{"id":246615,"date":"1971-11-29T00:00:00","date_gmt":"1971-11-28T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/state-of-madhya-pradesh-anr-vs-dadabhoys-new-chirimiri-ponri-on-29-november-1971"},"modified":"2018-01-05T01:46:14","modified_gmt":"2018-01-04T20:16:14","slug":"state-of-madhya-pradesh-anr-vs-dadabhoys-new-chirimiri-ponri-on-29-november-1971","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/state-of-madhya-pradesh-anr-vs-dadabhoys-new-chirimiri-ponri-on-29-november-1971","title":{"rendered":"State Of Madhya Pradesh & Anr vs Dadabhoy’S New Chirimiri Ponri … on 29 November, 1971"},"content":{"rendered":"
Supreme Court of India<\/div>\n
State Of Madhya Pradesh & Anr vs Dadabhoy’S New Chirimiri Ponri … on 29 November, 1971<\/div>\n
Equivalent citations: 1972 AIR 614, \t\t 1972 SCR (2) 609<\/div>\n
Author: Shelat<\/div>\n
Bench: Shelat, J.M.<\/div>\n
           PETITIONER:\nSTATE OF MADHYA PRADESH & ANR.\n\n\tVs.\n\nRESPONDENT:\nDADABHOY'S NEW CHIRIMIRI PONRI HILL COLLIERY  CO. PVT.\tLTD.\n\nDATE OF JUDGMENT29\/11\/1971\n\nBENCH:\nSHELAT, J.M.\nBENCH:\nSHELAT, J.M.\nSIKRI, S.M. (CJ)\nREDDY, P. JAGANMOHAN\nMITTER, G.K.\n\nCITATION:\n 1972 AIR  614\t\t  1972 SCR  (2) 609\n 1972 SCC  (1) 278\n CITATOR INFO :\n RF\t    1976 SC1978\t (16)\n\n\nACT:\nThe Mines & Minerals (Regulation and Development) Act 67  of\n1957   as  amended  by\tAct  15\t of  1958,  ss.\t 9(1),\t and\n30A--Notification issued under Second Part of s. 30A whether\ncan  have  effect  of raising rate of  royalty\ton  coal  in\nrespect of pre 1949 mining leases above rate of 5%  provided\nin s. 9(1) read with Second Schedule.\n\n\n\nHEADNOTE:\nIn  1944  the Ruler of the erstwhile Indian State  of  Korea\ngranted\t to D a mining lease in respect of an area  of\t5.25\nsq..  miles  in the State.  According to the  terms  of\t the\nlease  the rates of royalty varied from 5% 0 25%  according\nto  the price of the coal per tons extracted from the  eased\narea,  that is to say, from 4 as. per ton if the  price\t was\nRs.  51-  per .on to 25% of the price per ton at  the  pit's\nhead if that price was Rs. 20\/or more.\tOn the merger of the\nKorea  State  with  Madhya Pradesh the\tleased\tarea  became\nsubject\t  to  the  provisions  of  the\tMines\t&   Minerals\n(Regulation and Development) Act 53 of 1948 and the  Mineral\nConcorde Rules, 1949., In 1952 D assigned the lease and\t its\nbenefits  to  the respondent company.  The State  of  Madhya\nPradesh\t granted  its  consent to  the\tassignment  for\t the\nunexpired  period  of  the lease  in  consideration  of\t the\nrespondent-company  agreeing  to comply with the  terms\t and\nconditions  of the lease including payment of royalties'  On\nDecember  28,  1967 Parliament passed the Mines\t &  Minerals\n(Regulation and Development) Act 67 of 1957 under its  power\nunder  Entry  54 of List I of the Seventh  Schedule  to\t the\nConstitution.\tThe  Act as amended by Act 15  of  1958\t was\nbrought\t into  force  by  a  notification  of  the   Central\nGovernment with effect from June 1, 1958.  Under s. 9(1)  of\nthe  Act  a lessee under a mining lease granted\t before\t the\ncommencement  of  the Act was liable to pay royalty  at\t the\nrate  for the time being specified in the  Second  Schedule.\nUnder  item  (1) of the Second Schedule royalty\t payable  in\nrespect\t of coal was the same as under r. 41 of the  Mineral\nConcession  Rules,  1949, that is, 5% of the  f.o.r.  price,\nsubject to. a minimum of fifty naye paise per ,on.  Under s.\n30A  which  had\t been inserted by Act 15 of  1958  with\t re-\ntrospective  effect, the provisions of s. 9(1) and s.  16(1)\nwere  not  applicable to mining leases granted\tbefore\t25th\nOctober 1949 in respect of coal, but the Central  Government\nbad  power if satisfied that it was expedient to do  so,  to\ndirect by notification in the Official Gazette, that all  or\nany  of the said provisions (including rules made under\t ss.\n13  and\t 18) shall apply to or in relation  to\tsuch  leases\n\"subject  to such exceptions and modifications, if  any,  as\nmay be specified in that or in any subsequent notification\".\nOn  December  29.  1961\t the  Central  Government  issued  a\nnotification in exercise of its power under the second\tpart\nof  s. 30A by which it directed application of s. 9(1)\twith\nimmediate  effect  to or in relation to\t the  pre-1949\tcoal\nmining\tleases \"subject to the modification that the  lessee\nshall  pay  royalty at the rate specified in  any  agreement\nbetween\t the  lessee and the lessor or at 2-1\/2%  of  f.o.r.\nprice,\twhichever is higher, in lieu of the rate of  royalty\nspecified  in respect of coal in the Second Schedule to\t the\nsaid Act.\" The Collector served upon the respondent  company\ndemand notices to pay the arrears of royalty for the  period\nDecember  29,  1961  to\t December  31,\t1965  at  the  rates\nspecified in the lease.