PETITIONER:
STATE OF BIHAR & ANR. ETC.
Vs.
RESPONDENT:
KHAS KARANPURA COLLIERIES LTD. ETC.
DATE OF JUDGMENT06/08/1976
BENCH:
SINGH, JASWANT
RAY, A.N. (CJ)
BEG, M. HAMEEDULLAH
CITATION:
1976 AIR 1978 1977 SCR (1) 157
1976 SCC (4) 134
ACT
Mines & Minerals (Regulation & Development) Act, 1957--s.
30A Scope-of.
HEADNOTE
Prior to October 25, 1949, the proprietors; of big
estates granted mine leases either without payment of
royalty or at very low royalty. In most c the lessees
granted sub-leases on similar terms. The Mines and Mine
(Regulation and Development) Act, 1948, prohibited grant of
any mine lease except in accordance with rules made under
the Act. Rule. 41 of Mineral Concession Rules, 1949 which
came into force on October 25, 1 -made it compulsory for
every mining lease to include a condition regard payment of
royalty on the minerals. The rule, however, did not apply
leases or sub-leases granted prior to October 25, 1949.
Under the Bihar Land Reforms Act, 1950 passed by the
State legislate the interest of a proprietor or tenure-
holder as. well as of the lessee including rights in mines
and minerals, came to an end and vested absolutely in State.
Section 10 provided that the whole or part of the estate or
term comprised in a subsisting lease shall be deemed to have
been leased by State Government to the holder for the
remainder of the term of lease.
The Mines and Minerals (Regulation and Development) Act,
1957 w replaced the 1948Act came into force on June 1, 1958.
Section 9(1) of Act made it obligatory for the holder of a
mining lease granted before commencement of the 1957-Act to
pay in respect of any mineral removed him from the leased
area after December 28, 19’57, royalty at a specified
Section 16 provided that a mining lease granted before
October 25, 194_9, w be brought into conformity with the
provisions of the 1957-Act and the r Section 29 provided for
the effective continuance of the rules made under 1948-Act
in so. far as they related to. matters provided for in the
1957 and were not inconsistent therewith.
Section 30A which was inserted in the 1957 Act provides
that the proviso of s. 9(1) and of s. 16(1) "shall not apply
to or in relation to mining lease granted before October 25,
1949" and empowered the Central Government direct by notifi-
cation that all or any of the provisions of ss. 9(1) and 1.
shall apply to or in relation to such leases subject to such
exceptions and notifications if any, as might be specified
in that or in any subsequent notification Section 30A was
given retrospective effect.
In 1967, the High Court, in Narendra Nath Mandal v.
State of Bihar & held (i) that a lessee of a mine was liable
to pay royalty for the period being from November 3, 19,51
(date of vesting of an estate under the Bihar Reforms Act)
to. May 31, 1958 by virtue of s. 29 of 1957-Act read with
and Schedule I of 1949-Rules and (ii) from June 1, 1958 (the
date of col into force of the 1957 Act) to December 31, 1965
b.y virtue of s. 9(1) of Act read with the second Schedule
there to because neither s. 30A nor notification was ap-
plicable to the, lease in view of the effect of the vesting
estate in the State and the coming into. existence of a new
lease by fore s. 10 of the Act. After this decision the
State issued demand notices to respondents for payment of
royalty in accordance with the decision of High Court.
Allowing the respondents’ Writ petitions, the High Court
quashed the der notices. The High Court held that Mandal’s
case had been wrongly decide
On the question whether the claim for royalty (1) prior
to June 1, and (2) from June 1, 1958 to December 31, 1965
could be sustained.
158
Dismissing the appeals of the State,
HELD: (1) The High Court was right in holding that the claim
for yalty prior to June 1, 1958 was wholly unfounded and
cannot be supported. Bihar Mines Ltd. v.-Union of India this
Court held that the consequence of the operation of ss.
4(1)(a) and 10.(1) of the Bihar Act was that the original
ntractual leases came to an end on the date of vesting and
for the remainder the terms of those leases fresh statutory
leases in favour of the lessees me into being under s. 10(1)
of the Act as a result of which from November 3, 1951, the
subsisting leases came to be treated as new statutory leases
wanted by the State Government in terms of s. 1D(1) of the
Bihar Act, 1950. the 41 of the Mineral Concession Rules,
1949 applied only to contractual cases envisaged by Chapter
IV of the Rules and not to the statutory leases which came
into existence as a result of the deeming provision in s. 10
of e Bihar Land Reforms. Act. [169 B; 163 B-D]
Bihar Mines Ltd. v. Union of India [1967] 1 S.C.R. 707;
A.I.R. 1967 S.C. 7 followed.
Chhatu Ram Horil Ram Private Ltd. v. State of Bihar & Anr.
[1968] 2 C.R. 881; A.I.R. 1969 S.C. 177 applied.
