JAGAT NARAYAN, C.J.—This is an appeal by the State of Rajasthan (defendant No. 2) against a decree of the District Judge, Kota, dated 25-9 58 decreeing a suit instituted against it and against the Union of India (defendant No. 1) by the Associated Stone Industries Kota (hereinafter referred to as the Company).

2. The relevant facts are that the Ruler of the erstwhile State of Kota entered into an agreement Ex.A on 2-5-45 with the Company for quarrying Kachcha stone from the Tehsils of Ramganj Mandi and Chechat. Monopoly rights for quarrying Kachcha stone in [these two tehsils were granted to the Company for a period of 15 years from 1-10-44 The terms and conditions contained in cl.18 (1) of the agreement ran as under.

"In consideration of the concessions and privileges granted by the Grantor and in lieu of Income-tax, Super-tax and excess profits tax, the Grantee covenants to pay to the Grantor royalty on the stone excavated at the rate of rupee one per 100 sq. ft. subject to the minimum amount of Rs. 1,50,000 per financial year. Provided that the aforesaid rate of Re. 1 per 100 sq. ft. will be operative so long as the selling rate of unpolished slabs does not exceed Rs. 10 per 100 s

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