08 November 1996
Supreme Court


Case number: Appeal Civil 3224 of 1983






DATE OF JUDGMENT:       08/11/1996




JUDGMENT:                             WITH      (C.A Nos. 3226. 3227/83, 959. 732/81. 2903. 2904, 2906. 2907.  2908.   2910/809.  409/84   with  CP  56/96  in  C.A. No.2907/80)                       J U D G M E N T      K. Venkataswami J.      In all  these appeals  a Common  question of law arises for our  consideration. A  common argument  was addressed by counsel concerned  and that  is why  they are disposed of by this common Judgment.      The U.P. Zamindari Abolition and Land Reforms Act, 1951 (hereinafter called  "the Act")  came into force on and from July 1.1952.  On the  publication of  a  Notification  under Section 4  of the  Act all  the estates stood transferred to and vested  in the State free from all encumbrances. Section 6 of  the Act  speaks of consequences of such vesting in the State. It says that on the publication of Notification under Section  4  all  rights.  title  and  interest  of  all  the intermediaries in  every estate  in such area including land and in all sub-soil in such estate including rights, if any, any mines  and minerals  whether being  worked or  not shall cease and  be vested in the State of Uttar Pradesh free from all encumbrances.  In the  light of  the above provision. it appeals the Collector. Agra issued notices to the appellants stating that  they should  stop mining as they have lost all rights in  the mines  and minerals.  The Collector,  further took steps  to auction the right to win the minor minerals . At this  stage. the appellants challenged the actions of the Collector by moving the High Court.      The High  Court by  an order  dated March 18. 1955 held that the  appellants were  entitled to take advantage of the provisions of  Chapter VI  of the  Act  and  consequently  a direction  was   given  to  the  State  Government  and  the Collector, Agra,  for considering  the applications  of  the appellants for  grant of lease under Sections 106-108 of the Act.      Pursuant to  the said  judgment of  the High Court, the Collector, Agra,  sent letters  dated 8.1.1964  offering the terms  and   conditions  of   the  proposed  leases  to  the appellants. Along  with those letters drafts of mining lease



containing the  details of  terms and  conditions were  also enclosed. Inter  alia, the lease was offered for a period of 15 years  and the  terms and conditions proposed were in the light  of  U.P.  Minor  Minerals  (Concession)  Rules.  1963 (hereinafter called "the Rules") as well as the rules framed under the Mines and Minerals (Regulation & Development) Act, 1957 (hereinafter  called "the Central Act"). The appellants raised objections  regarding certain  terms  and  conditions contained in  the porposed  leases. Initially  the aggrieved parties moved  the High  Court by  filing writ petitions and the  High  Court  while  dismissing  the  same  on  9.2.1965 directed the  parties to  come to settlement regarding terms and conditions  on which  the leases have to be given to the appellants and  in case they could not settle the terms, the differences  can   be  referred  to  Mines  Tribunal  to  be appointed under  Section 110  of the.  Act. As  the  parties could not  come to a settlement, the collector on 12.10.1966 filed an  application under  Section 107(2)  of the  Act for settlement of  the terms  of the  leases. Before  the  Mines Tribunal, the following were placed as area of controversy:- "(A) Period of lease Proposal of  State                   Objection  of  Opposite Government                           Party. ___________________________________ The lease shall be for a            The lease should be period of fifteen years             perpetual and permanent. with effect from 1.7.1952. (B) Payment of Royality or     Dead Rent. The rate of Royality or dead        The question of making rent shall be charged in            payment of Royality or accordance with the maximum         dead rent for the past rate prescribed under First         years does not arise at Schedule (Rule 22) of the           all. The rate of dead U.P. Minor Mineral (Conce-          rent indicated in the ssion) Rules 1963, with             draft lease deed is effect from 1.7.1952                excessive and there is                                     no guiding principle to                                     determine the same. (C) Commencement and     Execution of the lease The lease shall be deemed to     The terms and proposed to have been executed with       lease deed should be effect from July l, 1952.        prospective and not                                  retrospective.      The Mines  Tribunal,  which  was  presided  over  by  a District Judge  and an  expert Member  along with him, after considering elaborately  the  arguments  and  the  materials placed before  it negatived all the claims of the appellants holding  that   the  leases   could  not  be  perpetual  and permanent, that the appellants are bound to pay royalty/dead rent as the case may be and that the leaves will necessarily be from  the date  of vesting  of the  estate in  the State. However the  Mines Tribunal  fixed the period of leases from 1.7.52 to  23 11.87  being 10  years from  the date  of  its order.      Aggrieved by  the order  of the  Mines  Tribunals,  the appellants  moved   the  High  Court  reiterating  the  same arguments once  over before  the High  Court. The High Court after considering  the arguments  threadbare  confirmed  the views expressed  by  the  Mines  Tribunal  and  consequently dismissed the  writ petitions.  Hence the present appeals by special leave.      Mr. Satish Chandra, learned Sr. Counsel addressed three main arguments  and the  other learned  counsel adopted  the



