CIVIL WRIT JURISDICTION CASE No.2481 OF 2008 --------- In the matter of applications under Article 226 of the Constitution of India. Madhucon Projects Ltd. a Limited Company duly incorporated under the provisions of the Companies Act, 1956 having Corporate Office at Madhucon House, Plot No. 1129/A, Road No.36, Hitech City Road, Jublee Hills, Hyderabad-500033 and Regi- stered Office at Madhu Complex, Jublepura, Khamam, Andra Pradesh-507003 and Administrative Office at D-27, East of Kailash, New Delhi-110065 as we as Site Office at BR-07, Manigachi, (Near Petrol Pump), District-Darbhanga, Bihar through its Deputy Project Manager, Md. Shafi, S/o-Late Bigan Ali, residing at Manigachi (Near Petrol Pump), P.S.-Manigachi, District-Darbhanga. -Petitioner. VERSUS 1. The State of Bihar through the Commissioner of Mines, Government of Bihar, Patna. 2. The Commissioner of Mines, Government of Bihar, Patna. 3. The Collector, Darbhanga. 4. The Assistant Mining Officer, Darbhanga. 5. The Collector, Madhubani. 6. The Assistant Mining Officer, Madhubani. -Respondents. WITH CIVIL WRIT JURISDICTION CASE No. 6837 of 2008 Madhucon Projects Ltd. a Limited Company duly incorporated under the provisions of the Companies Act, 1956 having Corporate Office at Madhucon House, Plot No. 1129/A, Road No.36, Hitech City Road, Jublee Hills, Hyderabad-500033 and Regi- stered Office at Madhu Complex, Jublepura, Khamam, Andra Pradesh-507003 and Administrative Office at D-27, East of Kailash, New Delhi-110065 as we as Camp Office at Simra, Village, P.S. & P.O.-Chakia, District-East Champaran, Bihar, 845412 Through its Project Manager, Mr. Anup Kumar Banarjee, S/o-Late Hari Banerjee, - 2 - Residing at Simra Village, P.S.& P.O.-Chakia, District-East Champaran, Bihar. -Petitioner. VERSUS 1. The State of Bihar through the Commissioner of Mines, Government of Bihar, Patna. 2. The Commissioner of Mines, Government of Bihar, Patna. 3. The Assistant Mining Officer, Motihari, East Champaran. -Respondents. ------------ For the Petitioners : Mr. R.K.P.Singh For the Respondents : Mr.Vishwa Mohan Kr. Sinha ------------ P R E S E N T THE HON'BLE MR. JUSTICE NAVANITI PRASAD SINGH Navaniti Prasad Singh, J. In both these writ applications a common question arise as such they have been heard together. The petitioner is a company engaged in large scale civil construction work. As a part of its business, it had undertaken certain work from National Highway Authority of India (NHAI) for repairing and strengthening the road of National Highway. In both these cases, the agreement as entered into between the parties, that is the petitioner and the National Highway Authority of India, were admittedly entered into prior to 19.04.2006, which date is a material date and of some significance as would be seen later. - 3 - In course of executing their work agreement petitioner was required to strengthen the embankments of the National Highway. For this purpose, they were required to use substantial quantity of earth. The petitioner entered into agreement with nearby raiyats, who permitted petitioner to remove earth from their raiyati lands. Some wanted irrigation ditch to be created, some wanted ponds to be created and some wanted some embankments to be created, but the common underlying fact was that petitioner was permitted by the raiyats to remove earth on payment for facilitating the contract, which petitioner had taken from the National Highway Authority of India Limited. The Officers of the Mining Department of the State, on finding that the petitioner was removing earth from various fields nearby and using it, demanded royalty on the ground that petitioner was extracting minor mineral and was as such liable to pay royalty. Initially, petitioner paid but thereafter made a representation for refund pleading that it had paid under mistaken notion of law, whereas in fact, there was no liability. That having not been done and being pressed for further payment these two writ applications were filed in which initially interim stay was granted but later on vacated. The writ applications have now been listed for final disposal after hearing. On the facts aforesaid, learned counsel for the petitioner submits firstly that the petitioner as per agreement with the raiyat had used their earth and paid price thereof to the raiyat, petitioner cannot now be made liable to pay royalty to the State. - 4 - Secondly, it was submitted that removing earth with permission of raiyat is not a mining activity, and petitioner not being a lessee or a permit holder, cannot be made to pay royalty, as royalty is a charge for removing minerals payable by a lessee. It was thirdly submitted that by virtue of Section 3A of the Bihar Lands Reforms Act all rights in land vested in the raiyat