Case ID: 3023

Judgment:
Appeals Nos. 167 and 168 of 1968. Appeals from the judgment and orders dated December 20	 1966 of the Madhya Pradesh High Court in Misc. Petition Nos. 139 and 182 of 1966. I. N. Shroff	 for the appellants (in both the appeals). section V. Gupte	 Suresh A. Shroff	 R. K. Thakur	 Bhuvanesh Kumari	 K. section Cooper	 M. K. Cooper	 J. B. Dadachanji	 O. C. 611 Mathur and Ravinder Narain	 for respondent No. 1 (in C.A. No. 167 of 1968). B. P. Maheshwari	 for	 respondent No. 1 (in C.A. No. 168 of 1968). section P. Nayar	 for respondent No. 2 (in both the appeals). The Judgment of the Court was delivered by Shelat	 J. By an Indenture of Lease	 dated January 12	 1944	 made between the then Ruler of Korea State of the one part	 referred to as the lessor therein	 and Sir Mukherji B. Dadabhoy	 referred to as the lessee	 of the other part	 the lessor granted to the lessee for a term of 30 years	 in consideration of payment of rents and royalties therein mentioned	 a mining lease of an area measuring 5.25 sq. miles delineated on the plan annexed thereto	 with liberties	 powers and privileges and on terms and conditions therein set out. By cl. (2) of that Indenture	 the lessee agreed to pay during the subsistence of the lease royalties at the rates and on dates set out therein. The rates of royalty varied from 5% to 25% according to the price of coal per ton extracted from the leased area	 that is to say	 from 4 ans. per ton if the price was Rs. 51/ per ton to 25% of the price per ton at the pit 's head if that price was Rs. 20/ or more. On the merger of the Korea State with Madhya Pradesh	 into the events of which it is not necessary for the purposes of this appeal to go	 the leased area became subject to the provisions of the Mines and Minerals (Regulation and Development) Act	 53 of 1948 and the Mineral Concession Rules made thereunder on October 25	 1949. In 1952	 Sir Maneckji agreed to assign the said lease and the benefits	 powers and privileges thereunder provided to the respondent company. Since	 under that lease	 such assignment could not be made without the previous consent of the lessor and since	 by that time	 owing to the merger of the Korea State with Madhya Pradesh	 the State of Madhya Pradesh had acquired the said area and the rights in respect of it under the said lease	 an agreement was made between the State of Madhya Pradesh and the respondent company on November 6	 1952 under which the State of Madhya Pradesh granted its consent to the said assignment for the unexpired period of the said lease in consideration of the respondent company agreeing to comply with the terms and conditions of the said lease including I payment of royalties to the State Government as provided therein. That meant that the respondent company had to pay henceforth royalty to the State of Madhya Pradesh as the lessor at the rates provided in the original lease. 612 An unexpected development in the meantime took place. Under an industrial award	 called the Mazumdar Award	 published on May 25	 1956	 increased wages were awarded to colliery workers. To meet the consequent increased expenditure which the collieries had to incur	 the Government of India proportionately increased the controlled coal price. A representation made by the respondent company to the Government of India	 dated October 5	 1956 shows that the increase in respect of the coal extracted by the respondent company was from 14.6.0 and Rs. 15.6.0 to Rs. 17.6.0 and Rs. 18.6.0 per ton. That increase	 however	 resulted in the respondent company having to pay royalty at an increased rate since the rate of royalty payable by the company was on graded slabs varying according to the price of coal at the pit 's head. The company 's representation	 therefore	 was that the royalty payable by it should be modified so as to bring it in consonance with that payable under the 1948 Act read with the Mineral Concession Rules	 1949 and the First Schedule thereto	 namely	 at a fixed rate of 5% of the f.o.r. price subject to the minimum of 8 ans. per ton. (rule 41 (1) (a)). The Government of India referred the respondent company to the State Government and advised it to make a similar representation to that Government. Thereafter correspondence went on between the Government of Madhya Pradesh and the respondent company for a considerable time. The State	 Government	 however	 was not agreeable to modify the terms of the said lease and to bring the royalty payable thereunder in consonance with r. 41 of 1949 Rules and the First Schedule thereto. On December 28	 1957	 Parliament passed the Mines and Minerals (Regulation and Development) Act	 67 of 1957 under its power under Entry 54 of List I of the Seventh Schedule to the Constitution. Before the Act was brought into force by a notification as provided by section 1(3) thereof	 an amending Act	 being Act 15 of 1958	 was passed on May 15	 1958	 By a notification dated May 29	 1958	 the Central Government brought into force the Act with effect from June 1	 1958. As its long title recites	 the Act was passed to provide for the regulation of mines and the development of minerals under the control of the Union. 