Case: M/S. Nagarjuna Construction Co. Ltd Vs. Govt. Of A.P.

2. Writ Petitions were filed by the appellants before the Andhra Pradesh High Court praying for quashing the order passed by the State Government in Memorandum No.8817/M.II(1)/2001-6, dated 4.2.2002 and the consequent demand notice issued by the Director of Mines and Geology and the proceedings of the Deputy Director, Mines and Geology. The appellant in each case is engaged in the business of construction, engineering and civil works. In each case the appellant had participated in the tenders invited by the Bharat Heavy Electricals Ltd. (in short ‘BHEL) for the purpose of executing their part of the contract which is with NTPC for levelling and grading. BHEL had awarded the contract to the appellant-company for execution of the work. According to the appellant, the material required for the purpose of execution of the contract in terms of the specifications prescribed under the contract is earth, morrum gravel and mixture of these or any other material approved by the BHEL. The appellant had obtained rights for excavation of good earth from the ryots of patta lands in the vicinity as well as from the quarry lease holders. Each appellant was supplying the materials from the source in which they obtained right of excavation of materials. Huge quantity of these materials was supplied under the contract. The Assistant Director of Mines and Geology required BHEL to show cause as to why action should not be initiated to realize a sum of money towards seigniorage fee which includes five times penalty over and above the normal seigniorage fee. The Assistant Director required BHEL to produce documentary evidence, if any, with regard to the source from where the materials had been procured alongwith the permits issued by the Department. BHEL filed a detailed reply disputing the liability in the matter. It was indicated that the requisite application for allotment of quarries and other formalities were to be done directly by the sub contractors concerned. The agencies have been paying the seigniorage fee directly to the Department of Mines and Geology. In between meeting was held between the agencies and Department of Mines and Geology, BHEL and the contractors. Detailed minutes were drawn up according to which the Director of Mines and Geology expressed that type of filling materials may have to be decided by the Department of Mines and not by the contractors themselves.3. Subsequently, demands were raised. Reference was made to certain data supplied by BHEL to the Vigilance and Enforcement Department. It was observed that filling material was partly gravel and partly ordinary clay in respect of which seigniorage fee is liable to be paid. The appellant in each case requested the authority to withdraw the demands while agreeing to pay the seigniorage fee under protest.4. The Assistant Director, Mines and Geology again sent demand notice. The Deputy Director of Mines and Geology raised demand notice directing the appellant to pay a higher sum being the balance of seigniorage fee after giving credit to the fees already paid. At this stage the appellant submitted detailed representation to the Secretary (Mines), Industries and Commerce Department, Government of Andhra Pradesh inter-alia highlighting various contradictory notices issued by the Assistant Director and the Deputy Director. The Government of Andhra Pradesh in exercise of suo motu revisional jurisdiction under Rule 35-A of the Andhra Pradesh Minor Mineral Concession Rules, 1966 (in short the ‘Andhra Pradesh Rules) set aside the revised demand issued by the Deputy Director confirming the original demand and the appellant was directed to pay the balance amount. Writ Petition was filed before the High Court challenging the revisional order. The High Court by its order dated 20.7.2001 allowed the writ petition at the admission stage holding that the order of the State Government is misconceived and unsustainable on account of having been issued without any notice to the affected persons. However, leave was granted to the Government to initiate fresh proceedings if so desired and if so permitted by law after giving notice and opportunity to the appropriate parties. Notices were issued to all the sub- contractors and after hearing the parties the order impugned before the High Court was passed. Again challenge was made before the High Court.5. The first stand was that the Government ought not to have passed the impugned order clubbing the companies with the other sub contractors inasmuch as demands raised by the Deputy Director in respect of each party were totally different. Quantity and the nature of materials supplied by each of them and the sources were different and merits of each case was to be gone into separately and it was also submitted that the order of the State Government was passed on surmises and assumptions and indicated non application of mind.6. It was also submitted that seigniorage fee on the total quantity of earth materials supplied by the company was levied in utter disregard of the analyst report of the material and without any authority to do so. Finally, it was submitted that copy of the report submitted by the Deputy Director of Mines and Geology who was purportedly instructed to inspect the area to ascertain the nomenclature of the materials supplied by the sub contractors to the BHEL was not at point of time supplied to the affected parties. It was submitted that the Government could not have ignored the test and analyst report of the Department of Civil Engineering and Soil Mechanics Division of Andhra Pradesh University which was a relevant piece of evidence. A detailed counter affidavit was filed on behalf of the Joint Director of Mines and Geology, Department of Mines and Geology, Hyderabad. Allegations were disputed. The High Court observed that the Deputy Director of Mines and Geology had played havoc in the matter. He had been placed under suspension. He was found guilty of the charges in the matter of short levy and collection of seigniorage fee. Various charges were framed against him and the enquiry officer appointed has submitted his report upholding him guilty of several charges.7. The High Court came to hold that the plea of the Government that said officer had acted in collusion with the appellant was not without any basis. The High Court also observed that in reply to the show cause notice BHEL had furnished a list of five sub-contractors who were entrusted with the levelling work. In reply it was stated that the agency had paid certain amounts towards seigniorage fee for the quantities burrowed from the foot of the hills. It was further submitted that in line with the provisions of the contract the agencies are under obligation to accept and deal with the mining department directly. It was therefore the stand of BHEL that it had no mens rea and had always made conscious effort to ensure payment of seigniorage fee by the agencies.8. It was stated that BHEL was under the impression that the matter would have been decided