So far as the appeal filed by the State of Rajasthan, viz. Civil Appeal No. 1494 of 2008 is concerned, it mainly challenges the impugned judgment on the ground that by virtue of methodology directed to be employed in the said judgment, the State would suffer substantial loss as the lessee company, viz. Hindustan Zinc Limited would be paying much less royalty than what it is supposed to pay. 3. On the other hand, an appeal has also been filed by Hindustan Zinc Limited as it has been aggrieved by the direction issued by the High Court, whereby the amount of royalty has been directed to be re-calculated.=The negligible contents of metal which remains in the mining area by way of tailings, slimes or rejects, which are returned to the mother earth cannot be said to be the part of metal content in the ore produced. “Dumped tailings or rejects may be liable to payment of royalty if only they are sold or consumed”.- whether the details given by the lease holder on the basis of which royalty is calculated is correct. Upon carefully going through the impugned judgment and the judgment delivered by the learned Single Judge of the High Court, we find that the courts below did not commit any mistake in arriving at the conclusion that the holder of the lease was not liable to pay the amount demanded under the impugned notices because, by virtue of Notification dated 12th September, 2000 read with the relevant Rules, the lease holder is supposed to pay royalty only on the contents of metal in ore produced and not on the metal contained in the tailings, rejects or slimes which had not been taken out of the leased area and which had been dumped into dumping ground of the leased area. For the afore-stated reasons, we do not find any substance in the appeal and therefore, the appeal is dismissed with no order as to costs. So far as the present appeal is concerned, it has been filed by Hindustan Zinc Limited as it has been aggrieved by the directions whereby the matter has been ordered to be remitted to the mining engineer for re-computing the royalty payable on lead and zinc contained in the ore produced. The submission on behalf of the appellant-company was to the effect that as the entire concentrate has been taken out of the leased area and as the quantity of concentrate of lead and zinc was very much known, it was not necessary to give such a direction because there is no question with regard to re-computation of royalty on the basis of metal contained in ore produced. We find substance in what has been submitted because the metal concentrate which had been taken out from the leased area is known to the parties and therefore, it is not necessary to have any further details regarding the ore produced by the appellantcompany. 40. We, therefore, quash the afore-stated direction and the appeal filed by the appellant-company is allowed to the above effect with no order as to costs.

