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PETITIONER: STEEL AUTHORITY OF INDIA LTD.

       Vs.

RESPONDENT: STATE OF M.P.  & ORS

DATE OF JUDGMENT:       05/04/1999

BENCH: M.Jagannadha Rao, S.  N.  Phukan

JUDGMENT:

JUDGEMENT S.N.  PHUKAN, J.

       This appeal is directed  against  the  Judgment  and Order passed by the Madhya Pradesh High Court at Jabalpur in Misc.  Petition No.  1826 of 1993.

       A  few  facts  leading  to this appeal deserve to be noted at the outset for highlighting the  grievance  of  the appellant in the present appeal.

       The Central Government, Ministry of Production wrote a letter dated 8th January, 1955 to the Chief  Secretaries of the  States of West Bengal, Bihar and Madhya Pradesh.  In this letter it was indicated that it was under consideration of the Central Government  to  establish  Russian  technical assistance steel plants at three places in the three States. For  this  purpose  a  piece  of land measuring about 50 sq. miles, would be required.  Therefore, the Central Government by letter dated the 8th January, 1955 wanted  to  know  from the  State  Governments  whether  the  Governments  would be prepared to accord facilities.  The  said  three  facilities are stated below:-

"(1) 50  sq.    miles  of land, free to the extent it is the property of the State Government, and guarantee of a ceiling cost for the acquisition of privately owned land,  it  being understood that any cost in excess of the guaranteed ceiling would be borne by the State Government concerned.

(2)  A guarantee of adequate and continuous water supply, as required for the steel plant, associated  projects  and  the town,  at rates to be mutually agreed upon between the State Government and the Government of India and/or an  autonomous State Co.  to be registered for the purpose.

(3)   Guarantee  of  prior  claim  on  all  unleased  mining concessions  in  respect  of  iron-ore,   coal,   limestone, dolomite  and  any  other raw material discovered or to  be discovered within the territory of the State  concerned  and required for the steel project."

By  letter  dated  11th  of  January, 1955 the Government of Madhya Pradesh informed the Central

Government that the State Government was prepared to  accord all the above facilities.

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Another letter was sent dated 25th of September, 1958 by the Government  of  Madhya Pradesh bringing to the notice of the Central Government the rules  framed  by  the  Secretary  of State in   1925.      Two  salient  features  of  the  rules particularly A and B were stated in the said letter.   These features are:

"(A)  When  any  land  is required by the Central Government that Government are required to pay (i) cost of acquisition, if the land is occupied and market value  of  land,  if  the land  belongs  to  the State Government and {ii) capitalised value of  land  revenue  at  the  assessment  to  the  State Government  the loss of land revenue, as no land revenue can be recovered from the Central Government.

(B) When any land is not required by the Central  Government for  the  purpose  for  which  it  was  acquired,  the State Government are given the first option to  take  it  back  on payment of  its  market  value.  Should the State Government exercise the option and pay the marketvalue of the land then they are at liberty to dispose it of in  such  a  manner  as they deem fit."

By this letter Central Government was informed that the land for the Bhilai  Steel  Plant  might  be  classified  in  two categories namely land belonging to private persons and land belonging  to  State,  It  was  brought to the notice of the Central Government that the Central Government agreed to pay the  cost  of  acquisition  of  land  and  that  the   State Government  was  also  entitled to claim the amount awarded, that is, market value plus  15%  on  account  of  compulsory nature of  acquisition  from the Central Government.  It was further brought to the notice of the Central Government that the  State  Government  would   be   entitled   to   recover capitalised  value of land revenue at 25 times the amount of land revenue in accordance to above 1925 rules.

Regarding land which belonged to  State  Government  as  per earlier  agreement  it was agreed to transfer such land free of cost.

We may like to quote paragraph 10 of the said  letter  which is as follows:

"The  State  Government are, therefore, of the view that the land  shall  be  held  by  the  Central  Government  on  the following terms and conditions :-

(1)  Land  acquired/transferred  for  the Bhilai Steel Plant should be treated as if it were in possession of the Central Government for the purposes of the Union.

(2) in respect of occupied land, i.e.    land  belonging  to private  persons, the Central Government should pay the cost of acquisition,  including  15%  on  account  of  compulsory nature  of  acquisition,  to  the  owners  of  the  land and capitalised value at 25 times the  amount  of  land  revenue assessed on such land to the State Government.

(3) in  respect  of unoccupied land, i.e.  land belonging to the State Government, neither the cost nor capitalised value of land revenue shall be payable by the Central Government.

