IN THE SUPREME COURT OF INDIA

CIVIL  APPELLATE JURISDICTION

CIVIL APPEAL NOS.  3226-3271        OF 2010 (Arising out of SLP(C) Nos. 24489-24534 of 2007)

State of Jharkhand & Ors.          …Appellants

Versus   M/s. Misrilall Jain & Sons & Anr. etc.etc.   …Respondents

WITH

CIVIL APPEAL No. 3272      OF 2010 (Arising out of SLP(C) No. 7199 of 2008)

CIVIL APPEAL Nos.  3274-3275               OF 2010 (Arising out of SLP(C) Nos. 7200-7201 of 2008)

CIVIL APPEAL No.   3273      of 2010 (Arising out of SLP(C) No. 7202 of 2008)

CIVIL APPEAL Nos.   3276-3277         of 2010 (Arising out of SLP(C) Nos. 7203-7204 of 2008)

JUDGEMENT

R.M. Lodha, J.

Leave granted.

2. In this group of 52 appeals by special leave, 46  are  

directed  against  the  common  judgment  dated  May  7,  2007  

passed by the High of Jharkhand disposing of 46 writ petitions.

The remaining 6 arise from separate judgments but following  

the  judgment  dated  May  7,  2007.  These  appeals  involve  

common issues and, accordingly, were heard together and are  

being disposed of by this common order.

3. The  appellants  in  these  appeals  are  State  of  

Jharkhand  and  their  officers  (for  short,  ‘State  Government’).  

The respondents  are major  mineral  lease holders  and minor  

mineral lease holders (for short, ‘lessees’).

4. On June 17, 2005, the State Government through  

Department  of  Mines  and  Geology  issued  a  Resolution  

regarding collection of surface rent on the area of mining leases  

at  par  with  the  land  under  commercial  use  whereby  and  

whereunder the following decisions were taken:

“(a) The area held for minor and major mineral  mining  lease  shall  be  treated  as  held  for  commercial purposes in accordance therewith the  surface rent shall be collected on it.

(b) The  annual  land  rent  for  the  entire  area  held  under  minor  and  major  mineral  shall  be  equal  to  the  5%  of  the  latest  market  price  determined  for  that  particular  area  by  the  Dy.  Commissioner-cum-District  Registration  (should  be  Registrar)  and  it  shall  be  collected  by  the  District/Asst.  Mining  Officer  from  the  lease  holders.

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(c) This rate shall be variable from time to time  in proportion of  the market price determined by  the Dy. Commissioner-cum-District Registrar.

(d) The  arrear  of  the  surface  rent  can  be  realized by initiating case for auction as a public  under  the  Bihar  &  Orissa  Public  Demand  Recovery Act, 1914.”

   5. In pursuance of the aforesaid Resolution, demand  

notices were issued to the lessees in respect of the leases held  

by them for payment of enhanced surface rent, i.e., surface rent  

equal to 5% of the latest market price of the land treating the  

entire leased area as having been held for commercial use. The  

lessees  approached  Jharkhand  High  Court  by  filing  writ  

petitions challenging the competence and authority of the State  

Government in issuing the said Resolution treating entire land  

for the purposes of determination of surface rent as the lease  

for commercial purposes and revising surface rent at 5% of the  

latest market price of the land. The lessees prayed for quashing  

the Resolution dated June 17, 2005 and demand notices.

6. The  State  Government  defended  their  action  as  

valid,  legal and justified. According to State Government,  the  

Resolution dated June 17, 2005 has been issued in terms of  

the power conferred upon them, insofar as major minerals are  

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concerned,  under the Mines and Minerals (Development  and  

Regulation)  Act,  1957  (for  short,  ‘1957  Act’)  and  Mineral  

Concession  Rules,  1960  (for  short,  ‘1960  Rules’)  and  as  

regards  minor  minerals  under  Jharkhand  Minor  Mineral  

Concession Rules, 2004 (for short, ‘2004 Rules’).

7. The High Court by a common judgment dated May  

7, 2007, allowed 46 writ petitions and quashed the Resolution  

dated June 17, 2005 and the demand notices. The other 6 writ  

petitions were allowed subsequently by following the judgment  

dated May 7, 2007.