Page 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1494 OF 2008
State of Rajasthan & Ors. .....APPELLANTS
 VERSUS
Hindustan Zinc Ltd. & Anr. ....RESPONDENTS
WITH
CIVIL APPEAL NO. 1526 OF 2008
J U D G M E N T
ANIL R. DAVE, J.
1. Being aggrieved by the judgment dated 6th July, 2007
delivered by the High Court of Rajasthan in D.B. Civil Special
Appeal No.43 of 2006, the afore-stated two appeals have been
filed. One appeal has been filed by the State of Rajasthan whereas
the other appeal has been filed by Hindustan Zinc Limited, who
1Page 2
had been leased land situated in districts Bhilwara, Rajsamand and
Udaipur by the State of Rajasthan for extraction of lead and zinc
therefrom.
2. As both the appeals arise from a common judgment, at the
request of the learned counsel, both the appeals were heard
together. So far as the appeal filed by the State of Rajasthan, viz.
Civil Appeal No. 1494 of 2008 is concerned, it mainly challenges
the impugned judgment on the ground that by virtue of
methodology directed to be employed in the said judgment, the
State would suffer substantial loss as the lessee company, viz.
Hindustan Zinc Limited would be paying much less royalty than
what it is supposed to pay.
3. On the other hand, an appeal has also been filed by
Hindustan Zinc Limited as it has been aggrieved by the direction
issued by the High Court, whereby the amount of royalty has been
directed to be re-calculated.
4. As Civil Appeal No. 1494 of 2008 filed by the State of
Rajasthan is the main appeal, we would like to deal with the said
2Page 3
appeal at the first instance and, thereafter we would deal with the
appeal filed by Hindustan Zinc Limited i.e. Civil Appeal No. 1526
of 2008.
Civil Appeal No. 1494 of 2008
5. The appellant-State and the State Authorities have been
aggrieved by the impugned order whereby the additional demand
raised under notice dated 24th December, 2001 and subsequent
notices issued by the State for recovery of royalty in respect of the
lead and zinc extracted by the respondent-company had been
quashed by the learned Single Judge of the Rajasthan High Court
and the order of the learned Single Judge was confirmed by the
Division Bench in the appeal filed before it. After hearing the
concerned learned advocates appearing for the State and the
respondent-company, the learned Single Judge had come to the
conclusion that the impugned notices, whereby additional amount
was demanded, were bad in law and therefore, the petition was
allowed and the impugned notices dated 22nd December, 2001, 24th
December, 2001 and 4th January, 2002 had been quashed. It may
3Page 4
also be stated here that the afore-stated notices had been
challenged by the respondent-company initially before the
revisional authority under the Mineral Concession Rules, 1960,
which had confirmed the validity of the said notices and therefore,
the order passed by the revisional authority dated 2nd July, 2003,
whereby the validity of the impugned notices had been upheld, was
also quashed and set aside.
6. The facts giving rise to the issue in question, in a nutshell, are
as under:
7. The respondent-company had been leased land in the areas of
District Bhilwara, Rajsamand and Udaipur for the purpose of
extracting lead and zinc therefrom under the provisions of Mines
and Minerals (Development and Regulation) Act, 1957 (hereinafter
referred to as ‘the Act’). Section 9 of the Act is the charging
section, which enables the State to recover royalty in respect of the
minerals extracted by the holder of a mining lease. The Mineral
Concession Rules, 1960 (hereinafter referred to as ‘the Rules’)
have been framed in exercise of the powers conferred under
4Page 5
Section 13 of the Act. Rules 64A, 64B, 64C & 64D of the Rules
are relevant Rules, which pertain to calculation of the amount of
royalty payable by the holder of the lease in respect of the minerals
extracted from the land leased to the holder of the mining lease.
8. From time to time, the Government had issued Notifications
determining the rate at which royalty was to be paid by the holder
of the lease in respect of the minerals extracted. In the instant
case, we are concerned with two minerals: lead and zinc. Two
Notifications are relevant for the purpose of determining the issue
involved in these appeals. Under Notification dated 11th April,
1997, by virtue of item nos. 22 and 41 incorporated in the said
Notification, royalty in respect of the afore-stated two minerals
was to be paid as under:
Item No. 22 4% of London metal exchange
Lead concentrate metal price on ad valorem basis
Chargeable per tonne of
concentrate produced.
Item No. 41 3.5% of London metal exchange
Zinc concentrate metal price on ad valorem basis
Chargeable per tonne of
concentrate produced.
5Page 6
9. Thereafter, by virtue of another Notification dated 12th
September, 2000, substituting the Notification dated 11th April,
1997, royalty in respect of the afore-stated two minerals was
payable as under:
Item No. 25 5% of London metal exchange
Lead lead metal price chargeable on
the contained lead metal in ore
produced.
Item No. 50 6.6% of London metal exchange
Zinc Zinc metal price on ad valorem
basis chargeable on contained
zinc metal in ore produced.
10. By virtue of the afore-stated Notification dated 12th
September, 2000, the manner in which the royalty was to be
calculated had been changed.
11. Formerly the royalty was to be charged on the basis of
mineral concentrate produced but by virtue of the Notification
dated 12th September, 2000, royalty is now to be charged on ad
valorem basis on the contents of metal found in the ore produced.
12. According to the appellant-State, the respondent-lease holder
was supposed to pay the royalty on the entire mineral extracted
6Page 7
from the earth and accordingly the impugned notices were issued
to the respondent for recovery of difference of royalty.
13. On the other hand, the case of the respondent-company was
that the royalty was chargeable only on the contents of lead and
zinc metal in the ore produced because, by virtue of the
Notification issued in 2000, the respondent-company was supposed
to pay royalty only on the contents of lead or zinc, as the case may
be, contained in the ore produced.
14. As stated hereinabove, the demand made by the appellantState under the impugned notices had been upheld by the
revisional authority but the same had been quashed by the High
Court when the order of the revisional authority was challenged
before the learned Single Judge of the High Court and the view of
the learned Single Judge had been upheld by virtue of the
impugned order passed by the Division Bench.
15. The learned counsel appearing for the appellant-State
submitted that the High Court committed an error in interpreting
provisions of the Rule 64A, 64B and 64C of the Rules read with
7Page 8
the Notification dated 12th September, 2000 issued by the Central
Government.
16. The sum and substance of the submissions made by the
learned senior counsel appearing for the appellant was that the
royalty ought to have been charged on the basis of the metal
contained in the ore produced so as to give effect to the provisions
of Section 9 and the Second Schedule to the Act read with Rules
64B, 64C and 64D of the Rules.
17. According to the learned counsel, the contention of the
respondent, that unless the ores are taken out of the leased
premises, the royalty would not be leviable, is not correct because
processing the ore would also amount to consumption of the ores
and therefore, even if the said ores are not physically taken out of
the leased area, the royalty will have to be paid on the contents of
lead and zinc contained in the ore.
18. He further submitted that the methodology approved by the
High Court would amount to re-writing the provisions with regard
to computation and calculation of royalty.
8Page 9
19. He further submitted that the amount of royalty demanded by
the appellant-State from the respondent-company was just and
proper and therefore, the order passed by the High Court be
quashed and set aside. So as to substantiate his submissions, he
relied upon the judgment delivered by this Court in State of
Orissa & Ors. v. M/s. Steel Authority of India Ltd. [(1998) 6
SCC 476].
20. On the other hand, the learned senior counsel appearing for
the respondent-company vehemently supported the reasons given
by the High Court whereby the High Court has held that the
respondent-company was not liable to pay royalty on the tailings as
they had not been taken out of the leased area. Relying upon the
judgment delivered in National Mineral Development
Corporation Limited v. State of Madhya Pradesh & Anr.
[(2004) 6 SCC 281], the High Court had further held that as per the
provisions of Rule 64C of the Rules, unless dumped tailings or
rejects are consumed by the lessee, no royalty can be collected on
such tailings or rejects.
9Page 10
21. The learned senior counsel appearing for the respondentcompany mainly submitted that the negligible contents of lead and
zinc contained in tailings, which is not taken out of the leased area
and which is dumped within the leased area, can never be taken
into account for the purpose of calculating royalty for the reason
that according to the Notification dated 12th September, 2000,
royalty is to be paid in respect of the metal contained in the ore
produced and the metal which has been left out by way of tailings
within the leased area would never be treated as metal in the ore
produced.
22. According to him, the negligible metal contained in the
tailings, slimes or the rejects can never be the subject matter of
calculation of royalty as that portion of metal was returned to the
mother earth by dumping the same in the leased area without being
taken out of the leased area and that can not be included in the
contents of the metal produced.
23. Upon hearing the learned counsel at length and upon perusal
of the relevant material and the impugned judgment and the
10Page 11
judgments referred to by the learned counsel, we are of the view
that the conclusion arrived at by the High Court is correct.
24. It is pertinent to note that Section 9 of the Act enables the
appellant-authority to charge royalty on the minerals extracted by
the lease holder from the land given on lease for the purpose of
mining. The methodology for calculating the amount of royalty is
determined by the Rules and by the Notifications issued by the
Central Government from time to time.
25. It is also pertinent to note that prior to issuance of
Notification dated 12th September, 2000, by virtue of Notification
dated 11th April, 1997, royalty was to be calculated on the basis of
metal concentrate produced by the lease holder whereas in
pursuance of Notification dated 12th September, 2000, the method
of calculating the royalty has been substantially changed and in
pursuance of the said Notification, royalty is to be calculated on
the contents of lead and zinc metal in the ore produced.
26. Immediately after the aforestated Notification dated 12th
September, 2000 was issued by the Central Government,
11Page 12
provisions of Rule 64 of the Rules had also been amended. By
virtue of the said amendment, Rule 64B and Rule 64C had been
inserted with effect from 25th September, 2000, which read as
follows:
“64B. Charging of royalty in case of minerals
subjected to processing.- (1) In case processing of run-ofmine is carried out within the leased area, then, royalty shall be
chargeable on the processed mineral removed from the leased
area.
(2) In case run-of-mine mineral is removed from the
leased area to a processing plant which is located outside the
leased area, then, royalty shall be chargeable on the
unprocessed run-of-mine mineral and not on the processed
product.
64C. Royalty on tailings or rejects – On removal of
tailings or rejects from the leased area for dumping and not for
sale or consumption, outside leased area such tailings or rejects
shall not be liable for payment of royalty;
Provided that in case so dumped tailings or rejects are
used for sale or consumption on any later date after the date of
such dumping, then, such tailings or rejects shall be liable for
payment of royalty.”
27. In the instant case, we are more concerned with the
provisions of Rule 64C of the Rules. Upon perusal of the said
Rule, it is very clear that unless the tailings or rejects are used for
sale or for consumption, such tailings or rejects would not be liable
for payment of royalty.
12Page 13
28. Moreover, provisions of Rule 64B of the Rules also make it
clear that in case of processing of run-of-mine, royalty shall be
charged only on the processed mineral removed from the leased
area.
29. The aforestated amendment and Notification dated 12th
September, 2000 clearly denote intention of the Government with
regard to the calculation of royalty on the contents of metal in the
ore produced and not on tailings or rejects, which are not taken out
of the leased area. The negligible contents of metal which remains
in the mining area by way of tailings, slimes or rejects, which are
returned to the mother earth cannot be said to be the part of metal
content in the ore produced. 
30. This court in the case of National Mineral Development
Corporation Limited (supra) has clearly observed as under:
“Dumped tailings or rejects may be liable to
payment of royalty if only they are sold or
consumed”.
31. From the contents of what has been stated hereinabove by
this Court, it is very clear that once a portion of the metal is
13Page 14
returned back to the mother earth, it cannot be said to have been
extracted or cannot be said to have been taken out of the leased
area and when the metal which has not been taken out from the
leased area or which is not contained in the ore produced, it cannot
be made subject to payment of royalty because the lease holder
never took out that portion of the metal from the earth and
therefore, that cannot be said to be the part of metal contained in
the ore produced.
32. Though the learned counsel for the State referred to the forms
in which information with regard to ore received from the mines
and treated ore was required to be filled up and supplied to the
concerned Government Authorities by the holder of the mining
lease, in our opinion the said information and the averments are not
much relevant because each and every information required by the
Government may not be necessary for the purpose of calculating
royalty. Possibly the information received from the holders of the
mining lease would be for some other incidental purpose or for the
purpose of cross checking the information given by the holder of
14Page 15
the mining lease so as to find out whether the details given by the
lease holder on the basis of which royalty is calculated is correct. 
33. For the afore-stated reasons, in our opinion, we need not refer
to the submissions made in relation to the forms referred to in the
Rules.
34. Upon carefully going through the impugned judgment and
the judgment delivered by the learned Single Judge of the High
Court, we find that the courts below did not commit any mistake in
arriving at the conclusion that the holder of the lease was not liable
to pay the amount demanded under the impugned notices because,
by virtue of Notification dated 12th September, 2000 read with the
relevant Rules, the lease holder is supposed to pay royalty only on
the contents of metal in ore produced and not on the metal
contained in the tailings, rejects or slimes which had not been
taken out of the leased area and which had been dumped into
dumping ground of the leased area.
15Page 16
35. For the afore-stated reasons, we do not find any substance in
the appeal and therefore, the appeal is dismissed with no order as
to costs.
CIVIL APPEAL NO. 1526 OF 2008
36. So far as the present appeal is concerned, it has been filed by
Hindustan Zinc Limited as it has been aggrieved by the directions
whereby the matter has been ordered to be remitted to the mining
engineer for re-computing the royalty payable on lead and zinc
contained in the ore produced.
37. The appellant-company is aggrieved by the afore-stated
direction because it was never prayed by the State that the matter
be remitted back to the mining engineer for re-computation of the
royalty.
38. The submission on behalf of the appellant-company was to
the effect that as the entire concentrate has been taken out of the
leased area and as the quantity of concentrate of lead and zinc was
very much known, it was not necessary to give such a direction
16Page 17
because there is no question with regard to re-computation of
royalty on the basis of metal contained in ore produced.
39. We find substance in what has been submitted because the
metal concentrate which had been taken out from the leased area is
known to the parties and therefore, it is not necessary to have any
further details regarding the ore produced by the appellant company.
40. We, therefore, quash the afore-stated direction and the appeal
filed by the appellant-company is allowed to the above effect with
no order as to costs.
 .........................................J.
 (R.M. LODHA)
.........................................J.
 (ANIL R. DAVE)
New Delhi
March 11, 2013
17

a) Whether the Memorandum of Understanding dated 15th May, 2002, continues to subsist in favour of the Appellants? b) Whether the State Government is obliged to make recommendations for the grant of iron ore mines in

                                           REPORTABLE

                    IN THE SUPREME COURT OF INDIA



                    CIVIL APPELLATE JURISDICTION



                    CIVIL APPEAL NO.2790 OF 2012

              (Arising out of SLP(C)No.8567 of 2008)





BHUSHAN POWER & STEEL LTD. & ORS.                     ... APPELLANTS



             Vs.



