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2003 DIGILAW 452 (SC)

WESTERN COALFIELDS LTD. v. CENTRAL BANK OF INDIAS

2003-03-27

B.N.SRIKRISHNA, RUMA PAL

body2003
ORDER 1. RESPONDENTS 2 TO 6 WERE THE LESSEES OF TWO COAL MINES, ONE AT DAMUA AND THE OTHER AT KALICHHAPAR, BOTH IN THE STATE OF MADHYA PRADESH. THESE RESPONDENTS HAD OBTAINED OVERDRAFT FACILITIES FROM RESPONDENT 1 IN 1969. IN CONSIDERATION FOR THE GRANT OF SUCH FACILITIES, THESE RESPONDENTS HAD EXECUTED PROMISSORY NOTES AS WELL AS AN AGREEMENT OF HYPOTHECATION AND PERSONAL GUARANTEES OF RESPONDENT 6 AND ANOTHER. THE HYPOTHECATION AGREEMENT A COVERED THE TANGIBLE MOVABLE PROPERTY OF RESPONDENT 2 WHICH INCLUDED MACHINERY AND PLANT UTILIZED FOR THE PURPOSE OF THE MINING OPERATIONS. THESE RESPONDENTS FAILED TO PAY THE ROYALTY IN RESPECT OF THEIR MINING ACTIVITIES TO THE STATE GOVERNMENT. AS A RESULT, THE LEASES WERE CANCELLED. THESE RESPONDENTS IMPUGNED THE SAID CANCELLATION BY WAY OF WRIT PROCEEDINGS. THE WRIT PETITIONS BEING DISMISSED, THE MATTER ULTIMATELY CAME UP FOR HEARING B BEFORE THIS COURT. 2. DURING THESE PROCEEDINGS, PURSUANT TO THE COAL MINES (TAKING OVER OF MANAGEMENT) ACT, 1973 THE MANAGEMENT OF DAMUA AND KALICHHAPAR COLLIERIES WAS TAKEN OVER BY THE PREDECESSOR-IN-INTEREST OF THE APPELLANTS. THIS WAS FOLLOWED BY THE COAL MINES (NATIONALISATION) ACT, 1973. THE RESPONDENTS CHALLENGED THE NATIONALISATION ACT UNDER ARTICLE 32 OF THE C CONSTITUTION. ALL THESE PROCEEDINGS WERE DISPOSED OF BY AN ORDER DATED 6-41976. THE ORDER RECORDS THAT THE WRIT PETITIONS FILED BY THE PRIVATE RESPONDENTS WERE WITHDRAWN. 3. IN THE MEANWHILE, RESPONDENT I FILED A SUIT AGAINST THE PRIVATE RESPONDENTS AS WELL AS THE APPELLANTS FOR RECOVERY OF A SUM OF RS 68,128.86 P. IN RESPECT OF OUTSTANDING IN THE SAID OVERDRAFT FACILITIES WHICH D HAD BEEN GRANTED BY RESPONDENT 1 TO THE PRIVATE RESPONDENTS. DESPITE THE SUBMISSIONS OF THE APPELLANTS BEFORE THE CIVIL COURT THAT THE CLAIM OF RESPONDENT 1 AGAINST THE APPELLANTS WAS NOT MAINTAINABLE BY VIRTUE OF THE PROVISIONS OF SECTION 6 OF THE COAL MINES (NATIONALISATION) ACT, THE TRIAL COURT HELD THAT SINCE THE MANAGEMENT OF THE COAL MINES WAS ALREADY UNDER THE CENTRAL GOVERNMENT, THE COAL MINES (NATIONALISATION) ACT, 1973 DID NOT E APPLY, INASMUCH AS GOVERNMENT PROPERTY COULD NOT BE NATIONALISED. IT WAS ALSO HELD THAT THE CHARGE IN FAVOUR OF RESPONDENT 1 BANK HAD BEEN CREATED BY THE PRIVATE RESPONDENTS PRIOR TO THE CANCELLATION OF THE LEASES; AND THAT RESPONDENT 1 COULD PROCEED TO REA1ISE ITS CLAIM FROM THOSE HYPOTHECATED SECURITIES WHICH WERE IN THE HANDS OF THE APPELLANTS. IT WAS ALSO HELD THAT THE CHARGE IN FAVOUR OF RESPONDENT 1 BANK HAD BEEN CREATED BY THE PRIVATE RESPONDENTS PRIOR TO THE CANCELLATION OF THE LEASES; AND