Gujarat High Court
Ultra Tech Cement Company Ltd, vs The State Of Gujarat on 10 May, 2018
Author: Rajesh H.Shukla
Bench: Rajesh H.Shukla
C/SCA/17447/2006 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 17447 of 2006
With
R/SPECIAL CIVIL APPLICATION NO. 22673 of 2005
With
R/SPECIAL CIVIL APPLICATION NO. 3984 of 2007
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE RAJESH H.SHUKLA : Sd/
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1 Whether Reporters of Local Papers may be NO
allowed to see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the
fair copy of the judgment ? NO
4 Whether this case involves a substantial
question of law as to the interpretation
of the Constitution of India or any NO
order made thereunder ?
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ULTRA TECH CEMENT COMPANY LTD,
Versus
THE STATE OF GUJARAT
=======================================================
Appearance:
Special Civil Application Nos.
17447/2006 & 3984/2007
MR MIHIR THAKORE, Sr. Adv. with MR SHAMIK BHATT & MS
PARINI SHAH for SINGHI AND CO for the PETITIONER No.1
MR PK JANI, AAG with MS ASMITA PATEL AGP (1) for the
RESPONDENT(s) No. 1 5
Special Civil Application No.22673
/2005
MR PS PATEL for the PETITIONER(s) No. 1
MR PK JANI, AAG with MS ASMITA PATEL AGP (1) for the
RESPONDENT(s) No. 1 5
=======================================================
CORAM: HONOURABLE MR.JUSTICE RAJESH H.SHUKLA
Page 1 of 47
C/SCA/17447/2006 JUDGMENT
Date : 10/05/2018
COMMON ORAL JUDGMENT
1. The present group of petitions are filed by the petitioners under Articles 14 and 226 of the Constitution of India as well as under the Mines and Minerals (Development & Regulation) Act, 1957 read with Mineral Concession Rules, 1960 inter alia challenging the Circulars dated 22.12.2000, 06.07.2005 and 02.05.2006 issued by the Industries & Mines Department, Government of Gujarat as also challenging the impugned notices effecting recovery as stated in each petition on the grounds stated in the memo of petition.
2. The facts of the case briefly summarized are as follows: 2.1 The petitioner in Special Civil Application No.17447/2006 and Special Civil Application No.3984 of 2017 is the Company incorporated under the Companies Act, 1956, which was also known as "Narmada Cement Company Ltd., which stood amalgamated with UltraTech Cement Ltd. per the proceeding before the Board for Industrial and Financial Reconstruction. The petitioner - Company had Page 2 of 47 C/SCA/17447/2006 JUDGMENT entered into lease agreement for mining of lime stone, which is used in manufacturing of cement. There were various such lease deeds requiring the petitioner to comply with the terms and conditions of the lease deed. However as stated in detail, the lease agreement provides for the payment of royalty by the petitioner and it also provides that the Government has right to prescribe the time limit and the manner of payment of royalty. It appears that there was change in the payment of royalty and the advance payment system was introduced pursuant to the Mineral Concession Rules, 1960 (hereinafter referred to "Rules, 1960"
for short) and the Circulars have been issued permitting the respondent - State to demand for advance payment of such royalty and also interest if the amount is not paid within prescribed time. This issue regarding the payment of royalty i.e. advance payment of royalty or the manner of payment of royalty and the interest charged for the delayed payment of royalty is the bone of Page 3 of 47 C/SCA/17447/2006 JUDGMENT contention or the issue raised in the present petition.
2.2 It is sought to be contended by the petitioner that the State has no authority and by impugned Circular dated 22.12.2000, 06.07.2005 and 02.05.2006, clause in the agreement between the petitioner and the Government cannot be modified and, therefore, such demand for interest is illegal as the Circular cannot override the statutory provision and/or terms of the agreement. It is, therefore, contended that there is lack of jurisdiction or power to raise such demand. It is contended that provision in the Circular cannot override the Rules or the lease agreement, which is mutually agreed between the parties and, therefore, when the State Government has prescribed the time and the manner of payment of royalty, it cannot be altered unilaterally by the State. Further it is contended that even if there is an amendment in the Rules, 1960, it would empower the State to change the payment of royalty or Page 4 of 47 C/SCA/17447/2006 JUDGMENT the method of payment of royalty in respect of existing mining lease agreement. It is further contended that even if the statute empowers, the Government cannot amend the terms of the existing agreement by such Circular. Even if it is required to be done, it could be only by amendment in the Rules itself. Therefore, the State Government can introduce the system of advance payment or system of advance payment of royalty in accordance with law in the manner suggested that there may be a fresh lease agreement or there may be modification of the existing lease agreement by consent of the parties or the modification of the existing agreement by operation of law or change of law but it cannot be by executive instructions or the Circular.
2.3 On the other hand, the State has contended that the petition is not maintainable in view of the Rule 53 of the Rules, 1960, which provides for an alternate remedy and, therefore, the petition itself is not maintainable. Further it has been contended Page 5 of 47 C/SCA/17447/2006 JUDGMENT that the Rules, 1960 have been amended and particularly, Rule 27(2)(a) of the Rules, 1960 provides for such power and, therefore, the Government is within its right to impose further conditions and liability. It is also contended that the State Government in exercise of power under Section 13 of the Mines and Minerals (Development & Regulation) Act, 1957 ("Act, 1957" for short) has amended the Mineral Concession Rules, 1960 by 2nd Amendment in the year 2000 and the said amendments have been notified in the official gazette on 25.09.2000 and, therefore, it authorizes the State Government to introduce the modification of the payment of advance royalty on the basis of such amended Rules permitted by the State Government and, therefore, the State is justified and within its right to raise such demand. Again Rule 64A of the Rules, 1960 refers to the liability for the demand of interest. It has been contended that the Rules are also "law" and it would have application. It is also contended that the Page 6 of 47 C/SCA/17447/2006 JUDGMENT Rules will have overriding effect on the clause of the lease agreement.