STATE OF ORISSA & ANR.                                ... RESPONDENTS





                          J U D G M E N T





ALTAMAS KABIR, J.




1.    Leave granted.





2.    With   the   intention   of   setting   up   an   integrated   steel



plant   in   the   State   of   Orissa,   Bhushan   Limited,   entered   into



discussions   with   the   State   Government   in   2001   in   that


regard.        Pursuant   to   such   discussions,   Bhushan   Limited



applied   to   the   Industrial   Development   Corporation   of   India



(IDCO)   for   acquisition   of   land   measuring   1250   acres,   for



setting   up   the   proposed   plant   in   the   identified   villages   of



Thelkoloi,   Dhubenchhabrar   and   Khariapalli   (Lapanga)   in   the



District   of   Sambalpur.     On   13th  November,   2001,   Bhushan



Limited   applied   to   the   Industrial   Promotion   and   Investment



Corporation   of   Orissa   Ltd.   (IPICOL)   for   appraisal   and



recommendation   for   acquisition   of   land   for   the   aforesaid



purpose to IDCO.   Bhushan Limited also addressed two letters



to   the   Collector,   Sundergarh   and   Collector,   Keonjhar   on   28th



November,   2001,   applying   for   grant   of   lease   for   mining   of



iron   ore   for   use   in   the   proposed   plant.     The   applications



were   received   in   the   Collector's   office   on   3rd  December,



2001, 4th December, 2001 and 1st March, 2002.  On the basis of



such   applications   filed   by   Bhushan   Limited,   a   meeting   was



held   on   27th     March,   2002,   between   the   Chief   Secretary,



Government   of   Orissa   and   Bhushan   Limited,   in   which   the


Government   agreed   to   accord   due   priority   to   Bhushan   Limited



for   grant   of   suitable   iron   ore   areas   and   also   agreed   to



recommend   the   proposal   of   Bhushan   Limited   to   the   Government



of India for grant of a Coal Block.





3.    Thereafter,   meetings   were   held   between   Bhushan   Limited



and the representatives of the State Government and one such



meeting   was  held   on  24th  April,   2002,  under   the  Chairmanship



of   the   Chief   Minister,   relating   to   the   setting   up   of   the



steel   plant   at   Lapanga.     The   said   meeting   was   confirmed   by



IDCO   and   the   Water   Resources   Department   and   it   was   decided



to   prepare   a   Memorandum   of   Understanding   (MOU)   to   be   signed



by the parties for setting up of a 1.2 million tonnes steel



plant   under  Phase-I   and  a   2.8  million   tonnes  steel   plant  in



Phase-II   in  Lapanga,   in  the   District  of   Sambalpur.    The  MOU



contained   the   commitment   of   the   State   Government   to



recommend   to   the   Central   Government   grant   of   iron   ore   mines



to   the   Appellant   for   its   use   in   the   plant   to   be   set   up   at



Lapanga.     As   far   as   the   grant   of   the   iron   ore   mines   is


concerned, the State Government agreed to make the following



recommendations to the Central Government:





     a)    For   grant   of   96   million   tonnes   iron   ore



           reserves   in   Joda   Barbil   Sector   of   Keonjhar



           (Thakurani   area)   for   50   years   requirement   of



           the plant.





     b)    For   additional   128   million   tonnes   of   iron   ore



           reserves in Keora, District Sundergarh, to meet



           a   requirement   of   1.6   million   tonnes   for   50



           years.





     The total requirement of 200 million tonnes was split up



into   two   parts,   i.e.,   96   million   tonnes   and   128   million



tonnes   respectively,   and   the   same   were   to   be   met   from   the



Thakurani   mines   situated   in   the   Joda   Barbil   sector   and   from



the Keora area of Sundergarh District.


4.    Pursuant   to   the   aforesaid   understanding,   on   16th  May,



2002,   the   Government   of   Orissa   addressed   two   letters   to   the



Government   of   India,   in   its   Ministry   of   Steel   and   Ministry



of   Coal,   for   allotment   of   Jamkhani   and   Bijahan   Coal   Blocks



to   Bhushan   Limited.     In   aid   of   the   decision   to   set   up   the



steel   plant,   the   Department   of   Energy   issued   a   No   Objection



Certificate   (NOC)   for   setting   up   of   a   power   plant   at



Thelkoloi   in   the   name   of   Bhushan   Limited   and,   on   5th  July,



2002,   the   State   Government   conveyed   its   approval   for



acquisition of 632.28 acres of private land and 634.94 acres



of   Government   land   in   identified   villages   under   Rengali



Tehsil of Sambalpur District, for establishment of the steel



plant.     Several   meetings   took   place   between   the   Principal



Secretary   and   the   representatives   of   Bhushan   Limited,   where



even the Joint Secretary of Mines was present and assurances



were given to Bhushan Limited to send the proposal for grant



of   mining   lease   in   favour   of   Bhushan   Limited   to   the   State



Government   by   the   first   week   of   September,   2002.     On   22nd


October,   2002,   even   the   State   Pollution   Control   Board   gave



its   approval   in   principle   for   setting   up   the   plant   in   the



selected sites.





5.    On 8th November, 2002, the Director, Mines, furnished his



report   on   the   application   made   by   the   Appellant   on   4th



December, 2001, for grant of mining lease over the Thakurani



Block   area.     In   the   said   report   it   was   recorded   that



Thakurani   Block   A   and   Block   B   mines   had   been   leased   in



favour   of  the   Sharda's  in   1934,  by   the  Ex-Ruler   of  Keonjhar



and   that   the   Thakurani   Block   A   mines   had   been   extensively



mined   by  the   original  lessee   from  1934   onwards.    The  report



also   disclosed  that   in  1998,   the  matter   was  settled   in  this



Court   between   the   State,   the   Sharda's   and   the   Centre.     It



was   agreed   that   Thakurani   Block   A   would   be   relinquished   in



favour of the State and the mining lease of Block B would be



renewed in favour of the Sharda's.  Accordingly, in terms of



the   settlement,   the   Thakurani   Block   A   became   available   with



the State.   It is on the aforesaid basis that the Appellant


had   been   advised   to   apply   to   the   State   Government   for   this



area,   and   the   same   was   done   in   December,   2001.     The   report



also   indicated   that   a   mining   licence   could   be   granted   to



Bhushan   Limited   in   relaxation   of   Rule   59(2)   of   the   Mineral



Concession   Rules,   1960,   hereinafter   referred   to   as   the   "MC



Rules",   in   view   of   the   fact   that   the   Thakurani   Block   A   had



been   mined   by   the   original   lessee   from   1934   onwards.     The



State   Government   was   advised   to   recommend   to   the   Centre   for



grant of relaxation under Rule 59(2) of the MC Rules.





6.    On 19th February, 2003, the Orissa Electricity Regulatory



Commission   (OERC)   passed   an   order   granting   permission   for



installation of a Captive Power Plant by Bhushan Limited.





7.    It   is   at   this   stage   that   trouble   began   to   brew.   A



decision   had  been   taken  to   merge  Bhushan     Ltd.   with  Bhushan



Steel   and   Strips   Limited   (BSSL)   which   had   an   identity   which



was separate from that of Bhushan Limited, though treated to



be   a   family   concern   under   the   Bhushan   family   umbrella.   On


21st February, 2003, the Government of Orissa was informed by



Shri   Brij   Bhushan   Singhal,   Chairman   of   the   Bhushan   Group,



that   Bhushan   Limited,   the   Appellant   herein,   would   not   be



merging   with   BSSL,   but   that   the   papers   were   being   processed



in the name of Bhushan Limited, as a group. Accordingly, the



State Government was requested not to process the papers for



2-3   months.   On   17th  March,   2003,   BSSL   wrote   to   the   Chief



Minister,   informing   him   of   the   developments   which   had   taken



place   and  that   two  companies   had  decided   not  to   merge,  with



retrospective   effect   from   1st        April,   2002,   as   had   been



decided earlier.    





8.    Thereafter,   on   5th  May,   2003,   Shri   Neeraj   Singhal   wrote



to   the   Chief   Minister   on   behalf   of   BSSL   informing   him   that



BSSL was unable to process the setting up of the steel plant



at Lapanga and in order to minimize the friction between the



two   groups   within   the   family,   BSSL   had   decided   to   set   up   a



separate steel plant at a different location in Mehramandali



in   the   District   of   Dhankanal   in   respect   whereof   1500   acres


of   land   had   been   identified.     On   17th  June,   2003,   the   Water



Resources Department, Government of Orissa, wrote to Bhushan



Power   &   Steel   Ltd.   giving   its   approval   of   the   layout   for



intake well for drawal of 100 cusec water for the integrated



steel plant of the Company.  This was followed by grant of a



certificate   by   IDCO   on   19th  July,   2003,   confirming   sanction



of   land   for   lease   measuring   488.08   acres   in   favour   of



Bhushan   Limited   comprising   Thelkoloi,   Dhubenchhapar   and



Khadiapalli,   which   had   been   identified   in   the   MOU   for



establishment of the steel plant by Bhushan Limited.





