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REPORTABLE

                                         Corrected  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 11259 OF 2016 (Arising out of SLP(C)No. 12882 OF 2009)

MANBHAR DEVI AGARWAL .......PETITIONER(S)

    VERSUS

THE STATE OF RAJASTHAN & ORS  ......RESPONDENT(S)

J U D G M E N T

ASHOK BHUSHAN, J.

Leave Granted.

2. This appeal has been filed against the judgment of

the High Court of Judicature for Rajasthan, Jaipur

Bench, Jaipur dated 17.12.2008 in D.B. Civil Special

Appeal  No.  231  of  2008  by  which judgment,  the  Civil

Special Appeal filed by the appellant against judgment

and order of Learned Single Judge dated 20.02.2007 was

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dismissed. Brief facts necessary to be noted for

deciding the appeal are:­

The appellant, a contractor, licensed by Nagar

Nigam, Jaipur has been carrying out constructions of

buildings, roads, drains, footpaths, etc.. The appellant

for carrying out his construction work uses Bazri,

stone, grit, moram, etc. which is claimed to be

purchased from an open market at Jaipur.

3. State of Rajasthan has issued various Government

Orders dated 20.02.1994, 08.11.1996 and 20.11.1996 by

which provision of deduction of 2% towards the royalty

of minerals from bills of contractors of the

construction department was made. The State of Rajasthan

modified the scheme by issuing an order dated 13.11.2000

by which the earlier Government Orders providing for

deductions of 2% as royalty of minerals from the bill

was done  away.  A  new  scheme was enforced  vide  order

dated 13.11.2000. Under the new scheme, the copy of work

order issued by Construction Department to the

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contractors containing details of the quantity of the

minerals used for construction was required to be

produced before the Mining Engineer/ Assistant Mining

Engineer, who before the commencement of the mining work

were required to issue short term permission letter for

use of mineral in the construction.

4. Another Government Order was issued dated

03.10.2001 by which, direction nos. 2 & 4 as contained

in the circular dated 13.11.2000 were modified.  

5. Further, directions were issued on 25.01.2002.   A

letter dated 26.03.2002 was issued by the Government to

the Chief Executive Engineer, Commissioner, Jaipur

Municipal Corporation referring to Government Orders

dated 03.10.2001 and 13.11.2000 and requesting the

Jaipur Municipal Corporation to ensure compliance of the

aforesaid Government Orders. It was further stated that

until the No Dues certificate is issued in favour of the

contractors by the Department of Mining, payment against

final bill of the contractors  be not made so  that

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Department and State may not suffer any kind of revenue

loss. The appellant filed the writ petition being Writ

Petition No. 3191 of 2002 praying for the following

reliefs:­

“a. By way of writ, order or direction the order dated 26.03.2002 Annexure­5 passed by the respondent No. 3 may kindly be quashed and set aside.

b. by way of writ order or direction, the respondents may be restrained not to collect royalty from the petitioners on purchase of Bazri, grit, stone, moram etc from the open market.

c.  by way of writ order or direction, the respondents may be restrained to not to levy royalty from the running and final bills of the contractors i.e. petitioners awarded prior to 26.03.2002.

d. any other appropriate writ, order or direction to which the petitioner may be entitled to in the circumstances of the case may be issued in his favour.

e. cost  of  the  writ petition  may be awarded in favour of the petitioner.”

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6. The Writ Petition filed by the appellant was

disposed of by the learned Single Judge on 20.02.2007.

Learned Single Judge disposed of writ petition in terms

of an earlier judgment in SBCWP No. 359 of 1998,

R.S.Shekhawat & Others Vs. State of U.P.  decided on

28.02.2001.

7. The appellant aggrieved by the decision of learned

Single Judge dated 20.02.2007 filed DBCSA No. 231 of

2008. The Division Bench held that there is no

illegality in order passed by the learned Single Judge

in  R.S.Shekhawat and others case (Supra),  hence, the

learned Single Judge disposing of the writ petition of

the appellant did not commit an error. The appeal was

accordingly dismissed. Aggrieved by the decision of the

D.B. dated 17.12.2008, the appellant has filed the

present appeal.

