RAOJIBHAI JIVABHAI PATEL AND ORS. ETC. ETC. v. STATE OF GUJARAT AND ORS. ETC. ETC

Citation: [1989] SUPP. 2 S.C.R. 406

Court: Supreme Court of India

Bench: E.S. VENKATARAMIAH, K.N. SINGH, N.M. KASLIWAL

Case summary

The Act has made provision with regad to the issue of prospecting licences and mining leases in respect of various kinds of minerals other than minor minerals and the procedure to be followed in that connection in the matter of issue of prospecting licences and mining leases....

Judgment text

The Judgment of the Court was delivered by VENKATARAMIAH, CJ. The petitioners in these petitions have questioned the validity of a notification issued by the Government of Gujarat on June 26, 1985 in exercise of its powers conferred by Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957 (67 of 1957), hereinafter referred to as the Act, amending the Gujarat Minor Mineral Rules 1966, hereinafter referred to as the Rules, with effect from 1-7-1985 substituting the original rule 21 of the Rules by a new rule which reads as follows: "2 l. Rate of Royality: The holder of a quarry lease or any other mineral concession granted under these rules shall pay royalty in respect of minor minerals, specified in ~olumn 2 of the schedule, removed or consumed by him or by his agent, manager, employee, contractor or sub lessee from the leased area at the rates respectively specified against them in column 3 of the said schedule.

Provided that: (i) the holder of a Parwana granted under these rules shall pay royalty at the rate of fifty percent of the rate of royalty specified in the said schedule. (ii) no royalty shall be charged from Nimbhadas of village potters who manufacture upto one lakh bricks per year. (iii) no royalty shall be charged from Nimbhadas of village potters if their annual production is not exceeding two lakhs bricks and they supply at least one lakh bricks to the Rural Housing Board or Panchayats. (iv) Royalty shall be recoverable in whole rupees, fraction fifty paise and above to be rounded upwards to a whole rupee and fraction below fifty paise shall be ignore nable restrictions on the freedom of trade, commerce or inter- Cllurse with or within that State as required in the public interest. Provided that no Bill or amendment for the purpose of sub-clause (b) shall be introduced or moved in the legislature of a State without the previous sanction of the president.

We do not find that clause (b) of Article 304 has any relevance on the point in question. No restriction is being imposed on the freedom of trade of the petitioners by the levy of royalty. The minerals belong to the Government and if anybody wants to have the right as a lessee to exploit the mines in question to the exclusion of all others and to remove the minerals with a . view to making profit, he has to pay a royalty imposed in accordance with law. In the instant case the levy is made under a law made by the Central Government. It is not an imposition made by a law made by the State Legislature on which alone the restriction contemplated under Article 304(b) applies. We do not also find much substance in the contention that the levy in question is unreasonably heavy and has been imposed in an arbitrary manner. The burden of establishing that the levy is unreasonably heavy, is on the petitioners. It is urged that in the other States the royalty -is being levied at the rate of Re.

1 per metric tonne of Black Trap and Hard Murrum and Rs. 7 levied in the notification is excessive. The fact th_at i_n other States the royalty is fixed at Re.! is not by itself sufficient to hold that Rs. 7 per metric tonne is unreasonably high rate of royalty. In Trivedi's case (supra) this Court had upheld the levy of Rs . 4 per metric tonne which had been fixed in 1981 and in 1985 1t was increased to Rs. 7. Having regard to the depreciation in the value of R. J. PATEL v. STATE OF GUJARAT [VENKATARAMIAH, CJ. I 413 the rupee and the increase in the cost of administration of the State, which ·is ever increasing, as a welfare State we cannot say that Rs. 7 is an unreasonably high rate.

We have taken this view after going through the observations made by this Court in Trivedi's case (supra) at page 544 where this Court has observed that where a statute confers discretionary powers upon the executive or an administrative authority, the validity or constitutinality of such power cannot be judged on the assumption that the executive or such authority will act in an arbitrary manner in the exercise of the discretion conferred upon it. If the executive or the administrative authority acts in an arbitrary manner, its action would be bad in law and liable to be struck down by the courts but the possibility of abuse of_power or arbitrary exercise of power cannot invalidate the statute conferring the power or the power which has been c9nferred by it. We do not find that the levy is arbitrarily imposed.

It is obvious that the petitioners are lessees who are exploiting the mining areas for purposes of business and that the royalty in question is ultimately passed on to the consumers. It is not shown that the business . of the petitioners has been adversely affected in such a way that it is liable to be struck down on the ground of arbitrariness. We do not, therefore, find any substance in the contention urged by Shri Nariman. In Civil Writ Petition No. 618 of 1987 filed by Jai Sholanath Quarry Works and another, Mr. Keswani, learned counsel for the petitioners contended that the impugned rule 21 which was substituted in the place of the former rule 21 was invalid as it was discriminatory in character. He contended that the concession shown in favour of Parwana holders was discriminatory and violative of Article 14..

