Dismissed

Sri Venkana Gowda v. State of Karnataka

Karnataka HC8 Apr 2021WP/3620/2021

Case brief

AI extract

What is this about?

The High Court of Karnataka rejected four writ petitions challenging a demand for Additional Periodic Payment against a sand quarrying lease. The Court held that the royalty rate for calculating the payment must be the current notified rate, not the rate at the time of the bid, and dismissed the claims.

What did the court decide?

The impugned endorsements/demand notices were upheld as legal and the petitions were rejected.

Sri Venkana Gowda Vs State of Karnataka — Contract and Commercial Disputes | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8^TH DAY OF APRIL, 2021

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PRESENT

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THE HON’BLE MR.ABHAY S. OKA, CHIEF JUSTICE

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AND

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THE HON’BLE MR.JUSTICE SURAJ GOVINDARAJ

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WRIT PETITION NO.3620 OF 2021

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C/W WRIT PETITION NOS.3634 OF 2021, 3642 OF 2021 AND

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3647 OF 2021 (GM-MM-S)

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IN W.P No.3620/2021

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BETWEEN:

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SRI VENKANA GOWDA AGED 52 YEARS PROPRIETOR OF

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M/S VISWAS ENTERPRISES NO.75, 1^ST FLOOR, 1^ST MAIN ROAD J.P.NAGAR, GOKUL ROAD HUBLI - 580 030

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... PETITIONER

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(BY SHRI MADHUSUDHAN R NAIK, SENIOR COUNSEL FOR SRI ROHAN HOSMATH, ADVOCATE)

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AND:

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STATE OF KARNATAKA REPRESENTED BY ITS SECRETARY

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DEPARTMENT OF INDUSTRIES

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AND COMMERCE

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VIDHANA SOUDHA

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DR.AMBEDKAR VEEDHI

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BANGALORE - 560 001

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THE DIRECTOR

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DEPARTMENT OF MINES AND GEOLOGY

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39, KHANIJA BHAWAN

RACE COURSE ROAD

BANGALORE - 560 001

DEPUTY DIRECTOR DEPARTMENT OF MINES AND GEOLOGY B.L.GOWDA LAYOUT

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CHITRADURGA - 577 001

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... RESPONDENTS

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(BY SHRI VIKRAM HUILGOL, AGA)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT QUASHING THE IMPUGNED ENDORSEMENT/DEMAND NOTIE DATED 05.01.2021 ISSUED BY RESPONDENT NO.3 (ANNEXURE-A) AND ETC.

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IN W.P No.3634/2021

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BETWEEN:

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SRI GARAGA D KUMARSWAMY AGED 46 YEARS SON OF DEVIRAPPA SHARAVATHINAGAR, 1^ST CROSS ROAD SHIVAMOGGA - 577 202

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... PETITIONER

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(BY SHRI MADHUSUDHAN R NAIK, SENIOR COUNSEL FOR SRI SURAJ NAIK, ADVOCATE)

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AND:

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STATE OF KARNATAKA

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REPRESENTED BY ITS SECRETARY

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DEPARTMENT OF INDUSTRIES

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AND COMMERCE

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VIDHANA SOUDHA DR.AMBEDKAR VEEDHI

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BANGALORE - 560 001

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THE DIRECTOR DEPARTMENT OF MINES AND GEOLOGY 39, KHANIJA BHAWAN

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RACE COURSE ROAD

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BANGALORE - 560 001

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DEPUTY DIRECTOR DEPARTMENT OF MINES AND GEOLOGY

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B.L.GOWDA LAYOUT

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CHITRADURGA - 577 001

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... RESPONDENTS

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(BY SHRI VIKRAM HUILGOL, AGA)

IN W.P No.3642/2021

BETWEEN:

SMT. PARVATAMMA AGED 64 YEARS WIFE OF LATE M.G.DARUKAMURTHY MANDIMATH NILAYA KUBERA NAGAR GANDHI NAGAR CHALLAKERE - 577 522

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... PETITIONER

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(BY SHRI MADHUSUDHAN R NAIK, SENIOR COUNSEL FOR SRI SURAJ NAIK, ADVOCATE)

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AND:

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STATE OF KARNATAKA

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REPRESENTED BY ITS SECRETARY