3. Heard learned Senior Counsel, Shri Mihir Thakore appearing appearing learned advocate, Shri Shamir Bhatt and learned advocate, Ms. Parini Shah for Singhi & Co. for the petitioner in Special Civil Application Nos.17447/2006 & 3984/2007, learned advocate, Shri P.S. Patel for the petitioner in Special Civil Application No.22673/2005 and learned Additional Advocate General, Shri P.K. Jani appearing with learned AGP Ms. Asmita Patel for the respondent - State.
4. Learned Senior Counsel, Shri Mihir Thakore referred to the background of the facts and submitted that the petitioner is having mining lease granted by the State and the rights of the petitioner and the State of Gujarat are governed by the clause as mentioned in the lease agreement and such lease agreement is pursuant to the Rules, 1960. Learned Senior Counsel, Shri Mihir Thakore submitted that the royalty has been paid and the dispute is regarding the payment of interest on the delayed payment and the calculation of the period for the purpose of charging such interest. Page 7 of 47
C/SCA/17447/2006 JUDGMENT Learned Senior Counsel, Shri Mihir Thakore pointedly referred to the lease agreement produced at AnnexureC and emphasized Clause - 3, which reads as under:
"3. Subject to the provision of clause 1 of this Part, the lessee/lessees shall during the subsistence of this lease pay to the State Government at such times and in such manner as the State Government may prescribe royalty in respect of any mineral/minerals removed by him/them from the leased area at the rate for the time being specified in the Second Schedule to the Mines and Minerals (Regulation and Development) Act, 1957."
5. Learned Senior Counsel, Shri Mihir Thakore also submitted that there was a civil litigation and Appeal from Order No.58/2007 is pending, which is kept along with this group of petition. However, learned Senior Counsel, Shri Mihir Thakore referred to Rule 64A of the Rules, 1960 and submitted that no interest can be charged till expiry of 60 days. He emphasized that 60 days have not been clearly stated how it should be arrived at, which is required to be considered. Learned Senior Counsel, Shri Mihir Thakore demonstrated that 60 days gracing period would be available and Page 8 of 47 C/SCA/17447/2006 JUDGMENT if it is considered for the respective quarters and, thereafter, 60 days period is considered, the liability of the interest would be very less. For that purpose, learned Senior Counsel, Shri Mihir Thakore referred to the Circular dated 22.12.2000 produced at AnnexureM and submitted that as stated, by Circular dated 25.09.2000, the system of advance payment has been introduced. He also referred to Circular dated 25.09.2000. Similarly, he also referred to the Circular dated 06.07.2005 produced at AnnexureV of Special Civil Application No. No.17447/2006 and submitted that the dates have been mentioned for the advance payment of respective quarter. He, therefore, submitted that as per Rule 64A of Rules, 1960, 60 days grace period would be available. However he submitted that how it could be calculated, is required to be seen. Learned Senior Counsel, Shri Mihir Thakore submitted that the Circular dated 22.12.2000 and also another Circular dated 06.05.2005 provide for advance payment according to Rule 64A of Rules, 1960. Therefore, learned Senior Counsel, Shri Mihir Thakore submitted that whatever period or quarter is provided, amount of Page 9 of 47 C/SCA/17447/2006 JUDGMENT royalty shall be payable after the period of 60 days. He, therefore, submitted that Rule 64A of the Rules, 1960 only refers to the payment of interest and it has not provided for or amended any Rules for any procedure or mechanism. Therefore, learned Senior Counsel, Shri Mihir Thakore submitted that the agreement between the parties, therefore, cannot be unilaterally modified by the State by such Circulars, which are only an executive instructions. He submitted that the Circulars cannot override other Rules or the clause in the agreement mutually agreed between the parties. He also referred to the Circular dated 14.11.2005 and read both the Circulars to support his contention that even if it is accepted that such Circulars are applicable made pursuant to the statutory Rules, still it will not have any retrospective effect. He, therefore, submitted that the Circular provides for the payment of interest has to be read with Rule 64A of the Rules, 1960 and it can only be prospective, meaning thereby, it will not have retrospective application and no interest could be demanded prior to the date of Circular. Learned Senior Page 10 of 47 C/SCA/17447/2006 JUDGMENT Counsel, Shri Mihir Thakore also strenuously submitted that he maintains his argument that Circular cannot override or such Circular cannot be issued, however, the submissions about the retrospective effect are in alternate to his main contention that the Circular cannot have any application or cannot override nor can give power to the State Government to unilaterally modify or change the clause in the agreement between the parties. Learned Senior Counsel, Shri Mihir Thakore strenuously submitted that as stated, either the lease agreement would be modified by mutual agreement or there has to be a law, which would entitle and permit the State to modify the clause in the agreement by such operation of law. Learned Senior Counsel, Shri Mihir Thakore submitted that the Circular cannot said to be a law and reliance placed by other side regarding the source of law when the Rules, 1960, more particularly, Rule 27(2)(a) of the Rules, 1960 has been amended in exercise of statutory power conferred under Section 13 of the Act, 1957 even then, such amendment could be effected by the Rules, meaning thereby, Rules, 1960 itself and not Page 11 of 47 C/SCA/17447/2006 JUDGMENT by any of Circular issued by the State.
6. Learned Senior Counsel, Shri Mihir Thakore has also referred to the judgments to support his contention that the thing should be done in the manner prescribed. However subsequently, he fairly stated that Rule 64A of the Rules, 1960 provides for the manner of payment of royalty on minerals and guidelines referred to in Rule 64 of the Rules, 1960, which was substituted, is to be considered. However again he emphasized that these are the only guidelines and Rules will have to be considered and if the statutory Rules do not provide then, by Circular or the executive instructions, the system of payment cannot be changed unilaterally without modification of the lease agreement itself by mutually agreement between the parties.