9.    The said sanctions were followed up by a meeting chaired



by   the   Chief   Minister   of   Orissa   on   25h   July,   2003,   wherein



the   progress   of   the   project   was   discussed   and   it   was



resolved   that   the   application   of   Bhushan   Limited   for   iron



ore deposits would be recommended to the Government of India



and   that   no   fresh   MOU   was   required   to   be   filed.     It   was



decided   that   the   MOU   executed   earlier   between   the   Bhushan



Group   and   the   State   Government   on   15th  July,   2002,   would


remain   undisturbed,   since,   the   same   had   already   been   acted



upon   by   both   sides.        It   was   also   decided   that   the



application   of   Bhushan   Limited   for   iron   ore   deposits   would



be   recommended   to   the   Government   of   India   in   terms   of   the



MOU,   after   the   same   was   placed   before   the   Screening



Committee which was chaired by the Chief Secretary.





10.    Further   to   the   permission   being   granted   to   Bhushan



Limited on 21st February, 2003, for installation of a Captive



Power   Plant,   OERC   granted   a   "No   Objection   Certificate"   to



Bhushan   Limited  for   setting  up   of  a   Captive  Power   Plant  for



increased capacity.





11.    Subsequently,   various   other   steps   were   taken   for



establishment of the power plant at Lapanga by Bhushan Power



&   Steel   Ltd.     On   10th  February,   2004,   the   State   Government



wrote   to   Shri   Sanjay   Singhal,   representing   Bhushan   Limited,



that   in   view   of   the   reorganization   and   restructuring   of   the



Bhushan   Group,  the   earlier  MOU   ceased  to   exist  and   had  lost


its   force.     Accordingly,   a   fresh   MOU   was   required   to   be



entered into between the Appellants and the State Government



for   speedy   implementation   of   the   project   which   was   on   the



anvil. It is the case of the Appellants that this letter was



never   acted   upon   by   either   party,   since,   thereafter,   the



State   allotted   and   granted   possession   of   large   tracts   of



land   to   the   Appellants   and   other   agreements,   such   as   drawal



of   water   were   entered   into,   permission   was     given   for



connectivity   with   the   Grid   and   other   various   other



administrative   sanctions,   as   also   approval   for   acquisition



of land, were made in favour of Bhushan Power & Steel Ltd.,



without   any   insistence   for   the   execution   of   a   fresh   MOU.



Simultaneously,   Shri   Neeraj   Singhal   of   BSSL   was   also



informed   by   the   State   that   since   they   wanted   to   set   up   a



separate   steel   plant   at   Mehramandali,   a   fresh   MOU   to   this



effect could be entered into between the State and BSSL.





12.    Responding  to the  letter of  10th  February,  2004, Bhushan



Limited   wrote   back   on   21st  February,   2004,   stating   that   no


fresh   MOU   was   required   to   be   signed,   since   the   earlier   MOU



was   quite   valid.     On   11th  March,   2004,   the   Government   of



Orissa,   in   its   Department   of   Industries,   informed   IDCO   that



the   Government   had   been   pleased   to   advise   for   immediate



transfer   of   acquired   land,   both   Government   and   private,   to



Bhushan         Limited,         after         observing         all         the         necessary



formalities.     However,   on   17th  March,   2004,   Shri   Neeraj



Singhal,   Managing   Director   of   BSSL,   wrote   to   the   Principal



Secretary,   Department   of   Steel   and   Mines,   contending   that



Bhushan Limited, as also BSSL, were entitled to the benefits



of the MOU, which had been signed on 15th May, 2002.





13.    Within   a   week   thereafter,   on   24th  March,   2004,   IDCO



transferred   the   land   for   the   project   at   Lapanga   to   Bhushan



Limited and possession thereof was also made over on several



dates.     On   12th  May,   2004,   the   Ministry   of   Environment   and



Forest,   Government   of   India,   gave   clearance   to   the   project



at   Rengali   in   the   name   of   Bhushan   Limited.     The   Chief



Inspector   of   Factories   and   Boiler,   gave   approval   to   the


Steam   and   Feed   Water   pipe   line   drawing   for   Bhushan   Limited



on   2nd  July,   2004.   On   3rd  September,   2004,   the   Government   of



Orissa,   in   its   Ministry   of   Environment   and   Forest,   granted



approval   to   Bhushan   Limited   for   diversion   of   59.16   hectares



of   forest   land   for   establishment   of   the   integrated   steel



plant   and   an   agreement   was   also   drawn   up   between   the



Government   and   Bhushan   Limited   on   17th  September,   2004,   for



drawal   of   water   from   the   Hirakud   Reservoir   for   use   in   the



proposed   integrated   steel   plant   at   Lapanga.   On   2nd  February,



2005, the State Government wrote to Bhushan Limited, seeking



the   status   report   of   the   steel   plant   project   and   on   16th



March,   2005,   permission   was   granted   for   provisional



energisation   of   220   KV   line   issued   by   the   Chief   Electrical



Inspector   in   favour   of   Bhushan   Limited.   Several   other



approvals   were  granted   upto  9th  August,   2005,  and   finally  in



March,   2005,   Bhushan   Limited   (BPSL)   commenced   production   at



its   steel   plant.     On   6th  September,   2005,   administrative



approval   was   given   for   acquisition   of   additional   private


land   for   Lapanga   plant,   granted   by   the   Steel   and   Mines



Department to Bhushan Limited. Similar approval was given in



respect   of   other   lands   on   28th     September,   2005   and   6th



February, 2006.





14.    Simultaneously, with administrative approval being given



for acquisition of private land for the Lapanga plant on 3rd



November,   2005,   an   agreement   was   entered   into   between   BSSL



and   the  Government   of  Orissa   for  putting   up  the   steel  plant



at   Mehramandli.     There   was   no   mention   of   the   MOU   dated



15th  May, 2002, in the said agreement. Within a matter of 10



days,   the   Directorate   of   Factories   and   Boilers   wrote   to



Bhushan Limited granting permission under the Factories Act,



1948, to construct the steel plant at Lapanga.





15.    Surprisingly,   on   31st  December,   2005,   the   Government   of



Orissa issued a letter to Bhushan Limited indicating that it



had   decided   not   to   treat   the   MOU   signed   earlier   with   M/s



Bhushan   Group   of   Companies   as   place   specific   after   the


company had been divided into Bhushan Limited (BPSL) and M/s



Bhushan Steel and Strips Ltd. (BSSL).  The Bhushan Group was



informed   that   the   State   Government   had   decided   to   deal   with



both   the   Companies   separately   and   to   sign   two   separate



agreements   for   the   purpose   of   acquiring   land,   allotting



mines   and   providing   other   facilities   for   establishment   and



growth of steel plants in Orissa.





16.     On   9th  January,   2006,   a   letter   was   addressed   by   the



Directorate   of   Factories   and   Boilers   to   Bhushan   Steel   Ltd.



approving   the   draft   of   the   steam   pipe   line   and   on   13th



January,   2006,   on   the   recommendation   of   the   Government   of



Orissa,   the   Central   Government   allotted   Bijahan   Coal   Block



in   the  District   of  Sundergarh   to  Bhushan   Limited  as   per  the



MOU.





17.     Even   more   surprisingly,   on   18th     January,   2006,   the



Government   of   Orissa   issued   a   Show-Cause   Notice   to   Bhushan



Limited   to   appear   before   the   Joint   Secretary   on   17th


February, 2006, for a personal hearing. Several deficiencies



in   the   application   for   mining   lease   of   iron   ore   dated   4th



December,   2001,   in   respect   of   the   Thakurani   Block   A,   were



also pointed out.   Thereafter, the State Government informed



the   Appellants   that   their   application   dated   4th  December,



2001,   for  mining   lease  over   the  Thakurani   area  could   not  be



allowed   on   various   grounds.   However,   the   most   significant



ground   was   that   the   area   in   question   came   within   the



relinquished   area   of   the   mining   lease   of   M/s   Sharda   which



was   not   thereafter   thrown   open   for   re-allotment   under   Rule



59   of   the   aforesaid   Rules.         It   was   alleged   that   the



application   made   by   Bhushan   Limited   was,   therefore,



premature.   Having rejected the Appellants' prayer for grant



of   mining   lease,   on   9th  February,   2006,   the   Government   of



Orissa   made   a   recommendation   to   the   Central   Government   to



grant   mining   lease   in   favour   of   M/s   Neepaz   Metallicks   (P)



Ltd. in relaxation of Rule 59(1) of the aforesaid Rules, for



a period of 30 years.


