Partly allowed

M/S Grand Aggregates v. the State of Karnataka

Karnataka HC8 Feb 2021WP/6620/2020

Case brief

AI extract

What is this about?

This High Court quashed penalty demands issued to two stone crusher licensees for breach of natural justice. The court held that proper show-cause notices with full particulars and personal hearings were mandatory before demanding penalties or royalty.

What did the court decide?

Quashed impugned demand notices on grounds of violation of principles of natural justice; allowed petitioners to have show-cause notices issued subsequently with opportunity of hearing.

M/S Grand Aggregates Vs the State of… — Labour and Industrial Disputes | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8^TH DAY OF FEBRUARY, 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 SACHIN SHANKAR MAGADUM WRIT PETITION NO.6620/2020 (GM-MM-S)

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C/W

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WRIT PETITION No.18324/2019 (GM-MM-S)

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IN W.P.NO.6620/2020

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BETWEEN

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M/S. GRAND AGGREGATES, NO 805, 14^TH CROSS, 1^ST PHASE, J P NAGAR, BANGALORE – 560 078, REPRESENTED BY ITS PARTNER SRI. P MURTHY.

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... PETITIONER

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(BY SRI.GANAPATHY BHAT N., ADVOCATE)

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AND

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THE STATE OF KARNATAKA, REPRESENTED BY ITS

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CHIEF SECRETARY, VIDHANA SOUDHA, DR. B R AMBEDKAR VIDHI, BENGALURU – 560 001.

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THE PRINCIPAL SECRETARY, DEPARTMENT OF MINES AND GEOLOGY, VIDHANA SOUDHA, DR. B R AMBEDKAR VIDHI, BENGALURU – 560 001.

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THE DIRECTOR, DEPARTMENT OF MINES AND GEOLOGY, KANIJA BHAVA, RACE COURSE ROAD, BENGALURU – 560 001.

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THE DEPUTY DIRECTOR, DEPARTMENT OF MINES AND GEOLOGY, RAMANAGARA DISTRICT, RAMANAGARA – 571 511.

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THE DEPUTY COMMISSIONER AND CHAIRMAN, DISTRICT STONE CRUSHER LICENSING AND REGULATION AUTHORITY, RAMANAGARA – 571 511.

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... RESPONDENTS

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(BY SRI. I.TARANATH POOJARY, AGA)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED NOTICE DATED 17.02.2020 ISSUED BY THE R-4 AT ANNEXURE-E.

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IN W.P.NO.18324/2019

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BETWEEN

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SMT. D SUGANDI, D/O M. DORESWAMY MODALIAR, AGED ABOUT 52 YEARS, PROPRIETOR OF M/S PRATHIBA STONE CRUSHER, SY NO.76/1, GEJJENAHALLI VILLAGE, TAL & DIST:SHIVAMOGGA, R/O #39-2, KENCHAPPA LAYOUT, VINOBANAGARA, SHIVAMOGGA – 577 201.

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... PETITIONER

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(BY SRI.S.Y.SHIVALLY, ADVOCATE)

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AND

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STATE OF KARNATAKA, REPRESENTED BY ITS PRINCIPAL SECRETARY, DEPARTMENT OF MINES AND GEOLOGY, M.S. BUILDING, AMBEDKAR VEEDHI, BENGALURU – 560 001.

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THE COMMISSIONER, DEPARTMENT OF MINES AND GEOLOGY, KHANIJA BHAVAN, RACE COURSE ROAD, BANGALORE – 560 001.

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THE CHAIRMAN & DEPUTY COMMISSIONER, DISTRICT SAND COMMITTEE/ DISTRICT STONE CRUSHERS REGULATING COMMITTEE/

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DISTRICT TASK FORCE COMMITTEE (SINGLE WINDOW), SHIVAMOGGA – 577 201.

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THE SENIOR GEOLOGIST, MINES AND GEOLOGY DEPARTMENT, ASSISTANT COMMISSIONER’S BUILDING, SHIVAMOGGA – 577 201.

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... RESPONDENTS

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(BY SRI. I.TARANATH POOJARY, AGA)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE NOTICE DATED 21.03.2019 ISSUED BY THE R-4 AS BEING ARBITRARY, ERRONEOUS AND CONTRARY TO LAW EQUITY AND JUSTICE (ANNEXURE-J) AND ETC.,

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THESE WRIT PETITIONS COMING ON FOR PRELIMINARY HEARING THIS DAY, CHIEF JUSTICE MADE THE FOLLOWING:

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ORDER

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Submissions were heard on the earlier date.

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W.P.NO.6620/2020

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We come to the facts of Writ Petition No.6620/2020. The challenge in this petition under Article 226 of the Constitution of India is to the notice of demand dated 17^th February 2020 (Annexure-E to the writ petition). The petitioner in this writ petition has been granted a licence under sub-section (1) of Section 3 of the Karnataka Regulation of Stone Crushers Act, 2011 (for short “the said Act of

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2011”). A copy of the licence is at Annexure-B which expired on 27^th March 2020. On 26^th February 2019, a notice was issued by the Deputy Director of Mines and Geology to the petitioner. The allegation therein is that stock of 10,443 metric tons is not found to be stored in the land which is the subject matter of the petition. It is stated that advance royalty has been paid on the quantity of 14,000 metric tons and Mineral Dispatch Permit (MDP) has been issued only to the extent of 3857 metric ton. The petitioner was called upon to submit a reply, failing which, action will be taken under Section 16 of the said Act of 2011.

