State of Bihar (Now State of Jharkhand) Through the Sub Divisional Officer & Ors. vs Tata Iron & Steel Co. Ltd.

CIVIL APPEAL No. 3861 of 2014

State of Bihar (Now State of Jharkhand) Through the Sub Divisional Officer .... Appellant

Versus

Tata Iron …. Respondent

JUDGMENT

L. NAGESWARA RAO, J.

1. The Certificate Officer, Jamshedpur issued a notice for

recovery of a sum of Rs.5,97,97,527.92/- towards interest on

arrears of rent payable by the Respondent on 10.05.1994.

The objection raised by the Respondent was rejected by an

order dated 23.01.1996. The Respondent filed a Writ Petition

challenging the demand and the order dated 23.01.1996 of

the Certificate Officer in the High Court of Bihar at the Ranchi Signature Not Verified Digitally signed by VISHAL ANAND Date: 2019.05.10 Bench (now Jharkhand), which was allowed. This Appeal 11:16:12 IST Reason:

arises out of the said judgment of the High Court.

1

2. Land was acquired and conveyed to the Respondent

between the years 1912-1929 under the Land Acquisition

Act, 1894 for setting up an industry. The Respondent

established an integrated steel plant, allied manufacturing

units, township, civic amenities for its staff, hospitals,

schools, parks, etc. The entire township came up gradually

which was renamed as Jamshedpur.

3. The Bihar Land Reforms Act was enacted in the year

1950 (for short “the BLR Act”) and by a Notification dated

01.01.1956 all lands of the Respondent Company stood

vested in the State Government. Section 2B was inserted in

the BLR Act in the year 19611 exempting the lands which

were acquired for an industrial undertaking from the

application of the BLR Act. By virtue of the said amendment,

the Respondent’s lands were exempted from vesting under

the BLR Act. Thereafter, Section 2B of the BLR Act was

deleted in the year 1972 vide the Bihar Land Reforms

(Amendment) Act, 19722 (for short “Amendment Act, 1972”).

Consequently, the lands of the Respondent again stood

vested in the State. Amendment Act, 1972 was assailed by

1 Vide Bihar Land Reforms (Amendment) Act, 1960, Act 02 of 1961. 2 Act No.5 of 1972 2 the Respondent by way of a writ petition in this Court. The

implementation of the Amendment Act, 1972 against the

Respondent was stayed by this Court. Later, the Writ Petition

was withdrawn by the Respondent and the State of Bihar

amended the BLR Act in the year 1982 by enacting the Bihar

Land Reforms (Amendment) Act, 1982 (for short

“Amendment Act, 1982”). Sections 7D and Section 7E of the

BLR Act were substituted by the Amendment Act, 1982 and

the Respondent was treated as the deemed lessee of the

State Government for the lands held by it subject to the

payment of fair and equitable rent which was to be

determined by the State Government.

4. An Agreement for lease was entered into between the

Appellant and the Respondent on 01.08.1984. It was agreed

that the lands together with the buildings and structures as

were being used for the purposes of factories or mills or

godowns by the Respondent were saved to the company

under Section 7 of the BLR Act on payment of rent at the rate

of Rs.200/- per acre per year effective from 01.01.1956.

Clause (xii) of the Agreement provided that all rents and

dues from the Respondent company to the State

3 Government for the period from 01.01.1956 to 31.03.1984

particularly in respect of clauses (i), (ii), (iii), (v), (vi), (ix) and

(x) therein shall be paid in three equal annual installments

with interest. The first installment had to be paid on or

before 31.12.1984 and the interest would be calculated at

the rate of 9.5% from 01.01.1956 to 31.12.1974 and at the

rate of 13% from 01.01.1975 to 31.03.1984. According to

Clause (xv), the existing hats, Melas, Bazaars, Jalkars,

fisheries and other Sairats were to be settled by the State

Government with the Respondent company on a fixed jama

for a period of five years at a time and the Respondent had

to carry on the management and administration thereof on

payment of the entire amount of the fixed jama to the State

Government. The entire amount realized towards the above

mentioned items by the Respondent for the period between

01.01.1956 and 31.03.1984 was agreed to be paid by the

Respondent to the State Government in three equal

installments with the first of such installment due on or

before 31.12.1984. The interest on such dues was to be paid

at the rate of 9.5% per annum for the period between

4 01.01.1956 and 31.12.1974 and at the rate of 13% per

annum for the period between 01.01.1975 and 31.03.1984.

