SOUTH EASTERN COALFIELDS LTD. versus STATE OF M.P. AND ORS.

Citation: [2003] SUPP. 4 S.C.R. 651 · Decided: 13-10-2003 · Supreme Court of India · Bench: R.C. LAHOTI · Disposal: Dismissed
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Judgment (excerpt)

SOUTH EASTERN COALFIELDS LTD. 
v. 
STATE OF M.P. AND ORS. 
OCTOBER 13, 2003 
[R.C. LAHOTI AND ASHOK BHAN, JJ.] 
Mineral Concession Rules, 1960-Rule 64 A and 31-lnterest-
Grant of-Mining lease to C-Lease deed stipulating payment of interest at 
A 
B 
the rate of 24% in event of delay in payment of dues-Enhanced royalty 
not paid by C to Government due to interim ordres passed by High Court C 
prohibiting charge of enhanced royalty from consumers-Held, C is 
obliged by terms of lease deed and the rules to pay interest. 
Administrative Law-Delegated legislation-Ambit of-Act not 
providing for charge of interest on delayed payment-Rules framed under D 
the Act providing for charge of interest on delayed payment-Held, Rules 
can provide for interest-Mines and Minerals (Regulation and development) 
Act, 1957-Section 13-Mineral Concession Rules, 1960-Rule 64 A. 
Sale of Goods Act, 1930-Section 61-Jnterest-Grant of- E 
Incorporates a rule of equity, justice and sound logic-C selling coal to 
consumers-C entitled to include royalty paid for mining in the price of 
coal-Royalty payable enhanced-Enhanced royalty not paid by C under 
stay order of court-C not collecting enhanced royalty from consumers-
Validity of enhanced royalty upheld by the final judgment of the court- F 
C paying enhanced royalty to State with interest-Held, C can recover 
interest from consumers-Mines and Minerals (Regulation and 
Development) Act, 1957-Section 9. 
Words and Phrases-Restitution-Meaning of 
Code of Civil Procedure, 1908-Section 144-Restitution-Benefit of 
interim order passed by court to purchasers of coal-Litigation finally 
decided against the purchasers of coal-Held, the seller has a right to be 
restituted by payment of interest by purchasers even in respect of the period 
G 
of subsistence of stay order by the court. 
H 
651 
652 
SUPREME COURT REPORTS [~3] SUPP. 4 S.C.R. 
A 
The State Government had granted mining leases to the appellant 
Coalfields for extraction of coal under the provisions of the Mines and 
Minerals (Regulation and Development) Act, 1957. The prevailing rate 
of royalty payable on coal was Rs. 6.50 per ton. The Union of India 
enhanced the royalty payable on coal to Rs.120 per ton. The State 
B Government, thereafter, took steps to recover enhanced royalty from 
the Coalfiel51s. As under the Act, the Coalfields were entitled to pass 
on the _burden of royalty to the consumers/purchasers, the Coalfields 
proposed to enhance the price of coal. Several writ petitions were filed 
by ·the purchasers/consumers challenging the validity of enhancerr.ent 
C ofroyalty. The High Court, by interim orders, prohibited the Coalfields 
from recovering the enhanced royalty from the writ petitioners. 
Ultimately, the High Court quashed the enhancement of royalty on the 
ground that it was arbitrary and lacking in bona fides. 
D 
The State Government challenged the judgment and order of the 
High Court. before the Court. By an interim order, the Court stayed 
the operation of the judgment of the High Court. After passing of the 
stay order; the Coalfields issued notices to the consumers/purchasers 
demanding payment of the differential royalty and realised it by 
E invoking the bank guarantees furnished by the consumers/purchasers. 
The appeals filed by the State Government were ultimately allowed by 
the Court and the writ petitions filed by the consumers/purchasers 
were dismissed. 
Rule 64 of the Mineral Concession Rules, 1960 framed under the 
F provisions of the Mines and Minerals (Regulation and Development) 
Act, 1957 entitles the State Government to charge simple interest at 
the rate of 24% per annum on any rent, royalty, fee or sum due to it 
from the sixtieth day of the expiry of the date fixed for payment of such 
rent, royalty, fee or sum due. The agreement between the State 
G Government and lessees for grant of mining lease also includes a term 
entitling the State Government to recover simple interest at the rate 
of 24% per annum on any rent, royalty, fee or sum due to it and not 
paid within the prescribed time. 
H 
The State Government issued letters to the Coalfields demanding 
SOUTH EASTERN COALFIELDS LTD. v. ST A TE 
653 
payment of interest at the rate of 24% per annum for the period for A 
which the payment of the enhanced royalty to the State Government 
was delayed. The Coalfields, in turn, issued notices to the consumers/ 
purchasers demanding payment of similar interest from them. 
Several consumers/purcha
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