(2) The High Court was also right in its view that the
demand for payment of royalty for the period from June 1,
1958 to December 31, 1965 cannot
sustained. [168 G]
(a) Section 30A which has an over-riding effect on the other
provisions of Act, affords a temporary protection from
applicability of ss. 9(1) and
(1) of the Act not only to the leases granted before
October 25, 1949 but also the statutory leases which came
into existence as a result of the operation of 10(1) of the
Bihar Land Reforms Act and replaced the former category of
ses subsisting immediately before the date of vesting in the
State of the ates or tenures on the publication of the
notifications under s. 3 and 3A the Bihar Land Reforms Act.
This conclusion irresistibly flows from the tds "or in
relation to" occurring in s. 30A after the words "shall not
apply and before the words "mining leases granted before the
251h day of October-9". These words, enlarge the scope of
s. 30Pt and bring within the umbrella its protection mining
leases, granted before October 25, 1949 as also the utory
leases which sprang up in their place by virtue of the legal
fiction tained in s. 10(1 ) of the Bihar. Land. Reforms Act
on the ..vesting in the se of the estates or tenures. As
expressly ordained by s. 10(1) and (2) the Bihar Land Re-
forms Act not only the ’holder 017 a statutory lease had be
the same as the holder of a subsisting lease for the remain-
der of the of that lease but the terms and conditions of
the statutory lease had also ’aris mutandis to be the same
as the terms and conditions of the subsisting e i.e. the
original lease except to the extent in sub-s. (2). Thus the
statu lease being inextricably linked up with the subsist-
ing_lease which it replacas a result of the aforesaid provi-
sions of the Act, came within the purview s.30.A of the 1957
Act. The interpretation sought to be placed by the ellants
on the phraseology of s. 30A cannot be accepted as it would
unduly lict and limit the scope of that section and defeat
the object which it was nded to effectuate, namely, to
mitigate the rigour of liability for payment of dty under s.
9 of the 1957 Act after the commencement of the Act. If,
ontended by the appellants, the protection envisaged by s.
30A is restricted the leases granted before October 25,
1949, s. 30A would be rendered atory because on the. coming
into being of the statutory leases as a result 10(1) of the
Bihar Land Reforms Act, there would hardly be left any ing
lease to which, s. 30A would be applicable. There can be no
room doubt that the Legislature. intended that s. 30A of the
1957 Act should ’r the statutory leases as well. [168 F; 169
A-B]
b) Statutory mining leases in respect of coal which sprang
up under )(1) of the Bihar Land Reforms Act also acquired a
temporary immunity the applicability of ss. 9(1) and 16(1)
of the Act until the Central Government came out with a
notification making the said provisions applicable with
without modification to these leases. [170 G]
159
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 705-724
1971.
(From the Judgment and Order dated 3-9-1970 of the
Patna High Court in C.W.J.C. Nos. 992, 1042, 1088, 1096-
1101, 1148-1150, 1194, 1244-1247, 1722/68 and 146/69 re-
spectively).
D.P. Singh, S.C. Agarwal and V. 1. Francis, for the Appel-
lants.
Sachin Chaudhary (in CA. 705/71) for Respondent No. 1.
B. Sen, and S. 1. Sorabjee (in CA. 709/71), S.B. Sany-
al, S.C. Banerjee, D.N. Mukerjee and A.K. Nag for Respondent
No. 1 (in CAs. 705-713 & 718 and Respondents in 714/71).
D.N. Gupta, for Respondents (In CAs. 715-717/71).
S.N. Prasad (In CAs. 706/71), S.P. Nayar and Girish
Chandra for Respondent No. 2 (in CA. 706-708, 713/71).
A.K. Sen, B. Sen, D.N. Mukherjee and A. K. Nag for
Respondent (in CA. 724/71).
The Judgment of the Court was delivered by
JASWANT SINGH, J. This batch of 20 Civil Appeals Nos.
705 to 724 of 1971 by certificate under Article 133(1)(a) of
the Constitution which are directed against the common
judgment dated September 3, 1970, of the High Court of
Judicature at Patna and raise important questions relating
mainly to interpretation and scope of section 30A of the
Mines and Minerals (Regulation and Development) Act, 1957
(Act 67 of 1957) (hereinafter referred to as the 1957 Act),
shall be disposed of by this judgment.
Circumstances leading to these appeals in so far as
they would be helpful in appreciating the points involved
are: Prior to October 25, 1949, proprietors of big estates
like Rajas of Ramgarh and Jharia granted, in exercise of
their untramelled discretion, mining leases of huge tracts
of land in the districts of Hazaribagh, Dhanbad, and
Singhbhum to various persons for winning and extracting coal
for a period of 999 years in lieu of payment of premiums
and fixed annual rental. There was in these leases either
no stipulation for payment of royalty or the royalty
stipulated for was very low. Except in a few cases, the
lessees of these mining leases did not work the mines them-
selves and granted sub-leases thereof more or less or
similar terms.
