Supreme Court of India

V. KARNAL DURAIversusTHE DISTRICT COLLECTOR, TUTICORIN AND ANR.

Citation: 1998 INSC 450
Decided: 1 December 1998
Disposal: Appeal(s) allowed
Bench: K VENKATASWAMI

Holding

The amendment to Rule 8(8)(a) that makes a sand quarry lease run for three years from the date of execution applies to the pending appeal, so the lease must be for three years from execution with the lease amount increased by 40 % and seigniorage payable.

Summary

The appellant V. K. Dura submitted the highest tender for a sand quarry lease but his offer was rejected. He appealed to the Director of Geology and Mines, who allowed the appeal on 1 April 1997 but granted the lease only for the remaining period up to 31 March 1998 and imposed seigniorage fees under the amended Rule 8‑A. The appellant contended that the amendment to Rule 8(8)(a) (effective 19 December 1996) – which makes the lease period three years from the date of execution of the lease deed – should also apply, giving him a full three‑year lease and a revised lease amount. The High Court rejected this, holding the amendment was prospective and the advertisement fixed the period. The Supreme Court, relying on State of Tamil Nadu v. Hind Stone, held that the rule in force at the time of disposal governs, so the amendment applied to the pending appeal. Consequently, the lease was to run for three years from execution, the lease amount was increased by 40 % and seigniorage fees were payable. The Court set aside the High Court judgments and allowed the appeal.

Issues considered

The amendment to Rule 8(8)(a) of the Tamil Nadu Minor Mineral Concession Rules, 1959, whether it applies to an appeal disposed after the amendment came into force.
Whether the lease period should be counted from the date of execution of the lease deed despite the advertisement specifying a fixed period.
Whether administrative instructions dated 12 March 1997 can override the principle that the rule in force at the time of disposal governs.
Whether seigniorage fees under the amended Rule 8‑A are payable.
How the lease amount should be calculated in view of the dropped 20 % annual increase proviso.

Subjects

mineral leaserule amendmentprospective applicationappealseignioragelease periodadministrative instructionState of Tamil Nadu v. Hind Stone

Judgment

A V. KARNAL DURA!
v.
THE DISTRICT COLLECTOR, TUTICORIN AND ANR.

DECEMBER I, 1998

B [K. VENKATASWAMI AND M. JAGANNADHA RAO, JJ.]

Tamil Nadu Minor Mineral Concession Rules, 1959 :

Rules 8 (8) (a), 8-A-Quarry Lease-Commencement of period-
C Pending appeal against rejection ofappellant's tender, amendments regarding
commencement of lease period and seigniorage introduced-Held, amendments
would apply to appeal as well-Period for which lease is granted is to be
counted from the date of execution of lease deed-Seigniorage would also
be paid as per amended rules.

D Tenders were invited by the respondents for grant of lease of sand
quarry from 1.1.1995 to 31.3.1998. The appellant's tender, though quoting
the highest offer, was rejected by the respondents on the ground that the
offer was less than the accepted price as estimated by the department. The
appellant filed an appeal before the Director of Geology and Mines who
E allowed the appeal on 1.4.1997, but granted the lease only for the remaining
period from 1.4.1997 upto 31.3.1998. The Director, however, applied the
amended provisions of Rule 8-A of Tamil Nadu Minor Mineral Concession
Rules, 1959 introduced by GOMS 235 dated 29.12.1996 by which additional
seigniorage fees were payable in addition to the lease amount. The appellant
filed a writ petition before the High Court contending that when the Director
F applied the amended Rules so far as seigniorage was concerned, he should
have also given the benefit of the provisions ofamended Rule 8(8) (a) which
stated that the lease period should run for a period of 3 years from the date
of the execution of the lease deed. The writ petition was dismissed by the
Single Judge of the High Court holding that the auction notice specified a
G particular period and therefore the appellant could not claim the benefit of
the amended Rule as the amendment was prospective in nature and the
application of the appellant had been rejected prior to the amendment. The
writ appeal of the appellant was dismissed. Aggrieved, the appellant filed the
present appeal.

