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PETITIONER: STATE OF M.P.

       Vs.

RESPONDENT: MAHALAXMI FABRIC MILLS LIMITED & ORS.

DATE OF JUDGMENT01/02/1995

BENCH: MAJMUDAR S.B. (J) BENCH: MAJMUDAR S.B. (J) KULDIP SINGH (J) HANSARIA B.L. (J)

CITATION:  1995 AIR 2213            1995 SCC  Supl.  (1) 642  JT 1995 (3)    93        1995 SCALE  (1)758

ACT:

HEADNOTE:

JUDGMENT: MAJMUDAR, J.: 1. Leave granted in both the petitions. 98 2.Two  main  questions are involved in these  four  appeals, namely,  whether  Section  9(3) of the  Mines  and  Minerals (Regulation & Development) Act. 1957, (hereinafter  referred to  as  ’the  Act’)  is ultra  vires  the  Constitution  and secondly  whether Notification dated 1st August 1991  issued by  the Central Government under Section 9(3) of the Act  is ultra vires, illegal and inoperative in law.  On these  com- mon  questions  we  have  heard  learned  counsel  for   the contesting  parties and are, therefore, disposing  of  these appeals by this common judgment. 3.A few relevant facts leading to these cases may be  stated at  the outset.  Appellants in C.A. Nos. 275/94  and  276/94 being  State of M.P. and Union of India  respectively,  were respondents   before,   the   High   Court   Special   Civil Miscellaneous Petition No. 10/93.  The respondents in  these appeals  were  the  original writ petitioners  in  the  High Court.   These respondents are purchasers of coal form  Coal India Ltd. which was respondent No.3 in writ petition.   The writ petitioners complained that the Notification dated  1st August,  1991 issued by the Union of India fixing new  rates of  royalty  on various varieties of coal  was  illegal  and inoperative  in law on various grounds, that  before  1.8.91 royalty  was  payable at the rate of Rs.6.50  per  ton  vide earlier Notification but the same was sought to be increased to  Rs.  120/- per ton by the new Notification.   Since  the said Notification was issued under Section 9(3) of the  Act, it  was submitted that the said provision confers  unguided, unchannelized  and arbitrary discretion to the Central  Gov- ernment  to  increase  the rates of royalty  to  any  higher amount and as no guidelines were provided for effecting  the said increases either under this Section or elsewhere in the

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Act,  the  Section  itself  is  an  instance  of   excessive delegation  of essential legislative power and hence it  was void.   That royalty on various varieties of coal was  fixed in  the  year 1981 vide earlier Notification issued  by  the Central  Government under Section 9(3).  Proviso to  Section 9(3)  permits revision of the rates of royalty  once  during every three years.  In the year 1982, several coal producing States  imposed coal development cess and started  receiving revenue  for  effecting development of their  mining  areas, till  they  were challenged by consumers of coal  by  filing several writ petitions in the High Courts.  The  controversy ultimately came to be decided by this Court in Orissa Cement Limited v. State of Orissa (AIR 1991 SC 1674), whereby  such cess was held to be invalid and beyond the legislative  com- petence of the State Government.  It appears that soon after the  aforesaid invalidation of the cess the  coal  producing States  were  faced with problem of  refunding  the  amounts obtained by them that far.  They, therefore, approached  the central Government for help in the matter.  In pursuance  to the  said approach, the Parliament passed an Act  validating the  cess  paid by the coal consumers upto the date  of  the judgment by issuing an ordinance styled as ’The Cess & Other Taxes  of Minerals Validation Ordinance, 1992.  We  are  not concerned with the said Ordinance and the subsequent Act  in the  present proceedings.  It appears that since  the  State Government  had  suffered financial losses  because  of  the invalidation  of the cess, they also approached the  Central Government  for  help  in  the  matter.   As  a  consequence thereof, a working group was constituted in this behalf  The said  working group suggested an increase in the royalty  to the  extent of Rs.70/- per ton of coal.  The  working  group also found 99 sufficient justification for compensating the coal producing States  to the extent of 100 per cent of the loss caused  by the   aforesaid   judgment  of  this   Court.    Since   the recommendation  was accepted by the Central Government,  the impugned Notification was issued by the Central  Government. According to the writ petitioners before the High Court  the increase  in the rates of royalty pursuant to the  Notifica- tion  was to the extent of 400 per cent to 2000 per cent  as compared  to the royalty fixed in 1981 on various  varieties of coal.  It was further contended before the High Court  by the writ petitioners that the royalty fixed in the  impugned Notification was payable to the concerned State  Governments by  the coal companies.  The coal companies passed  on  this burden to their customers and showed this amount clearly and specifically  in bills issued by them.  The  coal  companies have  no objection to ,the Notification and  are  supporting the  Central Government in this behalf The purchasers  being consumers  of coal were the affected parties who  challenged the said Notification.  About 60 petitions were filed before the M.P. High Court by various consumers of coal.  The  High Court heard learned counsel for all the respective  parties. The Division Bench by its judgment dated 17th December, 1993 took  the view that Section 9(3) of the Act was not  invalid or  illegal  on  any ground.  However, so  far  as  impugned Notification  on Section 9(3) was concerned, the High  Court was of the opinion that the said Notification was lacking in bonafides  and  as it was issued for meeting  the  financial deficiency suffered by States on account of the judgment  of this Court in Orissa Cement Case (supra) it was outside  the scope  of  Section  9(3) of the Act.   Having  reached  that conclusion, the Division Bench of the High Court quashed the impugned  Notification dated 1.8.91 but so far as the  ques-

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tion  of refund was concerned, the High Court took the  view that no direction of refund of any amount could be issued as the burden of enhanced royalty was already passed on to  the customers  by the manufacturers.  Accordingly, the writ  pe- tition was partly allowed.  This order of the Division Bench dated  17.12.93  is  brought in challenge by  the  State  of Madhya  Pradesh by filing C.A. No. 275/ 94  after  obtaining special  leave  to appeal against the said order  from  this Court.  The Union of India has also challenged the very same order  in C.A. No.276/94 after obtaining special leave.   So far as Special leave petition No.8190/94 is concerned, it is filed  by  M/s.  Birla Jute & Industries Ltd.,  one  of  the consumers of coal, which has also felt aggrieved by the hike in royalty of coal as imposed by the impugned  Notification. It raised the very same contention in the High Court by  way of  Misc.  Civil Case No.833/93. The writ petition filed  by M/s.  Birla Jute Industries Ltd., was also partly allowed by the  High Court following its order dated 17.12.93.  By  the order dated 28.1.94, it was held that the petitioner therein was  entitled to the same benefit on the same lines  as  was available  to  the  writ petitioners in  matter  decided  on 17.12.93.  The petitioner, Ws.  Birla Jute Industries  Ltd., by  special leave has contended that the High Court  was  in error  in  not granting refund of  the  illegally  collected royalty as impugned Notification was struck down by the High Court.  In appeal, pursuant to SLP(C) No. 3395/94, the State of  M.P. has brought in challenge a similar order passed  by the High Court on 17.12.93 in Misc.  Petition No. 7907/ 92. 100 4.There  are number of other civil appeals arising from  the similar orders passed in the said writ petitions.  But as we have  heard  learned counsel in these four matters,  we  are disposing  of only these four matters in the first  instance by this judgment. S.Learned Solicitor General and Additional Solicitor General in  support  of C.A. Nos. 275/94, 276/94  and  Civil  Appeal arising  out of SLP(C) No. 3 3 95/94,  vehemently  contended that  the High Court was patently in error in striking  down the impugned Notification dated 1.8.91. It was submitted  by them  that  once this Court took the view in  Orissa  Cement Company’s case that royalty could not be imposed by  States, that it was within the domain of the Central Legislature  in view  of  the  Entry 54 of List I of  Schedule  VII  of  the Constitution  and when the Parliament had  already  occupied the field pertaining to regulation and development of  mines and minerals in the country be enacting the Act in 1957,  if the  rates of royalty were to be increased, it was only  the Central Government which could exercise power under  Section 9(3)  of  the Act and as the royalty had to be paid  to  the States,  there  was nothing wrong in  issuing  the  impugned Notification under which increased rates of royalty would be made available to the concerned States.  Equally, there  was nothing wrong in Section 9(3) which gives enough guidance to the  Central  Government for issuing such  Notification  and that  such Notification could not be said to be ultra  vires or  illegal or unconstitutional as wrongly held by the  High Court.   On  the  other hand,  Mr.  Sanghi,  senior  counsel appearing  for the respondents, submitted that Section  9(3) of   the  Act  was  a  piece  of  excessive  delegation   of legislative  power  of  Parliament, that  it  laid  down  no guidelines   for  the  Central  Government  to  follow   for increasing the rates of royalty.  That even otherwise as  it sought to tax mineral rights the said Section was beyond the legislative competence of the Parliament as such legislation would  be  covered by Entry 50 of the List 2  of  the  VIIth