On September 8, 1948, the Central Legislature passed the
Mines and Minerals (Regulation and Development) Act, 1948
(Act No. 53 of 1948) (hereinafter referred to as ’the 1948
Act’) under Entry 36 of List I of Seventh Schedule to the
Government of India Act, 1935. The Act, as declared in its
Preamble, was enacted as it was considered expedient in
public interest to provide inter alia for the regulation of
mines and for the development of minerals Sub-section (1)
of section 4 of the Act’ prohibited the grant after the
commencement of the Act of any mining lease otherwise than
in accordance with the rules made under the Act. Sub-
section (2) of section 4 of the Act provided that any mining
lease granted contrary to sub-section(1) would be void and
of no effect. Section 5 of the Act empower-
160
ed the Central Government to make rules for regulating the
grant of mining leases or for prohibiting the grant of such
leases in respect of any mineral or in any area. ’Section 7
of the Act empowered the Central Government to make rules
for the purpose of modifying or altering the terms and
conditions of any existing mining lease i.e. any mining
lease granted prior to the commencement of the Act, so as to
bring such lease into conformity with the rules made under
section 5. In exercise of the powers conferred on it by
section 5 of the Act, the Central Government made the Miner-
al Concession Rules, 1949. Both the 1948 Act and the Mineral
Concession Rules, 1949, came into force on October 25, 1949.
Rule 41 of the Mineral Concession Rules which related to
the conditions of mining leases made it compulsory for
every mining lease to include a condition enjoining the
lessee to pay royalty on the minerals at the rate specified
in the ,First Schedule to the Rules which in case of
coal was 5% of the F.O.R. price.
The 1948 Act was extended to Chhota Nagpur by a notifi-
cation dated January 16, 1950, issued under section 92 of
the Government of India Act, 1935.
The provisions of the Mineral Concession Rules, 1949,
did not apply to leases or sub-leases granted anterior to
October 25,’ 1949.
The Constitution of India came into force on January 26,
1950. Articles 246 and 254 of the Constitution which relate
to the distribution of legislative powers and Entry 54 of
List I (Union List) and Entry 23 of List II (State List) of
the Seventh Schedule to the Constitution read thus-
"Article 246: (1) Notwithstanding anything in clauses
(2) and (3), Parliament has exclusive power to make laws
with respect to any of the matters enumerated in List I in
the Seventh Schedule-
(2) Notwithstanding anything in clause (3), Parlia-
ment, and, subject to clause (1), the Legislature of any
State also, have power to make laws with respect to any of
the matters enumerated in List III in the Seventh Sche-
dule(3) Subject to clauses (1) and (2), the Legislature of
any State has exclusive power to make laws for such State or
any part thereof with respect to any of the matters enumer-
ated in List II in the Seventh Schedule.
(4) Parliament has power to make laws with respect
to any matter for any part of the territory of India not
included in a "State notwithstanding that such matter is a
matter enumerated in the State List".
"Article 254: (1) If any provision of a law
made by the Legislature of a State is repugnant to
any provision of a law made by Parliament which
Parliament is competent to enact, or to any provi-
sion of an existing law with respect to one of the
matters enumerated in the concurrent List, then,
subject to the provisions of clause (2), the law
made by Parliament, whether passed before or after
the
161
law made by the Legislature of such State or, as
the case may be, the existing law, shall prevail
and the law made by the Legislature of the State
shall, to the extent of the repugnancy, be void.
(2) Where a law made by the Legislature of a
State with respect to one of the matters enumer-
ated in the Con current List contains any provi-
sion repugnant to the provisions of an earlier
law made by Parliament or an existing law with
respect to that matter, then, the law so made by
the Legislature of such State shall, if it has
been reserved for the consideration of the Presi-
dent and has received his as sent prevail in that
State:
Provided that nothing in this clause shall prevent
Parliament from enacting at any time any law with
respect to the same matter including a law adding
to, amending, varying or repealing the law so made
by the Legislature of the State."
"Entry 54 of List 1 (Union List). Regulation of
mines and mineral development to the extent to
which such re gulation and development under the
control of the Union is declared by Parliament by
law to be expedient in the public interest."
"Entry 23 of List II (State List). Regulation of
mines and subject to the provisions of List I with
mineral development respect to regulation and
development under the control of the Union."
The Constitution was followed by the Bihar Land
Reforms Act, 1950 (Act XXX of 1950) (hereinafter
referred to as ’the Bihar Land Reforms Act’) which
though passed on September 11, 1950, came into
force on September 25, 1950. This legislation, as
evident from its preamble, was enacted as it was
considered expedient to provide for transference
to the State of the interests of proprietors and
tenure-holders in land and of mortgagees and les-
sees of such interests including interest in mines
and minerals. On the publication of notifications
under sections 3 and 3A of the Bihar Land Reforms
Act, the estates or tenures of proprietors or ten-
ure-holder as also the intermediary interests of
all intermediaries passed to and became vested
in the State. Section 4 of the Bihar Land Re-
forms Act declared the consequences flowing from
the vesting of the estate or tenure in the State.
