The Quarry Owners Association Vs. The State of Bihar & Ors [2000] INSC 456 (29 August 2000)
Appeal (civil) 5090 of 1997 Appeal (civil) 5091 of 1997 Appeal (civil) 5092 of 1997
A.P.Misra, N.S.Hegde
L.I.T.J MISRA, J.
The issues in these appeals, apparently impress a common picturisation of usual nature but they are raised in an interesting way while challenging the fixation of the rate of royalty for the minor minerals under Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter referred to as the Act). The question for consideration is, the ambit of delegation of power by the Parliament to the State Government under Section 15 of the said Act. Can it be said that the delegation is unbridled without any check if it travels beyond the guideline as spelt by this Court in the case of D.K.
1986 (Supp.) SCC 20? In the present case neither the validity of delegation under Section 15 nor it being without any guideline is under challenge but both appellants and the respondents State stress two different orbits for the guideline, the appellants constrict it to be within what is spelt in the D.K. Trivedi case (supra) while the respondent stresses it not to be confined to that case. The impugned notifications dated 17th August, 1991 and 28th September, 1994 issued by the State of Bihar enhancing the rate of royalty have to be tested as in which of the two orbits it falls. If it falls within the restricted orbit, as submitted by the appellants, it may be ultra vires but would be valid if it falls within the other orbit. Mr. F.S.
Nariman, learned senior counsel, submits that extents and limitations of the power of the delegatee have to be read as laid down by this Court in D.K. Trivedi case (supra), where the validity of this very delegation of power to the State Government was under challenge. Based on this the submission is, Item 54 of the Second Schedule of the Act controls and guides the State Government (hereinafter referred to as the State), for fixing or enhancing the rate of royalty which has to be within the reasonable bounds of 12% of the sale price at the pits mouth. Admittedly in the present case it is far beyond this, hence the submission is that the impugned notifications are liable to be struck down. On the other hand, submission for the respondents - the State of Bihar by learned senior counsel Mr. Rakesh Dwivedi is that D.K. Trivedis case (Supra) neither restricts nor limits the power of enhancement of royalty to Item 54, Schedule II of the Act nor it exhaustively dealt with all other sources of guidelines which was not necessary in that case, which can be gathered from other provisions of the Act, the objects and reasons, the scheme of the Act and the nature of material etc..
Before entering into this legal tangle, it is necessary to turn to some of the essential facts to appreciate more fully the controversies. The present appeal is directed against the judgment and order dated 16th October, 1996 of the High Court, passed in a writ petition by which the petition of the appellants, namely, Quarry Owners Association challenging the aforesaid notifications dated 17th August, 1991 and 28th September, 1994, issued by the State including challenge to the recovery of the enhanced royalty under it and for the refund of the amount already paid was dismissed.
The Preamble of the Act lays down:
An Act to provide for the development and regulation of mines and minerals under the control of the Union.
Section 2 declares the expediency of Union to control the regulation of mines and development of minerals Section 3(a) defines minerals which includes all minerals except mineral oils. Section 3(e) defines minor minerals.
Section 4 refers to the prospecting or mining operations to be undertaken only under a licence or lease. Section 4A is for termination of prospecting licences or mining leases, sub-section (1) is for premature termination other than minor minerals while sub-section (2) is for minor minerals.
Section 5 imposes restrictions on the grant of such licences or leases. Section 6 specifies the maximum area for which a licence and lease may be granted, while Section 7 gives period for the grant and renewal of such prospective licences. Section 8 deals with the periods for mining leases. Sub-sections (1) and (2) of Section 9 refer to the payment of royalty at the rate specified in the Second Schedule whether granted before coming into force of this Act or subsequently. Sub-section (3), empowers the Central Government to amend the Second Schedule so as to enhance or reduce the rate of royalty payable. Section 9A obliges lessee to pay the dead rent. Sections 10 to 12 deal with the procedure for obtaining prospective licence, or mining leases in respect of the land in which minerals vest in the Government. Section 13 empowers the Central Government to make rules in respect of minerals. Section 14 specifically excludes Sections 5 to 13 from application of quarrying leases, mining leases or other minerals concessions in respect of minor minerals. Section 15 empowers the State to make rules in respect of minor minerals. Section 16 entrusts power to modify mining leases granted before 25th October, 1949. Section 17 gives special power to the Central Government to undertake prospecting or mining operations in certain lands. Section 18 refers to the mineral development. Licences and mining leases under the Act to be void under Section 19 if made in contravention of the Act, while Section 20 makes the Act and Rules to apply to all renewals. Section 21 imposes penalties. Section 22 refers to the cognizance of offences. Section 23-C empowers the State to make rules for preventing illegal mining, transportation and storage of minerals. Section 26 entrusts both Central and the State to delegate its power under the Act on officer or authority of the Central or State.
Sub-section (1) of Section 28 puts an obligation on the Central Government to place its rules and notifications before the Parliament which is subject to its modifications, if any. Similarly, the State is obliged to place its Rules and notifications before each houses of State Legislature under sub-Section (3). Section 29 makes existing rules to continue so long they are not in consistent with the Act and Rules. Section 30 empowers the Central Government to revise any order made by the State or any other authority. The First Schedule refers to the specified minerals, viz., Hydro carbons/energy minerals Atomic minerals and Metallic and non-metallic minerals with reference to Sections 4(3), 5(1), 7(2) and 8(2) while the Second Schedule refer to the rate of royalty in all States and Union Territories except the States of Assam and West Bengal while the Third Schedule refers to the rate of Dead Rent. Thus, the aforesaid Act expressly lays down the rates of royalty of the minerals through Schedule II read with Section 9. It is significant that Section 14 excludes Sections 5 to 13 specifically for minor minerals which includes Section 9. Section 15, entrusts power on the State to lay down Rules in respect of the minor minerals. Original Section 15 as it stood at the time of D.K. Trivedi (Supra), is quoted hereunder:
Section 15: Power of State Government to make rules in respect of minor minerals:- (1) The State Government may, by notification in the Official Gazette, make rules for regulating the grant of quarry leases, mining leases or other minerals concessions in respect of minor minerals and for purposes connected therewith.