\t The com-\n610\npany in a writ petition before the High Court urged that the\nexception; and modifications under s. 30A had to be and were\nintended  to  cushion  of  soften  the\tburden\twhich  would\notherwise  fall on the lessees under s. 9(1) and the  Second\nSchedule  and therefore any modification or exception  which\nwould  be  specified in such notification  was\tintended  to\nreduce\trather\tthan increase the rate\tof  royalty  payable\nunder  s.  9(1).  The State Government\tcontended  that\t the\nrespondent-company  was\t bound to pay royalty at  the  rates\nprovided in its lease, that being higher than the minimum.or\n2-1\/2%\tprovided  in  the  notification.   The\tHigh   Court\nrejected  the  contention  raised  by  the  State  as  being\ninconsistent   with  the  purpose  for\twhich  s.  30A\t was\nintroduced.  The State appealed.\nHELD : The notification was issued in exercise of the powers\ncon feared by s. 30A.  That power was to apply by issuing  a\nnotification there% under, ss. 9(1) and 16(1) and the  rules\nmade  under  ss.  13  and 18.\tThe  notification  in  terms\ndirected the application of s. 9(1) which meant that on\t and\nfrom December 29, 1961 the company would have to pay royalty\nas  prescribed under that sub-section read with\t the  Second\nSchedule, that is, at 5%.  The notification however  applied\ns.  9(1)  subject  to one  modification,  namely.  that\t the\nlessees under the pre 1949 leases were to pay royalty at the\nrate  provided\tin  their leases or  at\t 21%  whichever\t was\nhigher.\t  The modification was to the rate applicable  under\ns.,  9(1) and the Second Schedule, that is, to the  rate  of\n5%.   Considering the object with which s. 30A\twas  enacted\nviz.  to  phase the rate of 5% and not to impose it  at\t one\nstroke,\t the modification could not mean recovery at a\trate\ninconsistent with s. 9(1) and the Second Schedule. that\t is,\nat the rate higher than 5% provided thereunder. [620 D-F]\nSuch  a modification, if it were to be construed as  meaning\npayment\t at a rate higher than 5% would be in excess of\t the\npower  under  s..  30A\tand also  in  contravention  of\t the\nlanguage  of  s. 9(1) and the Second  Schedule.\t  A  lateral\nmeaning\t which\tthe State canvassed for could  therefore  be\naccepted only at the cost of invalidating the  notification.\nWhere two constructions are possible the one which sustains-\nthe validity of the law must be preferred. [620 G-H; 621 A]\nOn  a  plain reading of the notification it was\t clear\tthat\nwhat it meant was that instead of the rate flowing from\t the\napplication  of s. 9(1) and the Second Schedule, a  modified\nrate  should  be applied, that is, 'in lieu of the  rate  of\nroyalty'  specified in the Second Schedule, royalty  at\t the\nagreed rate should be charged if it was lower than 5% or  at\n21%  minimum, whichever was higher.  The  notification\tthus\ndid not empower the State Government to recover royalty at a\nrate higher than 5% in lieu of the rate chargeable under  s.\n9(1) and the Second Schedule which provided 5% only. [621 B-\nC]\nThe  High  Court  was therefore justified  in  quashing\t the\nimpugned orders also the demand notices issued in  pursuance\nof that order.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 167 and 168
\nof 1968.\n<\/p>\n
Appeals from the judgment and orders dated December 20, 1966
\nof the Madhya Pradesh High Court in Misc.  Petition Nos. 139
\nand 182 of 1966.\n<\/p>\n
I.   N. Shroff, for the appellants (in both the appeals).
\nS.   V. Gupte, Suresh A. Shroff, R. K. Thakur, Bhuvanesh
\nKumari, K. S. Cooper, M. K. Cooper, J. B. Dadachanji, O. C.\n<\/p>\n
 611<\/span><\/p>\n
Mathur\tand Ravinder Narain, for respondent No. 1  (in\tC.A.
\nNo. 167 of 1968).\n<\/p>\n
B.   P.\t Maheshwari, for, respondent No. 1 (in C.A. No.\t 168
\nof 1968).\n<\/p>\n
S. P. Nayar, for respondent No. 2 (in both the appeals).
\nThe Judgment of the Court was delivered by
\nShelat, J. By an Indenture of Lease, dated January 12, 1944,
\nmade between the then Ruler of Korea State of the one  part,
\nreferred  to  as  the lessor therein, and  Sir\tMukherji  B.
\nDadabhoy, referred to as the lessee, of the other part,\t the
\nlessor\tgranted\t to the lessee for a term of  30  years,  in
\nconsideration  of  payment of rents  and  royalties  therein
\nmentioned,  a  mining lease of an area\tmeasuring  5.25\t sq.
\nmiles\tdelineated  on\tthe  plan  annexed   thereto,\twith
\nliberties, powers and privileges and on terms and conditions
\ntherein\t set out.  By cl. (2) of that Indenture, the  lessee
\nagreed to pay during the subsistence of the lease  royalties
\nat  the\t rates and on dates set out therein.  The  rates  of
\nroyalty varied from 5% to 25% according to the price of coal
\nper ton extracted from the leased area, that is to say, from
\n4  ans. per ton if the price was Rs. 51\/- per ton to 25%  of
\nthe  price per ton at the pit’s head if that price  was\t Rs.