It was contended for the appellant that the amended Rule 8(8) (a) of the
H 206
V. K. DURAi v. D.C. TUTICORIN 207
Rules provided that lease would be granted for a period of 3 years from the A
date of execution of the lease and, therefore, as the amendment had come into
force prior to the dismissal of the appeal by the Director, the Director as well
as the High Court erred in not applying the amended provision. It was
further contended that the High Court also erred in not applying the judgment
of this Court rendered in State of Tamil Nadu v. Hind Stone,· 1981 (3) SCR B
742, which laid down that the application for grant of lease of minerals under
the Rules had to be disposed of on the basis of such Rules as may be in force
at the time the application was disposed of and not by the Rules in force at
the time the application for grant of lease was made.

It was contended for the respondents that the tender being for a specific C
period from 1.4.1995 to 31.3.1998, it was not permissible for the appellant
to seek a lease for the period beyond 31.3.1998. It was submitted that the
Rules were preceded by administrative instructions dated 12.3.1997 which
stated that if any application had been processed before the commencement
of the new rules then such application should not be disposed of on the basis
of the amended rules. D
Allowing the appeal, this Court.

HELD : I.I. The amended Rule 8(8) (a) of the Tamil Nadu Minor
Mineral Concession Rules, 1959 which came into force on 19.12.1996
applied to the appeal which came to be disposed of on 1.4.1997. Accordingly, E
the period of 3 years is to be counted from the date of execution of the lease
deed. The Single Judge and the Division Bench of the High Court erred in
not applying the judgment of this Court in Hind Stone* to the appeal that
was pending before the appellate authority. The advertisement having been
issued in order to implement the rules, the terms of the advertisement F
cannot be viewed in isolation. They have necessarily to be read in conjunction
with the rules. Apart from the lease amount seigniorage fee or deed rent or
other charges have to be paid. [214-E-F-G; 213-A]

*State of Tamil Nadu v. Hind Stone, [1981] 2 SCR 742 , relied on.
G
1.2. Though the latter part of Administrative instructions dated
12.3.1997 states that ifthe processing ofth.e application is completed before
the new rules come into force then the new rules cannot be applied, this goes
against the judgment of this Court in Hind Stone case which stated that if
the application for lease was not disposed of by the date of the amendment,
then the amendment would apply. The administrative order cannot therefore, H
208 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A be relied upon by the respondents. [215-C)

1.3. It cannot be said that the amendment is prospective and is applicable
only to fresh application filed after the amendment. It is the rule in force on
the date of disposal of the application or appeal that is applicable. In case the
amendment comes during the pendency of an appeal against a refusal to
B grant the lease, as in the instant case, the appeal of the applicant has to be
disposed of by applying the amendment which has come into being during the
pendency of the appeal What applies to applications equally applies to appeals
because an appeal is nothing but the continuation of the proceedings, which
started with an application. (215-D-E)
c 2. Rule 8(8) (a) as it stood before the amendment had a proviso that the
lease amounts for the second and subsequent financial years shall be fixed
by way of an annual increase of 20%. However, the said proviso was dropped
w.e.f. 19.12.1996. Appellant's tender was rejected on 22.3.1995 and the
provision for periodic increases was there till 19.12.1996 only. In the
D circumstances of the case, as agreed on behalf of the respondents in the
event the appeal is to be allowed, the old rule would apply upto at least
19.12.1996 so far as the rate is concerned. The enhancement would be
roughly for 2 years. In the peculiar circumstances of the case, the lease
amount will stand increased by 40% of the offer. [215-F-H; 216-A)

E CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5995 of
1998.

From the Judgment and Order dated 24.12.97 of the Madras High Court
in W.A. No. 1686of1997.

F K.R Choudhary, V. Sanjeevi, V. Balachandran and P.R. Kovilan for the
Appellant.

