Holding

The Central Government cannot set off royalty arrears against stowing assistance; such set‑off is not permissible as the demands do not arise from the same transaction and the statutory purpose of the assistance must be fulfilled.

Summary

The Union of India, as successor to the Coal Board, was statutorily obligated under Section 9 of the Coal Mines (Conservation and Development) Act, 1974 to provide stowing assistance to the coal company, while the coal company owed royalty for sand extracted for stowing under a mining lease. The Government sought to recover the royalty arrears by setting off the amount against the stowing assistance it was required to pay. The coal company filed a civil writ petition; the Calcutta High Court held that such set‑off was impermissible and the Division Bench affirmed. On appeal, the Supreme Court examined whether the principles of legal and equitable set‑off (Order 8 Rule 6, CPC) could be applied to a statutory‑contractual cross‑demand. The Court held that the royalty and stowing assistance did not arise from the same transaction and that the statutory purpose of the assistance precluded any set‑off, leaving the discretion to allow equitable set‑off unused. Consequently, the appeal was dismissed and the High Court’s order upheld.

Issues considered

Whether the Central Government can withhold stowing assistance, a statutory obligation, to set off royalty arrears owed by the coal company under a contractual lease.
Whether the principles of legal or equitable set‑off under Order 8 Rule 6 of the CPC are applicable to the cross‑demands in this context.

Legislation cited

Code of Civil Procedure, 1908s. Order 8 Rule 6
Constitution of Indias. Art. 226

Subjects

set‑offstowing assistanceroyaltyCoal Mines Actequitable set‑offlegal set‑offOrder 8 Rule 6statutory obligationcontractual obligationwrit jurisdiction

Judgment

UNION OF INDIA A
v.
KARAM CHAND THAPAR AND BRS.
(COAL SALES) LTD. AND ORS.

MARCH 10, 2004
B
[R.C. LAHOTI AND ASHOK BHAN, JJ.]

Coal Mines (Conservation and Development) Act, 1974:

- Section 9-Stowing assistance-Obligation of Central Government to
provide-Coal company had contractual obligation to pay royalty to Central
Government for extracting sand for stowing operation-But the Coal company
C

fell into arrears-Therefore, Central Government sought to recover the arrears
of royalty by set-off against stowing assistance-Validity of-Held: It is not
permissible for Central Government to set-off outstanding royalty against D
stowing assistance-Coal Mines (Conservation and Safety) Rules, 1954, R.49.

Code of Civil Procedure, 1908: Order 8 Rule
I
6.

Set-off-Claim for-Writ petition to enforce the same-Applicability of
0. 8 R. 6-Held: Though there is no specific provision of law or settled rule of E
procedure governing writ jurisdiction yet the principles underlying 0. 8 R. 6
are applicable to writ proceedings-Constitution of India, 1950, Art. 226.

Equitab_le and legal set-off-Conditions. to be fulfilled-Held: Mutual
debts and credits to be available for extinction by way of equitable set-off
must have arisen out of the same transaction-Equittable set off not available F
as a matter ofright and the discretion to allow or disallow lies with the Court.

The predecessor of respondent No. 1 (Coal company) was liable to
pay royalty to the Central Government on account of sand extracted by
it for the purpose of stowing operations in the coalfields. The Central
Government was liable to pay a certain amount to the Coal company as G
stowing assistance under Section 9 of the Coal Mines (Conservation and
Development) Act, 1974. There were certain arrears of the amount of
royalty payable by the Coal company to the Central Government and the
Central Government sought to enforce recovery of the amount of royalty
997 H
998 SUPREME COURT REPORTS [2004] 2 S.C.R.

A due and payable on account of sand already extracted and.utilized in its
stowing operations by the Coal company by making an adjustment from
out of the amount payable by the Central Government to the Coal
Company as stowing assistance.