2 declared that it was in the public interest that the Union should take under its control the regulation of mines and the development of minerals. 6 and 8 provided for the period and the area in respect of which mining leases henceforth could be granted. 9(1) provided that a lessee under a mining lease granted before the commencement of the Act shall pay royalty at the rate for the time being specified in the Second Schedule. Its sub sec. 2 provided that a lessee under a lease granted on or after the commencement of the Act 613 shall likewise pay royalty in respect of any mineral removed by him from the area leased to him at the rate for the time being. specified in the Second Schedule in respect of that mineral. Sub sec. (3) authorised the Central Government to amend the rates of royalty specified in the Second Schedule	 but not so as to exceed twenty per cent. of the sale price at the pit 's head. Under item (1) of the Second Schedule	 royalty payable in respect of coal was the same as under r. 41 of the Mineral Concession Rules	 1949	 that is	 5% of the f.o.r. price	 subject to a minimum of fifty naye paise per ton. The effect of sec. 9 was that the rate of royalty was enhanced in the case of those lessees	 who	 under the leases obtained by them before the commencement of the Act	 were paying at a rate lesser than 5%	 while the royalty payable by lessees similarly placed was reduced if they were paying royalty at a higher rate. Under sec. 9(1) read with the Second Schedule	 the respondent company would have been required to pay royalty at the reduced	 rate of 5 % instead of at the rates varying from 5 % to 25 % according as the price fluctuated from time to time. Sec. 1 6 provided that all mining leases granted before October 25	 1949 should	 as soon as may be	 after the commencement of the Act	 be brought into conformity with the provisions of the Act and the Rules made under sees. 13 and 18. The Amending Act	 15 of 1958	 by its sec. 2	 inserted into the Act sec. 30A with retrospective effect. That section reads as under "Notwithstanding anything contained in this Act	 the provisions of sub section (1) of section 9 and of sub section (1) of section 16	 shall not apply to or in relation to mining leases granted before the 25th day of October	 1949	 in respect of coal	 but the Central Government	 if it is satisfied that it is expedient so to do	 may	 by notification in the Official Gazette	 direct that all or any of the said provisions (including any rules made under sections 13 and 18) shall apply to or in relation to such leases subject to such exceptions and modifications	 if any	 as may be specified in that or in any subsequent notification. " The section falls into two parts. Under the first part	 the operation of sections 9(1) and 16(1) was suspended as far as pre 1949 mining leases for coal were concerned. The second part	 however	 empowered the Central Government	 on its satisfaction that it was expedient to do so	 to direct that all or any of those provisions	 including rules made under sees. 13 and 18	 should apply to such leases subject to such exceptions and modi 614 fications	 if any	 as might be specified in that or any subsequent notification. The "exceptions and modifications" which might be so specified in the notification would obviously be in regard to the application	 when such application was decided upon	 of sees. 9(1) and 16(1) and the relevant rules. As a result of the suspension of the operation of sec. 9(1)	 and consequently of the Second Schedule	 the respondent company remained liable to pay under its lease royalty at the graded rates provided therein which	 in consequence of the increase in the controlled price of coal	 came to more than 5% prescribed by the Second Schedule. On December 29	 1961	 the Central Government issued a notification in exercise of its power under the second part of sec. 30A	 by which it directed application of sec. 9(1) with immediate effect to or in relation to the pre 1949 coal mining leases " subject to the modification that the lessee shall pay royalty at the rate specified in any agreement between the lessee and lessor or at 2 1/2% of f.o.r. price	 whichever is higher	 in lieu of the rate of royalty specified in respect of coal in the Second Schedule to the said Act. " The respondent company would have been	 under this notification	 liable to pay royalty at the rate of 5% under the Second Schedule. The question is whether the said modification made any difference. It appears that the respondent company continued to press the Central Government to modify and reduce the royalty pay able by it under its lease. This is seen from the Central Government 's letter	 dated July 4	 1962	 by which it informed the company in reply to the company 's letter of May 21	 1962 that the question of the rate of royalty payable	 by the colliery was	 in consultation with the State Government	 under consideration and that action in that connection would shortly be taken. It would seem that as a result of the