State Of Jharkhand & Ors vs M/S Misrilall Jain & Sons And Anr. Etc

State of Jharkhand & Ors. ...Appellants

Versus

M/s. Misrilall Jain & Sons & Anr. etc.etc. ...Respondents

WITH

CIVIL APPEAL No. 3272 OF 2010 (Arising out of SLP(C) No. 7199 of 2008)

CIVIL APPEAL Nos. 3274-3275 OF 2010 (Arising out of SLP(C) Nos. 7200-7201 of 2008)

CIVIL APPEAL No. 3273 of 2010 (Arising out of SLP(C) No. 7202 of 2008)

CIVIL APPEAL Nos. 3276-3277 of 2010 (Arising out of SLP(C) Nos. 7203-7204 of 2008)

JUDGEMENT

R.M. Lodha, J.

Leave granted.

2. In this group of 52 appeals by special leave, 46 are

directed against the common judgment dated May 7, 2007

passed by the High of Jharkhand disposing of 46 writ petitions. The remaining 6 arise from separate judgments but following

the judgment dated May 7, 2007. These appeals involve

common issues and, accordingly, were heard together and are

being disposed of by this common order.

3. The appellants in these appeals are State of

Jharkhand and their officers (for short, `State Government').

The respondents are major mineral lease holders and minor

mineral lease holders (for short, `lessees').

4. On June 17, 2005, the State Government through

Department of Mines and Geology issued a Resolution

regarding collection of surface rent on the area of mining leases

at par with the land under commercial use whereby and

whereunder the following decisions were taken:

"(a) The area held for minor and major mineral mining lease shall be treated as held for commercial purposes in accordance therewith the surface rent shall be collected on it.

(b) The annual land rent for the entire area held under minor and major mineral shall be equal to the 5% of the latest market price determined for that particular area by the Dy.

Commissioner-cum-District Registration (should be Registrar) and it shall be collected by the District/Asst. Mining Officer from the lease holders.

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(c) This rate shall be variable from time to time in proportion of the market price determined by the Dy. Commissioner-cum-District Registrar.

(d) The arrear of the surface rent can be realized by initiating case for auction as a public under the Bihar & Orissa Public Demand Recovery Act, 1914."

5. In pursuance of the aforesaid Resolution, demand

notices were issued to the lessees in respect of the leases held

by them for payment of enhanced surface rent, i.e., surface rent

equal to 5% of the latest market price of the land treating the

entire leased area as having been held for commercial use. The

lessees approached Jharkhand High Court by filing writ

petitions challenging the competence and authority of the State

Government in issuing the said Resolution treating entire land

for the purposes of determination of surface rent as the lease

for commercial purposes and revising surface rent at 5% of the

latest market price of the land. The lessees prayed for quashing

the Resolution dated June 17, 2005 and demand notices.

6. The State Government defended their action as

valid, legal and justified. According to State Government, the

Resolution dated June 17, 2005 has been issued in terms of

the power conferred upon them, insofar as major minerals are

3 concerned, under the Mines and Minerals (Development and

Regulation) Act, 1957 (for short, `1957 Act') and Mineral

Concession Rules, 1960 (for short, `1960 Rules') and as

regards minor minerals under Jharkhand Minor Mineral

Concession Rules, 2004 (for short, `2004 Rules').

7. The High Court by a common judgment dated May

7, 2007, allowed 46 writ petitions and quashed the Resolution

dated June 17, 2005 and the demand notices. The other 6 writ

petitions were allowed subsequently by following the judgment

dated May 7, 2007.

8. Mr. M.S. Ganesh, learned senior counsel for the

State Government invited our attention to Entry 54 of Union List

and Entry 18, Entry 23 and Entry 45 of the State List in Seventh

Schedule to the Constitution. He referred to the provisions of

1957 Act, particularly, definition of `mining lease' and `mining

operations' in Section 3(c) and Section 3(d) respectively,

Section 13 that empowers Central Government to make rules in

respect of minerals, Section 15 that empowers State

Government to make rules in respect of minor minerals and

Section 17 that specially empowers the Central Government to

undertake prospecting or mining operations in certain lands. He

4 also invited our attention to 1960 Rules, particularly, Rule 27

(1)(d) and Rule 31. In backdrop of the aforesaid legal

provisions, Mr. M.S. Ganesh assailed the impugned judgment

of the High Court dated May 7, 2007 and submitted that none of

the writ petitioners laid any challenge to or prayed for any relief

against the legislative competence of Parliament to enact, or to

the constitutional validity/vires of Section 13(2)(i) of 1957 Act or

to the competence of the Central Government to make, or to

the vires of, Rule 27(1)(d) of the 1960 Rules or to the

constitutional validity/vires of Section 15(1A)(g) of 1957 Act or

to the competence of the State Government to make, or to the

vires of Rule 29(1)(d) of the 2004 Rules. In the circumstances,

learned senior counsel submitted that it was not open to the

High Court to pronounce that the imposition of surface rent

(whether for major or minor minerals) is beyond the legislative

competence of the State and the subordinate/delegated

legislative competence and executive authority of the State

Government.

