DALMIA CEMENT (BHARAT) LTD. versus STATE OF TAMIL NADU & ANOTHER

15. From the contents of the said documents, it appears that Dalmia Cement applied for a mining lease over a huge 4. Footnote G.O.Ms. No. 903 dated 25th February, 1966 – ORDER – Dalmia Cement (Bharat) limited, Dalmiapuram have applied for the grant of mining lease for magnasite over an extent of 1386.36 acres in Cheltichavadi Jaghir Village, Salem Taluk, Salem District, for a period of 20 years. · Out -of the total extent of 1386.36 acres, applied for an extent 493.26 acres is covered by the lease deed dated 10.11.1945 for which modification proposals are pending with the controller mining leases for India so as to bring it in conformity with other provisions of the Mines and Minerals (Regulation and Development) Act, 1957 and the Rules framed there under. As regards the remaining extent of 893.1 acres, the applicant Company are carrying on. mining operations in these land by virtue of the temporary permission granted to them in accordance with ihe procedure prescribed in this Government's proceedings No. 5303 development dated 28.12.1950. Consequent on the coming in to force of the Mineral Coneession Rules, 1960 containing M.O.D. provisions for the grant of Minerals Concessions in ryotwari and other intermediary tenure lands, the applicant have also applied for regularization of the permission already granted following the procedures prescribed in the said Rules. As the entire lnam estate of Chettichavadi Jaghir has been taken over by the Government under the Madras lnam Estates (Abolition and Conversion into Ryotwari) Act, 1963 (Madras Act 26of1963), this Government have decided to grant the mining lease applied for by the Company treating the lands as Government lands …. DALMIA CEMENT (BHARAT) LTD. v. STATE OF TAMIL NADU [J. CHELAMESWAR, J.] extent of land of which a part i.e. 493.26 acres was covered by an existing lease deed dated 10.11.1945. In the circumstances, the assertion of -Oalmia Cement in the writ petition, that it was a ryotwari pattadar of an extent of 355 acres becomes incomprehensible.

16. The expression "ryotwari pattadar" acquired a definite legal connotation in the erstwhile province of Madras in British India where two parallel systems of revenue administration were in vogue. They were known as (1) the zamindari, and (2) the ryotwari systems. The zamindari system came to be initially introduced by Lord Cornwalis in the province of Bengal. In the year 1799, the East India Company ordered that the zamindari system designed by Cornwalis be adopted even in the Madras Presidency. Though such a system was initially introduced in some parts of the Madras Presidency, in 1806 Lord William Bentick, the then Governor of Madras recorded a minute that , "creation of zamindaris where none existed before was neither calculated to improve the condition of the lower classes of people nor politically wise with reference to the future security of the Government". Eventually, in 1813, the Court of Directors of East India Company prohibited introduction of zamindari system any further5.

17. In 1812, the Court of Directors of the East India Company ordered that the ryotwari system should be introduced in all the provinces where the settlement had not-ye! been finalised. The difference between the zamindari and~­ ryotwari systems is very succinctly described by Sundararaja Iyengar at page 153. "The distinguishing feature of this system is that the state is brought into direct contact with the owner of land and collects its revenue through its own servants without the 5. Footnote For detailed history of the zamindari system. see Land Tenures in the Madras Presidency by S. Sundararaja Iyengar, Second Edition, Chapter IV. intervention of an intermediate agent such as the zamindar or farmer, and its object is the creation of peasant proprietors. All the income derived from extended cultivation goes to the state."

18. Therefore, the expression ryotwari pattadar was understood to be a person holding a patta in the erstwhile province of Madras under the system of ryotwari settlement. Though a person/tenant cultivating land under the zamindari system is also called a ryot and in some cases even the zamindar issued certain documents called pattas in favour of C such ryots, those pattas can never be equated by pattas issued by East India Company or its successor governments. Because, though the Zamindar/land holder of a permanently settled estate held not only the surface but also the subsoil of the estate, whether the tenant held any subsoil rights in a given D case depended upon the terms on which the Zamindar granted the tenancy. Such a possibility is recognised under Section 16 of the Mines and Minerals (Development and Regulation) Act, 1957 which says – "Where the rights under any mining lease granted by the proprietor of an estate or tenure before the E commencement of the Mines and Minerals (Regulation and Development) Amendment Act, 1972 …… ". Similarly, in lnam estates whether the lnamdar held the subsoil rights depended upon the terms on which the lnam was originally granted. [See State of Andhra Pradesh vs. Duvurru Balaram Reddy AIR 1963 F SC 64].