A. Mariarputham, Ms. Aruna Mathur, for Mis. Arputham and Aruna &
Co. for the Respondents.

G The Judgment of the Court was delivered by

M. JAGANNADHA RAO, J. Leave granted. The appellant's writ petition
No. I 046 of 1997 was dismissed by a learned Single Judge of the Madras High
Court by Judgment dated 20. I 0.1997 and further appeal filed by the appellant ·
before the Division Bench in Writ Appeal No. 1686of1998 was also dismissed.
H Aggrieved by the said Judgments this appeal has been preferred.
V. K. DURA! v. D.C. TUTICORIN [M. JAGANNADHA RAO, J.] 209
The following are the relevant facts. A
The District Collector, Tuticorin (First respondent) published a
notification in the District Gazette in January 1995 calling for tender applications
for grant of lease of sand quarry in 1.17 1/2 hectares for a period of two years
from l. l.95 to 31.3.1997. The said advertisement was amended and modified
as a lease for three years i.e. upto 31.3.98, rather than for two years. On B
23.2.1995 the petitioner submitted his tender and offered a sum of Rs. 1.60
lakhs per annum. The offer of the petitioners was the highest. The first
respondent did not accept the offer but rejected the same by orders dated
22.3.1995 in exercise of his powers under Rule 8(6)(b)(ii) of the Tamil Nadu
Minor Mineral Concession Rules, 1959 (hereinafter called 'the Rules'). The C
Collector felt that the appellant's offer, even though it was highest, was less
than the upset price as estimated by the department The appellant preferred
an appeal to the Director of Geology and Mines (second respondent). The
Director allowed the appeal of the appellant by his order dated 1.4.1997 on
the ground that by the closing date of the tenders namely, 6.3.1995 the upset D
price was not fixed by the Assistant Geologist, that such upset price was fixed
only on 10.3.1995 long after the closing date namely, 6.3.1995. The Director
also held that compared to another tender where the offer of Rs. 1.75 lakhs
of this very appellant was accepted for an extent of 3 .24 hectares, the present
offer of the appellant for 1.60 lakhs was not unreasonable particularly when
the extent of the quarry area in this case was only 1.17 1/2 hectares. However, E
the Director applied the provisions contained in the amendment to Rule 8-A
introduced by G.O. Ms.235 on 19.12.1996 by which additional Seigniorage fee
was payable in addition to lease amount. By the date when the Director
allowed the appeal on 1.4.1997, part of the lease period from 1.4.1995 upto
1.4.1997 had already expired. Therefore, the Director granted the lease only F
for the remaining period from 1.4.1997 upto 31.3.1998.

Aggrieved by the said order to the extent that full three year lease was
not granted by the Director from the date of execution of lease as provided
in the amended Rules dated 19.12.96, the appellant filed the writ petition in G
the High Court. He contended that when the Director applied the amended
rules dated 19.12.1996 which were issued in GOMs No.235, so far as seigniorage
was concerned, the Director should have also given the benefit of the
amendment to Rule 8(8)(a) which stated that the lease should run for a period
of three years from the date of the execution of the lease deed. The writ
petition was contested by the respondents before the learned Single Judge. H
210 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A The learned Single Judge while dismissing the writ petition observed
that the auction notice specified a particular period namely, 1.1.95 to 31.3.98
and, therefore, the appellant could not claim that the three year period was
to run as per the amended Rule 8(8)(a), that the amendment was prospective
in nature and was not applicable to leases which had already been processed
B and rejected by the Collector earlier, - in this case on 22.3.1995. Merely
because the appellate order was passed subsequent to the amendment of the
rules in GOMs No. 235 dated 19.12.1996, the appellant could not seek the
benefit of the amendment. Before the learned Single Judge, the appellant
relied upon the judgment of this Court in State of Tamil Nadu v. Hind Stone
[1981] 3 SCR 742 for the proposition that if rules were amended during the
C pendency of an application for the grant of a mining lease, the said rules
should be applied to such pending applications. The said decision was
distinguished by the learned Single Judge on the ground that the appellant's
application was rejected by the Collector on 22.3.1995 long before the rules
came into force on 19.12.1996 and that the pendency of the appeal by the time
the amended rules came into force, was not a sufficient reason for applying
D the amendment. So far as the appellate order of the Director asking the
appellant to pay seigniorage as per the amended rule was concerned, the
learned Single Judge justified the said charge on the ground that the said fee
was leviable from 19.12.96 and therefore leviable for the remaining period from
1.4.1997 to 31.3.1998. On these grounds, the writ petition was dismissed.
E
When the appellant appealed before the Division Bench the learned
Judges too distinguished the decision of the Supreme Court in Hind Stone,
[1981] 2 SCR 742. The Bench also held that the new rules did not apply. The
Bench was also of the view that the value of the sand by the time the
appellate order came to be passed on 1.4.97 would have been more than what
F the appellant offered at the time of the tender of 21.3 .1995 and that, therefore,
in case the appeal were to be allowed, the interests of the State would suffer.
For all these reasons, the appeal was dismissed.

