Dismissed

Nawal Singh Ratnawat v. State Mines Departmentors

Rajasthan HC11 Mar 2014CW/19947/2013

Case brief

AI extract

What is this about?

The High Court addressed two writ petitions challenging Rule 37(A)(xvi) of the Rajasthan Minor Mineral Concession Rules, 1986, which mandated payment of royalty even if leases were cancelled or excavations closed. The court held that the petitioners, having affirmed the contract, could seek restitution rather than strike down the rule, declaring it intra-vires.

What did the court decide?

The matter was disposed of by dismissing the challenge to the validity of Rule 37(A)(xvi).

Nawal Singh Ratnawat Vs State Mines… — Contract and Commercial Disputes | Rajasthan HC (2014)

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IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR

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ORDER

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D.B. Civil Writ Petition No.19947 of 2013

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Nawal Singh Ratnawat Versus

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State of Rajasthan & Ors.

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D.B. Civil Writ Petition No.19948 of 2013 M/s. Nawal Banas Sands Versus State of Rajasthan & Ors.

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Date of Judgment :: 11^th March, 2014

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PRESENT

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HON'BLE THE CHIEF JUSTICE MR. AMITAVA ROY HON'BLE MR. JUSTICE VEERENDR SINGH SIRADHANA

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Mr.Kamlakar Sharma, Senior Counsel, with Ms. Alankrita Sharma for the petitioners.

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BY THE COURT : (Per Hon'ble Veerendr Singh Siradhana, J.)

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Both the writ petitions, instituted by the petitioners, project a challenge to Rule 37(A)(xvi) of the Rajasthan Minor Mineral Concession Rules, 1986 (hereinafter referred to as the 'Rules of 1986', for short) being ultra-vires to Article 14, 19(1)(g) of the Constitution of India and Section 56 of the Indian Contract Act, 1874, and therefore, are being adjudicated upon by this common judgment and order. The petitioners, in the alternative, have prayed for an appropriate writ, order or direction to quash and set aside the orders dated 8^th March, 2013, 31^st March, 2013 and 25^th September, 2013. In D.B. Civil Writ

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Petition No.19947 of 2013, the petitioner has also prayed for refund of an amount of Rs.60,00,000/- (Rupees Sixty Lacks Only) with interest @ 12% per annum.

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Briefly, the essential material facts necessary for adjudication of the controversy are: That the petitioner was granted a royalty collection contract for ' Bajri ' (sand) excavated from flow area of Banas river and Nallahs within the revenue boundaries of Tehsil and District Sawaimadhopur, for a period of two years. The terms and conditions of the contract, entered into between the State Government and the petitioners on 23^rd March, 2011 and 2^nd July, 2011, were reduced to writing. A specific condition 3(xvi) was incorporated in the contract (Annexure-1), to the effect that in the event of cancellation/surrender of leases or sanctioning of new leases/revision of 'dead rent' of existing leases, in the area concerned, shall not have any impact on yearly contract amount. On 30^th March, 2012 in D.B. Civil Writ Petition Number 4250 of 2012 (Villagers of Chandgarh, Tehsil Kothadi, District Bhilwara v. State of Rajasthan), an injunction was granted on excavation of Bajri (sand) from the riverbeds of Banas river and the petitioners were directed to stop collection of royalty or permit fee, only for the period with effect from 1^st April, 2012 to 18^th April, 2012. 3. The petitioners are aggrieved of the demand notice(s) dated 8^th March, 2013 and 31^st March, 2013, calling upon the petitioners to deposit the due amount for the period of 18 days i.e., with effect from 1^st of April, 2012 to 18^th April, 2012. The demand is sustained in view of Rule 37(A)(xvi) of the Rules of 1986 as well as in view of Condition 3(xvi) incorporated in the contract entered into between the State

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Government and the petitioner (Annexure-1).