same on behalf of the appellants. It was his contention that under Section  7 of  the Act,  the rights of intermediaries, like the  appellants who  were zamindars  to work  the mines would continue  and such rights do not cease and vest in the State. In other words, they continue to remain vested in the intermediaries as  before, though,  the title  to the  lands has gone  to the  State. In  support of  this contention, he invited our  attention to  the fact that no compensation was provided under the provisions of the Act in respect of their right in  the mines. The same was because, according to him. their right  to work  mines did not vest in the State and it always  remained   with  the   appellants  (intermediaries). According to  the learned  Sr. Counsel, the right to operate or work  mines and to extract minerals remains unaffected by the extinguishment of the rights under Chapter II and at the same time  the same is to be governed by Chapter VI only. He placed reliance  on the proviso to Section 107(2) of the Act to contend differently. Section 107 reads as follows :-      "Section 107      (1)  With effect  from the  date of      vesting, all mines comprised in the      estate or  estates  acquired  under      this Act  as were  in operation  on      the date immediately preceeding the      said date  and  were  being  worked      directly by the intermediary shall,      if so  desired by him. be deemed to      have  been   leased  by  the  State      Government to the intermediary, and      such intermediary shall be entitled      to retain possession of those mines      as a lessee thereof.      (2)   The  term and  conditions  of      the  said   lease  by   the   State      Government shall  be such as may be      agreed upon  between the  State  of      Government and  the intermediary or      in dafault  of agreement  as may be      settled   by   a   Mines   Tribunal      appointed under Section 110:      Provided that  all such  terms  and      conditions shall  be in  accordance      With the  provisions of any Central      Act, for  the time  being in  force      regulating the  grant of new mining      leases."      Elaborating his  submission on the basis of the proviso to Section 107(2), it was submitted that the phrase ’for the time being  in force’  occurring in the proviso is referable only for regulating the terms and conditions of those leases under Section 107(1) which on the date of vesting are deemed to have  been leased  by the  State Government.  Inasmuch as there was  no Central  enactment laying  down any provision, regulating the  operation of  the mines  in respect of minor minerals  on  1.7.1952,  the  subsequent  enactments  either Central  or   State,  will  not  come  to  the  aid  of  the respondents to  restrict the  rights by fixing the period in the terms  and conditions  of the proposed leases. The Minor Mineral Concession  Rules, 1963 are only prospective and the same cannot be applied to bind the appellants with the fixed period and  conditions in  the proposed lease from 1.7.1952. the date  of’ vesting.  Therefore, the  terms and conditions proposed by  the Collector.  Agra cannot be justified either under the  Act or  under the  Rules. Period  of lease can be fixed only in a case where the rights in the mines including



the right to work the mines has been acquired and have to be regulated by  the terms  and conditions of the lease such as the cases  where the  mines had  already been leased out. So far as  the cases of the appellants are concerned, according to the  learned Sr.  Counsel, the  right to  work the  mines remains vested  in them as intermediaries and that right has not been  acquired under Chapter 11 of the Abolition Act and therefore no  period  can  be  fixed  so  far  as  they  are concerned.      Alternatively   it    was   argued    that   regulation contemplated under  the Central  Act, 1957 by Section 15 can only mean  in the  present context  to preserve the right to work the  mines without  let  or  hindrance.  The  power  to regulate, Contemplated  under Section  15 of the Central Act given  lo   the  State  Government  cannot  be  extended  to extinguish the  rights of  intermediaries under the guise of Regulation. In  support of  this  argument  that  regulation cannot amount  to prohibition  or extinguishment. he cited a number of authorities.      The second  major point  argued was  that assuming that the Collector  was  right  in  offering  the  lease  to  the appellants subject  to the  terms and  conditions  mentioned thereon, the  same cannot be from the date of vesting and it must be  from the date on which the parties agree to execute the lease.  Learned Sr.  Counsel submitted that the order of the Mines  Tribunal that  the mining lease was from 1.7.1952 and for  a period to 10 years from the date of its order was misconceived and invalid in law.      The last point argued was with reference to the payment of dead  rent. According  to the  learned Sr.  Counsel.  the payment or  dead rent  must relate  to the probable value of the minerals  extracted per  acre and  the amount fixed with reference to area namely. Rs.1.000/- per acre per annum was, therefore. not sustainable.      Some of  the counsel  who adopted  the argument  of Mr. Satish Chandra  submitted that the power is vested under the Rules with  the Government  to relax  wherever necessary and the Government  must be  directed to relax the conditions in favour of the appellants.      Learned  counsel  appearing  for  the  respondent-State reiterated the conclusions reached by the Mines Tribunal and confirmed by the High Court in support of his argument.      We have  considered the rival submissions and we are of the view  that the  High Court was right and appellants have no case in all these appeals.      In view  of the  consequences of  vesting of the estate pursuant to  the Notification under Section 4 of the Act, we are not  able to appreciate the arguments of the learned Sr. Counsel  for  the  appellants.  The  clear  and  unambiguous provisions of  6 and 107 of the Act leave no doubt about the vesting of  mines and minerals with the State Government. We have already  given the  substance ox Section 6 and the text of Section 107.      In this  connection, we  need  only  to  refer  to  the judgment  of   this  Court  rendered  under  the  very  same provisions with  which we  are concerned.  In Bagwan Das vs. State of  U.P. &  Others (AIR  1976  SC  1393).  this  court observed as follows :-      "The right  of the former Zamindars      to   mines    and   minerals    was      extinguished by the Act of 1951 and      became   vested    in   the   State      Government.   So    long   as   the      proprietory right  to the  land was      vested  in  the  Zamindar.  he  was



