STATE OF KARNATAKA v. K. M. MADHUSUDHAN — 1987 DIGILAW 88 (KAR)

PREM CHAND JAIN, C. J. ( 1 ) THIS group of Writ Appeals raises question relating to the power conferred on the State Government under S. 15, Mines and Minerals (Regulation and Development) Act, (in short 'the Act') to levy dead rent in respect of minor minerals and in the event of existence of such power can the Rules framed affect existing leases in which the rate of dead rent payable by the concerned lessees had been specified; the validity of R. 20 (1) (2), Karnataka Minor Mineral Concession Rules, 1969, (in short 'the Rules') and the validity of Notification No. CI 194 MMN 83, dated 11-8-1983. ( 2 ) IT is unnecessary in order to decide these appeals, to relate the facts of each case. It will suffice if we state broadly how these appeals have come to be filed. The respondents entered into agreements with the State Government for extraction of various types of minor minerals in the areas specified in the respective lease deeds. The different types of minor minerals extraction of which constitutes the subject matter are :i) Ornamental stone. ii) Building stone. iii) Limestone and Kankar. The relevant clauses in the agreement regarding payment of dead rent and royalty read thus :-"1. To pay dead rent or royalty whichever is greater.- The lessee/lessees shall pay for every year except the first year of the lease yearly dead rent as specified in Clause 2 of this Part in respect of each mineral : provided that the lessee/lessees shall be liable to pay the dead rent or royalty in respect of each mineral whichever is higher' in amount but not both. 2. Rate and mode of payment of dead rent.- Subject to the provision of Cl. 1 of this Part, as from the date of. . . . . . 19. . . during the subsistence of this lease, the lessee/lessees shall pay to the State Government annual dead rent at the following rates per hectare of the lands described in Part I of the Schedule. 3. Rate and mode of payment of royalty.- Subject to the provisions of Cl. . . . . . 19. . . during the subsistence of this lease, the lessee/lessees shall pay to the State Government annual dead rent at the following rates per hectare of the lands described in Part I of the Schedule. 3. Rate and mode of payment of royalty.- Subject to the provisions of Cl. 1 of this Part, the lessee/lessees shall, during the subsistence of this lease, pay to Government at such times and in such manner as the Government may prescribe royalty in respect of any minor minerals removed by him/them from the leased area at the rates for the time being in force under Schedule I to the Mysore Minor Mineral Rules, 1969. 4. Payment of surface rent.- The lessee shall pay rent to the State Government for all parts of the surface area leased to him for the purpose of quarrying, surface rent at the rate prescribed by Government. "there is no dispute that under the Act and the Rules, every lessee is liable to pay dead rent or royalty to the Government annually, whichever is high. Dead rent is in the nature of invariable ground-rent, whereas royalty is payable ad valorem on the quantity of minerals extracted at the prescribed rate. It is also an admitted position that all the lease deeds were executed sometime prior to 11-8-1983, on which date the impugned notification fixing higher rate of dead rent was sought to be brought into force. The rate of dead rent fixed in the lease deeds is as follows :i) Ornamental Stone Rs. 500/- per acre per annum. ii) Building Stone Rs. 400/- per acre per annum. iii) Lime Stone and all other minor minerals Rs. 50/- per acre per annum. These rates were fixed by means of a Notification issued in accordance with sub-cl. (1) of R. 20 of the Rules. A notification dated 11-8-1983 was published in the Official Gazette dated 4th May, 1984 by which the rates of dead rent were enhanced. The notification reads :"notification no. CI 194 MMN 83, Bangalore, dated 11th August, 1983. In exercise of the powers conferred under sub-r. (1) of R. 20, Karnataka Minor Mineral Concession Rules, 1969, and in supersession of the Government Order No. CI 151 EMO 69, dated 15-11-1969, the Government of Karnataka hereby fixes the dead rent payable under the said rules as follows : 1) For specified minor minerals. Rs. In exercise of the powers conferred under sub-r. (1) of R. 20, Karnataka Minor Mineral Concession Rules, 1969, and in supersession of the Government Order No. CI 151 EMO 69, dated 15-11-1969, the Government of Karnataka hereby fixes the dead rent payable under the said rules as follows : 1) For specified minor minerals. Rs. 5000 per acre : per annum; 2) For other building stones. Rs. 2500 per acre : per annum, and 3) For other minor minerals. Rs. 500/- per acre : per annum. This shall come into force at once. By order and in the name of the Governor of Karnataka. Sd/- Y. B. Chinnappa Reddy, under Secretary to Government, commerce and Industries Department. "the respondents felt aggrieved by the aforementioned notification and challenged the legality of the same in this Court by filing writ petitions. ( 3 ) BEFORE the learned single Judge the following points were urged on behalf of the writ petitions :-1) No power is conferred on the State Government under S. 15, Mines and Minerals (Regulation and Development) Act, to levy dead rent in respect of minor minerals. 