8. Learned counsel for the appellant in support of the

appeal contends that both learned Single Judge and

Division Bench of High Court did not decide the issues

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raised by the appellant in the writ petition and have

disposed of the writ petition in terms of earlier

judgment of learned Single Judge,  R.S.Shekhawat and

others  in which judgment no issues were decided. He

submits that Judgment in  R.S.Shekhawat Case  indicates

that the Court did not enter into the correctness or

otherwise of the notification dated 22.09.1994 &

03.07.1994 which were under challenge. The Court

noticing the new scheme as issued by Government Order

dated 13.11.2000, noted the request of the appellant

that matter may be directed to be examined by the

Department of Mines on which request the writ petition

was disposed of.

9. It  is  submitted that  the  above  judgment did not

decide the issues raised by the appellant which were

required to be considered. It is further submitted that

the payment of royalty is to be made by lessees or

licensees who have been granted right of excavation of

minerals i.e. a holder of mining lease or license. The

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appellant who has been purchasing the minerals from the

open market cannot be saddled with the payment of

royalty. The appellant is not carrying out any mining

operation so as to be asked to make payment of royalty.

10. Learned counsel for the State disputing the

submissions of counsel for the appellant submits that

the various Government Orders by the State of Rajasthan

have been issued to prevent the illegal mining i.e. use

of the minerals without payment of the royalty.  It is

submitted that the Government Orders provide for a

mechanism to  check illegal mining and in event minerals

used are minerals which are   royalty paid minerals,

there is no liability and the  Government only requires

verification of such facts  i.e. whether minerals used

by the contractors are royalty  paid  or  not.    It is

submitted that direction for withholding the payment

till the verification of above facts are only for the

purpose of ensuring that minerals used are not illegally

mined minerals without payment of royalty. He submit

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that no error was committed by learned Single Judge and

the Division Bench in disposing of the writ petition

giving liberty to the writ petitioner to approach the

competent authorities in the mining department to prove

that minerals used by them are all royalty paid.  

11. We have considered the submission of learned

counsel for the parties and have perused the records.

12. The Parliament has enacted Mines and Minerals

(Development and Regulation) Act, 1957, for the

development and regulation of mines and minerals. The

Union control on regulation of mines and development of

minerals has been declared by virtue of Section 2 of

1957 Act. Section 3(e) defines 'Minor Minerals' which is

to the following effect:­

“3(e). 'Minor Minerals' means building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral which the Central Government may, by notification in the Official Gazette, declare to be a minor mineral;”

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13. By Section 15 of the Act, the State Government has

been empowered to make rules on Minor minerals.  

14. Section 9(2) provides for payment of royalty by the

holder of mining lease. Section 9(2) is as follows:­

“9(2). The holder of a mining lease granted on or after the commencement of this Act shall pay royalty in respect of any (mineral removed or consumed by him or by his agent, manager, employee, contractor or sub­lessee) from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral.”

15. By Act 25 of 94, certain amendments have been

incorporated in 1957 Act. One of the sections inserted

by Amendment is Section 23C. Section 23C(1) is as

follows:­

“23C. Power of State Government to make rules for preventing illegal mining, transportation and storage of minerals:­

(1). The State Government may, by notification in the Official

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Gazette, make rules for preventing illegal mining, transportation and storage of minerals and for the purposes connected therewith.

(2)  ..............................”

16. The State of Rajasthan has framed Rajasthan Mines

and Minerals Concession Rules, 1986, in exercise of

power under Section 15. Rule 3(2)(XX) defines

‘Royalty’ which is to the following effect:­

“Royalty means the charge payable to the Government in respect of the ore or mineral excavated, removed or utilized from any land as prescribed in Schedule­I.”