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Schedule.   It  was next contended by Shri Sanghi  that  the impugned  Notification enhancing the royalty by  almost  200 per  cent was ultra vires the purpose and object of the  Act as the purpose of the Notification was to increase the  rev- enues  of  the State Governments in  whose  territories  the concerned  mines were situated and as it had nothing  to  do with  the  development of the mines,  the  Notification  was beyond the scope and ambit of Section 9(3) of the Act.   Mr. Sorabjee,   learned   senior  counsel  appearing   for   the appellant,  M/s.Birla  Jute  Industries  Ltd.,  adopted  the arguments  of  Mr.  Sanghi and further  submitted  that  the Notification  issued  under Section 9(3)  must  have  direct nexus  with  royalty which would be a payment made  for  the privilege of removing the minerals and it had to be  charged on the quantity removed.  That no Notification under Section 9(3)  could  be issued by the Central  Government  only  for increasing  the general revenues of the States, that such  a purpose  is  outside  the  scope  of  Section  9(3)  and  in substance   by  the  impugned  Notification,   the   Central Government had imposed a tax for the purpose of swelling the revenues of the States and not for the purpose of increasing royalty  on any permissible ground which may be  within  the scope  of  Section 9(3) of the Act.  Mr.  Dholakia,  learned senior counsel appearing for Respondent No.1 in Civil Appeal 1994/95  arising  out  of  SLP(C)  No.  3395/  94,   broadly supported the aforesaid contentions of Shri Sanghi and  Shri Sorabjee and further contended that Section 9 of 101 the  Act  has nothing to do with  mineral  development  and, therefore,  enactment  of Section 9 could not  be  supported under Entry 54 of the Union List but would be covered by the sweep  of  Entry5O  of the  State  List.   Mr.  Chidambaram, learned  senior counsel, appearing for some of the  original writ petitioners before the High Court in companion matters, also adopted the arguments of Shri Sanghi and Shri  Sorabjee and  further  contended that as laid down by this  Court  in Indian Cement case royalty is a tax, and there was no  Entry in  the  Union List which could support such a  tax  and  it would clearly fall within the scope and ambit of Entry 50 of the State List.  He further contended that every tax  should have  a  tax  entry  and as  there  was  no  specific  entry regarding  imposition of tax by way of royalty in the  Union List  such  tax could be covered by Entry 50  of  the  State list,   and  so,  impugned  Section  9(3)  is   beyond   the legislative power of the Parliament. 6.Mr. Ramaswamy, leamed senior counsel, who was permitted to intervene  supported the contention of the aforesaid  leamed counsel for the writ petitioners and further contended  that the  impugned  Notification, even if assumed  partly  to  be based on relevant grounds, at least partly was not based  on relevant grounds as it was not wholly issued for the purpose of   development  of  minerals  but  for  the   purpose   of development  of  State coffers and,  therefore,  the  entire Notification   has  to  be  struck  down  as   invalid   and incompetent.   An  alien purpose cannot be  mixed  with  the relevant  purpose  for exercising  any  statutory  powereven including  the  power  to  exercise  delegated   legislative function. 7.   In  the  light of the aforesaid rival  conditions,  the following points arise for our determination:- 1.   Whether  Section  9(3) of the Act is  ultra  vires  the Constitution and/or is illegal on any other ground? 2.   Whether  the impugned Notification is beyond  scope  of Section  9(3)  of the Act and,  therefore,  incompetent  and invalid?

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3.   Whether  the  impugned  Notification  is  a  piece   of colourable exercise of power? 4.   Whether  the  impugned Notification  is  arbitrary  and confiscatory in nature? As discussed hereinafter, answers to the above points are as follows:-               1st   In the negative;               2nd   In the negative,               3rd   In the negative;               4th   In the negative. 8.   We shall deal with these points seriatim. Point No. 1 9.   So far as vires of Section 9 are concerned, it must  be kept  in  view that a Constitution Bench of this  Court  has held  in  the case Baijnath v.State of Bihar, (AIR  1970  SC 1436)  that the Act is enacted by Parliament under Entry  54 of  the  Union list.  In this  connection  the  Constitution Bench  speaking  through  Hdayatullah  C.J.,  has  made  the following observations:-               "Entry  54  of the Union List speaks  both  of               Regulation and mines and minerals  development               and Entry 23 of State list is subject to Entry               54 of Union list.  It is open to Parliament to               declare that it is ex-               102               pedient  in the public interest that the  con-               trol  should vest in Central  Government.   To               what  extent such a declaration can go is  for               Parliament  to  determine  and  this  must  be               commensurate with public interest.  Once  this               declaration is made and the extent laid  down,               the subject of legislation to the extent  laid               down   becomes   an  exclusive   subject   for               legislation by Parliament. Any legislation  by               the State after such declaration and trenching               upon  the field disclosed in  the  declaration               must  necessarily be unconstitutional  because               that field is abstracted from the  legislative               competence of the State legislative. 10.Once  it  is  held  that the entire  Act  is  within  the exclusive  domain  of legislative power  of  the  Parliament under  Entry  54 of the Union list it becomes  obvious  that Section  9 which is a part and parcel of the same Act  would also  fall  within Entry 5 which deals  with  regulation  of mines  an development of minerals and for which  declaration is already found in Section 2 of the Act to the effect  that such  regulation  of mines and  minerals  development  under control  of the Union is expedient in public  interest.   We may now turn to Section 9 which reads as under:-               "9. Royalties in respect of mining leases:-               (1)   The  holder  of  mining  lease   granted               before the commencement of this Act shall, not               withstanding anything contained in  instrument               of  lease  or  in any law  in  force  at  such                             commencement,  pay  royalty in respect  of  an y               mineral  removed or consumed by him or by  his               agent,  manager, employee, contractor or  sub-               lessee   from  the  leased  area  after   such               commencement  at the rate for the  time  being               specified in the Second Schedule in respect of               that mineral.               (2)   The holder of a mining lease granted  on               or  after the commencement of this  Act  shall               pay royalty in respect of any mineral  removed

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             or  consumed by him or by his agent,  manager,               employee,  contractor or sub-lessee  from  the               leased  area  at the rate for the  time  being               specified in the Second Schedule in respect of               that mineral.               (2-A)  The holder of a mining  lease,  whether               granted  before or after commencement  of  the               Mines and Minerals (Regulation &  Development)               Amendment Act, 1972, (56 of 1972) shall not be               liable  to pay any royalty in respect  of  any               coal  consumed  by  a  workman  engaged  in  a               colliery provided that such consumption by the               workman  does not exceed one-third of a  tonne               per month.               (3)   The    Central   Government   may,    by               notification  in the official  Gazette,  amend               the Second Schedule so as to enhance or reduce               the rate at which royalty shall be payable  in               respect of any minerals with effect from  such               date as may be specified in the notification:               Provided that the Central Government shall not               enhance the rate of royalty in respect of  any               mineral  more than once during any  period  of               (three years)." 11.It becomes obvious that Parliament while enacting Section 9  has already laid down the rates of royalty to be  charged on  the removal and consumption of mineral by any lessee  of mining  lease, his agent or manager of sub-lessee, from  the leased area.  The rates of royalty are scheduled in the Act. So far as coal is concerned it is by Entry 11 of the  Second Schedule.  Separate rates of royalty are prescribed for dif- ferent  types  of coal.  However, the Parliament  felt  that these  rates  of royalty may be required to be  enhanced  or reduced from time to time due to fall of money value 103 with  the  passage  of time of vice  versa.  For  that  very purpose  the  Central  Government as  per  Section  9(3)  is permitted  by  Parliament to amend the  Second  Schedule  by Notification  to be published in Official Gazette from  time to  time-subject to the proviso that the Central  Government shall  not enhance mineral and mines royalty for  more  than once during the period of three years.  The power  conferred upon the Central Government under Section 9(3) is by way  of delegated  legislative  power.  Vires of  Section  9(3)  was challenged  on twin grounds by Shri Sanghi,  learned  senior counsel.  In the first instance he submitted that if royalty is  a tax, there should be a clear entry in the  Union  list permitting  the Parliament to impose such a tax.  He  placed reliance on M/s.  International Tourist Corporation &  Ors., Avtar  Singh & Ors Namaskar Bus Service and Others V.  State of  Haryana & Others, State of UP. & Others, (1981  (2)  SCC 318) and State of Mysore & Others Vs.  M/s D Cawasji &Co.  & Others,  (1971 (2) SCR 799), and submitted that there is  no such  entry regarding tax on royalty in the Union  list;  on the contrary, tax on mineral rights is found in Entry 50  of the  State  list.   Therefore,  Mr.  Sanghi  submitted  that legislative  competence in connect-ion with tax  on  mineral rights would be exclusively of State legislature and not  of the  Parliament and, therefore, Section 9(3) is  beyond  the legislature competence of the Parliament.  The second leg of challenge  was  that  in  any  case  by  Section  9(3)   the Parliament has delegated its legislative power in favour  of the Central Government by way of excessive delegation and no guidelines are found in the Section as to on what basis  the Central  Government  once  in three  years  can  revise  the

