1995 (9) TMI 317 - SC - Indian Laws

Meaning to the word royalty figuring in a deed of assignment of mining rights between two beings

Issues Involved:

1. Meaning and interpretation of the term "royalty" in the deed of assignment.
2. Validity of the claim for royalty by the plaintiffs.
3. Applicability of Section 11 of the Transfer of Property Act.
4. Consideration for the assignment and its components.
5. Interpretation of the document Ex.D-5 and its terms.

Issue-wise Detailed Analysis:

1. Meaning and Interpretation of the Term "Royalty" in the Deed of Assignment:

The primary issue was to ascribe a meaning to the word "royalty" in the context of a deed of assignment for mining rights. The court noted that in its primary sense, "royalty" refers to royal rights and prerogatives of a sovereign. In its secondary sense, it signifies a part of the reddendum payable for rights and privileges obtained, often found in mining leases. The court emphasized that the term "royalty" in the deed was used in a loose sense to convey liability for periodic payments to the assignor for the lease period, dependent on the coal extracted. The court rejected the argument that "royalty" was used in its technical sense, asserting that the term was meant to cover an important item of consideration for future payments.

2. Validity of the Claim for Royalty by the Plaintiffs:

The plaintiffs, heirs of Sardar Pishora Singh Sial, claimed unpaid royalties from the defendants based on the assignment deed Ex.D-5. The defendants argued that the payments made over 20 years were mistakenly made and that royalty could not be claimed by an individual. The trial court interpreted the terms of Ex.D-5, concluding that the obligation to pay the so-called royalty was a periodic payment stipulated in the deed and not royalty in its technical sense. The High Court, however, held that the payment was meant to be royalty and thus not claimable by the plaintiffs as individuals. The Supreme Court disagreed with the High Court, ruling that the term "royalty" was misdescriptive and intended to cover periodic payments as part of the consideration. The plaintiffs were entitled to their rightful dues.

3. Applicability of Section 11 of the Transfer of Property Act:

The High Court mentioned Section 11 of the Transfer of Property Act, which voids terms in a deed that are offensive to the enjoyment of absolute rights. One judge opined that the term directing payment of royalty or rent was offensive under Section 11. However, the Supreme Court noted that the High Court itself declared that Section 11 was not the basis of its decision, thereby absolving the need to prod the provision. The Supreme Court did not consider Section 11 relevant to the case.

4. Consideration for the Assignment and Its Components:

The consideration for the assignment in Ex.D-5 included Rs.10,000 as earnest money, 2000 fully paid ordinary shares or Rs.20,000 in cash, and periodic payments termed as "royalty." The High Court's reasoning that Rs.30,000 was the total consideration was rejected by the Supreme Court. The court emphasized that the endorsement on the deed did not conclusively state whether Rs.30,000 was full or part consideration. The balance consideration was meant to be periodically paid as stipulated in the deed. The court concluded that the periodic payments termed as "royalty" were part of the consideration for the assignment.

5. Interpretation of the Document Ex.D-5 and Its Terms:

The Supreme Court analyzed the terms of Ex.D-5, emphasizing that the document must be construed on its own terms and not merely on the label or description given to the stipulated payments. The court noted that the word "royalty" was used to ensure periodic payments and not to confer sovereign rights. The court rejected the High Court's reasons for upsetting the trial court's judgment, asserting that the document's content and the parties' intent were clear. The court restored the trial court's judgment, recognizing the plaintiffs' entitlement to the periodic payments as part of the consideration.

Conclusion:

The Supreme Court allowed the appeal, set aside the High Court's judgment, and restored the trial court's judgment, granting the plaintiffs their rightful dues with costs. The court emphasized that the term "royalty" in the deed was misdescriptive and intended to cover periodic payments as part of the consideration for the assignment.

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