Civil APPEAL NOS
2144 2145 of 1970 From the Judgment and Decree 
131424369 of the High Court of Gujarat in First Appeal Nos
98160  27061
MN Phadke  Girish Chandra  C V Subba Rao and RN Poddar for the Appellant
Mr V Gouri Shankar
KL Harhi  MK Arora and Ms II Wahi  for the Respondent
The Judgment of the Court was delivered by  BALAKRISHNA ERADI  J
These two appeals have been filed by the State of Gujarat on the strength of a certificate granted by the High Court of Gujarat under Article 133 1 c of the Constitution of India as it stood prior to the Amendment of 1972
Dhrangadhra was a princely State in Kathiawar region ruled by a Maharaja  until April  1948  when pursuant to the covenant entered into by the Maharaja with the Government of India it became merged in the newly formed State of Saurashtra On January 29  1937  an agreement had been entered into between the Dhrangadhra Chemical Works Ltd  hereinafter called the defendant company   and the Maharaja of Dhrangadhra where under the defendant company purchased from the Government of Maharaja  Shree Shakti Alkali Works in Dhrangadhra and the Salt Works at Kuda with exclusive rights to manufacture salt at the Kuda Works on certain conditions
That agreement was subsequently modified as per the Minutes of the Board of Directors of the defendant company recorded on April 5  1953
After the 633 merger of the Dhrangadhra State in the State of Saurashtra  the aforesaid agreement was further modified by an agreement dated January 4  1950 entered into between the defendant company and the Government of Saurashtra
It is with that agreement alone that we are concerned with in these appeals
Under that agreement  the defendant company agreed to pay to the Government of Saurashtra royalty at the rate of Rs 0 2 3 2 annas  3 pies per Bengal Maund on the total quantity of salt sold by them every year
The payment of royalty was to be made as and when delivery was given by the defendant company to the purchaser
Under clause 3 of the said agreement the defendant company agreed to manufacture a minimum quantity of at least 50  000 tons of salt every year in addition to the quantity required by the defendant company for consumption if there Alkali factory
Clause 5 of the agreement provided for the payment of a minimum royalty  equivalent to an amount chargeable on the minimum quantity to be manufactured by the defendant company in accordance with clause 3
There was a short fall in the production of salt by the company for the years 1950 53 aggregating to 27300 0 54 tons
The royalty payable in respect of the said quantity of salt calculated at the agreed rate of 2 annas  3 pies per Bengal Maund amounted to Rs 107 495 10 0
Differences arose between the Government of Saurashtra and the defendant company with respect to the royalty payable under the agreement
The said dispute mainly centered round two points
According to the Government  irrespective of the quantity of salt actually sold by the company during any year  the company was bound to pay a minimum guarantee royalty in 1 respect of 50000 tons of salt by virtue of the combined operations of clauses 3 and 5 of the agreement The stand taken by the defendant company that clause 3 of the agreement was void due to vagueness and uncertainty and since clause 5 was dependent for its operation on clause 3  the said clause 5 was also vide due to vagueness
According to the defendant company their liability to pay royalty was only under clause 2  whereunder royalty was realizable by the Government only on the total amount of salt actually sold and delivered by the defendant company in each year
In spite of repeated demands made by the Government of Saurashtra  the defendant company persisted in its aforesaid stand
While matters stood thus  that as a result of the State reorganization of 634 1956  the State of Bombay became the successor state to the State of Saurashtra
The State of Bombay instituted the suit out of which these two appeals have arisen in the Court of Civil Judge  Senior Division  Surendranagar seeking to recover Rs 506959 5 0 with interest at 6 per cent per annum from the date of suit by way of royalty claimed to be payable by the defendant company on the terms of the aforesaid agreement of 1950
In defence to the suit  the defendant company reiterated the position it had taken in response to the claims made on it by the Government of Saurashtra namely  that clauses 3 and 5 of the agreement were vague and void and that under clause 2 its liability was to pay royalty only on the actual amount of salt sold by the company during each year The basis of the claim put forward by the plaintiff was that during the years when there was a short fall in the production  the company was bound to pay royalty on the minimum guaranteed quantity of 50000 tons of salt and that a sum of Rs 107495 10 0 was due on this account