company 's representations and consultation by the Central Government with the State Government	 the latter issued an order	 dated September 23	 1963 to the Collector	 Surguja	 directing him to recover from the respondent 	company royalty at the rate of 5% with effect from July 1	 1958 subject to the condition that the royalty amount should not be less than Rs. 2	47	000/ per year. The Government	 however	 directed the Collector to recover the outstanding royalty due for the period prior to July 1	 1958 at the old rates	 that is	 as provided by the lease. The State Government	 however	 changed its mind later on	 for	 by its order dated October 1	 1965 it partially suspended its order of September 23	 1963 and directed the Collector to recover royalty as from December 29	 1961 at the rates prescribed under the lease "in accordance with the Government of 615 India 's notification No. S.O. 30	 dated 29th December	 1961". Representations by the respondent company to the State Government to charge royalty at 5% proved futile. However	 on January 1	 1966	 the Central Government issued a notification under which it directed the lessees of pre 1949 leases to pay royalty at 5% of the f.o.r. price. Thereupon	 by its order	 dated February 11	 1966	 the State Government issued instructions to the Collector to charge royalty at that rate with effect from 1st of January	 1966. The controversy between the parties	 therefore	 is confined to the rate of royalty at which the company was liable to pay royalty for the period between December 29	 1961 and December 31	 1965. On January 25	 1966	 the Collector served upon the respon dent company demand notices to pay the arrears of royalty for the aforesaid period at the rates provided in the lease. The company thereupon filed a revision before the Central Government under the Mineral Concession Rules	 1960. That revision was pending when the company filed a writ petition in March 1966 in the High Court of Madhya Pradesh for quashing the said order	 dated October 1	 1965	 the rejection of its representation by the State Government	 dated November 19	 1965 and the said demand notices. The respondent company urged that the purpose of suspending operation of section 9(1)	 till a notification applying it was issued by the Central Government	 was not to burden lessees under pre 1949 leases with royalty at the rate of 5% of the f.o.r. price for the time being prescribed in the Second Schedule	 and that even when a notification applying sec. 9 was to be issued	 the Central Government was empowered to direct that that section	 the Second Schedule and the Rules made under sees. 13 and 18 would apply with such exceptions and modifications as may be specified in such or any subsequent notification. Such exceptions and modifications had to be and were intended to cushion or soften the burden which would otherwise fall on the lessees under sec. 9(1) and the Second Schedule	 and therefore	 any modification or exception which would be specified in such notification was intended to reduce rather than increase the rate of royalty payable under sec. The contention	 therefore	 was that the notification	 dated December 29	 1961 could not be read to mean that lessees	 such as the respondent company	 whose leases provided for royalty at a rate higher than 5% were to pay royalty at a rate higher than the one provided under sec. The State Government	 on the other hand	 urged that the language of the notification was clear and provided treat such lessees were to pay royalty either at the rate provided in their leases or if the rate provided therein was less than 2 1/2% at that rate	 whichever was 616 higher. Therefore	 oil a plain construction of the words of the notification	 the respondent company was bound to pay royalty at the rates provided in its lease	 that being higher than the minimum of 2 1/2% provided in the notification. The High Court rejected the contention raised by the State as being inconsistent with the purpose for which sec. 30A was introduced. The High Court observed : "In our view	 the true construction and effect of the notification dated 29th December 1961 is that in regard to coal mining leases granted before 25th October 1949 if the rate of royalty stipulated in the lease was higher than 5% of f.o.r. price per ton	 then the royalty payable from 29th December 1961 in respect of coal removed from the leased area after that date would be the one specified on that date in the Second Schedule	 namely	 5 per cent of f.o.r. price per ton; in relation to leases where the rate of royalty stipulated in less than 5 per cent but more than 2 1/2 per cent of f.o.r. price per ton	 the rate of royalty would be the one specified in the lease agreement; and in respect of leases where the rate of royalty specified was less than 2 1/2 per cent of f.o.r. price per ton	 the rate would be 2 1/2 per cent of f.o.r. price per ton from 29th December 1961. It follows from this that the petitioner company which was	 under the terms of its lease liable to pay royalty at a rate higher than 5 per cent of f.o.r. price per ton