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royalty  rates and what would be the relevant  criteria  for the said exercise. As  the Section is silent on these vital aspects, it has  to be  held  to  be  suffering  from  the  vice  of   excessive delegation of legislative power. 12.  In  our  considered opinion there is  no  substance  in either  of  the twin contentions for  challenging  vires  of Section 9(3).  So far as to competence to enact Section 9 is concerned,  the question is no longer res integral.   It  is covered by the Constitution Bench decision of this Court  in the case India Cement Ltd. & Others Vs.  State of Tamil Nadu &  Others,  (1990  (1)  SCC  12).   In  that  decision   the Constitution Bench speaking through Sabyasachi Mukherji  J., as  he then was, expressly rules that royalty is a  tax  and for imposing such royalty the State legislature will have no power  under  Entry  50  of the  Second  list.   Mr.  Sanghi contended that strictly royalty cannot -be said to be a  tax and  to that extent the decision of the  Constitution  Bench may  appear  to be erroneous.  It is not possible  to  agree with  this  contention.  In paragraph 34 of the  report  the Constitution Bench has made the following pertinent observa- tions:-               34.   "In the aforesaid view of the matter  we               arc of the opinion that royalty is a tax,  and               -as such a cess on the royalty being a tax  on               royalty, is beyond the competence of the State               legislature  because Section 9 of the  Central               Act covers the field and the State legislature               is denuded of its competence under Entry 23 of               List  H.  In any event we are of  the  opinion               that cess on royalty cannot be sustained under               Entry  49 of List II as being a tax a  tax  on               land but a payment for the user of land." 13.It  is  true  that  in paragraph 13  of  the  report  the Constitution  Bench noted the on land.  Royalty  on  mineral rights is not 104 judgments  of  Rajasthan, Punjab and  Gujarath  High  Courts which  had taken the view that royalty was not a tax and  it is  equally true that it is not expressly mentioned  in  the judgment of the Constitution Bench that these judgments were erroneous  or were required to be over ruled.  However on  a conjoint  reading  of  paras 31 and 34  of  the  report,  it becomes  obvious that the view that royalty is not a tax  as expressed by these High Courts did not find favour with  the Constitution Bench of this Court which took a contrary view. Therefore, these judgments necessarily stood over ruled,  on this aspect.  It is true that in the last line of  paragraph 34  it is mentioned that royalty on mineral rights is not  a tax  on  land  but  a payment for  use  of  land  but  these observations  are in connection with Entry 49 List II  which deals  with a tax on land.  But so far as nature of  royalty is  concerned  it  is  clearly rules to  be  a  tax  by  the Constitution   Bench,  and  that  is  the  reason  why   the Constitution  Bench reached the conclusion that any cess  on the royalty would be a tax.  It would be beyond  legislative competence  of the State legislature as Entry 50 in List  II would  be of no avail once the Parliament has  occupied  the field  by  enacting the Act, especially Section  9  thereof. The view of the Constitution Bench that royalty is a tax  as found  in paragraph 34 of the report can also  be  supported from other paragraphs of the report.  In paragraph 23 of the report while agreeing with Mr. Nariman that royalty which is indirectly  connected with land cannot be said to be  a  tax directly on land as a unit, it has been observed that no tax

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can  be  levied  or leviable if  no  mining  activities  are carried on.  Hence it is manifest that it is not related to, land as a unit which is the only method of valuation of land under  Entry  49  of List II but is  relatable  to  minerals extracted.   Royalty is payable on a proportion of the  min- erals extracted.  These observations in paragraph 23 clearly indicates  that in view of the Constitution  Bench,  royalty was  a tax which had a nexus with mining activities  meaning thereby  it was a tax on mineral rights.  Similarly in  para 27 of the report, the Constitution Bench noted with approval of  the decision of the Division Bench of the High Court  of Mysore  in Laxminarayana Mining Co. Bangalore v. Taluk  Dev. Board  (AIR  1972 Mysore 299).  In the case  the  Court  was concerned  with  the  Mysore village  Panchayats  and  Local Boards  Act, 1959.  Under the said act the Board had  sought to  levy tax on mining activities carried on by the  persons holding mineral concessions.  The mysore Court had  observed that  once the Parliament made a declaration by law that  it is  expedient in the public interest to make  regulation  on mines  and  minerals development under the  control  of  the Union to the extent to which such regulation and development is undertaken by the law made by the Parliament. the’  power of the State legislature under entries 23 and 50 of List  II got  denuded.   It would, therefore, be not said  that  even after  passing of the Central Act, the State legislature  by enacting  Section 143 of the Act could confer power  on  the Taluk Board to levy tax on the mining activities carried  on by   the   persons   holding   mineral   concessions.    The Constitution Bench then noted that at page 306 of the report of Mysore case it was held that royalty fixed under  Section 9  of the Mines and Minerals Act was really a tax.  It  must be kept in view that this decision of the Mysore High  Court was noticed by the Constitution Bench and was not  dissented from.   On the other hand it got approved by it.   It  must, therefore, be 105 held that royalty imposed had to, be treated as tax as ruled by the Constitution Bench of this Court in India Cement Case (supra).   It is no doubt true that in the late decision  of this  Court in Orissa Cement Ltd. & Ors. etc. etc. v.  State of Orissa & Ors. etc. etc., (1991 (2) SCR 105), a threeJudge Bench  of  this Court did not go into the  question  whether there  was  any typegraphical error in the judgment  of  the Constitution Bench as found in para 34 of its report when it held  that  royalty is a tax.  But in view of what  we  have discussed have it becomes absolutely clear that there was no typographical error but on the contrary the said  conclusion logically flew from’ the earlier paragraphs of the  judgment referred to by us hereinabove. 14.  Once  the conclusion is reached that royalty is a  tax, the next question arises whether Entry 50 of the State  list can  at  all be resorted to for imposing such a tax  by  the State  legislature.   Even that question  is  fully  covered against  the writ petitioners by the very same  Constitution Bench judgment of India CementOrs.  In para 24 of the report it  has been observed while repelling the contention of  Mr. Krishnamurthy Iyer for the State of Tamil Nadu that Entry 50 in List II of the Seventh Schedule can be of any avail,  the Constitution Bench noted that Entry 23 of List II deals with regulation of mines and minerals development subject to  the provision   of  List  I  with  respect  to  regulation   and development  under the control of the Union and Entry 54  in List I deals with regulation of mines and minerals under the control  of  Union declared by the Parliament by law  to  be expedient in public interest Thereafter it was observed that