(2) Until rules are made under sub-section (1), any rules made by a State Government regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals which are in force immediately before the commencement of this Act shall continue in force.
(3) The holder of a mining lease or any other mineral concession granted under any rule made under sub-section (1) shall pay royalty in respect of minor minerals removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee at the rate prescribed for the time being in the rules framed by the State Government in respect of minor minerals.
Provided that the State Government shall not enhance the rate of royalty in respect of any minor minerals for more than once during any period of four years.
This delegation of power to the State withstood its challenge in D.K. Trivedi case (Supra), as aforesaid.
Later this section was amended on 10th February, 1987, by introducing sub-section 1-A through Act No.37 of 1986. This was in particular and without prejudice to the generality of power conferred by sub-section 1 of Section 15. This sub-section 1-A is quoted hereunder:- (1-A): In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:- (a) the person by whom and the manner in which, applications for quarry leases, mining leases or other mineral concessions may be made and the fees to be paid therefor;
(b) the time within which, and the form in which, acknowledgement of the receipt of any such applications may be sent;
(c) the matters which may be considered where applications in respect of the same land are received within the same day;
(d) the terms on which, and the conditions subject to which and the authority by which quarry leases, mining leases or other mineral concessions may be granted or renewed;
(e) the procedure for obtaining quarry leases, mining leases or other mineral concessions;
(f) the facilities to be afforded by holders of quarry leases, mining leases or other mineral concessions to persons deputed by the Government for the purpose of undertaking research or training in matters relating to mining operations;
(g) the fixing and collection of rent, royalty, fees, dead rent, fines or other charges and the time within which and the manner in which these shall be payable;
(h) the manner in which rights of third parties may be protected (whether by way of payment of compensation or otherwise) in cases where any such party is prejudicially affected by reason of any prospecting or mining operations;
(i) the manner in which rehabilitation of flora and other vegetation, such as trees, shrubs and the like destroyed by reason of any quarrying on mining operations shall be made in the same area or in any other area selected by the State Government (whether by way of reimbursement of the cost of rehabilitation or otherwise) by the person holding the quarrying or mining lease;
(j) the manner in which and the conditions subject to which, a quarry lease, mining lease or other mineral concession may be transferred;
(k) the construction, maintenance and use of roads, power transmission lines, tramways, railways, aerial ropeways, pipelines and the making of passage for water for mining purposes on any land comprised in a quarry or mining lease or other mineral concession;
(l) the form of registers to be maintained under this Act;
(m) the reports and statements to be submitted by holders of quarry or mining leases or other mineral concessions and the authority to which such reports and statements shall be submitted;
(n) the period within which and the manner in which and the authority to which applications for revision of any order passed by any authority under these rules may be made, the fees to be paid therefor, and the powers of the revisional authority; and (o) any other matter which is to be, or may be prescribed.
The introduction of this sub-section 1-A including the Objects and Reasons, is submitted further enlarges the area of the guidelines to the State. Its Objects and Reasons are also quoted hereunder:- Statement of Objects and Reasons: The Mines and Minerals (Regulation and Development) Act, 1957 provides for the regulation of mines and the development of minerals under the control of the Union. Since the last amendment of the Act in 1972, many problems have come to the force. The adverse effects of mining operation on ecology and environment have increasingly come to notice. In many cases, mining operations have been undertaken without proper prospecting resulting in unscientific mining. Further, a number of Committees have stressed the need for amending certain provisions of the Act with the object of removing bottle-necks and promoting speedy development of mineral based Industries. State Governments and representatives of trade and industry have in formal forums like the Mineral Advisory Council as well as in other forums, expressed the desirability of taking a fresh look at the various provisions of the Act with a view to making them more effective and development oriented.
2. The suggestions made from time to time have been considered and incorporated in the present Bill, which, inter alia, includes the following salient features, namely :- (i) inclusion of 11 more minerals of national importance in the First Schedule to the Act;
(ii) premature termination of prospecting licences and mining leases on ecological and other grounds:
(iii) dispensing with the Certificate of Approval, Income-tax Clearance Certificate, etc. for the grant of prospecting licences and mining leases;
(iv) prospecting of an area and preparation of mining plan as a pre-condition for the grant of a mining lease;
(v) rationalisation of the period of mining leases, and renewals thereof;
(vi) shorter periodicity for purposes of revision of royalty and dead rent; and (vii) provision for increasing the quantum of punishment to curb illegal mining activities.
3. The Bill seeks to provide for the above objects.
It is also relevant to record here the rate of royalty fixed by the State for the minor minerals through various notifications in various years. Initially on 1st April, 1975 the rate of royalty fixed was Rs.2.50 per cubic meter that is Rs.7.07 per 100 cubic ft., Rs.1.75 per cubic meter that is Rs.4.95 for 100 cubic ft for Ballast and Boulder.
Next on 3rd August, 1977 the rate of stone chips, Ballast and Boulder was increased to Rs.3/- per cubic meter that is Rs.8.49 per 100 cubic ft and from 17th August, 1991 (impugned) the rate of royalty of stone chips, Ballast and Boulder was increased to Rs.12/- per cubic meter that is Rs.33.96 per 100 cubic ft. By notification dated 28th November, 1994 (impugned) the rate of royalty was Rs.25/- per cubic meter or Rs.70.75 per 100 cubic ft. for Ballast, Boulder and stone chips, which according to the appellants is more than 15 times as originally provided and more than 5 times in excess of the maximum rate of 12% of sale price at pits mouth under Entry 54 of Schedule II. It is also not in dispute by the aforesaid Act, under Item 54 of List I, VII Schedule of the Constitution of India, the regulation of mines and mineral development both of major and minor minerals came under the control of the Union, including fixation of the rate of royalty. The challenge to the aforesaid two notifications are that the State trespassed the limit of the guideline as laid and spelt out in D.K.
Trivedis case (Supra). Further, if that guideline has not to be, then there is no other check and control or guideline of the Union over the State Government. In contrast there is check over the other delegatee, viz., Central Government where under Section 28(1) rules or notifications by it including enhancement of royalty is to be laid before the Parliament. The High Court repealed the contention of the appellants by holding:
No doubt when the decision in the case of D.K.