Clause (a) of section 4(1) provided that on publi-
cation of the aforesaid notifications, such estate
or tenure, including the interests of the proprie-
tor or tenure-holder in any building etc., in trees
etc., as also his interest in all sub-soil includ-
ing any rights in mines and minerals, whether
discovered, or undiscovered, or whether being
worked or not, inclusive of such rights of a lessee
of mines and minerals comprised in such estate or
tenure other than the interests of raiyats or
under-raiyats shall, with effect from the date of
vesting, vest absolutely in the State free. from
all encumbrances and such proprietor or tenure-
holder shall cease to have any interest in such
estate or tenure other than the interests expressly
saved by
162
or under the provisions of the Act. Thus the
interest of the proprietor or tenure-holder includ-
ing his rights in mines and minerals, inclusive of
rights of a lessee of mines and minerals came to an
end and vested absolutely in the State. Having
once so vested, certain rights were conferred by
statute on the proprietors and tenure-holders and
the lessees.’ Section 9 of the Bihar Land Reforms
Act provided that mines which were in operation. at
the commencement of the Act and were being worked
directly by the. intermediary shall be deemed to
have been leased by the State Government to the-
intermediary and he would be entitled to retain
possession of those mines as a lessee thereof.
The lease by the State Government to the interme-
diary, according to sub-section (2) of section 9
was to have such terms and conditions as might be
agreed upon between the State Government and the
intermediary or in the absence of such agreement,
as might be settled by the Mines Tribunal appointed
under section 12 of the Act provided that all such
terms and conditions had to be in, accordance with
the provisions of any Central Act for the time
being in force regulating the grant of new mining
leases. According to the proviso,. such terms and
conditions were to be in accordance with the provi-
sions of the 1948 Act which was in force at the
,time the estate vested in the State of Bihar. The
mines in the present cases, it may be mentioned,
were not worked by the intermediary lessees. Sec-
tion, 10 of the Bihar Land Reforms Act which dealt
with leases of mines and minerals which subsisted
on the date immediately preceding the date of
vesting of the estate or tenure provided:
"10. Subsisting leases of mines and minerals--
( 1 ) Notwithstanding anything contained in
this Act, where, immediately before the date of
vesting of the estate or tenure there is a subsist-
ing lease of mines or minerals comprised the
estate or tenure or any part thereof, the whole or
that part of the estate or tenure comprised in such
lease shall, with effect from the date of vest-
ing, be deemed to have been leased by the State
Government to the holder of the said subsisting
lease for the remainder of the term of that lease,
and such holder shah be entitled to retain posses-
sion of’ the leasehold property.
(2) The terms and conditions of the said
lease by the State Government shall mutatis mutan-
dis be the same as the terms and conditions of the
subsisting lease referred to in sub-section (1),
but with ’the additional condition that, if in the
opinion of the State Government the holder of the
lease had not, before the date of the commencement
of this Act, done any prospecting or development
work, the State Government shall be entitled at any
time before ’the expiry of one year from the said
date to determine the lease by giving three months’
notice in writing:
Provided that nothing in this sub-section shall
be deemed to prevent any modifications being made
in the terms and conditions of the said lease in
accordance with the provision of any Central Act
for the time being in force regulating the modifi-
cation of existing mining leases.
163
(3) The holder of any such lease of mines
and minerals as is referred to in sub-
section ( 1 ) shall not be entitled to claim
any damages from the outgoing proprietor or
tenure-holder on the ground that the terms of the
lease executed by such proprietor or tenure-holder
in respect of the said mines and minerals have
become incapable of fulfilment by the operation of
this Act."
The consequence of the operation of sections 4(1)(a) and
10(1) of the Bihar Land Reforms Act as held by this Court in
Bihar Mines Ltd. v. Union of India(1) and reiterated in
Chhatu Ram Horil Ram Private Ltd. v. State of Bihar &
Anr.(2) was not that the old original contractual leases of
mines and minerals comprised in the estate and subsisting on
the date of vesting continued with the Government substi-
tuted as lessor in place of original lessor but was that the
original contractual leases came to an end on the date of
vesting as a result of section 4(1)(a) of the Act and for
the remainder of the terms of those leases, fresh statutory
leases in favour of the lessees came into being under sec-
tion 10(1) of the Act.
All the estates of Jharia Kajya within which the leases
in question fell became vested in the State of Bihar on
November 3, 1951, Thenceforth i.e. from November 3, 1951,
the subsisting leases came to be treated as new statutory
leases granted ,by the State Government in terms of section
10(1) of the Bihar Land Reforms Act in view of the decision
of this Court in Bihar Mines Ltd. v. Union of India (supra).
In 1956 the Mining Leases (Modification of Terms)
Rules, 1956 providing for the modification and alteration
of the terms and conditions of the mining leases granted
prior to the commencement of the 1948 Act so as to bring
them in conformity with the terms and conditions of the
mining leases granted after the commencement of the 1948
Act in accordance with the Mineral Concession Rules, 1949,
were promulgated under section 7 of the 1948 Act on Septem-
ber 4. 1956. These Rules by virtue of the definition of
the "existing mining lease" contained in rule 2(c) of the
Mining Leases (Modification of Terms) Rules, 1956 were made
expressly inapplicable to mining leases in respect of coal
granted before October 25, 1959--the date of commencement of
1948 Act, with the result that the mining leases or sub-
leases of the respondents were not affected by the provi-
sions of the 1948 Act or the rules made thereunder.