2) Even on the basis that the rule making power conferred under Sub-S. (1) of S. 15 to frame rules regulating the grant of lease of minerals and for the purposes connected therewith includes the power to levy dead rent, in the rules framed under that provision, such rules cannot affect the lease already executed in which the rate of dead rent payable by the lessee concerned had been specified. 3) In any event the rates of dead rent fixed in the impugned notification are to be regarded as having come into force on 4-5-1984 on which date the notification was published in the Official Gazette and not with effect from 11-8-1983 on which date it is stated to have been issued. 4) Rule 20 (1) (2) of the Rules is invalid for the reason that while provisions of S. 15 (1) require the fixation of dead rent under the rules itself, by that rule the power to fix the rent is delegated to the State Government. 5) The rate of dead rent fixed in the impugned notification is not only discriminatory but also arbitrary as the rate is exorbitant and confiscatory in character and therefore violative of Art. 14 of the Constitution. 5) The rate of dead rent fixed in the impugned notification is not only discriminatory but also arbitrary as the rate is exorbitant and confiscatory in character and therefore violative of Art. 14 of the Constitution. ( 4 ) ON consideration of the entire matter in the light of the provisions of the Act, the Rules and the judicial pronouncements, the learned Single Judge came to the following conclusions : (I) Section 15 (1) which confers power on the concerned State Governments, to make rules for regulating the grant of annual leases in respect of minor minerals and for purposes connected therewith, includes the power to fix rate of royalty and also the rate of dead rent payable by lessees for extracting minerals. (II) The said power read with S. 21, General Clauses Act, empowers the State Government to revise the rates either by way of enactment or by way of reduction. However, in view of the proviso to S. 15 (3), which is really a proviso to S. 15 (1), the revision of rate of royalty by way of enhancement cannot be made more than once during any period of four years. (III) Sub-Section (3) which provides that a lessee shall pay the royalty at the rate prescribed for the time being in the rules framed by the State Government, applies only to royalty and that the word 'royalty' used in that Sub-Section does not, include dead rent. (IV) As the power to fix the rate of dead rent is a subordinate legislative power flowing from Sub-S. (1) of S. 15, the revised rate cannot be made applicable to lease deeds in which the rate of dead rent payable by the concerned lessee, has been incorporated, as that is vested right and therefore cannot be affected by subordinate legislation in view of the law declared by the Supreme Court in Baijnath's case, AIR 1970 SC 1436 . (V) The impugned notification by which the rates of dead rent are revised cannot be enforced against the petitioners as they are governed by the rates which existed then and which formed one of the conditions of lease. (V) The impugned notification by which the rates of dead rent are revised cannot be enforced against the petitioners as they are governed by the rates which existed then and which formed one of the conditions of lease. "on the contention raised on behalf of the writ petitioners that though the notification was dated 11-8-1983 it was actually published in the Official Gazette dated 4th of May, 1984 and therefore even if the notification is held to be void (valid ?), it can be effective only from 4th of May, 1984 and not from 11-8-1983, the learned single Judge did not finally express his opinion on the ground that it was unnecessary to pursue this contention as he had accepted the second contention and held that the notification could not be enforced against the writ petitioners. In view of the findings reproduced above, the writ petitions were allowed and a writ of mandamus was issued to the respondents not to enforce the impugned notification dated 11-8-1983 published in the Official Gazette dated 4th of May, 1984 against the writ petitioners. Feeling aggrieved by the judgement of the learned single Judge, this group of appeals has been filed by the State. ( 5 ) IT may be observed at the outset that in view of the authoritative pronouncement of the Supreme Court in Baijnath v. State of Bihar, AIR 1970 SC 1436 , that vested rights cannot be affected by subordinate legislation, there can be no gainsaying that the impugned notification No. CI 194 MMN 83 dated 11-8-1983 revising the rate of dead rent is unenforceable against the respondents (writ petitioners) as they are governed by the rates which existed then and which formed one of the conditions of the leases; but the whole case of the appellants before us is based on the judgement of the Supreme Court in D. K. Trivedi and Sons v. State of Gujarat, AIR 1986 SC 1323 . What was contended before us by the learned Advocate General was that by the Amendment Act of 1972, Sub-S. (3) and proviso have been added to S. 15 with a view to overcome the hurdle created by