Trivedi and sons (Supra) was given there were no specific guidelines in Section 15 of the Act. However..Amendment Act 1986 (Act No.37 of 1986) which came into force on 10th February, 1987, guidelines have been provided in Section 15 itself.clause (g) of sub-section 1-A provided that the rules may be framed by the State Government for fixing and collecting rent, royalty, fees etcThe guidelines provided for framing Rules in respect of minerals other than minor minerals do not remain relevant after insertion of sub-section 1-A in Section 15 of the Act.
However, submission for the appellants is sub-section 1-A only empowers the State Government but does not lay down any guideline, hence it cannot shield the State to be providing with any guideline, for which State has only to fall under Item 54 of Schedule II of the Act, which records:- Item 54: All other materials not herein before specified = Twelve per cent of sale price at the pits mouth.
The submission is, this is residuary item which cover all other minerals not specified in any of the preceding items in Schedule II. The minor minerals not being specified in any of the items it would fall under this entry.
It is also significant to record that minor minerals are used in the local areas for local purposes while major minerals are used for the industrial development for the National purpose. The crux of the matter for consideration is, whether is it only Sections 4 to 12 which controls or guides the State in fixing the royalty for the minor mineral and, if it is, whether Entry 54 of Schedule II places any ceiling of 12% of the sale price at the pits mouth for fixing this royalty by the State? In other words, does D.K.
Trivedi case (Supra) fore closes the issue of guideline or is it open to travel to other fields which guides the State for fixing the royalty.
The appellants are an association of quarry owners.
They were given permit/lease for the extraction of stone in respect of their respective places of operation in pursuance to such permit/lease. The State Government in exercise of its power under Section 15 of the aforesaid Act made rules called Bihar Minor Mineral Concession Rules 1972, (hereinafter referred to as the Rules) and fixed the royalties from time to time. Submission for the appellants is since rate of royalty on building stone including stone chips , Bolder, Road medal and ballast has been increased to more than 100% , the appellants are unable to pay, hence challenge this enhancement.
Mr. F.S. Nariman, learned senior counsel for the appellants submits, in order to judge the validity regarding excessive delegation one has to identify the power which is sought to be delegated. The power delegated to the State Government under Section 15 of the Act is the power to fix and collect royalty. It cannot be disputed that royalty is a tax. The question is, are there any guideline to vary the rate of royalty apart from D.K. Trivedis case (Supra).
The submission is, this decision settles the guideline by placing the restrictions on State power through Section 9 read with Item No.54 of the Second Schedule of the Act. The introduction of sub-section 1A in Section 15 of the Act makes no difference, as it is only an amplification and illustration of Section 15(1). Further, sub-clause (g) of Section 15(1A) only clothes the State with power to change the rate of royalty but it cannot be construed as giving any guideline. It is only when legislature fixes any maximum rate, beyond which delegatee cannot enhance the rate, it could be said it - retained sufficient control over the delegatee. The control of the Parliament in relation to the major minerals for such enhancement is enshrined in Section 28(1) of the Act, State of M.P. V. Mahalakshmi 1995 (Supp) 1 SCC 642 upheld such a delegation. The delegatee, viz., Central Government was entrusted with the power to amend the Second Schedule which fixes royalty but obligates the delegatee to lay such amendment before the Parliament. This is absent in the case of minor minerals.
Next it is submitted, this Court in Baijnath Kedias 1969 (3) SCC 838, held that the State legislature is denuded of all its legislative power over the minor minerals after the passing of the said Act, hence it looses its legislative control for fixing the royalty. The State only acts as delegatee of the Parliament to enhance the rate of royalty.
So far, Section 28(3), which is for minor minerals, merely provides laying down procedure before the State legislature for information and not with any entrustment of power to alter or modify the rate of royalty, hence Section 28(3) by itself cannot save the plea of excessive delegation of the legislative power. The language used in Section 28(3) is different from what is in Section 28(1), hence both cannot be equated. There is nothing to show that, in fact, the impugned notifications, were laid before the State legislature. So far Delegation Legislation Provision (Amendment) Act of 1983, it refers to the rules made by the State Government under a parliamentary Act for laying before the State legislature only with respect to the subjects under concurrent List 3 of VII Schedule of the Constitution of India and not in respect of subjects in exclusive competence of the Parliament under List I.
Learned senior counsel Mr. P.P. Rao, also appearing for some of the appellants submits, power to fix the rate of tax can be delegated provided the statute provides guidance for fixing such rate. The guidance may be by fixing maximum rates of tax or by providing consultation with the people, i.e., subject to the approval by them as held in Municipal Corporation of Delhi V. Birla Cotton 1968 (3) SCR 251.
Reasserting the principle as laid down in the case of Mahalakshim Fabrics (Supra), it is submitted Parliament has itself laid down for the major minerals the rate of royalty in the Second Schedule of the Act and authorised the Central Government to revise the rates. In doing so the Central Government has the guidance to keep in view the original rates. The fixation of royalty should have a direct nexus with the minerals throughout the country on a uniform pattern. Further, there is requirement that every rule or notification made by the Central Government is to be placed before each House of Parliament subject to agreed modification by both Houses. Thus, Section 28(1) permits Parliament to veto the enhanced rate of royalty. In contrast there is no such guideline so far minor minerals are concerned, except what is contained in D.K. Trivedis case (Supra). Based on that it is submitted that only provision among Sections 4 to 12 of the Act, which is relevant is Section 9(2) read with Entry 54 of the Second Schedule of the Act which fixes the limit of royalty at 12% of the sale price at the pits mouth. The very rationale of Entry 54 of List I of the Constitution is to regulate the mines and mineral development under the control of Union in the public interest. The preamble as well as Section 2 of the Act speak about the expedience of Union control of both major and minor minerals. Thus no part of the Act can be construed so as to take away the control of the Union.
Section 28(3) cannot be read so as to divest the Union of its control and vest the control in the respective State legislature. In view of difference in the language between Sections 28(3) and 28(1), the same purport what is contained in sub-section (1) cannot be brought into sub-section (3).
Further the taxing statute must be interpreted as it reads with no additions or subtractions of words and where two opinions are possible the one which benefits an assessee must be adopted.
