1 IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA C.W.P. No. 332 of 2001 Reserved No. 23.9.2008 Date of decision: Associated Cement Company & anr …Petitioners Versus State of HP & ors ..Respondents Coram The Hon’ble Mr. Justice R.B.Misra, Judge. The Hon’ble Mr. Justice Surjit Singh, Judge. Whether approved for reporting?1 For the Petitioners Mr. K.D. Sood, Advocate For Respondent NO.1 to 4: Mr. P.K. Sharma, Add. AG For respondent No.5 Mr. Anup Rattan, Advocate. Per R.B. Misra, Judge The petitioner company has approached this court by way of filing the present writ petition under article 226/227 of the Constitution of India, with a prayer to quash rule 64-A of Mineral Concession Rules, 1960, authorizing and/ or permitting respondents to recover interest on belated payment of royalty as the same being beyond the legislative 1 Whether the reporters of the local papers may be allowed to see the Judgment? 2 competence and without authority of law. Further, prayer has been made for declaration that the said clause-3 in part-VI of the mining lease granted to the petitioner to be ultra vires, illegal, null and void and for quashing the demand of recovery of Rs. 6,76,57,671/- on account of interest on belated payment of royalty vide letters dated 18.1.2001 (Annexure P-1) and dated 12.3.2001 (Annexure P-2 ). 2. Petitioner a Company incorporated under the Companies Act having its registered office at 121, Maharishi Karve Road, Mumbai and has set up a cement plant at Barmana, known as Associated Cement Company, Gagan Cement Works, PO Barmana, District Bilaspur, State of H.P. A mining lease for lime stone in respect of the land specified in Para-1 to the schedule to the lease agreement dated 10.2.1979 was granted to the petitioner company in Form-K by the State Govt. for a period of 20 years under the provisions of Mines and Minerals (Regulation & Development) Act, 1957 (hereinafter referred to as the ‘Act’), read with Mining Concession Rules, 1960 ( here –in-after referred to as the ‘Rules’). The said mining lease was further renewed for a period of 20 years with effect from 19.9.1999 to 18.2.2018. Sub section (3) of section 9 of the ‘Act’, empowers the Central government to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification published in the official gazette in that behalf. In exercise of such power so conferred, Central government vide notification issued in 3 the year 1982 provided for levy of Rs. 4.30 per tonne in respect of lime stone. Subsequently, Central government in exercise of power under Sub section (3) of section 9 of the ‘Act’, enhanced the royalty in respect of lime stone from 4.30 per tonne to Rs. 10/- per metric tonne. Similarly, the dead rent was increased amending 3rd schedule vide notification dated 17.2.1992 in purported exercise of power under the ‘Act’ by enhancing royalty from Rs.10/- to Rs. 25/- per tonne. 3. The petitioner company filed a CWP No. 857/92 ( ACC Vs. Union of India), challenging the increase of royalty from Rs. 10/- to Rs. 25/- per tonne, issued vide notification dated 17.2.1992, on the ground of arbitrariness, discrimination and being in contravention to the provisions of the ‘Act’. The operation of the said notification dated 17.2.1992 was stayed vide an interim order 17.11.1992 ( Annexure P-3) of this court and was further extended on 5.1.1993 ( Annexure P-4 ). The said interim order 17.11.1992 was made absolute by subsequent order of this court dated 27.9.1993 ( Annexure P-5 ). This court after adjudicating and relying on the decision of Supreme Court in State of M.P. Vs. Mahalaxmi Fabric Mills Ltd, 1995 Supple. (1) SCC 642, has finally dismissed the said writ petition vide order dated 13.11.1997 (Annexure P-6), upholding the enhancement of the rate of royalty. 4. It appears that the petitioner had paid royalty at the enhanced rate of Rs. 25/- per tonne upto October, 1992, but during the pendency of CWP No. 857/1992, the petitioner had been paying royalty 4 only at the rate of Rs. 10/- per tonne without paying enhanced royalty at the rate of Rs. 15/- per tonne. It appears that the State Geologist vide his letter dated 12.12.1997, directed the Mining Officer, Bilaspur to recover the difference of royalty. The latter in turn, vide his letter dated 17.12.1007 ( Annexure P-7), directed the petitioner company to deposit royalty of Rs. 10,25,54,854/- for the period 17.12.1992 to 31.3.1997. The Petitioner company vide letter dated 16.1.1998 requested the respondents to allow to clear the arrear of royalty payment in 60 (sixty) equal monthly interest free instalments, starting from January, 1998. The State Geologist vide