5. A formal lease deed was executed on 01.08.1985

incorporating the terms of the Agreement for Lease dated

01.08.1984 (for short “Lease Deed”). A demand was raised

by the State Government for payment of Rs.1.95 Crores as

rent along with interest as per Clause (xii) of the Lease Deed

on 11.09.1985. A further demand of Rs.2.19 Crores was

made on 18.10.1985 towards rent coupled with interest in

terms of Clause (xv) of the Lease Deed. The Respondent

complied with the demand and made the payments.

6. On 29.10.1993, a letter was written by the Secretary,

Department of Revenue and Land Reform, Bihar (for short

“the Secretary”) to the Deputy Commissioner, Jamshedpur in

which it was stated that the Government was suffering heavy

losses due to the absence of the words “per annum” for

calculation of interest in Clause (xii) of the Lease Deed. After

obtaining legal opinion, the Secretary directed the Deputy

Commissioner, Jamshedpur to re-calculate the interest on the

arrears of rent payable under Clause (xii) of the Lease Deed

5 on a yearly basis in the same manner as done for the rent on

the lands under Clause (xv) and realize the same from the

Respondent. A certificate proceeding was issued by the

District Collector, Jamshedpur under the Bihar and Orissa

Public Demands Recovery Act, 1914 (for short “Public

Demands Act”) by which the Respondent was directed to pay

Rs.5.97 Crores towards interest calculated on per annum

basis in respect of the lands under Clause (xii) of the Lease

Deed. The Respondent filed a Writ Petition against the said

demand before the High Court of Bihar, Ranchi Bench (now

Jharkhand). The contention raised on behalf of the

Respondent that the demand cannot be said to be a public

demand under the Public Demands Act was rejected by the

learned Single Judge of the High Court. The learned Single

Judge observed that the demand for the payment of interest

on rent payable under the Lease Deed entered into pursuant

to the BLR Act would certainly fall within the sweep of Item

(vii) of Schedule I read with Section 6(3) of the Public

Demands Act. Writ Petition No. 2761 of 1994 was dismissed

as being not maintainable but liberty was granted to the

Respondent to raise all objections relating to their liability to

6 pay in accordance with the provisions of Section 9 of the

Public Demands Act. The Certificate Officer was directed to

consider the objections notwithstanding any delay in filing

the same without being influenced by the observations made

by the High Court. The judgment of the learned Single Judge

was affirmed by the Division Bench in the LPA No.276 of

1995 (R) filed by the Respondent.

7. On 23.01.1996, the Certificate Officer rejected the

objections that were filed by the Respondent. Questioning

the legality and validity of the demand and the Order of the

Certificate Officer by which the objections were rejected, the

Respondent filed a Writ Petition before the High Court of

Bihar, Ranchi Bench (now Jharkhand). The High Court stayed

the execution of the demand subject to the Respondent

depositing Rupees One Crore before 30.03.1996 and

furnishing a Bank Guarantee for the remaining amount. In

compliance of the interim order of the High Court, we are

informed by the learned Senior Counsel for the Respondent

that an amount of Rupees One Crore was deposited in the

High Court on 28.03.1996. The High Court by the impugned

7 judgment allowed the Writ Petition filed by the Respondent

and concluded as follows:

“48 (i)The wording contained in clause (xii) and clause

(xv) would clearly convey the meaning that clauses (xii) would indicate that interest in respect of the said clause can be calculated only on “lump sum” basis and not “per annum” basis as there is no use of words “per annum” in clause (xii) like that of clause (xv) and therefore, the impugned demand for interest “per annum” in respect of clause (xii) is illegal.

(ii) The impugned demand is not a “public demand” within the meaning of section 3(6) of the Bihar and Orissa Public Demands Recovery Act, 1914 as the demand in question is concerned with the interpretation of clause (xii) and hence the demand is not realizable in certificate proceedings.”

