STATE OF ORISSA AND ORS.versusUNION OF INDIA AND ANR.

                      ST ATE OF ORIS SA AND ORS.                                  A
                                  v.
                      UNION OF INDIA AND ANR.

                          NOVEMBER 24, 2000

             [G.B. PATTANAIK AND B.N. AGRAWAL, JJ.]                               B


       Mines and Minerals (Regulation and Development) Act, 1957-Section
 2-0rissa Minor Mineral Concession Rules, 1990-Rule 3, Rule 2(o)-
 Acquisilion of land by State for laying Railway line-Railway administration C
 using certain minor minerals while laying line-State initiating proceeding
for recovery of royalty and cess-Held, Railway Administration bound to pay
 royalty and cess for carrying out quarrying operations-Constitution of
 India Entry 54 list I-Entry 22 of list II.

    Words and Phrases-'Person', '"bonafide domestic consumption"-                 D
Meaning of.

       The Government of Orissa acquired a land for laying the railway line
and handed over the same to the railway administration. When the Railway
Administration utilised certain minor minerals like the rock cut spoils and
earth from that land, the Revenue Authorities of the State of Orissa initiated    E
proceedings for realisation of royalty and cess under the provisions of Orissa
Minor Mineral Concession Rules. The Railway Administration and the Union
of and India challenged the same by filing a writ petition in the High Court.
The Railway Administration contended that, royalty or cess could be levied
against the lessee of any mineral and the railway administration not being        F
the lessee of the land or the minor minerals therein, no royalty is payable for
utilisation of the aforesaid minor mineral for laying down the railway line.
The State Government contended that the handing over of the land for laying
of the railway track to the railway administration does not amount to
conferring ownership right over the minerals existing on the land and in
accordance with the provisions of the Mines and Minerals (Regulation and          G
Development) Act, 1957 as well as the Orissa Minor Mineral Concession
Rules, 1990, and that the railway administration would be liable to pay royalty
for use of any minerals from the land. The High Court held that the earth
and rock cut spoils excavated by the railway administration are minerals, but
however the State would not be justified in levying the royalty in respect of     H
                                      57
    58                       SUPREME COURT REPORTS [2000] SUPP. 5 S.C.R.

A   the minerals on the land which had been acquired and possession of which
    has been delivered to the railway administration. In so far as the land
    belonging to the State Government the High Court held that since no formal
    transfer deed has been executed, it would be open to the State Government to
    incorporate in the formal transfer, a term as to the payment of royalty in view
B   of the admission of the railway administration in its letter dated 10.6.1987
    that they would abide by the terms and conditions to be decided by the State
    Government while sanctioning transfer of Government land.

           In appeal to this Court the Appellant-State contended that the State is
     the owner of the mines and minerals within the territory and right to levy
C    royalty or cess in respect of any minerals is governed by the provisions of
     the Act and the Rules framed thereunder, that under the provisions of Orissa
     Minor Mineral Concession Rules 1990, which has been framed in exercise
     of power under Section 15(1) of the Act, no person can undertake any
     quarrying operation or collect and/or remove any minor mineral except under
    and in accordance with the terms and conditions of quarry lease, permit and/
D   or auction sale provided under the rules, that under the proviso to Rule 3 of
     the Rules, 1990 when extraction and collection of minor minerals is made by
    a person from his own land for normal agricultural operations or other bona
    fide domestic consumptions, then that would not tantamount to quarrying
     operations and it is excluded from the purview of Rule 3, that therefore if
E    minor minerals are extracted or removed from one's own land not for any
    domestic consumption or agricultural operations, but are sold to the public,
    then the State would be justified in levying the royalty on such extraction and
    or collection.

          The Respondent-Union of India, contended that unless and until the lease
F   deed is executed in favour of the Union of India, the State Government would
    not be entitled to levy royalty or cess for extraction of minerals from the land
    which had been acquired for the purpose of laying down railway track and
    possession whereof has been given to the Union of India itself and that the
    High Court was justified in disposing of the matter against the State.