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On 28^th June 2019, a notice was issued to the petitioner calling upon the petitioner to pay penalty of Rs.30,07,150/- being five times royalty as well as penalty of Rs.25,000/- under Section 16 of the said Act of 2011. By Annexure-E which is the subject matter of challenge in this petition, the same demand which is made in the notice dated 28^th June 2019 has been reiterated.

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The submission of the learned counsel for the petitioner is firstly that an opportunity of being heard was not granted to the petitioner before making a demand and a proper show-cause notice was not issued. His submission is that sub-rule (4) of Rule 44 of the

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Karnataka Mines and Minerals Concession Rules, 1994 (for short “the said Rules of 1994”) will have no application. He also pointed out the stand taken by the petitioner especially in Paragraph 13 of the petition.

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The Learned Additional Government Advocate invited our attention to the provisions of the Karnataka Regulation of Stone Crushers Rules, 2012 (for short “the said Rules of 2012”) and submitted that it is very clear from sub-rule (1) of Rule 3(c) of the said Rules of 2012 that sub-rule (4) of Rule 44 of the said Rules of 1994 conferring a power to impose penalty is attracted in the present case.

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W.P.NO.18324/2020

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Now, coming to the Writ Petition No.18324/2020, the challenge is to the demand at Annexure-B which is of 21^st March 2015. Even in this case, the petitioner was granted a licence under sub-section (1) of Section 3 of the Sand Act of 2011. On 09^th January 2015, the petitioner was called upon by a notice to submit documents relating to the stock found near her crusher unit. It is alleged in the same notice that MDPs were not granted for storing 800 metric tons of stone in the crusher unit. The petitioner replied to the same by stating that 10,000 MT of the jelly and 8000 MT of stone has been stored by one Sri.C.N.Manjunath, Class-I Contractor appointed by the State

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Government. It is claimed that the said contractor works for the State Government and royalty for the said material has been deducted from the bills payable to him. Subsequently, a notice was issued on 26^th March 2015 to said C.N.Manjunath. Another notice was issued on 14^th July 2015. In reply dated 22^nd July 2015, C.N.Manjunath accepted to have stored jelly and stone. He has stated that he has brought only 1000 MT of Jelly and 500 MT of stone for Government work and he has paid royalty amount on the same. Ultimately, by the impugned notice dated 21^st March 2019, the petitioner was called upon to deposit arrears of penalty amount of Rs.47,52,000/- and if the said amount was not paid, the petitioner was informed that the application for renewal of licence granted to the petitioner will be rejected.

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The statement of objections has been filed by the State Government in this petition. Reliance is placed on the orders dated 30^th October 2018 passed by this Court, in which it was held that the petitioner was not entitled to renewal of licence.

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The Learned counsel for the petitioner submitted that there is no show-cause notice issued to the petitioner calling upon the petitioner to pay arrears of penalty of Rs.47,52,000/-. He submitted

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that the material is stored by Sri.Manjunath and therefore, the petitioner could not have been penalized.

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The Learned Additional Government Advocate submitted that in view of sub-rule (1) of Rule 3(c) of the said Rules of 2012, the provisions of the said Rules of 1994 have been incorporated by a reference in the said Rules of 2012 and therefore, the respondent had every right to levy penalty in accordance with sub-rule (4) of Rule 44 of the said Rules of 1994. He submitted that certain specific conditions have been incorporated in the licence.

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CONSIDERATION OF SUMBISSIONS

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We have considered the submissions. In both the petitions, we are dealing with the petitioners who have been granted a licence under sub-section (1) of Section 3 of the said Act of 2011 for carrying on the business of stone crushing. It is necessary to make a reference to Rule 3(c) of the said Rules of 2012, which reads thus:

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“3-C.Mineral Dispatched Permit for Stone

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Crushing/sand Manufacturing Units. -(1) No crusher licensee shall receive, cause to receive, store or cause to store any mineral or processed mineral in his premises without valid mineral dispatch permits issued in accordance with mineral concession rules.

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(2) The licensee shall acknowledge the mineral received with permits in electronic form in Integrated Lease Management System of Mines and Geology Department.

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(3) Any person intending to transport the beneficiated mineral or any mineral processed in the crusher, shall apply for Mineral Dispatch Release Order (MDRO) to the concerned Senior Geologist/Deputy Director as envisaged in Karnataka Minor Mineral Concession Rules, 1994.