18.    On  28th  February,  2006, Bhushan  Limited altered  its name



to Bhushan Power & Steel Ltd. (BPSL).





19.    On   8th  May,   2006,   Bhushan   Limited   filed   Writ   Petition



No.6646   of   2006   before   the   Orissa   High   Court.   On   the   next



day,   the   State   Government   issued   a   reminder   to   Bhushan



Limited in regard to its letter dated 31st December, 2005, by



which the State Government had asked for a separate MOU from



Bhushan Limited, inspite of the MOU already existing between



the parties, which had also been acted upon till as late as



26th  April, 2006. On 15th  May, 2006, the High Court passed an



interim   order   granting   status-quo   with   regard   to   the



applications   for   mining   lease.   On   5th  September,   2006,   an



intervention   application   was   filed   by   BSSL,   which   was



allowed on 6th December, 2006.





20.    During   the   course   of   hearing   of   the   Writ   Petition,   the



High   Court   passed   an   interim   order   and   directed   that   the



problems   relating   to   the   Show-Cause   Notice   dated   18th


January,   2006,   should   be   resolved,   keeping   in   view   the



commitments of the State.  On 26th June, 2007, the High Court



directed   circulation  of   the  order   dated  18th  June,   2007,  and



liberty   was   given   to   Bhushan   Limited   to   challenge   the   same



by filing an affidavit in the writ proceedings.





21.      Such affidavit was duly filed on 10th July, 2007, and the



order   impugned   in   the   present   appeal   came   to   be   passed   by



the   High   Court   on   14th      December,   2007,   dismissing   the



aforesaid   Writ   Petition   No.6646   of   2006.   The   substance   of



the   order   of   the   High   Court   while   dismissing   the   Writ



Petition is :-





  (a)      The   Court   cannot   set   aside   the   communication   of   the



           State Government asking the Appellants to sign a fresh



           MOU with the Government as early as possible.





  (b)      The   Appellants'   application   for   grant   of   mining   lease



           dated   4th  December,   2001,   should   be   considered   afresh



           by the appropriate authorities of the State Government


           in   accordance   with   law,   along   with   other   similarly



           placed applicants.





  (c)      The   Appellants   would   be   at   liberty   to   challenge   the



           subsequent   report   of   the   Director   of   Mines   dated   31st



           May,   2007,   in   the   hearing   which   would   be   afforded   to



           the   Appellants   by   the   appropriate   authority   of   the



           State.





  (d)      The   Appellants   would   be   at   liberty   to   challenge   the



           order dated 18th June, 2007, on merits, but it was also



           submitted that the application for mining lease of the



           Appellants   would   be   considered   after   it   executed   a



           fresh MOU with the State Government.





22.      As   indicated   hereinbefore,   on   21st  April,   2008,   this



Court   passed   an   interim   order   in   the   Special   Leave   Petition



filed   by   Bhushan   Limited   directing   the   parties   to   maintain



status-quo   with   regard   to   the   lands   indicated   in   the



application   filed   by   the   Appellants   for   grant   of   mining


lease.   However,   one   of   the   most   significant   developments



that subsequently took place was that on 15th November, 2011,



Shri B.B. Singhal and Shri Neeraj Singhal, Vice-Chairman and



Managing   Director   of   Bhushan   Steel   and   Strips   Ltd.   filed



affidavits   withdrawing   all   their   claims   and   rights   in   the



MOU   dated   15th     May,   2002,   executed   between   the   State



Government   and   Bhushan   Limited   and   declaring   that   the   said



MOU   was   and   had   always   been   in   favour   of   Bhushan   Power   &



Steel   Ltd.   The   above-named   persons   also   prayed   for   deletion



of their names from the array of parties.





23.    Appearing for the Appellants, Mr. Mukul Rohatgi, learned



Senior   Advocate,   pointed   out   that   only   two   issues   arise   for



the   consideration   of   this   Court   in   the   present   case,   namely



-





       a)    Whether   the   Memorandum   of   Understanding   dated

       15th May, 2002, continues to subsist in favour of the

       Appellants?



       b)    Whether the State Government is obliged to make

       recommendations   for   the   grant   of   iron   ore   mines   in


       terms of the stipulations contained in the aforesaid

       MOU   dated   15th  May,   2002,   and   whether   in   respect   of

       the   areas   which   had   not   been   notified   under   Rule

       59(1),         the         State         Government         can         make         a

       recommendation   for   relaxation   of   Rule   59(1)   under

       Rule 59(2)?





24.    Mr.   Rohatgi   submitted   that   having   entered   into   a



Memorandum   of   Understanding   with   the   Appellant   Company   and



having acted thereupon and having also caused the Appellants



to   change   their   position   to     their   detriment,   it   was   not



open   to  the   State  Government   to  call   upon  the   Appellants  to



execute a fresh MOU, during the subsistence of the MOU dated



15th May, 2002.





25.    Mr.   Rohatgi   also   submitted   that   notwithstanding   the



State   Government's   requirement   that   the   Appellants   should



enter   into   a   fresh   MOU,   the   State   Government   continued   to



act   under   the   MOU   dated   15th                May,   2002.   Despite   the



communications   dated   10th  February,   2004,   and   31st  December,



2005,   above   recorded,   the   State   Government   went   on   further



to   hold   that   all   the   steps   required   to   be   taken   for


installation   of   the   steel   plant   at   Lapanga,   had   been   taken,



except that it did not comply with the obligations of making



recommendations   to   the   Central   Government   for   grant   of   iron



ore   mines.     Mr.   Rohatgi   urged   that   during   the   pendency   of



the   proceedings,   the   dispute   between   the   members   of   the



Bhushan   Group   had   been   settled   and   the   parties   had   mutually



agreed   to   withdraw   all   the   allegations   and   claims   relating



to   the   MOU   dated   15th  May,   2002.     Incidentally,   by   filing



I.A.No.13,   BSSL   confirmed   that   Bhushan   Power   &   Steel   Ltd.



was the sole beneficiary under the MOU dated 15th  May, 2002,



and   withdrew   all   its   claims   under   the   MOU   dated   15th  May,



2002.





26.    Mr. L. Nageshwar Rao, learned Senior Advocate, appearing



for the State of Orissa, has also very fairly stated that in



view   of   the   settlement   of   disputes   between   the   members   of



the   Bhushan   Group,   the   issue   relating   to   the   MOU   did   not



survive   and,   since,   the   State   Government   had   already



performed   its   obligation   under   the   MOU,   the   only   thing


remaining to be done by the State is to make recommendations



to the Central Government for grant of iron ore mines to the



Bhushan Power & Steel Ltd.





27.    Mr. Rohatgi submitted that in the changed circumstances,



the question of execution of a fresh MOU loses its relevance



and   the   letter   dated   31st  December,   2005,   calling   upon   the



Appellants   to   execute   a   fresh   MOU,   is   not   required   to   be



given   effect   to.   Consequently,   it   may   be   held   that   the   MOU



dated   15th  May,   2002,   continues   to   be   valid   and   subsisting



between the State of Orissa and Bhushan Power & Steel Ltd.





28.    On the question of Rule 59 of the MC Rules, which formed



the   basis   of   the   State   Government's   decision   to   reject   the



Appellants' application for being recommended to the Central



Government   for   grant   of   a   mining   lease,   Mr.   Rohatgi



submitted   that   such   recommendations   had   been   made   by   the



State Government in favour of other applicants as well, such



as   M/s.   S.M.C.   Power   Generation   Ltd.,   M/s.   Neepaz   Metalics,


M/s. Sree Metaliks and M/s. Deepak Steel & Power. Therefore,



there   was   no   reason   to   deny   the   same   benefits   to   the



Appellants as well.





29.    Appearing   for   the   Intervener,   M/s.   Jindal   Steels   Ltd.,



Mr.   K.V.   Vishwanathan,   learned   Senior   Advocate,   submitted



that   so   long   as   any   allotment   made   in   favour   of   the



Appellants   did   not   impinge   on   the   allotment   made   in   favour



of   M/s.   Jindal   Steels   Ltd.,   it   could   have   no   grievance



against   a   separate   allotment   being   made   in   favour   of   the



Appellants.