8. Guided by the decisions of this Court on the

interpretation of contracts in Delhi Development

Authority v. Durga Chand,3 Provash Chandra Dalui v.

Biswanath Banerjee,4 20th Century Finance

Corporation Ltd. v. State of Maharashtra,5 and Union of

India v. Shiv Dayal Soin & Sons (P) Ltd., 6 the High Court

3 (1973) 2 SCC 815 : AIR 1973 SC 2609 ¶19 and 21 4 (1989) 1 SCC Suppl. 487: AIR 1989 SC 1834 5 (2000) 6 SCC 12 ¶ 12 6 (2003) 4 SCC 695

8 was of the opinion that the contract must be construed as a

whole and that the meaning of the words contained in the

contract has to be formed on the facts and circumstances of

each case in the light of the terms and conditions of the

contract. According to the High Court, the words expressly

mentioned in one place but not in another place must be

taken to have been deliberately omitted on the well settled

principle of Expressio Unius Est Exclusio Alterius. The High

Court found that Clause (xii) and Clause (xv) pertain to two

different types of lands. Clause (xii) relates to properties

falling in Clauses (i), (ii), (iii), (v), (vi), (ix) and (x) of the

Lease Deed wherein the Respondent developed the lands by

setting up industries, buildings, structures, roads, civic

amenities, hospitals, etc. whereas Clause (xv) dealt with the

lands settled by the Government on a fixed jama on a period

of five years at a time. Lands covered in Clause (xv) were

being utilized for hats, bazaars, melas, Jalkars , fisheries and

other Sairats from which the Respondent was earning money.

Taking into account the difference in the nature of the lands

and their utility, the High Court held that the word “per

annum” was intentionally included in Clause (xv) of the

9 Lease Deed and excluded from Clause (xii) of the Lease

Deed. The High Court observed that the State cannot travel

beyond the terms and conditions of the Lease Deed and

issue a demand for payment of interest under Clause (xii) by

calculating the same on a yearly basis.

9. The High Court accepted the submission made on

behalf of the Respondent that the demand that was made by

the Certificate Officer was not a public demand within the

meaning of Section 3(6) of the Public Demands Act. The

High Court remarked that Sections 7D and 7E of the BLR Act

did not provide for payment of interest and the interest

charged by the State of Bihar was pursuant to an agreement.

As the demand was purely contractual, it cannot be termed

as a “public demand”, according to the High Court.

10. The judgment of the High Court was criticized by the

learned Senior Counsel for the Appellant, Mr. Sunil Kumar, on

more than one count. Being aware of the earlier judgment of

the High Court wherein the very same demand was held to

be a public demand under the Public Demands Act by

another Division Bench of the same High Court, a different

10 view could not have been taken by the Division Bench. If the

Division Bench was not in agreement with the judgment of

the earlier Division Bench the only course open to it was to

refer the matter to a larger Bench. The learned Senior

Counsel for the State further submitted that the word “rent”

has not been defined in the BLR Act. He submitted that the

words and expressions used in the BLR Act but not defined

thereunder would have the same meaning as per the

definitions in the Bihar Tenancy Act, 1885 or the Chota

Nagpur Tenancy Act, 19087. As the Chota Nagpur Tenancy

Act, 1908 was applicable to the lands in question, the word

“rent” as defined in Section 3(xxviii) of the Chota Nagpur

Tenancy Act, 1908 would apply to the facts of the case.

“Rent” as defined in the said Act includes any rent lawfully

payable by a tenant to his landlord on account of the use or

occupation of the land held by the tenant and includes all

dues (other than personal services) which were recoverable

under any enactment for the time being in force as if they

were rent. The learned Senior Counsel contended that in

view of the definition of “rent” in the Chota Nagpur Tenancy

Act, 1908 which includes all dues recoverable under any

7 Section 2(t), BLR Act

11 enactment, it cannot be said that the demand made by the

State of Bihar was not a public demand. On the

interpretation of Clauses (xii) and (xv) of the Lease Deed, he

stated that the mere omission of the words “per annum” in

Clause (xii) would not make any difference and the

Government committed an inadvertent error in the

calculation of interest payable under Clause (xii) in the year

1985 which was corrected later.

