INDUSTRIAL SUPPLIES PVT. LTD. & ANR. v. UNION OF INDIA & ORS

Citation: [1981] 1 S.C.R. 375

Court: Supreme Court of India

Bench: V.R. KRISHNA IYER, O. CHINNAPPA REDDY, A.P. SEN

Case summary

The appeals raise a question of far reaching importance namely, whether a raising contractor of a coal mine is an owner within the meaning of sub-s. It, however, held that the amount of sub•idy of Rs.

Judgment text

(· JNDUSTRIAL SUPPLIES PVT. LTD. & ANR. v. UNION OF INDIA & ORS. (AND VICE VERSA) B August 1, 1980 [V. R. KRISHNA IYER, 0. CmNNAPPA REDDY AND A. P. SEN, JJ. ] . Coking . Coal Mines (Nationalisation) Act, 1972, sub-s. (1) of s. 4---Whether a raising co~tractor of a coal mine is an "owner" and· if so, whether the fixed assets like machinery, planls, equipment and other properties installed 'or brought :C . in by such a raising contractor vest in the Central Government-Whether su[,sidy receivable from the erstwhile Coal Board established :mder s. 4 of the Cor:! Mines (Conservation,. Safety and Development) Act, 1952 upto the specified date from a fund kno. wn as a Conservation and Safety Fund, by such raising ; contractor prior to the appointed day can be realised by the Central Govern· ment by virtue of their powers . under sub-s. (3) of s. 22 of the Nationalisation 1 Act, to the exclusion of all other persons including such contractor and applkd D J under sub-s. (4) of s.

22 towards the. discharge of the liabilities of the coking coal mine, . which could not be discharged by the appointed day. · The appellants by virtue of two agreements with M /s. Balihari Colliery Co. Pvt. Ltd. and with New Dharamband Colliery Ltd. became the managing contractor for a period of 20 years of the former and the raising contractor of the latter; In terms of the said agreements, they installed from time to time various fixed assets like machinery, plants and equipment and erected stmctures and raised new roads within. the said collieries. These two collieries were ·taken over by the Central Government under its management with effect from October 17, 1971, by virtue of the powers vested in it under the Coking Coal Mines (Nationalisation) Act, 1972. The appellants aggrieved by the said taking over filed a writ. petition in the Delhi High Court seeking a declaration that sub· s. (! ) of s.

4 of the Nationalisation Act does not provide for the acquisition :of the right, title and i;,terest inasmuch as being mi. sing contrnctors. they were not covered by the term 'owner' within the meaning of- s. 3(n) of the Nationa· lisation Act. and, therefore, they were entitled to dismantle and remove the fixed assets like machinery, plants etc. They also sought t9 recover the amount of subsidy of about Rs. ,4,50,000 collected by . the Central Government from the erstwhile Coal Board. The High Court substantially disallowed the claim of the appellants holding ·that they fall within . the meaning of term 'owner'. It, however, held that the amount of sub•idy of Rs. 4,50,000 receivable from the Coal Board by way of reimbursement towards the cost of sand stowing and hard. mining operati·1ns carried on by them could not· be treated to. be as an amount due to the coking coal mine within the meaning of sub-s. (3) of s. 22 and, therefore, could not be utilised .

by the Central Government under ~ub-s. 4 of s. 22 for ·discharge . of the liabilities of the coking coal mine. Hence, the two appeals one by. the appellants and the other by the Union of. Indi~. . Allo~ing the. Union of India's appeal only and dismissing . the Company's ·. appeal,. the Court. · ''i '. • HELD : (1) The appellants do fall under the purview of the term "owner" in s. '3(n) of the Nationalisation Act· read with s. 2 of 'the Mines Act, 1952 I and any other construction as sought to be placed on the . definition would frustrate the very object of the legislation and the intention of the Legislature. {387 F] Parliament, with due deliberation, in s. 3(n) adopted by incorporation . the enlarged definition of the "owner" in s. 2(1) of the Mines Act, 1952 to make the Nationalisation Act all embracing and fully effective.

The definition is wide enough to include three categories of persons (i) in relation to a mine, the person who is the immediate proprietor or a Jessee or occupier of mine or any part thereof, (ii) in the case of a mine the business whereof. is carried on by . a liquidator or a receiver, such liquidator or receiver, and (iii) in the case of a 0 mine owned by a company, the business whereof is carried on by a managing agent, such managing agent. Each is a separate and distinct category of persons and the concept of ownership does not come in: The insertion of the clause "but any contractor for the working of a mine or any part thereof shal! be subject to this Act in like manner as if he were an owner, but not so as to exempt the owner from any liability" is to make both the owner as well as the contractor equally liable for the due observance of the Act.

