Holding

A raising contractor is deemed an "owner" under the Nationalisation Act, so its installed assets vest in the Government and the subsidy amount is payable to the mine and may be appropriated by the Government.

Summary

Industrial Supplies Pvt. Ltd. and another company were managing/raising contractors of two coking coal mines under long‑term agreements that required them to install machinery and other plant. The mines were taken over by the Central Government under the Coking Coal Mines (Nationalisation) Act, 1972. The contractors claimed they were not "owners" within the meaning of the Act and therefore sought to remove their installed assets and recover a subsidy of Rs. 4,50,000 paid by the erstwhile Coal Board. The Supreme Court held that a raising contractor is deemed an "owner" under s.3(n) of the Act read with s.2(1) of the Mines Act, 1952, so the assets vested in the Government and the subsidy amount was an amount due to the mine, recoverable by the Government under s.22. Consequently, the Union of India's appeal was allowed and the contractors' appeal dismissed.

Issues considered

Whether a raising contractor of a coking coal mine falls within the definition of "owner" under sub‑s. (1) of s.4 of the Coking Coal Mines (Nationalisation) Act, 1972.
Whether fixed assets installed by such contractor vest in the Central Government upon nationalisation.
Whether the subsidy of Rs. 4,50,000 receivable from the erstwhile Coal Board is an amount due to the mine and can be appropriated by the Government under s.22 of the Nationalisation Act.
Interpretation of the term "owner" in s.3(n) of the Nationalisation Act in light of s.2(1) of the Mines Act, 1952 and the purpose of the statutory fiction.

Legislation cited

Coal Mines (Conservation and Safety) Rules, 1952s. r.49, s. r.54
Coal Mines (Conservation, Safety and Development) Act, 1952s. s.4
Coking Coal Mines (Nationalisation) Act, 1972s. s.22, s. s.3(n), s. s.4(1)
Mines Act, 1952s. s.2(1)

Subjects

Nationalisationowner definitionraising contractorcoking coal minessubsidylegal fictionMines Actproperty vestingcompensationSection 22

Judgment

375

. (·
JNDUSTRIAL SUPPLIES PVT. LTD. & ANR.
v.
UNION OF INDIA & ORS.
(AND VICE VERSA) B
August 1, 1980
[V. R. KRISHNA IYER, 0. CmNNAPPA REDDY AND A. P. SEN, JJ.]
.Coking .Coal Mines (Nationalisation) Act, 1972, sub-s. (1) of s. 4---Whether
a raising co~tractor of a coal mine is an "owner" and· if so, whether the fixed
assets like machinery, planls, equipment and other properties installed 'or brought :C
. in by such a raising contractor vest in the Central Government-Whether su[,-
sidy receivable from the erstwhile Coal Board established :mder s. 4 of the
Cor:! Mines (Conservation,. Safety and Development) Act, 1952 upto the specified
date from a fund kno.wn as a Conservation and Safety Fund, by such raising
contractor prior to the appointed day can be realised by the Central Govern· ;
ment by virtue of their powers .under sub-s. (3) of s. 22 of the Nationalisation 1
Act, to the exclusion of all other persons including such contractor and applkd D J
under sub-s. (4) of s. 22 towards the. discharge of the liabilities of the coking
coal mine, .which could not be discharged by the appointed day. ·
The appellants by virtue of two agreements with M / s. Balihari Colliery
Co. Pvt. Ltd. and with New Dharamband Colliery Ltd. became the managing
contractor for a period of 20 years of the former and the raising contractor of
the latter; In terms of the said agreements, they installed from time to time
various fixed assets like machinery, plants and equipment and erected stmctures
and raised new roads within. the said collieries. These two collieries were ·taken
over by the Central Government under its management with effect from October
17, 1971, by virtue of the powers vested in it under the Coking Coal Mines
(Nationalisation) Act, 1972. The appellants aggrieved by the said taking over
filed a writ. petition in the Delhi High Court seeking a declaration that sub·
s. (!) of s. 4 of the Nationalisation Act does not provide for the acquisition
: of the right, title and i;,terest inasmuch as being mi.sing contrnctors. they were
not covered by the term 'owner' within the meaning of- s. 3(n) of the Nationa·
lisation Act. and, therefore, they were entitled to dismantle and remove the
fixed assets like machinery, plants etc. They also sought t9 recover the amount
of subsidy of about Rs. ,4,50,000 collected by . the Central Government from
the erstwhile Coal Board.
The High Court substantially disallowed the claim of the appellants holding
·that they fall within .the meaning of term 'owner'. It, however, held that the
amount of sub•idy of Rs. 4,50,000 receivable from the Coal Board by way of
reimbursement towards the cost of sand stowing and hard. mining operati·1ns
carried on by them could not· be treated to. be as an amount due to the
coking coal mine within the meaning of sub-s. (3) of s. 22 and, therefore,
could not be utilised . by the Central Government under ~ub-s. 4 of s. 22
for ·discharge .of the liabilities of the coking coal mine. Hence, the two appeals
one by. the appellants and the other by the Union of. Indi~ .
. Allo~ing the. Union of India's appeal only and dismissing .the Company's
·.appeal,. the Court. ·
''i '.•

