Reportable  IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8152 OF 2009 (Arising out of SLP [C] No.27219 of 2008]

State of Rajasthan & Ors. … Appellants

Vs.

Dev Ganga Enterprises … Respondent

J U D G M E N T

R. V. RAVEENDRAN J.

Leave granted. Heard learned counsel.

2. The  question  that  arises  for  consideration  is  where  the  State  

Government enters into an ‘Excess Royalty Collection Contract’ under  

Rule 32 of the Rajasthan Minor Mineral Concession Rules, 1986 (‘Rules’  

for short), whether a contractor is entitled to a grace period of 15 days  

(from  the  date  when  the  amount  becomes  due)  for  paying  the  dues  

without interest under Rule 61 of the said Rules.   

3. The  respondents  entered  into  an  ‘Excess  Royalty  Collection  

Contract’ with the State of Rajasthan, agreeing to pay a fixed amount of  

Rs.36.52 crores per annum in consideration of the State granting them a

contract to collect from mining lease holders excavating and removing  

marble from the mines of such leaseholders, excess royalty on marble, in  

regard  to  the  mining  leases  within  the  revenue  boundaries  of  Tehsil  

Rajsamand,  Kumbhalgarh,  Amet and Railmangra  of  Distt.  Rajsamand,  

during  the  period  19.7.2003  to  31.3.2005.  The  contract  required  the  

contractor to pay the annual fixed amount in instalments, that is, the first  

instalment on or before the signing of the agreement and the balance in  

eleven monthly instalments, payable in advance upto the 10th day of the  

month. Sub-clause (11) of clause 2 of the agreement provided as follows:  

“The  Contractor  shall  pay  the  instalments  of  contract  money  according to the stipulations laid down in the contract, and if any  amount is not paid on due date it shall be collected as an arrears of  land revenue and an interest @ 12% will be charged irrespective of  any  other  action  being  taken  for  cancellation  of  contract  or  imposition of penalty under relevant rules.”

4. The annual amount payable by the respondents was increased to  

Rs. 42,32,36,000/- per annum on account of revision in rates of royalty.  

On the ground that  there was delay on the part  of the respondents,  in  

paying the instalments,  the department raised a demand for interest  of  

Rs.18,46,899/-, by its letter dated 30.12.2004. The respondent paid the  

said amount under protest on 22.1.2005 and filed a suit on 24.1.2005 for  

setting  aside  the  said  demand  and  seeking  a  mandatory  injunction  to  

adjust the amount recovered from them as interest, towards their future  

dues. The trial court dismissed the suit vide judgment and decree dated  

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29.3.2006.  However  the  High  Court  allowed  the  appeal  filed  by  the  

respondent by judgment dated 27.2.2008 holding that the respondent was  

entitled to a grace period of 15 days under Rule 61 of the Rules, after the  

tenth day of the ‘month’ when the amount fell due. This meant that in a  

contract which commenced on 19.7.2003, if the instalment was due in  

terms  of  the  agreement  on  29.7.2003  (that  is  10th day  of  the  month  

commencing from 19.7.2003), the contractor who commits default cannot  

be charged interest if the payment was made on or before 13.8.2003 and  

that interest could be charged on delayed payments only from 14.8.2003.  

The  said  judgment  is  challenged  in  this  appeal  by  special  leave.  The  

appellants contended that only the first ten days of the contract month  

were  interest  free,  and  the  contractor  was  not  entitled  to  any  further  

interest free period of 15 days.   

5. A  reference  to  the  relevant  Rules  is  necessary  to  consider  the  

tenability  of  appellant’s  contention.  Rule  3(xiii-a)  defines  ‘Excess  

Royalty Collection Contract’ thus:  

“Excess Royalty Collection Contract” means a contract for specified  mineral(s) and area given to collect royalty in excess of annual dead  rent, on behalf of the Government from the holder of mining lease  (s) under the contract whereunder the contractor shall  pay a fixed  amount annually to the Government as per terms of the contract.”   