7. Another facet of submission made by learned Senior Counsel, Shri Mihir Thakore is regarding the condition in the lease deed. He pointedly referred to the lease deed and the conditions reproduced at Page No.112. Again he referred to same Clause 3 of the lease agreement and submitted that clause in the lease agreement could be modified in the Page 12 of 47 C/SCA/17447/2006 JUDGMENT manner prescribed and, therefore, any change in the royalty in respect of the mineral could be affected accordingly. Therefore, learned Senior Counsel, Shri Mihir Thakore submitted that as the lease is an agreement between two parties, the Government cannot unilaterally modify by subsequent circular. He emphasized that it can be done by the amendment in the Rules itself, which is required to be placed before the Legislative Assembly and in the facts of the case, it has not been done. Therefore, learned Senior Counsel, Shri Mihir Thakore submitted that the conditions prescribed or the imposed in exercise of power under Rule 27 of the Rules, 1960 could be by way of appropriate Rules and if there was any specific Rule then, it could override the contract but the circular, which is an executive instruction, cannot override the contract and, therefore, the demand made by way of Circulars as stated above are without any jurisdiction and authority and it cannot be said to be a law, which would permit the modification overriding the clause in the agreement or the lease agreement. In support of his submissions, he referred to and relied upon Page 13 of 47 C/SCA/17447/2006 JUDGMENT the judgment of the Hon'ble Apex Court in case of Bharat Sanchar Nigam Ltd. & Anr. Vs. BPL Mobile Cellular Ltd. & Ors., reported in (2008) 13 SCC 597 and emphasized the observations that the Circulars having no statutory force, would not govern the terms of the contract. He emphasized that the Circular cannot be given effect unless they are part of the contract and, therefore, if the terms of the contract is required to be modified, it has to be by express agreement. Therefore, learned Senior Counsel, Shri Mihir Thakore submitted that the respondent - State could not have unilaterally modified the lease agreement regarding the advance payment and/or payment of interest.
8. Learned Senior Counsel, Shri Mihir Thakore, therefore, submitted that Rule 27 of the Rules, 1960 is of no consequence. Again learned Senior Counsel, Shri Mihir Thakore referred to communication from the Director of Geology dated 02.08.1988 produced at AnnexureF and submitted that even if it is assumed for the sake of argument, this circular permitted the advance payment system even then, it will have application Page 14 of 47 C/SCA/17447/2006 JUDGMENT prospectively and, therefore, demand made in respect of socalled late payment of the amount of royalty prior to 2005 or 2000 is bad. Learned Senior Counsel, Shri Mihir Thakore submitted that in fact, the circular of the year 2005 prescribes for the first time the manner for the procedure and, therefore at the most, it could be from the year 2005. In support of his contention, he has referred to and relied upon the judgment of the Hon'ble Apex Court in case of C.I.T., Bangalore Vs. B.C. Srinivasa Setty, reported in (1981) 2 SCC 460 and submitted that as observed, even if there is provision in the charging section, but where the computation is not provided, meaning thereby, the procedure is not specifically provided then, it will not have any application. He, therefore, submitted that the mode of computation is required to be decided, which is provided in the Circular of the year 2005 and, therefore, any demand prior thereto is bad and illegal. Learned Senior Counsel, Shri Mihir Thakore has also referred to and relied upon the judgment of the Hon'ble Apex Court in case of Indian Banks' Association, Bombay & Ors. Vs. Devkala Consultancy Service & Ors., Page 15 of 47 C/SCA/17447/2006 JUDGMENT reported in (2004) 11 SCC 1 and emphasized that "chargeable interest" has been considered with reference to the statutory provision.
9. Learned Senior Counsel, Shri Mihir Thakore has also referred to Rule 27(2)(a) of the Rules, 1960 and submitted that it provides for time limit, mode and payment as laid down in the lease agreement. He, therefore, submitted that the contract itself is pursuant to Rule 27 of the Rules, 1960 and, therefore, the Government cannot unilaterally modify the terms of the agreement by Circular. Again he submitted that Rules 27(2) and 27(2)(a) preceding Rule 3 provides for the procedure. Again learned Senior Counsel, Shri Mihir Thakore at the cost of repetition submitted that there are three different ways for the purpose of modification of the clause of the agreement i.e. (1) The agreement itself is based on Rule 27 of the Rules, 1960 and, therefore, when it is provided or prescribing the time and the manner, there is no scope for any alteration and there is no power with the Government to modify with the Government;
Page 16 of 47
C/SCA/17447/2006 JUDGMENT
(2) If it is accepted then, the terms of the
agreement would prevail; and
(3) Further if it is argued that the Government
can prescribe at any time then, it has to be by Rule and not by Circular.
10. Again learned Senior Counsel, Shri Mihir Thakore referred to the papers and emphasized Section 3(f) to emphasis ""prescribed" means prescribed by rules made under this Act".
11. Therefore, learned Senior Counsel, Shri Mihir Thakore submitted that unless there is Rule specifically providing for such advance payment and/or charging of the interest, the Government could not have unilaterally amended the clause of agreement and there is power with the Government to make the Rules and they could have made the Rules but without making the Rules, cannot be by circular altered or modified the clause in the agreement. He has referred to and relied upon the judgment of the Hon'ble Apex Court in case of Bharat Sanchar Nigam Ltd. (supra). Learned Senior Counsel, Shri Mihir Thakore has therefore submitted referring to the Circulars that it does not give power to the Government to make any Page 17 of 47 C/SCA/17447/2006 JUDGMENT modification of the terms of the lease agreement. However he has stated that even if it is assumed then, it can only prospective and cannot have retrospective application. He, therefore, submitted that at the most, Circular dated 06.07.2005, which has provided for the calculation and the manner, would have applicability and, therefore, there cannot be any liability prior thereto. Learned Senior Counsel, Shri Mihir Thakore has referred to the judgment of the Hon'ble Apex Court in case of ViceChancellor, M.D. University, Rohtak Vs. Jahan Singh, reported in (2007) 5 SCC 77 and emphasized the observations made in Paragraph No.19. Therefore, learned Senior Counsel, Shri Mihir Thakore submitted that the Circular will have to be considered in light of the background of the facts, lease agreement and also statutory provision and, therefore in light of Rule 64D of the Rules, 1960, grace period has to be considered.