376 SUPREME COURT REPORTS [198ll 1 S.C.R.

HELD : (1) The appellants do fall under the purview of the term "owner"
in s. '3(n) of the Nationalisation Act· read with s. 2 of 'the Mines Act, 1952 I
and any other construction as sought to be placed on the .definition would
frustrate the very object of the legislation and the intention of the Legislature.
{387 F]
Parliament, with due deliberation, in s. 3(n) adopted by incorporation .the
enlarged definition of the "owner" in s. 2(1) of the Mines Act, 1952 to make the
Nationalisation Act all embracing and fully effective. The definition is wide
enough to include three categories of persons (i) in relation to a mine, the
person who is the immediate proprietor or a Jessee or occupier of mine or any
part thereof, (ii) in the case of a mine the business whereof. is carried on by
. a liquidator or a receiver, such liquidator or receiver, and (iii) in the case of a
0

mine owned by a company, the business whereof is carried on by a managing
agent, such managing agent. Each is a separate and distinct category of persons
c and the concept of ownership does not come in: The insertion of the clause
"but any contractor for the working of a mine or any part thereof shal! be
subject to this Act in like manner as if he were an owner, but not so as to
exempt the owner from any liability" is to make both the owner as well as
the contractor equally liable for the due observance of the Act. Jn the case
of a mine the working whereof is being carried on by a raising contractor he
is primarily responsible to comply with the provisions of the Mines Act. Though·
D a contractor for the working of a mine or any part thereof, is not an ov.ner
he shall be subject to the provisions of the Mines Act in the like manner
"as if he were a owner" but not so as to exempt the owner from any liability.
[387 A-DJ
The whole object and purpose of the Nationalisation Act is to expropriate
private ownership of coking coal mines and all interests created therein. The
term 'owner' in sub-s. (1) of s. 4 is to be given an extended. meaning so as
to include a contractor for the working of a mine or any part thereof. It has
to be presumed that Parliament was fully aware of the normal pattern of work·
ing of all the coal mines, that is, by employment of raising contra~tors. Any
other con.struction would lead to a manifest absurdity and attribute to Parlia·
ment a result which it never intended. It would result in the contractors
escaping from the consequences of vesting under sub-s. (1) of s. ,.4 of the Act
and permit them to dismantle and remove the additional machinery, plants
F and equipment which are being utilised for the working of mines. [388 B-D]
(2) The word 'occupier' in s. 3(n) of the Nationalisation Act should be
. understood to have been used in the usual sense according to its plain meaning.
In the legal sense an occupier is a person in actual occupation. The appelbnts
being "raising contractors" were under the terms of the agreement dated
February 7, 1969. entitled to and were in fact in actual possession and en,ioy-
ment of the colliery and were, therefore, an occupier thereof. That being
so, the appellants in possession in their own right by virtue of their substantial
right acquired by them under the agreement were not in possession on behalf
of somebody else. [384 F·GJ
The Chief Inspector of Mines and Anr. v. Lala Karamchand Thaper etc.
[1962] 1 S.C.R. 9, distinguished.
(3) The Nationalisation Act, no doubt, separately defines 'owner' and 'manag-
H ing contractor'. The words and expressions used and defined in the Act have
the meaning respectively assigned to them "unless the context otherwise requires".
Therefore, the expression 'managing contractor' as defined in s. 3(1) of the
. Nationalisation Act cotnes 'into play only for the purpose of apportionment
";>- '-.:~ <-:

' INDUSTRIAL SUPPLIES V •. UNION 377

of ·compensation under sub-s. (:i) of s. 26. To exclude a "mal'.!aging contractor" A·
from .term 'owner' used in sub'.s. (1) of s. 4 of the Nationalisation Act would
be against the scheme of the Act. The term 'owner' in sub·s. (!) of s. 4 of the
Act must bear the meaning given in the definition contained in s. 3(n). Any
reservation under any process of any agreement between the parties to reserve
the power to appoint managers, does not take the appellants out of the defini··
tion of 'managing contractor' under s. 3(1) of the Nationalisation Act ~ince
they still had substantial control over the mine. The plea that not they but
someone else was the managing contractor is only an after-thought. The appel·
!ants who have bound themselves by 'the terms of the agreement, cannot be
permitted to escape from the provisions of sub·s. (1) of s. 4 of the Act, as
they come within the ·purview of the definition of 'owner' in s. 3(n) of the
Nationalisation Act. [384 H, 385 C, 385 H-386 A; 386 E·F]
(4) When a legal fiction 'is incorporated in a statute, the Court has to .,
ascertain for what purpose the fiction is created. After ascertaining the purpose, c
full effect must be given to the statutory fiction and it should be carried to
its logical conclusion. The court has to assume all the facts and consequences
which are incidental or inevitable corollaries to giving effect to the fiction.
lfhe legal effect of the words "as if he were" in the definition of owner in
s. 3(n) of the Nationalisation Act read with s. 2(1) of the Mines Act is that
although the petitioners were not the owners, they being the contractors for the
working of the mines in question, were to be treated as such though, in fact, D
they were not so. [388 E'G}
East End Dwe/linfi Co. Ltd. v. Finebury Borough Council, LR. [1952] A.C.
109, p. 132; qiwted with approval.
(5) The bills for the subsidy were for the cost of stowing and connected
safety operation and all hard mining operations which the appellants had already
prior to Octobe'r 17, 1971 at their own cost, carried out. If that be so, the
amount of subsidy in question was like any other amount due to the coking
coal mines prior to the appointed day and, therefore, did not fall outside the
purview of sub·s. (3) of s. 22. [389 H-390 A]
The payment in question was not by way of assistance receivable from
the erstwhile Coal Board for carrying out the stowing and other' safety opera·
!ions and conservation of the coal mines. The payment of Rs. 4,50,000 claimed
by the. appellants was, therefore, one to. reimburse for the expenditure already
unde11aken. Indubitably, the_ amount in dispute was payable '"by way of re·
imbursement". The appellants were, therefore, free to utilise their money in
any manner they liked. In other words, the grant was not impressed with
any particular purpose or purl'oses. [390 B-C] ·
(6) Even if the subsidy receivable from the erstwhile Coal Board was by
way of 'assistance' the amount of Rs. 4,50,000 was recoverable by the Central
Government in whom the coking coal mines have vested under sub-s. (!) of G
s. 4 of the Nationalisation Act and _not by the appellants. If the grant were
by way of assistance under rule 49 of the Coal Mines (Conservation and Safety)
Rules 1952, the grant being conditional, the Central Government would in
that event, be bound to comply with the requirements of r. 54 and ~pp!y the
same for the purposes for which it was granted namely, for the purposes of
stowing or other safety operations and conservation of coal mines. [390 D-E]
H
Barclays Bank Ltd, v. Quistclose lnv{!sfments Ltd., L.R. [1970] A.C. 567,
Coal Products Private Ltd. v. Income Tax Officer (1972} 8'5 I.T.R:. 347 explained
and distinguished.
SUPREME COURT REPORTS '. [1981] 1 S.C.R.
.
A' '· CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 815 and 1284.
of 1978. ·

Appeals by special Leave from the Judgment and. Order dated
20-12-1977 of the Delhi High Court in Civil Writ No. 616/76.
Soli J. Sorabjee, A. C. Gulati, A. K. Ganguli, G. S. Chatterjee and.
B
B. B. Swahney for the Appellant in CA No. 815 /78.

