Case: Karnataka Rare Earth and Anr Vs. The Senior Geologist, Department of Mines and Geology and Anr

1. The grant of 203 cases for quarrying granites in government land under R.3 of the Karnataka Minor Mineral Concession R.1969, contrary to the prohibition contained in R.3A, was challenged in the Karnataka High Court in public interest litigation. The writ petitions were allowed by the learned single Judge and all the grants were quashed. Writ appeals were dismissed by a Division Bench of the High Court. The unsuccessful lessees came up to this Court and by judgment dated January 18, 1996 (Alankar Granites Industries and Ors. v. P.G.R. Scindia, MLA and Ors., 1996 (7) SCC 416 ) this Court directed the appeals to be dismissed by holding that the grants of leases were made against the prohibition contained in R.3A and were rightly held by the High Court to be invalid.2. The appellants before us were holding two quarry leases and were amongst the appellants in this Court in the appeals by special leave referred to hereinabove. On 19.11.1993, by an interim order, the Court directed that the renewals or existing grants in favour of the appellants would continue till the next date of hearing. On 21.11.1993, the Court modified the previous order by extending its operation to continue till further orders of the Court. The appellants brought to the notice of the Court that in spite of the previous interim order the appellants were not issued transport permits with the result that the renewal or grant of leases was of no avail to them as they were not able to remove the minerals quarried by them. In the opinion of the Court such action of the respondents resulted in frustrating the interim orders. It was clarified that the appellants in whose favour interim orders were granted, should be granted transport permits also by the appropriate authority on payment of royalty and complying with the rules. On 18.1.1996, the appeals came to be dismissed as already stated.3. According to the appellants they had operated the quarries and transported several granite blocks on the strength of the order passed by this Court. They had paid the prescribed royalty and exported the granite blocks. The quarrying had taken place during the pendency of the appeals and the export had taken place on 24.1.1996 as the dismissal of the appeals on 18.1.1996 at Delhi did not come to the notice of the appellants or the authorities of the State at Karnataka until after the granite blocks had already been exported. On 14/15.2.1996, the State of Karnataka issued an order calling upon the appellants to pay the price of the granite blocks calculated at the minimum rate per unit volume of minor mineral. The appellants filed writ petitions in the High Court laying challenge to the impugned action of the respondents proposing to recover the price of the granite blocks which were already exported. The unit petitions were dismissed. Feeling aggrieved the appellants have filed these appeals by special leave.

Court's reasoning:
7. In our opinion, the demand by the State of Karnataka of the price of the mineral cannot be said to be levy of penalty or a penal action. The marginal note of the section - Penalties, creates a wrong impression. A reading of S.21 shows that it deals with a variety of situations. Sub-sections (1), (2), (4), (4A) and (6) are in the realm of criminal law. Sub-section (3) empowers the State Government or any authority authorized in this behalf to summarily evict a trespasser. Sub-section (5) empowers the State Government to recover rent, royalty or tax from the person who has raised the mineral from any land without any lawful authority and also empowers the State Government to recover the price thereof where such mineral has already been disposed of inasmuch as the same would not be available for seizure and confiscation. The provision as to recovery of price is in the nature of recovering the compensation and not penalty so also the power of the State Government to recover rent, royalty or tax in respect of any mineral raised without any lawful authority can also not be called a penal action. The underlying principle of Sub-section (5) is that a person acting without any lawful authority must not find himself placed in a position more advantageous than a person raising minerals with lawful authority.8. The correct principles of law applicable to the facts of the present case emanating from equity, and statutorily embodied in Sub-section (5) of S.21 abovesaid, are to be found dealt with extensively in a recent decision of this Court in South Eastern Coalfields Ltd. v. State of M.P. and Ors. (2003 (8) SCC 648 ).9. It is true that by the interim orders passed by this Court the appellants were allowed during the pendency of the earlier appeals to operate under the mining leases, whether freshly granted or renewed and to effectuate the interim orders the authorities were also directed toe issue transport permits. Admittedly, the transport permits were obtained by the appellants after the dismissal of their appeals. Theappellants claim that both the parties were ignorant of the dismissal of the appeals when the transport permits were issued and the granite blocks were exported.It is difficult to accept the plea of the appellants that the dismissal of the appeals was not in their knowledge inasmuch as the judgments must have been pronounced in an open Court and their counsel at Delhi must have gathered the knowledge thereof. In any case the appellants cannot be heard taking shelter behind there own convenient ignorance. In our opinion, whether they had the knowledge of the judgment or not and whether the transport permits were obtained by the appellants before the dismissal of the appeals during which the interim orders were in operation or after the dismissal of the appeals when the interim orders had ceased to operate would not make any difference. For the purposes of the law it is enough that the appellants have enjoyed the benefit under the interim orders of the Court which have stood vacated with the dismissal of their appeals. It is also noteworthy that this Court had not, in the earlier appeals, directed the judgment of the High Court to remain stayed in its entirety and this is an additional fact or which tells adversely on the appellants.10. In South Eastern Coalfields Ltd. (supra), this Court dealt with the effect on the rights of the parties who have acted bona fide, protected by interim orders of the Court and incurred rights and obligations while the interim orders stood vacated or reversed at the end. The Court referred to the doctrine of actus curiae neminem gravabit and held that the doctrine was not confined in its application only to such acts of the Court which were erroneous; the doctrine is applicable to all such acts as to which it can be held that the Court would not have so acted had it been correctly apprised of the facts and the law. It is the principle of restitution which is attracted. When on account of an act of the party, persuading the Court to pass an order, which at the end is held as not sustainable, has resulted in one party gaining advantage which it would not have otherwise earned, or the other party has suffered an improvement which it would not have suffered but for the order of the Court and the act of such party, then the successful party finally held entitled to a relief, assessable in terms of money at the end of the litigation, is entitled to be compensated in the same manner in which the parties would have been if the interim order of the Court would not have been passed. The successful party can demand (a) the delivery of benefit earned by the opposite party under the interim order of the Court, or (b) to make restitution for what it has lost.11. In the facts of this case, in spite of the judgment of the High Court, if the appellants would not have persuaded this Court to pass the interim orders, they would not have been entitled to operate the mining leases and to raise and remove and disposed of the minerals extracted. But for the interim orders passed by this Court, there is no difference between the appellants and any person raising, without any lawful authority, any mineral from any land, attracting applicability of Sub-section (5) of S.21. As the appellants have lost from the Court they cannot be allowed to retain the benefit earned by them under the interim orders of the Court. The High Court has rightly held the appellants liable to be placed in the same position in which they would have been if this Court would not have protected them by issuing interim orders. All that the State Government is demanding from the appellants is the price of the minor minerals. Rent, royalty or tax has already been recovered by the State Government and, therefore, there is no demand under that Head. No penal proceedings, much less any criminal proceedings, have been initiated against the appellants. It is absolutely incorrect to contend that the appellants are being asked to pay any penalty or are being subjected to any penal action. It is not the case of the appellants that they are being asked to pay a price more than what they have realised from the exports or that the price appointed by the respondent State is in any manner arbitrary or unreasonable.We are clearly of the opinion that the marginal note penalties cannot be pressed into service for giving such colour to the meaning of Sub-section (5) as it cannot have in law. The recovery of price of the mineral is intended to compensate the State for the loss of the mineral owned by it and caused by a person who has been held to be not entitled in law to raise the same. There is no element of penalty involved and the recovery of price is not a penal action. It is just compensatory.