\n20\/- or more.\n<\/p>\n
On  the merger of the Korea State with Madhya Pradesh,\tinto
\nthe events of which it is not necessary for the purposes  of
\nthis  appeal  to go, the leased area became subject  to\t the
\nprovisions  of\tthe  Mines  and\t Minerals  (Regulation\t and
\nDevelopment)  Act,  53 of 1948 and  the\t Mineral  Concession
\nRules  made  thereunder on October 25, 1949.  In  1952,\t Sir
\nManeckji  agreed to assign the said lease and the  benefits,
\npowers and privileges thereunder provided to the respondent-
\ncompany.  Since, under that lease, such assignment could not
\nbe  made  without  the previous consent of  the\t lessor\t and
\nsince, by that time, owing to the merger of the Korea  State
\nwith  Madhya  Pradesh,\tthe  State  of\tMadhya\tPradesh\t had
\nacquired the said area and the rights in respect of it under
\nthe  said lease, an agreement was made between the State  of
\nMadhya\tPradesh\t and the respondent-company on\tNovember  6,
\n1952  under  which the State of Madhya Pradesh\tgranted\t its
\nconsent\t to the said assignment for the unexpired period  of
\nthe  said lease in consideration of  the  respondent-company
\nagreeing to comply with the terms and conditions of the said
\nlease  including  I  payment  of  royalties  to\t the   State
\nGovernment   as\t provided  therein.  That  meant  that\t the
\nrespondent-company  had\t to pay henceforth  royalty  to\t the
\nState of Madhya Pradesh as the lessor at the rates  provided
\nin the original lease.\n<\/p>\n
612<\/span><\/p>\n
An unexpected development in the meantime took place.  Under
\nan industrial award, called the Mazumdar Award, published on
\nMay  25,  1956,\t increased wages were  awarded\tto  colliery
\nworkers.  To meet the consequent increased expenditure which
\nthe  collieries\t had  to  incur,  the  Government  of  India
\nproportionately\t increased  the controlled  coal  price.   A
\nrepresentation\t made  by  the\trespondent-company  to\t the
\nGovernment  of India, dated October 5, 1956 shows  that\t the
\nincrease in respect of the coal extracted by the respondent-
\ncompany was from 14.6.0 and Rs. 15.6.0 to Rs. 17.6.0 and Rs.
\n18.6.0\tper  ton.  That increase, however, resulted  in\t the
\nrespondent-company  having  to pay royalty at  an  increased
\nrate since the rate of royalty payable by the company was on
\ngraded\tslabs varying according to the price of coal at\t the
\npit’s  head.  The company’s representation,  therefore,\t was
\nthat  the royalty payable by it should be modified so as  to
\nbring it in consonance with that payable under the 1948\t Act
\nread  with the Mineral Concession Rules, 1949 and the  First
\nSchedule  thereto,  namely,  at a fixed rate of\t 5%  of\t the
\nf.o.r. price subject to the minimum of 8 ans. per ton. (rule
\n41   (1)  (a)).\t  The  Government  of  India  referred\t the
\nrespondent-company to the State Government and advised it to
\nmake   a   similar  representation   to\t  that\t Government.
\nThereafter correspondence went on between the Government  of
\nMadhya Pradesh and the respondent-company for a considerable
\ntime.  The State, Government, however, was not agreeable  to
\nmodify the terms of the said lease and to bring the  royalty
\npayable\t thereunder in consonance with r. 41 of\t 1949  Rules
\nand the First Schedule thereto.\n<\/p>\n
On  December  28,  1957, Parliament  passed  the  Mines\t and
\nMinerals (Regulation and Development) Act, 67 of 1957  under
\nits  power under Entry 54 of List I of the Seventh  Schedule
\nto the Constitution.  Before the Act was brought into  force
\nby  a  notification  as\t provided by  S.  1(3)\tthereof,  an
\namending  Act, being Act 15 of 1958, was passed on  May\t 15,
\n1958,  By  a notification dated May 29,\t 1958,\tthe  Central
\nGovernment brought into force the Act with effect from\tJune
\n1, 1958.\n<\/p>\n
As its long title recites, the Act was passed to provide for
\nthe  regulation\t of mines and the  development\tof  minerals
\nunder the control of the Union.\t Sec. 2 declared that it was
\nin the public interest that the Union should take under\t its
\ncontrol\t the  regulation  of mines and\tthe  development  of
\nminerals.   Secs.  6 and 8 provided for the period  and\t the
\narea  in respect of which mining leases henceforth could  be
\ngranted.   Sec. 9(1) provided that a lessee under  a  mining
\nlease  granted before the commencement of the Act shall\t pay
\nroyalty\t at  the rate for the time being  specified  in\t the
\nSecond\tSchedule.   Its sub-sec. 2 provided  that  a  lessee
\nunder  a lease granted on or after the commencement  of\t the
\nAct
\n613<\/span>
\nshall likewise pay royalty in respect of any mineral removed
\nby him from the area leased to him at the rate for the\ttime
\nbeing.\tspecified in the Second Schedule in respect of\tthat
\nmineral.  Sub-sec. (3) authorised the Central Government  to
\namend the rates of royalty specified in the Second Schedule,
\nbut  not so as to exceed twenty per cent. of the sale  price
\nat  the pit’s head.  Under item (1) of the Second  Schedule,
\nroyalty payable in respect of coal was the same as under  r.