Lal Narain Sinha, Att. Genl. Miss A. Subhashini and Girish
Chandra for the Appellant in CA No. 1284 and Respondent. No. l in
CA No. 815 /78.
c The Judgment.of the Court was delivered by
SEN, J.-These appeals by special leave against a judgment of the
Delhi High Court tum on the construction of ·certain provisions of the
Coking Coal Mines (Nationalisation) Act, 1972. ·

D The appeals raise a question of far reaching importance namely,
whether a raising contractor of a coal mine is an owner within the
meaning of sub-s. (1) of s. 4 of the Coking Coal Mines (Nationalisation)
Act, 1972 (hereinafter referred to as the Nationalisation Act) ; and if
so, whether the fixed assets like machinery, plants, equipment and
other properties installed or brought in by such a raising contractor
E vest in the. Central Government. They also give rise to a subsidiary
question, namely, whether subsidy receivable from the erstwhile Coal -,,
Board established under s. 4 of the Coal Mines (Conservation, Safety
and Development) Act, 1952 upto the specified date, from a fund
known as Conservation and Safety Fund, by such raising contractor . ,_
prior to the appointed day, can be realised by the Central Government
by virtue of their powers under sub-s. (3) of s. 22 of the Nationalisation
Act, to the exclusion of all other persons including such contractor
and applied under sub-s. (4) of s. 22 towards the discharge of the
liabilities of the coking coal mine, which could not be discharged by
the appointed day.

G To make the points intelligible, it is necessary to state a few facts.
By an agreement dated February 7, 1969 made between Messrs Bali- Y
hari Colliery Co. Pvt. Ltd. (hereinafter referred to as the 'owner')
of the one part and Messrs Industrial Supplies Pvt. Ltd. (hereinafter
referred to as 'the petitioners') of the other part, it was recited as
follows:· · ·
H
"WHEREAS the Owners are the Owners of a Working
Colliery comprising an area of 800 Bighas more or less and known
•i'f"l:;'

' INDUSTlliAL SUPPLIES v. UNION (Sen, l.) 379

as Balihari CoIIiery particular)y described in the first Schedule
hereunder written held under the lease and subleases mentioned
in the said Sch~dule and in connection therewith have built various
structures, dhewrahs coolie lines (hereinafter referred to as the·
·said buildings) and also installed and put up various machinery,
plants, t~ls, implements and utensils (hereinafter referred to as
the said 1:11achinery) therein ; · B
AND WHEREAS the owners have appainted INDUSTRIAL
SUPPLIES PRIVATE LIMITED as Managing Contractor of
their .said coIIiery and the said Managing Contractor has agreed
to act as such Managing Contractor for the period and upon the
terms and conditions herein contained: " c"
Under the said agreement, the petitioners were appointed to be'
the Managing Contractors of Kutchi Balihari Colliery for a period of
20 years. Under cl. 7(a) the petitioners were required at their own
cost to instali fixed assets like equipment: machinery and planw and
also invest in the form of current asset~ like stores in the said colliery
and to work the same as raising contractors. By cl. 7(b) the addi- D
tional machinery so installed and the chattels and utensils so brought
in by the petitioners were to remain the property of .the petitioners
absolutely and on the determination of the agreement they were entitled
subject to the provisions of- cl. 9, to remove such additional fixed assets
and current assets. Clause 9 gave an option to the owners fo purchase
the additional machinery, chattels and utensils referred to in cl. 7. E
Clause 25 of the agreement is mate~al for ?ur purp0ses and it reads:
"25. That in case the said colliery is nationalised these pre-
sents shall stand determined and all moneys then due and owing
by the owners to the Managing Contractor or by the Managing
Contractor to- the owners under the. provisions hereof shall at F
·once become due and payable by the owners to the Managing
Contractor or by the Managing Contractor to the owners as the
case may be. If as result of such nationalisation the machinery,
chattels and utensils installed at and/ or brought into the said
colliery by the Managing Contractor under the provisions of clause
7 of these presents or any one O[' nmre of them or the buildings G
and structures created by it at the said coIIiery under the provi-
sions of clause 8 of these presents are taken over by the autho-
rities concerned then and in such event the Managing Contractor
shall be entitled to compensation payable for or attributable to
the said machinery, chattels and utensils and the buildings and ;

structures so taken over and the owners shall -be entitled to receive H
compensation for all other properties comprised in the said
colliezy."
380 SUPREME COURT REPORTS [19811 1 S.C.R.