17. Rule  18 provides  for  conditions which  are  to  be

included in every mining lease. According to Rule

18(1)(b), the holder of a mining lease granted on or

after commencement of these rules shall pay royalty in

respect of any mineral removed by him from and/or

consumed within the leased area at the time being as

specified in Schedule I in respect of that mineral.

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18. Rule 48 contains various provisions with regard to

unauthorized working. Various provisions regarding

undertaking of mining operation not in accordance with

the mining lease have been contained in Rule 48 which

also includes seizure of illegally mined minerals and

recovery of royalty and tax chargeable as well as

compounding charges.

19. Above statutory provisions clearly indicates that

excavation of minor minerals, as per mining lease or

permit is subject to payment of royalty and the rent as

prescribed in the rules. The liability to make payment

of royalty is on the person who excavates the minerals

under the lease or license.

20. The provisions also indicate that in event of

illegal mining or excavation of minerals without payment

of royalty, the rules empower exercise of various powers

including seizure of minerals, recovery of royalty,

taxes and compounding charges on such minerals.

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21. The first submission which has been raised by

learned counsel for appellant is that learned Single

Judge and Division Bench did not consider the issues

raised in the writ petition and disposed of the matter

in terms of earlier judgment of  R.S.Shekhawat case  in

which case no issues were decided. The judgment of

R.S.Shekhawat is brought on record as Annexure P­2.

22. The above judgment indicates that in writ petition,

notification dated 22.09.1994 and 03.07.1995 by which 2%

deductions were made from running bills submitted by

petitioners to the Public Works Department and other

State Departments towards royalty of minerals was under

challenge. The petitioners of that case were engaged in

business of constructing roads, buildings and were using

different varieties of minerals purchasing it from the

open market. However, when the writ petition came for

hearing, the court noticed the subsequent development by

which the aforesaid two notifications were substituted

by a new scheme dated 13.11.2000.

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23. The petitioner of that case, in view of the

subsequent development did not press for adjudication

regarding the notification dated 22.04.1994 and

03.07.1994 but prayed for the refund of the royalty

deducted from their bills. The petitioner suggested that

the matter may be examined by the Department of Mines

itself. It is useful to note following observation in

the judgment:­

“...as already stated the counsel for the petitioner as also other counsels appearing in all these writ petitions, no longer consider it necessary to insist for adjudication of the  question  as  to  whether  the two notifications dated 22.09.1994 and 03.07.1994 are legal or not in view of the fact that a new scheme on 13th  November 2000 referred to hereinbefore has been implemented but insofar as deductions already made by the Public Works Department and other Departments on behalf of the Mining Department is concerned, the same requires adjudication by the Department of Mining to ascertain whether the petitioners at any point of time prior to 13th

November 2000 had used minerals in their construction operations or not which were not royalty paid and for

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this purpose the counsel for the petitioners have themselves suggested that the matter be examined by the Department of Mines in order to come to a just conclusion whether any wrongful deduction had been made in the running bills by the Public Works Department and other Departments or not in regard to the amount of royalty for the minerals used...”

24. The aforesaid writ petition was thus disposed of

giving liberty to the petitioner to approach the

Department of Mines with the relevant records for

assessment and explaining the position for whether the

claim for refund or adjustment is sustainable or not.

25. When the writ petition no. 3191 of 2002 filed by

the appellant came for consideration on 20.02.2007, the

learned Single Judge after  considering  the judgment in

R.S.Shekhawat case,  disposed of the writ petition with

following directions:­

“...Having perused the aforesaid judgment and considering the rival arguments of the learned counsel for the parties, I am not persuaded to

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take  any other view  of the  matter than the one taken by the Co­ordinate Bench in the aforesaid judgment.

The writ petition is accordingly disposed of in terms of the aforesaid directions. The observations made and directions given in the aforesaid judgment shall also apply to the present case.”

26. The Division Bench also affirmed the aforesaid

judgment.

