Full Judgment Text
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CASE NO.:
Appeal (civil) 3618-3619 of 1999
PETITIONER:
Karnataka Rare Earth & Anr.
RESPONDENT:
The Sr.Gelt.,Dep.of Mines and Geology & Anr.
DATE OF JUDGMENT: 23/01/2004
BENCH:
R.C.LAHOTI,ASHOK BHAN & B.P. SINGH
JUDGMENT:
JUDGMENT
R.C. Lahoti, J.
The grant of 203 leases for quarrying granites in government
land under Rule 3 of the Karnataka Minor Mineral Concession Rules
1969, contrary to the prohibition contained in Rule 3A, was
challenged in the Karnataka High Court in public interest litigation.
The writ petitions were allowed by the learned single Judge and all the
grants were quashed. Writ appeals were dismissed by a Division
Bench of the High Court. The unsuccessful lessees came up to this
Court and by judgment dated January 18, 1996 [Alankar Granites
Industries & Ors. Vs. P.G.R. Scindia, MLA & Ors., (1996) 7 SCC
416] this Court directed the appeals to be dismissed by holding that
the grants of leases were made against the prohibition contained in
Rule 3A and were rightly held by the High Court to be invalid.
The appellants before us were holding two quarry leases and
were amongst the appellants in this Court in the appeals by special
leave referred to hereinabove. On 19.11.1993, by an interim order,
the Court directed that the renewals or existing grants in favour of the
appellants would continue till the next date of hearing. On
21.11.1993, the Court modified the previous order by extending its
operation ’to continue till further orders of the Court’. The appellants
brought to the notice of the Court that in spite of the previous interim
order the appellants were not issued transport permits with the result
that the renewal or grant of leases was of no avail to them as they
were not able to remove the minerals quarried by them. In the opinion
of the Court such action of the respondents resulted in frustrating the
interim orders. It was clarified that the appellants in whose favour
interim orders were granted, should be granted transport permits also
by the appropriate authority on payment of royalty and complying
with the rules. On 18.1.1996, the appeals came to be dismissed as
already stated.
According to the appellants they had operated the quarries and
transported several granite blocks on the strength of the order passed
by this Court. They had paid the prescribed royalty and exported the
granite blocks. The quarrying had taken place during the pendency of
the appeals and the export had taken place on 24.1.1996 as the
dismissal of the appeals on 18.1.1996 at Delhi did not come to the
notice of the appellants or the authorities of the State at Karnataka
until after the granite blocks had already been exported. On
14/15.2.1996, the State of Karnataka issued an order calling upon the
appellants to pay the price of the granite blocks calculated at the
minimum rate per unit volume of minor mineral. The appellants filed
writ petitions in the High Court laying challenge to the impugned
action of the respondents proposing to recover the price of the granite
blocks which were already exported. The writ petitions were
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dismissed. Feeling aggrieved the appellants have filed these appeals
by special leave.
The substance of the plea, forcefully urged by the learned
counsel for the appellants and highlighted from very many angles, is
that the act of the appellants in quarrying the granite stones and
exporting the same was accompanied by payment of royalty and
issuance of transport permits by the authorities of the State and though
done under the interim orders of this Court was nevertheless a lawful
and bona fide act. The mining leases in favour of the appellants ought
to be held to be valid, in spite having been invalidated by the High
Court, in view of the interim orders passed by this Court. The
appellants cannot be held liable for payment of price of the granite
blocks. The demand of price of the granite blocks is a demand in the
nature of penalty and hence cannot be sustained. Reliance is placed
by the learned counsel on the decision of this Court in Hindustan
Steel Vs. State of Orissa, (1970) 1 SCR 753 and Consolidated Coffee
Vs. Agricultural Income Tax Office, (2001) 1 SCC 278.
Having heard Shri K.V. Vishwanathan, the learned counsel for
the appellants and Shri Sanjay R. Hegde, the learned counsel for the
State of Karnataka, we are satisfied that no fault can be found with the
view taken by the High Court and the appeals are devoid of any merit
and hence liable to be dismissed.
