Citation Codes

Equivalent Citations

citation codes

Case Number

First Appeal No. 69 of 1982

Advocates

P.S Nair
Y.S Dharrmdhikari

Judges

B.C Varma
K.K Adhikari, JJ.

Acts

Clauses (vi) and (x) of Section 2(h) of the Nationalisation Act.
Section 2(h) of the Nationalisation Act. Likewise, Clause (x)
COAL MINES NATIONALISATION ACT
Clause (vi) or Clause (x) of Sub-section (h) of Section 2
Section 26(5) of the Coal Mines (Nationalisation) Act
Mines (Nationalisation) Act, 1973 (Act No. 26 of 1973)
SECTION 3 COAL MINES NATIONALISATION ACT
Clause (xii) of Sub-section (h) of Section 2
clauses of Sub-section (h) of Section 2
Management) Act, 1973 (Act No. 15 of 1973),
Mines (Nationalisation) Act

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Smart Summary

Structured Summary of the Provided Opinion

Factual and Procedural Background

The dispute arises from defendants' appeal contesting whether certain items (fire extinguishing plants, pumps and other machinery listed in Schedule A to the plaint) that were left on the premises of Nowrozabad and Kotma Coal Mines vested in the Central Government on the appointed date under the Coal Mines (Nationalisation) Act, 1973.

The plaintiff is the Associated Cement Companies Ltd. The plaintiff owned the two coal mines and also owned several cement works (Kymore, Banmor, Lakheri, Mancherial). Prior to the Nationalisation Act coming into force, certain equipment was loaned from various cement works to the two coal mines for temporary purposes: to control an underground fire at Nowrozabad and to pump out water at Kotma. After enactment and subsequent refusals to return the items, the plaintiff filed a suit for the return of the property or payment of its assessed value of Rs. 1,81,650.

At trial, the court found that the contested items did not belong to either of the two coal mines, that they remained the property of the plaintiff, and therefore the suit was maintainable. The trial court awarded the plaintiff either return of the property or its equivalent value and interest at 9% per annum from 10-3-1975 until realisation. The defendants appealed against this decision.

Legal Issues Presented

Whether, on the appointed date (1-5-1973), the right, title and interest in the disputed items vested in the Central Government under Section 3 of the Coal Mines (Nationalisation) Act, 1973, free from all incumbrances.
If vesting occurred, whether the disputed items fell within the definition of "mine" or "coal mine" under Section 2(h) of the Act by virtue of Clauses (vi), (x) or (xii) (and thereby became assets of the mines).
Whether the trial court rightly awarded interest at 9% per annum from 10-3-1975, or whether interest should be awarded from the date of suit and at a different rate.

Arguments of the Parties

Appellants' Arguments

The appellants contended that, because the disputed property was used for the purposes of the coal mines and because the plaintiff was the owner of both the cement works and the mines, those items were covered by Clause (vi) or Clause (x) of Section 2(h) of the Nationalisation Act.
The appellants also urged that the items became assets of the owner of the mines or the mines themselves and thus came within Clause (xii) of Section 2(h).
As a consequence of alleged vesting, appellants argued that the plaintiff's civil suit was barred and the plaintiff's remedy, if any, was confined to an application for compensation under the Act; Section 26(5) of the Act was invoked in this context.

Respondent/Plaintiff's Arguments

The plaintiff maintained that the items were the property of the plaintiff and had merely been loaned temporarily to the coal mines from the plaintiff's other establishments for specific, limited purposes (extinguishing fire and pumping water).
The plaintiff contended that the items did not form part of the invested resources or assets of the mines and therefore did not vest in the Central Government on the appointed date.
The plaintiff sought either the return of the items or their assessed monetary value (Rs. 1,81,650), together with interest and costs.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Union of India v. United Collieries Ltd., AIR 1985 SC 192	The enlarged definition of "mine" in Section 2(h) indicates the nature of properties that vest; guidance on the meaning of "fixed assets" and "current assets" (fixed assets include real estate, building, machinery etc.).	The court applied the principles in this decision to examine whether the challenged items answered the descriptions in the clauses of Section 2(h). It used the precedent's explanation of fixed and current assets to conclude that the items were neither fixed assets nor current assets of the mines and therefore did not vest in the Central Government.

