Case: Central Coal Fields Limited Etc Vs. Bhubaneswar Singh and Others

Respondent No. 1, a partnership firm, held a coking coal mine known as Tariya Colliery within the State of Bihar the management where of was taken over under the Coking Coal Mines (Emergency Provisions) Ordinance of 1971 with effect from October 17, 1971, along with several other coking coal mines and some coke oven plants. The ordinance was in due course replaced by a statute bearing the same title (hereinafter referred to as the Management Act). Then came the Coking Coal Mines (Nationalisation) Act, 1971 (Nationalisation Act for short) which received Presidential assent on August 17, 1982, but under section 1, sub-section (2) there of, the statute was deemed to have come into force with effect from May 1, 1972. Under s. 3; sub-s. (a) of the Nationalisation Act, May, 1, 1972 was the appointed day. Under the provisions of the Ordinance followed by the Management Act, ownership of the mines was not disturbed but management was taken over. Under the Nationalisation Act, the right, title and interest of the owner in the mines extinguished and became vested in the Central Government with effect from May 1, 1972. Under the Management Act, the Custodian carried on the management on behalf of the owner while under the Nationalisation Act ownership was abolished and payment of a sum to the owner by way of compensation was contemplated. So far as the period between October 17, 1971 and April 30, 1972 when title in the colliery continued to vest in the owner but only management had been taken over under the provisions of the first statute, was concerned, the business was run by the Custodian on account of the owner. Therefore, the Nationalisation Act provided that upon accounts being taken, either the owner was to be paid the surplus or if there had been excess expenditure, the same had to be recovered from the owner.In the instant case there was a stock of 5650 tons of coking coal and 602 tons of soft coke when management was taken over on October 17, 1971 and on April 30, 1972 at the end of which ownership was extinguished, there was a stock of 30, 411 to ns of coking coal and 956 tons of soft coke. A total expenditure of about eight lak rupees had been incurred for raising the said quantity of coal during the period of management. This stock was not taken into account and credit for it was not given to the owner but expenses of extraction amounting to Rs. 7, 95, 071.94 were raised against the owner. The owner laid claim to a sum of Rs. 1, 01, 755.37 as its entitlement under the Nationalisation Act on the ground that if credit was given to the stock in trade on the basis of the closing balance, it would be entitled to that amountClaim having been laid for the recovery of the aforesaid amount from the owner under the Nationalisation Act, that amount was certified to be recoverable. The owner Respondent No. 1 challenged the order of the statutory authority by filing a writ petition before the Patna High Court impleading, inter alia, the Central Coal Fields Ltd. as also M/s. Bharat Coking Coal Ltd. two Government companies as respondents. The High Court after hearing the parties came to the conclusion that the owner was entitled to credit for the coal lying in stock when the closing balance was drawn up and accordingly directed the accounts to be recast and payments to be made on the basis of the recast accounts. Central Coal Fields Ltd. and M/s. Bharat Coking Coal Ltd. moved this Court under Article 136 of the Constitution separately for leave to appeal against the said decision of the High Court.

Court's reasoning:
Under the Income-tax Act profits have to be ascertained for the purpose of computing tax liability. Under the Nationalisation Act the books had to be balanced with a view to finding out whether the Government company which was in management for the relevant period on behalf of the owner was to pay anything to the owner or the Government company having spent for the owner was entitled to recover any sum from the owner. Therefore, we accept the submission of Mr. Shanti Bhushan that the Nationalisation Act contemplated a balance-sheet according to the commercial procedure to be drawn up which necessarily require d stock in trade to be reflectedAdmittedly the amount claimed from the owner represents the cost of extraction of the coal from the mine. The appellants had conceded before the High Court and Mr. Sinha appearing for them before us accept ed the position that if the extracted coal had been sold before the appointed day, the owner would have been entitled to the price. The mere fact that the extracted coal remained in stock at the commencement of the appointed date can make no difference to the position. The expenses were to be set off against the sale price of the stock to be received at the time of disposal. Therefore, the stock of coal had to be taken into account for balancing the position. Reliance on the definition of mine and S. 10 of the Nationalisation Act to counteract this conclusion cannot avail the appellants. Indeed, the submission advanced on behalf of the appellants is so much opposed to common sense logic of the matter that in the absence of a legislative mandate we have no hesitation in rejecting it.Much of the controversy could have been avoided if reference had been made to the statutory form. Statement 8 in the prescribed form clearly indicates that the stock as on April 30, 1972, had to be taken into account. We are sorry to observe that the High Court omitted to make a reference to it, and are equally sorry to note that the Government companies have failed to do their duty as cast on them by law and driven the owner to unnecessary litigationUnder thex Act profits have to be ascertained for the purpose of computing tax liability.Under theNationalisation Act the books had to be balanced with a view to finding out whether the Government company which was in management for the relevant period on behalf of the owner was to pay anything to the owner or the Government company having spent for the owner was entitled to recover any sum from the owner. Therefore, we accept the submission of Mr. Shanti Bhushan that the Nationalisation Act contemplated at according to the commercial procedure to be drawn up which necessarily require d stock in trade to be