12. Learned AAG, Shri Jani submitted that the present petition under article 226 of the Constitution of India is not maintainable as it involves the questions of facts regarding the liability to pay Page 18 of 47 C/SCA/17447/2006 JUDGMENT interest and, therefore, the discretionary jurisdiction may not be exercised. Learned AAG, Shri Jani submitted that the subject matter of the petition is in the realm of interpretation of lease agreement and corresponding liability of the petitioner and, therefore also, the petition may not be entertained. Learned AAG, Shri Jani submitted that wide powers are conferred upon the Central Government under the Act and when Rule 54 of the Rules, 1960 provides for an alternate remedy by way of Revision, the present petition may not be entertained.
13. Learned AAG, Shri Jani submitted that there is no inherent lack of power or source. Learned AAG, Shri Jani submitted that in exercise of power under Section 57 of the Act, 1957, the Rules have been amended. For that purpose, learned AAG, Shri Jani referred to Section 13 of the Act, 1957 and submitted that it provides that the Central Government may by official Notification make the Rules for regulating the grant of lease in respect of minerals and such Rules may provide for the matters as stated in Section 13A of the Act, 1957. He, therefore, submitted that in exercise of Page 19 of 47 C/SCA/17447/2006 JUDGMENT statutory powers, the Mineral Concession Rules, 1960 have been made and Rule 64D of the Rules, 1960, which has been amended referred to the payment of royalty. Learned AAG, Shri Jani referred to Rule 64D of the Rules, 1960 and the guidelines, which are substituted by way of Notification and emphasized, "64D.Guidelines for computing royalty on minerals on ad valorem basis. Every mine owner, his agent, manager, employee, contractor or sublessee shall follow the following Guidelines for computation of the amount or royalty on minerals where the royalty is charged on ad valorem basis, Note. The State Governments may, if necessary, introduce systems of advance payment for the purpose of royalty collection and they may also impose any additional conditions in accordance with the law for the time being in force."
14. Learned AAG, Shri Jani submitted that as stated in this guidelines, on the basis of the study with regard to the statistic of mineral production and other details, it was desired to have an advance payment system and same has been introduced, which cannot be said to be without power or authority. Learned AAG, Shri Jani submitted that when other Page 20 of 47 C/SCA/17447/2006 JUDGMENT system of advance payment has been introduced, the State Government has been implementing the same and, therefore, the Circulars have been issued pursuant to such authority or the statutory Rules, which cannot be said that there is no authority or jurisdiction. Learned AAG, Shri Jani also referred to the Circulars and submitted that it would make it clear that it is in exercise of powers conferred, the Circulars have been issued and, therefore, it cannot be said to be mere an executive instructions. Learned AAG, Shri Jani submitted that the petitioners have not challenged the Rules and have challenged the Government Resolutions of the year 2000, 2005 and 2006 belatedly and, therefore, petitioner challenging the Government Resolution of the year 2000 in the year 2006 by way of such petition may not be entertained.
15. Learned AAG, Shri Jani submitted that referred to the lease agreement and pointedly referred to Clause - 3 and submitted that the mode of payment of royalty is subject to the provision of the lease and the rate prescribed in schedule under the Act, 1957. He further referred to Para No.3 of Page 21 of 47 C/SCA/17447/2006 JUDGMENT Clause - 3, which provides, "3. Should any rent, royalty or other sums due to the State Government under the terms and conditions of these presents be not paid by the lessee/lessees within the prescribed time, the same may be recovered on a certificate of such officer as may be specified by the State Government by general or special order, in the same manner as an arrear of land revenue.
16. Learned AAG, Shri Jani, therefore, submitted that the provision is there even in the lease agreement also for the recovery of such dues. Further, he pointedly referred to Clause 12 of the lease agreement, which provides,
12. The lessee/lessees shall be bound by such rules as may be issued from time to time by the Government of India under section 18 of the Mines and Minerals (Regulation and Development) Act, 1957 (Act 67 of 1957), and shall not carry on mining or other operations under the said lease in any way other than as prescribed under these rules."
17. Therefore, learned AAG, Shri Jani submitted that by entering into such lease agreement, the petitioner is unequivocally accepting to comply with the terms and condition of the lease and one Page 22 of 47 C/SCA/17447/2006 JUDGMENT of the conditions has a reference to power to modify or make variation in the royalty, as may be fixed by the State from time to time. He, therefore, submitted that the person, who has entered into lease agreement with an open eye is not permitted to wriggle out the contractual obligation and cannot say that he will have benefit under the agreement or the contract but will not accept the liability. Learned AAG, Shri Jani, therefore, referred to the details and clarified that Section 15 of the Act, 1957 will not have any application as it only applies to mineral. Therefore referring to Section 13 of the Act, 1957, he has emphasized that it provides for the Rule making power of the Central Government and when the Rules, 1960 are made by the Central Government in exercise of statutory powers, which are binding. Learned AAG, Shri Jani referred to Rule 27(2)(a) of Rules, 1960 and submitted that it provides, "27(2) "A mining lease may contain such other conditions as the State Government may deem necessary in regard to the following,
(a) the timelimit, mode and place of Page 23 of 47 C/SCA/17447/2006 JUDGMENT payment of rents and royalties."