Court's Reasoning and Analysis

The court proceeded by first stating the statutory effect of vesting under Section 3 of the Coal Mines (Nationalisation) Act: on the appointed date (1-5-1973) the right, title and interest of the owners of the mines vested in the Central Government, free from all incumbrances. The central analytical task was therefore to determine whether the disputed items were assets of the coal mines within the meaning of Section 2(h) and thus fell within the sweep of the statutory vesting.

The court examined the text of Section 2(h), noting its wide and "artificial" definition of "mine" which includes various classes of property in clauses such as (vi), (x), and (xii). The court emphasized that the inquiry must be factual and tied to whether the particular asset answers the description given in any of the clauses of Section 2(h).

Turning to the evidence, which the court found to be uncontradicted by the appellants, the court recorded that the items had been borrowed temporarily from other establishments of the plaintiff and were brought to the coal mine premises for specific, temporary purposes (extinguishing fire or pumping out water). The documentary and oral evidence (witnesses P.W.1 and P.W.4 and Ex. P/1) supported that the articles were originally installed at other plaintiff establishments and were not acquired or held by the mines as enduring resources.

The court analyzed the applicability of the specific clauses:

Clause (vi): requires that the property be "in, or adjacent to a mine" and used for the purpose of the mine. The court found the items were neither in nor adjacent to the mines (they were temporarily brought and on loan) and thus Clause (vi) did not apply.
Clause (x): applies to lands, buildings and equipments belonging to the owners of the mine that are in, adjacent to or on the surface of the mine where washing/manufacture is carried on. The court found this clause inapplicable because the items were not in, adjacent to or situated on the surface of the mine for such purposes.
Clause (xii): covers "all other fixed assets, movable and immovable, belonging to the owner of a mine, wherever situate, and current assets belonging to a mine, whether within its premises or outside." The court explained that to attract this clause it had to be shown that the articles were included in the assets of the mines at the relevant time.

To assess Clause (xii), the court explored the ordinary meanings of "assets," "current assets," and "fixed assets," citing commercial definitions and the Supreme Court's formulation in Union of India v. United Collieries Ltd. It concluded that:

The contested articles were not fixed assets of the mines because they were not acquired, held, or used without change over a long period for earning revenue; they were temporary loans.
They were not current assets of the mines because they could not be converted into purchasing power at the mines or obviate an outlay of purchasing power in the normal course of mine operations.

Consequently, Clause (xii) did not apply. On the combined statutory interpretation and factual findings, the court concluded the items did not fall within any clause of Section 2(h) and therefore did not vest in the Central Government on the appointed date. They continued to belong to the plaintiff.

On the point of interest, the court held that the trial court erred in awarding interest prior to the date of the suit (26-11-1975) and in awarding interest at 9% per annum from 10-3-1975. The appellate court held that interest could be awarded only from the date of the suit (26-11-1975) and at a rate not exceeding 6% per annum.

Holding and Implications

Final Ruling: The appeal "substantially fails and is dismissed" except insofar as the trial court's award of interest at 9% from 10-3-1975 is set aside. The appellate court modified that part of the decree and awarded interest at 6% per annum from 26-11-1975 on a sum of Rs. 1,81,650/- until realisation. The appellants were ordered to pay the costs of the appeal to the plaintiff and counsel's fee as per schedule, if certified.

Implications:

Direct effect on the parties: The disputed articles listed in Schedule A did not vest in the Central Government and remained the property of the plaintiff, entitling the plaintiff to either the return of the articles or payment of their assessed value (Rs. 1,81,650), together with interest at 6% per annum from 26-11-1975 and costs of the appeal.
No broader new precedent was proclaimed by this opinion beyond applying statutory definitions in Section 2(h) and existing authority (Union of India v. United Collieries Ltd.) to the particular facts; the decision turns on the factual finding that the items were temporary loans and not assets of the mines within the statutory categories.

All statements in this summary are drawn exclusively from the supplied opinion text and do not introduce information not contained therein.

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Coal Mines Authority Limited, Calcutta & Others v. The Associated Cement Companies Limited, Bombay, .