Jn the case of a mine the working whereof is being carried on by a raising contractor he is primarily responsible to comply with the provisions of the Mines Act. Though· a contractor for the working of a mine or any part thereof, is not an ov. ner he shall be subject to the provisions of the Mines Act in the like manner "as if he were a owner" but not so as to exempt the owner from any liability. [387 A-DJ The whole object and purpose of the Nationalisation Act is to expropriate private ownership of coking coal mines and all interests created therein. The term 'owner' in sub-s. (1) of s. 4 is to be given an extended. meaning so as to include a contractor for the working of a mine or any part thereof. It has to be presumed that Parliament was fully aware of the normal pattern of work· ing of all the coal mines, that is, by employment of raising contra~tors. Any other con. struction would lead to a manifest absurdity and attribute to Parlia· ment a result which it never intended.

It would result in the contractors escaping from the consequences of vesting under sub-s. (1) of s. ,. 4 of the Act and permit them to dismantle and remove the additional machinery, plants and equipment which are being utilised for the working of mines. [388 B-D] (2) The word 'occupier' in s. 3(n) of the Nationalisation Act should be . understood to have been used in the usual sense according to its plain meaning. In the legal sense an occupier is a person in actual occupation. The appelbnts being "raising contractors" were under the terms of the agreement dated February 7, 1969. entitled to and were in fact in actual possession and en,ioyment of the colliery and were, therefore, an occupier thereof. That being so, the appellants in possession in their own right by virtue of their substantial right acquired by them under the agreement were not in possession on behalf of somebody else. [384 F·GJ The Chief Inspector of Mines and Anr. v. Lala Karamchand Thaper etc. [1962] 1 S. C. R.

9, distinguished. (3) The Nationalisation Act, no doubt, separately defines 'owner' and 'managing contractor'. The words and expressions used and defined in the Act have the meaning respectively assigned to them "unless the context otherwise requires". Therefore, the expression 'managing contractor' as defined in s. 3(1) of the . Nationalisation Act cotnes 'into play only for the purpose of apportionment ";>- '-. :~ f 'owner' under . s. 3(n) of the Nationalisation Act, reliance was placed <>n the decision in The Chief Inspector of Mines & Anr. v. Lala 1 Karamchand Thapar etc. ( ) While a raising contract may not be a lease and, therefore, the contractor not a lessee, we find no reason \why he should not be treated to be an occupier within the meaning -0f s. 3(n). Under the terms of the agreement dated February 7, 1969, the petitioners acquired complete dominion and control over the colliery in question for a period of 20 years.

It is common ground that the said agreement was by a registered instrument and even though this perhaps may not amount to a lease, there can be no doubt that it was a licence coupled with a grant. The petitioners were by virtue of cl. 7(a) of the agreement entitled to install at their own cost such additional machinery, tramways, ropeways etc. , in connection with . , the transport of coal raised and . to bring in chattels for the purpose of discovery and removal of coal. They were entitled under cl. 7(b) lo remove such additional machinery that may be installed and such chattels and utensils as may be brought in by them to the said collieries unless of course, the owners exercised their option to purchase the same under cl. 9. In view of these terms, it is futile to contend that the petitioners were not occupiers of the mines. They had th~ ac. tual use and occupation of the coal mine in question. (! ) (1962] I SCR 9.. [19811 1 S. C. R.

We have carefully gone through the judgment in Lala Karamchand T}l(lpar's case and, if we may say so, the decision is distinguishable on facts. There the question was whether the managing agent of a , ~ company owning a colliery was an occupier of the colliery, and the Court negatived this observing: "From the very collocation of the words "immediate proprietor, or lessee or occupier of the mine", it is abundantly clear that only a person whose occupation is of the same character. that is, occupation by a proprietor or a lessee-by way of .... possession on his behalf and not on behalf of somebody else is ... meant by the word "occupier" in the definition. Thus, a tres- 1 passer in wrongful -possession to the exclusion of the rightful owner would be an occupier of the mine, and . so be an "owner" _..... _ for the purpose of the Act.