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DEPARTMENT OF INDUSTRIES

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AND COMMERCE

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VIDHANA SOUDHA

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DR.AMBEDKAR VEEDHI

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BANGALORE - 560 001

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THE DIRECTOR

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DEPARTMENT OF MINES AND GEOLOGY

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39, KHANIJA BHAWAN

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RACE COURSE ROAD

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BANGALORE - 560 001

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DEPUTY DIRECTOR

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DEPARTMENT OF MINES AND GEOLOGY

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B.L.GOWDA LAYOUT

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CHITRADURGA - 577 001

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... RESPONDENTS

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(BY SHRI VIKRAM HUILGOL, AGA)

IN W.P No.3647/2021

BETWEEN:

SRI. SHABUDDIN AGED 46 YEARS SON OF BASHASAB NAGARATHNAMME LAYOUT NEAR CHURCH, SHANTI NAGAR SHIVAMOGGA - 577 202

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... PETITIONER

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(BY SHRI MADHUSUDHAN R NAIK, SENIOR COUNSEL FOR SRI ROHAN HOSMATH, ADVOCATE)

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AND:

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STATE OF KARNATAKA REPRESENTED BY ITS SECRETARY DEPARTMENT OF INDUSTRIES AND COMMERCE

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VIDHANA SOUDHA DR.AMBEDKAR VEEDHI

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BANGALORE - 560 001

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THE DIRECTOR DEPARTMENT OF MINES AND GEOLOGY 39, KHANIJA BHAWAN RACE COURSE ROAD

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BANGALORE - 560 001

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DEPUTY DIRECTOR

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DEPARTMENT OF MINES AND GEOLOGY

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B.L.GOWDA LAYOUT

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CHITRADURGA - 577 001

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... RESPONDENTS

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(BY SHRI VIKRAM HUILGOL, AGA)

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THESE PETITIONS COMING ON FOR FINAL DISPOSAL THROUGH VIDEO CONFERENCING THIS DAY, CHIEF JUSTICE MADE THE FOLLOWING:

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ORDER

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The issue involved in all the three petitions is the same and therefore, for the sake of convenience, we are making a reference to the facts of the case in Writ Petition No.3620 of 2021.

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The process of e-tender for grant of sand quarrying lease was initiated in accordance with Rule 31-T of the Karnataka Minor Mineral Concession Rules, 1994 (for short, "the said Rules of 1994"). The petitioner is the successful bidder. The bid offered by the petitioner was accepted and a quarrying lease was executed in favour of the petitioner, a copy of which is at Annexure-E.

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It is pointed out in the petition that on 12^th August 2020, an endorsement was issued by the Deputy Director of Mines and Geology making a demand for payment of the additional amounts towards Additional Periodic Payment (for short, "APP"). The said demand was challenged by the petitioner by filing Writ Petition No.10208 of 2020 in which there was also a challenge to Rule 2(a-a) of the said Rules of 1994. On 18^th November 2020, the petition filed by the petitioner was heard by this Court. Rule nisi was issued and an interim order was passed restraining the respondents from

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recovering APP as defined by Rule 2(a-a) of the said Rules of 1994 on the basis of the impugned demands.

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Now, the challenge in this petition under Article 226 of the Constitution of India is to the demand made by the endorsement dated 5^th January 2021 (Annexure-A). It must be stated here that the petitioner submitted a bid at 1,007.5% of the royalty. The present demand which is the subject matter of challenge is based on revision of royalty from Rs.60/- per metric tonne to Rs.80/- per metric tonne.

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The learned Senior Counsel appearing for the petitioners firstly invited our attention to the proceedings of the meeting of the Task Force and the District Sand Committee held on 23^rd May 2017. He invited our attention to that portion of the minutes which records that the bid submitted by the petitioner was at the rate of Rs.605/- per metric tonne, as can be seen from the last column of the annexure to the minutes of the meeting dated 23^rd May 2017. The submission of the learned Senior Counsel appearing for the petitioners is that what is accepted is the highest bid offered by the petitioner at the rate of Rs.605/- per metric tonne which was calculated on the basis of royalty at the rate of Rs.60/- per metric tonne. He submitted that neither the provisions of the tender document

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nor the relevant Rules of 1994 provide that the bid amount will vary depending upon the rate of royalty. His submission is that what is material is the bid amount specifically accepted which is mentioned in the annexures to the minutes of the meeting. The learned Senior Counsel appearing for the petitioners has taken us through the statements made in the statement of objections filed in the earlier petition by the State Government. He also invited our attention to the interim order passed in the earlier writ petitions. He submitted that what is prohibited under the interim order dated 18^th November 2020 is sought to be demanded by the impugned demand under a different name. He submitted that the respondents cannot demand any amount in excess of the bid offered by the petitioner which has been accepted.