1. The question raised in this appeal at the instance of the defendants is whether on the coming into force of the Coal Mines (Nationalisation) Act, 1973 (Act No. 26 of 1973) certain property, viz., fire extinguishing plants, pump and other machineries, left over the premises of Nowrozabad and Kotma Coal Mines in Shahdol district of Madhya Pradesh, stood transferred to and vested absolutely in the Central Government free from all incumbrances from the appointed date.

2. Facts are not much in dispute. The two Coal Mines, i.e. Nowrozabad and Kotma Mines, were owned by the respondent/plaintiff, i.e., the Associated Cement Companies Ltd., Bombay. This plaintiff company had many other establishments all over the country, including places at Kymore and Banmor in Madhya Pradesh, Lakheri in Rajasthan and Mancherial in Andhra Pradesh. It appears that in order to control the underground fire in Nowrozabad Coal Mines, its Manager summoned certain fire extinguishing equipments from Kymore Cement Works as loan. The details of the equipments so requisitioned are contained in schedule annexed to the plaint. Similarly, one pump was obtained from Lakheri Cement Works for the same Coal Mines. An Exciter was obtained from Banmor Cement Works for Kotma Coal Mines. All this was prior to the enforcement of the Coal Mines (Nationalisation) Act and was only on loan from one concern of the plaintiff to its two coal mines. Somewhere in March, 1973, i.e., after the enforcement of the Coal Mines (Taking Over of Management) Act, 1973 (Act No. 15 of 1973), but before the promulgation of the Coal Mines (Nationalisation) Act, the plaintiffs Manager at Mancherial Cement Works requested for return of the pump which was spared for Kotma Coal Mines. The custodian refused to return the said pump. There had been some correspondence between the plaintiff on one hand and the coal mines authority on the other regarding return of the said articles. Finally, the appellant refused to return the articles compelling the plaintiff to file a suit either for the return of the property (Schedule-A to the plaint) or for payment of its value which was assessed at Rs. 1,81,650/-. The suit was resisted on two counts. First it was asserted that the property belonged to the mines and, therefore, vested in the Central Government free from all incumbrances on the coming into force of the Coal Mines (Nationalisation) Act and the plaintiff, therefore, ceased to have any right, title or interest in the said property. As a corollary, it was said that the plaintiffs remedy, if any, was to apply for compensation and the civil suit was barred under Section 26(5) of the Coal Mines (Nationalisation) Act The trial Court's finding is that the properties in question did not belong to either of the two coal mines although they were properties of the plaintiff employed in different concerns. Consequently, these properties did not vest in the Central Government and continued to belong to the plaintiff. The suit was held maintainable and the plaintiff was held entitled to either the return of the property or its equivalent value, i.e., Rs. 1,81,650/-. The defendants have also been made liable to pay interest at nine per cent per annum from 10-3-1975 until realisation.

3. There is no dispute that these two mines, i.e., Nowrozabad and Kotma Coal Mines, were owned by the plaintiff i.e., the Associated Cement Companies Ltd., which also owned the Kymore Cement Works, Lakhera Cement Works and Banmor Cement Works. It is also not disputed that the articles in question at the time of coming into force, the Taking Over of Management as also the Nationalisation Act were found on the premises of the two coal mines and were in actual use for the purposes of those mines. From the oral evidence led by the plaintiff and particularly from that of Shri. K.C. Jain (P.W. 1) and Shri Gurudayal Prasad (P.W. 4) it is also amply proved that these articles were first installed at different establishments of the plaintiff at different places but were requisitioned by the authorities of the two coal mines prior to the coming into force of the Coal Mines (Taking Over of Management) Act and the Coal Mines (Nationalisation) Act for the purpose of extinguishing fire at Nowrozabad Mines and for pumping out water in the other, i.e., Kotma Mines. From Ex. P/1 which is a letter from the Coal Mines Authority Ltd. to the plaintiff, it appears that at one time (November, 1973) the Coal Mines Authority was inclined to return some of the items claimed in the suit to the plaintiff. However, ultimately there had been a denial on the contention that they all vested in the Central Government.

