Case: Karanpura Development Co., Ltd Vs. Raja Kamakshya Narain Singh

1. These appeals raise questions as to the validity of a prospecting license granted on 26-3-1915 in favour of Messrs Bird and Co., by the Court of Wards as representing the Ramgarh-Estate and of two deeds dated 23-11-1917 and 1-6-1937 executed by the Court of Wards modifying the terms of the license dated 26-3-1915.2. The Ramgarh Raj is an ancient principality situate in Bihar. It has three coal fields, Bokaro Jharia Ramgarh and Karanpura. Of these, the Karanpura Coal-fields are the largest being of the extent of 550 sq. miles, of which about 415 sq. miles belonged to the26-11-1907 Raja Ramnarain Singh, the proprietor of the estate, granted in favour of Messrs. Anderson Wright and Co., a prospecting license in respect of the Bokaro Ramgarh coal-fields, referred to in these proceedings as the Bokaro license. He was also negotiating for similar license in respect of the Karanpura coal-fields (vide Ex. 155-b dated 1-12-1912), but before anything was concluded, he died on 26-1-1913 leaving him surviving his widow, Rikinath Kaur, and a minor son, Lakshminarain Singh. At the time of his death, the debts owing by the estate amounted to about Rs. 9 Lakhs.3. On 20-5-1913 the Court of Wards took over the management of the estate, and its first concern was to relieve it from the pressure of creditors, and for that purpose, to arrange for a loan on easy terms. It was at this juncture that Messrs Bird and Co., made an application for a prospecting license for the Karanpura coal-fields, and in reply thereto the manger of the Court of wards informed them on 4-9-1913estate being involved and anxious to pay off the debts, one of the conditions of the lease would be an advance of about Rs. 8 to Rs. 11 lakhs including salami. etc., to the estate on the same terms as advanced by the Bokaro and Ramgarhthere were negotiations, extending over several months, a good deal of correspondence and personal discussions, and eventually on 29-7-1914 the terms were finally agreed upon, and on 26-3-1915 the deed of prospecting license was actually executed. Its main terms were as follows : It was to be in force for a period of six years. A sum of Rs. 1,00,000 was paid aslicensees were to pay a minimum ground rent of Rs. 8,000 per annum commencing from the second year of the license, and if the leases were actually taken by the licensees, this amount was to be adjusted towards royalties payable thereunder. The terms of the leases which were to be granted in pursuance of the license were firstly, the lessees were to pay a salami at Rs. 40 per biha, the payment to commence either when railway facilities were available for transport of coal from the mouth of the pit or after a lapse of six years after the period of the license, that is to say, after 26-3-1927, whichever was earlier; secondly, royalty was to be paid on coal, dust and coke at rates specified therein, subject to a minimum of Rs. 5 per bigha payable after the first year of the lease; and thirdly the lessees were to pay the ceases payable under the law by the occupier or tenant of theconsideration for the grant of the license, Messrs Bird and Co., were to advance Rs. 9 lakhs as loan to the estate. This amount was not to carry interest and was to be discharged by adjusting the royalties which would become payable under the leases. If no leases were taken and the license was abandoned, then the amount of the loan was to carry interest at 4 1/2 per cent per annum from that date and it had to be repaid in half-yearly instalments such that the entire debt would be discharged within a period of six years. A mortgage bond was executed on the same date as the prospecting license embodying these terms.4. The next phrase of the transaction begins on 3-8-1915 with Messrs Bird and Co applying to the Court of Wards for extension of the period of the license on the ground that as the result of war conditions, new and unexpected difficulties had cropped up and that to achieve the purpose of the license, it was necessary to extend the period of six years fixed therefore. This proposal was subjected to close scrutiny, and there was prolonged correspondence between Messrs Bird and Co., and the Court of Wards on the expediency of extending the period of license and on the terms on which such extension should beon 23-11-1917 the manager of the Court of Wards executed a deed modifying the terms of the deed dated 26-3-1915. Under this deed, the period of license was extended in the first instance from 6 to 12 years, that is to say, it would expire on 26-3-1927 instead of on 26-3-1921 as originally fixed. It was then provided that if within this extended period the licensee took a lease or leases of mines to the extent of at least 10,000 bighas, then the period of the license would be extended by a second term of 12 years, i.e., up towas a further provision that if before 26-3-1939 the licensees took leases