFF is not being claimed as compensation or damages. But, it is being claimed for transfer of surface rights and to enter the land for prospecting/mining operations and not as compensation or damages. Therefore, the contention of the petitioners on this score has also no merit.
77. The contention that MFF does not fall in any of the liabilities under the Act and the Rules and APMDC cannot charge any fee other than the statutory fees does not merit consideration. The decision relied upon by the learned counsel for the petitioners in India Cement Ltd. Vs. State of Tamilnadu (supra) has no application to the facts of the case. That was a case where Section 115 of the Madras Panchayats Act which imposed cess on royalty payable on extraction of mineral was challenged as ultra vires the Constitution. By majority, it was held that royalty is a tax and as such a cess on royalty being a tax on royalty is beyond the competence of the State legislature because Section 9 of the Central Act covers the field and the State legislature is denuded of its competence under Entry 23 of List II. As already held the true nature of MFF is quid pro quo for utilizing the surface of the land belonging to a private owner and it cannot be construed as cess on seigniorage fee or dead rent. Further the act does not prohibit the land owner from stipulating a consideration for permitting another person to enjoy the surface of the land owned by him. The decision of the Apex court in M/s Ramlal & Sons vs. The State of Rajasthan has also no application to the facts of the present case. There it was held that the State Government was obliged to follow the rules made under the Mines and Minerals (Regulation and Development) Act, 1948. Herein it is not pointed out any rule has been violated by the Government.
78. Another contention of the petitioners is that the area in which the mining operations are being undertaken is Government land and the Government alone is the owner but not APMDC and reliance has been placed on paragraph 4(f) of G.O.Ms.No.23. We do not find any merit in this contention too. In this connection, it is appropriate to refer to the statement made by the Vice Chairman of the APMDC in the counter filed at para 7(iv) which is to the following effect:
In reply to paras 8 to 11 of the affidavit, it is submitted that the State Investment Promotion Board )SIPB) at its 15th meeting held on 18.12.97 agreed for shifting the Farm Animal Husbandry Department to an alternate site which has been selected by the District Collector, Prakasam. The Collector, Prakasam District through his letter-dated 23.11.1998 submitted the proposals to the Principal Secretary to Government AH & F Department for shifting of Ramatheertham Cattle Breeding Farm to Chadalawada village, Naguluppalapadu Mandal, Prakasham District where the Endowment Department land is available.The government through their G.O.Ms.No.23, A.H & F (AH.III) Department, dated 22.2.1999 have accorded permission to shift the Cattle Breeding Farm from Ramatheertham to Chadalawada village in the lands of Endowment Department subject to conditions therein. Accordingly, the corporation paid the total amount of Rs.256.00 lakhs to the Collector, Prakasam District (Rs.186.00 lakhs towards infrastructure facilities at new site and Rs.70.00 lakhs towards land compensation. The animal Husbandry Department handed over the land of 268.68 acres to APMDC. Thus, the Corporation obtained surface rights over the Animal Husbandry lands.
79. Therefore, it is clear that APMDC is the absolute owner of thegalaxy granite area in question and enjoys surface rights over it. There is no basis in the contention of the petitioners that the government has adopted the method of subterfuge to collect MFF through APMDC as it cannot directly collect such fee. As already noticed earlier, this Court in W.A.Nos.2047 and 2048 has affirmed the ownership of AMMDC over the land in question.
80. Therefore, APMDC holds the rights over the land. As they are the owners of the land the MFF is collected by the Corporation as a consideration for the use of the surface of the land belonging to them in terms of the contract entered into between the Corporation and the Joint venture company.