\n41 of the Mineral Concession Rules, 1949, that is, 5% of the
\nf.o.r.\tprice, subject to a minimum of fifty naye paise\t per
\nton.\n<\/p>\n
The  effect  of\t sec. 9 was that the  rate  of\troyalty\t was
\nenhanced in the case of those lessees, who, under the leases
\nobtained  by them before the commencement of the  Act,\twere
\npaying\tat a rate lesser than 5%, while the royalty  payable
\nby lessees similarly placed was reduced if they were  paying
\nroyalty\t at  a higher rate.  Under sec. 9(1) read  with\t the
\nSecond\tSchedule,  the respondent company  would  have\tbeen
\nrequired to pay royalty at the reduced, rate of 5 %  instead
\nof  at the rates varying from 5 % to 25 % according  as\t the
\nprice fluctuated from time to time.  Sec. 1 6 provided\tthat
\nall mining leases granted before October 25, 1949 should, as
\nsoon  as  may  be, after the commencement  of  the  Act,  be
\nbrought\t into conformity with the provisions of the Act\t and
\nthe Rules made under sees. 13 and 18.\n<\/p>\n
The  Amending Act, 15 of 1958, by its sec. 2, inserted\tinto
\nthe  Act sec. 30A with retrospective effect.   That  section
\nreads as under
\n\t      “Notwithstanding\tanything contained  in\tthis
\n\t      Act,  the\t provisions of\tsub-section  (1)  of
\n\t      section  9 and of sub-section (1)\t of  section
\n\t      16,  shall  not  apply to or  in\trelation  to
\n\t      mining  leases granted before the 25th day  of
\n\t      October,\t1949,  in respect of coal,  but\t the
\n\t      Central Government, if it is satisfied that it
\n\t      is expedient so to do, may, by notification in
\n\t      the  Official Gazette, direct that all or\t any
\n\t      of  the said provisions (including  any  rules
\n\t      made under sections 13 and 18) shall apply  to
\n\t      or in relation to such leases subject to\tsuch
\n\t      exceptions  and modifications, if any, as\t may
\n\t      be  specified  in that or\t in  any  subsequent
\n\t      notification.”\n<\/p>\n
The section falls into two parts.  Under the first part, the
\noperation of sections 9(1) and 16(1) was suspended as far as
\npre-1949 mining leases for coal were concerned.\t The  second
\npart,  however,\t empowered the Central\tGovernment,  on\t its
\nsatisfaction that it was expedient to do so, to direct\tthat
\nall  or any of those provisions, including rules made  under
\nsees.  13 and 18, should apply to such leases  subject\tto
\nsuch exceptions and modi-\n<\/p>\n
614<\/span><\/p>\n
fications,  if\tany, as might be specified in  that  or\t any
\nsubsequent notification.  The “exceptions and modifications”
\nwhich  might  be  so specified\tin  the\t notification  would
\nobviously  be  in  regard  to  the  application,  when\tsuch
\napplication  was decided upon, of sees. 9(1) and  16(1)\t and
\nthe relevant rules.\n<\/p>\n
As a result of the suspension of the operation of sec. 9(1),
\nand  consequently  of the Second  Schedule,  the  respondent
\ncompany\t remained liable to pay under its lease\t royalty  at
\nthe  graded rates provided therein which, in consequence  of
\nthe  increase in the controlled price of coal, came to\tmore
\nthan 5% prescribed by the Second Schedule.
\nOn  December  29,  1961, the  Central  Government  issued  a
\nnotification in exercise of its power under the second\tpart
\nof  sec. 30A, by which it directed application of sec.\t9(1)
\nwith immediate effect to or in relation to the pre-1949 coal
\nmining leases ” subject to the modification that the  lessee
\nshall  pay  royalty at the rate specified in  any  agreement
\nbetween the lessee and lessor or at 2-1\/2% of f.o.r.  price,
\nwhichever  is  higher,\tin  lieu  of  the  rate\t of  royalty
\nspecified  in respect of coal in the Second Schedule to\t the
\nsaid  Act.”  The respondent-company would have\tbeen,  under
\nthis  notification, liable to pay royalty at the rate of  5%
\nunder the Second Schedule.  The question is whether the said
\nmodification made any difference.\n<\/p>\n
It  appears that the respondent-company continued  to  press
\nthe Central Government to modify and reduce the royalty pay-
\nable  by it under its lease.  This is seen from the  Central
\nGovernment’s  letter,  dated  July  4,\t1962,  by  which  it
\ninformed the company in reply to the company’s letter of May
\n21,  1962 that the question of the rate of royalty  payable,
\nby  the\t colliery  was,\t in  consultation  with\t the   State
\nGovernment,  under  consideration and that  action  in\tthat
\nconnection would shortly be taken.  It would seem that as  a
\nresult of the company’s representations and consultation  by
\nthe Central Government with the State Government, the latter
\nissued an order, dated September 23, 1963 to the  Collector,
\nSurguja,  directing  him  to recover  from  the\t respondent-
\n,company royalty at the rate of 5% with effect from July  1,
\n1958 subject to the condition that the royalty amount should
\nnot  be less than Rs. 2,47,000\/- per year.  The\t Government,
\nhowever,  directed the Collector to recover the\t outstanding
\nroyalty due for the period prior to July 1, 1958 at the\t old
\nrates, that is, as provided by the lease.\n<\/p>\n
The  State Government, however, changed its mind  later\t on,
\nfor,  by  its  order  dated October  1,\t 1965  it  partially
\nsuspended  its order of September 23, 1963 and directed\t the
\nCollector  to recover royalty as from December 29,  1961  at
\nthe rates prescribed under the lease “in accordance with the
\nGovernment of
\n 615<\/span>
\nIndia’s\t notification  No.  S.O. 30,  dated  29th  December,
\n1961″.\t Representations  by the respondent-company  to\t the
\nState  Government  to charge royalty at\t 5%  proved  futile.
\nHowever, on January 1, 1966, the Central Government issued a
\nnotification under which it directed the lessees of pre-1949
\nleases to pay royalty at 5% of the f.o.r. price.  Thereupon,
\nby its order, dated February 11, 1966, the State  Government
\nissued\tinstructions to the Collector to charge\t royalty  at
\nthat  rate  with  effect from 1st  of  January,\t 1966.\t The
\ncontroversy  between the parties, therefore, is confined  to
\nthe  rate of royalty at which the company was liable to\t pay
\nroyalty\t for  the  period  between  December  29,  1961\t and
\nDecember 31, 1965.\n<\/p>\n
On  January 25, 1966, the Collector served upon the  respon-
\ndent-company  demand notices to pay the arrears\t of  royalty
\nfor the aforesaid period at the rates provided in the lease.