Section 21 of the Mines and Minerals (Development &
Regulation) Act 1957 (hereinafter ’MMDR Act’, for short) reads as
under:-
"21. Penalties.__ (1) Whoever contravenes the
provisions of sub-section (1) or sub-section (1A)
of section 4 shall be punished with imprisonment
for a term which may extend to two years, or with
fine which may extend to twenty-five thousand
rupees, or with both.
(2) Any rule made under any provision of
this Act may provide that any contravention
thereof shall be punishable with imprisonment for
a term which may extend to one year, or with fine
which may extend to five thousand rupees, or with
both, and in the case of a continuing contravention,
with an additional fine which may extend to five
hundred rupees for every day during which such
contravention continues after conviction for the
first such contravention.
(3) Where any person trespasses into any
land in contravention of the provisions of sub-
section (1) of section 4, such trespasser may be
served with an order of eviction by the State
Government or any authority authorised in this
behalf by that Government and the State
Government or such authorised authority may, if
necessary, obtain the help of the police to evict the
trespasser from the land.
(4) Whenever any person raises, transports
or causes to be raised or transported, without any
lawful authority, any mineral from any land, and,
for that purpose, uses any tool, equipment, vehicle
or any other thing, such mineral tool, equipment,
vehicle or any other thing shall be liable to be
seized by an officer or authority specially
empowered in this behalf.
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(4A) Any mineral, tool, equipment, vehicle
or any other thing seized under sub-section (4),
shall be liable to be confiscated by an order of the
court competent to take cognizance of the offence
under sub-section (1) and shall be disposed of in
accordance with the directions of such court.
(5) Whenever any person raises, without
any lawful authority, any mineral from any land,
the State Government may recover from such
person the mineral so raised, or, where such
mineral has already been disposed of, the price
thereof, and may also recover from such person,
rent, royalty or tax, as the case may be, for the
period during which the land was occupied by such
person without any lawful authority.
(6) Notwithstanding anything contained in
the Code of Criminal Procedure, 1973 (2 of 1974),
an offence under sub-section (1) shall be
cognizable."
The submission of Shri Vishwanathan is that the impugned demand
by the State of Karnataka has been raised by reference to sub-Section
(5) of Section 21 above-quoted which is nothing but a levy of penalty.
The applicability of the provision is not attracted unless the extraction
and export of the minor mineral by the appellants can be said to be
’without any lawful authority’, which it is not, in the facts and
circumstances of the case, as already noticed, submitted Shri
Vishwanathan.
In our opinion, the demand by the State of Karnataka of the
price of the mineral cannot be said to be levy of penalty or a penal
action. The marginal note of the Section __ ’Penalties’, creates a
wrong impression. A reading of Section 21 shows that it deals with a
variety of situations. Sub-Sections (1), (2), (4), (4A) and (6) are in the
realm of criminal law. Sub-Section (3) empowers the State
Government or any authority authorized in this behalf to summarily
evict a trespasser. Sub-Section (5) empowers the State Government to
recover rent, royalty or tax from the person who has raised the mineral
from any land without any lawful authority and also empowers the
State Government to recover the price thereof where such mineral has
already been disposed of inasmuch as the same would not be available
for seizure and confiscation. The provision as to recovery of price is
in the nature of recovering the compensation and not penalty so also
the power of the State Government to recover rent, royalty or tax in
respect of any mineral raised without any lawful authority can also not
be called a penal action. The underlying principle of sub-Section (5)
is that a person acting without any lawful authority must not find
himself placed in a position more advantageous than a person raising
minerals with lawful authority.
The correct principles of law applicable to the facts of the
present case emanating from equity, and statutorily embodied in sub-
Section (5) of Section 21 abovesaid, are to be found dealt with
extensively in a recent decision of this Court in South Eastern
Coalfields Ltd. Vs. State of M.P. & Ors. (2003) 8 SCC 648.