Learned senior counsel Mr. S.B. Sanyal, in addition to the adoption of the submissions by the aforesaid two learned counsels further submits that Section 28(3) which is brought in through amendment cannot be construed to confer authority on the State legislature to modify any notifications or rules framed by the State Government. But laying of such rule or notification before the State legislature is only for the purpose of information. In a delegated legislation the control and authority of the Principal to modify or cancel any act of the delegatee must remain. Parliamentary control over delegated legislation should be living continuity as a constitutional necessity which is not to be found in the present case.
Repelling the submissions, Mr. Rakesh Dwivedi, learned senior counsel, appearing for the State of Bihar submits, in D.K. Trivedis case (Supra) Section 15, as it then stood, was questioned as suffering from the vice of excessive delegation of its legislative power. This Court held that sub-section (2) of Section 13 was merely particularisation or illustration of the generality of power already contained in sub-section (1) and since Section 15(1) was similar to Section 13(1), it could necessarily contain illustrations of Section 13(2) and the provisions of Section 13(2) being in the same sub-chapter as Section 15, would furnish sufficient guidelines. Reliance was also placed on the following observationsa made in that case:- The exclusion of the application of these sections to minor minerals means that these restrictions will not apply to minor minerals but it is left to the state governments to prescribe such restrictions as they think fit by rules made under Section 15(1).
The submission is, Sections 4 to 12, as they stood then, cannot be construed as restricting the power of delegatee over the minor minerals in view of Section 14. In fact, they were referred by this Court as it being available to the State Government for taking note while framing the rules. They are available not as restrictive or limiting its power but for its adoption wherever necessary. In fact, while judging the validity of the notifications impugned in that case, this Court was not called upon nor did it examine whether the State power to enhance royalty is restricted to Schedule 2 of Section 9 of the Act. Further, the guideline is also to be found in the preamble, the Statement of Objects and Reasons and other provisions of the Act.
Sections 4A, 17 and 18 also provide the guideline. Further after the amendment, the power of the Central Government under Section 9(3) of the Act for the modification of the rate of royalty for the major minerals is made very wide.
The only difference being that under Section 28(1) Parliament has opportunity to modify the rate fixed by the Central Government. This was because the Central Government was modifying the rates fixed by the Parliament itself.
Secondly, major minerals are minerals of national importance hence require uniform treatment at the national level. In contrast, the minor minerals are mostly used locally and are of local importance and hence their treatment is left to the State Government at the provincial level. This is in recognition of States original power to determine such royalty under Entry 54 of List II of the Seventh Schedule.
This is also in tune with the principle of federalism which requires local matters to be left for it being dealt with by the State Government.
Further submission is, in order to find the guidelines the nature of the subject matter is also to be considered.
The product, namely, minor minerals is neither produced nor it belong to the appellants. So it is not a case of imposition of tax simplicitor on the appellants but such tax in fact includes the price of the minerals which is the property of the State. In other words, it includes the price of the property which State parts with. Thus, royalty is a unique kind of tax which is different from other taxes.
Both royalty/dead rent are integral part of the lease as talked about in Section 4 of the Act and Section 105 of the Transfer of Property Act, 1882. Hence the lessee cannot insist that in spite of the minerals being parted by the State the mining should be made available cheaply so that they can derive profits, and even super profits. Further, fixation of maximum limit for royalty under Section 15 is not an absolute rule. In fact, the rate fixed has not been demonstrated to be confiscatory or arbitrary, for which the courts are there and if that be, it could be quashed.
Further the history of regulation of minerals shows that royalty has always been fixed by the State Government.
Under Rule 4 of the Mineral Concession Rules, 1949 framed by the Central Government under the 1948 Act, the State Government was given power to make rules with regard to the minor minerals. In fact, what was then delegated to the State by the Central Government has now been delegated by the Parliament itself. Thus the status of State Government has changed from sub-delegatee to delegatee. Next it is submitted, it is true that phraseology of Section 28(3) is differently couched than what is in Section 28(1). This is because the Parliament is directing the rules to be placed before the State legislature. This was done in view of the observations by this Court in D.K. Trivedis case (Supra).
It is also submitted that placement of such notification and rules under Section 28(3) before the State legislature cannot be said to be only a show piece but is meaningful.
He also submits since 1st April, 1975 the State of Bihar has increased royalty only four times and even now it has not raised royalty since 28.9.1994, despite the lapse of six years. Thus raising of royalty only four times during 25 years despite power to revise every three years shows that the Government has been more than reasonable in fixing the royalty.
In order to scrutinise the submissions of the learned counsels for the parties, it would be appropriate first to focus as to what this Court said in D.K. Trivedis case (Supra). The constitutionality of Section 15(1) of the said Act was raised with reference to the delegation of power to the State Government delegating essential legislative function, including charging and enhancing the rate of dead rent and royalty that it being unbridled, including challenge to the charging of the same during the subsistence of the existing leases, including the validity of Rule 21(b) of the Gujarat Minor Minerals Rules, 1966 and few notifications issued by the State Government under Section 15 in respect of the minor minerals. The relevant notifications were, one dated 29.11.1974 by which the State Government made Gujarat Minor Minerals (Fourth Amendment) Rules, 1974 whereby Rule (1) was substituted and Schedule II was amended w.e.f. 1.12.1974. By this the rate of royalty and dead rent in respect of some of the minor minerals were specified. Through the notification dated 29th October, 1975 the State Government brought in Gujarat Minor Minerals (Second Amendment) Rules, 1975, whereby Rule 21 of the said rules and Schedule I was substituted w.e.f. 1.11.1975, through which the rate of royalty in respect of several items were enhanced. The next notification was dated 6th April, 1976, by which the State Government made the Gujarat Minor Minerals (Second Amendment) Rules, 1976 through which it substituted Schedule II in the said rules, by which the dead rent was enhanced. The next notification was dated 26th March, 1979, through which the State Government made the Gujarat Minor Minerals (Amendment) Rules, 1979. Through this new Rule 21-B was inserted and Rule 22 was amended and Schedules I and II were substituted. By substituted Schedule I the rate of royalty on all minor minerals were specified as 10 p. per metric tonne and by substituted Schedule II the rate of dead rent per hectare or part thereof in respect of quarry leases was enhanced to Rs.1200/-, in certain cases Rs.1500/- in some other cases Rs.2,000/- in one case and Rs.3,000/- in the remaining cases. The contention raised before this Court was, that Section 15(1) of the Act is unconstitutional as it suffers from the vice of excessive delegation of the essential legislative power to the executive as it is unchannelised as there are no guidelines, which gives free hand to the State Government to act arbitrary. This submission for the lessee was rejected when this Court held:- We find that this contention is based upon a fallacy inasmuch as it is founded upon reading the provisions of Section 15(1) in isolation and without reference to other provisions of the 1957 Act and its legislative history.