30.    The   mutual   settlement   of   the   disputes   between   the



members   of   the   Bhushan   Group   has   altered   the   situation



considerably,   since   BSSL   has   withdrawn   its   claim   under   the



MOU dated 15th  May, 2002, and has declared that the said MOU



was   and  had   always  been   executed  by   the  State   Government  in



favour   of   Bhushan   Power   &   Steel   Ltd.,   which   had   set   up   its



steel   plant   at   Lapanga.            As   indicated   hereinbefore,


although,   the   MOU   was   entered   into   by   the   State   Government



with   the   Bhushan   Group   for   setting   up   a   steel   plant   at



Lapanga,   at   a   later   stage,   BSSL   also   laid   claim   under   the



MOU   for   setting   up   a   separate   steel   plant   at   Mehramandali



and a suggestion was also made for execution of a fresh MOU



between the State Government and BSSL to this effect.





31.    Pursuant   to   the   MOU   with   Bhushan   Limited,   the   State



Government   had  not   only  allotted   land  for   the  setting   up  of



the   steel   plant   at   Lapanga,   it   had   even   extended   all   help



for   the   commissioning   of   the   plant,   which,   in   fact,   had



already   started   functioning.     However,   it   is   the   claim   made



by   BSSL   under   the   MOU   executed   on   15th  May,   2002,   that   had



created obstructions in the setting up of the steel plant at



Lapanga.     Despite   having   allotted   land   and   granted   sanction



to   Bhushan   Limited   to   take   steps   for   construction   of   the



said   plant,   it   was   subsequently   contended   that   the



application filed by Bhushan Limited was premature and could



not, therefore, be acted upon.   Specific instances have been


mentioned   hereinabove   of   the   steps   taken   by   the   various



departments   in   extending   cooperation   to   Bhushan   Limited   to



set   up   its   steel   plant   at   Lapanga.     To   now   turn   around   and



take   a   stand   that   the   application   made   by   Bhushan   Limited



was   premature,   is   not   only   unreasonable,   but   completely



unfair   to   Bhushan   Limited,   who   have   already   invested   large



sums   of  money   in  setting   up  the   plant.  The   State  Government



had,   on  its   own  volition,   entered  into   the  MOU   with  Bhushan



Limited on 15th May, 2002, and had even agreed to request the



Central Government to allot mining areas and coal blocks for



operating   the   steel   plant.     Whatever   differences   that   may



have   resulted   on   account   of   the   dispute   within   the   Bhushan



Group, which could have led to the rethinking on the part of



the   State   Government,   have   now   been   laid   to   rest   by   virtue



of   the   settlement   arrived   at   between   the   Bhushan   Limited



(now BPSL) and BSSL.  The State Government has also accepted



the   said   position.     In   addition   to   the   above,   the   action



taken   by   the   State   Government   appears   to   us   to   be   highly


unreasonable and arbitrary and also attracts the doctrine of



legitimate   expectation.     There   is   no   denying   the   fact   that



the   Appellants   have   altered   their   position   to   their



detriment   in   accordance   with   the   MOU   dated   15th  May,   2002.



Whatever   may   have   been   the   arrangement   subsequently   arrived



at   between   the   State   Government   and   BSSL,   the   original   MOU



dated   15th  May,   2002,   continued   to   be   in   existence   and



remained operative.





32.    The   State   Government   appears   to   have   acted   arbitrarily



in   requiring   Bhushan   Limited   to   enter   into   a   separate   MOU,



notwithstanding   the   existence   of   the   MOU   dated   15th  May,



2002,   which,   as   mentioned   hereinabove,   had   been   acted   upon



by the parties.





33.    In   the   light   of   the   above,   the   High   Court   erred   in



holding that it could not interfere with the decision of the



State Government calling upon the Appellants to sign a fresh



MOU   with   the   Government,   during   subsistence   of   the   earlier


MOU.   Since the State Government has already made allotments



in   favour   of   others   in   relaxation   of   the   Mineral   Concession



Rules,   1960,   under   Rule   59(2)   thereof,   no   cogent   ground   had



been   made   out   on   behalf   of   the   State   to   deny   the   said



privilege to the Appellants as well.





34.    Accordingly,   we   allow   the   appeal   and   set   aside   the



judgment and order of the High Court of Orissa and also the



decision   of   the   State   Government   dated   9th  February,   2006,



rejecting   the   Appellant's   claim   for   grant   of   mining   lease.



During   the   course   of   hearing,   we   have   been   informed   that



Thakurani   Block   A   has   large   reserves   of   iron   ore,   in   which



the   Appellants   can   also   be   accommodated.   We,   accordingly,



direct   the  State   of  Orissa   to  take   appropriate  steps   to  act



in terms of the MOU dated 15th May, 2002, as also its earlier



commitments   to   recommend   the   case   of   the   Appellants   to   the



Central   Government   for   grant   of   adequate   iron   ore   reserves



to   meet   the   requirements   of   the   Appellants   in   their   steel



plant at Lapanga.


35.    There will be no order as to costs.





                                        ...............................................................J.

                                        (ALTAMAS KABIR)





                                        ...............................................................J.

                                        (SURINDER SINGH NIJJAR)

New Delhi

Dated:14.03.2012

M/s Larsen & Toubro Ltd. till date of its demerger in 2004 and thereafter to M/s. Ultra Tech Cement Ltd.) obtained a mining lease for limestone from the Government of Maharashtra, as per lease deed dated 12.2.1980. Under the terms of the said lease, the appellant as lessee was required to pay dead rent as per clause V(1) and (2), royalty in terms of clause V(3) and surface rent, water rate and cesses in terms of clauses V(4) of the lease deed. In response to a notice served by the Collector on the appellant demanding payment of surface rent (equal to non-agricultural assessment) and the Zilla Parishad Cess (for short = (i) Whether the appellant is liable to pay ZP Cess? (ii) Whether the appellant is liable to pay GP Cess? =In view of the above, we accept the contention of the appellant that it is not liable to pay ZP cess or CP cess to the State Government under the lease deed. It is however made clear that if the said cesses (ZP cess and CP cess) become payable by the appellant by virtue of any amendment to the provisions of the respective enactments under which such cesses are leviable, then the appellant may have to pay the same. Be that as it may.

                                                                                    Reportable 


                       IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION




                           CIVIL APPEAL NO.864 OF 2005








Ultra Tech Cement Ltd.                                                     ... Appellant


(earlier Ultratech Cemco Ltd.)




Vs.




State of Maharashtra & Anr.                                                ... Respondents










                                      J U G D M E N T 




R. V. Raveendran J.








        The   appellant   (the   term   `appellant'   refers   to   M/s   Larsen   &   Toubro 




Ltd.   till   date   of   its   demerger   in   2004   and   thereafter   to   M/s.   Ultra   Tech 




Cement Ltd.) obtained a mining lease for limestone from the Government of 




Maharashtra, as per lease deed dated 12.2.1980. Under the terms of the said 




lease,   the   appellant   as   lessee   was   required   to   pay   dead   rent   as   per   clause 




V(1) and (2), royalty in terms of clause V(3) and surface rent, water rate and 




cesses   in   terms   of  clauses   V(4)   of  the   lease   deed.   In   response   to   a   notice 




served by the Collector on the appellant demanding payment of surface rent 




(equal to non-agricultural assessment) and the Zilla Parishad Cess (for short 



                                                    2








`ZP   Cess')   and   Gram  Panchayat   Cess   (for  short   `GP   Cess'),   the  appellant 




informed the Collector by letter dated 3.1.1991, that it was not liable to pay 




the   ZP   cess   and   GP   cess   and   that   those   cesses   may   be   deleted   from   the 




demand.   However   by   notice   of   demand   dated   (nil)   July   1991,   revised   by 




notice dated 28.1.1994, the Collector, Chandrapur, reiterated the demand for 




surface rent as also the ZP and GP cesses for the years 1987 to 1992, on the  




following ground:  




        "The   Government   of   Maharashtra   vide   its   letter   Industries   Energy   and 


        Labour   Department   (IND)   No.TQCR-2176/45691/1172/IND-9   Bombay 


        dated 13.06.1978 and Director, Geology & Mining, Govt.of Maharashtra, 


        Nagpur   vide   letter   No.STC/295/39/2007   dated   09.06.1989   have   issued 


        instructions  regarding  fixation  of surface  rent on the  lease  area used for 


        mining   purpose.   As   per   these   directives   and   Rule   27(1)(d)   of   Mineral 


        Concession Rules, 1960, the lessee is required to pay the surface rent at 


        such rate not exceeding the land revenue and the cesses assessable on the 


        land.   Since   the   mining   operation   is   the   use   of   land   other   than   the 


        Agriculture purpose,  the rate of non-agricultural  assessment, together 


        with the cesses assessable on the land, are applicable for levying the 


        surface rent."