18. Therefore, learned AAG Shri Jani has submitted that when the Central Government has made Rules viz., Mineral Concession (2nd Amendment) Rules, 2000 and by virtue of the amendment in the Rule made by the Central Government, the change in the royalty payment i.e. advance payment of royalty has been made. He submitted that the Central Government having power has therefore changed the system of advance payment of royalty and the State Government is required to act accordingly. He further submitted that Rule 64A of the Rules, 1960 refers to the authority on the payment of the interest. He submitted that Rule 64A of the Rules, 1960 provides for charging of simple interest by the State Government and Rule 64D of the Rules, 1960 has a reference to the payment of royalty as per the guidelines. He, therefore, submitted that the submissions that there cannot be any alteration in the lease agreement unilaterally made by the Government or the Circular cannot override the agreement, are misconceived. Learned AAG, Shri Jani submitted that the submission that there has to be a law, is clarified with reference Page 24 of 47 C/SCA/17447/2006 JUDGMENT to the statutory provision when the Rules have been made by the Central Government in exercise of power under the Act and on that basis, when the amendment in the Rule has been made i.e. the Mineral Concession Rules has been made, the grievance cannot be made. Learned AAG, Shri Jani has also referred to the judgment of the Hon'ble Apex Court in case of ViceChancellor, M.D. University, Rohtak (supra) and has made reference to the observations made in Paragraph No.19. Similarly, he submitted that the reliance placed by learned Senior Counsel, Shri Thakore on the judgment in case of Bharat Sanchar Nigam Ltd. (supra) would not have any application. He referred to the observations made in Paragraph No.45 and 9 and submitted that the facts of the case are not even remotely similarly with the facts of the case. Learned AAG Shri Jani, therefore, submitted that the context of every case has to be considered and it should be considered as to whether it is applicable or not. Learned AAG Shri Jani also referred to the written submissions, Rule 53 of the Rules, 1960 and the judgment of the High Court in case of Bhilalbhai Page 25 of 47 C/SCA/17447/2006 JUDGMENT Ukabhai Borpd Vs. Election Officer & Deputy Collector, Amreli, reported in 1997 (2) GLJ UJ 11. He also emphasized on the alternate remedy and pressed into service the judgment of the Hon'ble Apex Court in case of U.P. State Spinning Co. Ltd. Vs. R.S. Pandey & Anr., reported in (2005) 8 SCC 264 and in case of Bhilalbhai Ukabhai Borpd (supra).
19. Learned AAG Shri Jani submitted that the change in the system of payment of royalty i.e. advance payment of royalty pursuant to the study, is a matter of policy and, therefore, the Court may not interfere with the policy decision of the State Government. He emphasized that the State may on the basis of the express material take decision to have the advance payment of royalty, which cannot be said to be arbitrary and illegal and, therefore, the contentions, which are sought to be raised, may not be accepted. Learned AAG Shri Jani referred to and relied upon the judgment of the Hon'ble Apex Court in case of Shree Sidhbali Steels Ltd. Vs. State of Uttar Pradesh, reported in (2011) 3 SCC 193 = AIR 2011 SC 1175 and emphasized the observations made in Paragraph Page 26 of 47 C/SCA/17447/2006 JUDGMENT Nos.53, 54 and 60. Again he referred to the lease agreement and the terms and conditions of the lease agreement and emphasized that it gives power to the State Government as contract itself provides that the Government may decide to impose royalty and, therefore, when it is a condition, which has been accepted by the petitioner, it cannot be heard to say that it is unilateral modification of terms and conditions of the agreement. Learned AAG Shri Jani referred to and relied upon the judgment of the Hon'ble Apex Court in case of State of Rajasthan Vs. J.K. Synthetics Ltd., reported in (2011) 12 SCC 518 and submitted that the Rules will prevail over the lease agreement and when there is an amendment in the Rules, 1960, particularly, Rule 27 as stated above read with Rule 64D of the Rules, 1960, it cannot be said that there is any unilateral modification of the agreement or the system of advance payment, is without jurisdiction. He has also referred to the judgment of the Hon'ble Apex Court in case of State of Kerala & Ors. Vs. Kerala Rare Earth & Minerals Ltd. & Ors., reported in (2016) 6 SCC 323 and emphasized the observation made in Paragraph Page 27 of 47 C/SCA/17447/2006 JUDGMENT Nos.19 and 21. Similarly, he has referred and relied upon the judgment of the Hon'ble Apex Court in case of State of Rajasthan Vs. Deep Jyoti Company, reported in (2016) 6 SCC 120 and emphasized the observations made in Paragraph No.8. Similarly, learned AAG Shri Jani referred to the judgment of the Hon'ble Apex Court in case of Catholic Syrian Bank Ltd. Vs. Commissioner of Income Tax, Thrissur, reported in (2012) 3 SCC 784 and emphasized the observations made in Paragraph No.18 and also the judgment in case of Zile Singh Vs. State of Haryana, reported in (2004) 8 SCC 1 and in case of Shyam Sunder Vs. Ram Kumar, reported in (2001) 8 SCC 24.
20. In rejoinder, learned Senior Counsel, Shri Mihir Thakore referred to the papers and also Circulars particularly Circulars dated 22.12.2000 and 06.07.2005 and submitted that the demand for the royalty at the most could be from 2005 as per Circular dated 06.07.2005. He submitted that for the first time, the date regarding payment is determined by this Circular and, therefore, the calculation of the interest is not provided for a period between 2000 to 2005 nor any procedure has Page 28 of 47 C/SCA/17447/2006 JUDGMENT been prescribed or mechanism has been provided. He submitted that even if the statute provides for charging section, if the procedure or the mechanism is not provided, it will not have any application. He has again referred to the judgment of the Hon'ble Apex Court in case of C.I.T., Bangalore (supra) and emphasized the observations made in Paragraph Nos.9 to 15 and also judgment in case of Zile Singh (supra). Learned Senior Counsel, Shri Mihir Thakore referred to Articles 73 and 136 of the Constitution of India and submitted that it has reference to charging section by making provision, which is not provided, therefore, even if it is assumed that the interest could be charged, at the most it could be prospective from 2005 onwards.
