The penalty provision in the lease agreement, which has statutory force, could be invoked for unauthorized transportation of minerals, and the penalty was intended to compensate the State for breach of the contract.

ORDER :

1. In both these writ petitions, a common issue namely with regard to validity of revised demands made by Senior Geologist, Department of Mines and Geology, arise for consideration. Therefore, both these petitions were heard analogously and are being decided by these common order. For the facility of reference, facts from W.P. No. 2188/2017 are being referred to.

2. The petitioner was granted a quarry lese for extraction of ordinary building stone on 19.07.2013 for a period of five years in respect of land bearing Sy. No. 106/A-1 to the extent of 10 acres.

3. The Senior Geologist, Department of Mines and Geology, Haveri, issued an annual audit report in respect of Nellibeedu Quarrying Lease No. 93 for the period till 31.03.2015. It was found in the report that a quantity of 2,28,010 metric tonnes of ordinary building stone was quarried and 1,71,084 metric tonnes was consumed during the said period. According to the audit report, the petitioner has removed 51200 metric tonnes of ordinary building stone from the quarry lease area on payment of royalty of Rs. 30,71,980/-. Thereafter, notice was issued to the petitioner asking it to deposit a sum of Rs. 71,93,060/- towards royalty.

4. The Additional Chief Secretary, Government of Karnataka, issued oral instructions on 10.03.2016 to levy and collect royalty at four times i.e. Rs. 2,87,72,200/- on the grounds that (i) advance royalty has not been paid, (ii) mineral dispatch certificates have not been obtained and (iii) terms and conditions of Quarrying Lease Deed Book has been violated. Thereafter, orders dated 23.06.2016 and 24.11.2016 were passed by the Senior Geologist demanding four times the royalty amount i.e. a sum of Rs. 2,87,72,200/- for having transported 1,19,884 metric tonnes of ordinary building stone from Neelibeedu Quarrying Lease. The aforesaid order has been challenged in W.P. No. 2188/2017.

5. By another order dated 24.11.2016 passed by Senior Geologist, five times the amount of royalty, i.e. Rs. 7,73,56,724/- for extraction of ordinary building stone as on 31.03.2015 from Bingaapur Quarrying Lease, was demanded. In W.P. No. 2189/2017, the said order is assailed.

6. Learned counsel for the petitioner submitted that admittedly the petitioner has transported the mineral for a period prior to 12.08.2016. It is further submitted that, the provision incorporating the levy of penalty five times the royalty has been incorporated in Karnataka Minor Mineral Concession Rules, 1994 (hereinafter referred to as ‘the Rules’ for short) on 12.08.2016 and the said provision does not have a retrospective operation. It is also submitted that at the relevant time, there was no provision in the Rules authorizing the levy five times the amount of royalty. It is urged that under clause (4) of the lease agreement, the respondents have no authority to levy the penalty five times the royalty amount which is not provided in the Rules. It is contended that, levy of penalty is per se without any authority of law. It is also urged that issue involved in these writ petitions has been answered in favour of the petitioner by two division benches of this Court vide orders dated 02.07.2019 and 04.09.2021 in W.P. No. 27184/2019 and in W.P. No. 15589/2021. Reference has also been made to decisions of Hon'ble Supreme Court in Kerala SEB vs. Kurien E. Kalathil, (2000) 6 SCC 293, State of Bihar vs. Jain Plastics and Chemicals Ltd. (2002) 1 SCC 216 and National Highways Authority of India vs. Ganga Enterprises, (2003) 7 SCC 410.

7. On the other hand, learned Additional Government Advocate submitted that under Section 21(5) of the Minor minerals (Development and Regulation) Act, 1957, the respondents had the authority to recover the value of the mineral. It is further submitted that the market value of the mineral could be recovered under Rule 44(3) of the Mineral Concession Rules, 1994. It is also submitted that division bench decision of this court will not apply to the fact situation of the case. Learn