MANBHAR DEVI AGARWAL vs. STATE OF RAJASTHAN .

1 REPORTABLE IN THE SUPREME COURT OF INDIA

MANBHAR DEVI AGARWAL .......PETITIONER(S)      VERSUS THE STATE OF RAJASTHAN & ORS  ......RESPONDENT(S) J U D G M E N T ASHOK BHUSHAN, J. Leave Granted. JUDGMENT 2. This appeal has been filed against the judgment of the   High   Court   of   Judicature   for   Rajasthan,   Jaipur Bench,   Jaipur   dated   17.12.2008   in   D.B.   Civil   Special Appeal   No.   231   of   2008   by   which   judgment,   the   Civil Special Appeal filed by the appellant against judgment and order of Learned Single Judge dated 20.02.2007 was Page 1 2 dismissed.   Brief   facts   necessary   to   be   noted   for deciding the appeal are:­

Nigam,   Jaipur   has   been   carrying   out   constructions   of buildings, roads, drains, footpaths, etc.. The appellant for   carrying   out   his   construction   work   uses   Bazri, stone,   grit,   moram,   etc.   which   is   claimed   to   be purchased from an open market at Jaipur. 3. State   of   Rajasthan   has   issued   various   Government Orders   dated   20.02.1994,   08.11.1996   and   20.11.1996   by which provision of deduction of 2% towards the royalty of   minerals   from   bills   of   contractors   of   the JUDGMENT construction department was made. The State of Rajasthan modified the scheme by issuing an order dated 13.11.2000 by   which   the   earlier   Government   Orders   providing   for deductions of 2% as royalty of minerals from the bill was   done   away.   A   new   scheme   was   enforced   vide   order dated 13.11.2000. Under the new scheme, the copy of work order   issued   by   Construction   Department   to   the Page 2 3 contractors containing details of the quantity of the minerals   used   for   construction   was   required   to   be

Engineer, who before the commencement of the mining work were required to issue short term permission letter for use of mineral in the construction. 4. Another   Government   Order   was   issued   dated 03.10.2001 by which, direction nos. 2 & 4 as contained in the circular dated 13.11.2000 were modified.  5. Further, directions were issued on 25.01.2002.   A letter dated 26.03.2002 was issued by the Government to the   Chief   Executive   Engineer,   Commissioner,   Jaipur JUDGMENT Municipal   Corporation   referring   to   Government   Orders dated   03.10.2001   and   13.11.2000   and   requesting   the Jaipur Municipal Corporation to ensure compliance of the aforesaid Government Orders. It was further stated that until the No Dues certificate is issued in favour of the contractors by the Department of Mining, payment against final   bill   of   the   contractors  be   not   made   so  that Page 3 4 Department and State may not suffer any kind of revenue loss. The appellant filed the writ petition being Writ

reliefs:­ “ a.   By   way   of   writ,   order   or direction the order dated 26.03.2002 Annexure­5 passed by the respondent No. 3 may kindly be quashed and set aside. b. by   way   of   writ   order   or direction,   the   respondents   may   be restrained   not   to   collect   royalty from the petitioners on purchase of Bazri,   grit,   stone,   moram   etc   from the open market. c.  by   way   of   writ   order   or direction,   the   respondents   may   be restrained   to   not   to   levy   royalty from the running and final bills of the   contractors   i.e.   petitioners awarded prior to 26.03.2002. JUDGMENT d. any   other   appropriate   writ, order   or   direction   to   which   the petitioner may be entitled to in the circumstances   of   the   case   may   be issued in his favour. e. cost   of   the   writ   petition   may be   awarded   in   favour   of   the petitioner.” Page 4 5 6. The   Writ   Petition   filed   by   the   appellant   was disposed of by the learned Single Judge on 20.02.2007.