Baijnath's case and enable the Government to enhance the rates even with regard to the existing leases. What was contended before us by the learned Advocate General was that by the Amendment Act of 1972, Sub-S. (3) and proviso have been added to S. 15 with a view to overcome the hurdle created by Baijnath's case and enable the Government to enhance the rates even with regard to the existing leases. According to the learned Advocate General, the Government in exercise of its power under S. 15, Sub-S. (3) read with the proviso can make rules and issue notifications enhancing the dead rent and royalty even on the existing leases. ( 6 ) ON the other hand, Sri Narasimha Murthy, learned Senior Advocate, contended that by enacting Sub-S. (3) and the proviso the effect of the judgement in Baijnath's case ( AIR 1970 SC 1436 ) has not been diluted, that the power to make rules flows only from Sub-S. (1) of S. 15, that the Government does not derive any power to make rules under Sub-S. (3) nor does the proviso read with Sub-S. (3) vests the Government with any power to make rules thereby affecting the subsisting leases, that the proviso is to Sub-S. (3) and not to Sub-S. (1),that Trivedi's case ( AIR 1986 SC 1323 ) has in no way affected the decision in Baijnath's case, that the observations of the Bench in Trivedi's case in para 48 viz. :-"in any event, the power to make rules under S. 15 (1) is also for purposes connected with the grant of mining and quarry leases and other mineral concessions and the expression "and for purposes connected therewith" read with the word "grant" would include the power to enhance the rate of dead rent during the subsistence of the lease. " (Emphasis supplied by us) go counter to the ratio in Baijnath's case, and that Baijnath's case being a decision of a larger Bench has necessarily to be followed in preference to Trivedi's case which is a judgement of a smaller Bench. " (Emphasis supplied by us) go counter to the ratio in Baijnath's case, and that Baijnath's case being a decision of a larger Bench has necessarily to be followed in preference to Trivedi's case which is a judgement of a smaller Bench. ( 7 ) THOUGH before the learned single Judge several points were raised, but before us on the respective contentions of the learned counsel for the parties, the short point that needs determination is whether the Government can make rules and enhance the dead rent and royalty even on the existing leases by exercising power under Sub-S. (3) and the proviso which according to the learned Advocate General is to be read as proviso to S. 15 and not Sub-S. (3) only. There is no dispute that it has been authoritatively laid down by the Supreme Court in Baijnath's case that :"vested rights could only be taken away by law made by a competent legislature. Mere rule making power of the State Government was not able to reach them. The authority to do so must, therefore, have emanated from Parliament. The existing provision related to relation of leases and matters connected therewith to be granted in future and not for alteration of the terms of leases which were in existence before Act 67 of 1957. For that, special legislative provision was necessary. As no such parliamentary law had been passed, the second sub-rule to R. 20 was ineffective. It could not derive sustenance from the second proviso to S. 10 (2) of the Land Reforms Act since that proviso was not validly enacted. "the question that now needs determination is whether the provisions of Sub-S. (3) and the proviso have made any difference and does the Government derive any power therefrom to make rules and issue notifications enhancing the rate of dead rent and royalty on existing leases. At this stage, for facility of reference, provisions of S. 15 of the Act may be noticed :-"15. (1) The State Government may, by notification in the Official Gazette, make rules for regulating the grant, of quarry leases, mining leases or other mineral concessions in respect of minor minerals and for purposes connected therewith. At this stage, for facility of reference, provisions of S. 15 of the Act may be noticed :-"15. (1) The State Government may, by notification in the Official Gazette, make rules for regulating the grant, of quarry leases, mining leases or other mineral concessions in respect of minor minerals and for purposes connected therewith. (2) Until rules are made under Sub-S. (1), any rules made by a State Government regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals which are in force immediately before the commencement of this Act shall continue in force. (3) The holder of a mining lease or any other mineral concession granted under any rule made under Sub-S. (1)shall pay royalty in respect of minor minerals removed or consumed by him or by his agent, manager, employee, contractor, or sub-lessee at the rate prescribed for the time being in the rules framed by the State Government in respect of minor minerals; provided that the State Government shall not enhance the rate of royalty in respect of any minor mineral for more than once during any period of four years. "according to the contention of the learned Advocate General, addition of Sub-S. (3) and the proviso enables the State Government to