letter dated 16.2.1998 directed the Mining Officer, Bilaspur to recover the royalty arrear from the petitioner company along with simple interest @ 24%. The petitioner company was directed to deposit the interest at the rate of 24% on the balance/differential royalty by the Mining Officer, vide letter dated 1.2.1999 ( Annexure P-8 ) followed by a subsequent letters dated 17.2.1999 ( Annexure P-9) and dated 25.2.1999 ( Annexure P-10) of the State Geologist. The petitioner company informed vide letter dated 10.3.1999 ( Annexure P-11 ) to the Director of Industries that since entire royalty had already been deposited within 60 days of the demand being raised by the respondents vide their letter dated 17.12.1997, as such, the petitioner was not liable to pay interest @ 24% on the differential royalty. The State Geologist vide letter dated 26.3.1998 again directed the Mining Officer, Bilaspur to charge interest on the arrears of royalty. State Govt. vide letter dated 5 31.8.1998 further directed to charge interest on the belated payment at the rate of 24 %. 5. Petitioner company was also instructed vide letter dated 19.4.1999 ( Annexure P-12) to deposit interest on the balance royalty. The Director of Industries vide letter dated 6.5.1999 informed the Additional Chief Secretary cum Secretary (Industries), HP that the petitioner company had deposited arrear of royalty without interest , therefore, action may be taken at his level. The former vide his letter dated 5.8.1999 allowed the Director of Industries to adjust an amount of interest against the advance royalty paid by the petitioner company. Vide its letter dated 20.11.99 (Annexure P-13), the petitioner requested to Director of Industries to review the decision as charging of 24% interest on delayed payment on royalty as demand of interest would put serious burden on the financial condition of the petitioner. Vide letter dated 10.1.2000, the petitioner requested the Mining Officer, Bilapsur with a copy endorsed to Director of Industries that the rate of interest may be levied at the lower rate and not @ 24%. Petitioner company again on 31.3.2000 informed the Addl. Chief Secretary that the correct interest shall be Rs. 6,76,57,671/- and not Rs. 8,00,11,982/- and requested that the petitioner company is ready to pay interest at the rate of 12% under protest. Petitioner company vide its letter dated 13.9.2000 addressed to the Director of Industries, again requested to charge interest @ 12% only, whereas, Commissioner cum Secretary, Industries, State of HP vide its 6 letter dated 1.3.2001 directed the Director, Industries not to consider the representation of the petitioner as the equal amount of royalty advance has been adjusted against the interest calculated. Petitioner company vide its letter dated 4.4.2001 again requested the State Geologist not to press for payment of interest. Petitioner company has, however, filed present writ petition No. 332/2001 challenging the provision of Rule 64- A of ‘Rules’ with further prayers as indicated above. However, on 28.5.2001, this court while issuing notice and taking up a miscellaneous application for stay was pleased to direct the respondents not to resort to coercive measures to satisfy their demand of interest made in Annexures P-1 and P-2. The reply on behalf of respondents as well as rejoinder affidavit of petitioner is exchanged and in the meantime, State of HP has also filed an application i.e. CMP No. 1768 in CWP No. 857/1992 in September, 2001 for modification of the order dated 13.11.199, after allowing restitution of the same to the extent that petitioner company be directed to pay the interest on the default payment as the petitioner company has utilized the money for its own benefit. In view of this court’s order dated 25.3.2002 CMP No. 1768 was to be heard along with CWP No. 332/2001. 6. Following submissions have been made on behalf of the petitioner:- 7 (a) No liability could be imposed by incorporating terms and conditions in the lease deed unless such liability is clearly and unequivocally provided in the ‘Act’ itself and since section 4(1) and 2 of the ‘Act’ does not contain any substantive provision authorizing levy of interest on the royalty amount, as such, no liability of interest could be created by a ‘Rule’ framed under the ‘Act’. (b) The terms and conditions of lease agreement inserted by way of clause 3 of Part VI while extending the mining lease for a period of 20 years i.e. with effect from 19.9.1999 to 18.2.2018 is arbitrary, discriminatory, unreasonable being in contravention to the spirit of section 4(1) and 2 of the ‘Act’ ( c) The liability