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even if minerals are part of the State list they are treated separately  and, therefore, the principle that the  specific excludes  the general must be applied.  In  this  connection reference was made to the case of H.R.S. Murthy v. Collector of Chittor 1964(6) SCR 666), where it was held that cess  on minerals  would  be  covered by Entry 49 of  List  II.   The Constitution  Bench  with  regard to  H.R.S.  Murthy’s  case observed  in paragraphs 29 and 30 of India Cement Ltd.  case that attention of the Court was not invited to provisions of Mines and Minerals (Development & Regulation) Act, 1957  and Section 9(3) thereof Section 9(3) of the Act in terms states that  royalties payable under the IInd Schedule of  the  Act shall not be enhanced more than once during a period of four years.   It  is,  therefore,  a  clear  bar  on  the   State Legislature  taxing  royalty so as to in  fact...amend  IInd Schedule of the Central Act.  As seen earlier inparagraph 32 of  the  report in India Cement Case, it  has  been  clearly mentioned that in view of the express provisions of Mines  & Minerals Act, 1957, Entry 50 cannot be of any assistance  to sustain  such  legislation by the, State.  Oza.  J.  in  his concurring judgment has highlighted one additional dimension of  the  matter  in  para 40 of the  report.   It  has  been observed by Oza J., that it is no doubt true that mineral is extracted  from the land and is available but it could  only be extracted if there art three things: (1) land from  which mineral  could  be  extracted.  (2)  capital  for  providing machinery,  instruments  and  other  requirements,  and  (3) labour.   It  is, therefore, clear that unit  of  charge  of royalty is not only land but land + labour + capital.  It is also to clear that if royalty is a tax or an imposition or a levy,  it is not on land alone but it is a levy or a tax  on mineral,  including  land, labour and  capital  employed  in extraction  of  the  mineral.  It is  therefore  clear  that royalty if imposed by 106 the Parliament could only be a tax not only on land but also on these three things stated above. 15.Inview  of  the decision of Constitution Bench it  is  no longer open to the writ petitioners to submit that Entry  50 of -List II can still be available to State legislature.  It is easy to visualise that once the Parliament has,  occupied the  field  in  connection  with  regulation  of  mines  and minerals development in the country and when the  Parliament declares  that it is expedient in the public interest so  to do, Entry 23 of the State list regarding regulation of mines and  minerals development would be of no avail to the  State legislature as Entry 23 List II is subject to the  provision of List 1, nor will Entry 50 of the State list can be of any assistance  to  the State authorities.  In short,  both  the entries   will  be  out  of  way  in  enacting   appropriate legislation  imposing  the rates of royalty to  be  paid  by those  who  extract minerals in the  country.   Once,  these Entries are out of picture, it is Entry 54 in the Union list which will operate and the imposition of tax on minerals ex- tracted  would  be squarely got covered by Entry 54  of  the Union  list.   To recapitulate, as the entire Act  has  been upheld  by this Court in its earlier decisions to which  we, have  made reference in the light of Entry 54 of  the  Union list, Section 9 being part and parcel thereof cannot be  out of the sweep of Entry 54.  However, even assuming that there should  be  a  specific taxing  entry  regarding  taxing  of royalty on mineral rights which can sustain such legislation under the said entry, being a topic of legislative power, we find that there is no such specific entry in Union list  nor in  State  list  or  concurrent list which  can  be  of  any

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assistance  in this connection.  Entry 50 in the State  list is  out  of  picture as we have  seen  earlier.   In-  these circumstances the State legislature cannot rely on any entry in the State list or concurrent list for imposing such a tax once a valid legislation by Parliament under Entry 54 of the Union  list  is  holding  the  field.   In  the  alternative imposition  of such hybrid tax on mines + capital  +  labour would  be  covered by residuary Entry 97 of the  Union  list which  empowers the Parliament to enact laws on  topics  not covered  by others specific entries in List II or List  III. This conclusion squarely flows from the observations made by Oza  J., in his concurring judgment in India Cement  Ors.... It  must,  therefore, be held that Section 9 of the  Act  is within  the  legislative competence of the  Parliament  both under Entry 54 of the Union list as well as Entry 97 thereof The  first ground of attack on Section 9 by Shri  Sanghi  is thus devoid of substance and is, therefore, -rejected. 16.  Mr. Sanghi next submitted that Section  9(3)   is    an piece of ’delegated legislation    and it should not  suffer from the vice of excessive delegation.  No exception can  be taken to this submission of Shri Sanghi.  Let us try to  see whether Section 9(3) suffers from any such vice.  It must be kept in view that Parliament itself has laid down the  rates of  royalty in the IInd schedule of the Act.   However,  the Parliament  felt  that with passage of time these  rates  of royalty  may have to be suitably modified.  This is  obvious as the Act was enacted years back  in 1957.  The  purchasing power  of rupee went on failing year after year  and  decade after decade.  Therefore, instead of Parliament itself every time  being required to increase the rates, it left  to  the Central  Government to do so but it imposed certain  fetters on  the  power  of the  Central  Government.   Firstly,  the proviso of Section 107 9(3)  clearly lays down that such enhancement should not  be made  before the end of four years and  now  after-amendment before  the  end of three years.  This  itself  indicates  a guideline  laid  down  by the Parliament that  the  rate  of inflation  and  fall of money value of the rupee  should  be considered  once in three years and that the royalty  should be enhanced only once in three years.  The second  guideline in  Section  9(3)  is  pertaining  to  the  very  topic   of delegation   of   such  legislative  power.    The   Central "Government has to keep in view the original rates mentioned in  End  Schedule  in connection  with  different  types  of minerals  and  to suggest suitable enhancement once  in  the three  years depending upon the requirements of  the  States concerned  for whom the royalty is meant.  It is to be  paid by  holder  of  mining lease who extracts  minerals.   If  a person is merely in occupation of land which contains  mines and minerals, he is not liable to pay any royalty but it  is only  when  he holds a mining lease and by  virtue  of  that extracts one or more minerals then only he is called upon to pay  royalty  to  the State Government as the  lease  is  in respect  of  the land in which minerals vest  in  the  State Government.   This exercise is to be carried out keeping  in view the very object and purpose of the Act, namely, regula- tion  of  mines and development of minerals  which  are  the catch  words of Entry 54 of List II under which the  Act  is enacted.   Therefore,  fixation  of royalty  should  have  a direct  nexus with the minerals through out the  country  on uniform pattern so that activity of winning the minerals for the  benefit  of the lessees of such mining  leases  in  the first  instance  and ultimately for the economy as  a  whole should not get in any way frustrated.  There are  sufficient

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guidelines from the Act to enable the Central Government  to exercise  its delegated legislative function in a  just  and proper  manner  keeping in view the uniform  development  of minerals through out the country.  In this connection it  is also  necessary  to keep in view Section 28  subsection  (1) which  provides that every rule or notification made by  the Central Government be placed before each House of Parliament for  a  total period of 30 days in one session or  two  more successive  session and if both Houses agree in  making  any modification in the rule or Notification should not be made, the  rule or Notification shall thereafter have effect  only in  such modified form or be of no effect, as the  case  may be.  When such a safety valve is provided it cannot be  said that the exercise of delegated legislative power by  Central Government  in the first instance under Section  9(3)  would suffer from any excessive delegation of legislative power or effacement of legislative power of the Parliament. 17.  In our view the High Court correctly held that  Section 9(3)  does  not  suffer from  any  excessive  delegation  of legislative  power.  Before parting with this discussion  we may  deal  with  one more submission  of  Shri  Sanghi.   He submitted  that earlier the legislation had itself  provided in  Section  9(3)  a ceiling for  enhancement  of  rates  of royalty  and  to  that extent there was a  safety  valve  or guideline  by Parliament.  But after amendment this  ceiling is  given  a  go  bye  and  hence  the  Section  has  become arbitrary.  It is not possible to agree with this contention for  the obvious reason that whatever enhanced rate of  roy- alty  is  fixed by Notification by  the  Central  Government under  Section 9(3), it has got to be filtered  through  the process  of  Section 28(1) and if the Parliament  finds  the proposed hike to be uncalled for it may 108 veto it out.  There are sufficient guidelines as to for what purpose   the   royalty  can  be   enhanced   as   discussed hereinabove, once in three years.  In this connection we may profitably  refer to the decision of this Court in the  Case N.K.  Papiah  &  Sons.  v.  The  Exercise  Commissioner  and another,  (AIR 1975 SC 1007).  In that case this  Court  was concerned  with the question of constitutional  validity  of Section  22 of Karnataka Excise Act.  Section  22  conferred power on the Government to fix rates of excise duty.   There was no guideline in Section 22 about upper limit of the duty which  could be fixed.  Repelling the contention  that  this had resulted in excessive delegated power, Mathew J.  speak- ing  for  this  Court  held  that  power  conferred  on  the Government by Section 22 was valid.  From the mere fact that it is not certain whether the preamble of the Act gives  any guidance  for fixing the rate of excise duty, it  cannot  be said that the legislature has no control over delegate; that requirement  of  laying of rules before the  legislature  is control  over  delegated legislation.  The  legislature  may also retain its control over its delegate by exercising  its power of repeal. 18.  In  the case of Delhi Cloth and General Mills  Co.Ltd., M/s.   Arvind  Mills  Ltd. etc. etc. v.  Union  of  India  & Ors,etc. etc. (AIR 1983 SC 937) another Bench of this  Court speaking  through  Desai  J.  held  that  the  provision  of Sections  58A and 642 of the Companies Act  requiring  every rule  enacted in exercise of the power conferred by it  must be placed before each House of Parliament for a period of 30 days  and both Houses have power to suggest modification  in the proposed rules to check any transgression of permissible limits  of delegated legislation by the delegate,  made  the challenge   on   the,   ground   of   excessive   delegation