of at least 20,000 bighas, the period of the license would be extended by another term of 12 years, i.e., up to 26-3-1951. While under the prospecting license dated 26-3-1915 a minimum ground rent of Rs. 8,000 was payable from the second year, under the deed dated 23-11-1917 a minimum ground rent of Rs. 50,000 per annum at Rs. 5 per bigha on the covenanted number of 10,000 bighas was payable from the seventh to twelfth years. These are the salient features of the license as revised by the document dated 23-11-1917.5. Raja Lakshminarain Singh, the ward became a major on 6-4-1919, and died shortly thereafter on 10-4-1919 leaving him surviving a minor son, Raja Kamakshya Narain Singh, the main respondent in these appeals. The Court of Wards accordingly continued in management of the estate on behalf of the Raja until 10-7-1937, when he became a major. On 14-7-1920, the appellant Company was registered under the provision of the Indian Companies Act, and it took over the interests of Messrs Bird and Co., under the license dated 26-3-1915 as modified by the deed of variation datedpursuance of these deeds, the Company took six leases covering in all an area of 17,539 bighas on divers dates between 17-7-1922 and 17-7-1913. Under the terms of the deed dated 23-11-1917 the appellant would be entitled to extension of the licence from 26-3-1939for the third period of 12 years only if it had taken lease of at least 20,000 bighas before 26-3-1939. Accordingly, it applied for and obtained three leases on 2-8-1937 covering an area of 2,461 bighas, thus making up along with the six leases mentioned above, the minimum area of 20,000 bighas.6. There is one more deed to which reference must now be made. Clause 6of the deed dated 23-11-1917 provides that the minimum royalty on areas in excess of 10,000 bighas taken on lease would not be payable till 26-3-1939. Thereafter, the appellant would under this clause become liable to pay a minimum royalty for an area in excess of 10,000 bighas. The appellant applied to modify this term by postponing the date of payment by a further period of 12proposal was accepted by the Court of wards and on 1-6-1937 a deed was executed providing in modification of clause 6 as it stood in the deed dated 23-11-1917, that the minimum royalty for the areas in excess of 10,000 bighas was not to become payable by the Company until railway facilities for transport of the coal from the mouth of the pit were available or from 26-3-1951, whichever happened earlier. These are the three transactions, which form the subject matter of this litigation.On 10-8-1937 the Raja became, as already stated a major and assumed management of the estate. On 9-3-1939 he sent a notice to the appellant repudiating the license dated 26-3-1915 and the two deeds of variation dated 23-11-1917 and 1-6-1937 as not binding on him. The appellant in turn sent a notice on 14-5-1940 calling upon the Raja to execute a lease in respect of 250 bighas in accordance with the deeds dated 26-3-1915, 23-11-1917 and 1-6-1937,and followed it up by instituting on 8-6-1940 Title Suit No. 28 of 1940 in the Court of the Subordinate Judge of Hazaribagh for compelling specific performance9-8-1940 the Raja filed Title Suit No. 82 of 1940 in the Sub Court Hazaribagh, and therein, he pleaded that the deed dated 26-3-1915 was void, because the Court of Wards had no power to grant a prospecting license and also because it had acted with gross negligence in granting the same; and that the deeds dated 23-11-1917 and 1-6-1937 were bad because there was no sanction thereof as required by section 18 of the Bengal Court of Wards Act 9 of 1879, hereinafter referred to as the Act, and also because they were not for the benefit of the estate. He accordingly prayed for a declaration that the three deeds aforesaid were void, and for possession of the properties comprised in the leases, with mesne profits, past and future.8. Both these suits, which were really cross-actions, involving the determination of the same points were heard together by the Subordinate Judge of Hazaribagh, and by his judgment dated 30-4-1943 he held that the deed dated 26-3-1915 and 23-11-1917 were intra vires the powers of the courts of wards that they were beneficial to the estate and were therefore valid and he accordingly upheld the six leased granted pursuant to those deeds. He, however, held that the deed dated 1-6-1937 was not valid, both because the Court of Wards had not sanctioned it and also because it was not for the benefit of theview of this finding, he held that the clause in the lease deeds dated 2-8-1937 based on the deed dated 1-6-1937 postponing the payment of minimum of royalty was bad, but that the leases themselves were otherwise valid. As a result of these findings, he granted a decree for specific performance in Title Suit No. 28 of 1940 and in Title Suit No. 82 of 1940 he awarded reliefs consequential on the invalidity of the deed dated 1-6-1937.