27. From the prayers as made in the writ petition, it

is clear that principle prayer made by the writ

petitioners was challenge to D.O. letter dated

26.03.2002 issued by the Office of Mining Engineer,

Mines and Geology, addressed to Commissioner, Jaipur

Municipal Corporation, Jaipur.

28. The writ petition in R.S.Shekhawat case was decided

on 28.02.2001 by which date the letter dated 26.03.2002

was not even in existence. Letter dated 26.03.2002 being

subsequent in point of time from the judgment of

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R.S.Shekhawat case, it was necessary to look into the

content of the letter and to take decision thereafter.

We thus find substance in the submission for the learned

counsel for the appellant that letter dated 26.03.2002

was also necessary to be looked into before deciding the

writ petition of the appellant and without referring to

the letter dated 26.03.2002, the writ petition of the

appellant ought not to have been disposed of.  

29. We thus, in view of the above, proceed to examine

the contents of D.O. letter dated 26.03.2002 and

submissions made by the appellant in support of the

appeal.

30. The submission which has been pressed by the

counsel of the appellant is that payment of royalty is

contemplated from holder of a mining lease or permit. As

noted above, the statutory scheme clearly indicates that

the royalty is required to be paid by mining lease

holder or permit holder for excavation of a minor

mineral and no mineral is to be removed or excavated

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without payment of the royalty. For mining of all

minerals payment of royalty is necessary.

31. It is however also relevant to note that where

mineral is excavated/transported/removed without payment

of royalty, there are specific provisions for seizure of

such minerals, recovery of royalty, tax and compounding

charges. The statute thus takes care of payment of

royalty for even those minerals which have been

illegally mined or excavated. The lease holders or

permit holders who excavate the minerals under the lease

or license are obliged to make payment of royalty and in

event any such mineral is found to be removed by lessee

or their agents without payment of royalty, statute

contains ample provisions to ensure recovery of royalty

and fine etc.  

32. As noted above, the earlier Government Orders dated

22.09.1994 & 03.07.1995 provided for 2% deductions from

the running bills of the contractors of public works

department and other state departments towards the

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royalty of minerals which were used by contractors in

building of roads etc. The Scheme as provided under the

aforesaid Government Orders were subsequently withdrawn

and a new scheme was enforced by Government Order dated

13.11.2000 and 03.10.2001. By Government Order

03.10.2001 modifying earlier direction dated 13.11.2000,

following was directed:­

“After carrying out amendment in the even numbered Circular dated 13.11.2000 related to guidance to recover the royalty against the minerals used in various works by the Contractors of Government Works Department and substituting the Paras 2 and 4 of the above Circular, following directions are issued:­

"(2) Before commencement of mining work by the Contractor of Construction Department, Short Term Permission Letter for mineral used in the construction from the Mining Department shall be obtained and shall have to deposit the fee fixed for it and cost of Khanna Book with the Department, but amount of royalty payable on the quantity of the mineral mentioned in the short term License will be deducted from the running bills of the contractor by the concerned Construction

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Department on the basis of the quantity of the mineral used in the construction.

(4) On completion of the construction work, complete details of the mineral such as quantity of the mineral, source of receiving mineral and details of the amount deducted from the bill etc. utilized by the Contractor duly verified by the Executive Engineer of the concerned Construction Department shall be submitted to Mining Engineer/Assistant Mining Engineer within 15 days and further a Certificate of Construction Department will also be produced in which quantity of the mineral used in the construction has been certified.”

33. A further Government Order was issued on 25.01.2002

which  has  been  brought  on  record  as Annexure  P­4  by

which certain other directions were issued for ensuring

that the payment of royalty regarding all minerals used

is made and the mining engineer was required to keep all

details and the contractors were also to obtain short

term  permission for use of  the  minerals as  per  work

order.