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The learned Senior Counsel urged that Rule 63(3) of the Rules of 1986, dealing with grant of short-term permit, provides for a totally different procedure for excavation of Bajri (sand). The State Government in exercise of power of relaxation under Rule 65 of the Rules of 1986, has provided the procedure for grant of mineral concession for Bajri (sand) vide circular dated 10^th December, 1986. The circular was further modified by a policy dated 12^th September, 1988 and thereafter, by policy circular dated 3^rd October, 1988 (Annexure-18, 19 and 20, respectively). The learned Senior Counsel further submitted that no mining lease or quarry licenses are in existence for the mineral Bajri (sand) in the entire State of Rajasthan. 5. Anybody, desiring to excavate mineral Bajri (sand) may do so and make a payment while passing through Naka or Government Check-post. No application for short-term permit is required. Therefore, the procedure provided for excavation of mineral Bajri (sand) by the State is totally different from one adopted for other minerals and hence, the provisions of Rule 37(A)(xvi) as well as condition stipulated under Clause-3(xvi) of the agreement have no application. Thus, Rule 37(A)(xvi) is ultra-vires of Article 14, 19(1)(g) of the Constitution of India as well as Section 56 of the Indian Contract Act, 1872.

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The learned Senior Counsel also emphasized that in the event of closure of excavation or removal of the mineral Bajri (sand) for the relevant period, the petitioners could not have been saddled with the liability for payment of 'royalty' or 'permit fee', and therefore, the

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demand raised by the Government amounts to fulfillment of a condition, which was impossible and hence, void. Moreover, when the petitioner entered into contract with the State Government, there was no such closure contemplated by the petitioner. Since the closure was after the contract was entered into, the petitioner cannot be held liable and called upon to fulfill a condition impossible. Hence, the demand raised by the State-respondents for the period, when the excavation of the mineral Bajri (sand) was completely stopped, cannot be sustained in the eye of law.

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We have heard the learned counsel for the petitioners and carefully perused the materials available on record.

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At this juncture, it will be gainful to consider the text of Rule

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3(x), (xvi) and (xxi) of the Rules of 1986, which read thus:-

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“3. Definitions-

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(x) “ Dead rent ” means the minimum guaranteed amount of royalty per year payable as per rules of agreement under a mining lease.

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(xvi) “ Forms ” means forms appended to these rules.

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(xxi) “ Royalty Collection Contract ” means a contract for the specified mineral or minerals given to collect royalty [with or without fee, as the case may be] on behalf of the Government from the quarry licensee and short term permit holders who excavate minor minerals from the land specified under the contract whereunder the contractor undertakes to pay fixed amount annually to the Government save as exempted under rule 58.”

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Rule 37(A)(xvi) of the Rules of 1986, read thus:-

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“Rule 37(A)(xvi)- Cancellation/surrender of lease/quarry licenses or temporary/permanent closure of leases/quarry

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licenses by Government/ court or due to any other reason in the area concerned shall not have any impact on yearly contract amount.”

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Section 56 of the Indian Contract Act, 1872 read thus:-

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“56. Agreement to do impossible act - An agreement to do an act impossible in itself is void.

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Contract to do act afterwards becoming impossible or unlawful: A contract to do an act which, after the contract is made, becomes impossible or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

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Compensation for loss through non-performance of act known to be impossible or unlawful: Where one person has promised to be something which he knew or, with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promise for any loss which such promisee sustains through the nonperformance of the promise.”

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The learned Senior Counsel submits that the petitioner's right to collect the royalty or permit fee on behalf of the State Government was temporarily withheld during the period in dispute and therefore, the demand raised, is absolutely illegal as the performance of the contract was impossible on account of closure of excavation of mineral Bajri (sand), in view of the order passed by the Court on 30^th March, 2013. The learned Senior Counsel also assailed the action of the Staterespondents in rejecting his representation for grant of rebate without any application of mind.

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Mr.K.K. Sharma, learned Senior Counsel, at the very outset, has restricted his arguments only to the extent of challenge to the vires of

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Rule 37(A)(xvi) of the Rules of 1986 and therefore, we are confining the scrutiny of the subject matter, in the writ petitions, only to the extent of the challenge to vires of the Rule aforesaid.

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It is an admitted case of the petitioners that they did enter into an agreement for collection of the royalty in the prescribed form (Annexure-1), which also contained a clause 3(xvi), which reads thus:-

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“3(xvi). Cancellation/surrender of leases or sanctioning of new leases/revision of dead rent of existing leases in the area concerned shall not have any impact on yearly contract amount.”