\nThe  company thereupon filed a revision before\tthe  Central
\nGovernment  under the Mineral Concession Rules, 1960.\tThat
\nrevision was pending when the company filed a writ  petition
\nin  March  1966\t in the High Court  of\tMadhya\tPradesh\t for
\nquashing  the  said  order,  dated  October  1,\t 1965,\t the
\nrejection  of  its representation by the  State\t Government,
\ndated November 19, 1965 and the said demand notices.
\nThe respondent-company urged that the purpose of  suspending
\noperation  of S. 9(1), till a notification applying  it\t was
\nissued by the Central Government, was not to burden  lessees
\nunder pre-1949 leases with royalty at the rate of 5% of\t the
\nf.o.r.\tprice  for the time being prescribed in\t the  Second
\nSchedule, and that even when a notification applying sec.  9
\nwas  to be issued, the Central Government was  empowered  to
\ndirect that that section, the Second Schedule and the  Rules
\nmade under sees. 13 and 18 would apply with such  exceptions
\nand  modifications  as\tmay  be specified  in  such  or\t any
\nsubsequent notification.  Such exceptions and  modifications
\nhad to be and were intended to cushion or soften the  burden
\nwhich  would otherwise fall on the lessees under  sec.\t9(1)
\nand the Second Schedule, and therefore, any modification  or
\nexception which would be specified in such notification\t was
\nintended to reduce rather than increase the rate of  royalty
\npayable\t under\tsec. 9(1).  The contention,  therefore,\t was
\nthat the notification, dated December 29, 1961 could not  be
\nread  to mean that lessees, such as the\t respondent-company,
\nwhose  leases provided for royalty at a rate higher than  5%
\nwere  to pay royalty at a rate higher than the one  provided
\nunder  sec. 9(1).  The State Government, on the other  hand,
\nurged  that the language of the notification was  clear\t and
\nprovided  treat such lessees were to pay royalty  either  at
\nthe  rate provided in their leases or if the  rate  provided
\ntherein was less than 2-1\/2% at that rate, whichever was
\n616<\/span>
\nhigher.\t Therefore, oil a plain construction of the words of
\nthe  notification, the respondent-company was bound  to\t pay
\nroyalty\t at  the  rates provided in its\t lease,\t that  being
\nhigher\t than  the  minimum  of\t 2-1\/2%\t provided   in\t the
\nnotification.  The High Court rejected the contention raised
\nby  the\t State as being inconsistent with  the\tpurpose\t for
\nwhich sec. 30A was introduced.\tThe High Court observed :\n<\/p>\n
\t      “In our view, the true construction and effect
\n\t      of  the notification dated 29th December\t1961
\n\t      is  that\tin  regard  to\tcoal  mining  leases
\n\t      granted  before 25th October 1949 if the\trate
\n\t      of royalty stipulated in the lease was  higher
\n\t      than  5%\tof f.o.r. price per  ton,  then\t the
\n\t      royalty  payable\tfrom 29th December  1961  in
\n\t      respect  of coal removed from the leased\tarea
\n\t      after that date would be the one specified  on
\n\t      that  date in the Second Schedule,  namely,  5
\n\t      per cent of f.o.r. price per ton; in  relation
\n\t      to leases where the rate of royalty stipulated
\n\t      in  less than 5 per cent but more\t than  2-1\/2
\n\t      per cent of f.o.r. price per ton, the rate  of
\n\t      royalty  would  be the one  specified  in\t the
\n\t      lease  agreement;\t and in\t respect  of  leases
\n\t      where  the rate of royalty specified was\tless
\n\t      than  2-1\/2 per cent of f.o.r. price per\tton,
\n\t      the  rate\t would be 2-1\/2 per cent  of  f.o.r.
\n\t      price  per  ton from 29th December  1961.\t  It
\n\t      follows from this that the  petitioner-company
\n\t      which was, under the terms of its lease liable
\n\t      to  pay  royalty at a rate higher than  5\t per
\n\t      cent  of f.o.r. price per ton for\t the  period
\n\t      from 29th December .1961, is rightly  entitled
\n\t      to  claim\t that under the\t notification  dated
\n\t      29th  December 1961, it cannot be called\tupon
\n\t      to pay royalty from 29th September 1961 at the
\n\t      rate stipulated in the lease granted to it but
\n\t      only at the rate of 5 per cent of f.o.r. price
\n\t      per ton specified in the Second Schedule.”\n<\/p><\/blockquote>\n
The  High  Court  also rejected the  State’s  contention  as
\nregards\t its  order dated September 23, 1963 that  once\t the
\nsaid notification was issued, the State Government could not
\ncharge\troyalty at a rate lower than the one  prescribed  in
\nthe  said notification, and that therefore, the State  acted
\nproperly in rescinding its said order.\tThe High Court\theld
\nthat  order amounted to a modification of the terms  of\t the
\nlease in consideration of the lessee guaranteeing payment of
\nthe minimum amount of Rs. 2.47,000\/- a year, which the State
\nGovernment was competent to make, and that therefore, it had
\nno right to rescind it unilaterally.  On this view, it\theld
\nthat  the company’s liability for royalty as  from  December
\n29,  1961 would be at the reduced rate of 5% of\t the  f.o.r.