It was further urged on behalf of the plaintiff that on a proper construction of clause 2 of the agreement  the liability of the company was to pay royalty not on the quantity of salt sold and delivered by them during the years when more than the minimum quantity stipulated in clause 3 had been manufactured but on the actual quantity manufactured by the company irrespective of whether any portion thereof remained unsold 
The Trial Court after a careful and detailed consideration of the terms of the agreement as well as all the relevant aspects of the case to the conclusion that the defendant company is liable to pay royalty on the minimum quantity of 50000 tons in respect of each year in which the production of salt was less than 50000 tons after excluding the quantity requirel for consumption in their own factory
For the years during which the production exceeded the stipulated minimum of 50000 tons the Trial Court held that royalty was chargeable only on the quantity of salt sold and delivered by the company and not on the total quantity manufactured by it
In this view it passed a decree in the plaintiff favour for a sum of Rs 266462 0 9 and dismissed the suit in respect of the remaining part of the plaintiff s claim
635 While the matter was pending in the Trial Court  the bifurcation of the State of Bombay had taken place and the area in question became the part of the territory of the State of Gujarat and the State of Gujarat bad been substituted as plaintiff the suit
Both the defendant company as well as the State of Gujarat filed appeals in the High Court questioning the correctness of the aforesaid judgment and the decree of the learned Civil Judge
First Appeal No 981 of 1960 was appeal filed by the defendant company and First Appeal No270 of 1961 was State s appeal
Both these appeals were heard together by the Division Bench of the High Court and they were disposed of under the judgment now impugned before us
The High Court on a consideration of clauses 2  3 and 5 of the agreement was of opinion that even though clause 5 dealt with a particular contingency namely  the failure of the defendant company to manufacture minimum quantity of salt as specified in clause 3  it was introduced by way of abundant caution and not by way of limiting the ambit and scope of the operative part of the agreement namely  clause 2
In the view of the High Court  clause 5 could not be regarded as controlling clause 2 and the liability of the defendant company to pay royalty to Government rested solely upon the terms of clause 2
In this view the High Court held that merely on account of the fact that the defendant company had during certain years failed to manufacture the minimum quantity of salt stipulated in clause 3  it could not be saddled with liability for payment of royalty during those years since under clause 2 royalty was to be paid only on the quantity of salt actually sold and delivered
The Division Bench of the High Court concerned with the Trial Court in the view taken by it that under clause 2 the charge to royalty would get attracted not by mere manufacture alone but only at the point of sale and delivery of the salt to the purchasers
On the basis of the foregoing conclusions reached by it  the High Court set aside the decree passed by the learned Civil Judge and dismissed a suit except regarding an amount of Rs 16631 which had been admitted by the defendant company to be payable by it to the plaintiff Aggrieved by the said decision of the High Court  the State of Gujarat has preferred these two appeals before this Court
636 After hearing arguments on both sides and scrutinizing the terms of the agreement dated January 4 1950  we have unhesitatingly come to the conclusion that the High Court was not right interfering with the decree passed by the learned Civil Judge
Since the points raised in the appeals turn on the interpretation to be placed on the clauses 2 to 5  we shall reproduce those clauses in full
They read 2
The company shall pay a royalty to the Government at the rate of 0 2 3 per Bengal maund on the total quantity a of salt sold by them every year
The amount of royalty under this clause shall be paid by the company as and when delivery is given by the company to the purchaser  and for the purposes of ascertaining the royalty chargeable under this clause the company shall produce the sale notes  delivery notes and such other documents or records as may be required by an Officer authorized by Government in this behalf
The company shall manufacture at least 50000 tons of salt in addition to the quantity required for consumption in their works
However  if it become impossible to produce the minimum quantity of salt required to be produced by this clause on account of natural circumstances beyond the control of the company Government may relax this requirement to such extent as may be deemed fit by Government in view of such circumstances
The company shall make all efforts to raise the production of salt above the minimum specified in clause 3 above