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34. A letter dated 26.03.2002 was issued by the Mining

Engineer to the Commissioner Municipal Corporation,

Jaipur, whereunder the attention of Commissioner, Jaipur

Municipal Corporation, Jaipur was drawn towards circular

dated 03.10.2001 of the State Government and circular

dated 13.11.2000, and the commissioner was informed that

although the information of the circular has been sent

earlier to the Jaipur Municipal Corporation, the amount

of royalty has not been received. The Commissioner,

Jaipur Municipal Corporation was requested to arrange to

send royalty on the basis of the quantity of the

minerals used in the contract of the construction work

given to the contractor by subordinate offices of

Jaipur Municipal Corporation before end of the financial

year.

35. The letter dated 26.03.2002 impressed upon

Commissioner of Jaipur Municipal Corporation to ensure

compliance of Government Orders dated 13.11.2000 and

03.10.2001 which has been noted earlier. The appellant

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in writ petition has only challenged the letter dated

26.03.2002 but has not challenged the Government

Circulars issued earlier which was sought to be complied

by the said letter.

36. Learned counsel for the State is right in his

submissions that since appellant did not challenge the

aforesaid two circulars of the State Government where

scheme for realization of the royalty from the

contractors for use of the minerals was enforced, the

state had no occasion to give all relevant facts

pertaining to two earlier circulars by which royalty was

sought to be recovered. In the present writ petition

only prayer is to quash the letter dated 26.03.2002,

which is only a letter to Municipal Commissioner Jaipur

to ensure compliance of Circulars dated 13.11.2000 &

03.01.2001. There being no challenge to Circular's

13.11.2000 & 03.01.2001 in the writ petition and the

State had no opportunity to defend its above policy it

is not appropriate for this Court to embark upon the

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adjudication of above Government Scheme. The letter

dated 26.03.2002 being only a letter to ensure

compliance of Circulars dated 13.01.2000 & 03.01.2001,

no fault can be found in the said letter.

37. A Counter Affidavit has already been filed by the

Respondent No. 1 & 2, the State of Rajasthan and Mining

Engineer in the present appeal. In the counter

affidavit,  State  has  come  up  with  the  case  that the

liabilities to pay royalty rest with contractors/lease

holders to whom mining lease are bestowed. It is further

pleaded  that in case the minerals have been procured

from the legal source on which royalty have been paid,

there is no royalty payable subsequently. In

sub­paragraph IV of the counter affidavit, following was

stated:­

“IV. That the contents of para IV of the questions of law are wrong, ill­advised and are hence denied. It is submitted that the liability to pay royalty rests with the contractors/lease holders to whom the mining leases are bestowed but

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in order to prevent losses on account of rampant illegal mining and subsequent usage of such illegally mined minerals in construction work, the department of mines of the State of Rajasthan issued circulars from time to time calling upon vendors/contractors registered with Public Works Department of the State who carry out construction works to place before it the records of the minerals having been purchased legitimately and that such minerals have not been procured from illegal mining to determine whether royalties on such minerals have been paid. In case, the minerals have been procured by vendors/contractor from illegal mining, the royalties due to the State can be recovered. The said circulars categorically state that, in case minerals have been procured from legal sources on which royalties have been paid, there is no royalties payable subsequently. However, in case such minerals are procured from illegal mining, then the royalties that have been usurped by the vendors/contractors must be paid to the State. There is no infirmity or illegality in such a circular which is intended to legitimately collect the royalties due to the State and which have not been paid.”

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38. It is further stated in the counter affidavit that

in event appellant has procured the minerals from open

market, the appellant should have presented the

documents to prove that such minerals used in

construction work were purchased legitimately and then

no royalty shall be paid to the State by the appellant

on such mineral in such a case.  