In this appeal before us, it was contended by the learned senior counsel
G of the appellant Shri K.R. Choudhary that the learned Single Judge and the
Division Bench as also the Director (second respondent) were wrong in not
applying the amended rule in GOMs No. 235 dated 19.12.1996. According to
him the judgment of this Court in State of Tamil Nadu v. Hind Stone [1981]
2 SCR 742 was directly in point when it said that the application for grant of
a lease of minerals under these rules had to be disposed of on the basis of
H such rules as may be in force at the time the application was disposed of and
V. K. DURAi v. D.C. TUTICORIN [M. JAGANNADHA RAO, J.] 211
not by the rules in force at the time the application for grant of lease was A
made. Learned senior counsel, therefore, contended that the Director. Mines
and Geology ought to have, while allowing the appeal of the appellant,
granted a lease for a period of three years from the date of execution of the
lease as provided in the amended rules in rule 8(8)(a).

On the other hand, the learned counsel for the respondents contended B
that the tender being for a specific period from 1.4 .1995 to 31.3 .1998 it was
not permissible for the appellant to seek a lease for a period beyond 31.3.1998
on the basis of the amended rules. The fact that the appeal before the Director
was pending upto 1.4.1997 was not a ground for applying the amended rules.
The rules were preceded by administrative instructions dated 12.3.1997 which C
stated that if any application had been processed before the commencement
of the new rules then such applications should not be disposed of on the
basis of the amended rules. Even otherwise the amended rules were prospective
in nature. The judgment of this court relied upon by the appellant in Hind
Stone was not applicable inasmuch as the application of the appellant was
disposed of by the Collector on 22.3.1995 whereas the rules came into force D
long thereafter on 19 .12. 1996. If the appellant was granted three years lease
from the date of the execution of the lease then the appellant would be making
an undue profit inasmuch as the value of sand has gone up betWeen 1995 and
1998 and to that extent the interests of the Government would suffer.

The point for condderation is whether the appellant is entitled to a E
quarrying lease for sand for three years from the date of the execution of the
lease date as per rule 8(8)(a) of the rules as amended by the GOMs No.235
dated 19.12.1996 or only upto 31.3.1998 as per the advertisement?

It may be noticed that Rule 8(8)(a), before its amendment by GOMs No.
23 5 dated 19 .12.1996 read, insofar as it is material for the case before us, as F
follows:

"Rule B(B)(a): The period of any quarry lease granted under this rule
for quarrying stones shall be five years and the period of quarry lease
for quarrying sand and other minor minerals shall be three years, G
subject to the following conditions:-

(1) The date of commencement of the period of a quarrying lease
granted under this rule shall be the first day of the first financial year
of the lease period:
Provided that where the lease deed could not be executed before the H
212 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A I st day of April in the first financial year of the lease period due to
administrative reasons, the lessee is entitled for proportionate reduction
in the annual lease amount in the first year of the lease period;
Provided that. ................................................................................................ .

B
Provided also that the lease amounts for the second and subsequent
financial years of the lease period shall be fixed by enhancing the
lease amount of the previous year by twenty per cent or as prescribed
by the State Government from time to time.

C (II) . . . . . . . . . . . . . . . . . ,,

By the amendment made w.e.f. 19.12.1996 in GOMs No. 235 (Industries) it is
stated as follows :

"Amendments.

