STATE OF RAJASTHAN & ANR Vs. M/S DEEP JYOTI COMPANY & ANR
Supreme Court of India (Full Bench (FB)- Three Judge)
Appeal (Civil), 1854 of 2016, Judgment Date: Feb 26, 2016
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1854 OF 2016
(Arising out of S.L.P. (Civil) No.33894 of 2011)
STATE OF RAJASTHAN & ANR. ..Appellants
Versus
M/S. DEEP JYOTI COMPANY & ANR. …Respondents
WITH
CIVIL APPEAL NO. 1855 OF 2016
(Arising out of S.L.P. (Civil) No.35897 OF 2013)
J U D G M E N T
R. BANUMATHI, J.
Leave granted.
2. These appeals assail the order of Division Bench of the High
Court of Rajasthan at Jodhpur allowing Special Appeal No.369 of 2009 dated
17.01.2011 filed by the respondent thereby quashing the circular dated
06.10.2008 which provided for deduction of royalty payable to the mining
department from the bills of the contractors who have been given the work
contract by the government department. Relying upon the order in Special
Appeal No.369 of 2009, the High Court dismissed the Special Appeal No.753
of 2012 filed by the State.
3. Necessary facts which led to filing of the appeal arising out
of SLP (C) Nos.33894 of 2011 are as follows:-Respondent-Deep Jyoti Company,
a partnership firm registered as ‘A’ class contractor with various
departments of Government of Rajasthan was awarded contract for
construction of link road. On 06.10.2008, the Mines(Group-2) Department,
Government of Rajasthan issued a Circular being No.P13(6)Khan/Group-2/80-
Part dated 06.10.2008, concerning collection of royalty from the
contractors involved in construction work using mineral masonry stone,
grit, boulder, river sand, kankar, murrum, ordinary sand (excluding brick
earth) in government department, autonomous bodies, government undertaking.
As per circular dated 06.10.2008, before starting the work, the
respondents had to obtain a short term permit (STP) from the concerned
Mining Engineer by paying a requisite short term permit fees and the cost
of rawanna book for the minerals which were being used as raw material for
the work. Clause (5) of the circular deals with the deduction of royalty at
the rates provided in the circular from the bills of the contractors.
Clause (7) of the said circular provided that if the contractor had
purchased the royalty paid mineral from a leaseholder then he can get
refund of the same by submitting due receipts/rawanna issued by the lessee
within a period of thirty days. Clauses (2), (3), (5) and (7) of the said
circular dated 06.10.2008, which are relevant read as under:-
“2. Before commencing the work the contractor shall get a permit from the
concerned Mining Engineer/Assistant Mining Engineer office by applying in
Scheduled Proforma and enclosing an affidavit duly notary certified with
requisite short term permit fees and the cost of rawanna book according to
the quantity of mineral specified in G-Schedule.
3. Contractor shall produce the certified copy of the above permit to
the concerned department alongwith the first bill, otherwise construction
department should not make payment of the bill and if by any construction
department the payment for the first bill or any other bill is made without
getting certified copy of short time permit, the said department shall be
liable to deposit the cost of the mineral.
4. …….
5. The concerned construction department shall deduct the royalty
depending on the type of construction in the following manner from the
bills of the contractor and shall pay through cheque to the concerned
Mining Engineer/Assistant Mining Engineer or get adjusted through auditor
general and the details shall be informed within 15 days.
1. Road Construction 1.75%
2. Building Construction 1.00%
3. Road Renewal 0.75%
4. Other works in which 0. 5%
mineral is used
6. …..
7. If any contractor purchases royalty paid mineral from a lease holder
and he wants the refund of royalty, then he has to submit an application to
the concerned Mining Engineer/Assistant Mining Engineer office alongwith
rawanas issued by the lease holder, receipts of RCC/ERCC contractors and
copy of bill within 30 days of the completion of the construction work.
The refund of those rawannas which is desired shall be issued on the name
of the concerned construction department contractor. No assessment shall
be required if refund application is not make.”
4. Respondent-Deep Jyoti Company filed Writ Petition No.1309 of
2009 before the High Court, challenging the legality of the said circular
dated 06.10.2008 and prayed for restraining the authorities from
implementing the said circular. Learned Single Judge dismissed the writ
petition, holding that the condition imposed by the circular dated
06.10.2008 was a reasonable restriction and in public interest. Aggrieved
thereof, the respondent preferred appeal before the Division Bench of the
High Court. By the impugned order, Division Bench quashed the circular
dated 06.10.2008 and allowed the appeal holding that the contractor cannot
be compelled to obtain short term permit for conducting mining operations
and also cannot be asked to pay royalty from the bills payable and then
seek for refund of the same. Relying upon M/s Deep Jyoti Company’s case,
the High Court dismissed Special Appeal No.753 of 2012 by order dated
14.01.2013. These appeals challenge the correctness of the impugned orders.
5. Learned counsel for the appellants Mr. Shiv Mangal Sharma,
Additional Advocate General submitted that the circular dated 06.10.2008
merely provides the procedure for payment of royalty by the contractors who
have been given the works contract by the department of government and that
the said condition was imposed by the State Government in public interest.
It was contended that the High Court erred in not noticing clause (7) of
the circular dated 06.10.2008 which takes care of the situation that the
contractor can get refund of the royalty deducted from his bills by the
department if the contractor satisfies by producing necessary bills showing
that he used royalty paid mineral in execution of the contract.
6. Per contra, learned counsel for the respondent Mr. Manish
Singhvi contended that the High Court rightly quashed the circular dated
06.10.2008 as the State cannot compel a work contractor to obtain short
term permit and also to pay royalty in advance and then claim refund of the
royalty as the same is unreasonable and arbitrary.