A Under the said agreement, the petitioners· installed from time to·
time various fixed assets like machinery, plants and equipment and
erected structures and raised new roads within the said colliery and
b_rought in various current .assets and movables for the efficient working
of the said mine. ·

B
•
The. ·petitioners were also raising contractors in respect of another
coking coal mine kno.wn as 'Khas Dharmaband Colliery' owned by
Messrs Khas Dharmaband Colliery Co. Pvt. Ltd., subsequently known
as 'New Dharmaband Colliery'. They had similarly brought over
various assets including stores which were being used in the said ,
colliery. Under an agreement of October 1969, the New Dharmaband
c Colliery was brought over by Messrs Sethia Mining & Mfg. Corporation
Ltd. An: inventory was prepared of the assets like plants, machinery
and stores belonging to the petitioners which were lying in the colliery,
the value ·of which was approximately Rs. 1,21,000. ·
On October 17, 1971, the President promulgated the Coking
Coal Mines (Emergency Provisions) Ordinance 1971 to provide for
D
the taking over by the Central Government, in the public interest,
of the management of 214 coking coal mines and 12 coke oven plants,
including the coal mines in question, pending nationalisation of such
mines. The Ordinance was replaced by the Coking Coal Mines
(,Emergency Provisions)i Act, 1971. Tllereafter, Parliament enacted
E the Coking Coal Mines (Nationalisation) Act, 1972 to complete the
process of nationalisation of the coking coal mines and coke oven
plants. It was entitled as 'An Act to provide for the acquisition and
transfer of the right, title and interest of the owners of the coking
coal mines specified in the First Schedule and the right, title and
interest of the owners of 'such coke oven plants as are in or about
F a
the said coking coal mines with view to reorganising and reconstruct-
ing such mines and plants for the purp0se of protecting, conserving
and promoting scientific development of the resources of coking coal
needed to meet the growing requirements of the iron and steel industry
and for matters connected therewith or incidental thereto'.
"Appointed day" under s. 2(~) of the Coking Coal Mines (Erner·
G
gency Provisions) Act, 1971 was October 17, 1971, while that under
s. 3(a) of the Coking Coal Mines (Nationalisation) Act, J.972, is May
l, 1972.
According to the' petitioners, the total value of the fixed and
current assets and movables of Kutchi Balihari Colliery taken over by
H the Central 'Government on 'October 17, 1971 was to the tune of
Rs. 11,85,591.00. As regards New Dharmaband Colliery they allege
that between October 1969 and October 17. 1971. Messrs Sethia Mining
INDU5TRJ4..L .SUPPLms ':'· ~ION (Sen, J.) 381

& Mfg. Corporation Ltd., had utilised some of the stores lying in A
the colliery to the extent of Rs. 50,000.00 and the balance of the stores
lying in the colliery as on October 17, 1971 was approximately
Rs. 72.000.00. -
Since April 1969 when the petitioners became raising contractors
of Kutchi Balihari Colliery and until October 17, 1971 when the
B
management of the said colliery was taken over by the Central Govern-
ment, the petitioners allege that they had undertaken, at their cost,
operations for sand stowing and hard'mining and had accordingly
submitted bills to the Coal Board established under s. 4 of the Coal'
Mines (Conservation and Safety) Act, 1952 for subsidy through the
owners from time to time. As on October 17, 1971 the amount of c
subsidy payable to them was about Rs. 4,50,000.
On May 5, 1976 the petitioners filed a Writ Petition in the Delhi
High Court seeking a declaration that sub-s. (1) of s. 4 does not provide \
for the acquisition of t~e right, title and interest of the petitioners
inasmuch .as being raising .contractors they were not an owner within
the meaning of s: 3(n) of the Nationalisation Act and, therefore, they D
were entitled to dismantle and remove the fixed assets like machinery,
plants and equipment .installed in the two mines and also to remove
the .movables and current assets thereof like .furniture, stores, etc. and
were further entitled .to recover the amount of subsidy of about
Rs.' 4;50,000 collected by the Central Government .from the erstwhile E
Coal Board. They, accordingly, sought a writ or direction in the
nature of mandamus requiring the Central Government to return the
assets like machinery, plants, equipment and other assets and movables
and all amounts collected. by way of subsidy or other dues, or in any
event pay Rs. 16;35,591 with interest thereon from May 1, 1972 till
the date of payment.
F
The High Court substantially disallowed the claim of the peti-
tioners, holding that they fall .within the meaning of the terIJ?. 'owner'
as defined in s. 3(n) of the Nationalisation Act read with s. 2(1) of
the Mines Act, 1952 and that as such the various machinery, plants,
equipment and other fixed assets, current assets and movables belonging
to them lying in the two coal mines were included in the expression G
"mine" as defined in s. 30) of the Nationalisation Act, and therefore,
the right, title and interest of the petitioners therein stood vested in
the Central ·Government under sub-s. (1) of s. 4 free from all incum-
brances. It, however, held that the amount of subsidy of Rs. 4,50,000
receivable from the Coal Board by way of reimbursement towards
cost of sand stowing and hard mining operations carried on by the H
petitioners, could not be treated to be as an "amount due to the coking
coal mine" within sub-s. (3) o~ s. 22 and. therefore, could not be
4-647 S.C. India/80
382 SUPREME .COURT REPORTS [19811 1 S.C.R.