upon as the department had inspected the sources presumably in the presence of agencies as agreed in the meeting held on 4.9.1999.9. In the counter-affidavit it was also submitted that the appellants had failed to produce documentary evidence. The Deputy Director had acted on the basis of information furnished by BHEL. The High Court referred to BHELs letter dated 8.3.2000 whereby the details of total quantities of filling materials supplied by sub contractors were furnished. According to the data, various mines had been supplied as filling materials. The High Court noticed that there was no evidence to show that seigniorage fee had been paid in respect of filling material.10. According to the High Court the main question that arose for consideration was the nature of the soil utilized by the appellants in the levelling and grading work undertaken by them under the agreement with BHEL.11. Stand of the appellants was that the bulk of the materials used by the appellants-companies was earth and the same was not subject to seigniorage fee. It was therefore contended that the initiation of suo motu revisional power and the orders passed are illegal as the order ignored the materials available on record.12. It was pointed out that what was supplied was gravel from the quarry and the ordinary earth from the patta land and therefore the argument that the total material received by BHEL was partly gravel from sources of foot hills and partly ordinary clay from the tank beds and, therefore, the material is subject to seigniorage fee was vitiated for the reason that there was no material supplied by one of the appellants i.e. M/s Nagarjuna Construction Co. Ltd. from the foothills and the tank bed lands.13. The States stand as highlighted before the High Court was about the so-called collusion between the concerned Deputy Director and the appellants and his giving No Objection for the release of the amounts by BHEL. The High Court referred to para 3.03.01 of the specifications of the contract. We will deal with this aspect later.14. The High Court primarily focused on the role allegedly played by the concerned Deputy Director. It was observed that no permission was taken by any of the appellants to quarry mining as required under law and they had also not made available the details of purchase and lease of private lands for the purpose of excavation of materials. It did not accept the stand that what was utilized was only earth material for filling purpose and the same was not subject to seigniorage fee. The High Court observed that this version of the appellants cannot be accepted as a gospel truth and the conduct of the appellants showed that they were playing hide and seek with the statutory authorities.15. The High Court noted objection of appellants that the inspection report was not made available either by the Department or the Government as to enable the appellant to file its objections. It rejected the plea with the followingit is urged that the said inspection report is not made available either by the Department or the Government so as to enable the petitioner-company to file its objections. The petitioner-company admittedly supplied some quantity of gravel also. The source from whom the gravel is purchased and the details of transit waybills are not furnished by the petitioner-company at any point of time. No efforts ever have been made by the petitioner-company to identify and reveal the source of supply of material consumed and utilized by it for the purpose of filling in fulfillment of its contractual obligation. Everything is shrouded in mystery. Neither the petitioner-company nor the other sub contractors responded to the repeated queries of the department. The record contains the inspection notes of the sites from where the petitioner-company excavated the material. The memorandum of grounds, which has been treated as an explanation, does not contain any objection as to the non supply of the inspection report. There is no plea of any prejudice having been caused on account of non supply of the said inspection notes. It is not as if the petitioner-company demanded for the inspection notes during the hearing of the revision and the Government failed to furnish the same. In the absence of any such plea and demonstration of any prejudice having been caused on account of non supply of the inspection notes the impugned order cannot be set aside on that score.The High Court also did not find any substance in the plea relating to non consideration of the test and analysis report of the Civil Engineering Department of Andhra University. It was held that it was a self service devise adopted by the appellant. Therefore, it was held that since the Government had arrived at to its decision after hearing the parties no interference is called for.17. So far as the question of penalty is concerned, it was held that though mens rea is an essential ingredient but the fatual position left no manner of doubt that the appellant was not acting bona fide. The High Court did not also attach importance to the stand taken by the Department in the earlier writ petitions. Accordingly, all the writ petitions were

Court's reasoning:
26. Additionally, it is noticed the High Court has relied on certain records which purportedly contain the inspection notes of the sites from where the appellants had excavated the material. It is to be noted that for the first time before the High Court these records were produced. Since there was no reference to the so called inspection notes at any point of time the question of the appellant pleading prejudice because of non-supply of the same does not arise. The High Court observed that since the appellant had not demanded for the inspection notes during hearing of the revision there was no question of any prejudice. The approach is clearly wrong. At no point of time, not even at the time of hearing of revision petition or in the revisional order there is any reference to the so called inspection notes. Added to that, the High Court did not consider the effect of the stand taken by the Government earlier.The High Court did not accept the view expressed by a learned Single Judge while disposing of writ petition No.4579 of 2001 filed by one of the sub contractors M/s Gayatri Projects Ltd. Though that order was not challenged by the Department, the Division Bench thought that the decision was not proper. In any event, that question is of no relevance in the present case. The High Court rightly observed that since the amendments referred to, were introduced after the expiry of the contract period they were really of non consequence.29. Looked at from any angle the judgment of the High Court is unsustainable.The basic principles of natural justice seem to have been disregarded by the State Government while revising the order. It acted on materials which were not supplied to the appellants. Additionally the High Court for the first time made reference to the report/inspection notes which was not even referred to by the State Government while exercising revisional