81. In our opinion, it is a contractual obligation between the Corporation and the Joint venture company. The Corporation issued a tender notifications on 7.8.2001, 6.1.2001 and 12.1.2002 in certain newspapers inviting bids from the interested for mining franchise from interested parties for prospecting and quarrying of galaxy granite and formed seven joint venture companies for seven blocks. As rightly pointed by the learned Advocate-General, if the joint venture company is not willing to pay the MFF, they should have not participated in the ternders itself. The APDMC was granted prospecting licence by the Government of Andhra Pradesh, vide G.O.Ms.No.11, Industries and Commerce (MII) Department dated 5.1.2000 prior to the delegation of powers to the Director of Mines and Geology in an extent of Ac.70.70 cts. and after the delegation of powers, the prospecting licences were granted by the Director of Mines and Geology vide proceedings No.31380/R3(2)/94 dated 5.8.2000 and proceedings dated 22.9.2000 and lease deeds were also executed. As rightly pointed out by the learned Advocate-General whatever terms and conditions that are agreed upon are between the APMDC and Joint venture companies for getting transfer of prospecting licenses and neither the government nor the director of Mines and Geology are concerned in this regard. No provision in the Act nor in the provisions of A.P. Minor Mineral Concession Rules, 1966 stipulated any such condition nor it prohibits the APMDC to collect the Mining Franchise Fee from the joint venture companies. It is purely a private transaction between the APMDC and the joint venture companies. In our view, the transaction of sub-lease between APMDC and the private party is purely a private contract since there is no statutory power or flavor involved in implementing the conditions of sub-lease.
82. The contention that any fee collected in addition the liability contemplated under section 17A or Section 24A of the act or under Rule 10 of the Rules is violative of Article 265 of the Constitution of India has also no merit. Article 265 of the Constitution has no application to the present facts. It relates to the levy of taxes by the State. As already held, MFF is not a tax levied by the State. MFF is being collected by APMDC in consideration of transfer of surface rights and being enjoyed by licensee for undertaking the mining operations.
83. We are not inclined to go into the question of maintainability of the writ petitions in view of the fact that some legal contentions with reference to the provisions of Act have been raised. Therefore, it is not necessary to refer to the decisions in LIC of India vs. Consumer Education and Research center, Shrilekha Vidyarthi, Moti Ram vs. N.E. Frontier Railway case etc.
84. The transfer of surface rights of the lands to APMDC is for consideration; hence even though it is an instrumentality of the State it has every right to collect the amount for utilizing the surface rights.
85. We are not inclined to accede to the contention of Mr. Ramakrishna, learned counsel appearing for the petitioner in W.P.No.6777 of 2002 that grant of licence includes surface rights also that flow in favour of the petitioners. Grant of licence herein is for undertaking the prospecting operations on the land granted by the Mining Department. Unless the occupier of the land consented for utilizing the surface rights over the land, he cannot be granted prospecting licence or mining lease. For utilizing the surface rights the licensee has to enter into certain agreement with the owner. Mere grant of licence granted by the Mining Department for undertaking the prospecting operations or winning mineral does not clothe with the petitioners the right to enter into the land and utilize the surface rights unless the owner of the land has specifically consented for that. Grant of transfer of prospecting licence does not amount to transfer of surface rights. The transferor of a prospecting licence may, however, empower the licensee to do prospecting operations, but it may not empower it to win mineral unless the mining lease is granted. The mining lease will be granted only if the occupier or the owner of land consents for transfer of the surface rights. Here the APMDC, which has surface rights over the land in question, has consented for transfer of the surface rights in consideration of payment of MFF. Hence, we are of the view that transfer of licence does not include transfer of surface rights.
86. The payment of MFF covered by the MFF agreement cannot be construed as being against statute or against public policy.The decision of the Apex Court in Sudarshan Mineral Co. Ltd. Bilwara vs. Union of India is a case where there was increase in dead rent. It has no application to the case on hand.
87. As rightly contended by the learned Advocate General the contracts entered into by the petitioners pursuant to the tender notifications issued by the APMDC are private contracts, which are not controlled by any provision or statute. It may be that it has some statutory background, but that does not convert it into a statutory contract nor it has the statutory flavour. The contracts entered are purely private contracts. The MFF contracts have been entered into for transfer of surface rights and they are purely in the realm of property rights under the general law pertaining to property and for that no permission of the Government is required nor they were controlled or governed by the Act and the rules made thereunder. The contract-authorizing levy of MFF was entered into by the successful bidders with full understanding of the nature and quantum of liabilities being undertaken. They are not laymen in the field.They have the minimum qualifying criteria for Prospecting and Quarrying of Galaxy Granite. Further, the Corporation has fixed the price of lRs.10,000/- per cubic meter keeping the international price for black granite in mind and the quality of the granite in the area in question. The petitioners have voluntarily participated in the bids and the auction went upto Rs.44,900 per cubic metre. Having participated in the auction and bid the blocks, now they cannot be permitted to say that it is contrary to the statutory provisions.It is purely a private transaction between the A.P.M.D.C and the joint venture company. This position is clear from the decision decided in Y.S. Raja Reddy vs. A.P. Mining Corporation case. (supra).
