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

Citation: [2004] 2 S.C.R. 997 · Decided: 10-03-2004 · Supreme Court of India · Bench: R.C. LAHOTI · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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UNION OF INDIA 
v. 
KARAM CHAND THAPAR AND BRS. 
(COAL SALES) LTD. AND ORS. 
MARCH 10, 2004 
[R.C. LAHOTI AND ASHOK BHAN, JJ.] 
Coal Mines (Conservation and Development) Act, 1974: 
A 
B 
Section 9-Stowing assistance-Obligation of Central Government to C 
provide-Coal company had contractual obligation to pay royalty to Central 
Government for extracting sand for stowing operation-But the Coal company 
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 6. 
I 
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 of right 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 
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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 cred

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