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The learned Senior Counsel appearing for the petitioners placed reliance on a decision of the Apex Court in the case of DELHI DEVELOPMENT AUTHORITY AND ANOTHER vs. JOINT ACTION COMMITTEE, ALLOTTEE OF SFS FLATS AND OTHERS¹ . He invited our attention to what is held by the Apex Court in paragraphs 62 and 63 of the decision that the parties to the contract are bound by the terms and conditions

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1 (2008) 2 SCC 672

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thereof. On the same proposition, he relied upon a decision of the Apex Court in the case of SUNIL PANNALAL BANTHIA AND OTHERS vs. CITY & INDUSTRIAL DEVELOPMENT CORPORATION OF MAHARASHTRA LTD. AND ANOTHER² . He concluded by submitting that the demand made by the impugned endorsement is in excess of the bid amount offered by the petitioner which was accepted by the respondents.

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The learned Additional Government Advocate invited our attention to the provisions in the tender document. He also invited our attention to clause (a-1-c) of Rule 2 of the said Rules of 1994 as well as Rule 36 and specifically sub-rule (1) thereof of the said Rules of 1994. By relying upon the provisions of Rule 31-T of the said Rules of 1994 and the tender document, it is submitted that the bid offered by the petitioners was in terms of certain percentage of royalty. His submission is that the amount of royalty varies as provided under sub-rule (1) of Rule 36 of the said Rules of 1994 and therefore, the demand is justified.

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We have carefully considered the submissions. There is no dispute that the process of auction was conducted in accordance with Rule 31-T of the said Rules of 1994. It is

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2 (2007) 10 SCC 674

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therefore, necessary for us to refer to the relevant terms and conditions incorporated in the tender document. A copy of the tender document is annexed at Annexure-C.

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Clause 8 of the tender document deals with the price bid. Sub-clauses (a) and (b) of Clause 8 of the tender

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document are relevant which read thus:

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"8. PRICE BID:

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(a) The Financial bid in e-tender shall be made in Annexure-2 with percentage of initial price offer payable equal or or greater than the Base Price payable per tonne both in words and figures. Incomplete or corrections, modifications in the initial price offer and conditional bids, shall be deemed as defective and shall be rejected.

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(b) The minimum percentage of royalty payable as Base Price is 20%. Hence, the tenderer has to offer/bid above 20%. If more than one bid is quoted by the same applicant, the highest quoted bid will be valid.

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For example: At Present Royalty for one tonne of sand is Rs.60/- and the minimum of 20% of Rs.60/- will be Rs.12/- which is the minimum base price payable to the Government from the bidder."

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10. Basic Price is defined in clause (a-1-c) of Rule 2 of

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the said Rules of 1994 which reads thus:

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"Basic Price means a minimum percentage of Royalty fixed by the State Government in tender document for the purpose of auction."

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Hence, the base price fixed has to be in terms of

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the minimum percentage of the royalty fixed by the State Government. In this case, the base price was fixed at 20% of the royalty and therefore, a condition was imposed that the tenderer has to offer a bid at the rate above 20% of the royalty amount. What is material is the example which is a part of subclause (b) of clause 8 of the tender document which specifically records that "At present Royalty, for one tonne of sand is Rs.60/- and the minimum of 20% of Rs.60/- will be Rs.12/-". Clause 8 does not provide that the base price of 20% must be calculated only on the basis of rates of royalty prevailing on the date of publication of the tender or the date of acceptance of the bid amount. Even clause (a-1-c) of Rule 2 of the said Rules of 1994 refers to royalty fixed by the State Government.

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As far as Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 (for short, "the said Act of 1957") is concerned, it deals with the royalty in respect of the mining lease. However, Section 14 of the said Act of 1957 makes it clear that the provisions of Sections 5 to 13 of the said Act of 1957 shall not apply to the quarrying leases in respect of minor minerals.