In case company fails to manufacture the minimum quantity of salt as specified in clause 3 above and Government do not think it fit to relax the requirements of the said clause in accordance with the pro visions mentioned therein  then notwithstanding any thing contained in clause 2 above the company shall 637 pay the minimum royalty equivalent to an amount chargeable on the minimum quantity to be manufactured in accordance with clause 3 of this agreement
 We do not find possible to agree with the High Court that clause 3 was only introduced by way of abundant caution  and that clause5 does not create any liability for payment of a minimum royalty
On a combined reading of clauses 2 to 5  it appears to us to be clear that while clause 2 was intended to operate and govern the rights and liabilities of the parties in respect of payment of royalty during years when the company maintained its normal scale of production  clauses 3 and 5 had been deliberately inserted with the object and purpose of ensuring that even in respect of lean years when the production of salt by the company fell short of the stipulated minimum of 50000 tons after excluding the quantity required for the consumption in the company s own factory  the Government was to be paid a minimum guaranteed royalty equivalent to the amount chargeable on 50000 tons of salt which is stipulated as the minimum quantity to be manufactured under clause 3
The interpretation put on clause 2 by the High Court has the result of completely rendering clauses 3 and 5 otiose and such interpretation does not commend itself to us
We do not also find it possible to agree with the view expressed by the High Court that the liability for payment of royalty emanated only from clause 2
No doubt clause 2 is the principal clause providing for the payment of royalty but it was to be operative in respect of years when the production of salt by the company fell within the normal limits  that is above the stipulated minimum
Clause S is a special provision for payment of a minimum guaranteed royalty in respect of periods when the production of salt by the company fell short of the quantity stipulated in clause 3
Hence there is no conflict between clauses 2 and 5 on the contrary  they supplement each other
We are  therefore  constrained to hold that the High Court was in error in its conclusion that in respect of years when the company failed to produce the minimum quantity of salt stipulated in clause 3  it was under no liability at all to pay any royalty to the Government under clause 5
The Trial Court was  in our opinion  perfectly right in granting a decree to the plaintiff for the amount of royalty payable in respect of the short fall in production during the years 1950 53
There remains only the further question  whether under the 638 terms of clause 2  the royalty payable thereunder is to be computed on the total amount of salt manufactured by the company or on the quantity sold and delivered
In our opinion  the terms of the clause are absolutely clear and provide for levy and collection of royalty only when the salt is sold and delivered by the company to the purchasers
This obviously means that royalty can be charged only on the quantity actually sold and delivered by the company and not on the total quantity manufactured by it during the particular year
The concurrent findings recorded on this point by the High Court and the learned Civil Judge do not  therefore  call for any interference
In the result  we allow these appeals  set aside the judgment of the High Court and restore the judgment and decree of the learned Civil Judge subject to the modification that the rate of interest payable to the plaintiff on the decree amount shall be 12 per cent from the date of the trial Court
The costs incurred by the appellant in this Court in these appeals will be paid by the respondent
The appellant will also get its full costs from the respondent in the High Court in First Appeal No981 of 1960
The defendant company will bear its own costs in the Trial Court as well as in the High Court
The plaintiff will get proportionate costs in the Trial Court while the defendant will bear its own costs
SR Appeals allowed


Summary:
On January 29 1937 an agreement had been entered into between the Dhangadhra Chemical Works Ltd and the Maharaja of Dhrangadhra whereunder the company purchased from the Government of Maharaja Shakti Alkali Works in Dhrangadhra and the Salt Works at Kuda with exclusive rights to manufacture salt at the Kuda Works on certain conditions
In April 1948  the princely State of Dhrangadhra got merged in the newly formed State of Saurashtra
By a further agreement dated January 4  1950 entered into between the company and the Government Saurashtra  the company agreed to ply to the Government of Saurashtra royalty at the rate of Rs 0 2 3 2 annas  3 pies per Bengal Maund on the total quantity of salt sold by them every year
The payment of royalty was to be made as and then delivery was given by the respondent company to the purchaser Under clause 3 of the said agreement the respondent company agreed to manufacture a minimum quantity of at least 50000 tons of salt every year in addition to the quantity required by the respondent company for consumption in their Alkali factory
