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CASE NO.: Appeal (civil) 2235 1996

PETITIONER: STATE OF ORISSA AND ORS.

       Vs.

RESPONDENT: UNION OF INDIA & ANR.

DATE OF JUDGMENT:       24/11/2000

BENCH: G.B.Pattanaik, B.N.Agrawal

JUDGMENT:

PATTANAIK,J.

     This  appeal  is directed against the judgment of  the Division  Bench  of Orrisa High Court and the  question  for consideration is whether the Railway Administration would be liable  to pay the royalty in respect of the minor  minerals used  by it in laying down the railway line.  The facts  are not  disputed namely for laying the railway line, Government of  Orrisa acquired the land and handed over the same to the railway  administration.   When the  Railway  Administration utilised certain minor minerals like the rock cut spoils and earth from the very land, which had been acquired for laying the  railway  line, the Revenue Authorities of the State  of Orissa  initiated proceedings for realisation of royalty and cess under the provisions of Orissa Minor Mineral Concession Rules.   The  Railway Administration and the Union of  India assailed  the  same by filing a writ petition in the  Orissa High  Court.   According  to   the  Railway  Administration, royalty  or  cess could be levied against the lessee of  any mineral  and the railway administration not being the lessee of  the  land or the minor minerals therein, no  royalty  is payable  for utilisation of the aforesaid minor minerals for laying  down the railway line.  The State Government on  the other  hand took the stand that the handing over of the land for   laying   of  the  railway   track   to   the   railway administration does not amount to conferring ownership right over  the  minerals existing on the land and  in  accordance with the provisions of the Mines and Minerals(Regulation and Development) Act, 1957 [hereinafter referred to as the Act] as  well as the Orissa Minor Mineral Concession Rules,  1990 [hereinafter  referred  to  as  the  Rules],  the  railway administration would be liable to pay royalty for use of any minerals  from  the  land in question and  accordingly,  the revenue  authorities  had rightly issued notice.   The  High Court,  in the impugned judgment came to hold that the earth and  rock cut spoils excavated by the railway administration are  minerals.  This finding of the High Court has not  been assailed  by the railway administration.  But so far as  the right  to levy royalty on the use of minerals from the  land in  question, the High Court came to the conclusion that the

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State  would  not  be justified in levying  the  royalty  in respect  of the minerals on the land which had been acquired and  possession  of which has been delivered to the  railway administration.   But  so far as the land belonging  to  the State  Government  is concerned, the High Court came to  the conclusion, since no formal transfer deed has been executed, it  would be open to the State Government to incorporate  in the  formal transfer, a term as to the payment of royalty in view  of the admission of the railway administration in  its letter  dated  10.6.1987 that they would abide by the  terms and  conditions to be decided by the State Government  while sanctioning  transfer  of  Government   land.   It  is  this judgment  of  the  High  Court of  Orissa,  which  is  under challenge in this appeal.

     Mr.   P.N.   Mishra,  the   learned  senior   counsel, appearing  for the State of Orissa, contended that the State is  the owner of the mines and minerals within its territory and right to levy royalty or cess in respect of any minerals is  governed  by  the provisions of the Act  and  the  Rules framed  thereunder.  According to the learned counsel, under the  provisions  of Orissa Minor Mineral  Concession  Rules, which  has been framed in exercise of power under  Section15 (1)  of  the  Act,  no person can  undertake  any  quarrying operation  or collect and/or remove any minor mineral except under  and  in accordance with the terms and  conditions  of quarry  lease, permit and/or auction sale provided under the rules.   Under  the proviso to Rule 3, when  extraction  and collection  of  minor minerals is made by a person from  his own  land  for normal agricultural operations or other  bona fide  domestic consumptions, then that would not  tantamount to  quarrying operations and it is excluded from the purview of  Rule  3.  Necessarily, therefore if minor  minerals  are extracted  or  removed  from  ones own  land  not  for  any domestic  consumption  or agricultural operations,  but  are sold  to  the public, then the State would be  justified  in levying the royalty on such extraction and or collection.

     Mr.   P.P.   Malhotra,  the  learned  senior  counsel, appearing  for  the  Union  of India,  on  the  other  hand, contended  that unless and until the lease deed is  executed in  favour of the Union of India, the State Government would not  be  entitled to levy royalty or cess for extraction  of minerals  from  the  land which had been  acquired  for  the purpose  of laying down railway track and possession whereof has  been given to the Union of India itself.  According  to the  learned  counsel,  the  High  Court  was  justified  in disposing of the matter against the State.