to pay interest on the amount of royalty is to be provided statutorily under the ‘Act’ itself and the Central government could not have, in exercise of the delegated power of legislation, make provision for interest on overdue royalty. In support of above submissions, learned counsel for the petitioner has placed reliance on the decision of Supreme Court in India Carbon V. State of Assam (1997) 6 SCC 479, VVS Sugars V Government of HP (1999) 4 SCC 192 as well as on the decision of Vikrant Tyres Ltd V First ITO(2001) 3 SCC 76. (d) The State had neither come forward to make any demand of the enhanced royalty during pendency of writ petition 857/1992 nor has come forward for variation/ modification /clarification/ 8 direction of interim order dated 13.11.1997 and dated 27.9.1993 passed by this court in CWP No. 857/1992. (e) The State Govt. had not only failed to make a prayer for demand of royalty at the time of dismissal of the above writ petition No. 857/1992 but has also failed to challenge the order of staying of enhanced royalty before the superior court. (f) After the dismissal of the writ petition No. 857/1992, the respondent-State had made a specific and quantified demand on 29.1.1998 for the differential amount, which however was paid by petitioner within 60 days of the said demand i.e. payment was made on 17/25.2.1999, as such, it could be inferred by the conduct of respondents that they have waived their right to claim interest in view of the decision of Supreme Court in Union of India V Pramod Gupta (2005) 12 SCC 1 (Para 111 @ pg 48). (g) In the light of the word used “may” and not “shall” to charge interest as provided in Rule ‘64-A’ the respondent-State has consciously chosen not to exercise this power then subsequently the respondents cannot demand interest without any authority. (h) For the sake of argument without admitting that Rule 64-A is applicable in the present case, then the said power was to be exercised within reasonable time and not after a lapse of about five years, as in large number of cases, Hon’ble Supreme court has observed that if there is no period prescribed by the legislation under a statute, the 9 exercise of power must be made within reasonable time in the light of decisions in ( Mansaram V S.P. Pathak & ors (1984) 1 SCC 125, Para 12 @ pg. 136; ?Ram Chand V Union of India (1994) 1 SCC 44 Para 6 @ pg. 51, read with Para 14 @ pg. 54; R.P.F. Commissioner V. K.T. rolling Mills Pvt Ltd (1995) 1 SCC 181, Para 4 @ pg. 182; State of Punjab & Ors V Bhatinda Distt. Co operative Milk Producers Union Ltd (2007) 11 SCC 363, Para 18 @ pg. 367). (i) Without admitting for sake of argument in view of the decision of the Supreme Court in Sourth Eastern Coalfields V State of MP (2003) 8 SCC 648, the demand of not more than 12% per annum could be made. (j) Interim application i.e. CMP No. 1768 is not maintainable in view of the provisions of section 151 and 152 of CPC as after dismissal of the writ petition No. 857/1992, such endeavour of petitioner would be indirectly seeking review of the main judgment in the light of the observations made in the AC Estates Vs Serajuddin and Co. (AIR 1996 SC 935). The endeavour of party seeking review under the guise of applications for clarification, modification, etc, tantamounts abuse of the process of the law and not to be countenanced in view of the observations made in Delhi Administration V. Gurdip Singh Uban and Ors (2000) 7 SCC 296, Paras 16,17,19 and 20 at Pages 308-09 as well as in Tamil Nadu Electricity Board and Anr V. N. Raju Reddiar & anr (1997) 9 SCC 736. 10 7. On the other hand, it has been argued on behalf of the respondent-State as below:- (i) The issue of payment of interest by South Eastern Coalfields Ltd and also liability of consumers /purchasers to pay interest on unpaid royalty to the Sought Eastern Coalfields Ltd came for consideration before Hon’ble Supreme Court, where while upholding the validity of Rule 64-A, Hon’ble Supreme Court has specifically directed that the Coalfields, i.e mine lessees were bound to pay interest as per the terms of the mining lease incorporating the clause for payment of interest and has also very categorically observed that the South Eastern Coalfields Ltd as well as Consumer/Purchasers were liable to pay interest on unpaid royalty. As such, the dispute in respect of the validity of Rule 64-A as well as issue of payment of interest on unpaid royalty is set at rest in view of the decision of Supreme Court in (2003) 8 SCC 648 (South Eastern Coalfields Ltd Vs. State of MP & Ors). (ii) The petitioner cannot take protection of the decisions of India Carbon Ltd