8. Mr.  M.S.  Ganesh,  learned  senior  counsel  for  the  

State Government invited our attention to Entry 54 of Union List  

and Entry 18, Entry 23 and Entry 45 of the State List in Seventh  

Schedule to the Constitution. He  referred to the provisions of  

1957 Act,  particularly,  definition of  ‘mining lease’ and ‘mining  

operations’  in  Section  3(c)  and  Section  3(d)  respectively,  

Section 13 that empowers Central Government to make rules in  

respect  of  minerals,  Section  15  that  empowers  State  

Government  to  make rules in  respect  of  minor  minerals  and  

Section 17 that specially empowers the Central Government to  

undertake prospecting or mining operations in certain lands. He  

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also invited our attention to 1960 Rules, particularly,  Rule 27  

(1)(d)  and  Rule  31.  In  backdrop  of  the  aforesaid  legal  

provisions, Mr. M.S. Ganesh assailed the impugned judgment  

of the High Court dated May 7, 2007 and submitted that none of  

the writ petitioners laid any challenge to or prayed for any relief  

against the legislative competence of Parliament to enact, or to  

the constitutional validity/vires of Section 13(2)(i) of 1957 Act or  

to the competence of the Central Government to make, or to  

the  vires  of,  Rule  27(1)(d)  of  the  1960  Rules  or  to  the  

constitutional validity/vires of Section 15(1A)(g) of 1957 Act or  

to the competence of the State Government to make, or to the  

vires of Rule 29(1)(d) of the 2004 Rules. In the circumstances,  

learned senior counsel  submitted that it  was not open to the  

High  Court  to  pronounce  that  the  imposition  of  surface  rent  

(whether for major or minor minerals) is beyond the legislative  

competence  of  the  State  and  the  subordinate/delegated  

legislative  competence  and  executive  authority  of  the  State  

Government.

9. Learned senior  counsel  for  the State Government  

would  submit  that  the  High  Court  while  considering  the  

controversy  relating  to  the  Resolution  dated  June  17,  2005  

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applied principles evolved in relation to taxing statutes and the  

decisions  rendered  relating  to  such  statutes  overlooking  the  

conceptual distinction between the State’s sovereign capacity  

to levy taxes and duties and the State’s capacity as a lessor to  

collect  rent.  He  vehemently  contended  that  the  findings  

recorded by the High Court, namely, (a) that mining leases do  

not  partake  of  the  same character  as  other  leases  that  are  

characterised as commercial leases and (b) that no provision  

has been made in 1957 Act  for  the enhancement of  surface  

rent were fundamentally erroneous. He urged that High Court  

seriously erred in overlooking the fact that lessees have failed  

to plead jurisdictional facts, let alone discharge their burden of,  

showing  that  the  surface  rent  as  enhanced  pursuant  to  

Resolution dated June 17, 2005 is at a rate that exceeds the  

land revenue in terms of 1960 Rules. He would also submit that  

power  to  review  and  enhance  the  surface  rent  of  a  mining  

lease, even during its subsistence as regards major minerals, is  

embodied and inherent in Section 13(2)(i) of 1957 Act read with  

Rule 27(1)(d) and Part-V, clauses (2) and (4) in the statutory  

lease  of  1960  Rules  and  in  respect  of  minor  minerals,  in  

Section 15(1A)(g) read with Rule 29 (1)(d) of 2004 Rules. He  

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also submitted that lessees have all along been paying surface  

rent without demur and their challenge to the enhancement of  

surface rent had no merit yet High Court allowed writ petitions.

10. Mr.  A.K.  Ganguli,  learned  senior  counsel  led  the  

arguments  on  behalf  of  the  lessees.  He  supported  the  

judgment dated May 7, 2007  and submitted that the entire field  

of legislation—‘Regulation of Mines and Minerals Development’  

is  fully  under  the  control  of  the  Central  Government  and  

consequently the State Legislature are denuded of their power  

to make any law with reference to the subject matter covered  

by Entry 23 of List II of Seventh  Schedule to the Constitution.  

He would submit that the validity of the Resolution dated June  

17, 2005 has to be tested with reference to the powers of the  

State Government within the four corners of 1957 Act and the  

Rules made thereunder and the State Government would not  

be competent to issue such Resolution as an executive order in  

exercise of its power under Article 162 of the Constitution. He  

invited our attention to Sections 2,4, 5 and 13 of 1957 Act, Rule  

27(1)(d)  and  Rule  31  of  1960  Rules  and  submitted   that  a  

conjoint  reading  of  these  provisions  would  show  that  the  

surface rent is payable only for surface area occupied or used  

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by the lessee and that too during the period when the lessee  

continues to occupy or use such area even though the mining  

lease for the leasehold area continues beyond the period when  

the  surface  area  ceased  to  be  occupied  by  the  lessee.  