     The  State is the owner of all the mines and  minerals within  its territory and the minerals vest with the  State. It  has been so held in the case of Amrit Lal Nathubhai Shah and Ors.  Vs.  Union Govt.  of India and Anr., by this Court in  1976(4)  SCC  108.  Entry 54 of List I  of  the  Seventh Schedule  confers  power  on the Union Legislature  to  have Regulation  of  mines  and minerals  development  under  the control  of the Union, as declared by the Parliament by  law to  be  expedient  in the public interest.   The  Mines  and Minerals  (Regulation  &  Development) Act,  1957  has  been enacted  by the Union Legislature in exercise of such powers conferred  upon it under Entry 54 of List I and in Section 2 thereof, there is a declaration that Union should take under

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its  control the regulation of mines and the development  of minerals  to the extent provided under the Act.  Entry 23 of List  II  of the Seventh Schedule deals with  regulation  of mines and mineral development but the same is subject to the provisions  of  List  I  with   respect  to  regulation  and development  under  the control of the Union.  Entry  50  of List  II is the power of the State Legislature to have taxes on  mineral  rights  subject to any limitations  imposed  by Parliament  by  law relating to mineral  development.   This power  of  the  State government to have  taxes  on  mineral rights  gets  denuded to the extent the MMRD Act  has  taken over  and if any provision has been made for levy of any tax on any mineral in the Central Act, the State cannot make any law  in  the  same field, again by exercise of  power  under Entry  50  of List II.  But if there is no provision in  the Central Act, providing for levy of tax on any minerals, then the  State will have full power to make law to make levy  in question.   Section 15 of the MMRD Act itself authorises the State  Government to make rules for regulating the grant  of quarry  leases  in  respect of minor minerals  and  for  the purposes  connected therewith.  Minor Minerals is  defined in  Section  3(e) of the MMRD Act to mean  building  stones, gravel,  ordinary  clay, ordinary sand other than  used  for prescribed  purposes and any other mineral which the Central Government  may,  by notification in the  official  Gazette, declare  to  be  a  minor mineral.  In  exercise  of  powers conferred  under Section 15 of the MMRD Act, the  Government of  Orissa  has made a set of rules called the Orissa  Minor Minerals  Concession  Rules, 1990.  Rule 3 of the  aforesaid rules  is  relevant  for  our   purpose,  which  is   quoted herein-below in extenso:

     Rule  3.   No  person shall undertake  any  quarrying operations  for the purpose of extraction, collection and/or removal  of  minor minerals except under and  in  accordance with the terms and conditions of quarry lease, permit and/or auction  sale  provided  under these rules:   Provided  that extraction, collection and/or removal of minor minerals by a person  from his own land for normal agricultural operations or  other  bona  fide  domestic consumptions  shall  not  be construed as quarrying operations.

     The  aforesaid  rule makes it explicit that no  person can  undertake  any quarrying operations for the purpose  of extraction,  collection  and/or  removal of  minor  minerals except under and in accordance with the terms and conditions of  a quarry lease permit and/or auction sale provided under the Rules.  The expression Person has been defined in Rule 2(l) as thus:-

     Rule  2(l):  person shall include an individual,  a firm,  a company, an association or body of individuals,  an institution or Department of the State or Central Government and a Labour Co- operative Society.

     In  view  of the aforesaid definition of  person  in Rule  2(l)  and in view of the embargo contained in Rule  3, even  the  Central  Government  will   not  be  entitled  to undertake  any  quarrying operations, unless such permit  is granted  and  it  must be in accordance with the  terms  and conditions  of  the permit.  The contention of  the  Railway Administration,  that there being no lease in favour of  the Railway  Administration, it is not bound to pay any royalty, will  not hold good, in view of the proviso to Rule 3, which

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on  the  face  of it prohibits a person from  extracting  or collecting  minor  minerals  from his own land,  except  for agricultural   operations  or  other   bona  fide   domestic consumption.  But for the exclusion, contained in proviso to Rule  3 in relation to minor minerals extracted from owners own  land  for  normal agricultural operation or  bona  fide domestic  consumption,  it  would  be a  case  of  quarrying operation  within  the definition of the expression in  Rule 2(o), which is quoted below in extenso:

     Rule   2(o):    quarrying   operations  means   any operation  undertaken  for the purpose of winning any  minor mineral  and shall include erection of machinery, laying  of tramways,  construction  of  roads   and  other  preliminary operations for the purpose of quarrying.

     This  being the position and the use of minor minerals on  the railway track, after being extracted from the  land, not  coming  within  the   expression  bona  fide  domestic consumption,  the  said  operation  would  be  a  quarrying operation  under  Rule 2(o), and consequently,  the  embargo contained  in  Rule  3 would apply.  A combined  reading  of Rules  2(l), 2(o) and Rule 3 makes it crystal clear that the Railway  Administration,  cannot   undertake  the  quarrying operation  unless  a  permit is granted in its  favour  and, consequently,  if  the Railway Administration  utilises  the minor  minerals  from  the land, for the railway  track,  it would  be  bound  to pay the royalty  chargeable  under  the Orissa  Minor  Mineral Concession Rules.  The liability  for payment  of  royalty  accrues under Rule 13  and  no  doubt, speaks  of  a  lease deed.  If the  Railway  Administration, though  not a lessee and at the same time is not  authorised under  Rule  3 to undertake any quarrying operation for  the purpose  of  extraction  of minor minerals,  then  for  such unauthorised  action,  the Railway Administration  would  be liable  for penalties, as contained in Rule 24.  This  being the  position  and in view of the prohibition  contained  in sub-Rule  2 of Rule 10 and taking into account the fact that such minor minerals would be absolutely necessary for laying down the railway track and maintenance of the same, we would hold  that the Railway Administration would be bound to  pay royalty for the minerals extracted and used by it, in laying down the railway track.  The impugned judgment of the

     Orissa  High  Court is accordingly set aside and  this appeal is allowed.