19. Consequent upon the abolition of estates and lnams in the State of Madras (present Tamil Nadu), by the statutes called (1) The Estates (Abolition and Conversion into Ryotwari) Act, 1948 (Act 26 of 1948) and (2) The Tamil Nadu lnam Estates (Abolition & Conversion into Ryotwari) Act (Tamil Nadu Act XXVI of 1963), all the estates or inams, as the case may be, stood transferred and vested in the State in their entirety. Both the enactments declare DALMIA CEMENT (BHARAT) LTD. v. STATE OF TAMIL NADU [J. CHELAMESWAR, J.] that such transfer includes "mines and minerals"6 amongst others. However, on such vesting the State is obligated under both the enactments to recognise the right of the cultivating tenant under the estate holder or lnamdar, as the case may be, for the grant of "RYOTWARI PATTA"7 after an appropriate statutory enquiry.

20. Going by the recitals of G.O.Ms. No. 903, the entire extent of land with reference to which an application was made by Dalmia Cement is part of Chettichavadi Jaghir Village. By virtue of Section 3(b)6 of the Madras lnam Estates (Abolition 6. Footnote Sec. 3(b) of the Estates (Abolition & Concession) Act, 1948 – the entire estate (including minor imams (Post-settlement of pre-settlement) included in the assets of the zamindari estate at the permanent settlement of that estate; all communal lands and porambokes; other non-ryoti lands; waste lands; pasture lands; Lanka lands; forests; mines and minerals; quarries; rivers and streams; tanks and irrigation works; fisheries; and ferries, shall stand transferred to the Government and vest in them, free of all encumbrances; and the Andhra Pradesh (Andhra Area) Revenue Recovery Act, 1864, the Andhra Pradesh (Andhra Area) Irrigation Cess Act, 1865 and all other enactments applicable to ryotwari areas shall apply to the estate; Also See Footnote 5 for the corresponding provision under the lnams Abolition Act, 7. Footnote Section 11. Lands in which ryot is entitled to ryotwari patta – Every ryot in an estate shall, with effect on and from the notified da\0 •. be entitled to a ryotwari patta in respect of – Section 10.(1) In the case of an existing inam estate every ry~t shall, with effect on and from the.notified date, be entitled to ryotwari patta in r~spect of – 8A. "Ryot" is defined under Section 3(15) of Estates Land Act'as a person who holds for the purpose of agriculture, ryot land in an estate on condition of paying to the landholder the rent which is legally! due upon it. The same definition for the purposes of both the Estates Abolition and lnam Abolition Acts, the definition of the expression "ryot" is the same as in the Estates Land Act, 1908 by virtue of Sections 2(1) and 2(16) of the said enactments respectively. 8. Footnote Sec. 3 (b) – the entire inam estate (including all communal lands and porambokers, other non-ryoti lands, waste lands, pasture lands, forests, mines and minerals, quarries, rivers and streams, tanks and ooranies (including private tanks and ooranies) and irrigation works, fisheries and ferries), shall stand transferred to the Government and vest in them, free of all encumbrances, and the Tamil Nadu Revenue Recovery Act, 1864 (Tamil Nadu Act II of 1864), the Tamil Nadu Irrigation Cess Act, 1865 (Tamil Nadu Act VII of 1865) and, all the reenactments applicable to ryotwari areas shall apply to the inam estate. c A and Cqnversion of Ryotwari) Act, 1963 (Act 26 of 1963) with effect from the notified date [a defined expression under Section 2(1 O)] the entire lnam estate including mines and minerals, quarries etc. stood transferred to the Government and vests in them free of all encumbrances.

