2004 (1) TMI 686 - SC - Indian Laws

Whether the grants of leases were made against the prohibition contained in Rule 3A and were rightly held by the High Court to be invalid?

Issues Involved:
1. Validity of the grant of quarry leases.
2. Legality of the demand for the price of granite blocks by the State.
3. Applicability of Section 21(5) of the Mines and Minerals (Development & Regulation) Act, 1957.
4. Nature of the demand (whether it constitutes a penalty or compensatory recovery).
5. Impact of interim orders and subsequent dismissal of appeals on the appellants' obligations.

Detailed Analysis:

1. Validity of the Grant of Quarry Leases:
The appellants held quarry leases that were initially granted under Rule 3 of the Karnataka Minor Mineral Concession Rules 1969. However, these grants were challenged as they contravened Rule 3A. The Karnataka High Court quashed all the grants, and the Division Bench dismissed the writ appeals. The Supreme Court, in a previous judgment, upheld this decision, declaring the leases invalid.

2. Legality of the Demand for the Price of Granite Blocks by the State:
After the dismissal of the appeals, the State of Karnataka demanded the price of the granite blocks that were exported by the appellants. The appellants challenged this demand, arguing that their actions were lawful and bona fide, as they operated under interim orders from the Supreme Court. They contended that the demand for the price of the granite blocks was equivalent to a penalty and hence unsustainable.

3. Applicability of Section 21(5) of the Mines and Minerals (Development & Regulation) Act, 1957:
Section 21(5) of the MMDR Act allows the State Government to recover the price of minerals raised without lawful authority. The appellants argued that this provision was inapplicable as their actions were under the interim orders of the Supreme Court, thus not without lawful authority.

4. Nature of the Demand (Penalty or Compensatory Recovery):
The Court clarified that the demand by the State was not a penalty but compensatory. Section 21 deals with various situations, including criminal penalties and compensatory recovery. Sub-section (5) is intended to ensure that persons acting without lawful authority do not gain an advantage. The recovery of the price of the minerals is compensatory as it aims to reimburse the State for the loss of its minerals.

5. Impact of Interim Orders and Subsequent Dismissal of Appeals on the Appellants' Obligations:
The Supreme Court noted that the appellants operated under interim orders that were vacated upon the dismissal of their appeals. The Court held that the appellants could not retain the benefits gained under the interim orders once the appeals were dismissed. The principle of restitution applied, meaning the appellants must compensate the State for the minerals raised. The Court emphasized that the appellants' claim of ignorance about the dismissal of the appeals did not absolve them of their obligations.

Conclusion:
The Supreme Court dismissed the appeals, upholding the High Court's decision. The demand for the price of the granite blocks was deemed compensatory and not a penalty. The appellants were held liable to compensate the State for the minerals raised under the interim orders, which were vacated upon the dismissal of their appeals. The Court reiterated that the appellants could not be placed in a more advantageous position than those who raised minerals without lawful authority. The appeals were dismissed without any order as to costs, but the appellants were allowed the liberty to make a representation to the State Government for some relief in the calculation of the amount.

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