Clause 5 of the agreement provided for the payment of a minimum royalty equivalent to an amount chargeable on the minimum quantity to be manufactured by the respondent company in accordance with clause 3
For the years 1950 53  there was a short fall in the production of salt by the respondent company aggregating to 27300 0 54 tons  and the respondent company made payments of royalty in terms of clause 2 of the agreement and refused to pay the minimum guaranteed royalty on 50000 tons taking the stand that clause 3 of the agreement was void due to vagueness and uncertainty and since clause 5 was dependent for its operation on clause 3 the said clause 5 was also void due to vagueness
In spite of repeated demands the respondent company persisted in its stand  631 The State of Bombay  which became the successor State to the State of Saurashtra in 1956 therefore  instituted the suit in the court of Civil Judge  Senior Division  Surendranagar seeking to recover a sum of Rs 506 959 5 O with interest at 6 per cent per annum from the date of suit by way of royalty payable by the respondent company
The trial court  after a careful and detailed consideration of the terms of the agreement as well as all the relevant aspects of the case came to the conclusion that the respondent company was liable to pay royalty on the minimum quantity of 50  000 tons in respect of each year in which the production of salt was less than 50000 tons after excluding the quantity required for consumption in their own factory and that for the years during which the production exceeded the stipulated minimum of 50000 tons royalty was chargeable only on the quantity of salt sold and delivered by the company and not on the total quantity manufactured by it
In this view it passed a decree in favour of the appellant which during the tendency of the trial became the successor Government to State of Bombay on bifurcation of the State for a sum of Rs 266462 0 9 and dismissed the appellants  claim
While  concurring with the trial court the view taken by it that under clause 2 charge to royalty wound get attracted not by mere manufacture alone but only at the point of sale and delivery of the salt to the purchasers  the High Court of Gujarat took the view in the two first and cross Appeals  that clause 5 could not be regarded as controlling clause 2 and the liability of the respondent company to pay royalty to government rested solely upon the terms of clause 2 and had that merely on account of the fact that the respondent company had during certain years failed to manufacture the minimum quantity of salt stipulated in clause 3  it could not be saddled with liability for payment of royalty during those years since under clause 2 royalty was to be paid only on the quantity of salt actually sold and delivered
The High Court 
accordingly set aside the decree passed by the trial court and dismissed the appellant s suit  except regarding an amount of Rs 16  631 which had been admitted by the respondent company to be payable by it to the appellant
Hence the two State appeals by certificate granted by the High Court under Article 133 1 c of the Constitution  as it stood prior to the Amendment of 1972
Allowing the appeals  the Court F  HELD 1
On a combined reading of clauses 2 to 5 of the Agreement dated 4
50 it is clear  that while clause 2 was intended to operate and govern the right  and liabilities of the parties in respect of payment of royalty during years when the company maintained its normal scale of production  clauses 3 and 5 had been deliberately inserted with the object and purpose of ensuring that even in respect of lean year when the production of salt by the company fell short of the stipulated minimum of 50000 tons after excluding the quantity required for the consumption in the company s own factory the government was to be paid a minimum guaranteed royalty equivalent to the amount chargeable on 50000 tons of salt which is stipulated as the minimum quantity to be manufactured under clause 3
The interpretation put on clause 2 by the High Court the result of completely rendering clause 3 and 5 otiose
637B D 632 2
No doubt clause 2 is the principal clause providing for the payment of royalty but it was to be operative in respect of years when the production of salt by the company fell within the normal limits  that is above the stipulated minimum Clause 5 is a special provision for payment of a minimum guaranteed royalty in respect of periods when the production of salt by the company fell short of the quantity stipulated in clause 3
Hence there is no conflict between clauses 2 and 5 on the contrary  they supplement each other
637E F3 3
The terms of clause 2 are absolutely clear and provide for levy and collection of royalty only when the salt is sold and delivered by the company to the purchasers
This obviously means that royalty can be charged thereunder only on the quantity actually sold and delivered by the company and not on the total quantity manufactured by it during the particular years
638A B