THAT RESPONDENT 1 COULD PROCEED TO REA1ISE ITS CLAIM FROM THOSE HYPOTHECATED SECURITIES WHICH WERE IN THE HANDS OF THE APPELLANTS. BEING AGGRIEVED, THE APPELLANTS IMPUGNED THE DECISION OF THE TRIAL COURT BEFORE THE HIGH COURT. F THE HIGH COURT REJECTED THE FIRST APPEAL AND AFFIRMED THE DECISION OF THE TRIAL COURT ON A DIFFERENT GROUND, NAMELY, AN INTERIM ORDER PASSED BY THIS COURT ON 19-4-1973 IN THE WRIT PETITION FILED BY THE PRIVATE RESPONDENTS BEFORE THIS COURT. 4. WHEN THE MATTER WAS TAKEN UP FOR HEARING, NO ONE APPEARED ON BEHALF OF THE RESPONDENT BANK TO SUPPORT THE DECISION OF THE HIGH COURT. WE HAVE 9 HEARD THE SUBMISSIONS OF THE LEARNED COUNSEL APPEARING ON BEHALF OF THE APPELLANTS AND ARE OF THE VIEW THAT THE REASONING OF BOTH THE COURTS BELOW WAS INCORRECT. THE LEARNED SINGLE JUDGE ERRED IN HOLDING THAT MERELY BECAUSE THE MANAGEMENT OF COAL MINES HAD BEEN TAKEN OVER, THE SAME COULD NOT BE THE SUBJECT-MATTER OF THE NATIONALIZATION PROCEEDINGS. THAT THE HYPOTHECATED H PROPERTY BELONGED TO THE APPELLANTS BY VIRTUE OF THE NATIONALISATION ACT HAS ALSO BEEN CONCLUDED BY THE DECISION OF THE COMMISSIONER OF PAYMENTS ON 26-11-1985. THE HIGH COURT ALSO ERRED IN RELYING UPON AN INTERIM ORDER PASSED IN PROCEEDINGS WHICH WERE ULTIMATELY WITHDRAWN BEFORE THIS COURT. 5. THAT THE PLANT AND MACHINERY WHICH WERE HYPOTHECATED BY THE PRIVATE RESPONDENTS TO RESPONDENT 1 FORMED PART OF THE MINES AND, THEREFORE, SUBJECT TO NATIONALISATION UNDER THE COAL MINES (NATIONALISATION) ACT, CANNOT BE IN DISPUTE NOT ONLY HAVING REGARD TO THE DECISION OF THE COMMISSIONER OF PAYMENTS, BUT ALSO THE DEFINITION OF THE WORD IN THE ACT AND THE DECISIONS OF THIS COURT MORE PARTICULARLY THE DECISION IN SHARAT COKING COAL LTD. V. MADANLAL AGRAWAL1 CONSTRUING THE DEFINITION. AS SUCH ON THE NATIONALISATION OF THE TWO COAL MINES, THE HYPOTHECATED ASSETS VESTED IN THE APPELLANTS FREE FROM ENCUMBRANCES IN TERMS OF SECTION 6 OF THE COAL MINES (NATIONALISATION) ACT. V. MADANLAL AGRAWAL1 CONSTRUING THE DEFINITION. AS SUCH ON THE NATIONALISATION OF THE TWO COAL MINES, THE HYPOTHECATED ASSETS VESTED IN THE APPELLANTS FREE FROM ENCUMBRANCES IN TERMS OF SECTION 6 OF THE COAL MINES (NATIONALISATION) ACT. TO THE EXTENT THAT RESPONDENT 1 HAS ANY CLAIM AGAINST THE PRIVATE RESPONDENTS IN RESPECT OF THE HYPOTHECATED GOODS, RESPONDENT 1 MUST SEEK FOR RECOVERY OF THE SAME BY PURSUING ITS REMEDY UNDER SECTION 20 OF THE ACT BEFORE THE COMMISSIONER OF PAYMENTS OR BY SUCH OTHER METHOD WHICH MAY IN LAW BE AVAILABLE TO IT. NO DECREE COULD HAVE BEEN PASSED AGAINST THE APPELLANTS NOR ARE THEY OBLIGED TO MEET THE LIABILITIES OF THE PRIVATE RESPONDENTS. 6. THE DECISION OF THE HIGH COURT IS, ACCORDINGLY, SET ASIDE AND THE APPEAL IS ALLOWED WITHOUT ANY ORDER AS TO COSTS.