The Coal company filed a civil writ petition in the High Court. A
B Single Judge held that it was not open for the Central Government to make
an adjustment of cross demands and satisfy its contractual demand by
making an adjustment out of the amount due and payable on account of
its statutory obligation and allowed the writ petition. The Division Bench
upheld this order. Hence the appeal.
c The following question arose before the Court:

"Whether the Central Government can withhold the release of
stowing assistance, which is its statutory obligation to do so, for the
purpose of satisfying its demand of money arising under the contractual
D obligation (i.e. in mini~g lease) incurred by the Coal Company qua it?"

Dismissing the appeal, the Court

HELD: 1.1. The obligation to pay royalty is contractual. So far as
the quantified amount of royalty on sand is concerned the Coal Company
E is a debtor and the Union of India is lhe creditor. (1001-D]

2.1. A debtor making an adjustment or set-off, may have done so
in its own volition, nevertheless, the validity of such an action shall be
called in question and decided by a Court of law wherein the creditor
would seek enforcement of his claim while the debtor would raise in
F defence the plea of adjustment or set-off. Though there is no specific
provision of law or settled rule of procedure governing decision of such .-Jil
dispute arising for adjudication in exercise of writ jurisdiction, yet being
a money-claim, there is nothing wrong in borrowing the principles
underlying Order 8 Rule 6 of the Code of Civil Procedure, 1908 and
applying the same as governing the discretion of the writ Court.
G [1006-G-~; 1007-A]
2.2. What the rule deals with is legal set-off. The claim sought to be
set-off must be for an ascertained sum of money and legally recoverable
by the claimant. What is more significant is that both the parties must fill
H the same character in respect of the two claims sought to be set-off or
U.0.1. v. KARAM CHAND THAPAR AND BRS. (COAL SALES) LTD. 999

adjusted. Apart from the rule enacted in Order 8 Rule 6 there exists a A
right to set-off, called equitable, independently of the provisions of the
Code. Such mutual debts and credits or cross-demands, to be available
for extinction by way of equitable set-off, must have arisen out of the same
transaction or ought to be so connected in their nature and circumstances
as to make it inequitable for the court to allow the claim before it and B
leave the defendant high and dry for the present unless he files a cross-
suit of his own. When a plea in the nature of equitable set-off is raised it
is not done as of right and the discretion lies with the Court to entertain
and allow such plea or not to do so. (10.07-C-F)

- on.
Bhupendra Narain Singha Bhadur v. Bhadur, AIR (1952) SC 201, relied C

Black's Law Dictionary 7th Edn., 1999 and Thomas W. Waterman: "A
Treatise on the Law of Set-off, Recoupment and Counter Claim'', referred to.

3.1. It is not possible to accept the appellant's contention that the D
Coal Company had entered into a contract by correspondence with the
Central Government, supported by company resolutions, whereby the Coal
Company had agreed for such satisfaction of cross de~ands. It must be
held that the Coal Company had agreed to its demand of stowing
assistance being set-off against the demand by the Central Government
on account of royalty. (1005-E-G) E
3.2. What the Coal Company has sought to enforce is a statutory
obligation of the appellant-Union of India. The Coal Mines (Conservation
and Development) Act, 1974 has a public purpose and a beneficial object
to achieve. The stowing assistance is released to the coal company in the
interest of securing safety at the coal mines and the development thereof. F
In the absence of stowing, there may be accidents, casualties and difficulties
of operation. Non-payment of stowing allowance may discourage the coal .
mines from carrying out the stowing operations which would be
detrimental to the interest of the workers. It would not be a sound exercise
of discretion on the part of the Court to permit set-off or recognize an G
adjustment made out-of-Court which have the effect of withholding the
release of stowing assistance and appropriating the amount thereof for
the recovery of dues not arising out of the same transaction.
(1007-G-H; 1008-A-BJ

3.3. It would not make any difference whether the amount withheld H
1000 SUPREME COURT REPORTS (2004] 2 S.C.R.

A by the Central Government is on account of assistance or reimbursement;
in either case the Court would not hold in favour of adjustment being made
by the Central Government by setting off the outstanding credit referable
to stowing assistance as against the outstanding demand of arrears of
royalty. [1008-F-GJ

B Industrial Supplies Pvt. Ltd v. Union ofIndia, [198014 SCC 341, relied
on. ____......