Under - clause 1of the proviso to the impugned rule 21, a holder of a Parwana gr~nted under the Rules has to pay royalty at the fate of 50 per cent of the royalty payable by the lessees and no royalty is payable by village · potters who manufacture upto one lakh bricks per year and by the village potters whose annual production was not exceeding two lakh bricks and who supply at . least one lakh bricks to the Rural Housing Board or Panchayats. His contention was that section 15 of the Act which authorised the State Government to make rules in respect ·of minor minerals does not specifically authorise the State Government to make such discrimination. We find no substance in this contention too. It is obvious that a valid classification of persons and things for purposes of imposing any obligation on them would not be violative of Article 14 provided the classification is a reasonable one.

It is well settled that a classification to be valid has to satisfy two conditions: ( 1) that there is an intelligible differentia between those who are included in the class which is affected by any law or rule and those who are placed outside the said rule; and (2) that there is a reasonable nexus between the classification and the object to be achieved by the rule or law in question. The Act under the Rules was made for purposes of regulation and development and conservation of minerals. It is equally clear that while levying a tax the authority concerned is entitled to grant concessions and exemptions wherever necessary having regard to the purpose of the Act, the levy of royalty is incidental to the regulation and 'development of minerals. Many a time absence of such classification may itself result in the invalidation of the law or rule.

Whoever is given an exclusive right to exploit a mine will have to pay some amount by way of return to the Government of India as authorised by entry 50 of List II of the 7th·Schedule to the Constitution. Having regard to the broad policy underlying the Constitution if a concession is shown in favour of the poor and the down-trodden, it cannot be said that the exemption or concession is invalid. According to rule 2(vi)(a) of the Rules a "quarrying Parwana" means a quarrying Parwana granted under these rules to extract and remove any minor mineral from land not exceeding a specified area. Rule 33-A provides that the competent officer may notify areas of limestone, Black Trap, sand stone and building stones for the purpose of grant of quarrying plirawana, as he deems fit. When any area is so notified, no quarry lease shall be granted for such notified area. Rule 33-B of the Rules reads thus: - "33. B.

-Grant of quarrying Parwana-On an application made to the competent officer, he may grant a quarrying Parwana to extraet and remove from the specified area within his jurisdiction the minor mineral from a plot not exceeding 2,000 square meters, as may be specified by the competent officer. The competent officer may grant such Parwana in the following priorities: (a) Individual families to Khanias belonging to the Scheduled Castes or the Scheduled Tribes, who do physical work of excavating minor mineral in the area applied for. (b) Individual faniiHes of 'Khanias' who do physical work in excavating minor minerals in the area applied for. (c) New individual Khanias who do physical work in excavating minor minerals in any other areas. " Rule 33-C provides that the lease shall be. granted for one year ending 3lst December on a payment of a fee of Rs. 50 for an area! upto 1,000 square meters and Rs. 100 fo an area above 1,000·square meters and upto 2,000 square meters.

Thus it is seen that a Parwana can be given only respect of plots not exceeding 2,000 square meters and for a limited period of one year. It is only in the case of such people who are described in the Rules and who invariably belbng to the weaker sections of society the concession is shown under 'rule 21, whereas the mining lease may be given to persons mentioned in rule 9. Under rule 18 of the Rules the period of lease in the cass of the minor minerals can be for a much longer period, it can be upto 10 years in respect of minor minerals except in the case of ordinary sand, Kankar, Murram, Gravel and in the case of Kankar, Murram and gravel a lease can be granted ,upto three years, and the area or land covered by a mining lease is governed by rule 15 which says that no quarry lease shall be granted for an area exceei:fing JO hectares in case of specified minor mineral and 20 hectares in the case of other minerals.

So a comparison of the relevant rules would show that a larger restriction is imposed both on the area in respect of which a Parwana could be issued and the duration of th~ Parwana right and as also stated that the persons who take quarrying Parwana are persons belonging to the weaker sections of society and if under rule 21 a concession is shown in their favour it ·cannot be said that there is no reasonable nexus between the classification for purposes of the proviso to rule·21 to show concession in the matter of payment of royalty and the social policy underlying the Constitution, the statute and the Rules. The fact that section 15 of the Act does no authorise the State Government. to show such concession while promulgating the Rules which are in the nature of subordinate legislation is also of no consequence. Since the power exercised is Jegislative in character the authority which is exercising the said power has the power to make rules equitable. by necessary implication.

No express power need to conferred on such subordinate authority in order to make a classification for purposes of implementing the policy of the Act under which the Rules are made. We do not also agree with the contention that levying of royalty in the State of Gujarat on the minor minerals would impose in any way • ~ the freedom guaranteed under Article 301 of the Constitution regarding movement of goods frnm one State to another for the activity of quarrying does not involve any movement as such. The mineral may be consumed inside the State and in some cases may latter on be taken outside the State. But the movement outside the State is not the direct consequence of quarrying. B We do not, therefore, find any substance in any of the contentions urged before us. These petitions are dismissed with costs. Each of the petitioners shall pay a sum of Rs. 2,000 by way of costs to the State of Gujarat. c Y. Lal Petitions dismissed.