Case: Steel Authority of India Ltd Vs. State of M.P

2. A few facts leading to this appeal deserve to be noted at the outset for highlighting the grievance of the appellant in the present appeal.The Central Government, Ministry of Production wrote a letter dated 8th January, 1955 to the Chief Secretaries of the States of West Bengal, Bihar and Madhya Pradesh. In this letter it was indicated that it was under consideration of the Central Government to establish Russian technical assistance steel plants at three places in the three States. For this purpose a piece of land measuring about 50 sq. miles, would be required. Therefore, the Central Government by letter dated the 8th January, 195 wanted to know from the State Government whether the Governments would be prepared to accord facilities. The said three facilities are stated below50 sq. miles of land, free to the extent it is the property of the State Government, and guarantee of a ceiling cost for the acquisition of privately owned land, it being understood that any cost in excess of the guaranteed ceiling would be borne by the State GovernmentA guarantee of adequate and continuous water supply, as required for the steel plant, associated projects and the town, at rates to be mutually agreed upon between the State Government and the Government of India and/or an autonomous State Co. to be registered for theGuarantee of prior claim on all unleased mining concessions in respect ofcoal, limestone, dolomite and any other raw material discovered or to be discovered within the territory of the State concerned and required for the steel project.By letter dated 11th of January, 1955 the Government of Madhya Pradesh informed the Central Government that the State Government was prepared to accord all the above facilities.Another letter was sent dated 25th of September, 1958 by the Government of Madhya Pradesh bringing to the notice of the Central Government the rules framed by the Secretary of State in 1925. Two salient features of the rules particularly A and B were stated in the said letter. These features areWhen any land is required by the Central Government that Government are required to pay(i) cost of acquisition, if the land is occupied and market value of land, if the land belongs to the State Government and (ii) capitalized value of land revenue at the assessment to the State Government the loss of land revenue, as no land revenue can be recovered from the CentralWhen any land is not required by the Central Government for the purpose for which it was acquired, the State Government are given the first option to take it back on payment of its market value. Should the State Government exercise the option and pay the market value of the land then they are at liberty to dispose it of in such a manner as they deem fit.By this letter Central Government was informed that the land for the Bhilai Steel Plant might be classified in two categories namely land belonging to private persons and land belonging to State. It was brought to the notice of the Central Government that the Central Government agreed to pay the cost of acquisition of land and that the State Government was also entitled to claim the amount awarded, that is, market value plus 15% on account of compulsory nature of acquisition from the Central Government. It was further brought to the notice of the Central Government that the State Government would be entitled to recover capitalized value of land revenue at 25 times the amount of land revenue in accordance to above 1925 rules.Regarding land which belonged to State Government as per earlier agreement it was agreed to transfer such land free of cost.We may like to quote paragraph 10 of the said letter which is as followsState Government are, therefore, of the view that the land shall be held by the Central Government on the following terms and conditionsLand acquired/transferred for the Bhilai Steel Plant should be treated as if it were in possession of the Central Government for the purposes of thein respect of occupied land, i.e. land belonging to private persons, the Central Government should pay the cost of acquisition, including 15% on account of compulsory nature of acquisition, to the owners of the land and capitalized value at 25 times the amount of land revenue assessed on such land to the Statein respect of unoccupied land, i.e. land belonging to the State Government, neither the cost nor capitalized value of land revenue shall be payable by the CentralThe State Government shall be entitled to recover royalty on all minor and major minerals extracted from lands acquired transferred at rates fixed by the Stateif any land acquired/transferred for Bhilai Plant is not required for the purposes of the plant, the first option to take it back should be given to the State Government and the State Government should pay the cost of acquisition minus 15% on account of compulsory nature of the acquisition, where at the time of acquisition. where at time of acquisition, it was paid for. In cases where the Central Government have not been required to pay the cost of any land, the State Govt. should get it back without any payment whatsoever;If, however, the Central Government wants to transfer any land acquired/transferred for Bhilai Plant or any right therein to any private persons, the terms and conditions of such transfer should be intimated to the State Government and their concurrence obtained before the transfer and in appropriate cases, divide or allocated the proceeds between the Central and State Govt. on agreed terms.By two deeds of assignment executed on 31st day of March, 1959 and 27th of March, 1978 the Central Government transferred land etc. as indicated in the schedules to a company wholly owned by the Central Government namely Hindustan Steel Ltd. The present company is a successor company of Hindustan Steel Ltd. in respect of Bhilai Steel Plant. We may state here also that by letter dated 7th of May, 1963 the Central Government informed the State Government that as divided land could be acquired for Union of India for the Bhilai Steel Plant though the project had been handed over to the Hindustan Steel Ltd. and for this purpose Central Government authorised the General Manager of the Bhilai Steel Plant to act for the Central Government in all matters relating to acquisition of land and while doing so the General Manager would not deemed to be acting on behalf of the company.The Deputy Collector, Drug by letter dated 4th of March, 1987 informed the Bhilai Steel Plant authority that a sum of Rs. 3,27,90,220.00 was due as land revenue for the yearsFrom the letter dated 23rd of June, 1987 issued by Deputy Collector, Drug to the Assistant Estate Manager (Land), Bhilai Steel Plant it appears that a piece of land measuring 32759.00 acres was allotted to the Steel Plant and revenue was payable @ Rs. 40/per acre per annum and assessment for the land revenue was for the yearsFinally, the Collector, Drug by an order dated 27th of January, 1990 assessed the land revenue at Rs. 3,73,96,873.20 after making some deduction and passed an order for immediate realisation of the above amount. The area of land was assessed by the Collector for 32759.00 acres and land revenue was assessed @ Rs. 40 per acre per annum. An appeal was filed before the Commissioner, Raipur Division which was dismissed by order dated 19th January, 1992. Thereafter matter was taken up before the Board of Revenue and by order dated 16th of November, 1992 it was dismissed.ny approached the High Court by filing misc. Petition No. 1826/93 under Article 226 and 227 of the constitution of India which was dismissed by order dated 29.4.1993. Hence the present appeal.

