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TMI Blog2004 (3) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... s from carrying out the stowing operations which would be detrimental to the interest of the workers. It would not be sound exercise of discretion on the part of the Court to permit set-off or recognize an adjustment made out-of-Court which would have the effect of withholding the release of stowing assistance and appropriating the amount thereof for the recovery of dues not arising out of the same transaction. In our opinion, it would not make any difference whether the amount withheld by the Central Government is on account of assistance or reimbursement; in either case the Could would not hold in favour of adjustment being made by the Central Government by setting off the outstanding credit referable to stowing assistance as against the outstanding demand of arrears of royalty. The High Court has not erred in allowing the writ petition filed by the respondent-Coal Company. So far as the finding recorded in its appellate judgment by the Division Bench that the Central Government is not entitled to recover the royalty and it is the State of Bihar which only is entitled to demand and recover the royalty from the respondent-Coal Company is concerned, we set-aside that finding but wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch we will briefly set out hereinafter at an appropriate place as to whether it is the Central Government as successor of the Coal Board or the State of Bihar which is entitled to recover the royalty. For the purpose of the present appeal we proceed on an assumption that the amount of royalty on the sand extracted by the Coal Company is due and payable by it to the Central Government. The fact remains that such obligation to pay the amount of royalty is contractual inasmuch as there is a contract i.e. a mining lease entered into by the Coal Company whereby it has earned the privilege of extracting sand from Damodar River-bed and an obligation to pay royalty on account of sand extracted, calculated at the rate appointed by the mining contract. So far as the quantified amount of royalty on sand is concerned the Coal Company is a debtor and the Union of India is creditor. The Coal Mines (Conservation Development) Act, 1974 came into force on and from April 1, 1975. Clause (j) of Section 3 defines stowing to mean as the operation of filling, with sand or any other material, or with both, spaces left underground in a coal mine by the extraction of coal. Sub-section (2) of Section 4 spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under sub-section (3) of Section 13 or sub-rule (2) of Rule 35 or sub-rule (3) of Rule 40; (b) for any measures which in the opinion of the Board are essential for the effective prevention of the spread of fire to or the inundation by water of any coal mine from an area adjacent to it; (c) for stowing for conservation of coal or washing coal which is required to be undertaken by an order under Rule 36 or 37; (d) for the following measures voluntarily undertaken by the owner agent, or manager of the coal mine : (i) stowing operations in the interests of safety or conservation of coal, (ii) any process of washing or cleaning coal which reduces its ash content and also improves its qualities or, (iii) any other measures for safety in coal mines or for conservation of coal; (e) for any other measures undertaken by the owner, agent or manager of a coal mine under the order of the Board to ensure conservation of coal. (2) The Board may grant assistance to owner of any steel work, blast furnace or coke plant for blending of coal undertaken under the orders of the Board. (3) The Board may grant assistance to the owner, agent, or manager of a coal mine which is specially handicapped by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on such actual payment that the Coal Company would be entitled to be reimbursed for the amount as a constituent of the stowing assistance. So long as the Coal Company does not actually pay the amount or royalty, the question of its being reimbursed would not arise. If the amount of royalty is payable by the Coal Company to the Central Government by way of any arrangement arrived at with the State Government or otherwise the adjustment or reimbursement would pose no problem; for the Coal Company has first to pay the amount of royalty and then seek reimbursement of the amount of royalty included by way of an ingredient in the amount of stowing assistance released by the Central Government to it. The controversy, however, arose because 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 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 consisting of wages and transportati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. No statutory provision has been brought to our notice at the Bar to sustain the claim of the Central Government for such adjustment and satisfaction of cross-demands. We are called upon to decide if such an adjustment is permissible in equity. Shri Goswami, the learned Senior Counsel, has vehemently urged that the right of the creditor to withhold money due and payable by it to its debtor for the purpose of satisfying by appropriation the demand which the creditor legitimately has outstanding against the debtor, ought to be recognized and upheld as a principle of equity emanating from what is just, fair and convenient. The learned Senior Counsel submitted that it would be unfair and iniquitous if the Central Government was compelled to part with the money already available in its hands and left free or compelled to enforce its right of recovery wherein it may fail and consequently left high and dry. On general principles supported by rationality and reasonability, it appears to be a sound proposition that a person who is obliged to pay a sum of money to another person and also has in his hands an amount of money which that another person is entitled to claim from him then instea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney legally recoverable by him from the plaintiff, not exceeding the pecuniary limits of the jurisdiction of the Court, and both parties fill the same character as they fill in the plaintiff's suit, the defendant may, at the first hearing of the suit, but not afterwards unless permitted by the Court, present a written statement containing the particulars of the debt sought to be set-off. 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 the same character in respect of the two claims sought to be set-off or adjusted. Apart from the rule enacted in Rule 6 abovesaid there exists a right to set-off, called equitable, independently of the provisions of the Code. Such mutual debts and credits or cross-demands, to be available for extinction by way of equitable set-off, must have arisen out of the same transaction or ought to be so connected in their nature and circumstances as to make it inequitable for the Court to allow the claim before it and leave the defendant high and dry for the present unless he files a cross-sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aching to the grant of assistance from the Coal Board. Rule 49 referred to hereinabove came up for the consideration of this Court in Industrial Supplies Pvt. Ltd. and Anr. Vs. Union of India and Ors. (1980) 4 SCC 341, in some other context. Vide para 32, this Court observed that if the subsidy receivable from the Coal Board (succeeded by the Central Government) was by way of assistance, the grant being conditional, the recipient thereof would be bound to apply the same for the purposes for which it was granted viz. for the purpose of stowing or other safety operations and conservation of coal mines. In our opinion, in the facts and circumstances of the present case it would not make any difference whether the amount withheld by the Central Government is on account of assistance or reimbursement; in either case the Could would not hold in favour of adjustment being made by the Central Government by setting off the outstanding credit referable to stowing assistance as against the outstanding demand of arrears of royalty. In our opinion, the High Court has not erred in allowing the writ petition filed by the respondent-Coal Company. So far as the finding recorded in its appellate jud ..... 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