21. Therefore, the assertion by Dalmia Cement that it is a ryotwari pattadar itself is a doubtful statement of fact. An enquiry whether such a pattadar is entitled to the sub-soil rights was wholly uncalled for as there is not even a single sentence in the C entire writ petition whereby Dalmia Cement asserted that the sub-soil rights vest in them.

22. No information regarding the number of leases held by Dalmia Cement, the relevant dates on which such leases were first granted or subsequently renewed (if renewed) is D available on the record. Nor the information w.r.t. the mineral which is covered by any one of those leases (if there is more than one 'lease) is available on the record. Therefore, it is not known whether the leases pertain to a 'mineral' or 'minor mineral'.

23. The only fact which appears from the record is that pursuant to a mining.Jease granted way back on 10.11.1945, Dalmia Cement has been carrying on mining operations in some parcel of land. In 1945, there was no statute in this country F regulating the activity of mining operations. It appears that there were certain executive instructions (we presume so in the absence of any specific material before us) called the Madras Mining Manual which governed mining operations in that part of the country known as the Madras province. Whether the said mining lease of 1945 was in fact a lease as defined under the G Transfer of Property Act or was a permission granted by the State to carry on mining activity in exercise of its executive authority under the Government of India Act, 1935 requires examination, on an appropriate pleading. An inquiry into such matters is not really called for in the absence of any specific H pleading or issue. DALMIA CEMENT (BHARAT) LTD. v. STATE OF TAMIL NADU [J. CHELAMESWAR, J.]

24. Be that as it may. Subsequent to 1945, an enactment known as Mines and Minerals (Regulation and Development) Act, .1948 came into existence.

25. Section 4 of the said Act declares that after the commencement of the said Act, no mining lease shall be granted otherwise than in accordance with the rules made under the Act and any lease granted contrary would be void.

26. Sections 5 and 6 empower the Central Government to make rules for regularising various aspects of the mining activities. The details are not necessary for the purpose of the present adjudication.