(4) the  State  Government  shall  be  entitled  to  recover

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royalty on all minor and major minerals extracted from lands acquired transferred at rates fixed by the State Government.

(5) if any land acquired/transferred for Bhilai Plant is not required  for the purposes of the plant, the first option to take it back should be given to the State Government and the State Government should pay the cost  of  acquisition  minus 15%  on  account  of  compulsory nature of the a.cquisition, where at the time of acquisition, it was paid for.  In cases where the Central Government have not been required  to  pay the cost  of  any  land, the State Govt.  should get it back without any payment whatsoever; and

(6) if, however, the Central Government  wants  to  transfer any  land acquired/transferred for Bhilai Plant or any right therein to any privatepersons, the terms and  conditions  of such  transfer  should  be intimated to the State Government and their concurrence obtained before the  transfer  and  in appropriate  cases, divide or allocated the proceeds between the Central and State Govt.  on agreed terms."

By two deeds of assignment executed on 31st  day  of  March, 1959   and  27th  of  March,  1978  the  Central  Government transferred land etc.  as indicated in the  schedules  to  a company wholly owned by the Central Government namely namely Hindustan Steel  Ltd..    The present company is a successor company of Hindustan Steel Ltd.  in respect of Bhilai  Steel Plant.   We  may state here also that by letter dated 7th of May,  1963  the  Central  Government  informed   the   State Government  that as advised land could be acquired for Union of India for the Bhilai Steel Plant though the  project  had been handed  over  to the Hindustan Steel Ltd.  and for this purpose Central Government authorised the General Manager of the Bhilai Steel Plant to act for the Central Government  in all  matters relating to acquisition of land and while doing so the General Manager would not  deemed  to  be  acting  on behalf of the company.

The  Deputy  Collector,  Durg  by letter dated 4th of March, 1987 informed the Bhilai Steel Plant authority that a sum of Rs.  3,27,90,220.00 was due as land revenue  for  the  years 1962-87  from  the  above  Steel  Plant and amount had to be realised.  From the letter in the subject it  was  mentioned that  this  was  so  done  in  view  of  the  report  of the Comptroller and  Auditor  General  of  India  for  the  year 1981-82.

From  the  letter  dated 23rd of June, 1987 issued by Deputy Collector, Durg to the Assistant Estate Manager(Land),Bhilai Steel Plant it  appears  that  a  piece  of  land  measuring 32759.00  acres  was allotted to the Steel Plant and revenue was payable @ Rs.  40/- per acre per  annum  and  assessment for the  land  revenue  was for the years 1962-86.  Finally, the Collector ,Durg by an order dated 27th of January,  1990 assessed the  land  revenue  at  Rs.    3,73,96,873.20 after making some deduction and  passed  an  order  for  immediate realisation of  the  above  amount.    The  area of land was assessed by  the  Collector  for  32759.00  acres  and  land revenue was assessed  @  Rs.    40  per  acre per annum.  An appeal was filed before the  Commissioner,  Raipur  Division which  was  dismissed  by  order  dated  19th January, 1992. Thereafter matter was taken up before the Board  of  Revenue and by order dated 16th of November, 1992 it was dismissed.

The  appellant-company  approached  the High Court by filing

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Misc.  Petition No.  1826/93 under Article 226  and  227  of the Constitution of India which was dismissed by order dated 29.04.1993.  Hence the present appeal.

We have heard  Mr.    C.S.  Vaidyanathan, learned Additional Solicitor General for the appellant and Mr.  B.S.   Banthia, learned advocate for the respondents.

Section  58  of  the  Madhya Pradesh Land Revenue Code, 1959 (for short the Code) which fixes the liability  of  land  to payment of land revenue is quoted below:-

"Sec.   58  -  (1) All land, to whatever purpose applied and wherever situate, is liable to the payment of revenue to the State Government,  except  such  land  as  has  been  wholly exempted from such liability by special grant of or contract with the  State  Government.  or under the provisions of any law or  rule  for  the  time  being  in  force.    (Emphasis supplied)

(2)  Such  revenue  is  called "land revenue", and that term includes all moneys payable to the State Government for land notwithstanding that such other  manner  in  any  enactment, rule, contract or deed."

We also quote Section 264 of the Code:-

"Sec.  - 264.  Nothing contained in this Code shall apply to a  person  who  holds  land  from  the  Central  Government.  "(Emphasis supplied)

The only point to be decided is whether in view of the above facts and laws the appellant  is  liable  to  pay  any  land revenue for the land in occupation of Bhilai Steel Plant.