21. Again learned Senior Counsel, Shri Mihir Thakore referred to Rule 64A of the Rules, 1960 and emphasized that it provides for manner of payment of royalty. He submitted that it empowers the Government to modify the Rule and by such modification, it can add with the contract but not by way of Circular, which is not the Law but the executive instructions. Learned Senior Counsel, Page 29 of 47 C/SCA/17447/2006 JUDGMENT Shri Mihir Thakore strenuously submitted that the word "prescribed" may have to be read as "prescribed by the Rule". He again referred to and relied upon the judgment in case of Bharat Sanchar Nigam Ltd. (supra). He, therefore, submitted that it has to be prescribed by amendment in the Rule and not by Circular.
22. Learned AAG Shri Jani submitted that the lease agreement is between the parties and the submission that there cannot be any unilateral modification by the State, is misconceived. He submitted that when the amendment in the Rules specifically provides for such levy and lease agreement clearly provides that the lessee has accepted that the Government may modify the terms and conditions of the lease agreement agreed between the parties, there is no justification to raise such contention. He, therefore, submitted that the Circular issued pursuant to the Rules is delegated legislation and Law is made by the Rule and, therefore, when there is no challenge to the Rule, it cannot be contended that the Circulars are only executive instructions as they are issued in exercise of power under Rules, 1960. Page 30 of 47
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23. Learned AAG Shri Jani submitted that the statutory Rule provides that the Government may have such power to modify regarding the time and manner of levy of royalty and, therefore, when it has been done in exercise of powers under Rules, 1960, it cannot be said that it is not as per the Law and the emphasis on the Circular, are misconceived. He referred to and relied upon the judgment of the Hon'ble in case of State of Rajasthan Vs. J.K. Synthetics Ltd. (supra) and emphasized the observations made in Paragraph No.29.
24. In view of the rival submissions, it is required to be considered whether the present petitions deserve consideration.
25. First aspect which is required to be considered raising the preliminary objection regarding the maintainability of the petitions under Article 226 of the Constitution of India on the ground that the petition under article 226 of the Constitution of India may not be entertained as it requires examination of material and fact for the purpose of calculation and assessment, cannot be accepted in view of the fact that it is not an issue regarding the calculation but the contention which Page 31 of 47 C/SCA/17447/2006 JUDGMENT is raised, is regarding the method and permissibility of making a change in the manner of payment i.e. advance payment and/or payment of interest, which is charged for the delayed payment.
26. Another contention which has been raised by learned AAG Shri Jani that since subject matter is in the realm of contract, the parties may be relegated to the Civil Court and the present petitions may not be entertained, requires a closer scrutiny. It is well accepted that even if the matter is regarding the contract, the Court may examine under Article 226 of the Constitution of India at the threshold to scrutinize the allegation about the arbitrariness and/or fair play providing equal opportunity. Once the parties have entered into an agreement, normally the Court would decline to entertain such petition under Article 226 of the Constitution of India. However in the facts of the case, the issue which has been involved, is not with regard to only interpretation or clause in the agreement but it has bearing with regard to the interpretation of the statutory provision and exercise of power by Page 32 of 47 C/SCA/17447/2006 JUDGMENT the State, which is required to be considered.
27. The main thrust of the submission made by learned Senior Counsel, Shri Thakore is with regard to the jurisdiction or the authority or the source of power to make a demand on the basis of the Circular. It has been specifically contended that the Circular cannot override the clause in the agreement and the Government cannot unilaterally modify or alter the lease agreement entered into between the parties. It is also contended that the Circular is not a law and it is only an executive instructions and, therefore, even if the provision of the Act, 1957 empowers the Central Government to make the Rules and the Rules are there like Rules, 1960, it has to be specifically provided in the Rule for the advance payment. Therefore it is sought to be contended that any such change of system like advance payment or the payment of interest has to be by statutory Rule and not by way of Circular, is required to be considered. It is in this background, preliminary objection raised by learned AAG Shri Jani with regard to the maintainability of the petition, cannot be readily accepted in light of the controversy which has Page 33 of 47 C/SCA/17447/2006 JUDGMENT been involved with regard to not only interpretation of the statutory provision or the Rule but also as to whether the Rule or the amendment in the Rule can be said to be a source providing the Government with such power has to be considered.
28. Therefore the first aspect which has to be considered is with regard to the jurisdiction or the source of power with the respondent - Government. The provision of Section 13 of the Development Act, 1957 provides, "Rules for regulating the grant of prospecting licences and mining leases."
29. Rules have been made like Rules, 1960 and Rule 27(2)(a) of the Rules, 1960 clearly provides, "27(2) "A mining lease may contain such other conditions as the State Government may deem necessary in regard to the following,
(a) the timelimit, mode and place of payment of rents and royalties."