D In the said rules, in rule 8-

( l) In sub-rule (8), in clause (a) -(a) for sub-clause (i) including the
provisos, the following sub-clause shall be substituted, namely:-

(i) the date of commencement of the period for which the quarrying
lease is granted under this rule shall be the date on which the lease
E
deed is executed.

(b) for sub-clause (ii), the following sub-clause shall be substituted,
namely:-

(ii) the lease shall expire on the date specified in the lease deed and
F in no case extension of the period of lease shall be made.

(2) in sub-clause (iv), for clause (b), the following clause shall be
substituted, namely:-

(b) All leases, besides the one time payment of the bid amount/tender
G amount, which is the lease amount, shall also pay seigniorage fee or deed
rent ...Besides the lease amount and the seigniorage fee or deed rent, the
lessee shall also pay such other levies, as may be prescribed by the State
Government, ......."

It is clear, therefore, that after the amendment, the three year period for
H quarrying of sand is to be counted from the date of execution of the lease.
V. K. DURA! v. D.C. TUTICORIN [M. JAGANNADIM RAO, J.] 213
Apart from the lease amount, seigniorage fee or deed rent or other charges A
have to be paid.

In the present case, the above amendment by GOMs No.235 dated
19 .I 2.1996 came into force after the order of rejection was passed by the
Collector on 22.3.1995. Obviously, the Collector could not have applied the
amendment. But the appeal was preferred to the Director on 20.4.1995 and it B
, . was during the pendency of the appeal that the amendment dated 19.12.1996
came into being.

As to the effect of the amendments to the Rules, the judgment of the
Supreme Court in State of Tamil Nadu v. Hind Stone [1981] 2 SCR 742 is C
relevant. In that case, when certain renewal applications were pending under
these very Rules, before the Government, Rule 8(c) was introduced by GOMs
No.1312 (Industries) on 2.12.1977. By that rule, "leases" for quarrying black
granite in favour of private parties were banned. Question arose whether the
amendment applied only to fresh leases or whether the pending renewal
applications were to be disposed of under the Rules as they stood when the D
original lease was granted. Question also arose whether, the concerned
authority could apply a Rule which came into force during the pendency of
an application or whether the Rules in force on the date of the application
alone applied. It was argued for the applicant that there was undue delay in
the disposal of the renewal applications and hence the new amendments
could not be applied. This Court initially observed (p. 759) that an application E
for renewal is in substance an application for a lease. It held :

"It must be remembered that an application for the renewal of a lease
is, in essence an application for the grant of the lease for a fresh
period. We are, therefore, of the view that Rule 8( c) is attracted in F
considering applications for renewal of leases also."

This Court also held that if rules are amended during the pendency of
an application for a mining lease, the amended Rule is to be applied while
disposing of the application. The argument if there was long delay in disposal
of applications, subsequent amendments should not be applied, was rejected. G
At (pp.759-760) it was held:

"While it is true that such applications should be dealt with within a
reasonable time, it cannot on that account be said that the right to
have an application disposed of in a reasonable time clothes an
applicant for a lease with a right to have the application disposed of H
214 SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.

A on the basis of the rules in force at the time of the making of the
application. No one has a vested right to the grant or renewal of a
lease and none can claim a vested right to have an application for the
grant or renewal of a lease dealt with in a particular way, by applying
l .
particular provisions. In the absence of any vested rights in anyone,
an application for a lease has necessarily to be dealt with according
B to the rules in force on the date of the disposal of the application
despite the fact that there is a long delay since the making of the
application." . '
Question for consideration is whether in cases where the application for lease
C is rejected by the Collector and an appeal is filed by the applicant before the
Director, and the rules are amended during the pendency of the appeal, the
above principle in Hind Stone can be applied?

In our view, what applies to applications applies equally to appeals
because, an appeal is nothing by the continuation of the proceeding which
D stated with an application. In our view it makes no difference whether the
delay has occurred on account of keeping the applications pending or on
account of an appeal being filed. In either case, Hind Stone becomes applicable.