It  will  be noticed that we are concerned with two separate pieces of land, one assigned by the  Central  Government  to the  Company  on 31st March, 1959 and another on 27th March, 1978.  The assessment to land revenue by the State of Madhya Pradesh covers the period from 1962-1987.

The contention for the appellant is as follows:

So  far  as  the  first  assignment, is concerned, no doubt, during this period i.e.  from 1962 the said extent was owned by the Company after assignment by the Central Government on 31st March, 1959.  This land not being owned by the  Central Government from  1959  (i.e.   after 1962) is not covered by Article 285 of the Constitution of India.  It may be assumed that this piece of land is also not held by  a  person  from the Central Government so as to claim the benefit of Section 264 of the  Code.   But the.  right to levy land revenue can be lost  by  ’contract’  and  by  *  rules  as  provided  in sub-clause (1) of Section 58.  In the present case, there is a  contract  implied  by  the  correspondence  that  Central Government should make a one time payment  of  land  revenue for 25 years.  In addition, the 1925 Rules also provide that if  land  is transferred by the State to Central Government, and if such a payment is made, the Central  Government  need not pay  any  further  land  revenue  to the State.  Both on ground of contract and Rules, the  Central  Government  gets exemption under sub-clause (1) of Section 58.  So far as the extent  covered  by the second assignment dated 27.3.1979 is concerned,  the  contention  is  two  fold  -  the   Central Government  is  exempted  in  view  of  thg  Article 285 and

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Section 264 of the Code upto 26.3.1979.    No  levy  on  its successor, (the  Company) can be made upto 26.3.1979.  On or after 27.3.1979, the Company is not liable  because  of  the contract  (evidenced  by correspondence) and also because of the 1925 Rules, the case  comes  within  sub-clause  (1)  of Section 58.

On the other hand, the contention for  the  respondent-State of  Madhya  Pradesh  is  that  the company is liable for the whole period 1962-1987 in respect of both the pieces of land assigned to the company on 31st March, 1959 and 27th  March, 1978  inasmuch  as Article 285 cannot help the Company, even if all its shares are held by the Central Government.    The Company is a.    different juristic entity.  Nor can Section 264 of the Code apply because the Company is not holding the land for the Central Government for after  the  assignments, the Central Government cannot be said to be holding the land through the Company.  So far as sub-clause (1) of Section 58 is  concerned, there is no contract entered into between the Central and State Governments in accordance with Article 299 of the Constitution  of  India,  waiving  the  further  land revenue on the ground that once 25 times of land revenue was paid, no further land revenue need be paid.  There can be no estoppel against  statute.   The 1925 Rules cannot also help the appellant.  Nor has any  exemption  been  granted  under Section 59 of the Code.

It  will be noticed that in the letter of the Madhya Pradesh Government dated 25.9.58 which was referred  to  above,  the salient features of the rules framed by the Secretary to the Madhya Pradesh  Government  in  1925  were referred to.  The condition No.  A clearly  lays  down  that  the  capitalised value of the land revenue has to be assessed and paid to the State  Government  towards  loss  of land revenue as no land revenue can be recovered from the Central  Government  later on.   From  paragraph 10 of the letter which has been quoted above we also find that land revenue in respect of land held by the private persons has to be capitalised at 25 times and capitalised value of land revenue shall be  payable  by  the Central Government to the Government of Madhya Pradesh.

A  memorandum  dated  17th July, 1958 from the Government of Madhya Pradesh was issued  to  the  Commissioner  of  Raipur division  raising a query as to whether capitalised value of land revenue had been recovered  or  not  and  if  not,  the amount  to be reported to the Government so that it could be claimed from the Central Government.

According to the Black’s Law Dictionary (Fifth Edition.) the word ’capitalize’  means  ...    "To  convert  a  periodical payment into  an  equivalent capital sum or sum in hand.  To compute the present value  of  an  income  extended  over  a period of time...

According   to  the  Oxford  English  Dictionary’  (Being  a Corrected Re-issue with  an  Introduction,  Supplement,  and Bibliography  of  A  New  English  Distionary  on Historical Principles, Volume II-C) the word ’Capitalize’  means  ..... 2"To  convert  (a  periodical  income  or  payment)  into an equivalent capital sum; to compute or  realize  the  present value  of such a payment for a definite or indefinite length of time....."

The object of the Rules framed by the Secretary of State  in 1925  is  clear  that land revenue was to be capitalised and

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collected once for all and that no  land  revenue  could  be further recovered  thereafter.   Land revenue had to be paid periodically and in view of the  above  dictionary  meanings and  in  view of the rules framed in 1925, once land revenue was  capitalized  and  paid,  no  further  amount  could  be realised  by  the State Government for the land transferred. Thereafter the case falls under sub-clause (1) of Section 58 which states that by virtue of provisions in  a  rule  made, land revenue could become exempt.