‘Royalty  Collection  Contract’  is  defined  in  clause  (xxi)  of  Rule  3  as  

follows:  

“Royalty  Collection  Contract”  means  a  contract  for  the  specific  mineral or minerals given to collect royalty [with or without permit  

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fee as the case may be] on behalf of the Government from the quarry  licensees and short term permit holders who excavate minor minerals  from  the  lands  specified  under  the  contract  whereunder  the  contractor  undertakes  to  pay  fixed  amount  annually  to  the  Government save as exempted under rule 58;”

 Rule 32 provides that the Government may grant by auction or tender,  

Royalty  Collection  Contract/Excess  Royalty  Collection  Contract,  in  

regard to such area and such mineral as the Director may by general or  

special order direct, for a maximum period of two years. Sub rule (3) of  

Rule 32 provides that the amount to be paid annually by the contractor to  

the  Government  shall  be  determined  in  auction  or  by  tender  to  be  

submitted for acceptance by the authority competent to grant the contract.  

Rule 34 regulates the procedure for auctions and Rule 35 regulates the  

procedure  for  calling  tenders.  Rule  34  (g)(iii)  and   Rule  35  (g)(iii)  

provide  that where the oral bid/tender exceeds Rs.10 lakhs it shall be  

recovered  in  12  monthly  instalments  and  the  first  instalment  shall  be  

deposited  before  the  execution  of  the  agreement  and  the  remaining  

amount shall be deposited in 11 equal monthly instalments by the 10th of  

each month in  advance.  Rule  37(2)  provides  where  the  bid/tender  for  

Royalty Collection Contract/Excess Royalty Collection Contract has been  

accepted by the competent authority the bidder/tenderer shall execute an  

agreement in Form No.10 within a period of one month from the date of  

the  order  accepting  the  bid/tender  and  that  the  terms  and  conditions  

included in the notification issued under Rule 34 or 35 shall be treated as  

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a part of the agreement. Form No.10 is a common form for agreement for  

collection  of  royalty  or  excess  royalty.  The  Rules  also  contain  a  rule  

(Rule 61) relating to rate of interest which reads thus:

“Interest at the rate of 12% shall be charged on all dues in respect of  dead rent, royalty, quarry licence fee and royalty collection contract  amounts after 15 days from the date of it becomes due”

[Note: ‘12%’ amended as ‘15%’ by Notification dated 18.12.2004].

6. The appellants contend that having regard to Rule 35 (g)(iii) and  

37, the 11 monthly instalments shall  be paid by 10th of each month in  

advance, and if the contract commences as in this case on 19.7.2003, the  

first instalment shall be paid within 10 days from the 19th  July, that is, by  

29th July.  It  is  contended that  except  the said grace period of 10 days  

given under the Rules and under the terms of the contract, the contractor  

is not entitled to any further interest-free grace period. It is pointed out  

that  Rule  61,  which  is  a  general  provision  regarding  rate  of  interest,  

clearly states  that  the interest  provided therein shall  be charged on all  

dues  in  respect  of  dead  rent,  royalty,  quarry  licence  fee and  royalty  

collection contract amounts  after 15 days from the date of it  becomes  

due. It is pointed out that ‘Excess Royalty Collection Contract Amount’  

is not included in the items in regard to which the 15 days grace period is  

made available. It is further pointed out that there is a specific mention of  

‘Royalty  Collection  Contract  Amount’  in  Rule  61,  but  not  ‘Excess  

Royalty Collection Contract’. Therefore, it is contended that the 15 days  

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grace period mentioned in Rule 61, will be inapplicable to amounts due in  

regard to Excess Royalty Collection Contract.

7. On the other hand the respondents submit that Rules 34 (g)(iii),  

35(g)(iii)  and  37(2)  deal  with  both  Royalty  Collection  Contracts  and  

Excess  Royalty  Collection  Contracts  together,  treating  them  in  an  

identical  manner.  Even  Form  No.10  is  common  and  identical  for  

agreements for collection of royalty and excess royalty.  It is contended  

that Rule 61 is  a general provision relating to interest  in regard to all  

amounts due under the Rules and is therefore applicable to all contracts  

entered under the Rules; and that the mandatory provision in Rule 61 that  

interest  shall  be  chargeable  only  after  15 days  from the  date  when it  

becomes due, clearly means that all amounts due and payable under the  

Rules will enjoy the benefit of 15 days interest free period.  