11. Mr. Gopal Jain, learned Senior Counsel for the

Respondent, argued that the High Court was right in its

interpretation of Clause (xii) and Clause (xv) of the Lease

Deed by taking into account the intention of the parties. He

submitted that the revised demand made in the year 1994

was a unilateral decision of the Government contrary to the

terms of the Lease Deed. The demand made by reading the

words “per annum” into Clause (xii) of the Lease Deed is

wholly impermissible.

12. The well known rule of interpretation of Contracts is

that the deed ought to be read as a whole in order to

ascertain the true meaning of its several clauses and a word

12 of each Clause should be so interpreted as to bring it into

harmony with the other provisions of the deed, if that

interpretation does no violence to the meaning of which they

are naturally susceptible.8

13. Lord Hope speaking for the Supreme Court of the United

Kingdom stated the principles of interpretation as follows 9:

“The court’s task is to ascertain the intention of the parties by examining the words they used and giving them their ordinary meaning in their contractual context. It must start with what it is given by the parties themselves when it is conducting this exercise. Effect is to be given to every word, so far as possible, in the order in which they appear in the clauses in question. Words should not be added which are not there, and words which are there should not be changed, taken out or moved from the place in the clause where they have been put by the parties. It may be necessary to do some of these things at a later stage to make sense of the language. But this should not be done until it has become clear that the language the parties actually used creates an ambiguity which cannot be solved otherwise.”

8 Chamber Colliery Ltd. v. Twyerould (Note) (1893) (1915) 1 Ch. 268, per Lord Watson 9 Multi-Link Leisure Developments Limited v. North Lanarkshire Council (Scotland) [2010] UKSC 47

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14. The well known principles of interpretation of a contract

were correctly appreciated by the High Court. The question

that falls for our consideration in this case is whether the

demand of interest made by the Certificate Officer for the

arrears of rent payable under Clause (xii) of the Lease Deed

was valid or not.

15. It is relevant to refer to Section 7D and Section 7E of

the BLR Act.10 The Agreement dated 01.08.1984 and the

10 7D.Land and buildings etc. acquired for an industrial undertaking and utilized for providing civic amenities, namely, health, housing, welfare, power house and educational facilities to be deemed settled with it by the State –(1) If any land has been acquired for an industrial undertaking under the Land Acquisition Act, 1894 (Act 1 of 1894) so much of such land and buildings and structures thereon in possession of the industrial undertaking as are being utilized for providing civil amenities, namely, health, housing, welfare, power house and education facilities to its employees and so much of the remaining portion of such land and building and structures thereon as are found essential on enquiry by the State Government for production processes of the industrial undertaking shall be deemed to have been leased out by the State Government with the owner of the industrial undertaking for period as determined by the State Government subject to payment of such fair and equitable rent as determined by the State Government.

(2) The provisions of sub-section (1) shall have effect notwithstanding anything contained in section 4(a) and shall be without prejudice to the exemptions granted or concession given to intermediaries under Sections 5, 6, 7, 7A, 7B and 7C.

(3) If the claim of the industrial undertaking as to possession over the lands, buildings and structures thereon, referred to in sub-section (1) or to the extent of such lands, buildings and structure is disputed by any person within three months of the commencement of the Bihar Land Reforms (Amendment) Act, 1972, the Collector shall make such inquiries in the matter as he deems fit and pass orders as may appear to him as just and fair.

(4) The provisions of sub-section (1) shall be deemed to have been inserted in this Act from the commencement thereof.