30. Therefore the Rules, 1960 made by the Central Government authorize the State Government to prescribe the conditions for the purpose of lease. Similarly, Rule 64D of the Rules, 1960 provides for the manner of payment of royalty on minerals. Page 34 of 47
C/SCA/17447/2006 JUDGMENT Again by amendment in Rule 64D of the Rules, 1960, the guidelines have been laid down for computing the royalty. After the study made by the Government and on the basis of the study and availability of the record and the statistics with regard to the minerals, it has been provided by way of note as stated above that the State Government may if necessary introduce the system of advance payment for the purpose of royalty collection and also impose additional conditions in accordance with law for the time being in force. Thus the State Government in exercise of statutory powers is permitted to introduce the system of advance payment for the royalty and also it empowers to impose additional conditions in accordance with law, meaning thereby, when the law or the statutory provisions and the Rules made thereunder empower the State Government to have additional conditions without any kind of qualification, the submissions, which have been made by learned Senior Counsel, Shri Mihir Thakore with regard to the lack of authority or the source, are misconceived and cannot be accepted. Much emphasis on the word "law" to argue that the Page 35 of 47 C/SCA/17447/2006 JUDGMENT Circulars are not the law and are the executive instructions, also have to be considered in background of the facts. It is not necessary that every Circular or the instruction is only an executive instructions. It is well accepted that the Legislature could be by way of Rule or further delegated legislation in the form of the Notification issued in purported exercise of power under the statutory Rules like the Rules, 1960. The Hon'ble Apex Court in a judgment in case of State of Rajasthan Vs. J.K. Synthetics Ltd. (supra) has considered in similar circumstances the power of the State to charge interest and it has also been observed referring to same Rule 64A of the Rules, 1960 that the Rules will prevail over the terms of the lease. Thus when the statutory Rules provide for such authority or the power, it could be exercised and implemented by way of Circular or Notification. Therefore the submissions made by learned Senior Counsel, Shri Mihir Thakore is misconceived. Further a useful reference can be made to the judgment of the Hon'ble Apex Court in case of South Eastern Coalfields Ltd. Vs. State of M.P. & Ors., reported Page 36 of 47 C/SCA/17447/2006 JUDGMENT in (2003) 8 SCC 648, in which referring to same Rule 64A of the Rules, 1960, it has been observed that when they are the statutory rules and the lease agreement entered into with full knowledge of the terms and conditions, the parties cannot wriggle out the obligation on the ground that there is no provision in the Act for the payment of interest. Thus when the Rule provides for the payment of interest, necessary procedure or mechanism could be provided by Circular to give effect to such Rule, which is a Law and, therefore, the submission that there cannot be any unilateral modification by Circular, is misconceived.
31. Therefore when the Rule empowers the authority or the State, it is within the right of the State to issue necessary Notification/ Circular for the implementation and give effect to the provision of the Rule, which is a law. Therefore, the submissions made by learned Senior Counsel, Shri Mihir Thakore that in every case, the Circular or the Government Resolution is not a law, has to be examined with reference to the aspect of delegated legislation as well as the source of such power, Page 37 of 47 C/SCA/17447/2006 JUDGMENT which is either statutory provision or the statutory Rule. Therefore if in exercise of power under the statutory provision or the Rules, the decision is taken and for implementation of such law or the Rule, the Notification or the Circular is issued, which cannot be said that there is lack of authority or jurisdiction.
32. Further the submission that by such circular, there cannot be any modification in the lease agreement unilaterally by the Government, also requires a closer scrutiny with reference to the lease agreement itself. The lease agreement produced on record, which has been referred to by both the sides, particularly, emphasized on Clause
- 3 at Page No.113 and also Clause 3 in Para - 6. The Clause - 3 of the lease agreement emphasized by learned Senior Counsel, Shri Mihir Thakore with much emphasizing on the word "prescribed" that the State Government may prescribe the royalty and in fact, the State Government has in exercise of power under Rule 27 already prescribed and, therefore, there cannot be any unilateral modification, has to be considered. Clause - 3 refers to, Page 38 of 47 C/SCA/17447/2006 JUDGMENT "3. Subject to the provision of clause 1 of this Part, the lessee/lessees shall during the subsistence of this lease pay to the State Government at such times and in such manner as the State Government may prescribe royalty in respect of any mineral/minerals removed by him/them from the leased area at the rate for the time being specified in the Second Schedule to the Mines and Minerals (Regulation and Development) Act, 1957."
33. Therefore when it is specifically provided by this clause relied upon by learned Senior Counsel, Shri Mihir Thakore that the Government may prescribe the royalty, meaning thereby, it may prescribe from time to time, which has been accepted and schedule of the Act has been referred to. This clause also refers to rate for the time being specified in 2nd schedule to the Act, 1957. This itself would suggest the rate that may be applicable and the Government may have power to make amendment for the rate of royalty. Therefore, this agreement also refers to an agreement or the consensus between the parties that the Government may charge at the rate in force. Therefore when the Rule 27(2)(a) of Rules, 1960 specifically provides for the power of the State Government, it Page 39 of 47 C/SCA/17447/2006 JUDGMENT could levy such royalty and could decide the mode of payment of rent or royalty. Therefore, the payment of advance royalty cannot be said to be without authority or jurisdiction. Again Rule 64D of the Rules, 1960 as referred to hereinabove, specifically provides by way of guideline and the note that the Government may introduce the advance payment for the royalty by collection and impose additional condition, meaning thereby, it has power to impose and/or introduce the system of advance payment of royalty. The word "introduce" read with Rule 27 of Rules, 1960, therefore, have to be read together and when note refers to "any additional condition" would suggest that it empowers to add the conditions, which are already there in existence. In other words, the condition in the lease agreement could be further added with an introduction of system of advance payment. It is in this background, the submissions made by learned Senior Counsel, Shri Mihir Thakore that there is no source of power or it is without jurisdiction, is misconceived.