A utilised by the Central Government under sub-s. (4) of s. 22 for dis-
charge of the liabilities of the coking coal. mine.
It was contended by the petitioners that they were neither the
owners nor immediate occupiers or managing contractors of the coal
mines in question, but were merely raising contractors thereof and,
therefore, they did not come within the purview of the term 'owner'
B
as defined in s. 3(n) of the Nationalisation Act read with s. 2(1) of ~

the Mines Act, 1952. It was, therefore, said that the plants, equipment
and machinery and other assets,. and current assets and movables
belonging to them as on October 17, 1971 could not, and did not,
vest in the Central Government under sub-s. (1) of s. 4 of the Nationa-
c lisation Act. It was urged that the High Court was in error in
construing the definition of the term 'owner' as defined in s. 2(1) of
the Mines Act, 1952 so as to include a raising contractor, by laying
emphasis on the words 'as if he were' in the last sentence of the
definition, and particularly so, because the Act itself, separately and/ or
clearly distinguishes· between an 'owner' and a 'co~tractor'.
D It was further contended that due to the absence of the word
'includes' in the last sentence, in the definition of 'owner' in s. 2(1)
of the Mines Act, a 'contractor' cannot be treated to be an 'owner'. It
was said that the object of the fiction in s. 2(1) ofthe Mines Act, 1952
was for the limited purpose of making such· a raising contractor
responsible for the due observance of the provisions of that Act and
E such a deeming proviSion could JnQt be invoked for construing the
purpose and object of the Nationalisation Act which were different,
i.e., for the purpose of acquiring machinery, plants and equipment
and other assets belonging to such raising contractor, lying within
the mine, · unde[ sub-s. (1) of s. 4 of the Act. We are afraid, we
cannot accept these contentions.
'
The construction that is sought to be placed on the definition of
'owner' in s. 3(n) of the Nationalisation Act .read with s. 2(1) of the
Mines Act, upon the basis of which the argument proceeds would, if
accepted, frustrate the very object of the legislation.
The Nationalisation Act provides by sub-s. (1) of s. 4 that the
right, title and interest of the oMiers in relation to the coking coal
mines specified in the First Schedule, on the appointed day, i.e., on
October 17, W71 shall stand transferred to arid shall vest absolutely
in the Central Government free from all incul:nbrances.
In the Nationalisation Act, 'owner' is defined in s. 3(n) thus:
11 "3(n) "owner'.',-
(i) when used in relation to a mine, has the meail.ing assigned
to it in the Mines Act, 1952;
INDUSTRIAL SUPPLIES v. UNION (Sen, J.) 383

(ii) when used in relation to a coke oven plant, means any A
person who is the immediate proprietor or lessee or occupier of
the coke oven plant or any part thereof or is a contractor for the
working of the coke oven plant or any part thereof ;" '
Section 2(1) of the Mines Act, 1952 reads as follows:
"(1) "owner", when used in relation to a mine, means any B
person who is the immediate proprietor or lessee or occupier
'1f the mine or of any part thereof and in the case of a mine the

