2008 (10) TMI 686 - SC - Indian Laws

Tenders invited by the Bharat Heavy Electricals Ltd. ( BHEL ) for levelling and grading - material required for execution of the contract is earth morrow gravel and mixture of these or any other material - Huge quantity of these materials was supplied - The Deputy Director of Mines and Geology raised demand notice directing the appellant to pay a higher sum being the balance of seigniorage fee after giving credit to the fees already paid - filling material was partly gravel and partly ordinary clay in respect of which seigniorage fee is liable to be paid - appellant in each case requested the authority to withdraw the demands while agreeing to pay the seigniorage fee under protest - principles of natural justice - It was also submitted that seigniorage fee on the total quantity of earth materials supplied by the company was levied in utter disregard of the analyst report of the material and without any authority to do so - Government could not have ignored the test and analyst report of the Department of Civil Engineering and Soil Mechanics Division of Andhra Pradesh University which was a relevant piece of evidence. HELD THAT - In the instant case the expression earth is missing. The actual clause reads as follows The material used for constructing embankment by earth filling shall be earth morrum gravel and mixture of these or any other material approved by the engineers. The materials shall be free from lumps clouds boulders or rock pieces roots and vegetations harmful salts and chemicals organic material silt fine sand expansive clays in order to provide stable embankment. Further in the said specification it is clearly mentioned that the material for embankment shall be as obtained from a particular source with the preference given to material becoming available from nearby road excavation under the same contract or any other excavation under the same contract. It is noticed the High Court has relied on certain records which purportedly contain the inspection notes of the sites from where the appellants had excavated the material. It is to be noted that for the first time before the High Court these records were produced. Since there was no reference to the so called inspection notes at any point of time the question of the appellant pleading prejudice because of non-supply of the same does not arise. The High Court observed that since the appellant had not demanded for the inspection notes during hearing of the revision there was no question of any prejudice. The approach is clearly wrong. In the earlier round of proceedings the respondents had categorically admitted that the appellants utilized earth only as filling material. In the additional counter-affidavit filed by the Joint Secretary of Mines in the present case it was explained that in the counter affidavit filed on behalf of the respondents the then Assistant Director made a statement that the excavated material is earth which is also liable to levy seigniorage fee. This was a mistake. By the time the counter-affidavit was filed the Department had no precise knowledge of the locations where excavation was going on or the nature of the soil which was being excavated. It was much later pursuant to a meeting between the various contractors and the concerned officials during which it was decided that the locations should be disclosed to the Department. Then the Deputy Director and Assistant Director inspected the areas and opined that the excavated material was not simply earth but gravel and clay. The High Court found the explanation to be convincing. What the High Court seems to have overlooked is that there was a specific admission in the earlier cases. It is also not borne out from the records as to when the so called inspection notes of the Deputy Director and the Assistant Director were made and what was the nature of their report. The High Court s observation that the counter affidavit earlier was on account of inadvertence is without any basis. The observations of the High Court that there was no question of sending the samples to the Department of Civil Engineering are also unsustainable. As a matter of fact it is not a case that the appellants themselves had sent the samples. In fact the samples were sent by the Department apart from the samples being sent by the appellants. The High Court s observations that they were rightly ignored by Government do not stand to reason. The report was available on record and was not by an ordinary authority and was by the Department of Andhra Pradesh University. The High Court did not accept the view expressed by a ld Single Judge while disposing of writ petition filed by one of the sub contractors M/s Gayatri Projects Ltd. Though that order was not challenged by the Department the Division Bench thought that the decision was not proper. In any event that question is of no relevance in the present case. The High Court rightly observed that since the amendments referred to were introduced after the expiry of the contract period they were really of non consequence. The basic principles of natural justice seem to have been disregarded by the State Government while revising the order. It acted on materials which were not supplied to the appellants. Additionally the High Court for the first time made reference to the report/inspection notes which was not even referred to by the State Government while exercising revisional power. The expressions natural justice and legal justice do not present a water-tight classification. It is the substance of justice which is to be secured by both and whenever legal justice fails to achieve this solemn purpose natural justice is called in aid of legal justice. Principles of natural justice are those rules which have been laid down by the Courts as being the minimum protection of the rights of the individual against the arbitrary procedure that may be adopted by a judicial quasi-judicial and administrative authority while making an order affecting those rights. These rules are intended to prevent such authority from doing injustice. We therefore set aside the impugned order of the High Court. The matter is remitted to the State Government to re-consider the matter after supplying to the appellants copies of reports/inspection notes on which the Department case rests. It shall also consider the effect of the concession made by the Department in the earlier rounds of proceedings before the High Court. The appeals are allowed but without any order as to costs.