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13. As far as the minor minerals are concerned, a rule

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making power has been conferred on the State Government. By virtue of clause (g) of sub-section (1) of Section 15 of the said Act of 1957, the State Government is empowered to frame rules for fixing and collection of rent, royalty, fees, etc. of the minor mineral and manner in which the same shall be payable. The said Rules of 1994 are the rules framed in exercise of the power under Section 15 of the said Act of 1957. As far as the liability to pay royalty is concerned, it is governed by Rule 36 of Chapter VI of the said Rules of 1994. Sub-rule (1) of Rule 36 of the said Rules of 1994 is material which reads thus:

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" Payment of royalty and dead rent in advance - (1) The holder of a quarrying lease or licence under these rules, shall pay dead rent at the rates specified in Schedule-I as may be modified from time to time or royalty at the rates specified in Schedule II as may be modified from time to time whichever is more whether minor mineral is removed or consumed by him or his agent, manager, employee or contractor:

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Provided that no such royalty shall be payable in respect of leases for clay in tank bed with an Achcat not exceeding 100 hectares:

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Provided further that if the lease or licence permits the working of more than one mineral in the same area the lessee or licencee shall be liable to pay the dead rent for the entire lease area on the mineral for which the dead rent is higher but not both:

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Provided also that the State Government may provide for Royalty on any mineral to be charged on ad valorem basis on Sale Value or Average Selling

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Price of the mineral or the notified royalty per cubic meter or per metric tonne whichever is higher:

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Provided also that the State Government may prescribe an Additional Periodic Payment or Average Additional Periodic Payment as a percentage of Royalty to be charged, in additional to royalty, on lease or licences as per these rules."

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(underline supplied)

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Hence, the royalty is payable as per the rates provided in Schedule II which may be notified from time to time. When the tender process which is the subject matter of these petitions commenced, the royalty payable on ordinary sand was at the rate of Rs.60/- per metric tonne. By the notification dated 30^th June 2020, Schedule II was modified and royalty payable in respect of ordinary sand was enhanced to Rs.80/per metric tonne.

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The bid offered by the petitioner in terms of subclause (b) of clause 8 of the tender document was at the rate of 1007.5% of the royalty. The petitioner is relying upon the details of the successful bidders annexed to the minutes of the meeting of the Task Force and District Sand Committees. The last two columns in the chart incorporating the details has a heading "Bid Amount per MT". It has two sub-headings, namely, "Percent of Rs.60/- Royalty" and "Amount in rupees".

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This chart is prepared in May 2017 when the rate of royalty on ordinary sand was at Rs.60/- per metric tonne. The petitioners are relying upon the figures mentioned in the last column. For example in Writ Petition No.3620 of 2021, reliance is placed on figure of Rs.605/- per metric tonne mentioned in the last column. This amount is calculated at the rate of Rs.60/- per metric tonne which was the rate of royalty which prevailed at that time.

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As mentioned earlier, the base price has been fixed as provided in clause (a-1-c) of Rule 2 of the said Rules of 1994. Apart from the said Rule, it is provided in sub-clause (2) of clause 8 of the tender document that the financial bid shall be made at an amount equal to or greater than the base price payable. The base price payable, as noted earlier was 20% of the royalty payable. As we have noted earlier, none of the clauses in the tender document provide that the royalty payable for calculating the bid amount, shall be as on the date of the tender document or as on the date of acceptance of the bid. The royalty referred in sub-clauses (a) and (b) of clause 8 of the tender document is the royalty payable in accordance with sub-rule (1) of Rule 36 of the said Rules of 1994. Sub-rule (1) of Rule 36 of the said Rules of 1994 provides that the

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royalty will be payable as per the rates specified in Schedule II as may be notified from time to time.

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Now, the rate of royalty in respect of ordinary sand has been enhanced to Rs.80/- per metric tonne with effect from 30^th June 2020. Therefore, the bid amount payable by the petitioners from that date will have to be calculated at the percentage offered by the petitioners on the basis of royalty amount of Rs.80/- per metric tonne.

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Therefore, in our considered view, the demand made by the endorsements at Annexure-A cannot be said to be illegal. Needless to add that the demand at the rate of Rs.80/per metric tonne will apply from 30^th June 2020.

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Hence, we find no merit in the petitions and the same are rejected.

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Sd/CHIEF JUSTICE

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Sd/JUDGE

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AHB

Sri Venkana Gowda v. State of Karnataka

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Sri Venkana Gowda v. State of Karnataka

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