" The Court further observed : "That must be because possession on behalf of somebody else was not in the contemplation of the legislature such "occupation" as to make the per~on in possession an "occupier" within the meaning of s. 2(1). " These observations, if we may. say so, with great respect, are rather widely stated. They are indeed susceptible of a construction that a raising contractor being in possession on behalf of a proprietor or the lessee of a mine in p6ssession is not an 'occupier' within the meaning o! s. 3(n) of the Nationalisation Act read wit_h s. 2(1) of the Mines Act, 1952. We are quite sure that that was _not the intention of the Legislature. There is no reason why the word 'occupier' should not be understood to have been used in its usual sense, according to its plain meaning. In common parlance, an 'occupier' is one who 'takes• or (more usually) 'holds' possession: Shorter Oxford Dictionary, 3rd edn. , vol. 2, p. 1433.

In the legal sense, an occupier is a person in actual occupation. The petitiOners being raising contractors were, under the-terms of the agreement dated February 7, 1969 entitled to. and in fact in actual physical possession and enjoyment of the colliery and were. · therefore, an occupier thereof. That being so, the petitionei:s being in possession, in their own right, by virtue of the substantial rights acquired by them under the agreement, were not in possession on behalf of somebody else and, therefore. the decision in Lala Karamchand Thapar's case cannot apply. It is next urged that the Nationalisation Act itself makes a distinction between an 'owner' and a 'managing contractor', there being separate provisions made with regard to both. It is . said that in view of this, there is no legal justification fo read the word 'contractor' for the word 'owner' iii sub-s. (1) of s. 4. The· contention is wholly misconceived and cannot be accepted.

The Nationalisation Act no doubt separately. defines 'owner' a. nd 'ma·naging contractor'. The definition of managing contractor in s. 3(i) reads : "3(i) "managing contractor" means the perfon; or body of persons, who, with the previous consent in· Writing of the State Government has entered into an arrangement, contract or understanding, with the owner of a coking coal mine or coke oven plant under which the operations of the coking coal mine or coke oven plant are substantially controlled by such person or body of perso_ns ;" The words and expressions used and defined in the Act have the meaning, respectively, assigned to th:enl' 'unless the context otherwise requires'. · The expressibn 'managing contractor' finds place in Chapter VI, which deals with the power, functions and duties of the Commissioner of Payments ai:»pointed: under stib-s. (1) of s. 20, for the purpose of disbursing the amotintS payable to the owner of eacl:i coking coal mine or coke ovei:J. plant.

If appears in sub-s. (2) of s. 26, which provides: "(2) Iii relation to a coking coal mine or coke oven plant, the operations of which were, immediately before the 17th day of October, 1971 urider the control of a managing contractor, the amount specified in the First Schedule against such cokilig coal mine or irt the Second Schedule against such coke oven pfant shall be apportioneq between the owner of the coking coal mine or coke oven plant and such managing contractor in such proportions as ma. y be a. greed upon by or between the owner and such managing contractor, and in the event of there being no such agreement, by such proportions as may be determined by 'the Court. " Under cl. 25 of the agreement, it was agreed upon between the parties that (i) in the event the colliery was nationalised, the agreement shall stand determined and al! moneys then due and owing by the owners to the petitioners and vice .

versa shall at once become due and payable, and (ii)' in the event of such nationalisation, if the machinery, chatt. eis and utensils installed at and/ or brought into the colliery by the petitioners or the buildings and structures erected by them are taken over by the authorities, they shall become entitled to compensation payable for or attributable to the said machinery, chattels and utensils and buildings and structures so taken over and the owners shall be entitled to receive compensation for all other properties comprised in the said colliery. The expression 'managing contractor' :as defined in s. 3(i) of the Nationalisation Act comes into play only for the purpose of appointment of compensation under sub-s. (2) of s. 26. The submission that the term 'owner' used in sub-s. (1) of s. 4 of the Natimplisation Act excludes a 'managing contract9r' is against the scheme of the Act. The term 'owner' in sub-s. (1) of s.