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unsustainable.   In view of this settled legal  position  it cannot be held that Section 9(3) suffers from any  excessive delegation  of legislative power.  ’Mere is full control  of Parliament  under Section 28 for checking such  exercise  of the   delegate  and  for  correcting  the  same,  if   found necessary.   The second ground canvassed by Shri Sanghi  for challenging  the vires of Section 9(3) is also  without  any substance  and stands rejected.  Therefore,, point no. 1  is answered in the negative. Point No.2 19.  Sofaras  this  point is concerned,  wehaveto  see  the, background in which the impugned Notification dated 1.8.1991 saw  the  light  of  the  day.   After  1981  there  was  no enhancement of royalty though a clear power was conferred on the Central Government by Section 9(3) to enhance the  rates of  royalty at the end of every four years and then  amended after  every three years.  Almost a decade had  passed  when the  impugned Notification was issued, on 1.8.1991.  In  the meantime,  at least on three occasions rates of  royalty  as found in earlier Notification of 1981 of the Act could  have been  enhanced by the Central Government in exercise of  its power  under Section 9(3) but that was not done.   That  was because  the  States themselves who were the owners  of  the minerals and were entitled to receive the amounts of royalty on extracted minerals by the concerned lessee tried to  help themselves  by  imposing  various  cesses  on  royalties  by different  legislations.   It is no doubt  true  that,  that would  swell  the  exchequer  of the  States  but  the  said exercise  was undertaken with a view to  obtain  appropriate rates of royalty commensurate with the price of the 109 extracted  minerals  as  charged from time to  time  by  the lessees.  This imposition of cesses by the States on royalty as originally fixed by the Central Government under  Section 9(3)  was frowned upon by this Court and held to  be  beyond the legislative. competence of the State legislature. It  is under  these  circumstances that the  States  requested  the Centre  to repair the damage or loss to the State  exchequer in  the light of the decision of India Cement  Case  (supra) and  that is the reason why a study group to look  into  the matter  was  formed  by  the  Central  Government  in   this connection.   The  report of the study group  clearly  shows that  rates of royalty as earlier enhanced in 1981  had  not been, however, further enhanced for all these years and that in the meantime attempts by the States to raise the rates of royalty by way of imposed cesses on royalty were found to be ultra vires the State legislature and in these circumstances it was necessary in enhance the rates of royalty on  various types of coal.  It is thereafter that the said  Notification was  issued  by the Central Government  invoking  its  power under  Section  9(3).  It was vehemently  contended  by  Mr. Sanghi,  Mr.  Sorabjee and Mr. Ramaswamy that  the  impugned Notification is beyond the scope of Section 9 of the Act  as it has nothing to do with the development of minerals but it was  issued  only  for  compensating  the  States  who  have suffered loss because of striking down of cesses imposed  on royalty  by this Court.  Mr. Sorabjee invited our  attention to  various  decisions  of High Courts and  this  Court  for submitting that royalty is levied on the minerals  extracted by the’ holders of the mining leases.  In the first instance lie took us to decision of Punjab in case Dr. Shanti  Saroop Sharma  and  Another v. State of Punjab & Others  (AIR  1969 Punjab  &  Haryana 79), Gurudev J. in paragraph  14  of  the report held that royalty is not defined either in the Act or the Rules framed thereunder by the Central or the State Gov-

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ernment.   Learned Judge has referred to what is  stated  at page 893 of (Wharton’s Law Lexicon (14th edition) in para 15 to the following effect:-               "    royalty  is  payment  to  a   patentee by               agreement  on every article made according  to               his patent; or to an author by a publisher  on               every  copy of his book sold; or to the  owner               of minerals for the right of working the  same               on every ton or other weight raised." The  learned  Judge  also  referred  to  various  dictionary meanings  of  the  term  royalty.   According  to   Stroud’s Judicial Dictionary of Words and Phrases (3rd Edition)               "In  its  secondary sense the  word  ’royalty’               signifies, in mining leases, that part, of the               reddendum, which is variable and depends  upon               the  quantity of minerals gotten  (Att.   Gen.               Ontario  V.  Mercer  (18838AC  767)  Sup:  see               Hereon  Greville Nugent V Mackenzie (1900)  AC               83,  cited RENT; Listowel v. Gibbings  (1858-9               Ir  CLR 223) Sup; or the agreed payment  to  a               patentee  on every article made  according  to               the patent.  " According  to  Mozley  and Whiteley’s  Law  Dictionary  (7th Edition) page 328               "A pro rata payment to a granter or lessor  on               the   working  of  the  property  leased,   or               otherwise  on  the  profits of  the  grant  or               lease.   The  word is specially used  in  ref-               erence to mines patents and copyrights." According  to  Prem’s Judicial Dictionary (Volume  IV)  1964 Edition, page 1457: 110               "Royalty is inter alia, a charge by the  owner               of  minerals from those to when he  gives  the                             concession to remove them, and the charge is o n               production, the rate being fixed according  to               weight: Behru Lal v. State  of  Rajasthan  AIR               1956 Raj 161." According  to Wharton’s Law Lexicon royalties  are  payments which  the  Government may demand for the  appropriation  of minerals,   timber  or  other  property  belonging  to   the Government.   Two important features of royalty have  to  be noticed,  they are, that the payment made for the  privilege of  removing the articles is in proportion to  the  quantity removed  and the basis of the payment is an  agreement.   In para  22 learned Judge has concluded that the  word  Royalty has a well recognised and defined meaning which means  share of produce or profit paid to the owner of the land for being granted  privilege  of  producing  minerals  therefrom   and excludes  the  concept of fee simple title  to  minerals  in place.  The same meaning has been given to the term  royalty in  the cases Saurashtra Cement & Chemical Industries  Ltd., Ranavav  v.  Union  of India (AIR 1979  Gujarat  180)  Laxmi Narayan Agarwalla & Others etc. v. State of Orissa & Others, (AIR  1983  Orissa 21 0) and Surajdin Laxmanlal  v.State  of M.P.  Nagpur  & others (AIR 1960 M.P. 129).   Shri  Sorabjee also  took us through the decision in case D.K. Trivedi  and Sons and Ors. etc. etc. v. State of Gujarat & 0rs. etc. etc. (1986  (1) SCR 479), wherein at page 532 of the  report  the dictionary  meanings as found in various  dictionaries  were noticed.   Ultimately Madon J. speaking for the  Court  made the following observations at page 534 of the report:-               "In  a mining lease the consideration  usually               moving  from the lessee to the lessor  is  the

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             rent for the area leased (often called surface               rent),  dead  rent  and  royalty.   Since  the               mining lease confers upon the lessee the right               not  merely to enjoy the property as under  an               ordinary  lease but also to  extract  minerals               from the land and to appropriate them for  his               own  use or benefit, in addition to the  usual               rent  for  the  area demised,  the  lessee  is               required to pay a certain amount in respect of               the  minerals extracted proportionate  to  the               quantity so extracted. Such payment is  called               ’royalty’." In the light of the aforesaid meaning of the term ’royalty’, it   was  submitted  by  Shri  Sorabjee  that  the   Central Government  under  Section  9(3) can enhance  the  rates  of royalty payable on the extracted minerals by the lessee  and it is to be paid to the lessor, the State concerned in whose territory/jurisdiction  the  mines  are  situated  but   the impugned  Notification was issued in exercise of that  power not  for  developing mines but it is solely issued  for  the purpose  of compensating the States exchequers for the  loss of revenue suffered by them and that such a Notification has nothing   to  do  with  the  development  of  minerals   and therefore,  is beyond the scope and ambit of  Section  9(3). Same  view was canvassed by learned counsel Shri Sanghi  and Shri Ramaswamy. 20.  Having given our anxious consideration we find there is no  substance in this contention.  The reasons are  obvious. The  legislature has entrusted the Central  Government  with the power to enhance the rates of royalty from time to time. It is of course true that traditionally speaking royalty  is an  amount  which  is paid under contract of  lease  by  the lessee   to  the  lessor,  namely,  the  State   Governments concerned and-it is commensurate with the quantity 111 of minerals extracted.  But we cannot lose sight of the fact that  since  1981 such enhancement of royalty has  not  been done  by  the Central Government.  Rates  of  royalty  fixed before a decade, with the passage of time and fall in  money value  and  increase  in inflation  would  naturally  become illusory.   Therefore, the States would  legitimately  claim for  increasing the rates or royalty.   They  unsuccessfully tried to do so themselves by imposing cesses on royalty.  In these  circumstances, it was perfectly open to  the  Central Government  to  exercise its power under  Section  9(3)  and enhance  the  rates of royalty so that loss  to  the  States exchequer  of  the amounts which otherwise would  have  been available  to  the States could be compensated.  It  is  not that  the States were otherwise not entitled to the  royalty amounts;  but  because of the operation of  Section  9,  the power of the States to enhance the royalty get vested in the Central Government.  But once the rates are enhanced by  the Central Government, the enhanced royalty was to be  received by the State and same is to recovered from concerned  lessee of minerals.  In fact Mr. Sanghi was right when he contended that  there  is  no question of the  royalty  amounts  being distributed by the Centre to the States as per Articles  268 and 269 of the Constitution.  That once royalty amounts  are fixed  by  the Central Government under  Section  9(3),  the States  automatically  become entitled to receive  the  same from lessees of minerals who are allowed to extract them  on payment of such amounts of royalty to the State which is the owner-lessor  of  these minerals.  Enhancement of  rates  of royalty cannot be said to have no nexus with the development of  minerals  as contended by learned counsel for  the  writ