and, therefore, a raiyat could validly permit removal of earth from his land and royalty, if any, has to be discharged by the raiyat not the petitioner. It was lastly submitted that agreements with NHAI being of a date prior to the liability being created for the first time, petitioner should not put to loss because of this unanticipated liability, which was not provided for in the agreement under which he was required to use the earth. On the other hand, learned counsel for the State of Bihar relies on the Division Bench judgment of this Court in the case of Hindustan Steel Works Construction Limited & Anr. Vs. The State of Bihar & Ors. since reported in 2007(2) PLJR 849 to submit that it is no more open to the petitioner to urge that he is not liable to pay royalty on earth removed for use in his construction activity. It is further pointed out that the raiyati interest of a raiyat in land is limited to tilling the earth for agricultural purposes. So far as minerals are concerned, raiyat has no right in the minerals, which vests in the State. They may be above the ground or below, for example sand or coal, as the case may be. The two rights being distinct by virtue of Bihar Land - 5 - Reforms Act, the raiyati interest of raiyat has remained intact and specifically all mineral rights and interest therein being vested in the State and, as such, any mining activity to win mineral cannot be done except under authority of the State, though as it could interfere with the working of the raiyati, the raiyat would be required to give permission. That being so, if the petitioner entered into agreement with the raiyat, which was a private agreement, that would not deprive State of its right of recovery of royalty. Thus, first primal question for decision is, whether in the facts and circumstances, as enumerated above, is the petitioner’s activity of removing earth from raiyati land for use in its construction activity a mining activity? The second question would be whether it relates to a notified minor mineral or not? The third would be admittedly not being a lessee or a minor or mining permit holder can the petitioner be liable as a mere contractor to pay royalty on earth removed and used. In my view, upon consideration of the facts and the issues involved, the petitioner cannot succeed. Firstly, the question is, whether by extracting earth from lands of raiyats, would petitioner be liable to pay royalty is a question which is not open to question. That has been settled by Division Bench of this Court in the case of Hindustan Steel Works Construction Limited and another vs. The State of Bihar & Ors. (supra). There the question was similar and it was categorically held that first the - 6 - Central Government amended the Mines and Minerals (Regulation and Development) Act, 1957 and in the year 2000 declared ordinary clay as a minor mineral, but mere declaration did not make persons liable to pay royalty because royalty payable to State in respect of minor mineral has to be paid at the rate to be specified by the State Government, which for the first time was specified on 19.04.2006. The Division Bench first held that clay would mean ordinary earth and then held that the liability to pay royalty would arise only on and from 19.04.2006 and not earlier. Thus, this issue is decided against the petitioner. Coming to the next issue, petitioner not being a lessee or a permit holder, he cannot be made liable to pay royalty. Petitioner is partly correct. Royalty is a charge levied and realized by a person for granting permission to remove minerals under his authority. Thus seen, royalty is payable only by a lessee, as was held by this Court in the case of Tata Engineering & Locomotive Company Limited Vs. The District Mining Officer & Cess Collector (Mining) and The State of Bihar since reported in 1981 PLJR 86 and Monghyr Construction Company & Ors Vs. The State of Bihar & Ors. since reported in 1992 (1)PLJR 44. The statute did not stop there but was amended. Rule 40 of the Bihar Minor Mineral Concession Rule, was substantially amended in the year 1985 after TELCO judgment. Under sub Rule 8 of Rule 40, it has now been statutorily provided that whoever remove mining mineral without valid lease or permit or on through behalf, such - 7 - removal is made otherwise than in accordance with these rules, whoever, he may be, would be a party to illegal removal and shall be liable to pay to the government all such rent royalty etc., that would otherwise to be waived. Thus, clearly this covers cases where theft of minor mineral is committed or unauthorized removal of minor mineral is committed, the person so done becomes liable, which is in the present case is the petitioner. He had taken no lease or permit from the State for