MAHANADI COALFIELDS LTD. versus STATE OF ODISHA & ORS on 20 January 2023

1. Feeling aggrieved and dissatisfied withthe impugned judgmentand order dated 02.04.2019, passed by theHigh Court of Orissa atCuttackin W.P. (C) No. 2477/2009, by which, the High Court hasdismissed the said writ petition preferred by the appellant herein andDhas confirmed the demand made by the District Magistrate & Collector,Sambalpur, of Rs. 70 lakhs towards the premium of the governmentland, the appellant – Mahanadi Coalfields Ltd. has preferred the presentappeal.

2. The facts leading to the present appeal in a nutshell are asunder: -E

2. The facts leading to the present appeal in a nutshell are asunder: -E

2.1 That the lands in question owned by the State Government ofOdisha came to be acquired by the Government of India under Section9 of the Coal Bearing Areas (Acquisition and Development) Act, 1957(hereinafter referred to as the Act, 1957). That thereafter, vide orderdated 04.09.1981 and in exercise of powers conferred by Sub-sectionF(1) of Section 11 of the Act, 1957 with respect to some lands acquired,the Central Government directed that the rights in or over the landsvested absolutely in the Central Government, shall, instead of continuingto vest in the Central Government, under Sub-section (1) of Section 10,vest in the Western Coalfields Limited. That vide order dated 15.12.1988,with respect to some other lands acquired by the Central GovernmentGand in exercise of powers conferred by the Sub-section (1) of Section11 of the Act, 1957, the Central Government directed that the said landsand rights so vested shall, with effect from 16.05.1987 instead ofcontinuing to so vest in the Central Government, shall vest in theGovernment Company, subject to the terms and conditions mentioned inthe said order. That is how, the appellant acquired the lands and rightsHover the lands in question. That respondent issued the demand notice dated 15.03.1984 for a sum of Rs. 70 lakhs towards premium forGovernment land and Rs. 40 lakhs towards compensation. That varioussimilar demand notices were issued for area of Non-Forest Governmentland and Revenue Forest land. The demands were challenged by theappellant by way of writ petition before the High Court. Before the HighCourt, Section 18(a) of the Act, 1957 was pressed into service by theappellant herein and it was submitted that in view of the notification asthe lands and rights on the lands absolutely vested in the CentralGovernment thereafter, the State Government is not entitled to anycompensation with respect to the lands so acquired/vested except theroyalty leviable under Section 18(a) of the Act, 1957. By the impugnedjudgment and order the High Court has interpreted Section 2(d) of theAct, 1957 andhas observed that the State Government can be said to beperson interested in land and therefore, entitled to the compensationover and above in lieu of losing the rights over the land. That thereafter,by the impugned judgment and order the High Court has dismissed thewrit petition and has confirmed the demand(s).

2.2 Feeling aggrieved and dissatisfied with the impugned judgmentand order passed by the High Court the appellant – original writ petitioner– Mahanadi Coalfields Limited has preferred the present appeal.

3. Shri K.M. Nataraj, learned ASG, appearing on behalf of theappellant has taken us to the entire scheme of the Act, 1957 right fromSection 4 to Section 11. It is submitted that as per Section 4 of the Act,1957, whenever it appears to the Central Government that coal is likelyto be obtained from land in any locality, it may, by notification in theOfficial Gazette give notice of its intention to prospect for coal therein.It is submitted that thereafter after following the due procedure asrequired the Central Government being satisfied, after considering thereport, if any, made under Section 8 that any land or any right in or oversuch land should be acquired, a declaration shall be made by it to thateffect. It is submitted that thereafter once the declaration under Section9 of the Act is issued on the publication in Official Gazette of thedeclaration,the land or the rights in or over the land, as the case may be,shall vest absolutely in the Central Government free from allencumbrances as per Section 10 of the Act. It is further submitted thatas per Section 11 of the Act, notwithstanding anything contained in Section10, the Central Government may, if it is satisfied that a Governmentcompany is willing to comply or has complied with such terms andconditions as the Central Government may think fit to impose, direct, byorder in writing, that the land or the rights in or over the land, as the casemay be, shall, instead of vesting in the Central Government under Section A

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A10 or continuing to so vest, vest in the Government company either onthe date of publication of the declaration or on such other date as maybe specified in the direction. It is submitted that therefore, once the landor the rights vested in the Central Government and/or in a Governmentcompany (under Section 11), the same is vested absolutely free from allencumbrances and the State Government is not entitled to recover anyBamount of premium of the land or the compensation or any rental exceptthe royalty leviable under Section 18(a) of the Act, 1957. It is submittedthat therefore, the demands made by the State Government upheld bythe High Court towards premium/rental, etc., is absolutely illegal.

4. Opposing the present appeal Shri Umakant Mishra, learnedcounsel appearing on behalf of the State hasvehemently submitted thatCthe appellant has been vested with the rights in the land in questionpursuant to the order of the Central Government issued under Section11 of the Act, 1957. It is submitted that it cannot be disputed that theState Government was the owner of the lands in question. It is submittedthat therefore, the State Government is entitled to the premium/Dcompensation/rentals with respect to the lands in question of the landvested or rights so vested in the Government company.