8. We have carefully considered the contentions. It is no doubt true  

that  the  procedures  for  auction/tender  in  regard  to  Royalty  Collection  

Contracts and Excess Royalty Collection Contracts are the same. It is also  

true that the form of contract for both types of contracts is the same. It is  

also true that under both types of contract, the government gives contracts  

to collect royalty in regard to particular areas in consideration of payment  

of a fixed amount annually. But these factors do not lead to an inference  

that  the  Royalty  Collection  Contracts  are  same  as  Excess  Royalty  

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Collection Contract. It is clear from their definitions in clauses (xxi) and  

(xiii-a) of Rule 3 that they are conceptually different. Royalty Collection  

Contracts refer to contracts given to the contractors to collect royalty on  

behalf of the Government from quarry licensees and short term licence   

holders who excavate minor minerals. On the other hand, Excess Royalty  

Collection  Contracts  refer  to  contracts  given  to  contractors  to  collect   

royalty in excess of annual dead rent on behalf of the Government from  

the  holders  of  mining  leases.  Therefore  an  Excess  Royalty  Collection  

Contract cannot be equated with a Royalty Collection Contract. Rule 61  

clearly sets  out  the nature of dues in regard to which it  will  apply.  It  

specifically refers to dues in regard to “dead rent, royalty, quarry licence  

fee and royalty collection contract amounts”. ‘Excess Royalty Collection  

Contract Amount’ is neither a dead rent, nor royalty nor quarry licence  

fee  nor  a  royalty  collection  contract  amount.  ‘Royalty  Collection  

Contract’  was  a  concept  that  was  conceived  and  contemplated  in  the  

Rules  as  originally  framed.  On  the  other  hand,  ‘Excess  Royalty  

Collection Contract’ was a new concept introduced by amendment dated  

12.8.1994 by inserting a new definition under clause (xiii-a) of Rule 3.  

After  the said amendment  in 1994 introducing the  concept  of  ‘Excess  

Royalty Collection Contract’, Rules 32, 34, 35 and 37 were amended by  

inserting  ‘Excess  Royalty  Collection  Contract’  wherever  the  words  

'Royalty Collection Contract'  occurred by amendment dated 27.3.2003,  

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thereby emphasising that the two were different. But significantly such an  

insertion  was not  made  in  Rule  61.  If  the  intention  was to  apply  the  

provisions  of  Rule  61  even  in  regard  to  Excess  Royalty  Collection  

Contracts, then Rule 61 also would have been amended, when Rules 32,  

34,  35  and  37  were  amended,  to  include  ‘Excess  Royalty  Collection  

Contracts’. In the absence of any reference of ‘Excess Royalty Collection  

Contract  Amount’  in  Rule  61,  it  is  evident  that  the  15  days  interest  

holiday  is  not  available  in  regard  to  ‘Excess  Royalty  Collection  

Contracts’,  even  though  it  may  be  available  in  regard  to  the  four  

categories of dues referred to therein.  

9. The respondent next submitted that under the contract the rate of  

interest was 12% per annum; that originally the rate of interest specified  

under Rule 61 was also 12% per annum; that the rate of interest under  

Rule 61 was increased from 12% to 15% per annum by amendment dated  

18.12.2004;  and that  on the  basis  of  the  said  amendment  of  Rule  61,  

when there was some delay in payment  of  instalments  subsequent  to  

18.12.2004, the appellants demanded payment of interest at the rate of  

15% per annum relying upon Rule 61. It is contended that the said action  

clearly demonstrated that even according to the appellants, Rule 61 was  

applicable in regard to the Extra Royalty Collection Contracts. We are  

not  concerned  with  such  subsequent  dispute.  Further  a  wrong  or  

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untenable subsequent  claim by the government cannot justify a wrong  

interpretation  of  Rule  61.  The  wording  of  Rule  61  is  clear  and  

unambiguous. The State has categorically contended before us that Rule  

61  is  inapplicable,  as  the  said  rule  does  not  refer  to  ‘Excess  Royalty  

Collection Contracts’. If the State Government wrongly applied Rule 61  

to demand higher rate of interest in regard to any subsequent period, it is  

open to the contractor to contend therein that Rule 61 is inapplicable to  

Excess Royalty Collection Contracts.  

    10.  We, therefore allow this appeal, set aside the judgment of the High  

Court, restore the decision of the trial court and uphold the demand for  

interest  at  12%  per  annum  in  respect  of  the  delayed  payment  of  

instalments  relating  to  ‘Excess  Royalty  Collection  Contract’,  without  

applying the grace period of 15 days under Rule 61 of the Rules.

………………………..J. (R V Raveendran)

New Delhi; ……………………….J. December   8, 2009. (K S Radhakrishnan)       

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