7E. Land and building, etc., acquired for an industrial undertaking and leased out by it to another industrial undertaking for its expansion by establishing new industry or to an individual to be deemed as leased with it by State Government on same terms. -[If any portion out of the land acquired for an industrial undertaking under the Land Acquisition Act, 1894 (Act I of 1894) has been leased out by the industrial undertaking before the 22nd June, 1970 to another industrial undertaking for establishment of a new industry or its expansion or to any individual or society or association for residential, commercial or for such other purpose, the whole of such land, buildings or structures covered by such lease shall with effect from the commencement of this Act, be deemed to be leased to the industrial undertaking for such period as may be determined by the State Government subject to payment of

14 Lease Deed dated 01.8.1985 was entered into pursuant to

the abovementioned provisions of the BLR Act. Clause (xii)

of the Lease Deed pertains to lands which have been

developed by the Respondent by establishing industries and

other civic amenities whereas Clause (xv) relates to lands

which were being used for commercial purposes. The

Respondent was making money from the use of lands that

were covered under Clause (xv) for which reason the “ jama”

was also fixed for the lands falling under Clause (xv) for five

years at a time. Interest being calculated on a yearly basis

as per Clause (xv) is clearly due to the lands being used for

commercial purposes wherefrom the Respondent was getting

returns. The exclusion of the words “per annum” in Clause

(xii) was intentional and the Appellant cannot be permitted

to read those words into Clause (xii) for the purpose of

issuing a demand of additional amount towards interest. A

plain reading of the Lease Deed as a whole would make it

fair and equitable rent as determined by the State Government and the other industrial undertaking, individual, society or association to whom lease has been granted by the industrial undertaking shall be deemed to be the sub-lessee of the original industrial undertaking and the provisions of clauses (G) and (H) of Section 4 shall not be effective with respect to such land or buildings or structures thereon.

The terms and conditions of the lease granted under sub-section(1), shall be determined by the State Government: Provided that if the period of sub-lease expires before the expiry of the lease granted under sub-section (1) then in that condition at the time of renewal of the sublease, the State Government shall have power to revise the amount of rent payable to State Government by the lessee.

15 clear that the payment of interest on rent chargeable under

Clause (xii) is essentially different from that under Clause

(xv). The principle of Expressio Unius Est Exclusio Alterius is

squarely applicable to the facts of this case. For the above

reasons, we are in agreement with the finding of the High

Court that the District Collector, Jamshedpur was not right in

issuing a demand for payment of Rs.5.97 Crores towards

interest on the arrears of rent for the lands covered under

Clause (xii) of the Lease Deed.

16. However, the conclusion of the High Court that the

demand does not fall within the sweep of the Public

Demands Act is not correct. Being aware of the earlier

decision of the High Court on this point, an error was

committed by the High Court in taking a completely different

view. If the High Court was not in agreement with the earlier

decision, the only course open to it was to refer the matter to

a larger Bench. That apart, in Clause (xx) of the Lease Deed,

the Respondent and the Appellant agreed that recoveries of

arrears of rent may be affected under the Public Demands

Act. It is not open to the Respondent to contend that the

demand made for payment of interest under the Lease Deed

16 as not a public demand in view of Clause (xx) of the Lease

Deed. “Public demand” has been defined in Section 3(6) of

the Public Demands Act as under:

“3. Definitions. … …

(6) “Public demand’ means any arrear or money mentioned or referred to in Schedule I, and includes any interest which may, by law, be chargeable thereon upto the date on which a certificate is signed under Part II.” Item No.7 of Schedule I of the Public Demands Act is as

follows:

“Any demand payable to the Collector by a person holding any interest in land, pasturage, forest-rights, fisheries or the like, whether such demand is or is not transferable, when such demand is a condition of the use and enjoyment of such land, pasturage, forest right, fisheries or other things.”

17. Item No.7 of Schedule I covers any demand payable by

a person holding any interest in land. Therefore, interest on

rent payable for the lands would, in our opinion, be

recoverable under Item No.7 of Schedule I read with Section

3(6) of the Public Demands Act.

18. The judgment of the High Court is upheld though we are

not approving the conclusion of the High Court that the

demand is not a public demand under the Public Demands

Act. The amount of Rupees One Crore deposited by the

17 respondent in the High Court on 28.03.1996 pursuant to the

interim order shall be returned to the respondent.

19. For the aforementioned reasons, the Appeal is

dismissed.

.................................J. [L. NAGESWARA RAO]

..................................J. [M.R.SHAH] New Delhi, May 09, 2019.

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