Coal Products Pvt. Ltd. v. ITO, (1972) 85 ITR (Cal.), approved.

4. Thus, the High Court has not erred in allowing the writ petition
C filed by the respondent-Coal Company. [1008-H]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2509 of
1997.

From the Judgment and Order dated 16.12.91 of the Calcutta High
D Court in W.P. No. 226 of 1978.

N.N. Goswami, Y.P. Mahajan, Ajay Sharma and D.S. Mahra for the
Appellant.

Dipankar Gupta (NP), Jaideep Gupta, A.K. Yadav, Dilip Sinha, Sanjay
E R. Khalap, Anip Sachthey, Kumar Rajesh Singh, B.B.Singh and Ashok Mathur
for the Respondents.

The Judgment of the Court was delivered by

R.C. LAHOTI, J. Just bare essential facts, as ascertainable on retrieval
F from a jumble of facts, are set out hereinafter, as those would suffice, in our
opinion, to appreciate the crux of controversy arising for decision in this
appeal. The controversy and the consequent litigation have spread over nearly
four. decades. In between, the parties have changed their identities by
succession, amalgamation or supersession. The Coal Board, a statutory body
G has been dissolved and taken over by Union of India. What was Mis.
Bhulanbaree Coal Co. Ltd. has taken shape as Oriental Coal Co,. Ltd., and
then the respondent No.1 hereinafter. We would refer to the present parties
only and that reference would include their respective predecessor legal entities.
The Oriental Coal Co. Ltd. shall be referred to as 'Coal Company' for short.

H The Coal Company owns and possesses certain coal mines in the State
U.0.1. v. KARAM CHAND THAPAR AND BRS. (COAL SALES) LTD. [LAHOTI, J.J l 001
..._
of Bihar. The Coal Board was constituted under the provisions of the Coal A
Mines (Conservation and Development) Act, 1974, hereinafter 'the Act' for
short. However, the said Coal Board was dissolved with effect from April I,
1975 and all rights, privileges, liabilities and obligations of the Board have
come to vest in the Central Government.

There are cross-demands between the parties. It is not necessary to set B
out the details and particulars of the demands. It would suffice for our purpose
to notice that the Coal Company is liable to pay royalty on account of sand
extracted by it for the purpose of carrying out stowing operations in the

- coalfields. We would not enter into yet another controversy which we will
briefly set out hereinafter at an appropriate place as to whether it is the
Central Government as successor of the Coal Board or the State of Bihar
which is entitled to recover the royalty. For the purpose of the present appeal
c
we proceed on an assumption that the amount of royalty on the sand extracted
by the Coal Company is due and payable by it to the Central Government.
The fact remains that such obligation to pay the amount of royalty is contractual
inasmuch as there is a contract i.e. a mining lease entered. into by the Coal D
Company whereby it has earned the privilege of extracting sand from Damodar
River-bed and an obligation to pay royalty on account of sand extracted,
calculated at the rate appointed by the mining contract. So far as the quantified
amount of royalty on sand is concerned the Coal Company is a debtor and
the Union of India is creditor.

-- The Coal Mines (Conservation and Development) Act, 1974 came into
force on and from April 1, 1975. Clause G) of Section 3 defines ."stowing"
to mean as the operation of filling, with sand or any other material,. or with
E

both, spaces left underground in a coal mine by the extraction of coal. Sub-
section (2) of Section 4 specifically empowers the Central Government to
F
make order in writing addressed to the owner, agent or manager of a coal
mine, requiring him to take such measures as it may think necessary for the
purpose of conservation of coal or for development of coal mines including
in any coal mine, stowing for safety. Sub-section (2) of Section 5 specifically
obliges the owner of a coal mine to:- (i) execute such stowing and other
operations as may be necessary· to be taken in furtherance of the objects of G
this Act in so far as such objects relate to the conservation of coal or
development of the coal mine or the utilization of coal obtained from the coal
_____..__ mine; (ii) acquire such stowing and other materials as may be necessary for
ensuring the conservation of coal, and safety in, the coal mine; (iii) undertake
such other activity as the Central Government may, for the furtherance of the
H
1002 SUPREME COURT REPORTS [2004) 2 S.C.R.