This Court further held: 32. There is no substance in the contention that no guidelines are provided in the 1957 Act for the exercise of the rule-making power of the State Government under Section 15(1).
33.A provision similar to sub-section (2) of Section 13, however, does not find place in Section 15. In our opinion, this makes no difference. What sub- section (2) of Section 13 does is to give illustrations of the matters in respect of which the Central Government can make rules for regulating the grant of prospecting licences and mining leases in respect of minerals and for purposes connected therewith. The opening clause of sub-section (2) of Section 13, namely, In particular, and without prejudice to the generality of the foregoing power, makes it clear that the topics set out in that sub- section are already included in the general power conferred by sub-section (1) but are being listed to particularize them and to focus attention on them. The particular matters in respect of which the Central Government can make rules under sub-section (2) of Section 13 are, therefore, also matters with respect to which under sub-section (1) of Section 15 the State Government can make rules for regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals and for purposes connected therewith. When Section 14 directs that The provisions of Sections 4 to 13 (inclusive) shall not apply to quarry leases, mining leases or other mineral concessions in respect of minor minerals, what is intended is that the matters contained in those sections, so far as they concern minor minerals, will not be controlled by the Central Government but by the concerned State Government by exercising its rule- making power as a delegate of the Central Government. Sections 4 to 12 form a group of sections under the heading General restrictions on undertaking prospecting and mining operations. The exclusion of the application of these sections to minor minerals means that these restrictions will not apply to minor minerals but that it is left to the State Governments to prescribe such restrictions as they think fit by rules made under Section 15(1). The reason for treating minor minerals differently from minerals other than minor minerals is obvious. As seen from the definition of minor minerals given in clause (e) of Section 3, they are minerals which are mostly used in local areas and for local purposes while minerals other than minor minerals are those which are necessary for industrial development on a national scale and for the economy of the country. That is why matters relating to minor minerals have been left by Parliament to the State Government while reserving matters relating to minerals other than minor minerals to the Central Government.
This Court finally upheld the validity of sub-section (1) of Section 15 by holding that power conferred upon the State Governments does not amount to excessive delegation of any essential legislative power. It further held, there are sufficient guidelines for the exercise of rule-making power which are to be found in the object for which such power is conferred, namely, for regulating the grant of quarry leases, mining leases or mineral concessions in respect of minor minerals and for the purposes connected therewith. It also held that power to make rules under Section 15(1) includes to amend the rules so as to enhance the rates of royalty and dead rent. Further there is a check on the State Government not to enhance the rate of royalty/dead rent more than once during any period of four years in view of proviso to Section 15(3). It upheld notification dated 29th November, 1974, but held notification dated 29th October, 1975 as void as it offends the prohibition contained in the proviso to Section 15(3). It also similarly holds notification dated 6th April, 1976 as void as the same enhances the rates of dead rent for the second time during the same period of four years. It however holds notification dated 26th March, 1979 to be valid.
Strong hammering has been done by the learned counsels for the appellantss with reference to the observation made by this Court in D.K.Trivedis case (supra), where this Court records that the guidelines for the exercise of rule-making power under Section 15(1) are to be found in the restrictions and other matters contained in Sections 4 to 12 of the Act. Based on this, submission is that this restriction could only be, what is contained in Item 54 Schedule II read with Section 9 of the Act. The submission is, Item 54 refers to all other mines and minerals not hereinbefore specified which would include minor minerals as Section 3(a) defines Minerals very widely to mean all minerals except minerals oil. Hence the restriction which is stated, is really the restriction not to enhance the royalty beyond the rate specified in Item 54 which could only be upto 12% of sale price at the pits mouth.
In our considered opinion such a restrictive interpretation is not to be found in the D.K. Trivedis case (Supra). In that case, through the aforesaid 1979 notification, rate of dead rent was enhanced by substituting the then existing Schedule II. The then existing rate of dead rent in Schedule II was:
1. For specified minor minerals For every 100 sq. metres or part thereof, up to 5 hectares .. Re. 0.35 For each additional hectare or part thereof, exceeding 5 hectares ..Rs.50.00
2. For other minor minerals For every 100 sq. metres or part thereof upto 5 hectares ..Re. 0.20 For each additional hectare or part thereof exceeding 5 hectares ..Rs.35.00 This was substituted and the rate of dead rent per hectare was enhanced to Rs.1200/-, 1500/-, 2,000/- and 3,000/- in various cases. Though the enhancement through this notification of 1979 was enormous yet no submission was made, nor this Court adverted or recorded that this enhancement has to be restricted to 12% of the sale price at pits mouth in terms of Item 54 of Schedule II. In fact, in spite of this large enhancement, 1979 notification was upheld. The question, whether any such increase is arbitrary, excessive or violative of Article 14 is to be tested on a different pedestal. Any excessive exercise or arbitrary exercise of power by a delegatee could be controlled by the courts and if there are any, the courts would not hesitate to strike it down. Mere possibility of an abuse of power or arbitrary act, cannot invalidate any statute. To reach this, one has to make foundation with specific plea with reference to the facts and figures based on the circumstances of each case. In the present case, however, we are testing the submissions of the appellants, whether the said decision restricts the exercise of power by the State Government in enhancing the rate of royalty or dead rent to the rate as specified in Item 54 of Schedule II of the Act. This submission is based on the misconstruction of the statute and relying only on a part of the observation what is recorded in para 34 of that decision. This Court further records in the same para 34 that the guidelines with reference to Section 15(1) are to be found in the object for which such power is conferred, the illustrative matters set out in sub-section (2) of Section 13 and in the restriction and other matters contained in Section 4 to 12. Para 34 of the said decision records:-
34. The guidelines for the exercise of the rule-making power under Section 15(1) are, thus, to be found in the object for which such power is conferred (namely, for regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals and for purposes connected therewith), the meaning of the word regulating, the scope of the phrase for purposes connected therewith, the illustrative matters set out in sub-section (2) of Section 13, and in the restrictions and other matters contained in Sections 4 to 12.