9. Learned senior counsel for the State Government

would submit that the High Court while considering the

controversy relating to the Resolution dated June 17, 2005

5 applied principles evolved in relation to taxing statutes and the

decisions rendered relating to such statutes overlooking the

conceptual distinction between the State's sovereign capacity

to levy taxes and duties and the State's capacity as a lessor to

collect rent. He vehemently contended that the findings

recorded by the High Court, namely, (a) that mining leases do

not partake of the same character as other leases that are

characterised as commercial leases and (b) that no provision

has been made in 1957 Act for the enhancement of surface

rent were fundamentally erroneous. He urged that High Court

seriously erred in overlooking the fact that lessees have failed

to plead jurisdictional facts, let alone discharge their burden of,

showing that the surface rent as enhanced pursuant to

Resolution dated June 17, 2005 is at a rate that exceeds the

land revenue in terms of 1960 Rules. He would also submit that

power to review and enhance the surface rent of a mining

lease, even during its subsistence as regards major minerals, is

embodied and inherent in Section 13(2)(i) of 1957 Act read with

Rule 27(1)(d) and Part-V, clauses (2) and (4) in the statutory

lease of 1960 Rules and in respect of minor minerals, in

Section 15(1A)(g) read with Rule 29 (1)(d) of 2004 Rules. He

6 also submitted that lessees have all along been paying surface

rent without demur and their challenge to the enhancement of

surface rent had no merit yet High Court allowed writ petitions.

10. Mr. A.K. Ganguli, learned senior counsel led the

arguments on behalf of the lessees. He supported the

judgment dated May 7, 2007 and submitted that the entire field

of legislation--`Regulation of Mines and Minerals Development'

is fully under the control of the Central Government and

consequently the State Legislature are denuded of their power

to make any law with reference to the subject matter covered

by Entry 23 of List II of Seventh Schedule to the Constitution.

He would submit that the validity of the Resolution dated June

17, 2005 has to be tested with reference to the powers of the

State Government within the four corners of 1957 Act and the

Rules made thereunder and the State Government would not

be competent to issue such Resolution as an executive order in

exercise of its power under Article 162 of the Constitution. He

invited our attention to Sections 2,4, 5 and 13 of 1957 Act, Rule

27(1)(d) and Rule 31 of 1960 Rules and submitted that a

conjoint reading of these provisions would show that the

surface rent is payable only for surface area occupied or used

7 by the lessee and that too during the period when the lessee

continues to occupy or use such area even though the mining

lease for the leasehold area continues beyond the period when

the surface area ceased to be occupied by the lessee.

Mr. Ganguli submitted that the surface rent as determined by

the State Government is required to be specified in the lease

deed itself and although royalty/dead rent is variable but

surface rent is not. He vehemently contended that surface rent

could not be levied for the entire leasehold area held under the

mining lease. According to him, the approved mining plan

demarcates only limited surface area which could be put for

mining operation in a given year or for block of years and,

therefore, the Resolution dated June 17, 2005, in any case, is

bad to the extent it authorizes the levy of surface rent on the

entire area held. He would, thus, submit that the judgment

dated May 7, 2007 and subsequent judgments relying upon the

said judgment do not call for any interference. Learned senior

counsel and counsel for lessees in some appeals adopted the

arguments of Mr. A.K. Ganguli.

11. It was fairly clear during the course of arguments

before us that there was no challenge by writ petitioners to the

8 legislative competence of the Parliament to enact 1957 Act or

to the competence of the Central Government to make 1960

Rules or to the competence of the State Government to make

2004 Rules. It is also apparent from the Resolution dated June

17, 2005 that it has been issued by the State Government as

an executive order. However, perusal of the judgment of the

High Court dated May 7, 2007 shows that High Court was not

at all clear about the Resolution dated June 17, 2005. In

paragraph 29, High Court says :

"29. Taking into consideration the Act and the Rules, we have no doubt in our mind in holding that the State Legislature has no legislative competence to issue executive orders for revision of surface rent in respect of the mining lease of major minerals as it's jurisdiction is fully occupied by the Central Act and the Rules."

(emphasis supplied)

Then, in paragraph 37, High Court observes :

"37. On the face of the resolution, we are of the definite opinion that said resolution is not only beyond the competence of the State Legislature but also illegal, arbitrary and without application of mind."

(emphasis supplied)

In paragraph 48, High Court has concluded :

"48. Be that as it may, when the imposition of surface rent is beyond the legislative power of the State Government then by the Executive

9 Orders of the State demand of Surface rent treating mining leasehold used for commercial purposes is uncalled for. In our considered opinion, therefore, demand of surface rent both for major and minor minerals by issuing executive orders is illegal, arbitrary and wholly without jurisdiction."

(emphasis supplied)

12. The observations, `that the State Legislature has no

legislative competence to issue executive orders for revision of

surface rent' and `that said Resolution is not only beyond the

competence of the State Legislature' in the impugned judgment

dated May 7, 2007 show that the Division Bench carried the

impression as if the Resolution dated June 17, 2005 has been

issued by the State Legislature. The legality and validity of the

said Resolution was examined by the High Court partly on that

assumption. The reasoning in the judgment dated May 7, 2007

is full of confusion. The aspects which were germane for

consideration of the controversy have been overlooked by the

High Court and certain irrelevant aspects have been taken into

consideration. By reason of such patent errors, it is difficult to

sustain the impugned judgments. Ought we know what would

have been the ultimate decision of the High Court had such

errors not occurred. In the circumstances, we do not deem it

10 necessary to go into the merits of the diverse contentions and

leave the parties to agitate their contentions before High Court

as in our opinion the controversy relating to Resolution dated

June 17, 2005 and demand notices needs to be considered

afresh by the High Court.

13. Consequently, these appeals are allowed and

impugned judgments are set aside. Writ petitions are restored

to the file of the High Court for fresh consideration and disposal

as expeditiously as may be possible. No orders as to costs.

...........................J (P. Sathasivam)

.............................J (R. M. Lodha) New Delhi April 13, 2010.

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