The 1948 Act was replaced by the Mines and Minerals
(Regulation and Development) Act, 1957 (Act No. 67 of 1957)
(hereinafter referred to as ’the 1957 Act’) which though
after being passed by the Parliament under Entry 54 of List
I of the Seventh Schedule to the Constitution received the
assent of the President on December 28, 1957, came into
force on June 1, 1958. Section 9 of the 1957 Act provided :-
"9. Royalties in respect of mining leases:(1)
The holder of a mining lease granted before the
commencement of this Act shall, notwithstanding
anything
(1) [1967] 1 S.C.R. 707 :A.I.R. 1967 S.C. 887.
(2) [1968] 2 S.C.R. 881 :A.I.R. 1969 S.C .177.
164
contained in the instrument of lease or in any law
in force at such commencement, pay royalty in
respect of any mineral removed by him from the
leased area after such commencement, at the rate
for the time being specified in the Second Schedule
in respect of that mineral.
(2) The holder of a mining lease granted on
or after the commencement of this Act shall pay
royalty in respect of any mineral "removed by him
from the leased area at the rate for the time being
specified in the Second Schedule in respect of that
mineral.
(3) The Central Government may by notifica-
tion in the official gazette, amend the Second
Schedule so as to enhance or reduce the rate at
which royalty shall be pay-
able in respect of any mineral with effect from
such date as may be specified in the notification:
Provided that the Central Government shall not-
(a) fix the rate of royalty in respect of any
mineral so as to exceed twenty per cent of the sale
price of the mineral at the pit’s head, or
(b) enhance the rate of royalty in respect of
any mineral more than once during any period of
four years.
It will be noticed that sub-section (1) of the
above quoted section made it obligatory for the
holder of a mining lease granted before the com-
mencement of the 1957 Act notwithstanding anything
contained in the instrument of his lease or in any
other law in force at the commencement of the 1957
Act to pay in respect of any mineral removed by him
from the leased area after December 28, 1957,
royalty at the rate specified in the Second Sched-
ule of the 1957 Act which for coal was fixed at 5%
of F.O.R. price subject to a minimum of fifty N.P.
per ton.
Section 16 of the 1957 Act provided that mining
leases granted before October 25, 1949 would, as
soon as might be, after the commencement of the
1957 Act, be brought into conformity with the
provisions of the 1957 Act and the rules made
under sections 13 and 18 thereof.
Section 29 of the 1957 Act provided for the
effective continuance of the rules made or purport-
ed to have been made under the 1948 Act in so far
as they related to matters provided for in the
former Act and were not inconsistent therewith.
The effect of section 9 of the 1957 Act as held
by this Court in State of Madhya Pradesh & Anr. v.
Dadabhoy’s New Chirimiri Ponri Hill Colliery Co.
Pvt. Ltd. (1) was that the rate of royalty was
enhanced in case of those lessees who, under the
leases obtained by them before the commencement of
the Act, were paying a rate lesser than 5% while
the royalty payable by lessees similarly placed was
reduced if they were paying royalty at a higher
rate. As the enhancement envisaged by section 9
of the 1957 Act was apprehended to lead to an
increase in the cost of production of coal which is
a vital mineral for
(1) [972] 2 S.C.R. 609.
165
the industrial development and occupies a basic
position in the economy of the country, various
representations were made to the Government of
India to reduce the royalty. Impelled by these
representations, the Central Government moved a
Bill in March, 1958, being Bill No. 33 of 1958, and
got, by means of Mines and Minerals (Regulation
and Development) Amendment Act, 1958, section 30A
inserted in the 1957 Act reading as follows :--
"30A. Notwithstanding anything contained in
this Act the provisions of sub-section (1) of
section 9 and of subsection (1 ) of section 16 shah
not apply to or in relation to mining leases grant-
ed before the 25th day of October, 1949 in respect
of coal but the Central Government, if it is satis-
fied that it is expedient so to do, may by notifi-
cation in the official gazette direct shall all or
any of the said provisions (including any rules
made under sections 13 and 18) shall apply to or in
relation to such leases subject to such exceptions
and modifications, if any, as may be specified in
that or in any subsequent notification."
This section, it would be seen, consisted of two parts.
Under the first part, the provisions of sections 9(1) and
16(1) were expressly made inapplicable to or in relation to
pre-October 25, 1949 mining leases for coal. The second
part empowered the Central Government on being satisfied
that it was expedient so to do to direct by notification
that all or any of those provisions (including the rules
made under sections 13 and 18) would apply to or in relation
to such leases subject to such exceptions and modifications,
if any, as might be specified in that or any subsequent
notification. The "exceptions and modifications" which
could be so specified in the notification were obviously in
regard to the application, when such application was decided
upon, of sections 9 ( 1 ) and 16 ( 1 ) and the relevant
rules.
The aforesaid section 30-A was given a retrospective
effect by virtue of section 2 of the Amendment Act 15 of
1958.
Vide notification No. GSR-432 dated May 29, 1958, the
1957 Act was brought into force with effect from June 1,
1958.