It is true that by the interim orders passed by this Court the
appellants were allowed during the pendency of the earlier appeals to
operate under the mining leases, whether freshly granted or renewed
and to effectuate the interim orders the authorities were also directed
to issue transport permits. Admittedly, the transport permits were
obtained by the appellants after the dismissal of their appeals. The
appellants claim that both the parties were ignorant of the dismissal of
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the appeals when the transport permits were issued and the granite
blocks were exported. It is difficult to accept the plea of the
appellants that the dismissal of the appeals was not in their knowledge
inasmuch as the judgments must have been pronounced in an open
Court and their counsel at Delhi must have gathered the knowledge
thereof. In any case the appellants cannot be heard taking shelter
behind there own convenient ignorance. In our opinion, whether they
had the knowledge of the judgment or not and whether the transport
permits were obtained by the appellants before the dismissal of the
appeals during which the interim orders were in operation or after the
dismissal of the appeals when the interim orders had ceased to operate
would not make any difference. For the purposes of the law it is
enough that the appellants have enjoyed the benefit under the interim
orders of the Court which have stood vacated with the dismissal of
their appeals. It is also noteworthy that this Court had not, in the
earlier appeals, directed the judgment of the High Court to remain
stayed in its entirety and this is an additional fact or which tells
adversely on the appellants.
In South Eastern Coalfields Ltd. (supra), this Court dealt with
the effect on the rights of the parties who have acted bona fide,
protected by interim orders of the Court and incurred rights and
obligations while the interim orders stood vacated or reversed at the
end. The Court referred to the doctrine of actus curiae neminem
gravabit and held that the doctrine was not confined in its application
only to such acts of the Court which were erroneous; the doctrine is
applicable to all such acts as to which it can be held that the Court
would not have so acted had it been correctly apprised of the facts and
the law. It is the principle of restitution which is attracted. When on
account of an act of the party, persuading the Court to pass an order,
which at the end is held as not sustainable, has resulted in one party
gaining advantage which it would not have otherwise earned, or the
other party has suffered an impoverishment which it would not have
suffered but for the order of the Court and the act of such party, then
the successful party finally held entitled to a relief, assessable in terms
of money at the end of the litigation, is entitled to be compensated in
the same manner in which the parties would have been if the interim
order of the Court would not have been passed. The successful party
can demand (a) the delivery of benefit earned by the opposite party
under the interim order of the Court, or (b) to make restitution for
what it has lost.
In the facts of this case, in spite of the judgment of the High
Court, if the appellants would not have persuaded this Court to pass
the interim orders, they would not have been entitled to operate the
mining leases and to raise and remove and dispose of the minerals
extracted. But for the interim orders passed by this Court, there is no
difference between the appellants and any person raising, without any
lawful authority, any mineral from any land, attracting applicability of
sub-Section (5) of Section 21. As the appellants have lost from the
Court they cannot be allowed to retain the benefit earned by them
under the interim orders of the Court. The High Court has rightly held
the appellants liable to be placed in the same position in which they
would have been if this Court would not have protected them by
issuing interim orders. All that the State Government is demanding
from the appellants is the price of the minor minerals. Rent, royalty
or tax has already been recovered by the State Government and,
therefore, there is no demand under that Head. No penal proceedings,
much less any criminal proceedings, have been initiated against the
appellants. It is absolutely incorrect to contend that the appellants are
being asked to pay any penalty or are being subjected to any penal
action. It is not the case of the appellants that they are being asked to
pay a price more than what they have realised from the exports or that
the price appointed by the respondent State is in any manner arbitrary
or unreasonable.
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Is sub-section (5) of Section 21 a penal enactment? Can the
demand of mineral or its price thereunder be called a penal action or
levy of penalty?
A penal statute or penal law is a law that defines an offence and
prescribes its corresponding fine, penalty or punishment. (Blacks Law
Dictionary, Seventh Edition, p.1421). Penalty is a liability composed
as a punishment on the party committing the breach. The very use of
the term ’penal’ is suggestive of punishment and may also include any
extraordinary liability to which the law subjects a wrong-doer in
favour of the person wronged, not limited to the damages suffered.
(See, The Law Lexicon, P. Ramanatha Aiyar, Second Edition,
p.1431).
In support of the submission that the demand for the price of
mineral raised and exported is in the nature of penalty, the learned
counsel for the appellants has relied on the marginal note of Section
21. According to Justice G.P. Singh on Principles of Statutory
Interpretation (Eighth Edition, 2001, at p.147) though the opinion is
not uniform but the weight of authority is in favour of the view that
the marginal note appended to a Section cannot be used for construing
the Section. There is no justification for restricting the Section by the
marginal note nor does the marginal note control the meaning of the
body of the Section if the language employed therein is clear and
spells out its own meaning. In Director of Public Prosecutions Vs.
