M.V. Krishna Rao v. District Collector, Krishna

Raghuvir, J.:— In the above group of cases the lessees of various types of stone (Minor minerals) have approached this Court under Art. 226 of the Constitution to interdict the State of Andhra Pradesh not to collect “dead rent” from them. In the petition lodged on September 4, 1977 M.V Subba Rao, is the lessee for black granite stone; whereas in the petition lodged on December 8, 1977, the following five firms; Road Metal Industries; Mahaveer Metal Industries; Hyderabad Metal Industries; Fine Granite Pvt. Ltd., and Supreme Crusker are lessees of granite stone. In the petition lodged on Dec. 18, 1978 M.V Krishna Rao is the lessee for black rough stone. All these lessees make a common cause against the State Government when “dead rent” is demanded for them under the Mines and Mineral (Regulation and Development) Act, 67 of 1957 (the Act). Dead Rent to be precise is sought to be collected from them under rules promulgated on September 4, 1977. The rules are known as Mineral Concessions Rules of 1966. (The Rule). Rule 10 of the Rules pertains to dead rent and is substituted from March 25, 1977. The rule prescribes levy of dead rent if it is higher than the royalty payable on minerals removed: Schedule I to Rule ten prescribes rates for seignorage (royalty) fee. Schedule II pertains to rates of dead rent when levied.

2. In the Govt. of India Act 1935, the subject of mines and minerals were dealt in Entry 36 of the Federal Legislature List I and Entry 23 of the Provincial Legislature List II in the seventh Schedule of the Act together with the subject of “oil fields.” In the Constitution of India, oil fields and petroleum products are separately dealt in Entry 53 of List I. In the 1935 Act, unless it was declared by Federal Law to be expedient in the public interest, the Provincial Legislature vested the power to legislate on the subject of mines and minerals. Similar position is maintained in the Constitution in Entry 54 of List I to the State, the Parliament if it declares expedient in public interest, may legislate on the subject of minor minerals, otherwise minor minerals are enumerated in Entry 23 of list II of State List. The Indian Parliament in Sec. 2 of the Act declared that the Union to “control” mines and “regulate” development of minerals. Having declared the Parliament enforced the Act from June 1, 1958; The Act was amended by the Mines and Minerals (Regulation and Development) Amendment Act 56 of 1972 (Amending Act). The amending provisions were enforced from September 12, 1972. In that amendment Ss. 4-A. 0-A, 13A. 18-A, and 23-A and the III Schedule were introduced. Sections 6, 9, 14, 15, 16, 17, 21, 25, 28, were amended. The Act in S. 14 recites Secs. 4 to 13 are not applicable to minor minerals. Therefore, in considering the numerous questions raised, by the lessees in the above cases, Ss. 4 to 13 are excluded from consideration except where the subject for purpose of analogy is deemed relevant.

3. The debate in the cases covered wide-ranging subjects particularly, the learned counsel appearing for the black granite lessees argued that dead rent in the Act or in the rules is not defined. That dead rent is a tax, that it is an impost. That dead rent is also “financial burden.” The last of the words “financial burden” were repeatedly uttered to mean a tax within the meaning of Art. 265 or the word “Taxation” in item 28 of Art. 366 of the Constitution of India. In that sense, it was also argued royalty was a tax or an impost and a financial burden. That no tax, fee or financial burden can be imposed by the Parliament through subordinate legislation. It was contended delegation to levy a tax could not have been made under the Constitution unless expressly the Parliament in the Act enabled the impost or the levy of financial burden. The contrary position was assumed by the Andhra Pradesh State Government, so it was said, and dead rent was imposed on lessees by recourse to subordinate legislation, therefore, the impost of dead rent or “financial burden” was contended to be invalid in law.