By notification No. S.O. 3094 dated December 29, 1961,
the Central Government in exercise of the powers conferred
on it by the second part of section 30A of the 1957 Act,
directed the provisions of sub-section (1) or section 9 to
apply with immediate effect to or in relation tO mining
leases in respect of coal granted before October 25, 1949
subject to the modification that lessees were required to
pay royalty at the rates specified in the agreements between
them and the lessor or at the rate of 21/2% on F.O.R. price
of coal, whichever was higher, in place of the rate of
royalty specified in respect of coal under the Second Sched-
ule.
After the notification, the’ State Government started
demanding royalty at 21/2% and initiated proceedings under
the Public Demands Recovery Act to realize royalty at 21/2%
for the period between 29.12.1961 and 31.12.1965.
On October 26, 1964, the Bihar Land Reforms Act was
amended by insertion of section 10-A originally by the Bihar
Amendment Ordi-
166
nance No. 3 of 1964 which was subsequently replaced by the
Bihar Land Reforms (Amendment) Act, 1954 (Bihar Act 4 of
1965). Under this newly added section, the lessees’ interest
in mines and minerals which were subject to sub-leases also
came to vest in the State of Bihar. Thus the State also
acquired the right to sub-lease. On October 27, 1964, the
interests of Chakroborty and Adhikaris from whom sub-leases
appear to have been taken in the beginning of the current
century vested in the State of Bihar.
On January 1,-1966, a notification being S.O.No. 81 of
1966, was issued by the Central Government under section 30A
of the 1957 Act superseding the notification No. S.O. 3094
dated December 29 1961 and applying the provisions of
section 9(1) of the 1957 Act to leases granted prior to the
commencement of the said Act.
On October 3, 1966, this Court pronounced judgment in
Bihar Mines Ltd. v. Union of India (supra) holding therein
that the whole or that part of the estate or tenure com-
prised in an)’ lease of mines and minerals would, with
effect from the date of vesting, be deemed to have been
leased out by the State Government to the holder of the
subsisting lease (i.e. the first lessee) for the remainder
of the period of the lease and that the statutory lease thus
held by the head lessee from the State Government under
section 10 of the Bihar Land Reforms Act, would be a new
lease granted after October 25. 1949, and that the sub-
leases would also be deemed to be new leases granted by the
new lessee from the State Government, as the rights of the
original lessee under the original lease had ceased on the
vesting of the estate, and he was to be deemed to have got a
new lease from the State.
On December 22, 1967, the Patna High Court held in
Narendra Nath Mandal v. State of Bihar & Ors. (1) that a
lessee of a coal mine was liable to pay royalty for the
period beginning from the date of vesting of an estate
under the Bihar Land Reforms Act to May 31, 1958 at 5% of
F.O.R. price of coal subject to a minimum of eight paise per
ton by virtue of section 29 of the 1957 Ace read with Rule
41 and Schedule I of Mineral Concession Rules, 1949, and at
the same rate from the date on which the 1957 Act came into
force by virtue of section 9(1) of the said Act read with
Second Schedule thereto because neither section 30A nor the
notification issued thereunder was applicable to the said
lease in view of the effect of the vesting of estate in the
State of Bihar and the coming into existence of a new lease
by force of section 10 of the Act which could not be said to
be a lease granted before October 25, 1949 which alone was
the subject matter of section 30A of the 1957 Act.
In June 1968, demands were made by the District Mining
Officer, appellant No. 2 herein, for payment of royalty at
the rate specified in the Mineral Concession Rules, 1949 in
respect of the period commencing from November 3, 1951--the
date of vesting of the estates of the head lessors under the
Bihar Land Reforms Act--till May 31, 1958 and in respect of
the period from June 1, 1958--the date of coming into
force of the 1957 Act to December 12, 1965, at the rate
C. J.C. 653of 1965 (Patna H.C.)
167
specified in the Second Schedule to the 1957 Act, after
setting off 211/2% already realised, in view of the decision
in Narendra Nath Mandal’s case (supra). Aggrieved by these
demands, the respondents filed petitions in the High Court
of Patna for issue of writs of certiorari and ,mandamus
quashing the demand notices and restraining the State from
demanding royalty as indicated above.
The case as set up by the respondents in the writ peti-
tions was that as Rule 41 of the Mineral Concessions Rules,
1949, requiring royalty to be paid at the rate specified in
Schedule 1 to the rules, applied only to a’ lease granted
under the said Rules after the commencement of the 1948 Act
and had no application to the leases and subleases of the
respondents, royalty could not be claimed on the basis of 5
% of F.O.R. price of coal in respect of the period between
the date of vesting under the Bihar Land Reforms Act and May
31, 1958the date immediately preceding the date on which the
1957 Act was brought into force; that as regards the period
between June 1, 1958 and December 28, 1961 royalty at con-
tractual rates alone was payable because the provisions of
section 9(1) of the 1957 Act had no application to statuto-
ry leases deemed to. have come into existence under section
10(1) of the Bihar Land Reforms Act and alternatively be-
cause by virtue of the provisions of section 30A of the 1957
Act the provisions of section 9(1) of the said Act were not
applicable to or in relation to the mining leases in respect
of coal granted before October 25, 1949 until the Central
Government, by notification, decided otherwise; that as
regards the claim in respect of the period from December
29, 1961 to December 31, 1965’royalty at 21/2% of F.O.R.
price of coal had already been paid by the respondents as
per notification of the Central Government issued in exer-
cise of the power under section 30A of the 1957 Act and
having itself invited and accepted this payment in full
discharge of the respondents’ liability for royalty payable
for the said period, the State was not entitled to unilater-
ally revoke the aforesaid discharge or satisfaction and
claim further royalty at 21/2% of F.O.R. price of coal over
and above what has already been paid.