make rules and enhance dead rent and royalty on the subsisting leases also. In other words, what was contended by the learned Advocate General was that the power to make rules is also now available to the Government under Sub-S. (3) of S. 15. This contention of the learned Advocate General, in our view, is wholly unsustainable, and even does not find support from the judgement in Trivedi's case an which reliance has been placed. In no uncertain words it has been held that power to make rules is only available under Sub-S. (1) of S. 15 as would be evident from the observations in Trivedis case ( AIR 1986 SC 1323 ) (in para 40) which read as under :-"under S. 15 (1), therefore, the State Governments have the power to make rules providing for payment of surface rent, dead rent and royalty by the lessee to the Government. "in para 45, it is further observed thus :-"a proper reading of Sub-S. (3) of S. 15 shows that it does not confer any power upon the State Governments to make rules with respect to royalty. "in para 45, it is further observed thus :-"a proper reading of Sub-S. (3) of S. 15 shows that it does not confer any power upon the State Governments to make rules with respect to royalty. Royalty is payable by the holder of a quarry lease or mining lease or other mineral concession granted under rules made under Sub-S. (1) of S. 15. What Sub-S. (3) does is to make such holder liable to pay royalty in respect of minor minerals removed or consumed not only by him but also by his agent, manager, employee, contractor or sub-lessee. It thus casts a vicarious liability upon such holder to pay royalty in respect of the acts of persons other than himself. The very fact that under Sub-S. (3) the liability of such holder is to pay royalty "at the rate prescribed for the time being in the rules framed by the State Government in respect of minor minerals" shows that the prescribing of the rate of royalty in respect of minor minerals is to be done under the rule making power of the State Government which is to be found in Sub-S. (1) of S. 15. Yet another purpose of enacting Sub-S. (3) is to be found in the proviso to that Sub-Section which prohibits the State Government from enhancing the rate of royalty in respect of any minor mineral for more than once during any period of four years. "again in para 47, it is observed thus :-"the source of the power to enhance the rate of royalty is not contained in Sub-S. (3) of S. 15 as submitted at the Bar. As pointed out earlier, the purpose of inserting the said Sub-Section in S. 15 with retrospective effect was an entirely different one. "again in para 47, it is observed thus :-"the source of the power to enhance the rate of royalty is not contained in Sub-S. (3) of S. 15 as submitted at the Bar. As pointed out earlier, the purpose of inserting the said Sub-Section in S. 15 with retrospective effect was an entirely different one. "in para 48 again on this aspect it is observed as follows :-"it was then contended that the very language Sub-S. (1) of S. 15 shows that it does not confer any power upon the State Governments to enhance the rate of royalty or dead rent because the rules which are to be made under that Sub-Section are for regulating the grant of quarry leases, mining leases and other mineral concessions in respect of minor minerals and, therefore, the rules under that Sub-Section can be made only with respect to the time when such leases or concessions are granted and not with respect to any point of time subsequent thereto and there being no provision similar to Sub-S. (3) of S. 15 with respect to dead rent, any rule providing for increase in the rate of dead rent during the subsistence of lease would be ultra vires S. 15. This submission is devoid of substance. As pointed out earlier, Sub-S. (3) of S. 15 does not confer any power to amend the rules made under S. 15 (1) for the power to amend the rules is comprehended within the power to make the rules conferred by Sub-S. (1) of S. 15. "from the aforesaid observations, it is quite evident that the learned Judges have made it absolutely clear that the power to make rules only flows from Sub-S. (1) of S. 15 and not Sub-S. (3) of S. 15. "from the aforesaid observations, it is quite evident that the learned Judges have made it absolutely clear that the power to make rules only flows from Sub-S. (1) of S. 15 and not Sub-S. (3) of S. 15. ( 8 ) THE next question that needs determination is whether the proviso is to Sub-S. (3) or to Sub-S. (1) as on the basis of the proviso an argument was sought to be raised that this proviso has to be read as a proviso to Sub-S. (1), with the result that under this proviso power is available to the State Government to enhance the rate of royalty in respect of any minor mineral though that power is exercisable only once during any period of four years, According to the learned Advocate General, if this proviso is read with Sub-S. (1) of S. 15 then the notification could validly be issued affecting the subsisting leases also. On the question whether the proviso is to Sub-S. (3) or to Sub-S. (1), the answer is available from the observations in Trivedi's case ( AIR 1986 SC 1323 ) wherein the proviso is specifically construed as proviso to Sub-S. (3 ). In