                                                                          (emphasis supplied)








2.      The appellant was aggrieved by the demand in so far as it relates to 




ZP cess and GP cess. According to appellant section 151(1) of Maharashtra 




Zilla   Parishads   and   Panchayat   Samitis   Act,   1961   (`Zilla   Parishad   Act'   for 




short) exempted the lessees from the state government from payment of the 




ZP cess. The appellant also contended that it was not liable to pay the GP 




cess, as section 127 (1) of Bombay Gram Panchayats Act, 1958 (`Panchayats 




Act' for short) provides for levy of GP cess at the rate of one hundred paise  



                                                  3








on every rupee payable to the state government as ordinary land revenues in  




the area within the jurisdiction of the Panchayat, and as the appellant was 




exempted   from   paying   land   revenue   under   section   64   of   the   Maharashtra 




Land   Revenue   Code,   1966   (`Revenue   Code'   for   short)   read   with   clause 




VII(1)   of   the   lease   deed,   it   was   not   liable   to   pay   the   GP   cess   also.   The 




appellant admitted the liability to pay surface rent equal to non-agricultural 




assessment.








3.        On the other hand, the respondents contend that the demand for ZP 




cess and GP cess is authorized by Rule 27(1)(d) of the Mining Concession 




Rule, 1960 (`MC Rules' for short) read with clause V(4)   of the lease deed 




and the appellant is liable for the same. The submission of the respondents is 




that they have not made any demand for cess under the Zilla Parishads Act 




or Panchayats Act and that the demand for ZP cess and GP cess is as a part 




of the surface rent. According to the respondents, the reference to ZP cess 




and GP cess assessable on the land, in the lease deed is only for the purpose  




of arriving at the figure of surface rent. The respondents' submission is that 




though   "cesses   per   se   could   not   have   been   levied   under   the   Mineral 




Concession Rules",  cesses assessable on the land has been demanded  as a 




mode of calculating the charges for the surface area used by the lessee; and 



                                                  4








so   long   as  the  amount   charged   does  not  exceed   the   land  revenue   plus  ZP  




cess and GP cess assessable on the land, the lessees can have no grievance. 








4.     On   the   rival   contentions   urged,   two   questions   arise   for   our 




consideration: 




       (i)          Whether the appellant is liable to pay ZP Cess?




       (ii)         Whether the appellant is liable to pay GP Cess?








Re: Question No.(i)








5.     Rule   27   of   the   Mining   Concession   Rules,   1960   prescribes   the 




conditions subject  to  which a  mining  lease   should  be made.  Clause   (d) of 




sub-section (1) thereof is relevant and is extracted below : 




       "27. Conditions - (1) Every mining lease shall be subject to the following 


       conditions -     xxxx     xxxx




       (d)     the lessee shall also pay, for the surface area used by him for the 


       purposes of mining operations, surface rent and water rate at such rate, not 


       exceeding the land revenue, and cesses assessable on the land, as may be 


       specified by the State Government in the lease."


         


                                                                        (emphasis supplied)






Clause 4 of Part V of the lease deed reads thus: 




       "The lessee/lessees shall pay rent and water rate to the State Government  


       in respect of all parts of the surface of the said lands which shall from time 


       to  time  be occupied  or used by the  lessee/lessees  under the authority  of 


       those   presents   at   the   rate   of   Rs...and   Rs...respectively   per   annum   per 


       hectare of the area so occupied or used and so in proportion for any area 


       less   than   a   hectare   during   the   period   from   the   commencement   of   such 


       occupation or use until the area shall cease to be so occupied or used and 


       shall as far as possible restore the surface land so used to us in original  



                                                          5








              condition.   Surface   rent   and   water   rate   shall   be   paid   as   hereinbefore 


              detailed in clause (2) provided that no such rent/water rate shall be payable 


              in respect of the occupation and use of the area comprised in any roads or  


              ways to which the public have full right of access. 




                       1.       Surface rent equal the non-agricultural assessment.


                       2.       Water rates not exceeding the land revenue.


3.                 Cesses   assessable   on   the   land  (ZP   and   GP   Cesses)   subject   to   the 


      revision of rates prescribed by government from time to time."






                                                                               (emphasis supplied)








      A combined reading of Rule 27(1)(d) of the Rules and Clause V(4) of the 




      lease   deed,   makes   it   clear   that   the   lessee   under   the   mining   lease   deed   is 




      liable to pay, in addition to dead rent and royalty, the following amounts : (i)  




      surface   rent   equivalent   to   non-agricultural   assessment;   (ii)   water   rate   not 




      exceeding the land revenue and (iii) cesses assessable on the land specified 




      by the state government in the lease, that is ZP cess and GP cess assessable  




      on the land subject to revision of rates prescribed by government from time  




      to time. 








      6.      What is significant to note is that the State Government has stipulated 




      in the lease that the mining lessee shall pay ZP cess assessable on the land. 




      It has not used the words `an amount equivalent to ZP cess that could be or  




      may   be   assessed   on   the   land.'   The   word   `assessable'   means   liable   to   be 




      assessed. Therefore when Clause V(4) of the lease deed requires the lessee 




      to pay ZP cess assessable on the land, it would mean that the mining lessee 



                                                6








would be liable to pay ZP cess if it is so due under the Maharashtra Zilla 




Parishads Act. 








7.      Section 151(1) of the Zilla Parishad Act which is relevant is extracted 




below: 




        "151. (1) - In the Vidarbha area of the State of Maharashtra, every malik-


        makhuza, raiyat malik and occupant and every raiyat,  other than a sub-


        tenant and lessee from the State Government  shall be liable in respect 


        of the land held by him in the district to pay cess for the purpose of this  


        Act at the rate of twenty paise or at such increased rate not exceeding two  


        hundred   paise   as   may   be   determined   by   the   State   Government  under 


        section 155 on every rupee of the land revenue or rent assessed or fixed on 


        such land or the lease  money payable  in respect thereof, whether  or not 


        such land revenue or rent or lease money or any portion thereof has been 


        released, compounded for or redeemed.




        [Note : the words in italics should be read as  `at the rate of two hundred  


        paise or at such increased rate not exceeding seven hundred paise as may  


        be   determined  by   the   concerned   Divisional   Commissioner"  after 


        amendment of section 151(1) by Maharashtra Act 1 of 1993]






                                                                    (emphasis supplied)










It is evident from the said provision of the Zilla Parishad Act that a `lessee  




from the state government' is not liable to pay ZP cess under section 151 (1) 




of the Zilla Parishads. The ZP cess can be levied only in terms of and under 




the Zilla Parishads Act and cannot be levied by the state government, under 




the   terms   of   a   contract.     Where   a   particular   cess   is   leviable   under   an 




enactment,   and   the   contract   says  that   the   lessee   is  liable   to   pay   such   cess 




leviable under that enactment, but the enactment exempted a specified class 




of persons (to which the lessee belongs) from paying the said cess, the state  



                                                7








government cannot make the lessee liable to pay the said cess on the ground 




that   under   the   contract   entered   under   a   different   enactment,   the   lessee   is 




liable to pay such cess. For example, if a Sales Tax Act exempts the sale of  




particular goods from tax, the seller of such goods cannot demand Sales Tax 




on the ground that the contract of sale provides that the buyer is liable to pay 




all taxes leviable under any enactment.  It follows that if a lessee  from the 




State   Government   is   exempted   from   payment   of   ZP   cess   leviable   under 




section 151(1) of the Zilla Parishads Act, by section 151(1) itself, the State 




Government cannot `levy' the said ZP cess under a contract entered in terms 




of the Mineral Concession Rules. For payment of a cess under a particular 




Act, liability under that Act is condition precedent. Therefore if ZP cess is 




not due or payable by a lessee under the ZP Act, the State cannot say that the 




amount   is   due   under   the   lease   deed   executed   in   terms   of   the   Mineral 




Concession Rules.








8.      The effect of  clause V(4) of the lease deed providing that the mining 




lessee shall pay `ZP cess assessable on the land' is this: if it is liable to be  




paid   under   the   Zilla   Parishads   Act,   that   should   be   paid   by   the   lessee   and 




payment thereof is a term of the lease; and if the lessee is not liable to pay  




ZP cess in view of the exemption under the ZP Act, it is not payable.   The  




position would have been different if the lease deed had stipulated that the 



                                                 8








lessee is liable to pay as consideration, in addition to other sums payable, a 




sum equivalent to ZP cess under Zilla Parishad Act, irrespective of whether 




the lessee is liable to pay such cess under the Zilla Parishads Act or not. If 




the lease deed had contained such a term, the lessee would have been liable 




to   pay   a   sum   equivalent   to   ZP   cess,   irrespective   of   his   liability   under   the 




Zilla Parishads Act.