Court's reasoning:
19. It will be noticed that in the letter of the Madhya Pradesh Government dated 25.9.58 which was referred to above, the salient features of the rules framed by the Secretary to the Madhya Pradesh Government in 1925 were referred to. The condition No. A clearly lays down that the capitalized value of the land revenue has to be assessed and paid to the State Government towards loss of land revenue as no land revenue can be recovered from the Central Government later on. From paragraph 10 of the letter which has been quoted above we also find that land revenue in respect of land held by the private persons has to be capitalized at 25 times and capitalized value of land revenue shall be payable by the Central Government to the Government of Madhya Pradesh.The object of the Rules framed by the Secretary of State in 1925 is clear that land revenue was to be capitalized and collected once for all and that no land revenue could be further recovered thereafter. Land revenue had to be paid periodically and in view of the above dictionary meanings and in view of the rules framed in 1925, once land revenue was capitalized and paid, no further amount could be realised by the State Government for the land transferred. Thereafter the case falls under(1) of Section 58 which states that by virtue of provisions in a rule made land revenue could become exempt.Section 58 of the Code provides that land revenue is payable in respect of all land unless it is exempted from such liability by special grant or contract with the State Government. In view of the agreement between both the Governments and in view of the above provisions of Section 58 of the Code we hold that no land revenue is payable for the land in question more particularly as it has been capitalized at 25 times of the land revenue prevailing at that time.Thus, whether it is because of the 1925 Rules or the Contract, Central Government was not liable to pay land revenue once it had paid the 25 times land revenue as a one time payment.thus it is clear from the above clauses of the deeds of assignment that while transferring the land to the Company rights, liberties, privileges etc. to the said land were also transferred. Therefore, the privileges of or right to exemption accrued to the Central Government not to pay land revenue to the State Government under Section 58 of the Code would also be available to theas a successor in interest to the Central Government.Though Mr. Banthia has urged that as no reply was sent to the letter of the State Government dated 25th September, 1958, therefore, there was no contract under Article 299 of the Constitution of India between the Central Government and the State Government regarding theof land revenue, we are unable to accept the contention of the learned counsel inasmuch as by the conduct of the parties it is very clear that both the Governments agreed with the terms mentioned in the letter of the State Government dated 25th September, 1958 and, therefore, there was also a contract between the parties regarding the exemption from payment of land revenue, if 25 times of the land revenue was paid once for all. The contention that such a contract is not executed in the form required under Article 299 cannot be accepted. This point was not raised inthe High Court. Apart from that it is clear that Article 299 applies only to contracts to be executed in exercise of "executive power" and not to those executed by virtue of statutory power like Section 58 of the Code. (See State of Haryana v. Lal Chand, 1984(3) SCC 634; Lalji Khimji v. State of Gujarat, 1993 Suppl. (3) SCC 567 . In the latter case, Anand, J. (as he then was) observed as followsis a marked distinction between contracts which are executed in exercise of the executive powers and agreements or orders made which are statutory in nature .......In State of Haryana v. Lal Chand, this Court considered a contract granting exclusive privilege of liquor vending, in exercise of the statutory powers referable to Punjab Excise Act, 1914 and Punjab Liquor Licence Rules, 1956, and held that the grant of the exclusive privilege gave rise to a contract of a statutory nature, distinguished from the one executed under Article 299(1) and, therefore, compliance with Article 299(1) was not required in such aneed not entertain into this aspect as we have held that the appellant company is not liable to pay any land revenue.We may mention that the State Government was also were that no land revenue was payable but the proceedings were started in view of the audit objection.