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petitioners, only because the enhanced rates of royalty  are to  go to swell the exchequers of concerned States.  In  the case  of Orissa Cement Limited (supra),  while  interpreting Entry  50 in the light of Section 9 of the Act,  Ranganathan J. speaking for this Court has observed as under:-               "To take up Entry 50 first, a perusal of Entry               50 would show that the competence of the State               Legislature    with   respect    thereto    is               circumscribed  by ’any limitations imposed  by               Parliament   by   law  relating   to   mineral               development’.   The  M.M.R.D. Act  1957  is  -               there  can  be no doubt about this, a  law  of               Parliament  relating to  mineral  development.               S. 9 of the said Act empowers the Central Gov-               ernment  to fix, alter, enhance or reduce  the               rates   of  royalty  payable  in  respect   of               minerals, removed from the land or consumed by               the  lessee.  Sub-Section (3) of Section 9  in               terms states that the royalties payable  under               the  Second Schedule to that Act shall not  be               enhanced  more  than once during a  period  of               three years.  India Cement has held that  this               is a clear bar on the State Legislature taxing               royalty so as, in effect, to amend the  Second               Schedule  to the Central Act and that  if  the               cess is taken as a tax falling under Entry  50               it  will be ultra vires in view of the  provi-               sions of the Central Act." At page 168 of the said report while dealing with the  topic of development of minerals, Ranganathan J. examined the con- tention that imposition of such cesses had no nexus with the development of mineral.  Relying upon the observations found in earlier judgment of this Court it was observed that these observations establish on the one hand that the  distinction sought  to be made between mineral development  and  mineral area  development  is  not a real one as the  two  types  of development  are inextricably and integrally  interconnected and, on the other, that fees of the nature 112 we are concerned with, squarely fall within the scope of the provisions  of the Central Act.  The object of Section 9  of the Central Act cannot be ignored.  The terms of Section  13 of  the Central Act extracted earlier empower the  Union  to frame  rules  in  regard to  matters  concerning  roads  and environment.  Section 18(1) empowers the Central  Government to take all such steps may be necessary for the conservation and  development of minerals in India and for protection  of environment.  These in the very nature of things cannot mean such amenities only in the mines but take in also the  areas leading  to  and all around the mines.  The  development  of mineral  areas is implicit in them.  Section  25  implicitly authorises  the levy of rent, royalty, taxes and fees  under the  Act  and  the  rules. The  scope  of  the  powers  thus conferred  is very wide.  The purpose of the  Union  control envisaged  by  Entry 54 and the M.M.R.D. Act,  1957,  is  to provide  for proper development of mines and  mineral  areas and also to bring about a uniformity all over the country in regard to the minerals specified in Schedule 1 in the matter of royalties and, consequently, prices. Ranganathan J. agree with  Mr.  Bobde who appeared for  Central  Government  that prices  of minerals for exports were fixed and could not  be escalated with the enhancement of the royalties and that  if different royalties were to be charged by different  States, their working would become impossible.  There appeared to be force  in this submission.  As pointed out in  India  Cement

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Case,  the  Central Act bars an enhancement of  the  royalty directly or indirectly, except by the Union and in the  man- ner specified by the 1957 Act. 21.   It   becomes,   therefore,   clear   that    enhancing uniformlyrates of royalty for the entire country even though minerals might be extracted from different State’s territory is necessary for having uniform pattern of price of minerals and  that has a direct linkage with the development of  min- erals.   It is also to be kept in view that  regulating  the rates  of  royalty  on extraction of minerals  has  also  an important role to play in opening up new 1 mining areas  for winning  minerals.   In  this connection  we  may  refer  to Section 18 of the Act which deals with mineral  development. Sub-section (1) of Section 18 lays down that it shall be the duty of the Central Government to take all such steps as may be necessary for the conservation and systematic development of  minerals in India and for the protection of  environment by  preventing  or controlling any pollution  which  may  be caused  by  prospecting  or mining operation  and  for  such purposes, the Central Government may by Notification in  the Official  Gazette, make such rules as it thinks  fit.   Sub- Section  (2)  thereof lays down that in  particular  and  v. without  prejudice to the generality of the foregoing  power such  rules  may  provide for all or any  of  the  following matters,  namely,  (a)  the opening of  new  mines  and  the regulation  of  mining  operations  in  any  area  (b)   the regulation of the excavation or collection of minerals  from any mine.  It is obvious that rules framed under Section  18 (2)  have a direct nexus with the development  of  minerals. In this connection we may refer to Minerals Conservation And Development Rules, 1988 framed under Section 18  sub-section (2) of the Act.  It is true that these rules do not apply to coal but as laid down by Section 18(1) read with Section  30 A even for mining leases for coal such rules in  appropriate cases may be made applicable.  Rule 45 of these rules  deals with monthly, quarterly and an- 113 nual  returns  by owners of every mine.  When  we  refer  to prescribed  return from the owner of the mine we  find  from Form  1-9 that Form 1-1 will govern the monthly  return  for other  mines and various information sought for iron ore  in Part 1 of the form.  Item no.4 in that part deals with  rent and  royalty paid.  Thus royalty amount has to be  mentioned in  the  form.   It becomes, thus, clear  that  fixation  of royalty rates is in the realm of development of minerals  as envisaged  by Section 18 of the Act.  It is, therefore,  not possible  to  agree with the learned counsel  for  the  writ petitioners that fixation of rates of royalty has nothing to do with the development of minerals. 22.That takes to the contention that even if it were so  the impugned Notification is ultra vires Section 9(3) as it  has nothing to do with the development of minerals.  As we  have already seen earlier, to have a uniform pattern of rates  of royalty to be charged for extracting different qualities and quantities  of minerals from different parts of the  country is  a very vital aspect of the development of minerals.   It is true that one of the main objects of the Notification was for recompensing the loss suffered by States, but the  facts remains  that  they  suffered loss since the  last  hike  in royalty  was  done in 1981 by the  Central  Government.   It cannot  be said that even as purchasing power of  rupee  had fallen and inflation had risen including the prices of  coal in national and international market, there was no felt  for raising the rates of royalty to be charged for extraction of minerals  like coal from the lease holders when the  mineral