4. What vested in the Central Government on the appointed date, i.e., 1-5-1973, under Section 3 of the Coal Mines (Nationalisation) Act is the right, title and interest of the owners of the mines. This vesting was free from all incumbrances. Kotma and Nowrozabad mines also vested in the Government and it is also not disputed that on acquisition of these mines certain amount of compensation has also been paid to their owner, i.e., the plaintiff. The dispute, however, is as to what actually so vested. 'Mine' and 'Coal Mine' have been assigned special significance under the Coal Mines (Nationalisation) Act. 'Mine' is defined under Section 2(h) which reads as follows :

"(h) "mine" means any excavation where any operation for the purpose of searching for or obtaining minerals has been or is being carried on, and includes-

... ... ...

(vi) all lands, buildings, works, adits, levels, planes, machinery and equipments, instruments, stores, vehicles, railways, tramways and sidings in, or adjacent to a mine and used for the purpose of the mine;

(vii) all workshops (including buildings, machinery, instruments, stores, equipment of such workshops and the lands on which such workshops stand) in, or adjacent to, a mine and used substantially for the purposes of the mine or a number of mines under the same management;

... ... ...

(x) all lands, buildings and equipments belonging to the owners of the mine, and in, adjacent to or situated on the surface of, the mine where the washing of coal obtained from the mine or manufacture, therefrom, of coke is carried on;

(xi) all other fixed assets, movable and immovable, belonging to the owner of a mine, wherever situate, and current assets, belonging to a mine, whether within its premises or outside.'' And, a "coal mine" according to Section 2(h), means a mine in which there exists one or more seams of coal.

5. This artificial and wider definition of mine is not without purpose. Attempt is to frustrate the attempt of the owners to take away the assets of the mines from vesting. The various clauses of Sub-section (h) of Section 2 are indicative of the nature of the properties which may so vest. Whenever a question arises as to whether a particular asset vested in the Central Government as a consequence of the application of the Coal Mines (Nationalisation) Act to that particular mine, what is to be seen is whether it answers the description given in any of the clauses. What is, therefore, to be determined first is whether a given property was or was not the asset of the coal mine on the date of vesting and further whether the particular asset is within the sweep of Section 2(h). This is how the matter has been viewed by the Supreme Court in Union of India v. United Collieries Ltd. AIR 1985 SC 192, where, in paragraph 6 of the report, the following observations were made :

"Parliament by an enlarged definition of "mine" in Section 2(h) has indicated the nature of the properties that vest and the question whether a particular asset is taken within the sweep of Section 2(h) depends on whether it answers the description given therein.

6. Evidence adduced in the case by the plaintiff/respondent and not rebutted at all by the appellants, is that the properties in question were borrowed for temporary use in the mines. Fire extinguishing equipments were requisitioned for extinguishing fire at Nowrozabad colliary while pumps were used for extracting water in Kotma colliery. All the same, it belonged to the plaintiff who owned both the mines as also the concerns from which these articles were taken on loan by the mines. Apparently such articles borrowed from elsewhere for specific use in mines cannot be termed as mine. Shri Nair, learned counsel for the appellants, however, submitted that since the property belonged to the plaintiff who also owned those two coal mines and since they were used for the purposes of mines, they are covered by Clauses (vi) and (x) of Section 2(h) of the Nationalisation Act. Learned counsel also added that they became assets either of the owner of the mines or the mines themselves and were covered under Clause (xii). Clause (vi), in our opinion, is wholly out of consideration for the reason that before a property of the description mentioned therein is held to be a mine, it has to be shown that it is in or adjacent to a mine. In addition, it has to be shown that it was used for the purpose of mine. Obviously, the articles in question were neither in nor adjacent to the two mines. Instead, they were temporarily brought on the premises for specific purpose and that too on loan from different establishments. No doubt they were used for the purpose of mines but that by itself will not make them a 'mine' under Section 2(h) of the Nationalisation Act. Likewise, Clause (x) is also not attracted. In terms of that clause, only such lands, buildings and equipments belonging to the owners of the mine which are in, adjacent to or situated on the surface of the mine where the washing of coal obtained from the mine or manufacture, therefrom, of coke is carried on 'are mines'. Certainly that is not the case here. May be that the articles in question belonged to the owners of the mines but they are neither in nor adjacent to not situated on the surface of the mines. Therefore, merely because the properties in question are owned by the plaintiff who also owned the two mines, it is difficult to say that either under Clause (vi) or Clause (x) of Sub-section (h) of Section 2 they became vested in the Central Government from the appointed date, i.e., from 1-5-1973.