27. Section 79 authorises the Government of India to make rules for the purpose of modifying or altering the terms and conditions of any mining lease granted prior to the commencement of the said Act in order to bring such existing leases in conformity with the rules made under Sections 5 and 6. 9. Footnote 7. Power to make rules for modification of existing leases – (1) The Central Government may, by notification in the official Gazette, m~ke rules for the purpose of modifying or altering the terms and conditions of any mining lease granted prior to the commencement of this Act so as to bring such lease into conformity wiih the rules made under sections 5 and 6• Provided that any rules so made which provide for the matters mentioned in clause (c) of sub-section (2) shall not come into force until they have been approved, either with or without modifications, by the Central Legislature. (2) The rules made under sub-section (1) shall provide – (a) for giving previous notice of the modification or alteration proposed to c be made thereunder to the leases, and where the lessor is not the Central Government, also to the lessor and for affording them an opportunity of snowing cause against the proposal; (b) for the payment of compensation by the party who would be benefited by the proposed modification or alteration to the 1· 3rty whose rights under the existing lease would thereby be adversely affected; and (c) for the principles on which, the manner in which and the authority by which the said compensation shall be determined. 28. The said Act was repealed by the Mines and Minerals (Development and Regulation) Act, 1957, Act No.67 of 1957 (hereinafter referred to as "the 1957 Act"). Though the 1948 Act did not make any classification of the minerals, the 1957 Act creates such classification. The expression 'minor mineral' B is defined under Section 3(e)10 .The expression 'mineral' itself is defined in inclusive terms under Section 3(a) 11 . Therefore, under the 1957 Act there are MINERALS and MINOR MINERALS. 29. Section 1412 of the 1957 Act declares that Sections 5 C to 13 (both inclusive) do not apply to minor minerals. 30. Section 4 of the Act prohibits undertaking of any reconnaissance, prospecting or mining activities (of either class of minerals) except under and in accordance with the D terms and conditions of a reconnaissance permit or prospecting licence of a lease granted under the Act and the rules made thereunder'3. 31. Section 9 14 of the Act declares that notwithstanding 10. Footnote 3(e) "minor minerals" means building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral which the Central Government may, by notification in the Official Gazette, declare to be a minor mineral. 11. Footnote 3(a) "minerals" includes all minerals except mineral oils; 12. Footnote 14. Sections 5 to 13 not to apply to minor minerals – The provisions of sections 5 to 13 (inclusive) shall not apply to quarry leases, mining leases or other mineral concessions in respect of minor minerals. 13. Footnote 4. Prospecting or mining operations to be under licence or lease- (1) No person shall undertake any reconnaissance, prospecting or mining operations in any area, except under and in accordance with the terms and conditions of a reconnaissance permit or of a prospecting liocence or, as the case may be, of a mining lease, granted under this Act and the rules made thereunder. 14. Footnote 9. Royalties in respect of mining leases – (1) The holder of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in the instrument of lease or in any ~" in force at such commencement, pay royalty in respect of any mineral DALMIA CEMENT (BHARAT) LTD. v. STATE OF TAMIL NADU [J. CHELAMESWAR, J.] anything contained in the instrument of lease granted or in any A law in force, prior to the commencement of the 1957 Act, the holder of a mining lease granted either prior to or after the commencement of the Act shall pay royalty from the date of the commencement of the Act at the rates specified in the Second Schedule in respect of that mineral. 32. Section 1315 of the Act authorises the Government of India "to make rules for regulating the grant of reconnaissance permits, prospecting licences and mining leases in respect of minerals and for purposes connected therewith". Obviously, such rules are with reference to minerals other than the minor minerals. Insofar as minor minerals are concerned, Section 1516 removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area after such commencement, at the rate for the time being specified in the Second Schedule in respect of that mineral. (2) The holder of a mining lease granted on or after the commencement of this Act shall pay royalty in respect of any mineral removed or consumed by him or by his agent. manager, employee, contractor or sub-lessee from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral. 15. Footnote 13. Power of Central Government to make rules in respect of minerals – (1) The Central Government may, by notification in the Official Gazette, make rules for regulating the grant of reconnaissance permits, prospecting licences and mining leases] in respect of minerals and for purposes connected therewith. (2) In particular, and without prejudice to the generality of the foregoing power. such rules may provide for all or any of the following matters, namely:- (a) the person by whom, and the manner in which, applications for reconnaissance permits, prospecting liCences or mining leases in respect of land in which the minerals vest in the Government may be made and the fees to be paid therefor; ************ ************** ******""**"'*** (qq) the manner in which rehabilitation of flora and other vegetation, such as trees, shrubs and the like destroyed by reason of any prospecting or mining operations shall be made in the same area or in any other area selected by the Central Government (whether by way of reimbursement of the cost of rehabilitation or otherwise) by the person holding the prospecting licence or mining lease; and A of the Act authorises the State Government to make appropriate rules regulating the grant of leases, fixing of rents, royalty, fees etc with respect to minor minerals and various other connected and incidental matters. 