In reply the appellants herein submitted inter alia that
the demands were lawful, that the combined effect of sec-
tions 9 and 29 of the 1957 Act read with Second Schedule
thereto and the Mineral Concession Rules, 1949 was that the
respondents who were lessees or sub-lessees were liable to
pay royalty at the rate of 5% of F.O.R. price of coal from
the date of vesting of the respective estates of the pro-
prietors who had granted head leases in the State of Bihar
for the entire period in question; that section 9(1) of the
1957 Act was very comprehensive and applied to all leases
whether contractual or statutory which came into existence
before the 1957 Act was brought into operation; that section
30A of the 1957 Act applied only to leases in respect of
coal which had been granted before October 25, 1949 and not
to the new statutory mining leases of the respondents deemed
to have been granted by the State Government before the
coming into operation of the 1957 Act under the provisions
of section 10 of the Bihar Land Reforms Act; and that the
provisions of s. 9(1) of the 1957 Act
168
could not be taken to have been suspended by s. 30A of the
Act so far as the leases in question were concerned.
All the writ petitions were heard by a Sepcial Bench of five
Judges of the High Court. The said Bench by its judgment
and order dated September 3, 1970 allowed all the writ
petitions filed by the respondents and quashed the impugned
notices holding that Narendra Nath Mandal’s case (supra) had
been wrongly decided; that rule 41 of the Mineral Concession
Rules, 1949 made under section 5 of the 1948 Act which was
claimed by the appellants to have been continued in force by
virtue of section 29 of the 1957 Act and to justify the,
demand for royalty for the period prior to June 1, 1958 was
applicable only to contractual grants envisaged by the said
Rules and could have no application to statutory leases
arising by virtue of section 10 of the Bihar Land Reforms
Act; that there was no warrant for pushing back section 9 of
the 1957 Act by virtue of section 29 thereof to any date
anterior to that on which the said Act came into force; that
as section 30A of the 1957 Act on its true interpretation,
imposed a temporary bar on the operation of the provisions
of section 9(1) not only in respect of mining leases grant-
ed before October 25, 1949 in respect of coal but also in
relation to those leases which expression covered the statu-
tory leases of the respondents which must be deemed to have
come into existence with effect from the date of vesting
under the Bihar Land Reforms Act, the demand for royalty for
the period commencing from June 1, 1958 to December 31, 1965
was also unjustified and illegal.
Aggrieved by the judgment and order of the Special Bench
of the High Court, the appellants filed a petition in the
High Court under Articles 132 and 133(1)(a) of the Constitu-
tion for grant of certificate of fitness for appeal to this
Court. The High Court by itsorder dated January 22, 1971
granted the certificate of fitness under Article 133(1 )(a)
of the Constitution enabling the appellants to prefer the
aforesaid appeals to this Court.
Counsel for the parties have reiterated before us the
contentions urged on behalf of their clients before the High
Court.
Two important questions arise for determination by us in
these appeals: (1) whether the claim for royalty in regard
to the period prior to June 1, 1958 can be sustained; (2)
whether the claim for’ royalty in regard to the period from
June 1, 1958 to December 31 1965 is justified.
So far as the demand for royalty at 5% Of F.O.R. price
of coal for the period prior to June 1, 1958--the date on
which the 1957 Act came into force--is concerned we are of
opinion that it is not justified in view of the fact that
Rule 41 of the Mineral Concession Rules, 1949 applied only
to contractual leases envisaged by Chapter IV of the said
Rules (which were made inter alia for regulating the grant
of mining leases in respect of any mineral) and not to the
statutory leases which came into existence as a result of
the deeming provision embodied in section 10 of the Bihar
Land Reforms Act. This view is in accord with the decision
of this Court in Chhatu Ram’s case (supra) where dealing
with Rule 40 of the Mineral Concession Rules
169
1949 which relates to the period of lease, Shah, J. who
delivered the judgment of the Court observed that the rule
manifestly applied to grants made by the Government and had
no. application to statutory leases arising by reason of
section 10 of the Bihar Land Reforms Act. We, therefore,
find ourselves in complete agreement with the High Court
that the claim for royalty for the period prior to June 1,
1958, is wholly unfounded and cannot be supported.