4 of the Act must bear the meaning given in the definition contained in s. 3(n). It was asserted that the petitioners were really not the managing contractors but wrongly described as such in the agreement. A bare • perusal of the agreement would, however, be destructive of the argument. It is a document drawn consisting of 46 clauses defining the mutual rights and obligations of the parties. The petitioners were conferred all the rights to work the mine for winning, getting and raising coal. The so-called 'remuneration' payable to them was virtually the price of coal supplied leaving tQ the owners a margin of profit. Even the liability for payment of rent, royalty, taxes etc. , in relatio~ to the mine was saddled on the petitioners. In view of these terms, they cannot be heard to say that they were not the managing contractors though they have been so described in the preamble to the agreement and in each and every clause thereof. It is, however.

asserted that the functions of a managing contractor, namely, appointment of managers, were not entrusted 'to the petitioners but were actually assigned to Messrs Madhusudan & Co. under a separate agreement. The submission is spelled out from the terms of cl. 11 relating to employment of workers of the colliery. All that was done was that the erstwhile owners had by this clause reserved to themselves the power to appoint managers. Such reservation does not take the petitioners out of the definition of managing contractor under s. 3(i) of the Nationalisation Act, as they still had substantial c011trol over the mine. The plea that not they but someone else was the managing contractor is only an after thought. The petitioners having bbund themselves by the terms of the agreement, cannot be permitted to escape from the provisions· of sub-s. (1) of s. 4, as they come within the purview of the definition of 'owner' in s. 3(n) of the Nationalisation Act.

It is then argued, in the alternative, that the term 'owner' as defined in s. 3(n) of the Nationalisation Act read with s. 2(1) of the Mines Act, . 1952 does not in any event, include a raising contractor. It is not suggested that a raising contractor does not come within the description of a contractor in s. 2(1), but it is urged that the word 'includes' is not there. There was no need for Parliament to insert the word 'includes' because of the words 'as if he were'. Although the term 'owner' in common parlance, in its usual sense, connotes ownership of a mine, the term has to be understood in the legal sense. as defined. INDUST! UAL SUPPLIES v. UNION (Sen, J. ) 387 Parliament, with due deliberation, in s. 3{n) adopted by incorporation the enlarged definition of owner in s. 2(1) of the Mines Act, 1952 to' make the Nationalisation Act all embracing and fully effective.

The definition is wide enough to include three categories of persons: (i) in relation to a mine, the person who is the immediate proprietor or a Uessee or occupier of mine or any part thereof, (ii) in the case' of a mine the business whereof is. carried on by a,liquidator or a receiver, such liquidator or receiver, and (iii) in the case of a mine owned by · a company, the business whereof is carried on by a managing agent. such managing agent. Each is a separate and distinct category of persons and the concept of ownership does not. come in. Then come the crucial last words : "but. any contractor for the working of a mine or any part thereof shall be sub11ect to this Act in like manner as if he were an owner, but not so as to exempt the . owner from any . liability". The insertion of this clause is to make both the owner as well as the contractor equally liable for the due observance of the Act.

It is needless to stress that the Mines Act, 1952 contains various provisions for the safety of the mines and the persons employed therein. In the case of a mine, the working whereof is being carried on by a raising contractor, he is primariiy responsible to comply with the provisions of the Act. Though a contractor for the working of a mine or any part thereof is not an owner, he shall be subject to the provisions of the Act; in the like manner 'as if he were an owner' but not so as to exempt the owner from any liability. It is now axiomatic . that when a legal fiction is incorporated in a statute, the Court has to ascertain for what purpose the fiction is created. After ascertaining tlie purpose, full effect must be given to the statutory fiction and it should be carried to its logical conclusion. The Court has to assume all the facts and consequences which are incidental or inevitable corollaries 'lo giving effect to the fiction.

The legal effect of the words "as if he were" in the definition of owner in s. 3(n) of the Nationalisation Act read with s. 2(1) of the Mines Act is that although thei petitioners were not the owners, they being the contractors. for the working of the mine in question, were to be treated as such though, in fact, they were not so. The oft-quoted passage in the judgment of Lord Asquith in East End Dwelling Co. Ltii. v. Finebury Borough Council(1) brings out the legal effect of a legal fiction in these words : "If you are bidden ·to treat an imaginary state of affairs as real, you must 'surely, unless prohibited from doing so, also imagine as real the consequence and incidents wliich, if the puta- · tive state of affairs had in fact existed, must inevitably have (I) L. R. [1952] A. C. 109, p. 132. 388· SUPREME' COURT REPOll. TS [1981] 1 S. C. R. flowed from or accompanied it. ".. .. .

The statute says that you must imagine a certain state of affairs ; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. " The whole object and purpose of the Nationalisation Act is to expropriate private ownership of coking coal mines and all interests created therein. it provides by sub-s. (1) of s. 4 that on the appointed day, the right, title and interest of the owners in relation to the coking coal mines specified in the First Schedule shall· stand transferred to, and shall vest absolutely in the Central G. ovemment, free from all incumbrances. Now unless the tenn 'owner' in sub-s. (1) of s. 4 is given an extended meaning so as to include a contract~r for the working of a mine or any part thereof, the very object of the legisla· tion would be frustrated. It has to be presumed that Parliament was fully aware' of . the normal pattern of working of all the coal mines, Le.