4. In support of the contention, it was argued “taxation” in England must be authorised by statute. The case of United Diaries (1921) 37 TLR 384 and the case of Commr. of Customs and Excise v. Cure and Delly (1962-1 QB 340) were relied on to hold the incidents of tax or impost without statutory provision in the Constitution cannot be levied. If such an impost is allowed, so was the attack, the Parliament in which case, can be said to have had abdicated its powers. This as an illustration is urged with reference to sub-sec. (3) of Sec. 15 of the Act and it is contended the State as a rule-making authority by prescribing dead rent dislodged the imposition prescribed by the Parliament. In similar language as in Sec. 13(i), it is argued no power is delegated to prescribe dead rent by the A.P State Govt. Such a contingency as digressed in the illustration brought forth it is argued a situation when “the Writ of the Parliament expressed in the Act became nugatory.” This argument was adopted to impress that royalty is prescribed by the Act and is valid. Dead rent is prescribed by the Subordinate authority, therefore, not valid.

5. Alternatively having discussed the incidents of royalty and dead rent thread-bare, the provisions in Secs. 9-A, 13 and Sec. 15 alongside the III Schedule were referred, it was argued dead rent under the Act cannot at all be demanded, from the lessees of minor minerals. If it can be demanded, the argument proceeded, in particular, in the case of lessee for black rought stone the question from what date the dead rent is payable was raised with reference to execution of leases or instruments of concessions on March 25, 1977 when rule 10 was substituted. The words “regulation”, “the purposes of objects” in S. 15 were relied on to hold these words did not confer power on the State Govt. as a delegate of the Parliament to levy dead rent for it is again stressed that results in a “financial burden.” It was argued dead rent is not an invariable incident of a mining lease or mineral concession. In proof S. 9-A (Alongside the III Schedule) in the Act was referred. If the dead rent is to be imposed, the Parliament as in the case of other than minor mineral, it was argued, considered the subject empowered in express language in S. 9-A and similar provision for minor mineral should have been enacted. It was pointed in the Third Schedule of the Act for minerals other than minor minertals rate is specified, even as to the contingency when it can be enchanced, the Parliament did not leave the subject to the Subordinate legislation. Therefore, for all the aforesaid reasons, in the constitution Rule, 10, it is argued is void, cannot be enforced and that no demand can be made from lessees as to the payment of the dead rent.

6. In the further alternative, it was argued R. 10 is ultra vires of the Act. In S. 15 of the Act Parliament did not say in the objects or purposes of the Act in express language in el. (1) of S. 15 that dead rent can be levied. In the final alternative, it was argued, dead rent if is allowed to be imposed, rates in Schedule II of R. 10 are very excessive unreasonable and confiscatory for it was argued dead rent imposed is thirty times more than royalty payable by the lessees. Finally, the rules prescribed under S. 15 of the Act, it is argued by the State Government were not placed before the Parliament, therefore R. 10 prescribed without the consent of the Parliament. The impugned R. 10 even otherwise, it is stated, was prescribed without obtaining objections from the affected persons, therefore, the efficacy of 1966 Rules was assailed on that ground and that Courts should not permit the imposition of such a tax.

7. In digressing the subject as evident from the above contentions, wide-field on the subject of the constitutional law legislative limits of rule-making authorities and on the scope of subordinate legislation were touched. A large number of cases were cited for consideration of this Court.

8. The case of M.V Subba Rao, the lessee of black granite, was heard and decided on August, 25, 1978. His Writ Petition was allowed. The decision is reported in M.V Subba Rao v. State of Andhra Pradesh, AIR 1978 Andh Pra 453 Lakshmaiah, J. in that case held dead rent in the Act and Rules is not defined. Parliament did not provide levy of dead rent in express terms in the Act. Dead rent appears was accepted as a “financial burden,” impost but in the decision, in clear terms of the Act, dead rent was not held to be a tax. The learned Judge held provisions in the Act did not “clothe” the State to impose a “financial burden” on lessees. Sec. 15 was referred to say as provided in S. 13(i) read with S. 9-A and IIIrd Schedule, there is no statutory provision incorporated in the Act to levy dead rent. As a legislative necessity, express language and specific power it was held required to be conferred for the levy of dead rent. Such a power was held not conferred in Sec. 15 of the Act, Ss. 9-A, 13 and the Third Schedule of the Act were referred to hold, dead rent cannot be imposed by implication. The Parliament finally, it was held, did not think fit to relegate the levy of dead rent to the “realm of rule-making authority.” The State cannot levy dead rent “through rule-making” therefore, cannot levy by “amending the rules.”