for the period from 29th December .1961	 is rightly entitled to claim that under the notification dated 29th December 1961	 it cannot be called upon to pay royalty from 29th September 1961 at the rate stipulated in the lease granted to it but only at the rate of 5 per cent of f.o.r. price per ton specified in the Second Schedule. " The High Court also rejected the State 's contention as regards its order dated September 23	 1963 that once the said notification was issued	 the State Government could not charge royalty at a rate lower than the one prescribed in the said notification	 and that therefore	 the State acted properly in rescinding its said order. The High Court held that order amounted to a modification of the terms of the lease in consideration of the lessee guaranteeing payment of the minimum amount of Rs. 2.47	000/ a year	 which the State Government was competent to make	 and that therefore	 it had no right to rescind it unilaterally. On this view	 it held that the company 's liability for royalty as from December 29	 1961 would be at the reduced rate of 5% of the f.o.r. price and not as provided by the original lease deed. 617 As against these conclusions	 counsel for the State took us through the terms of the lease and the provisions of the Act	 and in particular sees. 9 and 30A	 and formulated three contentions for consideration. These were	 (1) that the High Court erred in construing the relevant provisions of the Act and particularly sec. 30A	 (2) that it also erred in construing the said notification	 and (3) that the order of the State Government of September 23	 1963 was erroneous having regard to the said notification which fixed the rate of royalty payable by the lessees under the pre 1949 1eases	 and that order being inconsistent with the notification had to be rescinded. by its subsequent order of November 19	 1965. Counsel urged that upon precision of its order dated September 23	 1963	 the State Government was entitled to recover royalty as from the date of the said notification at the rate agreed to in the lease or at 2 1/2%	 whichever was higher. Therefore	 the said demand notices were valid and had to be complied with. It is well known that prior to the enactment of the 1948 Act	 ' leases of mining areas had been granted by diverse authorities on different terms and conditions. The rate of royalty under those leases were inevitably divergent and were often fixed at very low rates. The purpose of enacting the 1948 Act was to bring about uniformity in such leases and with that lend that Act had made provisions for power to modify the terms and conditions both in regard to the area and the period under such leases. The object of such provisions was to regulate in a systematic and scientific manner development of mining and minerals. Though under the Constitution that subject was left to the States	 a power was carved out by entry 54 in List I for the exclusive exercise of it by the Centre. The consequence was 'the enactment of Act 67 of 1957 which was brought into operation from June 1	 1958. The purpose of passing that Act is clearly seen from the declaration required under entry 54	 List I	 in sec. 2	 namely	 that it was necessary for the Union to take under its control regulation of mines and the development of minerals. In pursuance of that object the Act made provisions with regard to the persons to whom prospecting licences and mining leases should be granted (sections 4 and 5)	 the maximum area for which such licences and leases should be granted (section 6)	 and the period for which a mining lease should be granted (section 8). In order that uniformity in leases granted before and after the commencement of the Act could be attained	 power was also conferred to bring all mining leases granted before October 25	 1949 into conformity with the provisions of the Act and the Rules made thereunder. (sections 16	 17 and 18). As regards royalty payable by the lessees under diverse kinds of leases for different minerals granted before October 25	 1949 uniformity was sought to be brought about sec. 618 In the 1948 Act the Central Government had the power to make rules for	 regulating the grant of mining leases	 or for prohibiting the	 grant of such leases in respect of any mineral including the power to make rules as regards the terms upon which and the conditions subject to which such leases would be granted. (section 5) Under sec. 7 of that Act	 the Central Government also could make rules for modifying or altering the terms and conditions of leases granted before the commencement of that Act	 that is	 before October 25	 1949. In pursuance of the power under sec. 5	 the Central Government framed the Mineral Concession Rules	 1949 and provided by r. 41 thereof read with the First Schedule thereto that the rate of royalty chargeable under a lease in respect of coal would be 5% of the f.o.r. price per ton. No rules	 however	 were made under sec. 7	 and therefore	 the rate of royalty provided by r. 41 did not govern pre 1949 leases	 with the result that the lessees thereunder continued to pay royalty