Summary

Issues Involved:
1. Quashing of the State Government's order and consequent demand notices.
2. Seigniorage fee and penalties imposed.
3. Alleged collusion and procedural irregularities.
4. Non-supply of inspection reports and test analysis reports.
5. Principles of natural justice and administrative fairness.

Detailed Analysis:

1. Quashing of the State Government's Order and Consequent Demand Notices:
The appellants filed writ petitions before the Andhra Pradesh High Court seeking to quash the State Government's order in Memorandum No. 8817/M.II(1)/2001-6, dated 4.2.2002, and the consequent demand notices issued by the Director of Mines and Geology and the Deputy Director, Mines and Geology. The appellants, engaged in construction and engineering, had participated in tenders by Bharat Heavy Electricals Ltd. (BHEL) for levelling and grading work. They obtained rights to excavate materials such as earth and gravel from ryots of patta lands and quarry leaseholders. The Assistant Director of Mines and Geology demanded seigniorage fees, including penalties, from BHEL, which disputed the liability, stating that the contractors were responsible for paying the fees directly to the Department of Mines and Geology.

2. Seigniorage Fee and Penalties Imposed:
The appellants contended that the seigniorage fee was levied without authority and disregarded the analyst report of the materials. They argued that the materials used were primarily earth, which was not subject to seigniorage fees. The High Court, however, rejected this argument, stating that the materials used were not merely earth but included gravel and clay, which are subject to seigniorage fees. The High Court also upheld the penalties, stating that the appellants were not acting bona fide.

3. Alleged Collusion and Procedural Irregularities:
The High Court noted allegations of collusion between the Deputy Director of Mines and Geology and the appellants. The Deputy Director was found guilty of short levy and collection of seigniorage fees and was placed under suspension. The High Court observed that the appellants failed to produce documentary evidence regarding the source of materials and did not obtain the necessary permissions for quarrying. It concluded that the appellants were playing "hide and seek" with the authorities.

4. Non-Supply of Inspection Reports and Test Analysis Reports:
The appellants argued that the inspection report was not made available to them, preventing them from filing objections. The High Court rejected this plea, stating that the appellants did not demonstrate any prejudice caused by the non-supply of the inspection notes. The High Court also dismissed the relevance of the test and analysis report from the Civil Engineering Department of Andhra University, terming it a "self-service device" by the appellants.

5. Principles of Natural Justice and Administrative Fairness:
The Supreme Court found that the principles of natural justice were disregarded by the State Government. The authorities acted on materials not supplied to the appellants, and the High Court referred to inspection notes not mentioned in the revisional order. The Court emphasized the importance of the audi alteram partem rule, stating that no one should be condemned unheard. The Court highlighted that the administrative authorities must act fairly and provide a reasonable opportunity for the affected parties to present their case.

Conclusion:
The Supreme Court set aside the High Court's judgment, stating that the basic principles of natural justice were not followed. The matter was remitted to the State Government to reconsider after supplying the appellants with copies of the reports/inspection notes and considering the effect of the Department's concession in earlier proceedings. The appeals were allowed without any order as to costs.