4.1 It is submitted that as such Section 18(a) of the Act, 1957which has been inserted in the year 1971 is distinct from and over andabove the right of the State Government to recover the compensation/rental, etc. It is submitted that the royalty is for the extraction of theEminerals/coal from the lands in question. He has taken us to the Statementsof Objects and Reasons for inserting Section 18(a) in the Act, 1957.

4.2 Making the above submissions, it is prayed to dismiss thepresent appeal by submitting that the High Court has rightly interpretedSection 2(d) of the Act, 1957 and has rightly observed that the Statebeing person interested in the land shall be entitled to the compensation/Frental over and above the amount of royalty leviable/payable under Section18(a) of the Act, 1957.

5. We have heard learned ASG on behalf of the appellant andlearned counsel appearing on behalf of the State. It cannot be disputedthat as per Sections 4 to 10, on the declaration being issued under SectionG9 of the acquisition, the land/rights in or over the land, as the case maybe, shall be vested absolutely in the Central Government free from allencumbrances. However, as per Section 11 of the Act, notwithstandinganything contained in Section 10, the Central Government may, if it issatisfied that a Government company is willing to comply, or has compliedwith such terms and conditions as the Central Government may think fitHto impose, direct, by order in writing, that the land or the rights in or over the land, as the case may be, shall, instead of vesting in the CentralGovernment under Section 10 or continuing to so vest, vest in theGovernment company either on the date of publication of the declarationor on such other date as may be specified in the direction. As per Sub-section (2) of Section 11, where the rights under any mining lease acquiredunder this Act vest in a Government company under Sub-section (1), theGovernment company shall, on and from the date of such vesting, bedeemed to have become lessee of the State Government as if a mininglease under the Mineral Concession Rules had been granted by the StateGovernment to the Government company, the period thereof being theentire period for which such a lease could have been granted by theState Government under those rules; and all the rights and liabilities ofthe Central Government in relation to the lease or the land covered by itshall, on and from the date of such vesting, be deemed to have becomethe rights and liabilities of the Government company. Section 13 providesfor compensation for prospecting licences ceasing to have effect, rightsunder mining leases being acquired. Thus, as per Section 11, theGovernment company in whose favour the order has been issued by theCentral Government shall be deemed to be the lessee and shall be liableto pay the compensation/rental, etc., to the State Government being‘person interested’. ‘Person interested’ is defined under Section 2(d) ofthe Act. The State Government being the original owner can be said tobe deemed lessor and ‘person interested.’ As per Sub-section (2) ofSection 11 of the Act, the Government company in whose favour theorder is issued under Section 11 can be said to be the deemed lessee ofthe State Government. Therefore, the State Government can be said tobe the ‘person interested’ in getting the compensation. Therefore, theHigh Court is absolutely right in observing and taking the view that being‘person interested’ the State Government is entitled to the compensation/rental, etc.

5.1 Now so far as the submission made on behalf of the appellantthat the Government company in whose favour the order is passed underSection 11 after which the land is vested absolutely with the CentralGovernment except the amount of royalty as per Section 18(a) of theAct, the Government company is not liable to pay any amount isconcerned, the aforesaid has no substance. The compensation/rentalpayable with respect to the lands by the lessee/deemed lessee is altogetherdifferent than the royalty. Royalty is for extraction of minerals in thelands in question. The aforesaid would be clear from the Statements ofObjects and Reasons of the Act 54 of 1971 by which Section 18(a) ofthe Act was introduced. The same reads as under: - ABC

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A“Act 54 of 1971- The Coal Bearing Areas (Acquisition andDevelopment) Act, 1957 (20 of 1957) hereinafter referred toas the Coal Bearing Areas Act) provides inter alia for theacquisition by the Central Government of virgin lands, includingunderground minerals, or rights in or over such lands. Underthe Explanation to clause (a) of sub-section (5) of section 13,Bwhich provides that the value of any minerals lying in the landwill not be taken into consideration in determining the marketvalue of any land no compensation is payable to the StateGovernments in respect of the underground minerals whichalso vest in the Central Government when the land is acquiredby the Central Government. The State Government have beenCrepresenting from time to time that this results in their beingdeprived of large sums by way of revenue. The CentralGovernment has considered the representations of the StateGovernment and has decided that the State Governments shouldbe paid purely on an ex gratia basis such sums as they wouldhave been entitled to receive by way of royalty, had miningDleases been granted in respect of the areas acquired. It is nowproposed to amend the Coal Bearing Areas Act to make suchpayments obligatory.

6. In that view of the matter over and above the amount of royaltythe coal company/Government company shall be liable to pay theEcompensation and surface land rent, etc., Therefore, the High Court isabsolutely justified in confirming the respective demand(s). The amountof royalty cannot be mixed with the compensation/loss caused to theState Government due to loss of land and surface land rent as the StateGovernment is entitled for the adequate compensation. If the submissionmade on behalf of the appellant is accepted in that case nothing wouldFbe paid towards the lands except the amount of royalty under Section18(a) of the Act, which is for extraction of minerals.

7. In view of the above and for the reasons stated above, theimpugned judgment and order passed by the High Court is not requiredto be interfered with. However, if the appellant is disputing the quantumand/or calculation of demand(s), it would be open for them to approachGthe appropriate authority, however, the demand(s) as such is/are upheld.With this, present appeal stands dismissed. No costs.

Divya Pandey(Assisted by : Abhishek Pratap Singh and Rakhi, LCRAs)

Appeal dismissed.

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