9. The decision of Lakshmaiah J. was followed in the cases of lessees of granite stone by Ramachandra Rao J. without any discussion and their writ petition on November 17, 1978 was allowed. The State of Andhra Pradesh assails the decision in black granite and the order in the granite stone in the above two writ appeals.

10. The collection of seignorage fee (royalty) or dead rent affecting minor minerals are not unknown in India. The dead rent, royalty, surface rents were imposed by the local authorities, provincial Governments even before the Constitution. Their connotation, import was elucidated in several cases in common law. In Halsbury's Laws of England, Vol 31 of Fourth Edition, the expression “dead rent” is defined at Para 235: It is usual in mining leases to reserve both a fixed annual rents otherwise known as a dead rent.” The expression “royalty” is defined in para 236 of the same volume “in connection with mining leases is a payment to the lessor proportionate to the amount of the demised mineral worked within a specified period by the lessee.” The expressions thus royalty, seignorage fee, dead rent whenever were used by the Parliament or State Legislature or by rule-making authorities in India, the words used in the same sense as defined in common law. In the case reported in Baijinath Kedia v. State of Bihar, AIR 1970 SC 1436, for example adverting to the incidents of royalty, the Supreme Court held, “royalty, is something other than the return to the lessor or licenser for the use of the land surface and represents as it normally connotes the payment made for the materials or minerals won from the land.” In one of the unreported cases following the Halsbury's Laws of England of this Court in W.A No. 534 of 1968, a Division Bench of this Court on December, 15, 1970 held “dead rent is only a rent and not a tax. It can in fact be recovered apart from royalty.” “The object of dead rent is twofold; firstly to ensure that the lessee really works the mine and secondly, to ensure definite minimum income to Government in respect of the demise.” The connotation shows dead rent, royalty were given the same meaning as understood in commonwealth countries. Therefore, we cannot accept that dead rent is a tax or an impost within the meaning of Art. 265 of the Constitution. The words “financial burden” as mentioned earlier are capable of more than one meaning. In our view as held by this Court earlier, dead rent is not a tax. In view of this position, it is unnecessary further to consider several aspects elaborated at the debate or to consider the authorities any further.

11. The next question raised with reference to S. 13. In sub-clause (i) of that Section, rules can be prescribed “fixing and collection of dead rent, fines, fees or other charges and the collection of royalties in respect of (i) prospecting licences (ii) mining leases, (iii) minerals mined, quarried, excavated or collected.” This provision was cited to show the Parliament for other than minor minerals provided for levy of dead rent, specified the period when it can be enhanced under S. 9-A is stated and mentioned the rate in the Third Schedule, of the Act. The argument, is that no corresponding provision as to minor minerals is enacted in the Act. Here, it may be pointed out, Ss. 3 to 13 are not applicable to minor minerals. True, it is in S. 15, Parliament did not employ specific words as in S. 9-A and did not provide rates for minor minerals but in the Scheme of the Act, minor minerals are differently dealt with by the Parliament. The States were delegated the power to regulate quarry leases and mineral concessions, if the scheme is so understood, it is not difficult to hold in regulating the mineral concession and quarry leases, the State imposed dead rent.