    entitled  to  mines  and  minerals.      With the  abolition of  Zamidari by      the 1951  Act that right has passed      on not  to the appellant but to the      State Government.  The  appellants’      writ petition filed to restrain the      State  Government  from  auctioning      the  right   to  undertake   mining      operations must, therefore, fail".      We  have   therefore,  no   hesitation  to  reject  the contention of  the learned  counsel for  the appellants that notwithstanding the Act, the rights of intermediaries in the mines remain vested with them.      The contention  that regulation cannot mean prohibition as a  general proposition  is no longer open for argument in view of  the decision  of this  Court in state of Tamil Nadu vs. Hind  Stone (  1981 (2)  SCC 205).    This  Court  while considering the scope of Rule 8C of Tamil Nadu Minor Mineral (Concessions) Rule 1959 observed as follows :-      "One  of   the  arguments   pressed      before us  was that  Section 15  of      the Mines  and Minerals (Regulation      and Development) Act authorised the      making of  rules for regulating the      grant of  mining leases and not for      prohibiting them as rule 8-t sought      to do. and, therefore, Rule 8-C was      ultra vires  Section  15.  We  know      cases on  the  subject  right  from      Municipal Corporation  of the  City      of Toronto  vs. Virgo and Attorney-      General for  Ontario  vs.  Attorney      General for  the  Dominions  up  to      State U.P.  VS. Hindustan  Aluminum      Corporatin Ltd, were brought to our      attention. We  do  not  think  that      ’regulation’ has  that rigidity  of      meaning  as   never  to   take   in      ’prohibition’. Much  depends on the      context in  which the expression is      used in  the statute and the object      sought  to   Be  achieved   by  the      contemplated  regulation.   It  was      observed  by  Mathew,  J.  in  G.K.      Krishnan vs.  State of Tamil Nadu :      The word  ’regulation’ has no fixed      connotation:  Its  meaning  differs      according  to  the  nature  of  the      thing to  which it  is applied". In      modern statutes  concerned as  they      are  with   economic   and   social      activities, ’regulation’  must,  of      necessity,  receive   so  wide   an      interpretation  that   in   certain      situations,   it    must    exclude      competition to  the  public  sector      from the private sector. More so in      a welfare State. It was pointed out      by  the  Privy  Council  in  Common      Wealth of Australia vs. Bank of New      South Wales  - and  we  agree  with      what was  stated therein - that the      problem whether  an   enactment was      regulatory  or  something  more  or      whether a restriction was direct or