of   an   earlier   judgment   in   SBCWP   No.   359   of   1998, R.S.Shekhawat   &   Others   Vs.   State   of   U.P.   decided   on 28.02.2001. 7. The appellant aggrieved by the decision of learned Single   Judge   dated   20.02.2007   filed   DBCSA   No.   231   of 2008.   The   Division   Bench   held   that   there   is   no illegality in order passed by the learned Single Judge in   R.S.Shekhawat   and   others   case   (Supra),   h ence,   the learned Single Judge disposing of the writ petition of JUDGMENT the appellant did not commit an error. The appeal was accordingly dismissed. Aggrieved by the decision of the D.B.   dated   17.12.2008,   the   appellant   has   filed   the present appeal. 8. Learned counsel for the appellant in support of the appeal   contends   that   both   learned   Single   Judge   and Division Bench of High Court did not decide the issues Page 5 6 raised by the appellant in the writ petition and have disposed   of   the   writ   petition   in   terms   of   earlier

others   in   which   judgment   no   issues   were   decided.   He submits   that   Judgment   in   R.S.Shekhawat   Case   indicates that the  Court  did not  enter  into the correctness or otherwise   of   the   notification   dated   22.09.1994   & 03.07.1994   which   were   under   challenge.   The   Court noticing the new scheme as issued by Government Order dated   13.11.2000,   noted   the   request   of   the   appellant that   matter   may   be   directed   to   be   examined   by   the Department of Mines on which request the writ petition was disposed of. JUDGMENT 9. It   is   submitted   that   the   above   judgment   did   not decide   the   issues   raised   by   the   appellant   which   were required to be considered. It is further submitted that the   payment   of   royalty   is   to   be   made   by   lessees   or licensees who have been granted right of excavation of minerals i.e. a holder of mining lease or license. The Page 6 7 appellant who has been purchasing the minerals from the open   market   cannot   be   saddled   with   the   payment   of

operation so as to be asked to make payment of royalty. 10. Learned   counsel   for   the   State   disputing   the submissions of counsel for the appellant submits that the various Government Orders by the State of Rajasthan have been issued to prevent the illegal mining i.e. use of the minerals without payment of the royalty.  It is submitted   that   the   Government   Orders   provide   for   a mechanism to  check illegal mining and in event minerals used   are   minerals   which   are     royalty   paid   minerals, JUDGMENT there is no liability and the  Government only requires verification of such facts   i.e. whether minerals used by the contractors are royalty  paid  or  not.    It   is submitted   that   direction   for   withholding   the   payment till the verification of above facts are only for the purpose of ensuring that minerals used are not illegally mined   minerals   without   payment   of   royalty.   He   submit Page 7 8 that no error was committed by learned Single Judge and the   Division   Bench   in   disposing   of   the   writ   petition

competent authorities in the mining department to prove that minerals used by them are all royalty paid.  11. We   have   considered   the   submission   of   learned counsel for the parties and have perused the records. 12. The   Parliament   has   enacted   Mines   and   Minerals (Development   and   Regulation)   Act,   1957,   for   the development and regulation of mines and minerals. The Union control on regulation of mines and development of minerals has  been declared by virtue  of Section 2 of JUDGMENT 1957 Act. Section 3(e) defines 'Minor Minerals' which is to the following effect:­ “ 3(e). 'Minor   Minerals'   means building   stones,   gravel,   ordinary clay, ordinary sand other than sand used   for   prescribed   purposes,   and any other mineral which the Central Government   may,   by   notification   in the Official Gazette, declare to be a minor mineral;” Page 8 9 13. By Section 15 of the Act, the State Government has

14. Section 9(2) provides for payment of royalty by the holder of mining lease. Section 9(2) is as follows:­ “ 9(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 or consumed by him or by his agent, manager, employee, contractor or sub­lessee) from the leased area at   the   rate   for   the   time   being specified in the Second Schedule in respect of that mineral.” 15. By   Act   25   of   94,   certain   amendments   have   been JUDGMENT incorporated in 1957 Act. One of the sections inserted by   Amendment   is   Section   23C.   Section   23C(1)   is   as follows:­ “ 23C.   Power   of   State   Government   to make   rules   for   preventing   illegal mining,   transportation   and   storage of minerals:­ (1).   The   State   Government   may,   by notification   in   the   Official Page 9 10

16. The State of Rajasthan has framed Rajasthan Mines and   Minerals   Concession   Rules,   1986,   in   exercise   of power   under   Section   15.   Section   3(2)(XX)   defines ‘Royalty’ which is to the following effect:­ “ Royalty means the charge payable to the Government in respect of the ore or   mineral   excavated,   removed   or utilized from any land as prescribed in Schedule­I.” 17. Rule   18   provides   for   conditions   which   are   to   be JUDGMENT included   in   every   mining   lease.   According   to   Section 18(1)(b), the holder of a mining  lease  granted on or after commencement of these rules shall pay royalty in respect   of   any   mineral   removed   by   him   from   and/or consumed within the leased area at the  time being as specified in Schedule I in respect of that mineral. Page 10 11 18. Rule 48 contains various provisions with regard to unauthorized   working.   Various   provisions   regarding