A objects of this Act, direct; and so on.

Out of the net proceeds of excise and customs duties on coal, the
Central Government is obliged to disburse a certain amount inter alia for the
purpose of grant of stowing materials and other assistance for stowing
operations and execution of stowing and other operations for the safety of
B coal mines or conservation of coal. The amount released by the Central
Government under Section 9 of the Act to the owner of every coal mine, is
required to be credited into the Coal Mine Conservation and Development
Account under Section I 0 of the Act. The money standing to the credit of the
Account shall be applied by the owner of the coal mine only for the purposes
C specified in sub-section (2) of Section I 0 of the Act including, inter a/ia, the
acquisition of stowing and other materials needed for stowing operations in
coal mines and the execution of stowing and other operations in furtherance
of the objects of the Act amongst others. Under Section 18 the Central
Government is empowered to make rules.

]) In exercise of the power, conferred by the Coal Mines (Conservation
and Safety) Act, 1952 on the Central Government, the Central Government
has framed the Coal Mines (Conservations and Safety) Rules I 954. Rule 49
provides as under:

"49. Purposes for which assistance may be granted
E
(I) The Board may grant assistance from the Fund to any owner,
agent or manager of coal mine -

(a) for stowing or other protective measures which are required
to be undertaken by an order issued under sub~section (3) of
Section 13 or sub-rule (2) of Rule 35 or sub-rule (3) of Rule
F
40;

(b) for any measures which in the opinion of the Board are
essential for the effective prevention of the spread of fire to
or the inundation by water of any coal mine from an area
G adjacent to it;

(c) for stowing for conservation of coal or washing coal which
is required to be undertaken by an order under Rule 36 or
37;·

(d) for the following measures voluntarily undertaken by the
H
U.0.1. "·KARAM CHAND THAPAR AND BRS. (COAL SALES) LTD. (LAHOTI, J.] } 003

owner agent, or manager of the coal mine : - A
(i) stowing operations in the interests of safety or
conservation of coal,

(ii) any process of washing or cleaning coal which reduces
its ash content and also improves its qualities or, B
(iii) any other measures for safety in coal mines or for
conservation of coal;

(e) for any other measures undertaken by the owner, agent or
manager of a coal mine under the order of the Board to
ensure conservation of coal. c
(2) The Board may grant assistance to owner of any steel work, blast
furnace or coke plant for blending of coal undertaken under the
orders of the Board -
(3) The Board may grant assistance to the owner, agent, or manager D
of a coal mine which is specially handicapped by adverse factors
rendering its working uneconomic, but which, in the opinion of
the Central Government, should be maintained in production for
the purpose of ensuring the conservation of coal. In such cases
assistance shall be granted by the Board -
E
(i) with due regard to the circumstances of each case;

(ii) only in respect of such adverse factors as may, from time to
time, be specified by the Central Government as entitling a
coal mine to receive assistance, and published by the Board
F
-- in the Official Gazette for general information; and

(iii) in accordance with such procedure as may be determined,
and not exceeding such rates as may be fixed, by the central
Government, from time to time :

Provided that the existence or otherwise of adverse factors in G
any coal mine, the extent to which such adverse factors render the
working of the coal mine uneeonomic, and the amount of assistance,
if any, to be granted to the coal mine, shall be determined by the
central Government."

Coal Board Manual is a compilation of the rules and instructions issued H
1004 SUPREME COURT REPORTS [2004] 2 S.C.R.