39. It is submitted that in spite of department

communication 18.02.2008 and 16.02.2009 calling upon the

appellant to produce the records of purchasing the

minerals from open market, the appellant has failed to

produce any such record of such purchase. In paragraph

VIII, following has been stated:­

“VIII. That the contents of corresponding para no. VIII are wrong and denied. It is submitted that as per the circular issued by the department under Rule 63 of Rajasthan Minor Minerals Concession Rules, 1986, it is mandatory for all contractors enlisted /registered with the Public Works Department cited above to obtain 'Short Terms Permit' for the minerals to be used

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in construction works. In case the petitioner purchased the minerals from the open market, then the petitioner should have produced the relevant documents to prove that such minerals used in construction works was purchased legitimately. However, in spite of the communications from the department dated 18.02.2008 and 16.02.2009 in this regard, the petitioner has failed to produce any documents that proves that the minerals have been purchased legitimately from the open market. It is clear that the petitioner does not possess any documents that prove that such minerals have been procured through legitimate means and hence it is clear form the conduct of the petitioner that such minerals are procured illegally and are illegally mined.”

40. The circulars issued by the State Government

including the circular dated 13.11.2000 as well as

circular dated 03.10.2001 has to be interpreted to mean

that circular requires payment of royalty with regard to

only those minerals which have been used by the

contractor for which no royalty was paid. The circular

cannot be interpreted to mean as requiring payment of

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royalty for minerals used for which once royalty has

already been paid. The state has come up with the above

mentioned Government Order only with object to ensure

that contractors do not use minerals which are not

royalty paid.  

41. Rajasthan High Court in  R. S. Shekhawat’s  case  as

noted above has permitted the contractor to approach the

mining department for refund of the amount which was

deducted from the bill in event they successfully prove

that minerals used by them were minerals for which

royalty was already paid. The aforesaid directions

clearly protected the interest of the contractors and we

are of the view that the appellant's interests are amply

protected with the aforesaid directions issued by

Rajasthan High Court.  

42. We, however, deem it appropriate to give liberty to

the appellant to approach the mining engineer,

Respondent No. 2 by a written representation giving

details of amount deducted from its bills or amount

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withheld along with the details of minerals used by

contractors with details of proof to establish that

minerals used were minerals for which royalty was paid

as per 1986 rules.  The Mining Engineer/Assistant Mining

Engineer, the Respondent No. 2 may consider the

representation and take an appropriate and reasoned

decision expeditiously preferably within three months of

submission of the representation and, in event it is

found that appellant is entitled to refund of any

amount, appropriate consequential action may be taken.  

43. The Civil Appeal is disposed of with the above

directions.

.............................................J.        (PINAKI CHANDRA GHOSE)

..........................................J.                        (ASHOK BHUSHAN)

NEW DELHI; NOVEMBER 25,  2016.

ITEM NO.1 B               COURT NO.10               SECTION XV  (For Judgment)                S U P R E M E  C O U R T  O F  I N D I A          

RECORD OF PROCEEDINGS CIVIL APPEAL NO. 11259 OF 2016 @                           Petition(s) for Special Leave to Appeal (C) No.  12882/2009 (Arising  out  of  impugned  final  judgment  and  order  dated 17/12/2008 in DBCSA No. 231/2008  in SBCWP No. 3191/2002 passed by the High Court Of Rajasthan At Jaipur)

MANBHAR DEVI AGARWAL                               APPELLANT(s)                                 VERSUS STATE OF RAJASTHAN & ORS.                          Respondent(s)

Date : 25/11/2016   This appeal was called on for          pronouncement of judgment today.

For Appellant(s) Mr. Venkateswara Rao Anumolu,Adv.                       For Respondent(s) Mr. Milind Kumar,Adv.                               –------

Hon'ble  Mr.  Justice  Ashok  Bhushan  pronounced the  judgment  of  the  Bench  comprising  Hon'ble  Mr. Justice Pinaki Chandra Ghose and His Lordship.

Leave granted. The  civil  appeal  is  disposed  of  with  the

directions  mentioned  in  the  signed  reportable judgment.

[ Charanjeet Kaur ]                [ Indu Pokhriyal ]    A.R.-cum-P.S.                      Court Master

       [ Signed reportable judgment is placed on the file ]