88. Rule 6 of the A.P. Minor Mineral Concession Rules, 1966 has no application to the facts of the present case. This rule has application only to cases where the persons possessing sub-soil rights seeks for a share in the quarrying fees. It is well settled principle of law that the sub-soil rights in any land vest in the State and the individual has only surface rights. However, in cases where subsoil rights have been specifically vested in any individual by reason of any grant or otherwise which has statutorily been recognized, the individual in such cases may apply to the Government for a share in the quarrying fees if any lease or permit has been granted by the Government for quarrying any minor mineral in respect of land owned by him. In the instant case, it is not the case of the petitioners that the APMDC is vested with any sub-soil rights over the land in question.The APMDC is not concerned with the quarrying fee payable under the Act and the rules thereunder. APMDC has been vested with only surface rights, which it had transferred in favour of the petitioners by reason of prospecting agreements.
89. The Decision of the Apex Court in State of Orissa vs. Mahanadi Coalfields ltd.18 relied upon by the learned counsel for the petitioner is a case where the controversy was regarding the levy of tax under the Orissa Rural Employment, Education and Production Act, 1992 on coal bearing lands. The High Court held that the State legislature did not have the competence to levy the tax on coal-bearing lands and struck down Section 3(2)(c) of the Act as well as the schedule appended to the act levying tax on coal bearing lands. The Apex Court held that levy of tax on mineral bearing lands and coal bearing lands under the Act is beyond the competence of the State legislature. It was also held that levy of tax under the Act is in substance on minerals and mineral rights, which has nothing to do with surface characteristic of the land. Herein, it is not the case of levy of tax. It is only payment of certain amount for utilizing the surface rights.
90. In Gem Granites vs. State of Tamilnadu19 the question involved is that Rule 8-C of Tamilnadu Minor Mineral Concession Rules, 1959 as amended by G.O.Ms.No.214 dated 10.6.1992and Rule 38 issued by the Government of Tamilandu are contrary to sub-section (2) of Section 17A of the Act, 1957. Rule 8-C provides that notwithstanding anything contained in the rules no lease for quarrying black, red, pink, grey, green white or other colored or multicolored granites or any rock suitable for ruse as ornamental and decorative stones shall be granted to any person. It also empowers the State Government themselves to engage in quarrying back, red, pink etc coloured or multicolored granites or any sock suitable for use as ornamental and decorative stones or may grant and renew leases for the above minerals to a State Government company or a corporation owned or controlled by the State Government. Rule 38 provides for reservation of area for exploitation in the public sector etc. The Apex Court rejected the contention of the State government that Rule 8-C was not intended to make a reservation of such granites and rock in favour of the State government or corporations but to preserve the same and therefore the State Government was not obliged to obtain the approval of the Central government thereto under the provisions of Section 17-A(2) of the Act. The Supreme Court held that Rule 8-C clearly intended to reserve the quarrying of the said granites and rock for the State Government and for State Government companies and Corporations and it is hit by Section 17-A(2) as no prior approval of the Central Government is obtained and accordingly truck down Rule 8-C. As regards Rule 38 it was held that it must be read as being subject to Section 17A(2). On facts it has no application to the facts of the present case. As already stated the area was not reserved either for the State or APMDC for undertaking mining prospecting operations. The APMDC is the owner of the land and it was granted prospecting licence, which was upheld by this Court and thereafter, and by reason of MFF agreement it transferred the surface rights to the petitioners. There is no order of the Government reserving the area in question for exploitation by the APMDC. Similarly, the decision of the Punjab and Haryana High Court in State of Haryana vs. Shish Pal singh20 has no application.
91. In Sudarshan & Com., vs. State of M.P.21 (AIR 1963 MP 213) the Madhya Pradesh High Court held that where, by the terms of the agreement, a person is required, and he has expressly undertaken, to pay surface rent in accordance with the rule, he cannot be called upon to pay any other compensation for the use of the surface of the land for the purposes of the mine. Herein it is not a case where the petitioners were asked to pay any compensation contrary to the agreement. The petitioners herein have themselves entered into an agreement for payment of MFF to enter into the land for undertaking mining operations.Subject to that only, they will be granted mining leases by the Mining Department. It is not a case where they were asked to pay compensation in addition to MFF for utilizing the surface area. On their own they have participated in the auction process and bid the amounts.