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belonged  to  the  State.  If the amount of  royalty  is  so enhanced, it has to go to the coffers of the State concerned which is the owner of the mineral. This  is a logical corollary of enhanced rates  of  royalty. It cannot be said to be an irrelevant consideration as tried to be suggested by the learned counsel for the  petitioners. On the contrary, it was a relevant consideration because the States  have  to monitor the working of the  mines  and  the income  generating from extraction of minerals within  their respective territories.  If the Central Government exercised its power under Section 9(3) of the Act though belatedly  in 1991 for bringing out this result, it cannot be said that it has done what is ultra vires or beyond the scope of  Section 9(3) of the Act.  In this connection we may keep in view the basic fact that minerals as found in the bowels of the earth or attached to earth surface by itself cannot develop.   For developing  it,  it  has to be brought on  the  surface  and separated from the crust of the mother earth and that can be done  by  mining operation for winning these  minerals.   In this connection it is profitable to look at Section 3 of the Act.   It  defines minerals to include all  minerals  except mineral  oils including natural gas and  petroleum.   Mining lease is defined to mean a lease granted for the purpose  of undertaking  mining  operations  and  includes  a  sub-lease granted for such purpose.  Mining operation means any opera- tions undertaken for the purpose of winning any mineral.  It is obvious that development of mineral as envisaged by  Sec- tion  18 of the Act and even by Entry 50 of List 11  of  the Seventh Schedule of the Constitution, necessarily would mean extraction  of  mineral out of the bowels of earth  or  from crust  of earth by mining operations.  Therefore,  the  term development  of  minerals has a direct linkage  with  mining operation.    Without  that  minerals  cannot   develop   by themselves.  In Words and Phrases, Permanent Edition, Volume No.27 114 issued by West Publishing Company, St. Paul Minn., the  term mineral is defined at page 21 0 as follows:               "A  mineral  is a natural  body  destitute  of               Organisation or life." It has also been  shown               that a mineral is anything that grows in mines               and contains metals.- It is further  mentioned               therein  that  the mineral as used in  a  deed               will  be  restricted to that given it  by  the               custom of the country in which the deed is  to               operate.   Mineral  in  ordinary  and   common               meaning is comprehensive term including  every               description of stone and rock deposit  whether               containing metallic or nonmetallic  substance.               The word mineral in popular sense means  those               inorganic  constituents of the  earth’s  crust               which are commonly obtained by mining or other               process  for bringing them to the surface  for               profit.   Mineral hidden in the bowel  of  the               earth  by  themselves cannot yield  profit  to               anyone and they become minerals when they  are               brought  out on the surface of the  earth  buy               mining operations. 23.It  must therefore be held that regulation of  mines  and development   of  minerals  are   interconnected   concepts. Consequently,   it  is  not  possible  to  agree  with   the contention  of the learned counsel for the writ  petitioners that  imposition  of  royalty has nothing  to  do  with  the development  of minerals or that enhancing the rates of  the royalty  by the impugned Notification is extraneous  to  the

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purpose  of developing mines but is solely for swelling  the coffers  of  the States.  Once that conclusion  is  reached, there would survive no question of Notification being issued partly  for  legitimate purpose of enhancing  royalty  rates after  a  decade  from 1981 and  partly  for  an  irrelevant purpose of swelling the State exchequer.  In fact the entire purpose  of  this  exercise is  for  a  legitimate  relevant purpose  for developing the minerals and enabling the  State which  are the owners thereof to properly manage the  mining leases  so  that minerals can develop on a  uniform  pattern throughout  the  country.  In that view of  the  matter  the submission made by Shri Ramaswamy relying on case S.  Pratap Singh  v. The State of Punjab (1964 (4) SCR 733) that  alien purpose  cannot  be mixed with statutory purpose  is  of  no avail to him.  The argument of Shri Sanghi relying upon  the decision of this Court in case Chanan Mal & Others, State of Haryana  & Others (1977 (1) SCC 340) in para 23 at page  350 that declaration, under Section has a limited coverage  also cannot  be  of any assistance to him for the  simple  reason that  whatever may be covered by Section 2  declaration,  it has  definitely  covered the imposition of  royalty  by  the Parliament  as  held in the Constitution Bench  decision  of this  Court  in India Cement Case (supra).  As a  result  of this   discussion  it  must  be  held  that   the   impugned Notification  cannot  be said to be ultra vires  of  Section 9(2)  of the Act.  The second point is, therefore,  answered in the negative. Point No. 3 24.  The question is whether the impugned Notification is  a piece  of colourable exercise of power and, therefore,  null and void.  It has to be kept in view that it is an  exercise of  delegated legislative function entrusted to the  Central Government by Parliament under Section 9(3).  The concept of colourable legislation has a well defined connotation so far as  parent  legislation  is concerned.  If  the  legislation trespasses on a field not reserved for it under the relevant entry of the.  Seventh Schedule it can be said to be 115 a colourable legislation meaning thereby it purports to  get covered  by  an  entry  which  does  not  give   legislative competence to the legislature concerned to enact such a law. Adverting  to  the  concept  of  colourable  legislation   a Constitution  Bench of this Court in case of  Federation  of Hotel  & Restaurant v. Union of India & Others (AIR 1990  SC 1637), made the following pertinent observations:-               "The  constitutionality  of  the  law  becomes               essentially  a  question of power which  in  a               federal  constitution,  unlike a  legally  om-               nipotent  legislature  like the  British  Par-               liament,  turns upon the construction  of  the               entries  in  the  legislative  lists.   If   a               legislature  with limited or qualified  juris-               diction   transgressed   its   powers,    such               transgression may be open direct and overt  or               disguised  indirect  and covert.   The  latter               kind  of trespass is figuratively referred  to               as  ’colourable legislation’,  connoting  that               although  apparently the legislature  purports                             to act within the limits of its own powers yet ,               in  substance  and in reality,  it  encroaches               upon  a field prohibited to it,  requiring  an               examination,   with   some   strictness,   the               substance  of the legislation for the  purpose               of  determining what is that  the  legislature

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             was really doing.  Wherever legislative powers               are  distributed  between the  Union  and  the               States   situations   may  arise   where   two               legislative  fields might apparently  overlap.               It  is  the  duty  of  the  Courts,   however,               difficult  it  may be, to  ascertain  to  what               degree  and to what extent, the  authority  to               deal with matters failing within these classes               of subjects exists in each legislature and  to               define in the particular case before them, the               limits of the respective powers." 5.It  is obvious that this aspect of colourable  legislation would  not  strictly ply while judging the legality  of  the exercise of the delegated legislative function. In fact it could not be contended by learned counsel for the writ petitioners that the Central Government had no power to act  under  Section 9(3).  Therefore, in the  strict  sense, there is no question of the said Notification being a  piece of  colourable legislation touching upon the power  of  some other  authority  functioning under any other  provision  of delegated legislation.  However, it has also to be  observed that even in cases of delegated legislation, there are  well defined  limitations  beyond  which  if  such  an   exercise projects  itself, it would become ultra vires the  provision permitting  such an exercise.  We may profitably refer to  a decision  of  this Court in case Indian  Express  Newspapers (Bombay) Pvt. Ltd. and Others etc. etc. v. Union of India  & Others. (AIR 1986 SC 515).  A Bench of three learned  Judges of this Court speaking through Venkataramaiah J., as he then was, in connection with Notification issued under Section 25 of the Customs Act which was a piece of subordinate legisla- tion has made the following observations:-               "A  piece of subordinate legislation does  not               carry  the  same degree of immunity  which  is               enjoyed  by  a Statute passed by  a  competent               legislature.   Subordinate legislation may  be               questioned  on  any of the  grounds  on  which               plenary   legislation   is   questioned.    In               addition  it  may also be  questioned  in  the               ground that it does not conform to the statute               under  which  it is made.  It may  further  be               questioned  on the ground that it is  contrary               to  some  other  statute.   That  is   because               subordinate legislation must yield to  plenary               legislation.  It may also be questioned on the               ground  that  it is unreasonable  not  in  the               sense of not being reasonable but in the sense               that it is manifestly arbitrary.  " Keeping in view this legal position, let us 116 examine  the challenge to the impugned Notification  on  the ground that it is a colourable device.  It was submitted  by the  writ  petitioners that though purporting to  act  under Section  9(3) of the Act and by which an effort was made  by the  Central  Government to raise the rates of  royalty,  in substance they wanted only augment the coffers of the  State Government  and  nothing more and in that manner  it  was  a colourable  exercise  of power on the part  of  the  Central Government.   While discussing Point No.2, we  have  already repelled this contention.  For the reasons recorded  therein even this contention has to be rejected.  Our attention  was invited  by  &fr.   Sorabjee, learned counsel  for  the  ap- pellants,  M/s.  Birla Jute and Industries Limited,  to  the counter filed by the Union of India and the State Government in the High Court for justifying the impugned  Notification.