Mr. Ganguli submitted that  the surface rent as determined by  

the State Government is required to be specified in the lease  

deed  itself  and  although  royalty/dead  rent  is  variable  but  

surface rent is not. He vehemently contended that surface rent  

could not be levied for the entire leasehold area held under the  

mining  lease.  According  to  him,  the  approved  mining  plan  

demarcates only limited surface area which could be put  for  

mining  operation  in  a  given  year  or  for  block  of  years  and,  

therefore, the Resolution dated June 17, 2005, in any case, is  

bad to the extent it authorizes the levy of surface rent on the  

entire  area  held.  He  would,  thus,  submit  that  the  judgment  

dated May 7, 2007 and subsequent judgments relying upon the  

said judgment do not call for any interference. Learned senior  

counsel and counsel for lessees in some appeals adopted the  

arguments of Mr. A.K. Ganguli.

11. It  was fairly clear during the course of  arguments  

before us that there was no challenge by writ petitioners to the  

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legislative competence of the Parliament to enact 1957 Act or  

to the competence of the Central Government to make 1960  

Rules or to the competence of the State Government to make  

2004 Rules. It is also apparent from the Resolution dated June  

17, 2005 that it has been issued by the State Government as  

an executive order.  However,  perusal  of  the judgment of  the  

High Court dated May 7, 2007 shows that High Court was not  

at  all  clear  about  the  Resolution  dated  June  17,  2005.  In  

paragraph 29, High Court says :

“29. Taking into consideration the Act and the Rules,  we have no doubt in our mind in holding that the State  Legislature has no legislative competence to issue  executive  orders  for  revision  of  surface  rent in  respect  of  the  mining lease  of  major  minerals  as  it’s  jurisdiction is fully occupied by the Central Act and the  Rules.”                                                                 (emphasis supplied)

Then, in paragraph 37, High Court observes :

“37. On the face of the resolution, we are of the  definite opinion that said resolution is not only  beyond  the  competence  of  the  State  Legislature but also illegal, arbitrary and without  application of mind.”

(emphasis supplied)

In paragraph 48,  High Court has concluded :

“48. Be that as it may, when the imposition of  surface rent is beyond the legislative power of  the State Government then by the Executive  

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Orders  of  the  State  demand of  Surface rent  treating  mining  leasehold  used  for  commercial  purposes  is  uncalled  for.  In  our  considered  opinion,  therefore,  demand of  surface rent  both  for major and minor minerals by issuing executive  orders  is  illegal,  arbitrary  and  wholly  without  jurisdiction.”   

(emphasis supplied)

12. The observations, ‘that the State Legislature has no  

legislative competence to issue executive orders for revision of  

surface rent’ and ‘that said Resolution is not only beyond the  

competence of the State Legislature’ in the impugned judgment  

dated May 7, 2007 show that the Division Bench carried the  

impression as if the Resolution dated June 17, 2005 has been  

issued by the State Legislature. The legality and validity of the  

said Resolution was examined by the High Court partly on that  

assumption. The reasoning in the judgment dated May 7, 2007  

is  full  of  confusion.  The  aspects  which  were  germane  for  

consideration of the controversy have been overlooked by the  

High Court and certain irrelevant aspects have been taken into  

consideration. By reason of such patent errors, it is difficult to  

sustain the impugned judgments. Ought we know what would  

have been the ultimate decision of  the High Court  had such  

errors not occurred. In the circumstances, we do not deem it  

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necessary to go into the merits of the diverse contentions and  

leave the parties to agitate their contentions before High Court  

as in our opinion the controversy relating to Resolution dated  

June 17,  2005 and demand notices  needs to  be considered  

afresh by the High Court.

13. Consequently,  these  appeals  are  allowed  and  

impugned judgments are set aside. Writ petitions are restored  

to the file of the High Court for fresh consideration and disposal  

as expeditiously as may be possible. No orders as to costs.  

……….……………..J        (P. Sathasivam)

…..…….……………..J                  (R. M. Lodha)

New Delhi April 13, 2010.    

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