    only  remote   or  only  incidental      involved,  not  so  much  legal  as      political,   social   or   economic      consideration and that it could not      be   laid    down   that    in   no      circumstances could  the  exclusion      of competition  so as  to create  a      monopoly,  either  in  a  State  or      Commonwealth   agency be justified.      Each case,  it was  said,  must  be      judged on  its own facts and in its      own    setting    of    time    and      circumstances and  it might be that      in   regard    to   some   economic      activities and  at  some  stage  of      social   development,   prohibition      with a  view to  State monopoly was      the only  practical and  reasonable      manner of  regulation. The  statute      with which  we are  concerned,  the      Mines and  Minerals    (Development      and Regulation)  Act, is  aimed, as      we  have  already  said  more  than      once, at  the conservation  and the      prudent     and      discribinating      exploitation of  minerals.  Surely,      in the case of a scarce mineral, to      permit exploitation by the State or      its   agency    and   to   prohibit      exploitation by private agencies is      the  most   effective   method   of      conservation      and       prudent      exploitation.  If   you   want   to      conserve for  the future,  you must      prohibit in the present. We have no      doubt  that   the  prohibiting   of      leases in  certain cases is part of      the  regulation   contemplated   by      Section 15 of the Act.":      Ours is  not an  extreme case of prohibition but one of regulation therefore,  there is  no force  in the  arguments that the  terms and conditions of the lease exceeds the area of regulation  contemplated under  Section 15 of the Central Act.      So far  as the  second contention  is concerned, it was equally without  substance. The  terms and  conditions which were required  to be  determined could  not be  only for the future. Necessarily  they had to be for the whole period for which the  lease was  to be  granted. As the legislature has conferred a  right on the intermediaries, who were operating the mines  on the date of vesting it had further created the Mines Tribunal  for settling  the terms.  Therefore,  it  is logical to  hold that  the terms  to be  laid  down  by  the Tribunal would  be in  respect of  the past  as well  as the future. Nobody  could imagine  that the  Tribunal  would  be created the  day on which the rights were abolished and that it would  determine the  right without  loss of any time. In this context  in which  these words find a place, it must he construed that  the phrase  ’for the  time being  in  force’ should he  given a meaning that at fulfils the object of the provision, the  purpose being  that at  the time of settling the terms  the Mines  Tribunal would  take into  account the provisions of  the Central  Act. This  was the view taken by the High Court and rightly too. Therefore we do not find any substance in  the argument of the learned Sr. Counsel on the



second point.      On the third point concerning the dead rent, it is seen that inspite of opportunities given, the appellants have not taken steps  to produce the records regarding the quality or quantity of  the minerals  removed by them during the period in question.  Necessarily, therefore the authorities have to levy the  dead rent  at the  maximum rate.  This is what the Tribunal observed :-      "Regarding royalty  or  dead  rent,      since there  is no  record  of  the      amount of  mineral taken out by the      lessee, and  the  opposite  parties      have   not   given   the   required      information       through       the      interrogatories  it  would  not  be      possible to  calculate the  royalty      of the mineral extracted, therefore      the Government  intends  to  charge      dead rent,  because the  dead rent,      as per  schedule 2  of rule  22  is      chargeable at  prescribed rates  on      per acre  basis irrespective of the      quality or  quantity of the mineral      removed by the lessee."      It is  not correct to contend that dead rent is payable with regard  to the  quantity of mineral won over. Dead rent has a  different connotation.  In D.K.  Trivedi &  Sons  vs. State of  Gujarat (  1986 Supp.  SCC 20)  it was observed as follows :      "In    a     mining    lease    the      consideration usually  moving  from      the lessee  to the  lessor  is  the      rent for  the  area  leased  (often      called surfact 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".  It      may, however,  be that  the mine is      not worked  Properly so  as not  to      yield enough  return to  the lessor      in the  shape of  royalty. In order      to ensure  for the lessor a regular      income, whether  the mine is worked      or not,  a fixed amount is provided      to be  paid to  him on  the lessee.      This is  called "dead  rent". "Dead      rent" is calculated on the basis of      the area  leased while  royalty  is      calculated  on   the  quantity   of      minerals  extracted   or   removed.      Thus, while  dead rent  is a  fixed      return to  the lessor, royalty is a      return  which   varies   with   the      quantity of  minerals extracted  or      removed.  Since   dead   rent   and



    royalty are  both a  return to  the      lessor  in   respect  of  the  area      leased, looked at from the point of      view dead  rent can be described as      the minimum  guaranteed  amount  of      royalty  payable   to  lessor   but      calculated on the basis of the area      leased and  not on  the quanity  of      minerals extracted  or removed.  In      fact. clause  (ix) of Rule 3 of the      Rajasthan Minor  Mineral Concession      Rules, 1977, defines "dead rent" as      meaning  "the   minimum  guaranteed      amount of  royalty per year payable      as per  rules or  agreement under a      mining     lease,      Stipulations      providing    for    the    lessee’s      liability to pay surface rent, dead      rent and  royalty to the lessor are      the usual  covenants to be found in      a mining lease."      Regarding the  relaxation of  rules. it is not for this Court to give any direction in the facts of these cases.      In the  foregoing circumstances,  we do  not  find  any substance in  all these  cases. The  appeals are  dismissed. However, there will be no order as to costs.