\nprice and not as provided by the original lease deed.\n<\/p>\n
 617<\/span><\/p>\n
As against these conclusions, counsel for the State took  us
\nthrough\t the  terms of the lease and the provisions  of\t the
\nAct, and in particular sees. 9 and 30A, and formulated three
\ncontentions  for  consideration.  These were, (1)  that\t the
\nHigh  Court erred in construing the relevant  provisions  of
\nthe Act and particularly sec. 30A, (2) that it also erred in
\nconstruing the said notification, and (3) that the order  of
\nthe  State  Government of September 23, 1963  was  erroneous
\nhaving regard to the said notification which fixed the\trate
\nof royalty payable by the lessees under the pre-1949 1eases,
\nand that order being inconsistent with the notification\t had
\nto  be\trescinded. by its subsequent order of  November\t 19,
\n1965.  Counsel urged that upon precision of its order  dated
\nSeptember  23,\t1963, the State Government was\tentitled  to
\nrecover royalty as from the date of the said notification at
\nthe rate agreed to in the lease or at 2-1\/2%, whichever\t was
\nhigher.\t  Therefore, the said demand notices were valid\t and
\nhad to be complied with.\n<\/p>\n
It  is\twell-known that prior to the enactment of  the\t1948
\nAct,’  leases  of mining areas had been granted\t by  diverse
\nauthorities on different terms and conditions.\tThe rate  of
\nroyalty\t under\tthose leases were inevitably  divergent\t and
\nwere often fixed at very low rates.  The purpose of enacting
\nthe  1948 Act was to bring about uniformity in such leases
\nand with that lend that Act had made provisions for power to
\nmodify\tthe terms and conditions both in regard to the\tarea
\nand  the  period  under such leases.   The  object  of\tsuch
\nprovisions  was to regulate in a systematic  and  scientific
\nmanner development of mining and minerals.  Though under the
\nConstitution  that subject was left to the States,  a  power
\nwas  carved  out  by entry 54 in List I\t for  the  exclusive
\nexercise  of  it by the Centre.\t The  consequence  was\t‘the
\nenactment of Act 67 of 1957 which was brought into operation
\nfrom June 1, 1958.\n<\/p>\n
The  purpose  of passing that Act is clearly seen  from\t the
\ndeclaration  required  under entry 54, List I,\tin  sec.  2,
\nnamely,\t that it was necessary for the Union to\t take  under
\nits  control  regulation  of mines and\tthe  development  of
\nminerals.   In\tpursuance  of  that  object  the  Act\tmade
\nprovisions  with regard to the persons to  whom\t prospecting
\nlicences and mining leases should be granted (ss. 4 and\t 5),
\nthe  maximum area for which such licences and leases  should
\nbe  granted (s. 6), and the period for which a mining  lease
\nshould\tbe  granted  (S. 8).  In order\tthat  uniformity  in
\nleases granted before and after the commencement of the\t Act
\ncould  be  attained, power was also conferred to  bring\t all
\nmining\t leases\t granted  before  October  25,\t 1949\tinto
\nconformity with the provisions of the Act and the Rules made
\nthereunder. (ss. 16, 17 and 18).  As regards royalty payable
\nby  the lessees under diverse kinds of leases for  different
\nminerals  granted  before October 25,  1949  uniformity\t was
\nsought to be brought about sec. 9(1).\n<\/p>\n
618<\/span><\/p>\n
In the 1948 Act the Central Government had the power to make
\nrules  for,  regulating the grant of mining leases,  or\t for
\nprohibiting  the,  grant of such leases in  respect  of\t any
\nmineral\t including  the power to make rules as\tregards\t the
\nterms  upon which and the conditions subject to\t which\tsuch
\nleases\twould be granted. (s. 5) Under sec. 7 of  that\tAct,
\nthe  Central Government also could make rules for  modifying
\nor  altering  the  terms and conditions\t of  leases  granted
\nbefore the commencement of that Act, that is, before October
\n25,  1949.   In pursuance of the power under  sec.  5,\tthe
\nCentral Government framed the Mineral Concession Rules, 1949
\nand  provided by r. 41 thereof read with the First  Schedule
\nthereto that the rate of royalty chargeable under a lease in
\nrespect of coal would be 5% of the f.o.r. price per ton.  No
\nrules,\thowever, were made under sec. 7, and therefore,\t the
\nrate  of royalty provided by r. 41 did not  govern  pre-1949
\nleases,\t  with\tthe  result  that  the\tlessees\t  thereunder
\ncontinued  to  pay  royalty  provided  in  their  respective
\nleases.\n<\/p>\n
Such diversity in the rates of royalty was sought to be done
\naway with by prescribing uniform rates of royalty in respect
\nof  each  mineral  through  sec. 9. Item  1  in\t the  Second
\nSchedule prescribed, in respect of coal, the rate of royalty
\nat 5% of the f.o.r. price subject to a minimum of fifty naye
\npaise per ton.\tThe result of S. 9 and item I in the  Second
\nSchedule  was  that all lessees whether\t their\tleases\twere
\ngranted\t before or after the commencement of the Act  became
\nliable\tto pay royalty at the uniform rate of 5% in  respect
\nof coal.  Since under the 1948 Act the lessees, whose leases
\nwere granted on and after the commencement of that Act, were
\nliable\tto  pay\t royalty  at 5% under  r.  41  of  the\t1949
\nConcession Rules, sec. 9 did not make any difference to them
\nas it prescribed the same rate.\t But so far as lessees under
\nthe  pre1949  leases were concerned, the new  rate  affected
\nthem, inasmuch as those, who, under their leases were paying
\nat  a lesser rate became liable to pay royalty at 5%,  while
\nthose  who were paying at a higher rate had to pay  at,\t the
\nlower  rate of 5% only.\t Besides, the change in the rate  of
\nroyalty\t under\tsec. 9, pre-1949 leases were  liable  to  be
\nmodified in respect of the area and the period under sec. 16
\nand the rules made under secs. 13 and 18.\n<\/p>\n