the mining lease have been contained in Rule 48 which also includes seizure of illegally mined minerals and recovery   of   royalty   and   tax   chargeable   as   well   as compounding charges. 19. Above   statutory   provisions   clearly   indicates   that excavation   of   minor   minerals,   as   per   mining   lease   or permit is subject to payment of royalty and the rent as prescribed in the rules. The liability to make payment of royalty is on the person who excavates the minerals JUDGMENT under the lease or license. 20. The   provisions   also   indicate   that   in   event   of illegal mining or excavation of minerals without payment of royalty, the rules empower exercise of various powers including   seizure   of   minerals,   recovery   of   royalty, taxes and compounding charges on such minerals. Page 11 12 21. The   first   submission   which   has   been   raised   by learned   counsel   for   appellant   is   that   learned   Single

raised in the writ petition and disposed of the matter in terms of earlier judgment of   R.S.Shekhawat case   in which   case   no   issues   were   decided.   The   judgment   of R.S.Shekhawat  is brought on record as Annexure P­2. 22. The above judgment indicates that in writ petition, notification dated 22.09.1994 and 03.07.1995 by which 2% deductions   were   made   from   running   bills   submitted   by petitioners   to   the   Public   Works   Department   and   other State Departments towards royalty of minerals was under JUDGMENT challenge. The petitioners of that case were engaged in business of constructing roads, buildings and were using different varieties of minerals purchasing it from the open market. However, when the writ petition came for hearing, the court noticed the subsequent development by which the aforesaid two notifications were substituted by a new scheme dated 13.11.2000.  Page 12 13 23. The   petitioner   of   that   case,   in   view   of   the subsequent   development   did   not   press   for   adjudication

03.07.1994   but   prayed   for   the   refund   of   the   royalty deducted from their bills. The petitioner suggested that the matter may be examined by the Department of Mines itself. It is useful to note following observation in the judgment:­ “ ...as   already   stated   the   counsel for   the   petitioner   as   also   other counsels appearing in all these writ petitions,   no   longer   consider   it necessary to insist for adjudication of   the   question   as   to   whether   the two   notifications   dated   22.09.1994 and 03.07.1994 are legal or not in view of the fact that a new scheme th on   13   November   2000   referred   to hereinbefore   has   been   implemented but   insofar   as   deductions   already made by the Public Works Department and   other   Departments   on   behalf   of the Mining Department is concerned, the   same   requires   adjudication   by the   Department   of   Mining   to ascertain whether the petitioners at th any   point   of   time   prior   to   13 JUDGMENT November   2000   had   used   minerals   in their construction operations or not which were not royalty paid and for Page 13 14

24. The   aforesaid   writ   petition   was   thus   disposed   of giving   liberty   to   the   petitioner   to   approach   the Department   of   Mines   with   the   relevant   records   for assessment and explaining the position for whether the claim for refund or adjustment is sustainable or not. 25. When the writ petition no. 3191 of 2002 filed by JUDGMENT the appellant came for consideration on 20.02.2007, the learned Single Judge after  considering  the judgment in R.S.Shekhawat case,   disposed of the writ petition with following directions:­ “ ...Having   perused   the   aforesaid judgment   and   considering   the   rival arguments of the learned counsel for the parties, I am not persuaded to Page 14 15

26. The   Division   Bench   also   affirmed   the   aforesaid judgment. 27. From the prayers as made in the writ petition, it is   clear   that   principle   prayer   made   by   the   writ petitioners   was   challenge   to   D.O.   letter   dated JUDGMENT 26.03.2002   issued   by   the   Office   of   Mining   Engineer, Mines   and   Geology,   addressed   to   Commissioner,   Jaipur Municipal Corporation, Jaipur. 28. The writ petition in  R.S.Shekhawat case  was decided on 28.02.2001 by which date the letter dated 26.03.2002 was not even in existence. Letter dated 26.03.2002 being subsequent   in   point   of   time   from   the   judgment   of Page 15 16 R.S.Shekhawat case , it was necessary to look into the content of the letter and to take decision thereafter.

