Case: Union Of India Vs. Karam Ch.Thapar&amp;Brs.(Coal Sales)Ltd&amp;Ors

2. The Coal Company owns and possesses certain coal mines in the State of Bihar. The Coal Board was constituted under the provisions of the Coal Mines (Conservation and Development) Act, 1974, hereinafter the Act for short. However, the said Coal Board was dissolved with effect from April 1, 1975 and all rights, privileges, liabilities and obligations of the Board have come to vest in the Central Government.3. There are cross-demands between the parties. It is not necessary to set out the details and particulars of the demands. It would suffice for our purpose to notice that the Coal Company is liable to pay royalty on account of sand extracted by it for the purpose of carrying out stowing operations in the coalfields. We would not enter into yet another controversy which we will briefly set out hereinafter at an appropriate place as to whether it is the Central Government as successor of the Coal Board or the State of Bihar which is entitled to recover the royalty. For the purpose of the present appeal we proceed on an assumption that the amount of royalty on the sand extracted by the Coal Company is due and payable by it to the Central Government. The fact remains that such obligation to pay the amount of royalty is contractual inasmuch as there is a contract i.e. a mining lease entered into by the Coal Company whereby it has earned the privilege of extracting sand from Damodar River-bed and obligation to pay royalty on account of sand extracted, calculated at the rate appointed by the mining contract. So far as the quantified amount of royalty on sand is concerned the Coal Company is a debtor and the Union of India is creditor.4. The Coal Mines (Conservation & Development) Act, 1974 came into force on and from April 1, 1975. Clause (j) of Section 3 defines stowing to mean as the operation of filling, with sand or any other material, or with both, spaces left underground in a coal mine by the extraction of coal. Sub-section (2) of Section 4 specifically empowers the Central Government to make order in writing addressed to the owner, agent or manager of a coal mine, requiring him to take such measures as it may think necessary for the purpose of conservation of coal or for development of coal mines including in any coal mine, stowing for safety. Sub-section (2) of Section 5 specifically obliges the owner of a coal mine to : (1) execute such stowing and other operations as may be necessary to be taken in furtherance of the objects of this Act in so far as such objects relate to the conversation of coal or development of the coal mine or the utilization of coal obtaining from the coal mine; (ii) acquire such stowing and other materials as may be necessary for ensuring the conservation of coal, and safety in, the coal mine; (iii) undertake such other activity as the Central Government may, for the furtherance of the objects of this Act, direct; and so on.5. Out of the net proceeds of excise and customs duties on coal, the Central Government is obliged to disburse a certain amount inter alia for the purpose of grant of stowing materials and other assistance for stowing operations and execution of stowing and other operations for the safety of coal mines or conservation of coal. The amount released by the Central Government under Section 9 of the Act to the owner of every coal mine, is required to be credited into the Coal Mine Conservation and Development Account under Section 10 of the Act. The money standing to the credit of the Account shall be applied by the owner of the coal mine only for the purposes specified in sub-section (2) of Section 10 of the Act including, inter alia, the acquisition of stowing and other materials needed for stowing operations in coal mines and the execution of stowing and other operations in furtherance of the objects of the Act amongst others. Under Section 18 the Central Government is empowered to make rules.6. In exercise of the power, conferred by the Coal Mines (Conservation and Safety) Act, 1952 on the Central Government, the Central Government has framed the Coal Mines (Conservations and Safety) Rules 1954. Rule 49 provides as under: "49. Purposes for which assistance may be granted - (1) The Board may grant assistance from the Fund to any owner, agent or manager of coal mine - (2) for stowing or other protective measures which are required to be undertaken by an order issued under sub-section (3) of Section 13 or sub-rule (2) of Rule 35 or sub-rule (3) of Rule 40; (b) for any measures which in the opinion of the Board are essential for the effective prevention of the spread of fire to or the inundation by water of any coal mine from an area adjacent to it; (c) for stowing for conservation of coal or washing coal which is required to be undertaken by an order under Rule 36 or 37; (d) for the following measures voluntarily undertaken by the owner agent, or manager of the coal mine:- (i) stowing operations in the interests of safety or conservation of coal, (ii) any process of washing or cleaning coal which reduces its ash content and also improves its qualities or (iii) any other measures for safety in coal mines or for conservation of coal; (e) for any other measures undertaken by the owner, agent or manager of a coal mine under the order of the Board to ensure conservation of coal. (2) The Board may grant assistance to owner of any steel work, blast furnace or coke plant for blending of coal undertaken under the orders of the Board. (3) The Board may grant assistance to the owner, agent, or manager of a coal mine which is specially handicapped by adverse factors rendering its working uneconomic, but which, in the opinion of the Central Government, should be maintained in production for the purpose of ensuring the conservation of coal. In such cases assistance shall be granted by the Board - (i) with due regard to the circumstances of each case; (ii) only in respect of such adverse factors as may, from time to time, be specified by the Central