provided in their respective leases. Such diversity in the rates of royalty was sought to be done away with by prescribing uniform rates of royalty in respect of each mineral through sec. Item 1 in the Second Schedule prescribed	 in respect of coal	 the rate of royalty at 5% of the f.o.r. price subject to a minimum of fifty naye paise per ton. The result of section 9 and item I in the Second Schedule was that all lessees whether their leases were granted before or after the commencement of the Act became liable to pay royalty at the uniform rate of 5% in respect of coal. Since under the 1948 Act the lessees	 whose leases were granted on and after the commencement of that Act	 were liable to pay royalty at 5% under r. 41 of the 1949 Concession Rules	 sec. 9 did not make any difference to them as it prescribed the same rate. But so far as lessees under the pre1949 leases were concerned	 the new rate affected them	 inasmuch as those	 who	 under their leases were paying at a lesser rate became liable to pay royalty at 5%	 while those who were paying at a higher rate had to pay at	 the lower rate of 5% only. Besides	 the change in the rate of royalty under sec. 9	 pre 1949 leases were liable to be modified in respect of the area and the period under sec. 16 and the rules made under secs. 13 and 18. Even before the new Act was brought into force	 consequences of enforcing such uniformity and the resultant automatic spurt in the rate of royalty	 especially in respect of coal	 had been realised. The Central Government	 therefore	 itself sponsored the insertion of sec. 30A by sec. 2 of the Amendment Act	 15 of 1958	 with retrospective effect. The consequences flowing from the attempted uniformity were set out in the Statement of Objects and Reasons(1) for amending the Act. The statement acknowledged (1) Gazette of India	 Extra.	 Part 	 Jan. July	 1958	 p. 507. 619 that coal	 as the basic fuel	 occupied a unique position in the country 's economy and had always	 therefore	 been treated differently from other minerals. It also acknowledged that operation of secs. 9 and 16 would have "numerous desirable consequences" such as unsettling coal industry as a whole and retarding the programme of coal production estimated in the	 Second Five Year Plan on account of the sudden and automatic rise in the royalty payable by lessees	 who under their leases granted before October 25	 1949 generally had to pay royalty "much below the rate" prescribed under the Second Schedule. A similar anxiety was also expressed during the passage of the Amendment Bill by the concerned Minister stating that if the automatic enhancement under sec. 9(1) in the rate of royalty at 5% were to be implemented	 the results would be unfortunate. For	 besides affecting the rate of production of coal	 it would also adversely affect the price structure in other industries	 such as cement	 steel and other similar industries	 and that for that reason "by this Amending Bill that mistake is sought to be rectified". "Instead of giving those increases automatically power will not be taken to phase them in such a way that the upward revision is not pushed up to the maximum limit (i.e. five per cent.) with one jerk	 but it is so phased that it does not cause any upset in the coal production programme and in the economy of the country as a whole".(1). The mischief which the Amending Act	 1958 sought to avoid was thus to prevent enhancement of royalty at one stroke to 5%. As aforesaid	 sec. 30A suspended the application of secs. 9(1) and 16(1) in relation to pre 1949 leases and authorised the Central Government to direct that all or any of the said provisions (including rules made under secs. 13 and 18) shall apply to or in relation to such leases subject to such exceptions and modifications	 if any	 as may be specified in a notification. As a result of the suspension of Sec. 9(1)	 lessees under pre 1949 leases were relegated to the original position under which they were liable to pay royalty at rates agreed to in those leases whether the rate was over or below 5% provided by sec.9(1). As and when the Central Government issued the notification envisaged by the second part	 such lessees would be obliged to pay royalty at the rate of 5% as prescribed for the time being in the Second Schedule	 and even if the Government were	 in the meantime	 to enhance the rate as authorised by sec. 9(3) upto the maximum rate of 20% at such rate but never more than 20%. The second part thus contemplated payment of royalty	 on sec. 9(1) being made applicable	 at the most	 at the rate of 5% only	 as no increase had till. then been made under sec. (1) Rajya Sabha Proceedings	 dated November 620 On December 29	 1961	 the Central Government "in exercise of the powers conferred by sec. 30A" issued the notification directing that the provisions of sub sec. (1) of sec. 9 of the said Act shall apply with immediate effect to or in relation to pre 1949 coal mining leases	 subject to the modification that such lessees shall pay royalty at the rate specified in the agreements between the lessees and the lessors or