Schildkamp, (1969) 3 All ER 1640, Lord Reid opined that a side note
is a poor guide to the scope of a section for it can do no more than
indicate the main subject with which the section deals and Lord
Upjohn opined that a side note being a brief pricis of the section
forms a most unsure guide to the construction of the enacting section
and very rarely it might throw some light on the intentions of
Parliament just as a punctuation mark.
We are clearly of the opinion that the marginal note ’penalties’
cannot be pressed into service for giving such colour to the meaning
of sub-Section (5) as it cannot have in law. The recovery of price of
the mineral is intended to compensate the State for the loss of the
mineral owned by it and caused by a person who has been held to be
not entitled in law to raise the same. There is no element of penalty
involved and the recovery of price is not a penal action. It is just
compensatory.
The Court while dismissing the appeals filed by the appellants
in the year 1996, which dismissal vacated the interim orders, could
have also relieved the appellants of the consequences logically and
necessarily flowing from the dismissal of the appeals by taking into
consideration the equity of relieving against hardship or could also
have done so in exercise of its jurisdiction conferred by Article 142 of
the Constitution. So was done in Samatha Vs. State of A.P. & Ors,
(1997) 8 SCC 191, 277 para 131. This Court having directed the State
Government to ensure further mining operations by industrialists
concerned in the scheduled area, restrained the lessees of mining
leases not to break fresh mines, but in the meanwhile allowed them to
remove the minerals already extracted and stocked in the reserved
forest area within four months’ time from the date of judgment.
Neither the appellants prayed for such relief nor the Court has
passed any such order. What this Court had not done, could not
obviously have been done by the High Court in exercise of its writ
jurisdiction in view of the earlier judgment of this Court having
achieved a finality.
The two decisions relied on by the learned counsel for the
appellants are not applicable to the facts of the present cases.
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Hindustan Steel (supra) is a case under the Orissa Sales Tax Act,
1947. The appellant company was engaged in construction activity.
During the course of such activity the company supplied building
materials to the contractor for construction and adjusted the value of
the goods supplied at the rates specified in the tender. The Court held
such transaction of supply of building materials to be a sale and,
therefore, the company a ’dealer’ covered by the Act. However, the
persons incharge of the affairs of the company had not registered the
company as dealer in the honest and genuine belief that the company
was not a dealer. The Court held that the liability to pay penalty did
not arise merely upon proof of default in registering as a dealer. An
order imposing penalty for failure to carry out the statutory obligation
is the result of a quasi-criminal proceeding and penalty will not
ordinarily be imposed unless the party obliged has either acted
deliberately in defiance of law or was guilty of conduct contumacious
or dishonest or acted in conscious disregard of its obligation. Penalty
will not also be imposed merely because it is lawful to do so. In spite
of a minimum penalty prescribed the authority competent to impose
the penalty may refuse to impose penalty if the breach complained of
was a technical or venial breach or flew from a bona fide though
mistaken belief. In Consolidated Coffee (supra), the court was
dealing with Section 42(1) of Karnataka Agricultural Income Tax Act,
1957. A default by assessee in making payment of tax attracted a
penalty equivalent to one and a one-half percent of the tax remaining
unpaid for the first three months and two and one-half percent of such
tax for each month subsequent thereto. There was also a provision for
payment of interest on delayed payment of tax. This Court held that
interest is compensatory while penalty is penal, i.e. punishing in
character. Where delay in payment of tax was attributable to the order
of stay passed by the Court, it was held that the order of stay placed
the demand for the tax in abeyance and, therefore, during the period of
stay the assessee cannot be said to be in default and hence no penalty
can be imposed on the assessee on the stay being vacated. However,
still the Court held that a late payment surcharge/interest is necessarily
compensatory in character and a penalty is a punishment.
At the end, the learned counsel for the appellants submitted
that the appellants may be allowed the liberty of making a
representation to the State Government for some relief at least in the
calculation of the amount of price. Needless to say that the appellants
are always at liberty to do and we express no opinion thereon.
The appeals are dismissed though without any order as to the
costs.