92. In Y.S., Raja Reddy vs. A.P. Mining Corporation (supra) it was held that execution of sub-lease by Corporation with certain conditions is valid.
93. In State of Oriss vs. Narain Prasad, it was held that a licensee having entered into the contractual obligations was bound by the terms of the contract. It was also held that a person after securing a contract taking into account its terms, cannot later be allowed to assail validity of those terms of the Rules constituting the terms of the contract by invoking the extraordinary jurisdiction of High Court under Article 226. The facts in this case are the respondents were the highest bidders in respect of the various liquor shops in Orissa. Their bids were accepted. They executed agreements in the prescribed form and were issued licences. Each of them had undertaken under the agreement/contract to lift a particular specified quantity of liquor every month during the relevant excise year as well as to remit the excde duty as specified in the rules. They did business for the entire excise year. But they failed to lift the Minimum Guarantee Quantity and also failed to remit the excise duty as provided by Rule 6-A of the Orissa Excise (Excusive Privilege) Rules, 1970. When notices were served calling upon them to remit the appropriate amount, they approached the Orissa High Court by way of writ petitions questioning the demand notices. The main contention urged was that the demand for payment of excise duty on unlifted quantity of arrack amounted to levy of duty and that such levy was not warranted by the Act. It was also contended that if there is a sale of liquor, duty can be collected on the liquor sold but that seeking to collect the duty even in the absence of sale amounts to levy of duty contrary to the provisions of the Act. The State insisted for enforcing the undertakings contained in the agreement/contract executed by the licensees. The Apex Court after referring to the Constitution Bench decision in Har Shankar vs. Dy. Excise and Taxation Commissioner22 which was carried forward in Panna Lal vs. State of Rajasthan23, State of A.P. vs. Y. Prabhakara Reddy24 and State of Haryana vs. Jage Ram25 at para 21 held thus:
The approach adopted in this decision has to be borne in mind in every such case. It is also to be kept in mind that while the decisions referred to hereinbefore are by smaller Benches, this decision is by a Constitution Bench. A person who enters into certain contractual obligations with his eyes open and works the entire contract, cannot be allowed to turn round, according to this decision and question the validity of those obligations or the validity of the Rules which constitute the terms of the contract. The extraordinary jurisdiction of the High Court under Article 226, which is in discretionary nature and is exercised only to an advance the interests of justice, cannot certainly be employed in aid of such persons. Neither justice nor equity is in their favour.
94. The aforesaid decision of the Apex Court squarely applies to the case of the petitioners herein who had entered into the contract with APMDC. Pursuant to the tender notification given APMDC they had participated in the auction process. The bids given by the petitioners constitute offers and upon their acceptance by APMDC a binding MFF agreement came into existence between the parties. Pursuant to the same, they were also granted mining leases in Form "G" by Assistant Director of Mines and Geology. As per Clause 3.1 of the MFF agreement, the minimum MFF per annum shall be paid to APMDC in two equal half year installments. However, if the MFF payable on dispatches exceeds the first half yearly installment amount, during the first six months, the company has to deposit the balance half year instilment immediately before effecting dispatches. As per Clause 3.2 the first half year installment shall be paid on or before the execution of licence of transfer deed and second half yearly installment to be paid fifteen days before the expiry of the first six months period or immediately before commencement of dispatches, if the amount deposited is already adjusted, whichever is earlier. The fifth respondent by letter dated 29.5.2002 in the case of petitioner in W.P.11088 of 2002 called upon the 5th respondent Joint venture company to pay Rs.22.45 lakhs towards MFF for the second half yearly installment of the first year on or before 2.6.2002. Similar is the case in respect of W.Ps.6777 of 2002 and 6714 of 2002where the amount demanded is Rs.5.05 lkhs and Rs.12.25 lakhs respectively. The petitioners having participated in the auction process and having offered their bids, which were accepted, cannot turn round and say that payment of MFF is contrary to the statute. Even otherwise, we have earlier held that such payment is not contrary to the statute.