A by the Coal Board/Central Government from time to time. Some of them are.
statutory and some are executive. However, it is not ·disputed that whatever
is contained in the Coal Board Manual is binding on the Coal Board/Central
Government and the coal companies. Vide para 34 of the Manual it is provided
that the stowing assistance granted by the Central Goverpment to the Coal
B Company includes amongst other items, the actual amount ofaoyalty paid for
stowing material excavated and transported. Other charges included in the
amount of stowing assistance are wages of labour employed in and associated
with stowing charges, certain charges related to sand pumps and so on, as
stated in the Rules. Thus, it appears that while the Coal Company has to pay
royalty on the amount of sand extracted by it for the purpose of carrying out
C stowing operations, the amount of royalty actually paid is reimbursed by the
Central Government to the Coal Company as one of th~ constituents of the
stowing assistance.

So far as the current amount of royalty is concerned there cannot possibly
·be any dispute as to adjustment or set off inasmuch as the amount of royalty
D on the quantum of sand extracted by the Coal Company for carrying out
stowing operations, shall be actually paid by the Coal Company to the Central
Government or anyone else entitled and it is only on such actual payment
that the Coal Company would be entitled to be reimbursed for the amount as
a constituent of the stowing assistance. So long as the Coal Company does
E not actually pay the amount or royalty, the question of its being reimbursed
would not arise. If the amount of royalty is payable by the Coal Company to
the Central Government by way of any arrangement arrived at with the State
Government or otherwise the adjustment or reimbursement would pose no
problem; for the Coal Company has first to pay the amount of royalty and
then seek reimbursement of the amount of royalty included by way of an ·
F ingredient in the amount of stowing assistance released by the Central
Government to it.

The controversy, however, arose because there were certain arrears of
the amount of royalty payable by the Coal Company to the Central Government
and the Central Government sought to enforce recovery of the amount of
G royalty due and payable on account of sand already extracted and utilized in
its stowing operations by the Coal Company by making an adjustment from
out of the amount payable by the Central Government to the Coal Company
as stowing assistance consisting of wages and transportation charges etc.
incurred by the Coal Company for carrying out the stowing operations. The
H Central Government sent a few communications to the Coal Company whereby
U.0.1. v. KARAM CHAND THAPAR AND BRS. (COAL SALES) LTD. [LAHOTI, J.] 1005

the Central Government made it clear that the payment of stowing assistance A
was being withheld and the amount appropriated by the Central Government
towards satisfying its demand outstanding against the Coal Company on
account of royalty due and payable by the Coal Company to the Central
Government on the sand extracted from the river-bed and utilized by it in
stowing.
B
The Coal Company filed a civil writ petition in the High Court of
Calcutta. A learned Single Judge held that it was not open for the Central
Government to make an adjustment of cross demands and satisfy its contractual
demand by making an adjustment out of the amount due and payable on
account of its statutory obligation. The learned Single Judge directed the C
communications to the contrary made by the Central Government to be
quashed. The Union of India preferred an intra-court appeal which has been
dismissed by the Division Bench. The Division Bench has not only upheld
the view taken by the learned Single Judge but it has also proceeded further
to opine that under the law it was the State Government which was entitled
to recover the amount of royalty on sand, and therefore, there was no question D
of Central Government raising a demand on account of royalty and withholding
the release of stowing assistance pursuant to its statutory obligation.

The question which arises for decision is: whether the Central
Government can withhold the release of stowing assistance, which is its
statutory obligation to do, for the purpose of satisfying its demand of money E
-- arising under the contractual obligation (i.e. in mining lease) incurred by the
Coal Company qua it?

Though Shri N.N. Goswami, the learned Senior Counsel for Union of
India, has urged that the Coal Company had entered into a contract by F
correspondence with the Central Government, supported by company
resolutions, whereby the Coal Company had agreed for such satisfaction of
cross demands but we are not satisfied if such a plea can be successfully
urged by the Union of India from the documents and materials available on
record. We cannot hold that the Coal Company had agreed to its demand of
stowing assistance being set-off against the demand by the Central Government G
on account of royalty.