9.      We may in contrast, refer to the term in the lease regarding payment 




of surface  rent. The clause   says what  is payable  is  `surface  rent equal  the  




non-agricultural assessment'. The clause does not say that the lessee is liable 




to pay `non-agricultural assessment'  assessable  on the land.  Consequently, 




irrespective of whether non-agricultural assessment is leviable or not under 




the Maharashtra Land Revenue Code, 1966, the lessee shall be liable to pay 




an amount equivalent to non-agricultural assessment, as surface rent. What 




is   payable   under   the   contract   is   `surface   rent'   and   non-agricultural 




assessment is made only the basis for quantification of the surface rent. But 




the wording relating to payment  of ZP cess and GP cess,  are significantly 




different from the wording relating to payment of surface rent.








10.     There is yet another indication that what is required to be paid in ZP 




cess,  only if it is leviable under Zilla Parishads Act. Clause V(4) provides 



                                                     9








that the mining lessee shall pay "cesses assessable on the land (ZP and GP  




cesses) subject to the revision of rates prescribed by Government from time  




to time." This refers to revision by the State Government in exercise of the 




power under section 151(1) of Zilla Parishads Act and not in exercise of any 




power   under   the   lease   deed,   as   a   lessor.   This   also   shows   that   ZP   cess   as 




revised under the Zilla Parishads Act is payable only if it is payable under 




the Zilla Parishads Act and not otherwise.  








Re: Question No.(ii)








11.     Section   127   of   the   Bombay   Gram   Panchayats   Act,   1958   deals   with 




levy and collection of cess. The said section is extracted below : 




        "(1) The State Government shall levy cess at the rate of one hundred paise, 


        on   every   rupee   of   every   sum   payable   to   the   state   government   as 


        ordinary   land   revenue   in   the   area   within   the   jurisdiction   of   a 


        panchayat  and thereupon, the state government shall (in addition to any 


        cess leviable under the Maharshtra Zilla Parishads and Panchayat Samitis 


        Act, 1961) levy and collect such cess in such area.




        (2) to (4) deleted by Maharashtra Act 10 of 1992.




        (5)   For the purpose of levying and collecting the cess referred to in sub-


        section (1), in the Bombay area athe provisions of section 144 (including 


        the   Fourth   Schedule),   145,   147   and   149,   in   the   Vidarbha   area,   the 


        provisions   of   section   151,   and   in   the   Hyderabad   area,   the   provisions   of 


        section 152 of the Maharashtra Zilla Parishad and Panchayat Samitis Act, 


        1961, shall apply thereto as they apply to the levy of cess leviable under 


        section 144, section 151, or as the case may be, section 152 of that Act."   


                                                                            (emphasis supplied)




Section 64 of the Maharashtra Land Revenue Code, 1966 (`Code' for short) 




reads thus:



                                                       10








        "64. All land liable to pay revenue unless specially exempted. 




        All land, whether applied to agricultural or other purposes, and wherever 


        situate, is liable to the payment of land revenue to the State Government as 


        provided by or under this Code except such as may be wholly exempted 


        under   the   provisions   of   any   special   contract   with   the   State 


        Government, or an any law for the time being in force or by special grant 


        of the State Government. 




        But   nothing   in   this   Code   shall   be   deemed   to   affect   the   power   of   the 


        Legislature   of   the   State   to   direct   the   levy   of   revenue   on   all   land   under  


        whatever title they may be held whenever and so long as the exigencies of 


        the State may render such levy necessary."




                                                                                (emphasis supplied)








The   term   `land   revenue'   is   defined   in   section   2(19)   of   the   said   Code   as 




under:-




        "(19) "land revenue" means all sums and payments, in money received or 


        legally   claimable   by   or   on   behalf   of   the   State   Government   from   any 


        person on account of any land or interest in or right exercisable over land 


        by or vested in him, under whatever designation such sum may be payable 


        and   any   cess   or   rate   authorised   by   the   State   Government   under   the 


        provisions of any law for the time being in force; and includes premium, 


        rent,   lease   money,   quit   rent,   judi   payable   by   an   inamdar   or   any   other 


        payment provided under any Act, rule, contract or deed on account of any 


        land."










12.     Section   127(1)   of   the   Panchayats   Act   casts   a   liability   to   pay   one  




hundred   paise   as   cess   on   every   rupee   of  every   sum   payable   to   the   state  




government   as   ordinary   land   revenue.  This   cess   is   described   as   Gram 




Panchayat cess or GP cess. The effection of section 127(1) is that wherever 




land   revenue   is   payable   by   a   person,   such   person   liable   to   pay   the   land 




revenue,   will   also   have   to   pay   GP   cess   equal   to   the   amount   of   the   land 



                                                   11








revenue. Therefore only a person who is liable to pay land revenue will be 




liable to pay GP cess. Section 64 of the Land Revenue Code provides that all 




lands are liable to payment of land revenue to the state government  except  




such as may be wholly exempted under the provisions of the special contract  




with the state government.  Clause VII(1) of the lease deed dated 12.2.1980 




between State Government and the appellant provides such exemption as it 




says   the   lessee   shall   not   be   liable   to   pay   land   revenue.   We   extract   below 




clause (1) of Part VII of the lease deed for ready reference:








        "Lessee to pay rents and royalties, taxes, etc.




        1. The lessee/lessees shall pay the rent, water rate and royalties reserved 


        by this lease at such times and in the manner provided in the PARTS V  


        and VI of these presents and shall also pay and discharge all taxes, rates  


        assessment   and   impositions   whatsoever   being   in   the   nature   of   public 


        demands which shall from time to time be charged, assessed or imposed 


        by the authority of the Central and State Governments upon or in respect 


        of   the   premises   and   works   of   the   lessee/lessees   in   common   with   other 


        premises   and   works   of   the   like   nature  except   demands   for   land 


        revenues."


                                                                          (emphasis supplied)










13.     Even under Clause V(4) of the lease deed, what is liable to be paid is 




`surface rent' which is equivalent to the non-agricultural assessment, and not 




land   revenue,   that   is   non-agricultural   assessment   itself.   Thus   there   is   a 




special contract between the State and the appellant whereby the appellant is 




exempted from paying land revenue. If the appellant is not liable to pay the 




land   revenue,   it   will   not   be   liable   to   pay   any   GP   cess,   as   section   127(1) 



                                                 12








makes it clear that the said cess is payable only on the  amount payable  as 




land   revenue.   If   no   amount   is   payable   as   land   revenue,   it   follows   as   no 




amount is payable as GP cess.  Therefore appellant is not liable to pay GP 




cess   under   the   Panchayats   Act.   Clause   V(4)   of   the   lease   deed   requires 




payment of  GP cess only if it is payable under the Panchayats Act. For the 




reasons stated while dealing ZP cess, we hold that the appellant is not liable 




to pay GP cess also.








Conclusion








14.     The   object   of   clause   V(4)   of   the   lease   deed   is   clear.   Normally,   all 




leases will contain a provision as to who will be liable to pay the rates, taxes, 




cesses   on   the   property   leased.   If   the   lease   deed   is   silent,   then   the   lessor 




would be liable to bear and pay the rates, taxes and cesses. Therefore, where 




the understanding is that the lessee should be liable to pay the rates, taxes 




and cesses in addition to the rent or premium,  the lease  deed will provide 




specifically that the lessee shall bear and pay all rates, taxes and cesses. But 




this is always on the assumption that there is a liability under the respective 




enactments to pay any rates, taxes, cesses in respect of the property. All that 




clause V(4) of the lease deed provides is that the lessee should bear and pay  




the ZP cess and GP cess, if it is leviable under the respective enactments. 



                                                13








15.     In view of the above, we accept the contention of the appellant that it 




is not liable to pay ZP cess or CP cess to the State Government under the 




lease deed. It is however made clear that if the said cesses (ZP cess and CP 




cess)  become  payable by the appellant by virtue of any amendment  to the 




provisions   of   the   respective   enactments   under   which   such   cesses   are 




leviable, then the appellant may have to pay the same. Be that as it may.  










16.     The appeal is therefore allowed. The judgment  of the High Court is 




set aside. The writ petition filed before the High Court stands allowed and 




the   demand   notices   dated   (nil)   July   1991   as   amended   on   28.10.1994   in 




regard  to   the  period  1987   to  1992   is  quashed   in   so   far  as   the   demand   for  




payment of ZP cess and CP cess. 










                                                            ...............................................J.


                                                            [ R. V.  Raveendran ]










                                                            ................................................J.


                                                            [A. K. Patnaik]










New Delhi                                                  ..................................................J.


September  27, 2011                                       [Sudhansu Jyoti Mukhopadhaya)