7. Shri Nair, however, laid stress and tried to bring his case within Clause (xii). In order to attract that clause and to bring a particular property within its ambit, it has to be necessarily found that the given article or articles whether movable or immovable are the fixed assets belonging to the owner of the mine or arc current assets belonging to a mine whether within its premises or outside. It has, therefore, to be shown that the articles were included in the assets of the mines at the relevant time. The term "assets" has not been defined in the Act. One, therefore, has to proceed on the basis of the meaning attributable to this term as ordinarily understood. It would mean and include every thing that is available to meet liabilities. Pullan and Alcock in their 'Commercial Dictionary', at page 26, set out how the term is understood in law. According to the authors, it means the sum total of property available to discharge liabilities and in that sense the word has a collective connotation. Later, plural sense was accorded to it, and singular form also came into use. Nowadays, in accounting and business, an asset represents an embodiment of invested resources. (See also Words and Phrases legally Defined, Vol. I, IInd Edition, page 126). The authors have then given basis of classification of assets. They divide the assets in two classes current assets and non-current assets. The non-current assets again have been put in three classes fixed tangible assets, fixed intangible assets and deferred assets. This is how current assets and fixed assets have been explained :

"Current Assets are thus those which represent immediate purchasing power in the form of cash or claims to cash and those which will be converted into purchasing power or obviate the outlay of purchasing power within a short time during the normal course of operations of the undertaking.

Fixed Assets. Those acquired with the intention that they shall be held and used without change over a long period for the purpose of earning revenue. They are necessary to the operations of most enterprises, since without them revenue could not be earned."

In Union of India v. United Collieries Ltd. AIR 1985 SC 192, the Supreme Court has assigned the following meaning to these terms :

"Fixed assets in general comprise those assets which are held for the purpose of conducting a business, in contradistinction to those assets which the proprietor holds for the purpose of converting into cash, and they include real estate, building, machinery etc."

The evidence on record, both oral and documentary, gives absolutely no indication of the articles in suit being assets of the two coal mines. Far from being any assets of the mines, the evidence indicates that they were borrowed from different establishments of the mine owner for specific purposes. They did not form part of invested resources of the mines. They were never acquired by the mines nor were held nor used without change over a long period for purposes of earning revenue. The evidence shows that they were brought on the premises temporarily either for extinguishing fire or for throwing out water. They, therefore, cannot in any case be said to be fixed assets. Similarly, they also are not current assets as none of them can be converted into purchasing power or obviate the outlay of purchasing power. The finding on evidence in this case must be that they could not be converted into purchasing power at the mines. With this finding alone application of Clause (xii) of Sub-section (h) of Section 2 must be ruled out.

8. Our finding, therefore, is that the articles in suit (Schedule A to the plaint) do not fall in any of the clauses of Section 2(h) of the Act and are, therefore, not mines within the meaning of such provision. Those articles, therefore, did not vest in the Central Government. The property in those articles continued and still continues to belong to the plaintiff/respondent who has rightly been held entitled to either the return of those articles or of its equivalent value. It was not disputed by the appellants that they have taken possession of all those properties and as appears from Ex. P/1 mentioned above, that at one time the Coal Mines Authority Ltd., was prepared to return quite a few of them to the plaintiff.

9. Shri Nair also urged that no interest should have been awarded to the plaintiff. The trial Court awarded interest on a sum of Rs. 1,81,650/- at nine per cent per annum from 10-3-1975 up to the date of delivery of the articles or payment of its price. In our opinion, interest prior to the date of suit, i.e. prior to 26-11-1975 could not have been awarded. Interest can be awarded to the plaintiff only from 26-11-1975 and that too at not more than six per cent per annum. We hold accordingly.

10. For the reasons aforesaid, the appeal substantially fails and is dismissed except in so far as it awards interest to the plaintiff at nine per cent per annum from 10-3-1975. That part of the decree is set aside. Instead, we award interest at six per cent per annum and that too from 26-11-1975 on a sum of Rs. 1,81,650/- until realisation. The appellants shall pay costs of this appeal to the plaintiff. Counsel's fee as per schedule, if certified.

Coal Mines Authority... v. The Associated Cemen...