It is relevant to refer here the preceding paragraph 33 with reference to Sections 4 to 12 were this Court records:
Sections 4 to 12 forms a group of sections under the heading General restrictions on undertaking prospecting and mining operations. The exclusion of the application of these sections to minor minerals means that these restrictions will not apply to minor minerals but that is left to the State Government to prescribe such restriction as they think fit by rules made under Section 15(1).
Thus this Court not only did not tie down the State Government to such restrictions, on the contrary left it open for it to prescribe such restrictions as it thinks fit.
In other words Sections 4 to 12, not being applicable to the minor minerals, the figurative restrictions what is contained there could not be made applicable, but of course they are available as a guide line to the State Government to take note of in other respects, while framing its rules.
So, they are available not as restrictive or limiting guidelines but are available otherwise for its consideration and adoption, wherever it is necessary. If submission for the appellants is accepted, it would militate against the express mandate of Parliament as contained in Section 14 which excludes Sections 4 to 12 from its application to minor minerals.
The fallacy of this submission that the rate of royalty and dead rent, for the minor minerals, is to be what is contained in Item 54 of Schedule II, is based on misconstruing both the said judgment of this Court and the provisions of the Act. The submission is, as Section 3(a) defines minerals which would include minor mineral, hence Item 54 as it records: all other minerals not hereinbefore specified would include minor minerals. It is an interpretation in abstract without taking into consideration Section 14. Section 14 specifically excludes Sections 5 to 13 (earlier it was Sections 4 to 13) from its application to minor minerals. Thus Second Schedule which refers to the rate of royalty in view of Section 9 could only refer to the minerals other than minor minerals. The language as recorded in Item 54, as aforesaid would only mean other residual major minerals not specified hereinbefore meaning that what is not specified in Item Nos. 1 to 53. This could never mean to include minor minerals. Thus the residuary mineral under Item 54 could only be the left over major minerals. Neither the residuary nor the left over major mineral could be equated with the minor mineral nor there is any material on record to draw such inference.
When this Court records : guidelines for the exercise of rule-making power under Section 15(1) is to be found in the restrictions and in the other matters contained in Sections 4 to 12. The use of word restriction is in view of the same words being used in the heading of this group of Sections 4 to 12. The heading states, General restriction on undertaking, prospecting and minor operations. In other words, the restriction referred to in para 34 co- relates to this heading of general restrictions to be taken note while framing the rules.
We may visualise this from another angle. This reference of general restrictions as contained in Sections 4 to 12 for it being taken note would only means to consider its broad principle and pattern while framing its own rules.
It cannot be doubted that Sections 4 to 12 also gives guidance to the State Government while acting as delegate under Section 15 while fixing rate of royalty. This guidance is to be found in Section 9 itself which refers to the royalties. Sub-section (1) of Section 9 provides, holder of a mining lease granted before the commencement of this Act to pay royalty in respect of any mineral removed or consumed from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral notwithstanding anything to the contrary contained in the instrument of lease and similarly sub-section (2) provides, after the commencement of this Act the holder of a mining lease shall pay royalty at the rate specified for the time being in the Second Schedule in respect of any particular mineral. Each of the aforesaid considerations itself may be taken note by the State Government while framing its own rules for the minor minerals. In other words, it may apply rate of royalty for the minor minerals at the same rate as the then existing rate, on the date this Act came into force. Schedule II with reference to Section 9 fixes rate of royalty for various minerals not being minor minerals is also a good source of guideline. There we find various methods applied for fixing or charging the royalty on the various minerals. It demonstrate charging of royalties per tone, per unit per cent, per tone of ore on prorata basis, per cent of sale price at the pits mouth etc.. In the case of gold, it is per one gram of gold per tonne of ore and on pro rata basis on the basis of per 100 kg. With reference to Uranium it is for dry ore with U3 O8 content of 0.05 per cent with pro rata increase/decrease @ Re.1.00 per metric tonne of ore for 0.01 per cent.
This pattern of charging also reveals a good guiding force while fixing any royalty by the State Government for the various minor minerals.
This apart, the guidelines even in the D.K. Trivedis case (Supra) does not confine itself to Sections 4 to 12 but further records, it to be found in the object for which such power is conferred, (namely, for regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals and for the purposes connected therewith) the meaning of the word regulating the scope of the phrase for purpose connected therewith the illustrative matters as set out in sub-section (2) of Section 13. We find that Section 13 gives power to the Central Government to make rules in respect of minerals other than minor minerals, while Section 15 gives power to the State Government to make rules in respect of minor minerals. The extent of exercise of power in both these sections are similar. The only difference is, Central Government exercises power in respect of all other minerals other than minor minerals, while the State Government exercises power for the minor minerals only. Section 13(2), in particular, gives power to the Central Government to make rules in respect of matters enumerated therein. Though they are already covered under Section 13 (1) but is more focused in sub section (2). There was no such similar sub-section in Section 15 when D.K. Trivedis case (Supra) was decided, though later it was brought in through amendment by incorporating sub-section 1A through Act No.37 of 1986 w.e.f. 10th February, 1987. This Court very clearly held in that case:- The ambit of the power under Section 13 and under Section 15 is, however, the same, the only difference being that in one case it is the Central Government which exercises the power in respect of minerals other than minor minerals while in the other case it is the State Government which do so in respect of minor minerals. Sub- section (2) of Section 13 which is illustrative of the general power conferred by Section 13(1) contains sufficient guidelines for the State Governments to follow in framing the rules under Section 15(1).
