State Of Rajasthan & Anr vs J.K. Synthetics Ltd. & Anr

5. The respective first respondent in these appeals (together referred to the `contesting respondents') filed writ petitions challenging the constitutional validity of section 9(3) of the Act and the notification dated 17.2.1992 increasing the rate of royalty from Rs.10 to Rs.25 per tonne. In all the cases (except in the case of J. K. Udaipur Udyog Ltd), the High Court issued interim orders directing the state government not to take coercive steps to recover royalty at the rate of Rs.25 per metric tonne in pursuance of notification dated 17.2.1992, subject to the writ petitioners paying royalty at the rate of Rs.10 per MT and furnishing bank guarantee for the difference of Rs.15 per MT. In the case of J. K. Udaipur Udyog Ltd, the High Court made an interim order as in the other cases, with an additional condition that in case the said writ petitioner ultimately failed in the writ petition, the difference amount due from the writ petitioner shall be recovered with interest at the rate of 18% per annum.

8. The State of Rajasthan issued the following demand notices to the contesting respondents calling upon them to pay interest at the rate of 24% per annum under Rule 64-A of the Rules, on the difference in royalty which had been withheld on account of the interim orders obtained by them and which were belatedly paid, after rejection of their writ petitions :

9. The contesting respondents at this stage again filed a second round of writ petitions challenging the notices demanding interest, contending that they were not liable to pay interest. They also challenged the validity of Rule 64-A of the Rules. During the pendency of those petitions, this Court in South Eastern Coalfields Ltd. vs. State of M.P. - 2003 (8) SCC 648, upheld the validity of Rule 64A. On the peculiar facts of that case which were noticed in para 30 of the said judgment, this Court held that it will not interfere, in exercise of the jurisdiction under Article 136 of the Constitution of India, the discretion exercised by the High Court in reducing the rate of interest from 24% per annum to 12% per annum making it clear that the same shall not however be treated as precedent in any other case. After the said decision, what remained to be considered in the writ petitions filed by the contesting respondent was the rate of interest. The contesting respondents as writ petitioners submitted before the learned Single Judge that the claim for interest at 24% per annum was harsh, excessive and 6 inequitable, and interest should not be charged at a rate higher than 9% per annum. They relied upon the decision of this court in Saurashtra Cement and Chemical Industries Ltd., vs. Union of India - 2001 (1) SCC 91, where this court had reduced the rate of interest on unpaid royalty imposed by the High Court (18% per annum) to 9% per annum. The learned Single Judge allowed the writ petitions of the six contesting respondents in part, by common order dated 11.8.2005. He noted that the Advocate General had submitted that the State Government was entitled to interest at 18% per annum. The learned Single Judge noted that the trend of directions by the Supreme Court showed that State should get interest at least at the rate of 12% per annum on the delayed payments. Consequently, he upheld the demand for interest only to an extent of 12% per annum and set aside the demand for the interest at the higher rate of 24% per annum, with a condition that if interest at 12% per annum on the delayed payments was not paid within three months, the respective writ petitioners shall be liable to pay interest at 24% per annum. It is stated by the contesting respondents that all of them have paid the interest at the rate of 12% per annum on the delayed payments, within three months period. Be that as it may.

17. It is therefore evident that whenever there is an interim order of stay in regard to any revision in rate or tariff, unless the order granting interim stay or the final order dismissing the writ petition specifies otherwise, on the dismissal of the writ petition or vacation of the interim order, the beneficiary of the interim order shall have to pay interest on the amount withheld or not paid by virtue of the interim order. Where the statute or contract specifies the rate of interest, usually interest will have to be paid at such rate. Even where there is no statutory or contractual provision for payment of interest, the court will have to direct the payment of interest at a reasonable rate, by way of restitution, while vacating the order of interim stay, or dismissing the writ petition, unless there are special reasons for not doing so. Any other interpretation would encourage unscrupulous debtors to file writ petitions challenging the revision in tariffs/rates and make attempts to obtain interim orders of stay. If the obligation to make restitution by paying appropriate interest on the withheld amount is not strictly enforced, the loser will end up with a financial benefit by resorting to unjust litigation and winner will end up as the loser financially for no fault of his. Be that as it may.

The above provision is accordingly incorporated in clause (2) of Part IX of the standard form of lease (Form K).

Re : Question (iv)

Conclusion

30. In view of the above, we allow these appeals in part and modify the rate of interest in each case as under :