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That  counter is found at page 52 in SLP(C) No, 8190/94.   A combined counter was filed on behalf of the respondent  nos. 1,  3  and 4 in Misc.  Petition No.2907 of 1992  before  the High Court in the case of Ws.  Saurashtra Cement & Chemicals India  Ltd.  and  Another  and it was  relied  upon  by  the concerned  authorities in all the other cases.  In the  said counter at paragraph ’Q’ it has been averred that the  State Government  tried various methods for increasing their  rev- enue  from  time to time a.-, stated in the  petition.   The State Government enacted various Laws imposing Minerals Area Development  and other cesses.  These have been struck  down by  the  Hon’ble Supreme Court and  the  State  Governments, therefore,  were left with practical difficulties in  making necessary financial arrangement, The matter was examined  in details  on  the representation made by  the  various  State Governments and after considering all aspect of the  matter, a  reasonable  increase in the royalty was  found  justified and,  therefore, the Central Government has issued the  said Notification.   That after revision of rates of  royalty  on coal  in  February, 1981 the next revision was due  in  Feb- ruary,  1985, Study group was appointed in 1984 to  consider all aspects in depth regarding revision of rates of  royalty on  coal.  The study group met representatives of the  State Government  and ascertained their views.  It also  issued  a questionnaire  to  the State Governments, calling  for  data relating to production of coal, rates of royalty, cesses, if any  levied  by them and other  relevant  information.   The study  group  found that most of the coal  producing  States were levying cesses and taxes on coal the incidence of which was  much higher than that or royalty.  Some of these  taxes cesses  were  being levied as a percentage of  the  pit-head value of coal by the State Governments.  All the State  Gov- ernments representated to the study group that the rates  of royalty  on  coal should bear a close correlation  with  the prices  of  coal.  The coal producing  States,  particularly West Bengal and Bihar pressed for fixation of royalty on  ad valorem  basis instead of the existing specific rates.   The study group expressed its views that any levy of royalty  on ad  valorem  basis,  without a  commitment  from  the  State Governments  to  refrain from levying cesses, would  not  be equitable as it would have a cascading effect on the  prices of  coal paid by the consumers.  Thereafter the counter  re- ferred  to  the striking down of cesses imposed  by  various State  legislatures by this Court and then at paragraph  ’T’ it is stated that Governments whose cess Acts were  declared unconstitutional  and collection of cesses was stopped  were suffering substantial losses of revenues, they approached 117 the Central Government to revise the rate of royalty on coal immediately to help the to get out of the financial  crisis. It  is  further  averred in the counter  that  in  order  to examine  the requests of State Governments to  increase  the rates  of royalty Department of Coal appointed  yet  another study  group on 6th February, 1991 to examine the report  of the  earlier study group and recommend appropriate  increase in  royalty in the wake of the Supreme Court’s  Judgment  in India  Cements  Case and subsequent judgments  of  the  High Courts.   The  study  group discussed the  issues  with  the representatives of the coal producing States Governments and considered  their views.  Then follows paragraph  ’U’  which states that after considering the report of the second study group the rates of royalty on coal have been revised from an average  of  Rs.5.30 per tonne to Rs.70/-  per  tonne  w.e.f 1.3.1991.  These rates have not been made applicable to  the States  of  Assam and West Bengal because these  States  are

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levying/collecting  cesses on coal as their Cess  Acts  have not been struck down by the Courts so far. 26.Placing  reliance  on these averments, of  the  concerned authorities  it was vehemently contended by Mr.Sorabjee  and Mr.  Ramaswamy that the impugned Notification is issued  not for the purpose of development of mineral as contemplated by Section  9(3)  but  entirely for  a  collateral  purpose  of compensating  the  State Governments for the  loss  of  cess revenues and for welling their coffers.  It is not  possible to  agree  with this contention.   The  aforesaid  averments clearly  indicate that from 1981 rates of royalty  were  not increased further and there was a demand from all States  to make  suitable increase in rates of royalty be  commensurate with the rising prices of coal.  That is why the first study group was appointed in 1984 and that was followed by  second study  group of 1991 Naturally the second study  group  came the  conclusion that the cesses impose were struck  down  by this  Court and, there fore, there was a need  for  properly enhancing  royalty  rates.   As Section  9(3)  is  the  only Section  remaining  in  field which  could  permit  such  an exercise  and it only the Central Government which could  do so,  accordingly the impugned Notification has been  issued. It  tried to enhance the rates of royalty which earlier  the States unauthorisedly tried to bring about.  If the original writ petitioner’s contentions are accepted, it could even be contended that neither the Central Government under  Section 9(3)  nor the State Governments could increase the rates  of royalty  and 1981 rates which have become illusory with  the passage  of  time  would  continue  to  hold  the  field  ad infinitum.  It has to be kept in view that a fresh  exercise of  delegated  legislative  function in all  the  facts  and circumstances did justify such enhancement at lease after 10 years   of  the  earlier  revision  in  1981.   The   motive underlying the said enhancement to compensate the States for loss  of revenue which they have suffered cannot be said  to be totally irrelevant or having any vitiating effect on  the exercise  of  power under Section 9(3)  which  is  otherwise required  to be resorted to in the facts and  -circumstances of  the case.  The motive of legislature or for that  matter that  of  the delegate in exercising  delegated  legislative function  for  enacting a provision  within  its  competence cannot  be considered to be in any way having  any  relevant nexus  to the efficacy of the product of such  an  exercise. As we have already discussed earlier, the mineral belongs to the States, and so, if the Central Govern- 118 ment  has taken into consideration the fact that the  States revenues are required to be re-compensated on account of the loss suffered by them in their abortive efforts to  escalate the  royalty,  it cannot be considered to be  an  irrelevant consideration.  It clearly appeared that after 10 years from 1981  during which the royalty rates remained  static  there was  a crying need of the day for the Central Government  to exercise  its power under Section 9(3) and to revise  upward the royalty rates in conformity v. with the rising prices of the  minerals  around as mentioned in the  counter  and  for which  there  was  a strong representation  by  the  various States Governments to the Central Government.  With  respect we  are  not in a position to endorse the view of  the  High Court that the impugned Notification was a colourable devise and was issued for extraneous purpose.  Equally, we are  not in a position to agree with the contention of Shri Ramaswamy that the said Notification was issued for an alien  purpose. The  third  point  for  our  consideration  is,   therefore, answered in the negative.

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Point No.4 27.So  far as this point is concerned, it is true that  even the  exercise  of delegated power can be challenged  on  the ground  that  it is highly arbitrary,  irrational  and  con- fiscatory in nature and would not stand the test of  Article 14  and 19(1)(g).  Learned counsel for the writ  petitioners submitted that as compared to the rates of royalty fixed  in 198 1, the present rates have gone up by 200 to 400 per cent and, therefore, they have become confiscatory in nature.  It is  not possible to agree with this contention as  the  writ petitioners  have  laid no evidence to show as to  how  this escalation of rates for different types of coal extracted by the lessee of mines had adversely affected their business or that  they are thrown out of business because of such  heavy burden  of escalated royalty.  It is not the case of any  of writ  petitioners  that their mining operations  had  to  be closed  down  because  of  such high  rates  of  royalty  as enhanced  by  the  impugned  Notification.   Also  there  is nothing  on  record  to  show whether  the  burden  of  this enhanced rates of royalty is borne only by the lessee of the mines  who  have  extracted the minerals and  has  not  been passed  on  to the customers by adding it to  the  price  of coal.   As all these are questions of facts there should  be clear  pleading and proof There is no such material  on  the record  from  which  on  the basis  of  such  arguments  any decision  can  be rendered.  Only on this short  ground,  we must hold that the original writ petitioners have failed  to show  how the enhanced rates of royalty as per the  impugned Notification  have  become unreasonable or  confiscatory  in nature.  Point No.4 is, therefore, answered in the negative. 28.As  all  the points raised by the  writ  petitioners  are answered  against  them, the inevitable result is  that  the orders  passed by the High Court in their favour  by  partly allowing the writ petitions will have to be quashed and  set aside and their writ petitions will have to stand dismissed. In  the  result  Civil Appeal Nos.275/94  and  276/  94  are allowed.   The  judgment  and order of  the  High  Court  in M.P.No.  10/93 dated 17.12.93 are quashed and set aside  and the  writ  petition  is dismissed.   Similarly,  appeal  No. 1994/95 from SLP(C) No. 3395 of 1994 moved by, the State  of Madhya  Pradesh is also allowed.  The judgment and order  of the High Court in Misc.  Peti- 119 tion No.7907/92 dated 17.12.93 are quashed and set aside and the   said  petition  is  also  dismissed.    Civil   Appeal No.1995/95  arising out of SLP(C) No. 8190/94 moved by  M/s. Birla  Jute and Industries Ltd. is dismissed.  In the  facts and circumstances of the case, there will-be no order as  to costs in all these matters. 120