The learned Single Judge and the Division Bench, in our view, erred in
not applying the judgment of this Court in Hind Stone to the appeal that was
E pending before the appellate authority. We are of the view that the amended
Rule 8(8)(a) which came into force on 19.12.1996 applied to the appeal which
came to be disposed of on 1.4.1997. If that be so, the period of 3 years for
a sand quarry lease must necessarily run from the date of execution of the
lease deed.

F Learned counsel for the State, however, relied on the fact that the
advertisement for lease was for a specific period i.e. 1.4.1995 to 31.3.1998.
According to him, the appellant was entitled to a lease, by orders of the
Director dated 1.4.1997, only upto 31.3 .1998 and if that period too had expired
by now, no relief could be granted. In our opinion, the advertisement having
G been issued in order to implement these very Rules, the terms of the
advertisement cannot be viewed in isolation. They have necessarily to be
read in con.junction with the rules.

Yet another argument of the learned counsel for the State is that the
amendment to the Rules dated 19.12.1996 was preceded by administrative
H instructions dated 12.3.1997 which stated that if by the date of amendment,
V. K. DURAi v. D.C. TUTICORIN [M. JAGANNADHA RAO, J.] 215
the lease application had been processed, the amendment would not apply. A
The relevant part of the instruction reads as follows:

"The District Collectors are also informed that in these cases where
order confirming the auction/tender have been issued already, the
leases may be granted as per certain rule and instructions issued. In
cases where auction/lender process was already over, the same may B
be confirmed under the earlier rules."

It is true that the latter part of this rule states that if the processing of
the application is completed before the new rules come into force, then the
new rules cannot be applied. In our opinion, this goes against the judgment
of this Court in Hind Stone case which stated that if the application for lease C
was not disposed of by the date of the amendment, then the amendment
would apply. The administrative order cannot, therefore, be relied upon by the
respondents.

Further, the argument that the amendment is prospective and is applicable D
only to fresh application filed after the amendment cannot hold good again
in view of what is decided in the Hind Stone case. It is the rule in force on
the date of disposal of the application or appeal that is applicable. In case
the amendment comes during the pendency of an appeal against a refu{al to
grant the lease, as in the case before us, the appeal by the applicant has to
be disposed of by applying the amendment which has come into being during E
the pendency of the appeal.

Lastly, we come to the submission by the respondent's counsel that the
price of sand had increased between 1995 and 1998 and if fresh tenders are
called today, the State would get a higher amount.
F
In this context, we may point out that the rule 8(8)(a)(i) as it stood
before the amendment had a proviso that the lease amounts for the second
and subsequent financial years shall be fixed by way of an annual increase
of 20%. We find, however, that the said proviso was dropped w.e.f. 19.12.1996.
This is clear from the fact that the amendment states.
G
"for sub-c!ause (i) including the provisos, the new amendment is
substituted."

In the present case, the appellant's tender was rejected on 22.3.1995 and
the provision for periodic increases was there till 19.12.1996 only. In the
circumstances of the case, we have put it to the appellant's senior counsel H
216 SUPREME COURT REPORTS [1998) SUPP. 3 S.C.R.

A that in the event the appeal is to be allowed, we will apply the old rule upto
at least 19.12.1996 so far as the rate is concerned. Learned senior counsel
agreed for such enhancement. The enhancement would be roughly for 2
years. In the peculiar circumstances of the case, we direct that the lease
amount will stand increased, to start, by 40% of the offer i.e. instead ofRs.l .6Q
B lakhs, it will be Rs.2.24 lakhs per annum, the period of lease will run for a
period of 3 years from the date of execution of the lease as stated in the
amended rule, at the rate of Rs.2.24 lakhs per annum. The appellant shall have
to pay the seigniorage also as per the amended rules in addition to the lease
amount. Time for payment of the enhancement in the lease amount or any
·-
balance of the lease amount or seigniorage, will be one month from today.
c The judgment of the learned Single Judge and Division Bench are set
aside. The order of the Director of Geology & Mining dated 1.4.1997 is
modified accordingly. The appeal is allowed as stated above. In the
circumstances, there will be no order as to costs.

D RP. Appeal allowed.

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