counsel for the appellant that letter dated 26.03.2002 was also necessary to be looked into before deciding the writ petition of the appellant and without referring to the letter dated 26.03.2002, the writ petition of the appellant ought not to have been disposed of.  29. We thus, in view of the above, proceed to examine the   contents   of   D.O.   letter   dated   26.03.2002   and submissions   made   by   the   appellant   in   support   of   the appeal. JUDGMENT 30. The   submission   which   has   been   pressed   by   the counsel of the appellant is that payment of royalty is contemplated from holder of a mining lease or permit. As noted above, the statutory scheme clearly indicates that the   royalty   is   required   to   be   paid   by   mining   lease holder   or   permit   holder   for   excavation   of   a   minor mineral and no  mineral is to  be removed or  excavated Page 16 17 without   payment   of   the   royalty.   For   mining   of   all minerals payment of royalty is necessary.

mineral is excavated/transported/removed without payment of royalty, there are specific provisions for seizure of such minerals, recovery of royalty, tax and compounding charges.   The   statute   thus   takes   care   of   payment   of royalty   for   even   those   minerals   which   have   been illegally   mined   or   excavated.   The   lease   holders   or permit holders who excavate the minerals under the lease or license are obliged to make payment of royalty and in event any such mineral is found to be removed by lessee JUDGMENT or   their   agents   without   payment   of   royalty,   statute contains ample provisions to ensure recovery of royalty and fine etc.  32. As noted above, the earlier Government Orders dated 22.09.1994 & 03.07.1995 provided for 2% deductions from the   running   bills   of   the   contractors   of   public   works department   and   other   state   departments   towards   the Page 17 18 royalty of minerals which were used by contractors in building of roads etc. The Scheme as provided under the

and a new scheme was enforced by Government Order dated 13.11.2000   and   03.01.2001.   By   Government   Order 03.01.2001 modifying earlier direction dated 13.11.2000, following was directed:­ “ After carrying out amendment in the even   numbered   Circular   dated 13.11.2000   related   to   guidance   to recover   the   royalty   against   the minerals   used   in   various   works   by the Contractors of Government Works Department   and   substituting   the Paras 2 and 4 of the above Circular, following directions are issued:­ "(2)   Before   commencement   of   mining work   by   the   Contractor   of Construction   Department,   Short   Term Permission   Letter   for   mineral   used in the construction from the Mining Department   shall   be   obtained   and shall have to deposit the fee fixed for it and cost of Khanna Book with the   Department,   but   amount   of royalty   payable   on   the   quantity   of the   mineral   mentioned   in   the   short term   License   will   be   deducted   from the running bills of the contractor by   the   concerned   Construction JUDGMENT Page 18 19 Department   on   the   basis   of   the quantity of the mineral used in the construction.

33. A further Government Order was issued on 25.01.2002 JUDGMENT which   has   been   brought   on   record   as   Annexure   P­4   by which certain other directions were issued for ensuring that the payment of royalty regarding all minerals used is made and the mining engineer was required to keep all details and the contractors were also to obtain short term   permission   for   use   of   the   minerals   as   per   work order. Page 19 20 34. A letter dated 26.03.2002 was issued by the Mining Engineer   to   the   Commissioner   Municipal   Corporation,

Municipal Corporation, Jaipur was drawn towards circular dated 03.10.2001 of the State Government and circular dated 13.11.2000, and the commissioner was informed that although the information of the circular has been sent earlier to the Jaipur Municipal Corporation, the amount of   royalty   has   not   been   received.   The   Commissioner, Jaipur Municipal Corporation was requested to arrange to send   royalty   on   the   basis   of   the   quantity   of   the minerals used in the contract of the construction work given   by   to   the   contractor   by   subordinate   offices   of JUDGMENT Jaipur Municipal Corporation before end of the financial year. 35. The   letter   dated   26.03.2000   impressed   upon Commissioner of Jaipur Municipal Corporation to ensure compliance   of   Government   Orders   dated   13.11.2000   and 03.10.2001 which has been noted earlier. The appellant Page 20 21 in writ petition has only challenged the letter dated 26.03.2002   but   has   not   challenged   the   Government