95. We may also notice the observations of the Apex Court in ASST. EXCISE COMMISSIONER vs.ISSAC PETER wherein Jeevan Reddy, J, speaking for the Bench held:
We are, therefore, of the opinion that in case of contracts freely entered into with the State, like the present ones, there is no room for invoking the doctrine of fairness and reasonableness against one party to the contract (State), for the purpose of altering or adding to the terms and conditions of the contract, merely because it happens to be the State. In such cases, the mutual rights and liabilities of the parties are governed by the terms of the contracts (which may be statutory in some cases) and the laws relating to contracts. It must be remembered that these contracts are entered into pursuant to public auction, floating of tenders or by negotiation. There is no compulsion on anyone to enter into these contracts. It is voluntary on both sides. There can be no question of the State power being involved in such contracts. It bears repetition to say that the State does not guarantee profit to the licensees in such contracts. There is no warranty against incurring losses. It is a business for the licensees. Whether they make profit or incur loss is no concern of the State. In law, it is entitled to its money under the contract. It is not as if the licensees are going to pay more to the State in case they make substantial profits. We reiterate that what we have said hereinabove is in the context of contracts entered into between the State and its citizens pursuant to public auction, floating of tenders or by negotiation. It is not necessary to say more than this for the purpose of these cases. What would be the position in the case of contracts entered into otherwise than by public auction, floating of tenders or negotiation, we need not express any opinion herein.
96. In view of the above decisions of the Apex Court on the point at issue, it is not necessary to refer to the other decisions relied upon by the learned Advocate General.
97. The contention of the petitioners that they were compelled to sign at the dictates of the authorities is without any basis. The learned counsel appearing for the petitioners relied upon the decision of the Apex Court in VERIGAMTO NAVEEN vs. GOVT. OF A.P.26 wherein the matter relates to termination of a sub-lease. It was held that interference in contractual matters is permissible where breach of contract involves breach of statutory obligation and order complained of has been made in exercise of statutory power by a statutory authority. It was held:
The freedom of the government to enter into business with anybody it likes is subject to the condition of reasonableness and fair play as well as public interest. After entering into a contract, in canceling the contract, which is subject to terms of the statutory provisions, as in the present case, it cannot be said that the matter falls purely in a contractual field.
98. Here the contract has not been terminated. On the other hand the petitioners are seeking a negative relief for non-implementation of the contracts, which they had entered into with APMDC with full knowledge and the implications of the contract. Further, the contracts are subject to the terms of any statutory provisions. The decision has, therefore, no application to the case on hand.
99. The decision of the Kerala High Court in Thressiamma Jacob vs. District Office of the Department of Mining and Geology (supra) has also no application to the case on hand. That was a case where the question for consideration is regarding the royalty payable by the petitioners on minerals extracted from the properties belonging to them. The case of the petitioners is that the properties are situated in Malabar area of the State and that the petitioners are the owners of lands on jenmon right and therefore the soil and minerals underneath belong to them and therefore the Government has no right to demand royalty when minerals are extracted. The petitioners were opposed by the State contending that the petitioners as jenmies have no right over the minerals and for exploiting the same they are bound to pay royalty to the State.The Full Bench of the Kerala High Court consisting one of us Dr. AR. Lakshmanan, ACJ held that lands in question are not jenmom lands and they are ryotwari patta lands and therefore minerals belong to the Government and royalty has to be paid to the Government for quarrying leases. The said case has no application to the facts on hand.
100. Inasmuch as we have come to the conclusion that the tender notification issued by the APMDC and the contracts entered into by some of the petitioners pursuant thereto are not contrary to the provisions of the Act and the Rules made thereunder, the application of principle of severance for invalidation of that part of the contract entered into for payment of MFF as being contrary to the statute and validating the remaining part of the contract as urged by the learned counsel for the petitioners does not arise. Therefore, it is not necessary to refer to the decisions relied on by the learned counsel for the petitioners on the said issue. The very essence of the contract entered into by the petitioners is for payment of MFF for transfer of surface rights for undertaking the mining operations.
101. For the foregoing reasons, we have no hesitation to dismiss the Writ petitions. They are accordingly dismissed. However, there shall be no order as to costs.