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PATNA HIGH COURT
Lakshmikanta Jha and Reuben JJ.
Sasanka Sekhar Pal
Versus
Dinanath Gorain
Appeal from Original Decree No. 120 of 1946 ;
Decided On : JANUARY 17, 1952
ROYALTY - LEASE - PENALTY - INTEREST - CONTRACT ACT, SECTION 74 - USURY LAWS REPEAL ACT, 1855, SECTION 2 - RATE OF INTEREST - JUDICIAL DISCRETION - BIHAR MONEY-LENDERS ACT - REASONABLE RATE OF INTEREST.
Fact of the Case:
A mining lease was granted for 930 years with a provision for payment of royalty and public demands. The lessees failed to pay the dues in time and the lessors filed a suit for recovery of the dues along with interest at 2% per month as stipulated in the lease agreement.
Finding of the Court:
The court held that the stipulation for payment of interest at 2% per month was in the nature of a penalty and was not independent of the primary contract to pay royalty. The court further held that the rate of interest was excessive and reduced it to 9% per annum.
Issues: 1. Whether the stipulation for payment of interest at 2% per month was in the nature of a penalty? 2. Whether the rate of interest was excessive?
Ratio Decidendi: 1. The court held that the stipulation for payment of interest at 2% per month was in the nature of a penalty because it was intended to secure regular payment of the royalty and was not independent of the primary contract. 2. The court held that the rate of interest was excessive and reduced it to 9% per annum, considering the provisions of the Bihar Money-Lenders Act and the fact that the lessees had a charge on the leasehold.
Final Decision: The court set aside the decree of the lower court and remanded the suit for disposal according to law in the light of the directions contained in the judgment.
Lakshmikanta Jha, J.
1. The appeal arises out of a suit for recovery of royalty, income-tax and other public demands in respect of a leasehold. The liability for the payment of the dues claimed in the suit is based upon the terms of a contract embodied in a mining lease. The trial Court passed a preliminary decree for a part of the claim and directed the exact amount to tie ascertained by a Commissioner in the manner indicated in the judgment. Defendants Nos. 3 to 8 are members of the family of defendants Nos. 1 and 2, and defendants Nos. 9 and 10 are the transferees of the interest of defendant No. 3, but the suit has been contested only by defendants Nos. 1 to 8 and they are the appellants here.
2. Defendants Nos. 1 and 2 took a mining lease under a registered patta and kaouliat (Ex. 1), dated the 26th April 1937, from the plaintiffs for a period of 930 years in respect of a coal mine in village Jairamdih. It is relevant to quote here paragraphs 2, 3, 4 and 6 of the kabuliat:
"2. That we as well as our heirs and successors in interest in succession shall remain bound to pay every one of you separately according to your share every month, commission at the rate of -/8/- eight annas per ton on all Kinds of kucha coal, i.e., steam, rubble, slack and dust etc., and -/12/- annas per ton on burnt, i.e., soft coke and Re. 1/- per ton on hard coke, which shall be raised and despatched from the said colliery,
3. That we shall submit to every one of you a copy of account of coal which shall be raised and despatched by Railway wagons from the said colliery in each month according to the English Calendar within 7 days of the month following and the commission on the amount of coal despatched, shall be paid by us and our heirs and successors-in-interest- in succession within 7 days of the month following. Should we fail to pay within the said 7 days, we as well as our heirs and successors in interest in succession shall remain bound to pay the same with interest there-on at the rate of Rs. 2/- (rupees two) per cent per month from the beginning of the month.
4. That whether we carry on colliery work or not or raise coal or not, we shall remain bound to pay you separately according to your shares, Rs. 800.00 (rupees eight hundred) as minimum royalty every month. We shall remain bound to pay the said monthly minimum royalty to you within 7 days of the next month. Should we fail to pay the same to you within the said 7 days, we as well as pur heirs and successors-in-interest in succession shall remain bound to pay interest thereon at the rate of Rs. 2/- (rupees two) per cent per month from the beginning of the month till realisation. Should the amount of commission in any month be less than Rs. 800/-the amount of minimum royalty, we shall remain bound to make it up to Rs. 800.00 the amount of minimum royalty. Should the amount of commission be more than Rs. 800/-, the amount of the minimum royalty, in any month, we as well as our heirs and successors-in-interest in succession shall remain bound to pay commission at the aforesaid rate.
6. That over and above the aforesaid commission or minimum royalty, we as well as our heirs and successors-in-interest in succession shall remain bound to pay whatever income-tax, road cess and public cess which are fixed at present, or any new tax which may be assessed in future, and whatever Mines Board of Health and Water Board Cess are payable by you in respect of the said mauza Jairamdih and we shall not be competent to deduct the said amount from the minimum royalty or commission or any other sum payable to you. Should you be put to any loss on account of non-payment of the said cess or income-tax, etc., in time, we as well as our heirs and successors-in-interest in succession shall remain bound to make good the same with interest."
It is clear from the recital in the deed that the lessees and their heirs and successors in interest in succession had to submit accounts of the raisings and despatch
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