V State of Assam (supra), V.V.S Sugars Vs Govt of AP (supra) as well as in Vikrant Tyres Ltd (supra) on the issue that in absence of statutory provision provided for the payment of interest in ‘Act’ on unpaid royalty, the interest may not be claimed by the respondent-State. In the above referred decisions relied upon by the petitioner, the levy of interest was sought to be justified by reference to some provision made in the Rules, which provision was held to be 11 beyond the rule making power as delegated by the parent statute and the statute itself did not make a provision for payment of interest. The levy of such interest was held to be ultra vires the power of the authority levying the interest in the facts of those cases, whereas the facts of the present case is different from those referred by the petitioner. (iii) The paragraph 15 of South Eastern Coalfields Ltd (supra) is referred and relied upon by the respondents, which, reads as below “ Here it is clear from the several provisions of the Act and the Rules quoted hereinabove, no mining operation is permissible except in accordance with the terms and conditions of a mining leave and the Rules made under the Act. The Rules clearly provided for payment of interest. The lease deed executed by the Coalfields incorporates a recital for the payment of interest. It is one of the terms and conditions of obtaining a mining lease that any delay in payment of royalty, referable to a period beyond the sixtieth day of the expiry of the date fixed by the Government for payment of such royalty, shall carry a liability to pay simple interest calculated at the rate of 24 % per annum on such amount of royalty. Rule 64-A has been framed in exercise of the powers conferred on the Central Government by Section 13 of the Act. The terms for payment of royalty, and for payment of interest for the period of delay, are authorized by the power to make rules for regulating the grant of mining lease. That apart, interest is included within the expression “ other charges” the phrase as employed in clause (i) of sub section (2) of Section 13 of the Act. A decision by a Division Bench of the Andhra Pradesh High Court in Suvarna Cements Ltd. V Union of India AIR 2002 AP 244 (2001) 6 An LT 728: (2002) I An LD 330 has been brought to our notice. The Division Bench has held ( AOR p.250, para 13). It cannot be said that the term “ charges” occurring in Section 13(2) (i) does not include ‘interest’. Undoubtedly, interest payable by a lessee for delayed payment is a financial liability on 12 the lessee and, therefore, a debt. It may also be construed as a cost or price or compensation payable to the contracting State authority for delay in payment of dues such as cess, royalty etc.” (iv) Since the writ petition No. 857/1992 challenging the demand of increase of royalty was pending before this court and the interim orders were passed , as such, no demand could be made till the dismissal of the said writ petition. (v) Even by not preferring earlier the application for vacation/modification/clarification of the interim orders, the State shall not be precluded subsequently from claiming increase in the amount of royalty and demanding the interest thereon, after final dismissal of CWP No. 857/92 on 13.11.1997 (vi) The respondent State has all along been demanding persistently for payment of interest @ 24% on the unpaid royalty, therefore, there does not arise any question for waiving the interest (vii) As the respondent State has taken a conscious decision of charging interest, as such, petitioner cannot be absolved from liabilities to pay interest in the circumstances when it has withheld the public money for long time and the petitioner itself has requested subsequently to deposit the same at the lesser rate of interest instead of 24%. (viii) The word indicated ‘State Government may’ as incorporated in Rule 64-A does not mean that the petitioner has no statutory liability to pay interest to the State Government. The State 13 government has exercised the power of charging the interest and for that purposes, different repeated notices have been issued and sincere endeavour has been made on the part of State respondent through repeated correspondences (ix) As per usual practice, every lessee makes the payment of royalty every month, so is, the case with the petitioner. Therefore, there was no necessity to specify fixed time, as in the routine manner every lessee as well as the petitioner is to pay royalty on the minerals which have been removed from the leased area. It was in reference to the demand dated 17.12.1999 the differential amount was paid