at 2 1/2% of f.o.r. price	 whichever was higher	 "in lieu of the rate of royalty specified in respect of coal in the Second Schedule to the said Act". The argument urged on behalf of the State both before the .High Court and before us was that the notification clearly envisaged payment of royalty at the rate agreed to between the lessor 	and the lessee or at 2 1/2% whichever was higher. Since	 the agreement in the present case provided for royalty at graded rates which were higher than 21%	 the company had to pay royalty at such agreed rates. The argument	 in our opinion	 is untenable :as it is not borne out by the language of the notification itself and of sec. 30A and was therefore rightly repelled by the High Court. The notification was issued	 as it recites	 in exercise of the powers conferred by sec. 30A. That power was to apply	 by issuing a notification thereunder	 sees. 9(1) and 16(1) and the rules made under sees. 13 and 18. The notification in terms directed the application of sec. 9(1) which meant that on and from December 29	 1961 the company would have to pay royalty as prescribed under that sub section read with the Second Schedule	 that is	 at 5%. The notification	 however	 applied sec. 9(1) subject to one modification	 namely	 that lessees under the pre1949 leases were to pay royalty at	 the rate provided in their leases or at 21% whichever was higher. The modification was to the rate applicable under sec. 9(1) and the Second Schedule	 that is	 to the rate of 5%. Considering the object with which sec. 30A was enacted	 viz.	 to phase the rate of 5%	 and not to impose it at one stroke	 the modification could not mean recovery at a rate inconsistent with sec. 9(1) and the Second Schedule	 that is	 at 	the rate higher than 5% provided thereunder. Such a modification	 if it were to be construed as meaning payment at a rate higher than 5% would be in excess of the power under sec. 30A and also in contravention of the language of sec. 9(1) and the Second Schedule. A modification	 if any	 would be for charging royalty at a rate lesser than the one provided under sec. 9 (1 ) and the Second Schedule	 and not at a rate higher than such rate. A construction to the contrary would mean exercise of power in excess of that conferred by the section and would affect the validity of the notification. A literal meaning which the State canvassed for can	 therefore	 be accepted only at the cost of invalidating the notification. 621 The rule of construction that a court construing a provision of law must presume that the intention of the authority making it was not to exceed its power and to enact it validly is well settled. Where	 therefore	 two constructions are possible	 the one which sustains its validity must be preferred. On a plain reading of the notification	 however	 it is clear that what it meant was that instead of the rate flowing from the application of sec. 9(1) and the Second Schedule	 a modified rate should be applied	 that is	 "in lieu of the rate of royalty" specified in the Second Schedule	 royalty at the agreed rate should be charged if it was lower than 5%	 or at 2 1/2% minimum	 whichever was higher. The notification	 thus	 did not empower the State Government to recover royalty at a rate higher than 5% in lieu of the rate chargeable under sec. 9(1) and the Second Schedule which provided 5% only. It appears that the State Government itself understood such a construction as proper	 for	 if it had understood otherwise	 it would not have issued its order dated September 23	 1963 directing the Collector to recover royalty at 5% pursuant to the correspondence which had ensued between the company	 the Central Government and the State Government. If it had understood the notification in the manner now urged by its counsel	 it would have at once pointed out both to the company and the Central Government in that correspondence that it was entitled to recover royalty at the rates agreed to in the lease instead of at 5 %. It was only in 1965 that it changed its mind and cancelled its previous order. On the construction placed by us on sec. 30A and the said notification	 it was not entitled so to do. The High Court	 in our view	 was right in quashing that order as also the demand notices issued in pursuance of that order. In view of our decision on the question of construction of the notification and sec. 30A	 it becomes unnecessary to consider the second contention raised by the company 's counsel that the order of 1963 amounted to a modification of the terms of the lease	 and that therefore	 the State Government could not unilaterally supersede such modification by issuing a subsequent order in 1965. For the reasons aforesaid	 we are in agreement with the High Court 's conclusions. Civil Appeal No. 168 of 1968 involves the same question and our decision in that appeal	 must	 therefore	 be governed by the decision in this appeal. Both the appeals	 therefore	 fail and are dismissed with costs. 'Mere will	 however	 be one set of hearing costs as the arguments in both the appeals have been common. G.C. Appeals dismissed.