- No statutory provision has been brought to our notice at the Bar to
sustain the claim of the Central Government for such adjustment and
satisfaction of cross-demands. We are called upon to decide if such an
adjustment is permissible in equity. Shri Goswami, the learned Senior Counsel, H
1006 SUPREME COURT REPORTS [2004) 2 S.C.R.

i ·. A has vehemently urged that the right of the creditor to withhold money due .
and payable by it to its debtor for the purpose of satisfying by appropriation
the demand which the creditor legitimately has outstanding against the debtor,
ought to be recognized and upheld as a principle of equity emanating from
what is just, fair and convenient. The learned Senior Counsel submitted that
it would be unfair and iniquitous if the Central Government was compelled
B to part with the money already available in its hands and left free or compelled
to enforce its right of recovery wherein it may fail and consequently left high
and dry.

On general principles supported by rationality and reasonability, it
appears to be a sound proposition that a person who is obliged to pay a sum
c of money to another person and also has in his hands an amount of money
which that another person is entitled to claim from him then instead of
physically entering into two transactions by exchanging money twice that
. person may utilize the money available in his hands to satisfy the claim due
and legally recoverable from such other person to him. However, this equitable ••
D principle is not one of universal application and has its own limitations.
"Set-off' is defined in Black's Law Dictionary (7th Edn., 1999) inter
alia as a debtor's right to reduce the amount of a debtor by any sum the
creditor owes the debtor; the counterbalancing sum owed by the creditor. The . J
dictionary quotes Thomas W. Waterman from 'A Treatise on the Law of Set-
E Off, Recoupment, and Counter Claim' as stating, "Set-off signifies the
subtraction or taking away of one demand from another opposite or cross
demand, so as to distinguish the smaller demand and reduce the greater by
the amount of the less; or, if the opposite demands are equal, to extinguish
both. It was also, formerly, sometimes called stoppage, because the amount
F to be set-off was stopped or deducted from the cross-demand."
...........
The writ petition filed by the respondent-Coal Company sought for
quashing of the communication made by the appellant-Union of India
informing it o_f its action to withhold the amount of stowing assistance against
its claim for arrears of royalty. In effect, the Coal Company was seeking a
G relief for release of stowing allowance by compelling the Central Government
to discharge its such statutory obligation. A debtor making an adjustment or
set-off, may have done so in its own volition, nevertheless, the validity of

H
such action shall be called in question and decided by a Court of law wherein
the creditor would seek enforcement of his claim while the debtor would
raise in defence the plea of adjustment or set-off. Though there is no specific
-
U.0.1. v. KARAM CHAND THAPAR AND BRS. (COAL SALES) LTD. [LAHOTI, .I.] 1007

provision of law or settled rule of procedure governing decision of such A
dispute arising for adjudication in exercise of writ jurisdiction, yet being a
money-claim, there is nothing wrong in borrowing the principles underlying
Order 8 Rule 6 of the Code of Civil Procedure and applying the same as
governing the discretion of the writ Court.

Sub-rule (1) of Rule 6 of Order 8 of the CPC provides as under : B
"6. Particulars of set-off to be given in written statement. (I)
Where in a suit for the recovery of money the defendant claims to
set-off against the plaintiff's demand any ascertained sum of money
legally recoverable by him from the plaintiff, not exceeding the
pecuniary limits of the jurisdiction of the Court, and both parties tip C
the same character as they fill in the plaintiff's suit, the defendant
may, at the first hearing of the suit, but not afterwards unless pennitted
by the Court, present a written statement containing the particulars of
the debt sought to be set-off."

What the rule deals with is legal set-off. The claim sought to be set-off
D
must be for an ascertained sum of money and legally recoverable by the
claimant. What is more significant is that both the parties must fill the same
character in respect of the two claims sought to be set-off or adjusted. Apart
from the rule enacted in Rule 6 abovesaid there exists a right to set-off, called
equitable, independently of the provisions of the Code. Such mutual debts E
and credits or cross-demands, to be available for extinction by way of equitable
set-off, must have arisen out of the same transaction or ought to be so
connected in their nature and circumstances as to make it inequitable for the
Court to allow the claim before it and leave the defendant high and dry for
the present unless he files a cross-suit of his own. When a plea in the nature
of equitable set-off is raised it is not done as of right and the discretion lies. F
with the Court to entertain and allow such plea or not to do so.