So, this Court held that sub-section (2) of Section 13, which is illustrative of the general power conferred by Section 13(1) itself contains sufficient guidelines for the State Government to frame its own rules under Section 15( 15(1).
It seems the Parliament in order to bring on parity, made similar provision for the minor minerals through insertion of Section 15(1-A) to equate it with Section 13 (2). This sub-section (1-A) similarly as Section 13 (2) is also illustrative of the general power conferred on Section 15 (1). Thus as sub-section (2) of Section 13 was held to be the guiding force to the State Government is now applicable to this sub-section (1-A) through the infusion of various sub-clauses in sub-Section (1-A). The submission that it is only power is equally applicable to sub-section (2) of Section 13. Even sub-dividing the exercise of power through various sub-clauses, both in Section 13 (2) and sub-Section (1-A) of Section 15 implicitly gives guideline to the delegatee. In fact, the Parliament itself through various amendments has been strengthening the guidelines to the State Government. Not only sub-Section (1-A) of Section 15 but even Section 4A and Section 17A were inserted through the same amending Act No.37 of 1986. Similarly, sub- section (3) was inserted in Section 28 by Act No.25 of 1994 and Section 23- C was inserted by Act No.38 of 1999. Even Section 14 was amended by the aforesaid Act No.37 of 1986.
Earlier Sections 4 to 13 were excluded for the minor minerals but through this amendment, the exclusion shrunk to Sections 5 to 13. In other words, both Sections 4 and 4A were made applicable even to the minor minerals. Further Section 4(1-A) which was inserted through Act No.38 of 1999 covers transport or storage of any mineral in accordance with the Act and Rules. In case the restrictive interpretation, as submitted for the appellant, to limit the States power within Entry 54 of Schedule II is accepted, it will lead to various incongruities. Section 6 fixes the maximum area of lease to be twenty-five square kilometers under sub-Section (a) and ten square kilometers under sub-section (b). Section 7 fixes 3 years for prospecting licence and Section 8 fixes maximum period of 30 years for mining lease. If the State Government has to take literally what is contained there then even for the minor Minerals State Government has to issue leases of such area for such a large period. This would be impracticable, in view of difference in the nature of major and minor minerals. Thus the fixation of period, area of leases and the rate of royalty for the major minerals is not equitable with that of the minor minerals.
Half hearted submission was also made by Mr. Sanyal, one of the learned senior counsel, that proviso to Section 9(3) limits the power of the Central Government to fix the rate of royalty not exceeding 20% while there is no such limitation on the power of the State Governments. It is sufficient to record here that this limitation has been lifted by amending sub-section (3) of Section 9. Now there is no such limitation on the power of the Central Government.
Now, we may proceed to examine another perceivable guideline to the State Government. It is significant, both Entry 54 List I of the Seventh Schedule of the Constitution and Entry 23 List II refer to the Regulation of mines and minerals development. This Entry has been reiterated both in the Preamble and the Statement of Objects and Reasons of this Act. This regulation of mines and minerals development clearly indicates the guidelines which the Parliament is projecting. Every word in a language is impregnated with and is flexible to connote different meaning, when used in context. That is why it is said, words are not static but dynamic and courts must adopt it that dynamic meaning which uphold the validity of any provision. This dynamism is the cause of saving many statutes of it being declared void, it dissolves the onslaught of any rigid and literal interpretation, it gives full thrust and satisfaction to achieve the objectivity which the legislature intended. Whenever there are two possible interpretations its true meaning and legislature intended has to be gathered, from the Preamble, Statement of Objects and Reasons and other provisions of the same statute. In order to find true meaning of any or what the legislature intended one has to go to the principle enunciated in the Heydons case, which laid down the following principle as early in the sixteenth century. 76 E.R. 637 = (1584) 3 Co. Rep. 7a 9.7; (1) What was the law before making of the Act; (2) What was the mischief or defect for which the law did not provide; (3) What is the remedy that the Act has provided; and (4) What is the reason of the remedy. The Court must adopt that construction which suppresses the mischief and advances the remedy. This Court has followed this principle in Bengal Shahzada Nand & Sons, AIR 1966 SC 1342 (1347); Sanghvi Chillies, Grains and Kirana Mercants Workers Union & Sankalachand Himatlal Sheth & Anr., AIR 1977 SC 2328 (2358) Anr., AIR 1981 SC 1922 (1929).
Returning to the present case we find the words regulation of mines and mineral development are incorporated both in the Preamble and Objects and Reasons of this Act. Before that we find Preamble of our Constitution in unequivocal words expresses for securing for our citizen, social, economical and political justice. It is in this background and in the context of the provisions of the Act we have to give meaning of the word regulation. The word regulation may have different meaning in different context but considering it in relation to the economic and social activities including the development and excavation of mines, ecological and environmental factors including States contribution in developing, manning and controlling such activities including parting with its wealth, viz., the minerals, the fixation of the rate of royalties would also be included within its meaning. This Court in State of held:- Word regulation has not got that rigidity of meaning as never to take in prohibition. In modern statutes concerned as they are with economic and social activities, regulation must of necessity, receive so wide an interpretation that in certain situations, it must exclude competition to the public sector from the private sector. More so in a welfare State. Must depends on the context in which the expression is used in the statute and the object sought to be achieved by the contemplated legislation. Each case must be judged on its own facts and in its own setting of time and circumstances and it may be that in regard to some economic activities and at some state of social development, prohibition with a view to State monopoly is the only practical and reasonable manner of regulation. The Mines and Minerals (Development and Regulation) Act aims at the conservation and the prudent and discriminating exploitation of minerals and prohibiting of leases in certain cases is part of the regulation contemplated by Section 15 of the Act.
So in regulating mineral development, the royalty/dead rent is the inherent part of it. State has thus before it number of factors which would guide it to fix, enhance or modify the royalty/dead rent payable by a lessee. The conservation and regulation of mines and mineral development includes wide activity of the State including parting with its wealth, are all relevant factors to be taken into consideration as a guiding force for fixing such royalty/dead rent. For interpretation of a Statute with reference to Preamble we may usefully refer the case of SC 478 where Constitution Bench held: In other words, in considering the question as to whether guidance was afforded to the delegate in bringing into operation the material provisions of the Act by laying down principles in that behalf, the Court consid/bn ered the statement of the principles contained in the preamble to the Act as well as in the material provisions of s. 3 itself. This decision shows that if we can find a reasonably clear statement of policy underlying the provisions of the Act either in the provisions of the Act or in the preamble, then any part of the Act cannot be attacked on the ground of delegated legislation by suggesting that questions of policy have been left to the delegate.....