12. In cl. (3) of S. 15, royalty is levied. In sub-sec. (3), it is laid “that the holder of a mining lease or any other mineral concession granted under any rule made under sub-sec. (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 Govt. in respect of minor minerals.” It is with reference to the rule, it was stressed the amended rule recites dead rent is to be collected if it is higher than the royalty. The criticism is the lessees pay dead rent as ordered by the State, not royalty as ordered by the Parliament, therefore, the State Govt. dislodged the Union legislation “the writ of the Parliament ceases to run” in the State of Andhra Pradesh. In the cut and thrust of the debate the point sounds alright but on a deeper consideration, it does not hold water. The State Government in prescribing dead rent followed the pattern laid by the Parliament in S. 9-A of the Act. That Section in the alternative prescribes royalty and dead rent both are leviable, the higher of the two is to be collected. The impugned rule prescribed dead rent in terms similar to that of the Parliament where both are levied, the higher of the two is to be collected, therefore, no exception can be taken to the validity of the impugned, rule.

13. The impugned rules of 1966 Mineral Concession Rules were not laid before the Parliament because the Parliament did not direct in the Act to do so for minor minerals. In recent past, statutes prescribe when rules are promulgated, they shall be laid before the Parliament. In some cases, rules do not come into operation till the expiry of specified period after laying them before the Parliament. So far as England is concerned, the procedure in the Parliament of United Kingdom is now standardised after 1948 both as respects the effect of instruments and their enforcement. The procedure before Indian Parliament is yet not standardised. Speaking of practice in Commonwealth countries, only in Australia there is a specific rule introduced in 1937 that if any “regulation” is not laid before the House within fifteen days, the regulation to have no effect. The instant Act does not declare rules under S. 15 are to be laid before the Parliament, therefore, no exception can be taken when they are not so laid before the Parliament.

14. Finally, as to the reasonableness of dead rent, there is no sufficient basis in these cases to hold the levy of dead rent is confiscatory. In considering that, it should not be lost sight the dead rent is levied in “proportionate to the amount of the demised minerals worked within a specified period.”

15. To sum up, we hold dead rent is not a tax, it is not an impost and not a financial burden within the meaning of Art. 265 of the Constitution. It is within the powers of the State Government as delegate of the Parliament to prescribe for levy of dead rent and in that view, rule 10 of 1966 Mineral Concession Rules, is not ultra vires of the Act.

16. In the instant cases, the leases in most of the cases, if not all have been executed by the State Govt. earlier to March 25, 1977 when rule 10 and Schedules I and II were substituted. Whether dead rent is payable by such lessees, requires to be considered next. In considering that question, whether rule 10 has any retrospective operation has to be determined. When like contentions were raised before the Supreme Court in Baijinath Kedia (AIR 1970 SC 1436) as respects minor mineral of Bihar State that Court observed “all mining leases granted before the commencement of the Mines and Minerals (Regulation and Development) Amendment Act, 1972 if in force at such commencement,” even when the leases were “brought in conformity” with the provisions of the Act, the Supreme Court held, “vested rights could only be taken away by law “made by a competent legislature” as distinguished from subordinate legislation. In that case it was added “Mere rule-making power of the State Govt. was not able to reach them.” Following the dicta of the Supreme Court, we hold the leases granted, concessions accorded, earlier to March 25, 1977 are not liable to pay dead rent under the impugned rule. The State Govt. can collect dead rent prospectively from the date of the date impugned rule. Rule 10, in that sense, has no retroactivity. Therefore, we direct the State Govt. to issue demand notices fresh as to dead rent wherever “leases” or “Concessions” were accorded after March 25, 1977 and in the cases of “contracts” executed earlier, demands be made afresh excluding the dead rent The Writ appeals and the Writ petition of M.V Krishna Rao, the lessee of black rought stone is allowed, with directions as indicated above. No costs. Advocates fee Rs. 150/- in each.

17. The counsel appearing for the Writ Petitioners has sought oral leave to appeal to the Supreme Court of India. Since we have followed the dicta laid by the Supreme Court, we cannot certify that this is a fit case which raises substantial questions of law required to be decided by the Supreme Court. The oral leave is therefore refused.

Order accordingly.