para 45, the learned Judges have stated thus :-"yet another purpose of enacting Sub-S. (3) is to be found in the proviso to that sub-Section which prohibits the State Government from enhancing the rate of royalty in respect of any minor mineral for more than once during any period of four years. "in paras 53, 55 and 57, their Lordships are again observing thus :- para-53 :"it was further submitted that though under the proviso to S. 15 (3) the rate of royalty in respect of a minor mineral cannot be enhanced more than once during any period of four years, there was no such restriction with respect to enhancing the rate of dead rent and the State Governments cannot nullify the prohibition contained in the proviso to S. 15 (3) by repeatedly and frequently enhancing the rate of dead rent and that the absence of such a restrictive provision with respect to dead rent shows that it was not the intention of Parliament to confer power upon the State Government to enhance the rate of dead rent so as to affect subsisting leases. "para-55 :"a construction placed upon S. 15 (1) which leaves the State Governments free to enhance the rate of dead rent as and when they like while the proviso to S. 15 (3) prohibits them from enhancing the rate of royalty more than once during a period of four years would amount to nullifying the object for which the proviso to S. 15 (3) was enacted. The same restrictions as contained in the proviso to S. 15 (3) must therefore apply to dead rent. Such a construction would be in consonance with practice, both past and present. "para-57 : ". . . . . . . . to consider what the expression "during any period of four years" occurring in the proviso to S. 15 (3) means. . . . (Emphasis supplied by us) from the aforesaid observations, it is quite evident that whenever there is a reference to the proviso, it is specifically stated that the proviso is to S. 15 (3 ). In the judgement it has nowhere been observed that that proviso governs S. 15 (1) or S. 15 (2) also. In this view of the matter, the contention of the learned Advocate General that the proviso is to be read with the whole Section is not legally tenable. ( 9 ) THIS brings us to the next question as to the effect of the observations of their Lordships in Trivedi's case which have been reproduced above, that the power to make rules under S. 15 (1) would include the power to enhance the rate of dead rent during the subsistence of the leases. Apparently these observations are contrary to the view enunciated in Baijanath's case ( AIR 1970 SC 1436 ) wherein it has been held that the subordinate legislation cannot affect the vested rights. In view of this apparent conflict we have to find out as to which view should ' be followed. In Mattulal v. Radhe Lal, air 1974 SC 1596 , it has been observed at page 1602 :-"but whatever be the reason, it cannot be gainsaid that it is not possible to reconcile the observations in these two decisions. That being so, we must prefer to follow the decision in Sarvate T. B. 's case as against the decision in Smt. Kamla Soni's case, as the former is a decision of a larger Bench than the latter. That being so, we must prefer to follow the decision in Sarvate T. B. 's case as against the decision in Smt. Kamla Soni's case, as the former is a decision of a larger Bench than the latter. "in Union of India v. K. S. Subramaniam, AIR 1976 SC 2433 , on this aspect of the matter, it has been observed thus :-"the proper course for a High Court in such a case is to try to find out and follow the opinions expressed by larger Benches of this Court in preference to those expressed by smaller Benches of the Court. That is the practice followed by this Court itself. The practice has now crystallized into a rule of law declared by this Court. "in view of the aforesaid observations of the Supreme Court the view in Baijnath's case being of a larger Bench has to be preferred over the view in Trivedi's case which is of a smaller Bench. In this view of the matter, following the law laid down in Baijnath's case we hold that the power to fix the rate of dead rent is a subordinate legislative power flowing from Sub-S. (1) of S. 15, that the revised rate cannot be made applicable to the lease deeds in which the rate of dead rent payable by the concerned lessee has been incorporated, as that is a vested right and therefore cannot be affected by subordinate legislation, and that the impugned notification by which the rates of dead rent are revised cannot be enforced against the writ petitioners as they are governed by the rates which existed then and which formed one of the conditions of leases. ( 10 ) NO other point is urged. ( 11 ) FOR the reasons recorded above, these appeals fail and are dismissed. But in the circumstances of the case we make no order as to costs. ( 12 ) SRI B. J. Somayyaji appearing on behalf of the State makes an oral prayer for certifying this case as a fit one to appeal to the Supreme Court. We have followed the decision of the Supreme Court in Baijnath's case ( AIR 1970 SC 1436 ) and find that no substantial question of law of general importance is involved, which may again require determination by the Supreme Court. Consequently, the prayer is declined. Appeal dismissed. --- *** --- .