Case: Smt. Rukmanibai Gupta Vs. Collector Jabalpur and Others

2. A brief resume of facts would help in focusing attention on the dispute involved in this appeal. Appellant applied for and obtained a quarry lease for excavating limestone in an area covering 25.32 acre in Jabalpur District, under the relevant Minor Mineral Rules then in force. The lease was executed by the appellant and the State of Madhya Pradesh on June 26, 1961. Madhya Pradesh Minor Mineral Rules, 1961 (1961 Rules for short), came into force with effect from August 11, 1961. By virtue of Rule 24 of 1961 Rules the royalty in respect of quarry leases was regulated as set out in the schedule annexed to the Rules. In respect of limestone for which appellant had obtained a lease, the provision in the First Schedule with regard to rate of royalty was, 10 per cent of the sale value at the pits mouth subject to a minimum of 50 naye paise per ton for limestone, 75 naye paise per ton for slaked lime and Re. 1 per ton for unslaked lime. As per Clause 3 of the indenture of lease royalty at the aforementioned rate was payable, i.e. on March 15 and September 15 in each year. Clause 5 made it obligatory for the lessee to keep correct and intelligible books of accounts showing accurately the quantity of mineral extracted, the weight and value of minerals sold and exported together with name of purchaser or consignees and there was a further obligation to submit certain statements to the Deputy Commissioner at Jabalpur on dates prescribed therein. Appellant was served with a memo bearing No. 2/MA/62 dated September 20/21, 1962, assessing the royalty in respect of limestone quarried by the appellant and demanding a sum of Rs. 35, 313.58 p. as arrears of royalty. On receipt of this memo appellant made a representation as contemplated by Clause 15 of the indenture of lease. As this clause spells out an arbitration agreement between the parties it may be reproduced in extenso15. Whenever any doubt, difference or dispute shall hereafter arise touching the construction of these presents or anything herein contained or any matter or things connected with the said lands or the working org thereof or the amount or payment of any rent or royalty reserved or made payable hereunder in the matter in difference shall be decided by the lessor whose decision shall be finalA hearing was given by Secretary to Government, Department of Natural Resources, Bhopal, respondent 4, where appellant appeared with her advocate Shri P. V. Lele. Respondent 4 by his minutes dated July 5, 1965, held that the appellant had no objection to the assessment of royalty for the period from January 1, 1958 to June 30, 1961, and the only objection raised was against the assessment for the period July 1, 1961 to December 31, 1961. After setting out the objections raised by learned Advocate of the appellant, respondent 4 directed the Mining Office to recheck the sales for this period and report by the next day. After report of the Mining Officer was received, the appellant was again heard by respondent 4 and he passed the impugned order assessing the royalty payable by the appellant. Pursuant to this order respondent 6 for and on behalf of Collector, Jabalpur issued a demand notice dated November 4, 1965. Appellant thereupon filed the writ petition questioning the legality and validity of the impugned demand notice

Court's reasoning:
A quarry lease is granted under the relevant Minor Mineral Rules by the State Government. The State is thus the lessor and the one who takes the quarry lease is the lessee. As required by Article 299 of the Constitution, all contracts made in exercise of the executive power of the State shall be expressed to be made by the Governor of the State and shall be executed on behalf of the Governor by such accordingly executed. It is thus a contract. This contract incorporates Clause 15 which we have extracted hereinaboveClause 15 provides that any doubt, difference or dispute, arising after the execution of the lease deed touching the construction of the terms of the lease deed or anything therein contained or any matter or things connected with the said lands or the working org thereof or the amount or payment of any rent or royalty reserved or made payable thereunder, the matter in difference shall be decided by the lessor whose decision shall be final. The reference has to be made to the lessor and the lessor is the Governor. His decision declared final by the terms of the contract. His decision has to be in respect of a dispute or difference that may arise either touching the construction of the terms of the lease deed or disputes or difference arising out the working org of the lease or any dispute about the payment of rent or royalty payable under the lease deed. Therefore, Clause 15 read as a whole provides for referring future disputes to the arbitration of the GovernorIn the clause under discussion there is a provision for referring the disputes to the lessor and the decision of the lessor is made final. On its true construction it spells out an arbitration agreementApart from this, appellant herself has unreservedly accepted Clause 15 spelling out an arbitration agreementWe, therefore, need not dilate on this aspect any more and hold in agreement with the High Court that Clause 15 spells out an arbitration agreementIn fact, the dispute was considerably narrowed down because appellant through her advocate in terms admitted that there was no dispute about the calculations of royalty for the period from January 1, 1958 to June 30, 1961, and the dispute was only with regard to the calculations from July 1, 1961 to December 31, 1961. Some attempt was made by the appellant to go back upon the admission recorded in the order made by respondent 4, but the High Court discouraged the attempt. And with regard to the difference in the calculations were called for from the Mining Officer but thereafter a further hearing was given to the appellant and an award was made. Therefore, the arbitrator has acted in accordance with the principles of natural justiceIn fact, the dispute was considerably narrowed down because appellant through her advocate in terms admitted that there was no dispute about the calculations of royalty for the period from January 1, 1958 to June 30, 1961, and the dispute was only with regard to the calculations from July 1, 1961 to December 31, 1961. Some attempt was made by the appellant to go back upon the admission recorded in the order made by respondent 4, but the High Court discouraged the attempt. And with regard to the difference in the calculations were called for from the Mining Officer but thereafter a further hearing was given to the appellant and an award was made. Therefore, the arbitrator has acted in accordance with the principles of natural justice11. The High Court, in our opinion, therefore, rightly declined to entertain the writ petition.