Though Mr.    Banthia has urged that as no reply was sent to the letter of the State  Government  dated  25th  September, 1958,  therefore, there was no contract under Article 299 of the Constitution of India between the Central Government and the State  Government  regarding  the  non-payment  of  land revenue,  we  are  unable  to  accept  the contention of the learned counsel inasmuch as by the conduct of the parties it is very clear that both  the  Governments  agreed  with  the terms  mentioned in the letter of the State Government dated 25th September,  1958  and,  therefore,  there  was  also  a contract  between  the  parties regarding the exemption from payment of land revenue, if 25 times of the land revenue was paid once for all.  The contention that such a  contract  is not  executed  in the form required under Article 299 cannot be accepted.  This point was not raised in the  High  Court. Apart from that it is clear that Article 299 applies only to contracts  to  be  executed in exercise of "executive power" and not to those executed by virtue of statutory power  like Section 58 of  the  Code.    ( See State of Haryana Vs.  Lal Chand 1984 (3) SCC 634; Lalji Khimji Vs.  State  of  Gujarat 1993 Suppl.(3) SCC 567.  In the latter case, Anand, J.(as he then was) observed as follows:

"There  is  a marked distinction between contracts which are executed in exercise of the executive powers and  agreements or  orders  made  which  a.re  statutory in nature .......In State of Haryana Vs.  Lal Chand,  this  Court  considered  a contract  granting exclusive privilege of liquor vending, in exercise of the statutory powers referable to Punjab  Excise Act,  1914  and  Punjab Liquor Licence Rules, 1956, and held that the grant of the exclusive privilege  gave  rise  to  a contract  of  a statutory nature, distinguished from the one executed under Article  299(1)  and,  therefore,  compliance with Article 299(1) was not required in such a case."

Section 58 of the Code provides that land revenue is payable in  respect  of  all  land  unless  it is exempted from such liability bv  special  grant  or  contract  with  the  State Government.   In  view  of  the  agreement  between both the Governments and in view of the above provisions  of  Section 58  of th-e Code we hold that no land revenue is payable for the land in  question  more  particularly  as  it  has  been capitalized  at  25  times of the land revenue prevailing at that time.

Thus, whether it  is  because  of  the  1925  Rules  or  the Contract,  Central  Government  was  not  liable to pay land revenue once it had paid the 25 timee land revenue as a  one time payment.

The  next question is whether after the land was transferred to the Company, the Company would be liable to pay any  land revenue under  the  Code?    Two  deeds  of assignments were executed on consideration for  transferring  shares  by  the Company to the Central Government.  We may refer to relevant

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portions of the assignment deeds;

".....the  Government  doth  hereby  grant  convey  transfer assign and assure unto the Company all those several  pieces or parcels of lands and hereditaments situate..  "

".....rights,  liberties, privileges, easements, advantages, and opportunas whatsoever to the said  lands,  hereditaments and  premises  appeartaining to or with the same or any part thereof now or hereto have or may hereafter be  occupied  or enjoyed  or  reputed  or  known as part and parcel or member thereof or appeartaining thereto(  hereinafter  called  "the said lands and buildings")

".....and  all  the estate, right, title and interest, claim and demand of the Government into and  upon  the  lands  and buildings,  the plant or every part thereof and also all the deeds and other evidences of title in any  way  relating  to the  said  lands  and  hereditaments  and  all  receipts and documents and other evidence of title to the plant  and  the component  parts  thereof  an installed or brought in by the Government  in  connection  with  the  said  "Bhilai   Steel Project"...."

Thus  it  is  clear  from  the above clauses of the deeds of assignment that while transferring the land to  the  Company rights, liberties,  privileges  etc.   to the said land were also transferred.  Therefore, the privileges of or right  to exemption

accrued to the Central Government not to pay land revenue to the State Government under Section 58 of the Code would also be  available  to  the  appellantcompany,  as a successor in interest to the Central Government.

Another point has been urged on behalf of the appellant that assessment of land revenue is barred by limitation.  We need not entertain into this aspect as  we  have  held  that  the appellant company is not liable to pay any land revenue.

We may mention that the State Government was also aware that no land revenue was payable but the proceedings were started in view of the audit objection.

For the  reasons  stated  above  the appeal is allowed.  The impugned judgments and orders are set aside.  We also  quash the  demand  of  the land revenue made by the Collector from the appellant.  No order as to costs.