With reference to the regulation of mineral development, with reference to the minor minerals the policy of the Act is communicating loudly from its roof top, that let it be done by the delegatees State who is fully aware of the local conditions as such mineral is also used for the local purposes and on whom this larges falls. What delegatee should do what it should not do is also enshrined in the Act. Section 18 is also not excluded from its application to the minor mineral development. Under it duty is cast duty on the Central Government to take all necessary steps for the conservation and systemic development of minerals in India. Its sub-section (2) focuses the periphery within which it has to do and what not to do.
This itself is a guidance which State may take note of while framing its own rules. Similarly Section 23-C gives detail guidance what State should provide to check illegal, mining, storage and transportation.
We have said Sections 4-A, 17, 18 and 23 C also provides for the guidelines. Sub-section (2) of Section 4-A empowers the State Government to premature terminate any prospecting licence or mining lease if it is expedient in the interest of regulation of mines and mineral development, preservation of natural environment, control of floods, prevention of population or for avoiding danger to the public health or communication or to ensure safety of buildings, monuments, structures or for other purposes.
Under sub-section (2) of Section 17, the Central Government undertakes reconnaissance, prospecting or mining operations in any area not already covered by any licence or lease, after consultation with the State Government but sub-section (3) obligates it to pay the permit fee, prospecting fee, royalty, surface rent or dead rent, at the same rate at which it would have been payable by any other person under this Act. This also is a check on the State Government, while fixing the rate of the royalty. Similarly, Section 18 which refers to the mineral development as aforesaid casts an obligation on the Central Government to take all such steps for the conservation and systematic development of minerals in India and for the protection of environment by preventing or controlling any pollution for which it may make rules and sub-section (2), in particular, specifies large list on which such rules may be framed, which has been framed (the Mineral Conservation and Development Rules, 1988), which would be binding on the Government including the State Government. In conserving or regulating the development of any mineral resources, the price factor is inherent. Any development requires, planning, execution, management and with reference to the excavation of mines, controlling the extent and manner of mining, to check its wastage, protecting environment and controlling pollution etc. which are provided in this Act. This all require expenditure to be incurred by the State coupled with considerations for parting with the wealth of the State, as minerals belongs to the State except on private land. They are all guiding factors in fixing, modifying or enhancing the rate of royalty. Thus development of mineral resources inherently refers to the price factor to be recovered by the owner.
One of the submission for the appellant is, since royalty is a tax, delegation for its enhancement cannot be left unbridled on the delegatee and if two interpretations are possible, the one which favours an assesee should be accepted. It is true that this Court has held royalties on State of Tamil Nadu and Ors. 1990(1) SCC 12, Orissa Cement State of Tamil Nadu & Ors. etc. etc. 1996(7) SC 16.
In considering this submission we have to keep in mind, tax on this royalty is distinct from other forms of taxes. This is not like a tax on income, wealth, sale or production of goods (excise) etc. This royalty includes the price for the consideration of parting with the right and privilege of the owner, namely, the State Government who own the mineral. In other words, the royalty/dead rent, which a lessee or licensee pays, includes the price the minerals which is the property of the State. Both royalty and dead rent are integral part of a lease. Thus, it does not constitutes usual tax as commonly understood but includes return for the consideration for parting with its property.
In view of this special nature of the subject under consideration, namely, the minerals, it would be too harsh to insist strict interpretation with reference to the guidelines to a delegatee who is also the owner of its mineral. In the present case, we are not considering any liability of tax on the assessee but whether delegation to the State by the Parliament with reference to minor minerals is unbridled.
One of the guidelines in the case of Mahalaxmi Fabric Mills Ltd. and Ors. (Supra) was that the Parliament had itself laid down with reference to major minerals, the rates of royalty in the Second Schedule of the Act and authorised the Central Government to revise the rates from time to time. So far minor minerals, also we find sub-section (2) of Section 15 approves the rules made by the State Government, regulating the grant of quarry leases, mining leases or other mineral concessions in respect of mine and mineral prior to the enforcement of this Act and similarly sub-section (3) approves the rate of royalty/dead rent prescribed for its payment in respect of minor minerals for the time being in force, i.e., what existed prior to the coming in force of this Act. Thus, even approval of the then existing rates of royalty or dead rent by the Parliament itself is similarly a guiding factor for any subsequent modification of its rate. The proviso to sub-section (3) brings an additional check on the enhancement of rate of royalty/dead rent that it cannot be enhanced more than once during any period of three years.
Prior to the Act No.37 of 1996 this period was of 4 years.
We have to keep in mind, in the present case, delegation of power is on the State Government which is the highest executive in the State, which is responsible to the State Legislature. In a Parliamentary democracy every act of the State Government is accountable to its people through State Legislature which itself is an additional factor which keeps the State Government under check to act arbitrarily or unreasonably. When a policy is clearly laid down in a statute with reference to the minor mineral with main object of the Act for its conservation and development, coupled with various other provisions to the Act guiding it, checking it and controlling it then how such delegation could be unbridled. With reference to Municipal Corporation Delhi, 1968 (3) SCR 251, the question of delegation of power to the Municipal Corporation and the State Government was Punjab and Ors. 1979 (1) SCC 137 was considered and relied as under:
In the Municipal Corporation of Delhi case, the proposition that where the power conferred on the corporation was not unguided, although widely worded, it could not be said to amount to excessive delegation, was upheld. Delegation coupled with a policy direction is good.
Counsel emphasised that the court had made a significant distinction between the local body with limited functions like a municipality and Government:
The needs of the State are unlimited and the purposes for which the State exists are also unlimited. The result of making delegation of a tax like sales tax to the State Government means a power to fix the tax without any limit even if the needs and purposes of the State are to be taken into account. On the other hand, in the case