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It is also not disputed that the petitioners entered into a contract with the State Government and the contract was reduced to writing, with the terms and conditions stipulated therein, for the purpose of collection of the royalty, which specifically stipulated that there shall be no impact on yearly contract amount in the event of cancellation/ surrender of leases or sanction of new leases including permanent/ temporary closure by Government/Court.

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Rule 37(A)(xvi) of the Rules of 1986 has not been assailed as ultra-vires, on either of the grounds, viz., (i) lack of legislative competence; or (ii) violation of any of the fundamental rights guaranteed under Part-III of the Constitution of India or for any other constitutional provision. By a catena of judgments, it is settled law that there are only two grounds to strike down the law made by a legislative body, as aforesaid, and there is no third ground. It is also not open to strike down an enactment on the ground of arbitrariness or unreasonableness or even if, in the opinion of the court, the enactment may be unjustified.

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From the materials available on record, the grievance of the petitioners, while assailing the vires, legality and validity of Rule 37(A) (xvi) in the face of Section 56 of the Indian Contract Act, 1872, cannot be sustained for the reason that in such a situation alternative, efficacious and speedy remedy under the law is available to the petitioners.

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The grievance raised pleading the grounds is really one of unreasonableness and for those reasons, in our opinion, the challenge to the legality and validity of Rule 37(A)(xvi) being ultra-vires of Article 14 and 19(1)(g) of the Constitution, cannot be sustained. Further, it is an admitted case of the petitioners that the State-respondents modified the procedure by a policy dated 10^th December, 1986 and 12^th September, 1988 and thereafter, by policy circular dated 3^rd October, 1988.

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A mere fact of refusal of the State-respondents to grant rebate to the petitioners for the period in dispute i.e. 1^st April, 2013 to 18^th April, 2013; when the excavation of Bajri (sand) was completely stopped, cannot, by any stretch of imagination, be a ground to assail the vires of Rule 37(A)(xvi) of the Rules of 1986.

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From the admitted facts and materials available on record, it is evident that the petitioners entered into agreement(s) with the State Government, reduced to writing on 23^rd March, 2011 and 2^nd July, 2011, respectively. The agreement(s) stipulated terms and conditions including one under Clause 3(xvi) wherein it has been specifically provided that there shall be no impact on yearly contract amount of dead rent, for the existing leases in the area concerned. Thus, the

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petitioners were conscious of the terms and conditions of the contract, state of facts as well as the law applicable. Be that as it may, in the event of subsequent developments, the petitioners were at liberty either to rescind the contract or to seek restitution or to affirm the contract reserving their right to seek damages by way of restitution for the loss. The very fact that the petitioners resorted to collection of royalty in terms of the contract/agreement clearly indicates their affirmation. The petitioners neither rescinded the contract nor reserved their right to seek restitution by way of damages and proceeded further, is also indicative of the full knowledge of the facts to the petitioners. In these attending facts and circumstances, it can safely be concluded that the petitioners in spite of having acquired complete knowledge of the true facts proceeded with the collection of royalty in terms of the agreement(s). Thus, the petitioners took a conscious decision to elect to stand by the agreement(s).

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For the reasons and discussions herein above, we find it difficulty to accept the proposition of the learned Senior Counsel, on those grounds, to declare Rule 37(A)(xvi) of the Rules of 1986 ultra-vires of Article 14 and 19(1)(g) of the Constitution of India or Section 56 of the Indian Contract Act, 1872

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In the result, the challenge fails. Rule 37(A)(xvi) of the Rules of 1986 is absolutely intra-vires legal and valid.

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Since we have not put to scrutiny the matter on merits but for challenge to the vires of Rule 37(A)(xvi) of the Rules of 1986; it will open for the petitioners to avail of the remedies available under the law.

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In view of the final adjudication on the writ petitions, the stay application stands closed.

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No costs.

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(VEERENDR SINGH SIRADHANA), J. (AMITAVA ROY), CJ.

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Sunil/P.A.

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All corrections made in the judgment/order have been incorporated in the judgment/order being emailed. (Sunil Solanki) P.A.

Nawal Singh Ratnawat v. State Mines Departmentors

Case brief

What is this about?

What did the court decide?

Nawal Singh Ratnawat v. State Mines Departmentors

Case brief

What is this about?

What did the court decide?

What the court decided

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