IMPORTANT POINT
The liability of the coalfields to pay interest to the State Government for the period for which the payment of the enhanced amount of royalty was delayed is statutory as well as contractual.

Headnote:(i) Mines and Minerals (Regulation and Development) Act, 1957-Section 9(3)-Mineral Concession Rules 1960-Rule 64A-Sale of Goods Act, 1930-Section 61-Mining Lease-Royalty on coal-State Government entitled to collect the royalty including enhanced royalty from lessees, i.e. coalfields-Coalfields can pass on burden of royalty to purchasers/consumers of coal by including amount equivalent to royalty in price of coal-Writ petitions filed by different consumers challenging enhancement of royalty-Coalfields did not lay any challenge to enhancement-Consumers furnished bank guarantees for payment of differential amount of royalty-Demand raised by State Government of payment of interest at the rate of 24 p.a. for the period for which payment of enhanced amount of royalty was delayed-High Court directed interest to be paid at the rate of 12 p.a. instead of 24 p.a.-Appeal against-Whether coalfields are liable to pay interest to State-Yes-Mining lessees are bound to pay interest as per terms of mining leases incorporating clause for payment of interest.
       Held : The lease deed executed by the Coalfields incorporates a recital for the payment of interest. It is one of the terms and conditions of obtaining a mining lease that any delay in payment of royalty, referable to a period beyond the sixtieth day of the expiry of the date fixed by the Government for payment of such royalty, shall carry a liability to pay simple interest calculated at the rate of 24 per annum on such amount of royalty. Rule 64A has been framed in exercise of the powers conferred on the Central Government by Section 13 of the Act. The terms for payment of royalty, and for payment of interest for the period of delay, are authorized by the power to make rules for regulating the grant of mining lease. That apart, interest is included within the expression other charges - the phrase as employed in clause (i) of sub-section (2) of Section 13 of the Act. (Para 14)
       The mining lessees, that is the Coalfields, having entered into mining lease contracts with full knowledge of terms and conditions thereof and having taken advantage thereunder of operating the mines, they cannot be subsequently allowed to wriggle out of the contractual obligations incurred by them, including the one for payment of interest, by executing the mining leases. (Para 15)
       In sum, we are of the opinion that the Coalfields, i.e., the mining lessees, are bound to pay interest as per the terms of mining leases incorporating the clause for payment of interest consistently with Rule 64A of the Mineral Concession Rules, 1960. (Para 16)
       The justification for award of interest stands fortified by the weighty factor that the Coalfields themselves are obliged to pay interest to the State on such amount. It will be a travesty of justice to hold that though the Coalfields must pay the amount of interest to the State but the consumers/purchasers in whose hands the money was actually withheld be exonerated from liability to pay the interest. (Para 23)
       (ii) Civil Procedure Code, 1908-Section 144-Principle of restitution-Scope of provision is wide enough so as to include therein almost all kinds of variation, reversal, setting aside or modification of a decree or order-Duty of Court to place parties in the position which they would have occupied but for such decree or such part thereof as has been varied or reversed.
       Held : Section 144 of the C.P.C. is not the fountain source of restitution; it is rather a statutory recognition of a pre-existing rule of justice, equity and fair play. That is why it is often held that even away from Section 144 the Court has inherent jurisdiction to order restitution so as to do complete justice between the parties. (Para 26)
       That no one shall suffer by an act of the court is not a rule confined to an erroneous act of the court; the act of the court embraces within its sweep all such acts as to which the court may form an opinion in any legal proceedings that the court would not have so acted had it been correctly apprised of the facts and the law. The factor attracting applicability of restitution is not the act of the Court being wrongful or a mistake or error committed by the Court; the test is whether on account of an act of the party persuading the Court to pass an order held at the end as not sustainable, has resulted in one party gaining an advantage which it would not have otherwise earned, or the other party has suffered an impoverishment which it would not have suffered but for the order of the Court and the act of such party. The quantum of restitution, depending on the facts and circumstances of a given case, may take into consideration not only what the party excluded would have made but also what the party under obligation has or might reasonably have made. There is nothing wrong in the parties demanding being placed in the same position in which they would have been had the court not intervened by its interim order when at the end of the proceedings the court pronounces its judicial verdict which does not match with and countenance its own interim verdict. Whenever called upon to adjudicate, the court would act in conjunction with what is the real and substantial justice. The injury, if any, caused by the act of the court shall be undone and the gain which the party would have earned unless it was interdicted by the order of the court would be restored to or conferred on the party by suitably commanding the party liable to do so. Any opinion to the contrary would lead to unjust if not disastrous consequences. Litigation may turn into a fruitful industry. Though litigation is not gambling yet there is an element of chance in every litigation. Unscrupulous litigants may feel encouraged to approach the Courts, persuading the court to pass interlocutory orders favourable to them by making out a prima facie case when the issues are yet to be heard and determined on merits and if the concept of restitution is excluded from application to interim orders, then the litigant would stand to gain by swallowing the benefits yielding out of the interim order even though the battle has been lost at the end. This cannot be countenanced. We are, therefore, of the opinion that the successful party finally held entitled to a relief assessable in terms of money at the end of the litigation, is entitled to be compensated by award of interest at a suitable reasonable rate for the period for which the interim order of the court withholding the release of money had remained in operation. Once the doctrine of restitution is attracted, the interest is often a normal relief given in restitution. Such interest is not controlled by the provisions of the Interest Act of 1839 or 1978. (Paras 27 and 28)

Judgement Key Points

Certainly. Based on the provided legal document, here are the key points:

The liability of coalfields to pay interest to the State Government for delayed royalty payments is both statutory and contractual (!) (!) .
The relevant lease agreements explicitly incorporate clauses for the payment of interest on delayed payments, establishing a contractual obligation (!) (!) .
The rules enacted under the authority of the law, such as Rule 64A, authorize the charging of simple interest at a specified rate (24% per annum) on overdue amounts (!) (!) .
The statutory provisions and the lease agreements together create a legal obligation for coalfields to pay interest on unpaid royalties, and this obligation is reinforced by the rules made under the law (!) (!) .
The absence of a specific provision in the primary legislation for interest does not preclude the levy of interest; delegated legislation and contractual clauses can establish such liabilities (!) (!) .
The principle of restitution applies to the case, suggesting that parties should be restored to their original positions if an order or interim relief has caused a benefit or detriment due to court proceedings or interim orders (!) (!) (!) .
Courts have inherent jurisdiction, beyond statutory provisions, to order restitution and award interest to ensure justice, especially when one party gains an advantage or suffers loss due to court orders or proceedings (!) (!) (!) .
The obligation of consumers/purchasers to pay interest to coalfields exists for the period when no court restraint was in effect, as the sale of minerals is a sale of goods, and interest can be awarded as damages or under equitable principles (!) (!) (!) (!) (!) (!) .
During periods when court orders restrained the recovery of the enhanced royalty, the liability to pay interest was still recognized, and the principle of restitution supports the obligation of consumers to pay interest even when payments were temporarily withheld under judicial orders (!) (!) .
The rate of interest awarded can be adjusted based on circumstances, with the court exercising discretion to reduce or modify the rate to meet the ends of justice, considering the duration and nature of the delay (!) (!) .
The overall legal framework supports the view that both statutory rules and contractual clauses establish the obligation to pay interest on delayed royalty payments, and courts can enforce this obligation to uphold justice and fairness (!) (!) (!) .

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JUDGMENT

R.C. Lahoti, J.-M/s. South Eastern Coalfields Ltd. and M/s. Western Coalfields Ltd. are Government Companies operating various coal mines in the State of Madhya Pradesh, holding mining leases granted to them by the State Government under the provisions of the Mines and Minerals (Regulation and Development) Act, 1957, hereinafter the Act , for short. Coal is a major mineral and the said companies, hereinafter collectively called as coalfields , have the exclusive right for extraction of coal under the lease deeds held by them.

2. Sub-section (3) of Section 9 of the Act empowers the Central Government to enhance or reduce the rate at which royalty shall be payable in respect of any mineral including coal w.e.f. such date as may be specified in the notification published in the official gazette in that behalf. In exercise of the power so conferred, the Union of India enhanced the royalty payable on coal to Rs. 120/- per ton from Rs. 6.50 per ton, which was the rate prevailing till then. So far as the State Government is concerned, it is entitled to collect the royalty including the enhanced royalty from the lessees, i.e. the coalfields, and the coalfields can, in law, pass-on the burden of royalty to the purchasers/consumers of coal by including the amount equivalent to royalty in the price of the coal. Coal is a controlled commodity and governed by the provisions of the Essential Commodities Act, 1956 and the Coal Control Order issued thereunder. Inasmuch as the State Government took steps for recovering the royalty on coal at the enhanced rate from the lessees and the lessees in their turn proposed to enhance the rate at which the coal was supplied to the purchasers/consumers, about 60 writ petitions came to be filed in the High Court of Madhya Pradesh by different consumers who were to bear the burden of enhancement ultimately. In the writ petitions, the enhancement of royalty on coal was sought to be impugned on two grounds: firstly, that Section 9(3) of the Act itself was ultra vires the Constitution; and secondly, that the notification dated 1st August, 1991 issued by the Central Government under Section 9(3) of the Act was unconstitutional being arbitrary, unreasonable and lacking in bona fides. The High Court of Madhya Pradesh by its decision dated 17.12.1993 upheld the vires of Section 9(3) of the Act but quashed the notification dated 1.8.1991 enhancing the rate of royalty on the ground that it was arbitrary and lacking in bona fides.

3. It is pertinent to note that the coalfields did not lay any challenge to the enhancement. All the writ petitions in the High Court were filed by the consumers/purchasers. The coalfields were impleaded as respondents. When the State of Madhya Pradesh filed appeals by special leave in this court impugning the judgment of the High Court, the coalfields joined as appellants with the State of Madhya Pradesh. A batch of appeals was decided by this Court on February 1, 1995 (decision reported as State of M.P. vs. Mahalaxmi Fabric Mills Ltd. & Ors., 1995 Supp. (1) SCC 642). This Court allowed the appeals, set aside the decision of the High Court of Madhya Pradesh and directed the writ petitions filed in the High Court to be dismissed.

4. The writ petitions in the High Court were filed on different dates. The High Court had, on a prayer made by the respective writ petitioners, passed orders protecting the writ petitioners from the recovery of enhanced royalty. Chronologically, the first of the interim orders which has been brought to our notice is dated 20.8.1992 passed in CWP No. 3239 of 1992. The order is so worded :

"...... it is directed that the respondents shall not charge royalty on coal from the petitioners at the enhanced rate but the old rate as it was prevalent before 1.8.1991 until further orders."

5. Several interim orders so made remained in operation during the pendency of the writ petitions in the High Court. On special leave petitions being filed in this Court against t

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2003 Supreme(SC) 1005

IMPORTANT POINTThe liability of the coalfields to pay interest to the State Government for the period for which the payment of the enhanced amount of royalty was delayed is statutory as well as contractual.

Cases Referred (10)

IMPORTANT POINT
The liability of the coalfields to pay interest to the State Government for the period for which the payment of the enhanced amount of royalty was delayed is statutory as well as contractual.