*Reported in 1950 Pat. (A.I.R. V 37).9. Against this judgment, the Raja preferred appeals to the High Court of Patna F. A. No. 125 of 1943 against the decree in Title Suit No. 82 of 1940 and F. A. No. 127 of 1943 against that in Title Suit No. 28 ofThe Company also filed cross-objections in F. A. No. 125 of 1943. The learned Judges agreed with the subordinate judges that the Court of Wards was competent to grant a prospecting license but they were of opinion that it had not applied its mind to certain importance aspects of the transaction, that the interest of the ward had suffered in consequence, and that the deed dated 26-3-1915 was therefore notnext with the deed dated 23-11-1917, they held that it was void, because the Court of Wards had not sanctioned it. They also held that it was not binding on the Raja firstly because its terms were not beneficial to him, secondly because it had been obtained by Messrs Bird and Co., on false representation, and thirdly because Mr. Mac Gregor, the then, manager of the Court of Wards was acting in his own interests and adversely to those of the minor ward, and the Court of Wards had been milled by him into entering into thethese reasons, the learned Judges held that the deed dated 23-11-1937 was void and inoperative as against the ward. Then as regards the deed dated 1-6-1937 the learned Judges agreed with the Subordinate Judge that it was invalid on both the grounds given by him. In the result in Title Suit No. 82 of 1940 a declaration was made that the deeds dated 26-3-1915, 26-11-1917 and 1-6-1937 as well as the leased granted pursuant thereto were void and a decree passed in favour of the Raja for possession of the demised properties with mesne profits, past andSuit No. 28 of 1940 instituted by the appellant for specific performance and the cross-examinations filed by it in F. A. No. 125 were dismissed. Against this judgment, the present appeals have been preferred by the Company, C. A. No. 191 of 1953 being directed against the decree in F. A. No. 127 of 1943 and C. A. No. 192 of 1953 against the decree in F. A. No. 125 of 1943. The first respondent in these appeals is the Raja of Ramgarh, the other respondents being transferees from him and he will be referred to in this judgment as the respondent.Though the question that were agitated by the parties in the Courts below ranged over a wide area, many of them have been abandoned in the argument before us, and the scope of the controversy in these appeals has been considerably narrowed down. Thus, the appellant does not challenge the correctness of the decision of the courts below that the deed dated 1-6-1937 is not binding on the estate.

Court's reasoning:
We have no hesitation in holding that the Board directed by its letter dated 9-10-1917 the execution of the agreement dated 23-11-1917, and that it was validly executed under S. 18.result, therefore, is that the deed dated 23-11-1917 is not open to attack on any of the grounds urged by the respondent, and must be upheld.Now, the contention of the respondent is that the leases dated 2-8-1937 are bad on two grounds. He firstly argues that as the deed dated 1-6-1937 has been held to be bad, the clause in the lease providing for the postponement of payment of minimum of royalty based thereon must also be held to be bad - that is conceded by the appellant - and that as a deed cannot be held to be partly bad, the whole of it must be held to befact that a clause in a deed is not binding on the ground that it is unauthorised cannot ipso facto render the whole deed void unless it forms such an integral part of the transaction as to render it impossible to sever the good from the bad. That is not the position here. The effect of declaring the proviso void will have the rest of the deed whole and intact. The leases without the proviso are perfectly valid, and indeed, they will be more advantageous to the ward.38.Secondly, it is contended that the sanction that was accorded by the Board was to the lease with the covenant which has been held to be void, and that the deed without that covenant has not been sanctioned. This contention again is clearly untenable. Section 18 only requires that the transaction should be entered into with the sanction of the Board. When that has been done, the force of the section is spent. Whether the transaction turns out to be good or bad on the merits can have no effect on the sanction, which had been granted before it was enteredthe deed is bad on the merits, it will fail on that ground and not on the ground that by reason thereof, the sanction becomes ineffective. And the result is the same whether the deed is bad in part or in toto. The contention therefore that the lease deeds dated 2-8-1937 are inoperative must be rejected.The result is that the deeds dated 26-3-1915 and 23-11-1917 are valid but not the clause postponing the payment of minimum royalty in the lease deed or deeds of 2-8-1937 is inoperative.