G         Allowing the Appeal, the Court

          HELD: I. In view of the definition "person" in Rule 2(1) of the Orissa
    Minor Mineral Concession Rules, 1990 and in view of the embargo contained
    in Rule 3, even the Central Go\'ernmcnt will not be entitled to undertake any
    quarrying operations, unless such permit is granted and it must be in
H   accordance with the terms and conditions of the permit. That there being no
                                STATE v. U.0.1.                                 59
lease in favour of the Railway Administration, it is not bound to pay any royalty,    A
is not correct, in view of the proviso to Rule 3, which on the face of it prohibits
a person from extracting or collecting. minor minerals from his own land,
except for agricultural operations or other bonafide domestic consumption.
But for the exclusion, contained in proviso to Rule 3 in relation to minor
minerals extracted from owner's own land for normal agricultural operations           B
or bonafide domestic consumption, it would be a case of quarrying operation
within the definition of the expression in Ruic 2(o). The use of minor minerals
on the railway track, after being extracted from the land, not coming within
the expression "bonafide domestic consumption", the said operation would
be a quarrying operation under Rule 2(o), and consequently, the embargo
contained in Rule 3 would apply. 163-8-C, El                                          C
     Amrit Lal Nathubhai Shah and Ors. v. Union Govt. of India and Anr..
(1976( 4 sec 108, referred to.

      2. A combined reading of Rules 2(1), 2(o) and Rule 3 of the Rules of
1990 makes it crystal clear that the Railway Administration, cannot undertake         D
the quarrying operation unless a permit is granted in its favour and,
consequently, if the Railway Administration utilises the minor minerals from
the land, for the railway track, it would be bound to pay the royalty chargeable
under the Orissa Minor Mineral Concession Rules 1990.163-FI

      3."lf the Railway Administration, though not a lessee and at the same           E
time is not authorised under Rule 3 to undertake any quarrying operation
for the purpose of extraction of minor minerals, then for such unauthorised
action, the Railway Administration would be liable for penalties, as contained
in Rule 24. This being the position and in view of the prohibition contained in
sub-Rule 2 of Rule IO and taking into account the fact that such minor
minerals would be absolutely necessary for laying down the railway track              F
and maintenance of the same, the Railway Administration would be bound to
pay royalty for the minerals extracted and used by it, in laying down the
railway track. (63-G-HI

     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2235 of 1996.

      From the Judgment and Order dated 22.4.94 of the Orissa High Court              G
in O.J.C. No. 1961 of1991.

    P.N. Mishra, Ms. Ki1ti Renu Mishra, K.N. Tripathy, R.M. Patnaik, Abhisth
Kumar and S. Misra for the Appellants.

     P.P. Malhotra, Rajeev Sharma and Anil Katiyar for the Respondents.               H
    60                       SUPREME COURT REPORTS [2000] SUPP. 5 S.C.R.

A         The Judgment of the Court was delivered by

          PATTANAIK, J. This appeal is directed against the judgment of the
   Division Bench of Orissa High Court and the question for consideration is
   whether the Railway Administration would be liable to pay the royalty in
   respect of the minor minerals used by it in laying down the railway line. The,
B facts are not disputed namely for laying the railway line, Government of
   Orissa acquired the land and handed over the same to the railway
   administration. When the Railway Administration utilised certain minor minerals
   like the rock cut spoils and earth from the very land, which had been acquired
   for laying the railway Iine, the Revenue Authorities of the State of Orissa
C initiated proceedings for realisation of royalty and cess under the provisions
   ofOrissa Minor Mineral Concession Rules. The Railway Administration and
   the Union of India assailed the same by filing a writ petition in the Orissa High
   Court. According to the Railway Administration, royalty or cess could be
   levied against the lessee of any mineral and the railway administration not
   being the lessee of the land or the minor minerals therein, no royalty is
D payable for utilisation of the aforesaid minor minerals for laying down the
   railway line. The State Government on the other hand took the stand that the
   handing over of the land for laying of the railway track to the railway
   administration does not amount to conferring ownership right over the minerals
   existing on the land and in accordance with the provisions of the Mines and
E Minerals (Regulation and Development) Act, 1957 [hereinafter referred to as
   'the Act] as well as the Orissa Minor Mineral Concession Rules, 1990
  [hereinafter referred to as 'the Rules'], the railway administration would be
   liable to pay royalty for use of any minerals from the land in question and
  accordingly, the revenue authorities had rightly issued notice. The High
  Court, in the impugned judgment came to hold that the earth and rock cut
F spoils excavated by the railway administration are minerals. This finding of
  the High Court has not been assailed by the railway administration. But so
   far as the right to levy royalty on the use of minerals from the land in
  question, the High Court came to the conclusion that the State would not be
  justified in levying the royalty in respect of the minerals on the land which
G had been acquired and possession of which has been delivered to the railway
  administration. But so far as the land belonging to the State Government is
  concerned, the High Court came to the conclusion, since no formal transfer
  deed has been executed, it would be open to the State Government to
  incorporate in the formal transfer, a term as to the payment of royalty in view
  of the admission of the railway administration in its letter dated 10.6.1987 that
H they would abide by the terms and conditions to be decided by the State
                      STATE v. U.0.1. [PATTANAIK, J.]                         61
Government while sanctioning transfer of Government land. It is this judgment       A
of the High Court of Orissa, which is under challenge in this appeal.