7. We have carefully considered the rival contentions and perused
the impugned orders and material on record.
8. The circular dated 06.10.2008 came to be issued by the State
Government which provides the procedure for payment of royalty by the
contractors who have been given the works contract by department of
government. According to the appellants, the said circular was issued in
order to ensure the payment of royalty and that the royalty paid mineral is
used for construction work. As noticed earlier, clause (2) of the circular
provides that before starting the work, the contractor was to obtain short
term permit and rawanna book and contractor was also required to submit an
affidavit to that effect that he had obtained the short term permit for
mining the required mineral and rawanna book. Clause (3) of the said
circular provides that if the contractor fails to produce copy of the short
term permit, the works department will withhold the payment of bills.
Clause (3) of the said circular further provided that in case, the
government department which allots the work to the contractor makes the
payment of contract bills without obtaining the copy of short term permit
and rawanna book, then the works department shall be liable to deposit the
cost of the mineral. Thus in terms of clauses (2) and (3), it is incumbent
upon the works contractor to obtain short term permit before starting the
work.
9. Some of the fundamental aspects, while dealing with the
validity of the aforesaid circular dated 06.10.2008, need to be kept in
mind. The said circular which mandates the contractors to obtain short-
term permit fess is meant for those contractors who are registered as ‘A’
class contractors with various departments of Government of Rajasthan. Such
registration qualifies them to bid for and obtain Government contracts,
which are construction contracts. The circular dated 06.10.2008 imposing
the conditions, thus, is required only for the purpose of undertaking that
work which is awarded by the Government/Government Departments etc.
Otherwise, there is no such requirement or obligation on the part of
contractors while doing any other private work. It is trite that for
awarding Government work, it can impose and stipulate conditions,
eligibility criteria as well as terms and conditions on which the contract
would be executed. If any person wants to bid for or undertake the work,
such persons has to fulfill those conditions. The only limitation is that
conditions so imposed should meet the test of fairness and reasonableness
and such conditions should not be arbitrary or contrary to any law. The
question, therefore, is as to whether imposition of the condition to obtain
short-term permit as provided in circular dated 06.10.2008 is reasonable
and not arbitrary.
10. In so far as the contention that in terms of the circular there
is compulsion to obtain short term permit, in our view, as such there is no
such compulsion. It is only to ensure that no mineral is excavated and
used without payment of royalty. The purpose of short-term permit is to
ensure that the material and minerals etc. used by the contractor in the
construction work are royalty paid. It only means that such material is
purchased by the contractor from the market which is legally mined and on
which due royalty is paid. In other words, the objective is to see that
illegally mined mineral/material is not purchased by the contractor and
used in the construction work which is awarded by the Government. Not only
it is a laudable object, such a stipulation is inserted in order to check
illegal mining which unfortunately has assumed serious proportions in the
recent past. Otherwise, the respondents herein do not stand to loose
anything inasmuch as the moment evidence is produced to the effect that
royalty was paid on the minerals by the leaseholder which was used in the
construction, the construction contractor like the respondents would be
refunded the royalty so paid by it in terms of circular dated 06.10.2008.
In terms of clauses (5) and (7) of the said circular, the contractor has to
pay royalty at the rates specified in the circular depending upon the
nature of work and on production of bills showing payment of royalty, the
contractor can get refund of royalty. There is, thus, no financial burden
on the respondents of any nature. The purpose which is sought to be
achieved, viz., non-royalty paid mineral (which would naturally be
illegally mined mineral) is not used in the execution of the Government
work and it cannot be treated as unreasonable or arbitrary. In our view,
there is a complete justification for providing such a provision.
11. The minor minerals removed from the quarries, admittedly are
the property of the government and the same cannot be removed and used
without payment of royalty. It is therefore the duty of the government to
ensure that only royalty paid minerals are used in the work and the purpose
of issuing such circular was to avoid pilferage/leakage of revenue because
royalty can be very conveniently evaded by the contractors either by not
purchasing the material from the mining leaseholders or obtaining it from
unauthorized excavators. In case, if the contractor purchases the material
from unauthorized person who has not paid royalty, there would be loss to
the public exchequer and the circular was issued to check evasion or loss
to the public exchequer. Such condition cannot be said to be unreasonable
and arbitrary and therefore no prejudice could be said to have been caused
to the contractors.
12. Learned counsel for the respondents contended that the royalty
can be levied in respect of the mineral removed or consumed from lease
areas at the rates prescribed in Mines and Mineral (Development and
Regulation) Act 1957 and any such levy can only be by a legislation and not
by any circular and the impugned circular dated 06.10.2008 which is in the
nature of levy of royalty was rightly quashed by the High Court and the
impugned orders warrant no interference. The clauses stipulating deduction
of royalty payable to the mineral department at the rates stipulated in the
circular cannot be said to be a levy. As noticed earlier, the circular
stipulates that the royalty is deducted at the rates prescribed in the
circular, on production of bills by the contractor to the mining department
showing that they had purchased the royalty paid mineral from the
leaseholder and thus it only provides the procedure for collection of
royalty. The circular only provides the procedure for payment of royalty
for the minerals used by the contractors who have been given the works
contract by the government department. The High Court did not keep in view
the object of the circular and erred in quashing the impugned circular.
13. The impugned orders of the High Court in Special Appeals No.369
of 2009 and 753 of 2012 are set aside and these appeals are allowed.
Consequently the Writ Petitions filed by the respondents herein stand
dismissed. The parties are to bear their respective costs.
..……………………CJI.
(T.S. THAKUR)
…..……………………J.
(A.K. SIKRI)
…..……………………J.
(R. BANUMATHI)
New Delhi;
February 26, 2016
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