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(4) The concerned Senior Geologist/Deputy Director shall verify whether the royalty has been paid in respect of the mineral received id the crusher and after satisfying about such payment shall issue the Mineral Dispatch Release Order (MDRO) by collecting a processing fee of rupees fifty per Mineral Dispatch Release Order and thereafter the crusher licensee shall generate permits. However the quantity of Mineral Dispatch Release Order shall not exceed the quantity of minor mineral acknowledged in Integrated Lease Management System.

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(5) If any mineral or its processed product is found in the premises belonging to crusher licensee, having not been covered under royalty, the Competent Authority shall after giving an opportunity of hearing initiate penal action under the provisions of the Act.”

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The requirement of sub-rule (1) of Rule 3(c) is that no

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crusher licencee shall receive or cause to receive mineral or processed mineral in his premises without a valid MDP issued in accordance with the said Rules of 1994. The object appears to be to check or to prevent illegal quarrying. Therefore, whenever a person who has been granted a licence under sub-section (1) of Section 3 receives or stores minerals in his premises, he can do so only after obtaining a MDP issued in accordance with the said Rules of 1994.

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There is one more provision invoked which is Section 16 of the said Act of 2011. For the sake of convenience, we reproduce Section 16 of the said Act of 2011 which reads thus:

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“ Section 16.Penalties.- (1) whoever contravenes the provisions of section 3 shall on conviction be punished with imprisonment for a term which may extend to two years ro with fine which may extend upto of two lakh rupees or with both and in case continuing contravention, with and additional fine which may extend to five thousand rupees for every day during which such contravention continues after first such contravention.

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(1A) If Licensee contravenes the conditions of the License shall on conviction be publishable with imprisonment for a term which may extend to one year, or with fine of twenty-five thousand rupees or with both and in case of continuing contravention, with an

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additional fine which may extend to five hundred rupees for every day during which such contravention continues after first such contravention.

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(2) Any rule made under any provision of this Act may provide that any contravention thereof shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five thousand rupees or with both and in the case of continuing contravention, with an additional fine which may extend to five hundred rupees for every day during which such contravention continues after conviction for the first such contravention.”

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Section 16 provides for punishment of imprisonment and

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fine. Section 16 has nothing to do with penalty.

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On first principles, it can be said that whenever a penalty is sought to be imposed by a statutory authority, compliance with the principles of natural justice is mandatory. Now, coming to the facts of the case in Writ Petition No.6620/2020, under the impugned demand at Annexure-E, penalty is demanded in accordance with Section 16 of the said Act of 2011. Under Section 16, there is no provision for recovery of penalty. Section 16 is a penal provision which attracts sentence and fine on being convicted by a Competent Court.

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Therefore, the demand of penalty under Section 16 is uncalled for and is illegal.

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In Writ Petition No.6620 of 2020, with regard to the other allegations of storing stock of 10143 metric tons without obtaining MDP, we find that a specific show-cause notice calling upon the petitioner to show-cause by incorporating all particulars regarding payment of penalty ought to have been served upon the petitioner. Such a notice has not been served. Only after service of a proper show-cause notice and after giving an opportunity of being heard to the petitioner, such a demand for penalty could have been made.

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In Writ Petition No.18324/2019, we may note here that in fact pursuant to the explanation sought from the petitioner, he submitted an explanation that storage of jelly and stone was made by Sri.C.N.Manjunath who is a Government Contractor. The notice which is impugned is dated 21^st March 2019. There is no reference in the said notice to the said explanation given by the petitioner. Moreover, the principles of natural justice have been violated. In this petition, as per interim order passed by this Court, dated 25^th April 2018, 25% of the demand has been deposited with the authorities. The learned counsel for the petitioner on instructions, stated that even if the

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impugned demand is set aside, the petitioner will not seek refund. However, the amount deposited by the petitioner with the Government should be utilized for adjusting the same towards royalty payable by the petitioner in future while obtaining MDP. This suggestion is very fair and deserves to be accepted.

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Accordingly, we pass the following order:

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ORDER

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In Writ Petition No.6620/2020:

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(i) The demand made by Annexure-E is hereby quashed and set aside only on the grounds of breach of principles of natural justice;

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(ii) It will be always open for the concerned authorities of the respondents to issue a show-cause notice giving all material particulars of the demand of penalty/royalty. If such a show-cause notice is issued, the same shall be decided after giving an opportunity of being heard to the petitioner;

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In Writ Petition No.18324/2019:

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(i) The impugned notice dated 21^st March 2019 at Annexure-J is hereby set aside only on the ground of the breach of the principles of natural justice;

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(ii) The amount paid by the petitioner under the interim order passed by this Court shall be adjusted against the amount of royalty payable in future while granting Mineral Dispatch Permits;

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(iii) Even in this case, it will be open for the respondent to issue proper a show-cause notice for demanding royalty/penalty by giving all particulars. Appropriate orders shall be passed on the show-cause notice after giving an opportunity of personal hearing to the petitioner;

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The Petitions are allowed on above terms .

Sd/-

CHIEF JUSTICE

Sd/JUDGE

bnv

M/S Grand Aggregates v. the State of Karnataka

Case brief

What is this about?

What did the court decide?

M/S Grand Aggregates v. the State of Karnataka

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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Statutes considered

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