In Bhupendra Narain Singha Bahadur v. Bahadur Singh and Ors., AIR
(1952) SC 201, this Court ruled that a plea in the nature of equitable set-off
is not available when the cross-demands do not arise out of the same G
transaction. A wrong-doer who has wrongfully withheld monies belonging to
another cannot invoke any principle of equity in his favour and seek to
deduct therefrom the amounts which may have fallen due to him. There
would be nothing improper or unjust in telling the wrong-doer to undo his
wrong and not to take advantage of it.
H
1008 SUPREME COURT REPORTS [2004] 2 :S.C.R.

A In the present case, what the Coal Company has sought to enforce is
a statutory obligation of the appellant-Union of India. The Coal Mines
(Conservation and Development) Act, 1974 has a public purpose and a
beneficial object to achieve. The stowing assistance is released to the Coal
Company in the interest of securing safety at the coal mines and the
development thereof. In the absence of stowing, there may be accidents,
B casualties and difficulties of operation. Non-payment of stowing allowance
may discourage the coal mines from carrying out the stowing operations
"which would be detrimental to the interest of the workers. It would not be
sound exercise of discretion on the part of the Court to permit set-off or
recognize an adjustment made out-of-Court which would have the effect of
C withholding the release of stowing assistance and appropriating the amount
thereof for the recovery of dues not arising out of the same transaction.

Shri Jaideep Gupta, the learned senior counsel for the Coal Company,
has rightly relied on the decision of Calcutta High Court in Coal Products
Pvt. Ltd and Anr. v. Income-Tax Officer, "M" Ward, Companies District II,
D Calcutta, and Ors., (1972) 85 ITR 347, wherein a garnishee order was quashed.
It was held that the money which is payable by the Coal Board to a Coal
Company as and by way of stowing assistance was not available to be paid
by the Coal Board to Income-tax Department for recovery of income-tax
dues as that would result in breach of statutory obligation of the Board with
E regard to the utilization of its fund as laid down in Section 12 of the Act as
also in breach of statutory obligation of the Coal Company attaching to the
grant of assistance from the Coal Board. Rule 49 referr~d to hereinabove
came up for the consideration of this Court in Industrial. Supplies Pvt. Ltd
and Anr. v. Union of India and Ors., [1980) 4 SCC 341, in some other
context. Vide para 32, this Court observed that if the subsidy receivable frqm
F the Coal Board (succeeded by the Central Government) was by way of
assistance, the grant being conditional, the recipient thereof would be bound
to apply the same for the purposes for which it was granted viz. for the
purpose of stowing or other safety operations and conservation of coal mines.
In our opinion, in the facts and circumstances of the present case it would not
G make any difference whether the amount withheld by the Central Government
is on account of assistance or reimbursement; in either case the Court would
not hold in favour of adjustment being made by the Central Government by ',
setting off the outstanding credit referable to stowing assistance as against
the outstanding demand of arrears of royalty.

H In our opinion, the High Court has not erred in allowing the writ petition
U.0.1. v. KARAM CHAND THAPAR AND BRS. (COAL SALES) LTD. [LAHOTI . .I.] 1009

filed by the respondent-Coal Company. A
So far as the finding recorded in its appellate judgment by the Division
Bench that the Central Government is not entitled to recover the royalty and
it is the. State of Bihar which only is entitled to demand and recover the
royalty from the respondent-Coal Company is concerned, we set-aside that
finding but without recording any opinion of ours on that aspect for the short B
reason that such issue is not required to be adjudicated upon in the present
case in view of the finding arrived at hereinabove. We hasten to add that
requisite pleadings and necessary material are also not available on record to
arrive at a definite finding in that regard.

Before parting we make it clear that the appellant or the State of Bihar, C
as the case may be, is free to recover arrears of royalty by adopting such
other method as may be available under the law.

The appeal is dismissed. No order as to the costs.

v.s.s. Appeal dismissed. D