Even before the new Act was brought into force, consequences
\nof  enforcing  such uniformity and the\tresultant  automatic
\nspurt in the rate of royalty, especially in respect of coal,
\nhad  been  realised.   The  Central  Government,  therefore,
\nitself sponsored the insertion of sec. 30A by sec. 2 of\t the
\nAmendment  Act, 15 of 1958, with retrospective effect.\t The
\nconsequences flowing from the attempted uniformity were\t set
\nout in the Statement of Objects and Reasons(1) for  amending
\nthe Act.  The statement acknowledged
\n(1)  Gazette  of India, Extra., Part 2, Sec.  2,  Jan.-July,
\n1958, p. 507.\n<\/p>\n
619<\/span><\/p>\n
that coal, as the basic fuel, occupied a unique position  in
\nthe  country’s\teconomy\t and  had  always,  therefore,\tbeen
\ntreated\t  differently\tfrom  other   minerals.\t   It\talso
\nacknowledged  that  operation of secs. 9 and 16\t would\thave
\n“numerous  desirable consequences” such as  unsettling\tcoal
\nindustry  as  a whole and retarding the\t programme  of\tcoal
\nproduction  estimated  in  the, Second\tFive  Year  Plan  on
\naccount\t of  the sudden and automatic rise  in\tthe  royalty
\npayable\t by lessees, who under their leases  granted  before
\nOctober\t 25, 1949 generally had to pay royalty\t“much  below
\nthe  rate” prescribed under the Second Schedule.  A  similar
\nanxiety\t was  also  expressed  during  the  passage  of\t the
\nAmendment Bill by the concerned Minister stating that if the
\nautomatic enhancement under sec. 9(1) in the rate of royalty
\nat  5%\twere  to  be  implemented,  the\t results  would\t  be
\nunfortunate.  For, besides affecting the rate of  production
\nof coal, it would also adversely affect the price  structure
\nin other industries, such as cement, steel and other similar
\nindustries, and that for that reason “by this Amending\tBill
\nthat mistake is sought to be rectified”.  “Instead of giving
\nthose  increases automatically power will not be  taken\t to
\nphase  them  in such a way that the upward revision  is\t not
\npushed\tup to the maximum limit (i.e. five per\tcent.)\twith
\none  jerk,  but it is so phased that it does not  cause\t any
\nupset in the coal production programme and in the economy of
\nthe country as a whole”.(1). The mischief which the Amending
\nAct, 1958 sought to avoid was thus to prevent enhancement of
\nroyalty at one stroke to 5%.\n<\/p>\n
As  aforesaid, sec. 30A suspended the application  of  secs.
\n9(1) and 16(1) in relation to pre-1949 leases and authorised
\nthe Central Government to direct that all or any of the said
\nprovisions  (including\trules made under secs.\t13  and\t 18)
\nshall apply to or in relation to such leases subject to such
\nexceptions and modifications, if any, as may be specified in
\na notification.\t As a result of the suspension of Sec. 9(1),
\nlessees under pre-1949 leases were relegated to the original
\nposition  under\t which they were liable to  pay\t royalty  at
\nrates agreed to in those leases whether the rate was over or
\nbelow  5%  provided  by sec.9(1). As and  when\tthe  Central
\nGovernment  issued the notification envisaged by the  second
\npart,  such lessees would be obliged to pay royalty  at\t the
\nrate  of 5% as prescribed for the time being in\t the  Second
\nSchedule, and even if the Government were, in the  meantime,
\nto  enhance  the rate as authorised by sec.  9(3)  upto\t the
\nmaximum\t rate of 20% at such rate but never more  than\t20%.
\nThe  second  part thus contemplated payment of\troyalty,  on
\nsec. 9(1) being made applicable, at the most, at the rate of
\n5% only, as no increase had till. then been-made under\tsec.
\n9(3).\n<\/p>\n
(1)  Rajya Sabha Proceedings, dated November
\n620<\/span>
\nOn December 29, 1961, the Central Government “in exercise of
\nthe  powers conferred by sec. 30A” issued  the\tnotification
\ndirecting  that the provisions of sub-sec. (1) of sec. 9  of
\nthe  said  Act shall apply with immediate effect  to  or  in
\nrelation  to  pre-1949 coal mining leases,  subject  to\t the
\nmodification that such lessees shall pay royalty at the rate
\nspecified  in  the agreements between the  lessees  and\t the
\nlessors or at 2-1\/2% of f.o.r. price, whichever was  higher,
\n“in lieu of the rate of royalty specified in respect of coal
\nin the Second Schedule to the said Act”.\n<\/p>\n
The  argument  urged  on behalf of  the\t State\tboth  before
\nthe  .High  Court and before us was  that  the\tnotification
\nclearly\t envisaged payment of royalty at the rate agreed  to
\nbetween\t the lessor ,and the lessee or at  2-1\/2%  whichever
\nwas  higher.   Since,  the agreement  in  the  present\tcase
\nprovided for royalty at graded rates which were higher\tthan
\n21%,  the company had to pay royalty at such  agreed  rates.
\nThe  argument,\tin our opinion, is untenable :as it  is\t not
\nborne out by the language of the notification itself and  of
\nsec.  30A  and was therefore rightly repelled  by  the\tHigh
\nCourt.\n<\/p>\n
The  notification was issued, as it recites, in exercise  of
\nthe powers conferred by sec. 30A. That power was to  apply,
\nby  issuing a notification thereunder, sees. 9(1) and  16(1)
\nand the rules made under sees. 13 and 18.  The\tnotification
\nin  terms directed the application of sec. 9(1) which  meant
\nthat on and from December 29, 1961 the company would have to
\npay  royalty as prescribed under that sub-section read\twith
\nthe  Second  Schedule, that is, at  5%.\t  The  notification,
\nhowever,  applied  sec. 9(1) subject  to  one  modification,
\nnamely,\t that lessees under the pre1949 leases were  to\t pay
\nroyalty\t at,  the rate provided in their leases\t or  at\t 21%
\nwhichever  was\thigher.\t The modification was  to  the\trate
\napplicable under sec. 9(1) and the Second Schedule, that is,
\nto  the rate of 5%.  Considering the object with which\tsec.