So far as the demand for royalty for the period beginning
with June 1, 1958 and ending with December 31, 1965 is con-
cerned, we are of the opinion that no exception can be taken
to the view expressed in this behalf by the High Court in
its judgment under appeal.’This becomes abundantly clear
from a close scrutiny of section 30A (supra) of the 1957
Act, the provisions whereof may usefully be recalled at
this stage. Before examining, however,. section 30A, it
would be profitable to advert to section 9 (supra) of the
Act. This section, it would be seen consists of three
parts. Sub-section (1) casts a liability on the holder of
a mining lease granted before June 1, 1958--the date of the
commencement of the Act--to pay royalty in respect of any
mineral removed by him from the leased area after that date
at the rate for the time being specified in the Second
Schedule, notwithstanding anything contained in the instru-
ment of lease or in any law in force on the aforesaid
date of the commencement of the Act. Sub-section (2) makes
also the holder of a mining lease granted on or after June
1, 1958 liable to pay royalty in respect of any mineral
removed by him from the leased area at the rate for the
time being specified in the Second Schedule. Sub-section
(3) empowers the Central Government to amend the Second
Schedule and enhance or reduce the rate of royalty in re-
spect of any mineral by issue of a notification subject to
the restriction contained in the proviso to this sub-sec-
tion. Section 30A which, as is evident from its opening
words, has an overriding effect on the other provisions of
the Act affords a temporary protection from applicability
of section 9(1) and section 16(1) of the Act not only to
the leases granted before October 25, 1949, but also to the
statutory leases which came into existence as a result of
the operation of s. 10(1) of the Bihar Land Reforms Act and
replaced the former category of leases subsisting
immediately before the date of vesting in the State of
the estates or tenures on the publication of the
notifications under sections 3 and 3A of the Bihar Land
Reforms Act. This conclusion irresistibly flows from the
words "or in relation to" occurring in section 30A of the
1957 Act after the words "shall not apply to" and before the
words "mining leases granted before the 25th day of October
1949" The aforesaid words which are of great significance
of enlarge the scope of section 30A and bring within the
umbrella of its protection the mining leases granted
before October 25, 1949 as also the statutory leases
which sprang up in their place by virtue of the legal
fiction contained in Section 10(1) of the Bihar Land Reforms
Act on the re:sting in the State of the estates or tenures.
As expressly ordained by sub-sections (1) & (2) of section
10 of the Bihar Land Reforms Act, not’ only the’ holder of a
statutory lease had to be the same as the holder of a
subsisting
13--1003 SCI/76
170
lease for the remainder of the term of that lease but the
terms and conditions of the statutory lease had also muta-
tis mutandis to be the same as the terms and conditions of
the subsisting lease i.e. the original lease except to the
extent mentioned in sub-section (2). Thus the statutory
lease being inextricably linked up with the aforesaid sub-
sisting lease which it replaced as a result of the aforesaid
provisions of the Act came within the purview of section
30A of the 1957 Act. The interpretation sought to be
placed by the appellants on the phraseology of section 30A
of the 1957 Act cannot be accepted as;. it would unduly re
strict and limit the scope of that section and defeat the
object which it was intended to effectuate viz. to mitigate
the rigour of liability for payment of royalty under section
9 of the 1957 Act at the rate specified in the Second Sched-
ule in respect of the coal removed from’ the leased area
after the commencement of the Act. If as contended by the
appellants, the protection envisaged by section 30A is
restricted to leases granted before October 25, 1949, sec-
tion 30A would be’ rendered nugatory because on the coming
into being of the statutory leases as a result of section
10(1) of the Bihar Land Reforms Act, there would hardly be
left any mining lease to which section 30A of the 1957 Act
would be applicable. Thus there can be no room for doubt
that the Legislature intended that section 30A of the 1957
Act should cover the aforesaid statutory leases as well.
It will be apposite in this connection to refer to the
following statement of objects and reasons given in the Bill
which sought to introduce section 30A in the 1957 Act with
retrospective effect which can be usefully resorted to for
ascertaining the true scope of section 30A and the extent of
the protection afforded by it :--
" .... It’ is considered that these changes will
have numerous undesirable consequences. The areas
covered by these mining leases are principally in West
Bengal and Bihar and they account for as much as 80 per cent
of the total coal production in the country. The royal-
ties paid on this coal vary over a wide range but are gener-
ally much below the rate per ton prescribed in the Second
Schedule. A sudden and uniform increase of these royalties
is likely to have an unsettling effect in the industry and
may retard the programme of coal production under the
Second Five Year Plan ....... "
Thus the above discussion makes it crystal clear that the
statutory mining leases in respect of coal which sprang up
under section 10(1) of the Bihar Land Reforms Act also
acquired a temporary immunity from the applicability of
sections 9(1) and 16(1) of the Act until the Central Govern-
ment came out with a notification making the said provisions
applicable with or without modification to these leases.
Accordingly, we have no hesitation in holding in agreement
with the High Court that the further demand for royalty for
the second period indicated above cannot also be sustained.
For the foregoing reasons, we find no force in these
appeals which are dismissed. In the circumstances of the
case, the parties are left to pay and bear their own costs
of these appeals,
P.B.R. Appeals dis-
missed.
171