Summary:
In 1944 the Ruler of the erstwhile Indian State of Korea granted to D a mining lease in respect of an area of 5.25 sq. miles in the State. According to the terms of the lease the rates of royalty varied from 5% 0 25% according to the price of the coal per tons extracted from the eased area	 that is to say	 from 4 as. per ton if the price was Rs. 51 per .on to 25% of the price per ton at the pit 's head if that price was Rs. 20/or more. On the merger of the Korea State with Madhya Pradesh the leased area became subject to the provisions of the Mines & Minerals (Regulation and Development) Act 53 of 1948 and the Mineral Concorde Rules	 1949. 	 In 1952 D assigned the lease and its benefits to the respondent company. The State of Madhya Pradesh granted its consent to the assignment for the unexpired period of the lease in consideration of the respondent company agreeing to comply with the terms and conditions of the lease including payment of royalties ' On December 28	 1967 Parliament passed the Mines & Minerals (Regulation and Development) Act 67 of 1957 under its power under Entry 54 of List I of the Seventh Schedule to the Constitution. The Act as amended by Act 15 of 1958 was brought into force by a notification of the Central Government with effect from June 1	 1958. Under section 9(1) of the Act a lessee under a mining lease granted before the commencement of the Act was liable to pay royalty at the rate for the time being specified in the Second Schedule. Under item (1) of the Second Schedule royalty payable in respect of coal was the same as under r. 41 of the Mineral Concession Rules	 1949	 that is	 5% of the f.o.r. price	 subject to. a minimum of fifty naye paise per 	on. Under section 30A which had been inserted by Act 15 of 1958 with re trospective effect	 the provisions of section 9(1) and section 16(1) were not applicable to mining leases granted before 25th October 1949 in respect of coal	 but the Central Government bad power if satisfied that it was expedient to do so	 to direct by notification in the Official Gazette	 that all or any of the said provisions (including rules made under sections 13 and 18) shall apply to or in relation to such leases "subject to such exceptions and modifications	 if any	 as may be specified in that or in any subsequent notification". On December 29. 1961 the Central Government issued a notification in exercise of its power under the second part of section 30A by which it directed application of section 9(1) with immediate effect to or in relation to the pre 1949 coal mining leases "subject to the modification that the lessee shall pay royalty at the rate specified in any agreement between the lessee and the lessor or at 2 1/2% of f.o.r. price	 whichever is higher	 in lieu of the rate of royalty specified in respect of coal in the Second Schedule to the said Act. " The Collector served upon the respondent company demand notices to pay the arrears of royalty for the period December 29	 1961 to December 31	 1965 at the rates specified in the lease. The com 610 pany in a writ petition before the High Court urged that the exception; and modifications under section 30A had to be and were intended to cushion of soften the burden which would otherwise fall on the lessees under section 9(1) and the Second Schedule and therefore any modification or exception which would be specified in such notification was intended to reduce rather than increase the rate of royalty payable under section 9(1). The State Government contended that the respondent company was bound to pay royalty at the rates provided in its lease	 that being higher than the minimum.or 2 1/2% provided in the notification. The High Court rejected the contention raised by the State as being inconsistent with the purpose for which section 30A was introduced. The State appealed. HELD : The notification was issued in exercise of the powers con feared by section 30A. That power was to apply by issuing a notification there% under	 sections 9(1) and 16(1) and the rules made under sections 13 and 18. The notification in terms directed the application of section 9(1) which meant that on and from December 29	 1961 the company would have to pay royalty as prescribed under that sub section read with the Second Schedule	 that is	 at 5%. The notification however applied section 9(1) subject to one modification	 namely. that the lessees under the pre 1949 leases were to pay royalty at the rate provided in their leases or at 21% whichever was higher. The modification was to the rate applicable under section	 9(1) and the Second Schedule	 that is	 to the rate of 5%. Considering the object with which section 30A was enacted viz. to phase the rate of 5% and not to impose it at one stroke	 the modification could not mean recovery at a rate inconsistent with section 9(1) and the Second Schedule. that is	 at the rate higher than 5% provided thereunder. [620 D F] Such a modification	 if it were to be construed as meaning payment at a rate higher than 5% would be in excess of the power under section 30A and also in contravention of the language of section 9(1) and the Second Schedule. A lateral meaning which the State canvassed for could therefore be accepted only at the cost of invalidating the notification. Where two constructions are possible the one which sustains the validity of the law must be preferred. [620 G H; 621 A] On a plain reading of the notification it was clear that what it meant was that instead of the rate flowing from the application of section 9(1) and the Second Schedule	 a modified rate should be applied	 that is	 'in lieu of the rate of royalty ' specified in the Second Schedule	 royalty at the agreed rate should be charged if it was lower than 5% or at 21% minimum	 whichever was higher. The notification thus did not empower the State Government to recover royalty at a rate higher than 5% in lieu of the rate chargeable under section 9(1) and the Second Schedule which provided 5% only. [621 B C] The High Court was therefore justified in quashing the impugned orders also the demand notices issued in pursuance of that order.