, by employment of raising contractors. Any other construction would lead to a manifest absurdity and attribute to Parliament a result which it never intended. It would result in the contractors escaping from the consequences of vesting under sub-s. (1) of s. 4 of the Act and pennit them to dismantle and remove the additional machinery, plants and equipment. which were being utilised for the working of niines. This brings us to the next question, namely whether the amount of Rs. 4,50,000 receivable by the petitioners from the erstwhile Coal Board, was an amount impressed with a trust; being advanced for a specific purpose, i. e. , for the purpose of stowing and other safety operations and conservation of coal mines, and could no. t be regarded F. as "any money due to the coking coal mines" within sub-s. (3) of s. 22 of the Act and the Central Government, therefore, could not appropriate the amount of subsidy and utilize it under sub-s.

(4) thereof for meeting the liabilities of the coking coal mines. The conclusion of the High Court upon this point is contained in the following passage: "The amount of subsidy due could not be current assets of the coking coal mine because it had to be utilised for a certain definite specified purpose. In the instant case cost of stowing and other safety operations had already been' incurred and the. subsidy was by way of reimbursement. The amount was already identified as belonging to the petitioner and is on the analogy or in the nature of trust money impressed with a specific purpose. " ! J:n reaching that conclusion, it relied upon the decisions in Barclays 1 Bank Ltd. v. Quistclose Investments Ltd. ( ) and Coal Products Private Ltd. v. I. T. 0. ,(2) which are both distinguishable.

They enunciate the ]principle that when property is entrusted for specific purpose, it is ·clothed with a trust It seems somewhat illogical that the equitable doctrine of resulting trust should be' brought into play in the construciion of the provisions of a legislation dealing with nationalisation like 1he Coking Coal Mines (Nationalisation) Act, 1972. Iri Barclays Bank Ltd. v. Quistclose lnvestinents Ltd. , the House of Lords dealt with a ·question as to rights of set off following the liquidation of a company. The principle was applied to a sum of money lent to a company (later ' . vound up) for a specific purp tioners, it is not disputed that the bills for the subsidy were for, the (I) L. R. [1970] A. C. 567. (2) (1972) 85 ITR 347. cost of stowing and connected safety operations and of hard mining. operations which, the petitioners had already prior to October 17, 1971. at their own cost, carried out.

If that be so, the inevitable conclusion is that the amount of subsidy in question was like any other amount due to the coking coal mine, prior to the appointed day, and therefore, did not fall outside the purview of sub-s. (3) of s. 22. The payment in question was not by way of 'assistance' receivable from the erstwhile Coal Board for carrying out of stowing and other safety operations and conservation of the coal mines. In the present case, the petitioners cin their own showing had already carried out sand stowing and hard mining operations and had admittedly applied for subsidy by way of reimbursement. The payment of Rs. 4,50,000• was, therefore, one to reimburse for the expenditure already under- ·~. taken. Indubitably, the amount in dispute was payable 'by way of reimbursement'. The petitioners were, therefore, free to utilise the money in any manner they liked. · In other words, the grant was not impressed with any particular purpose or purposes.

Even if the subsidy receivable from the erstwhile Coal Board was by way of 'assistance', the amount of Rs. 4,50,000 was recoverable by the Central Government in whom the coking coal mines have vested ,under sub-s. (1) of s. 4 of the Nationalisation Act and not by the petitioners. It is, however, needless to stress that if the grant were by way of 'assistance' under r. 49 of the Coal Mines (Conservation and Safety} Rules, 1952, the grant being conditional, the Central Government would in that event, be bound to comply with the requirements of r. 54 and apply the same 'for the purposes for which it was granted viz. , for the purposes of stowing or other safety operations and conservation of coal mines. F- For these reasons, the judgment of the High Court partly allowing the claim of the petitioners with regard to the subsidy amount of Rs. 4,50,000 is set aside, and the writ · petition is dismissed.

Accordingly, the appeal of the Union of India is allowed and that of the Industrial Supplies Pvt. Ltd. , is dismissed with costs throughout. Civil Appeal No. 815 /78 ·dismissed, and CivVZ Appeal No. 1284/7& S. R. a/lowed.