33. Section 16 of the Act, as originally enacted, read as follows: '"16. Power to modify mining leases granted before 25th October, 1949 – (1) All mining leases granted before the 25th day of October, 1949, shall, as soon as may be after the commencement of this Act, be brought into conformity with the provisions of this Act and the rules made under sections 13 and 15." It can be seen from the language of Section 16 that it is 0 mandatory that all mining leases (irrespective of the fact whether such a lease is w.r.t. a 'mineral' or 'minor mineral' as classified under the 1957 Act) granted before the 25th day of October, 1949 be brought into conformity with provisions of the 1957 Act and the rules made under Sections 13 and 15. 34. In exercise of powers conferred under Section 13, Government of India made rules known as Mineral Concession Rules, 1960. Chapter IV of the said rules deals with the procedure for grant and regulation of the mining leases in respect of the land in which the minerals vest in the F Government. Chapter V of the said rules deals with the procedure for obtaining a prospecting licence or mining lease in respect of land in which the minerals vest in a person other (r) any other matter which is to be, or may be, prescribed under this Act. Footnote 15. Power of State Governments to make rules in respect of minor minerals – (1) The State Government may, by notification in the Official Gazette, make rules for regulating the grant of quar,Y leases, mining leases or other mineral concessions in respect of minor minerals and for purposes connected therewith. (1A) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:- DALMIA CEMENT (BHARAT) LTD. v. STATE OF TAMIL NADU [J. CHELAMESWAR, J.] than the Government. Chapter VI of the said rules deals with the mining leases in respect of land in which the minerals vest partly in the Government and partly in private person. The rules deal with various classes of the lands covered by the abovementioned three chapters and provide for different procedures for securing the grant of a mining lease and regulatory measures for working of such mines and allied matters. But none of the rules provide for collection of royalty at a concessional rate in the case of the lands where the minerals vest in a person other than the Government. In any event, our attention has not been drawn to any such rule. 35. No Rule framed by the State of Tamil Nadu (in case any of the mining leases of the appellants herein pertains to minor minerals) authorising the State to collect royalty at a concessional rate w.r.t. a mining lease granted in favour of a "ryotwari pattadar" of the land, is brought to our notice. Nor is there any specific pleading in that regard. 36. Even if we assume for the sake of argument that the Cement companies are pattadars (or the successor in interest of such pattadars) either under the original ryotwari system or the holders of the 'ryotwari patta' pursuant to the abolition of estates/imams, and also assume for the sake of argument that each of the appellant companies is also the owners of the subsoil rights of their patta lands as, in our opinion, such OWNERSHIP does not make any difference insofar as the authority of the State to collect royalty. It may be remembered that even w.r.t. the original ryotwari patta lands where admittedly c the mineral vested in the pattadar, the State had asserted (in BSO 1 O dated 19.03.1888, which was extracted by us in Thressiamma Jacob fl, Ors. Vs. Geologist17, Department of Mining and Geology and Ors. , and we extract it again), its authority to collect "a share in the produce of the minerals worked commuted into money payment" – which eventually acquired the nomenclature Royalty- 17. Footnote (2013) 9 SCC 725. RESOLUTION – dated 19th March 1888, No. 277. c In supersession of the existing Standing Order, the following is issued as Standing Order No. 10 :- 1. The State lays no claim to minerals – G.O. 26th May, 1882, No. 511 (Notification, paragraph 1 ). (a) In estates held on sanads of permanent settlement G.O. 28th October 1882 No.1181 (b) In enfranchised inam lands G.O. 28th April 1881 No.861 (c) In religious service tenements confirmed under the inam rules on perpetual service tenure. d) In lands held on title – deeds, issued under the waste land rules, prior to 7th October, 1870, in which no reservation of the right of the State to minerals is made. 2. The right of the State in minerals is limited in the following cases to a share in the produce of the minerals worked, commuted into a money payment, if thought necessary, by Government, in like manner with and in addition to the land assessment :- G.O. 8th October 1883 No.1248. (a) In lands occupied fm agricultural purposes . under ryotwari pattas G.O. 23rd January 1881 No.121 (b) In janmom lands in Malabar DALMIA CEMENT (BHARAT) LTD. v. STATE OF TAMIL NADU [J. CHELAMESWAR, J.) G.O. 16th December 1881 No.1384 Persons intending to work minerals in those lands should give notice of their intention to the Collector of the district, specifying the lands in which they intend to carry on mining operation and should pay in two half-yearly instalments a special assessment for minerals in addition to the land assessment at the following rates:- Per acre (Rs.) 1. For mining for gold c 2. For mining for metals other than gold 3. For mining for diamonds and other precious stones 4. For mining for