\n30A  was enacted, viz., to phase the rate of 5%, and not  to
\nimpose\tit  at one stroke, the modification could  not\tmean
\nrecovery  at  a\t rate inconsistent with sec.  9(1)  and\t the
\nSecond\tSchedule,  that\t is, at ,the  rate  higher  than  5%
\nprovided thereunder.\n<\/p>\n
Such  a modification, if it were to be construed as  meaning
\npayment\t at a rate higher than 5% would be in excess of\t the
\npower  under  sec.  30A and also  in  contravention  of\t the
\nlanguage   of  sec.  9(1)  and\tthe  Second   Schedule.\t   A
\nmodification,  if  any, would be for charging royalty  at  a
\nrate lesser than the one provided under sec. 9 (1 ) and\t the
\nSecond Schedule, and not at a rate higher than such rate.  A
\nconstruction to the contrary would mean exercise of power in
\nexcess\tof that conferred by the section and  would affect
\nthe validity of the notification.  A literal meaning which
\nthe State canvassed for can, therefore, be accepted only  at
\nthe cost of invalidating the notification.\n<\/p>\n
 621<\/span><\/p>\n
The rule of construction that a court construing a provision
\nof  law\t must presume that the intention  of  the  authority
\nmaking\tit  was\t not to exceed its power  and  to  enact  it
\nvalidly\t   is\twell-settled.\t Where,\t   therefore,\t two
\nconstructions  are  possible,  the one\twhich  sustains\t its
\nvalidity  must\tbe  preferred.\tOn a plain  reading  of\t the
\nnotification,  however, it is clear that what it  meant\t was
\nthat  instead  of the rate flowing from the  application  of
\nsec. 9(1) and the Second Schedule, a modified rate should be
\napplied, that is, “in lieu of the rate of royalty” specified
\nin the Second Schedule, royalty at the agreed rate should be
\ncharged\t if  it\t was lower than 5%, or\tat  2-1\/2%  minimum,
\nwhichever  was\thigher.\t  The notification,  thus,  did\t not\n<\/p>\n
-empower  the State Government to recover royalty at a\trate
\nhigher\tthan  5% in lieu of the rate chargeable\t under\tsec.
\n9(1) and the Second Schedule which provided 5% only.
\nIt appears that the State Government itself understood\tsuch
\na  construction\t as  proper,  for,  if\tit  had\t  understood
\notherwise,  it\twould  not  have  issued  its  order   dated
\nSeptember  23,\t1963  directing\t the  Collector\t to  recover
\nroyalty\t at  5%\t pursuant to the  correspondence  which\t had
\nensued\tbetween the company, the Central Government and\t the
\nState Government.  If it had understood the notification  in
\nthe  manner now urged by its counsel, it would have at\tonce
\npointed\t out both to the company and the Central  Government
\nin  that  correspondence  that it was  entitled\t to  recover
\nroyalty at the rates agreed to in the lease instead of at  5
\n%.  It\twas  only  in 1965 that\t it  changed  its  mind\t and
\ncancelled its previous order.  On the construction placed by
\nus  on\tsec.  30A  and the said\t notification,\tit  was\t not
\nentitled  so to do.  The High Court, in our view, was  right
\nin quashing that order as also the demand notices issued  in
\npursuance of that order.\n<\/p>\n
In  view of our decision on the question of construction  of
\nthe  notification  and sec. 30A, it becomes  unnecessary  to
\nconsider  the  second  contention raised  by  the  company’s
\ncounsel that the order of 1963 amounted to a modification of
\nthe  terms  of\tthe lease, and\tthat  therefore,  the  State
\nGovernment    could   not   unilaterally   supersede\tsuch
\nmodification by issuing a subsequent order in 1965.  For the
\nreasons aforesaid, we are in agreement with the High Court’s
\nconclusions.\n<\/p>\n
Civil Appeal No. 168 of 1968 involves the same question\t and
\nour decision in that appeal, must, therefore, be governed by
\nthe decision in this appeal.\n<\/p>\n
Both  the  appeals, therefore, fail and are  dismissed\twith
\ncosts.\t‘Mere will, however, be one set of hearing costs  as
\nthe arguments in both the appeals have been common.\n<\/p>\n
G.C.\t\t\t  Appeals dismissed.\n9-L643 Sup CI\/72\n622<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India State Of Madhya Pradesh & Anr vs Dadabhoy’S New Chirimiri Ponri … on 29 November, 1971 Equivalent citations: 1972 AIR 614, 1972 SCR (2) 609 Author: Shelat Bench: Shelat, J.M. PETITIONER: STATE OF MADHYA PRADESH & ANR. Vs. RESPONDENT: DADABHOY’S NEW CHIRIMIRI PONRI HILL COLLIERY CO. PVT. LTD. DATE OF JUDGMENT29\/11\/1971 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-246615","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nState Of Madhya Pradesh & Anr vs Dadabhoy'S New Chirimiri Ponri ... on 29 November, 1971 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/state-of-madhya-pradesh-anr-vs-dadabhoys-new-chirimiri-ponri-on-29-november-1971\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"State Of Madhya Pradesh & Anr vs Dadabhoy'S New Chirimiri Ponri ... on 29 November, 1971 - 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