by the said letter. 36. Learned   counsel   for   the   State   is   right   in   his submissions that since appellant did not challenge the aforesaid two circulars of the State Government where scheme   for   realization   of   the   royalty   from   the contractors for use of the minerals was enforced, the state   had   no   occasion   to   give   all   relevant   facts pertaining to two earlier circulars by which royalty was sought   to   be   recovered.   In   the   present   writ   petition JUDGMENT only   prayer   is   to   quash   the   letter   dated   26.03.2002, which is only a letter to Municipal Commissioner Jaipur to   ensure   compliance   of   Circulars   dated   13.11.2000   & 03.01.2001.   There   being   no   challenge   to   Circular's 13.11.2000   &   03.01.2001   in   the   writ   petition   and   the State had no opportunity to defend its above policy it is  not appropriate  for this Court to embark upon the Page 21 22 adjudication   of   above   Government   Scheme.   The   letter dated   26.03.2002   being   only   a   letter   to   ensure

no fault can be found in the said letter. 37. A Counter Affidavit has already been filed by the Respondent No. 1 & 2, the State of Rajasthan and Mining Engineer   in   the   present   appeal.   In   the   counter affidavit,   State   has   come   up   with   the   case   that   the liabilities to pay royalty rest with contractors/lease holders to whom mining lease are bestowed. It is further pleaded  that   in   case   the   minerals   have   been   procured from the legal source on which royalty have been paid, JUDGMENT there   is   no   royalty   payable   subsequently.   In sub­paragraph IV of the counter affidavit, following was stated:­ “ IV.   That   the   contents   of   para   IV of the questions of law are wrong, ill­advised and are hence denied. It is   submitted   that   the   liability   to pay   royalty   rests   with   the contractors/lease   holders   to   whom the   mining   leases   are   bestowed   but Page 22 23

JUDGMENT Page 23 24 38. It is further stated in the counter affidavit that in event appellant has procured the minerals from open

documents   to   prove   that   such   minerals   used   in construction work were purchased legitimately and then no royalty shall be paid to the State by the appellant on such mineral in such a case.  39. It   is   submitted   that   in   spite   of   department communication 18.02.2008 and 16.02.2009 calling upon the appellant   to   produce   the   records   of   purchasing   the minerals from open market, the appellant has failed to produce any such record of such purchase. In paragraph JUDGMENT VIII, following has been stated:­ “ VIII.   That   the   contents   of corresponding   para   no.   VIII   are wrong   and   denied.   It   is   submitted that as per the circular issued by the   department   under   Rule   63   of Rajasthan   Minor   Minerals   Concession Rules, 1986, it is mandatory for all contractors   enlisted   /registered with   the   Public   Works   Department cited   above   to   obtain   'Short   Terms Permit' for the minerals to be used Page 24 25

JUDGMENT 40. The   circulars   issued   by   the   State   Government including   the   circular   dated   13.11.2000   as   well   as circular dated 03.10.2001 has to be interpreted to mean that circular requires payment of royalty with regard to only   those   minerals   which   have   been   used   by   the contractor for which no royalty was paid. The circular cannot be interpreted to mean as requiring payment of Page 25 26 royalty   for   minerals   used   for   which   once   royalty   has already been paid. The state has come up with the above

that   contractors   do   not   use   minerals   which   are   not royalty paid.  41. Rajasthan High Court in   R. S. Shekhawat’s   case   as noted above has permitted the contractor to approach the mining   department   for   refund   of   the   amount   which   was deducted from the bill in event they successfully prove that   minerals   used   by   them   were   minerals   for   which royalty   was   already   paid.   The   aforesaid   directions clearly protected the interest of the contractors and we JUDGMENT are of the view that the appellant's interests are amply protected   with   the   aforesaid   directions   issued   by Rajasthan High Court.  42. We, however, deem it appropriate to give liberty to the   appellant   to   approach   the   mining   engineer, Respondent   No.   2   by   a   written   representation   giving details   of   amount   deducted   from   its   bills   or   amount Page 26 27 withheld   along   with   the   details   of   minerals   used   by contractors   with   details   of   proof   to   establish   that

as per 1986 rules.  The Mining Engineer/Assistant Mining Engineer,   the   Respondent   No.   2   may   consider   the representation   and   take   an   appropriate   and   reasoned decision expeditiously preferably within three months of submission   of   the   representation   and,   in   event   it   is found   that   appellant   is   entitled   to   refund   of   any amount, appropriate consequential action may be taken.  43. The   Civil   Appeal   is   disposed   of   with   the   above directions. JUDGMENT .............................................J. (PINAKI CHANDRA GHOSE) ..........................................J. (ASHOK BHUSHAN) NEW DELHI; NOVEMBER 25, 2016. Page 27