removal of earth, which undoubtedly is a minor mineral, and for use in embankments etc., as such, petitioner is liable to pay royalty. I may refer to sub Rule 10 of Rule 40 as well. Here an obligation has been caste on the department while making payment to deduct the said amount that as has been held in the case of Monghyr Construction Company (supra) is a measure to prevent the evasion of payment of royalty, in either event petitioner is liable to pay royalty. It was next submitted that under the Bihar Land Reforms Act a raiyati interest matured into a full ownership of land in raiyat. I am afraid that it is not so and this issue is not open for any discussion. From the statute, it is clear what is kept intact with the raiyat is the raiyati interest in land and nothing beyond that. Under Bihar Land Reforms Act, it is specifically provided that so far as mining and minerals rights are concerned, they shall vest in the State. The rights are distinct rights one to till the land for agricultural purposes the other to win minerals either from top - 8 - of the land or beneath the land. The first right is with the raiyat, the second is with the State. The petitioner is being asked to pay for infringement of rights, which are conferred on the State. State is not concerned with any agreement which petitioner may or may not enter into with the raiyat in respect of his raiyati right. Thus, seen, none of the contentions, as raised, merit no consideration. Before parting, I may observe the last submission, which was made by the learned counsel for the petitioner. He submitted that admittedly both the agreements entered into as between the petitioner and National Highway Authority of India, which is a statutory Corporation, were prior to the statutory amendment creating liability of payment of royalty. Thus, when agreements were entered into the statutory liability was not known. It was a subsequent creation. Taking help from the principles, as enshrined in Section 64A of the Sales of Goods Act, it was argued that if petitioner was made to discharge unanticipated statutory liability created subsequent to the agreement by fresh enactment, he should not suffer for the work having been done for the National Highway Authority. They should reimburse to the petitioner to the extent this liability was discharged by the petitioner. Reliance was placed also in respect thereof on the case of M/s Hindustan Sugar Mills Vs. The State of Rajasthan and others since reported in AIR 1981 Supreme Court 1681. In that case some what similar situation had arisen. There was a countrywide dispute, whether freight charges, which were received - 9 - from the government by the cement manufacturers on dispatches of levy cement to various destinations, was amenable to sales tax or not being a part of sale price. High Courts had taken divergent view. Ultimately, the matter reached the Apex Court and the Apex Court ultimately held in the case of M/s Hindustan Sugar Mills Vs. The State of Rajasthan and others AIR 1978 SC 1496 that sales tax was payable on the freight component. This having been held by the Supreme Court for the first time that the Companies were now liable to pay sales tax pleaded to the Court that this was an unanticipated liability being created not contemplated under any agreement and they should not be put to loss. The Apex Court held thus:- “……….We hope and trust that the Central Government will honour its legal obligation and not drive the appellant to file a suit for recovery of the amount of such sales tax. We hopefully expect that the Central Government will not try to shirk its legal obligation by resorting to any legal technicalities, for we maintain that in a democratic society governed by the rule of law, it is the duty of the State to do what is fair and just to the citizen, and the State should not seek to defeat the legitimate claim of the citizen by adopting a legalistic - 10 - attitude but should do what fairness and justice demand…….” This is what the Apex Court held, even without reference to the agreements inter-party on the premise that there was no agreement for any such reimbursement, but soon it was found that there were Clauses justifying the claim for reimbursement, review application was filed, wherein the Apex Court reiterated its view that Central Government would be obliged to reimburse and that decision is reported in AIR 1981 SC 1681, but the unfortunate part is that there are no factual pleadings nor is National Highway Authority is a party to these writ applications and in absence thereof, no such relief though available, can be granted to the petitioner. Accordingly, both the writ applications are dismissed. Patna High Court The 30th March, 2010 AFR/Trivedi (Navaniti Prasad Singh, J.)