34. Another facet of submission that even if this power or the jurisdiction in exercise of statutory Page 40 of 47 C/SCA/17447/2006 JUDGMENT provision of the Act or the Rules is assumed, it cannot be retrospective inasmuch as the amendment in Rule 27 or Rule 64A of the Rules, 1960 or the issuance of the Circular pursuant thereto is either in the year 2000 or 2005 and, therefore, charging of interest prior to 2000 cannot be accepted. There appears to be some substance in the submission inasmuch as any such levy of charge or fee or tax has to be prospective. Similarly any amendment in the Circular or the Notification issued pursuant to the statutory provision of law or the Rule would be prospective unless the statute itself provides for retrospective effect or retroactive application of such Rule or the Circular. In the facts of the case, therefore when the Circulars are of the year 2000 and 2005 without any reference to retrospective effect, there is no justification to apply it retrospectively. Therefore even though the submission made by learned Senior Counsel, Shri Mihir Thakore on the count that there is no authority or jurisdiction or source for the advance payment and the charge of interest for the delayed payment, is not accepted or believed. It Page 41 of 47 C/SCA/17447/2006 JUDGMENT certainly requires consideration with regard to the applicability of the Circular. The Circulars of the year 2000 and 2005 have reference to advance payment of royalty as stated in the Circular itself. However, learned Senior Counsel, Shri Mihir Thakore has also joined an issue with regard to the retrospective application and has also contended that even if it is accepted that the Circulars will have application and the Government has the authority or the jurisdiction, it should be from 2007 when the manner and procedure for the payment has been prescribed and, therefore, it has been contended that though the statute may provide for liability or charging provision unless the mechanism or the procedure is provided, it cannot take effect. The reliance has been made on the judgment of the Hon'ble Apex Court in case of C.I.T., Bangalore (supra) as well as Indian Banks' Association, Bombay (supra), however, the submissions which have been made on the principle about the charging section and the mechanism are well accepted. However in the instant case, same analogy may not be applicable for the simple reason that the payment of royalty Page 42 of 47 C/SCA/17447/2006 JUDGMENT is already prescribed as contended learned Senior Counsel, Shri Mihir Thakore that the lease agreement is in effect giving effect to Rule 27 of the Rules, 1960 and it is in exercise of such Rule, the lease agreement is executed, meaning thereby, the charging section for the payment of lease and Rule empowering the State Government to prescribe the time limit and the manner of payment is the charging section. Therefore it cannot be said that for the first time, when the Circular dated 06.07.2005 has provided for the procedure or the manner or mechanism for the payment and, therefore, liability for the payment of interest would arise for the delayed payment only thereafter, is misconceived. A close look at the Circular dated 06.07.2005 produced at AnnexureO has a reference to earlier Resolution dated 08.03.1977 and also earlier Circular dated 22.12.2000. This Circular dated 06.07.2005 only refers to a note of the Auditor General with regard to the interest and the confusion regarding the payment of interest. Therefore, it has been clearly mentioned referring to the letter dated 08.03.1977 that the Government had introduced the Page 43 of 47 C/SCA/17447/2006 JUDGMENT payment of royalty quarterly and by Circular dated 22.12.2000, advance payment of royalty has been provided. The Circular dated 22.12.2000 also refers to the applicability of Rule 64 of the Rules, 1960 and it refers to the Government of India's Resolution dated 25.09.2000. It is stated that in order to bring uniformity and give effect to Government Resolution dated 25.09.2000, the advance payment of royalty is introduced. It has been clearly stated that the State Government may implement the advance payment system as provided in Government Resolution dated 25.09.2000. Therefore, it cannot be said that for the first time, by Circular dated 09.07.2000, mechanism or procedure for the payment was brought in and, therefore, liability for the payment of interest towards the delayed payment could arise from that date. It is required to be stated at this stage that the amount of royalty has been mostly paid as stated by learned Senior Counsel, Shri Mihir Thakore with reference to some litigation and, therefore, main emphasis is only in respect of the payment of interest for the delayed payment of royalty, which is paid subsequently. It is in this Page 44 of 47 C/SCA/17447/2006 JUDGMENT background, the contention raised by learned Senior Counsel, Shri Mihir Thakore that even if the Circulars are made applicable, the liability could be with effect from 06.07.2005 and it cannot be prior thereto also, cannot be accepted. It is required to be stated that while accepting the contention about the retrospective application of the Circular, as it has been observed, the Circular may not have retrospective effect, meaning thereby, the demand for any application prior to 2000 inasmuch as the Circular dated 22.12.2000 was first made by the Government stating that the Government of India's Resolution dated 25.09.2000 could be implemented by the State Government for the purpose of advance payment of royalty with the additional condition. Therefore, the interest could not be charged for the so called delayed payment prior to 2000. Therefore where the royalty has been paid in the year 2000 or thereafter, the interest for the purpose of delayed payment of royalty has to be calculated as provided in Rule 64A of the Rules, 1960. Again Rule 64A of the Rules, 1960 will have application and not any clarification by way of Circular, Page 45 of 47 C/SCA/17447/2006 JUDGMENT which is also relied upon by learned AAG Shri Jani. It is evident from Rule 64A of the Rules, 1960 read with lease agreement that interest could be charged on the royalty from 60 days of the expiry of the date fixed by the Government for the payment of such royalty. Therefore, the grace period of 60 days has to be provided when the Rule has provided for that. The payment of royalty or the advance payment of royalty is, therefore, required to be calculated and interest for the delayed payment from 2000 onwards has to be considered and calculated in light of Rule, 64A of the Rules, 1960.
35. Therefore, the petitioners will have grace period of 60 days from the date on which the advance payment is payable. Though system of advance payment is accepted as valid but for the delayed payment, grace period of 60 days has to be provided as per the Rule 64A of the Rules, 1960. Therefore, the present petitions deserve to be allowed partly only to the extent of calculation of the payment of interest as per Rule 64A of the Rules, 1960.
36. The submission regarding the quashing the Page 46 of 47 C/SCA/17447/2006 JUDGMENT Circulars dated 22.12.2000, 06.07.2005 and 02.05.2006 on the grounds as stated hereinabove including the jurisdiction or the source of power, cannot be sustained and such arguments are rejected. However, the respective impugned notices in each petition deserves to be quashed and set aside.
37. In the circumstances, the impugned notices in each petition issued by the respondent authority are hereby quashed and set aside with a clarification that the respondent - State may issue notice afresh after considering gracing period of 60 days as per Rule 64A of the Rules, 1960 and the petitioners shall be liabile to pay the same in accordance with law, failing which, the State may proceed to recover the same as per the law.
38. With the aforesaid observation and directions, the present petitions stands allowed partly to the aforesaid extent. Interim relief, granted earlier, shall stand vacated/modified to that extent. Rule is made absolute to the aforesaid extent.
Sd/ (RAJESH H.SHUKLA, J.) Gautam Page 47 of 47