Government as entitling a coal mine to receive assistance, and published by the Board in the Official Gazette for general information; and (iii) in accordance with such procedure as may be determined, and not exceeding such rates as may be fixed, by the Central Government, from to time: Provided that the existence or otherwise of adverse factors in any coal mine, the extent to which such adverse factors render the working of the coal mine uneconomic , and the amount of assistance, if any, to be granted to the coal mine, shall be determined by the central Government.Coal Board Manual is a compilation of the rules and instructions issued by the Coal Board/ Central Government from time to time. Some of them are statutory and some are executive. However, it is not disputed that whatever is contained in the Coal Board Manual is binding on the Coal Board/Central Government and the coal companies. Vide para 34 of the Manual it is provided that the stowing assistance granted by the Central Government to the Coal Company includes amongst other items, the actual amount of royalty paid for stowing material excavated and transported. Other charges included in the amount of stowing assistance are wages of labour employed in and associated with stowing charges, certain charges related to sand pumps and so on, as stated in the Rules. Thus, it appears that while the Coal Company has to pay royalty on the amount of sand extracted by it for the purpose of carrying out stowing operations, the amount of royalty paid is reimbursed by the Central Government to the Coal Company as one of the constituents of the stowing assistance.8. So far as the current amount of royalty is concerned there cannot possibly be any dispute as to adjustment or set off inasmuch as the amount of royalty on the quantum of sand extracted by the Coal Company for carrying out stowing operations, shall be actually paid by the Coal Company to the Central Government or anyone else entitled and it is only on such actual payment that the Coal Company would be entitled to be reimbursed for the amount as a constituent of the stowing assistance. So long as the Coal Company does not actually pay the amount or royalty, the question of its being reimbursed would not arise. If the amount of royalty is payable by the Coal Company to the Central Government by way of any arrangement arrived at with the State Government or otherwise the adjustment or reimbursement would pose no problem; for the Coal Company has first to pay the amount of royalty and then seek reimbursement of the amount of royalty included by way of an ingredient in the amount of stowing assistance released by the Central Government to it.9. The controversy, however, arose because there were certain arrears of the amount of royalty payable by the Coal Company to the Central Government and the Central Government sought to enforce recovery of the amount of royalty due and payable on account of sand already extracted and utilized in its stowing operations by the Coal Company by making an adjustment from out of the amount payable by the Central Government to the Coal Company as stowing assistance consisting of wages and transportation charges etc. incurred by the Coal Company for carrying out the stowing operations. The Central Government sent a few communications to the Coal Company whereby the Central Government made it clear that the payment of stowing assistance was being withheld and the amount appropriated by the Central Government towards satisfying its demand outstanding against the Coal Company on account of royalty due and payable by the Coal Company to the Central Government on the sand extracted from the river-bed and utilized by it in stowing.10. The Coal Company filed a civil writ petition in the High Court of Calcutta. A learned Single Judge held that it was not open for the Central Government to make an adjustment of cross demands and satisfy its contractual demand by making an adjustment out of the amount due and payable on account of its statutory obligation. The learned Single Judge directed the communications to the contrary made by the Central Government to be quashed. The Union of India preferred an intra-court appeal which has been dismissed by the Division Bench has not only upheld the view taken by the learned Single Judge but it has also proceeded further to opine that under the law it was the State Government which was entitled to recover the amount of royalty on sand, and therefore, there was no question of Central Government raising a demand on account of royalty and withholding the release of stowing assistance pursuant to its statutory

Court's reasoning:
n our opinion, in the facts and circumstances of the present case it would not make any difference whether the amount withheld by the Central Government is on account of assistance or reimbursement; in either case the Could would not hold in favour of adjustment being made by the Central Government by setting off the outstanding credit referable to stowing assistance as against the outstanding demand of arrears of royalty.22. In our opinion, the High Court has not erred in allowing the writ petition filed by the respondent-Coal Company.23. So far as the finding recorded in its appellate judgment by the Division Bench that the Central Government is not entitled to recover the royalty and it is the State of Bihar which only is entitled to demand and recover the royalty from the respondent-Coal Company is concerned, we set-aside that finding but without recording any opinion of ours on that aspect for the short reason that such issue is not required to be adjudicated upon in the present case in view of the finding arrived at hereinabove. We hasten to add that requisite pleadings and necessary material are also not available on record to arrive at a definite finding in that regard.24. Before parting we make it clear that the appellant or the State of Bihar, as the case may be, is free to recover arrears of royalty by adopting such other method as may be available under the law.