on 17/25.2.1999, that too, beyond 60 days of the demand, whereas, interest @ 24% on the belated payment of royalty was avoided. (x) Interest payable statutorily in terms of the provisions of ‘Act’ and ‘Rules’ cannot be avoided by saying that specific demand was not made in reasonable time. (xi) The cause of the petitioner highlighted in the present writ petition is devoid of legal force and merit, as such prayers cannot be granted as the issue involved in present case is resolved by judgment in south Eastern Coalfields Ltd (supra), more so, when Supreme Court has specifically observed that unless otherwise ordered by the court, the successful party at the end would be justified in demanding compensation and being placed in the same situation in which it would have been if the interim order could not have been passed against it and 14 once the doctrine of restitution is attracted, the demand of interest would be a normal feature to be given in the restitution and in that respect, CMP 1768 preferred by the respondent in CWP No. 857/92 may be allowed. The demand of payment of 12% i.e. per annum i.e. at the reduced rate other than 24% in the case of Sought Eastern Coalfield Ltd (supra), was made in facts and circumstances of that case and the concession is confined to the parties therein and was not be construed as a precedent. 8. In order to deal with the controversy in the present case, it is necessary to quote Section 4(1) and (2) as well as section 9(3) of the ‘Act’ “4 Application for reconnaissance permit (1) An application for reconnaissance permit shall be made to the State Govt. in Form A through such officer or authority as the State Government may specify in this behalf. (2) Every such application shall be accompanied by a non refundable fee calculated at the rate of five ruppes per square kilometer. 9(3) The State Government may, for the reasons to be recorded in writing, relax the provisions of clause (d) of sub rule (2) of rule 9.” 9. We have occasion to peruse the decision of Supreme Court in South Eastern Coalfield Ldt (supra) and undisputedly the 15 Supreme Court has set at rest the controversy by saying that ‘Rule 64’ has been validly enacted and mining lessees are bound to pay interest as per terms of the mining leases incorporating clause for payment of interest consistent with Rule ‘64-A’. Supreme Court has also very specifically observed that no mining operation is permissible except in terms and conditions of the mining rules and the rules made in the ‘Act’ and when rules clearly provide for payment of interest and once lease deed has been executed by the lessee by making a recital for the payment of interest, then the interest shall have to be payable within the expression other charges; provided in clause (i) of sub section 2 of section 13 of the Act. 10. Rule making power has been conferred on the Central Government by Section 13 of Act. The relevant part of section 13 is extracted and reproduced here-in-under:- “13. Power of Central Government to make rules in respect of minerals- (1) The Central Government may, by notification in the Official Gazette, make rules for regulating the grant of reconnaissance permits, prospecting licences and mining leases in respect of minerals and for purposes connected therewith. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely- (a) to (f) * * * (g) the terms on which, and the conditions subject to which, any other reconnaissance permit, prospecting licence or mining lease may be granted or renewed: (h) * * * 16 (i) the fixing and collection of fees for reconnaissance permits, prospecting licences or mining leases, surface rent, security deposit, fines, other fees or charges and the time within which and the manner in which the dead rent or royalty shall be payable; (j) to (qq) * * * (r) any other matter which is to be, or may be, prescribed under this Act.” 11. In exercise of the powers conferred under section 13, the Mineral Concession Rules, 1960 have been framed. Once an application for the grant of a mining lease has been sanctioned by an order for the grant of such lease, a lease deed in Form ‘K’ appended to the said Rules is required to be executed under Rule 31. The following two clauses of the lease deed relevant are reproduced hereunder: Part V- Rents and royalties reserved by this lease. 3. Subject to the provisions of clause 1 of this Part, the lessee/lessees shall during the subsistence of this lease pay to the State Government at such times and in such manner as the State Government may prescribed royalty in respect of any mineral/minerals removed by him/them from the leased area at the