       Mr. P.N. Mishra, the learned senior counsel, appearing for the State of
Orissa, contended that the State is the owner of the mines and minerals within
its territory and right to levy royalty or cess in respect of any minerals is
governed by the provisions of the Act and the Rules framed thereunder.              B
According to the learned counsel, under the provisions of Orissa Minor
Mineral Concession Rules, which has been framed in exercise of power under
Section 15 (1) of the Act, no person can undertake any quarrying operation
or collect and/or remove any minor mineral except under and in accordance
with the terms and conditions of quarry lease, permit and/or auction sale           C
provided under the rules. Under the proviso to Rule 3, when extraction and
collection of minor minerals is made by a person from his own land for normal
agricultural operations or other bona fide domestic consumptions, then that
would not tantamount to quarrying operations and it is excluded from the
purview of Rule 3. Necessarily, therefore if minor minerals are extracted or
removed from one's own land not for any domestic consumption or agricultural        D
operations, but are sold to the public, then the State would be justified in
levying the royalty on such extraction and or collection.

       Mr. P.P. Malhotra, the learned senior counsel, appearing for the Union
of India, on the other hand, contended that unless and until the lease deed         E
is executed in favour of the Union of India, the State Government would not
be entitled to levy royalty or cess for extraction of minerals from the land
which had been acquired for the purpose of laying down railway track and
possession whereof has been given to the Union of India itself. According
to the learned counsel, the High Court was justified in disposing of the matter
against the State.                                                                  F

        The State is the owner of all the mines and minerals within its territory
and the minerals vest with the State. It has been so held in the case of Amrit
Lal Nathubhai Shah and Ors. v. Union Govt. of India and Anr., by this Court
 in [ 1976] 4 SCC I 08. Entry 54 of List I of the Seventh Schedule confers power    G
on the Union Legislature to have Regulation of mines and minerals development
under the control of the Union, as declared by the Parliament by law to be
expedient in the public interest. The Mines .and Minerals (Regulation &
Development) Act, 1957 has been enacted by the Union Legislature in exercise
of such powers conferred upon it under Entry 54 of List I and in Section 2
thereof, there is a declaration that Union should take under its control the        H
    62                       SUPREME COURT REPORTS [2000] SUPP. 5 S.C.R.

A regulation of mines and the development of minerals to the extent provided
     under the Act. Entry 23 of List II of the Seventh Schedule deals with regulation
    of mines and mineral development but the same is subject to the provisions
    of List I with respect to regulation and development under the control of the
    Union. Entry 50 of List II is the power of the State Legislature to have taxes
B   on mineral rights subject to any limitations imposed by Parliament by law
    relating to mineral development. This power of the State government to have
    taxes on mineral rights gets denuded to the extent the MMRD Act has taken
    over and if any provision has been made for levy of any tax on any mineral
    in the Central Act, the State cannot make any law in the same field, again by
    exercise of power under Entry 50 of List II. But ifthere is no provision in the
C   Central Act, providing for levy of tax on any minerals, then the State will have
    full power to make law to make levy in question. Section 15 of the MMRD
    Act itself authorises the State Government to make rules for regulating the
    grant of quarry leases in respect of minor minerals and for the purposes
    connected therewith. "Minor Minerals" is defined in Section 3(e) of the
    MMRD Act to mean building stones, gravel, ordinary clay, ordinary sand
D   other than used for prescribed purposes and any other mineral which the
    Central Government may, by notification in the official Gazette, declare to be
    a minor mineral. In exercise of powers conferred under Section 15 of the
    MMRD Act, the Government of Orissa has made a set of rules called the
    Orissa Minor Minerals Concession Rules, 1990. Rule 3 of the aforesaid rules
E   is relevant for our purpose, which is quoted herein-below in extenso:

            "Rule 3. No person shall undertake any quarrying operations for the
            purpose of extraction, collection and/or removal of minor minerals
            except under and in accordance with the terms and conditions of
            quarry lease, permit and/or auction sale provided under these rules:
F
                Provided that extraction, collection and/or removal of minor
            minerals by a person from his own land for normal agricultural
            operations or other bonajide domestic consumptions shall not be
            construed as quarrying operations."

G The aforesaid rule makes it explicit that no. person can undertake any quarrying
    operations for the purpose of extraction, collection and/or removal of miror
    minerals except under and in accordance with the terms and conditions of a
    quarry lease permit and/or auction sale provided under the Rules. The
    expression "Person" has been defined in Rule 2(1) as thus:-

H           "Rule 2(1): "person" shall include an individual, a firm, a company,


                                                                                        (
                     STA TE v. U.0.1. [PATTANAIK, J.J                        63
        an association or body of individuals, an institution or Department of     A
        the State or Central Government and a Labour Co- operative Society."

In view of the aforesaid definition of "person" in Rule 2(1) and in view of the
embargo contained in Rule 3, even the Central Government will not be entitled
to undertake any quarrying operations, unless such permit is granted and it
must be in accordance with the terms and conditions of the permit. The             B
contention of the Railway Administration, that there being no lease in favour
of the Railway Administration, it is not bound to pay any royalty, will not hold
good, in view of the proviso to Rule 3, which on the face of it prohibits a
person from extracting or collecting minor minerals from his own land, except
for agricultural operations or other bona fide domestic consumption. But for
the exclusion, contained in proviso to Rule 3 in relation to minor minerals        C
extracted from owner's own land for normal agricultural operation or bonafide
domestic consumption, it would be a case of quarrying operation within the
definition of the expression in Rule 2(o ), which is quoted below in extenso:

        "Rule 2(o): "quarrying operations" means any operation undertaken          D
        for the purpose of winning any minor mineral and shall include erection
        of machinery, laying of tramways, construction of roads and other
        preliminary operations for the purpose of quarrying."

       This being the position and the use of minor mineral~ on the railway
 track, after being extracted from the land, not coming within the expression      E
"bona fide domestic .::onsumption", the said operation would be a quarrying
 operation under Rule 2(o), and consequently, the embargo contained in Rule
 3 would apply. A combined reading of Rules 2(1), 2(o) and Rule 3 makes it
 crystal clear that the Railway Administration, cannot undertake the quarrying
 operation unless a permit is granted in its favour and, consequently, if the
 Railway Administration utilises the minor minerals from the land, for the         F
railway track, it would be bound to pay the royalty chargeable under the
Orissa Minor Mineral Concession Rules. The liability for payment of royalty
accrues under Rule 13 and no doubt, speaks of a lease deed. If the Railway
Administration, though not a lessee and at the same time is not authorised
under Rule 3 to undertake any quarrying operation for the purpose of extraction    G
of minor minerals, then for such unauthorised action, the Railway
Administration would be liable for penalties, as contained in Rule 24. This
being the position and in view of the prohibition contained in sub-Rule 2 of
Rule I 0 and taking into account the fact that such minor minerals would be
absolutely necessary for laying down the railway track and maintenance of
the same, we would hold that the Railway Administration would be bound to          H
    64                     SUPREME COURT REPORTS (2000) SUPP. 5 S.C.R.

A pay royalty for thll minerals extracted and used by it, in laying down the
    railway track. The impugned judgment of the Orissa High Court is accordingly
    set aside and this appeal is allowed.

    VM                                                         Appeal allowed.