coal, lime-stone or quarrying for building stone … (Such rates as may be fixed by the Board from time to time The rates will be doubled if mining operations are carried on without giving notice to the Collector. Board's procedeings dated 10th July 1182 No. 1751. The special assessment will be entered in the patta granted for the land and collected under the provisions of Act II of 1834 Madras. No charge will be made for merely prospecting for minerals in patta lands if mines are not regularly worked. No remission"will be granted in respect of any land rendered unfit for surface cultivation by the carrying on of mining operations. This rule does not of course afeet in any way the . H right which all holders of lands on patta possess of digging wells in their lands and of disposing of the gravel and stones which may be thrown up in the course of such excavation. This Court had held that such authority flows from the sovereignty of the State-lmperium18. 37. There is nothing either in the Mines and Minerals (Development and Regulation) Act, 1957 or the Rules framed thereunder which entitles a ryotwari pattadar who secures a mining lease under the Act to pay royalty at a concessional rate. The question then is whether the State Government has a D discretion to collect royalty from any lessee at a concessional rate, other than the one prescribed under the Act in the absence of any specific provision under the Act and Rules conferring such discretion. An answer to the question depends upon the answer to the following questions: 18. Footnote We are of the clear opinion that the recitals in the patta or the Collector's standing order that the exploitation of mineral wealth in the patta land would attract additional tax, in our opinion, cannot in any way indicate the ownership of the State in the minerals. The power to tax is a necessary incident of sovereign authority (imperium) but not an incident of proprietary rights (dominium). Proprietary right is a compendium of rights consisting of various constituent, rights. If a person has only a share in the produce of some property, it can never be said that such property vests in such a person. In the instant case, the State asserted its 'right' to.demand a share in the 'produce of the minerals worked' though the expression employed is right – it is in fact the Sovereign authority which is asserted. From the language of the BSO No.10 it is clear that such right to demand the share could be exercised only when the pattadar or somebody claiming through the pattadar, extracts/works the minerals – the authority of the State to collect money on the happening of an event – such a demand is more in the nature of an excise duty/a tax. The assertion of authority to collect a duty or tax is in the realm of the sovereign authority, but not a proprietary right. [Para 51 of the judgment in Threesiamma Jacob & Ors. Vs. Geologist. Deptt. Of Mining & Geology & Ors., (2013) 9 SCC 725] DALMIA CEMENT (BHARAT) LTD. v. STATE OF 1. 2. 3. TAMIL NADU [J. CHELAMESWAR, J.] What is true legal character of a mining lease i.e. whether mining lease is a lease within the meaning of that expression as defined under the Transfer of Property Act or it is only a permission to carry an mining activity? Whether ownership of subsoil makes any difference to the determination of the above question? What is true legal character of the expression Royalty under the Mines and Minerals (Development and Regulation) Act, 1957, i.e., Whether it is a Tax or a consideration for a contract of mining lease? c 4. Whether the State has any discretion either under the provisions of the Mines and Minerals (Development and Regulation) Act, 1957 or under the Scheme of the Constitution to collect Royalty at rates lower than those prescribed under the Act and the Rules? 5. Whether the true character of Royalty makes any difference for the determination of Question No.4? 38. As already indicated, the pleadings in the writ petitions are hopelessly ambiguous, bald and imprecise to enable the Court to examine any one of the above-mentioned issues. In the normal course, we should have dismissed all these appeals on the ground of inadequate pleadings. But the third of the above-mentioned issues already stands referred to a larger Bench of this Court, arising out of appeals from other parts of the country. Dismissal of these appeals may eventually lead to asymmetric application of law; in a manner which is notuniform throughout the country thereby impacting the coherent and- uniform interpretation of the Constitution. We therefore deem · it appropriate to provide an opportunity to the appellants as well A as the State of Tamil Nadu to suitably amend the pleadings in the several writ petitions and place the complete facts necessary for the adjudication of the questions on hand. 39. We, therefore, call upon the appellants in these appeals to file affidavits disclosing the full facts necessary for 8 adjudication of the issues raised herP.inabo\te. Needless to say, it is open to the State of Tamil Nadu to file a counter affidavit to such further affidavits filed by the appellants, in case the State disputes anyone of the facts to be newly brought on record. c 40. The question "What is the true nature of royalty/dead rent payable to minerals produced/mined/extracted from mines" (alongwith certain other connected questions) was referred to a larger Bench by an order of this Court dated 30th March, 2011 o in Mineral Area Development Authority & Ors. Vs. Steel Authority of India & Ors., reported in (2011) 4 SCC 450. 41. We deem it appropriate that these appeals be tagged with Mineral Area Development Authority & Ors. Vs. Steel Authority of India & Ors., Clvil Appeal Nos. 4056-64 of 1999 E etc .. Ordered accordingly. Bibhuti Bhushan Bose Matter tagged with another set of appeals