~-·
business whereof is being carried on by a liquidator or receiver,
such liquidator or receiver and in the case of a mine owned by
a company, the business whereof is being carried on by a manag-
ing agent.. such managing agent ; but does not include a person c
who merely receives a royalty, rent or fine from the mine, or is
merely the proprietor of the mine, subjeCt to any lease, grant or
licence for the working thereof, or is merely the owner of the
soil and not interested in the minerals of the mine ; but any
{;Olltractor for the working of a mine or any part thereof shall be
subject to this Act in like manner as if he were an owner, but D
not so as to exempt the owner from any liability;"
In support of the contention that the petitioners could not be
regarded as occupiers and; therefore, do not come within the definition
<>f 'owner' under .s. 3(n) of the Nationalisation Act, reliance was placed
<>n the decision in The Chief Inspector of Mines & Anr. v. Lala
E
Karamchand Thapar etc.( 1) While a raising contract may not be a
lease and, therefore, the contractor not a lessee, we find no reason
\why he should not be treated to be an occupier within the meaning
-0f s. 3(n). Under the terms of the agreement dated February 7, 1969,
the petitioners acquired complete dominion and control over the
colliery in question for a period of 20 years. It is common ground F
that the said agreement was by a registered instrument and even though
this perhaps may not amount to a lease, there can be no doubt that
it was a licence coupled with a grant. The petitioners were by virtue
of cl. 7(a) of the agreement entitled to install at their own cost such
additional machinery, tramways, ropeways etc., in connection with .,
the transport of coal raised and .to bring in chattels for the purpose G
of discovery and removal of coal. They were entitled under cl. 7(b)
lo remove such additional machinery that may be installed and such
chattels and utensils as may be brought in by them to the said collieries
unless of course, the owners exercised their option to purchase the
same under cl. 9. In view of these terms, it is futile to contend that
the petitioners were not occupiers of the mines. They had th~ ac.tual H
use and occupation of the coal mine in question.
(!) (1962] I SCR 9 ..
384 SUPREME COURT REPORTS [19811 1 S.C.R.
A We have carefully gone through the judgment in Lala Karamchand
T}l(lpar's case and, if we may say so, the decision is distinguishable
on facts. There the question was whether the managing agent of a , ~
company owning a colliery was an occupier of the colliery, and the
Court negatived this observing:

B "From the very collocation of the words "immediate pro-
prietor, or lessee or occupier of the mine", it is abundantly
clear that only a person whose occupation is of the same character.
that is, occupation by a proprietor or a lessee-by way of ....
possession on his behalf and not on behalf of somebody else is ...
meant by the word "occupier" in the definition. Thus, a tres-
1
c passer in wrongful -possession to the exclusion of the rightful
owner would be an occupier of the mine, and .so be an "owner" _....._
for the purpose of the Act."
The Court further observed :
"That must be because possession on behalf of somebody
D else was not in the contemplation of the legislature such "occupa-
tion" as to make the per~on in possession an "occupier" within
the meaning of s. 2(1)."
These observations, if we may. say so, with great respect, are rather
widely stated. They are indeed susceptible of a construction that a
raising contractor being in possession on behalf of a proprietor or the
E lessee of a mine in p6ssession is not an 'occupier' within the meaning
o! s. 3(n) of the Nationalisation Act read wit_h s. 2(1) of the Mines
Act, 1952. We are quite sure that that was _not the intention of the
Legislature. There is no reason why the word 'occupier' should not
be understood to have been used in its usual sense, according to its
plain meaning. In common parlance, an 'occupier' is one who 'takes•
F or (more usually) 'holds' possession: Shorter Oxford Dictionary, 3rd
edn., vol. 2, p. 1433. In the legal sense, an occupier is a person in
actual occupation. The petitiOners being raising contractors were,
under the-terms of the agreement dated February 7, 1969 entitled to.
and in fact in actual physical possession and enjoyment of the colliery
and were.· therefore, an occupier thereof. That being so, the petitionei:s
G
being in possession, in their own right, by virtue of the substantial
rights acquired by them under the agreement, were not in possession
on behalf of somebody else and, therefore. the decision in Lala
Karamchand Thapar's case cannot apply.
It is next urged that the Nationalisation Act itself makes a
H distinction between an 'owner' and a 'managing contractor', there being
separate provisions made with regard to both. It is .said that in view
of this, there is no legal justification fo read the word 'contractor'
INDUSTRIAL SUPPLIES' v. UNION (Sen, J.) 385

for the word 'owner' iii sub-s. (1) of s. 4. The· contention is wholly A
misconceived and cannot be accepted. The Nationalisation Act no
doubt separately. defines 'owner' a.nd 'ma·naging contractor'. The
definition of managing contractor in s. 3(i) reads :
"3(i) "managing contractor" means the perfon; or body of
persons, who, with the previous consent in· Writing of the State
Government has entered into an arrangement, contract or under- B
standing, with the owner of a coking coal mine or coke oven plant
under which the operations of the coking coal mine or coke oven
plant are substantially controlled by such person or body of
perso_ns ;"
The words and expressions used and defined in the Act have the c
meaning, respectively, assigned to th:enl' 'unless the context otherwise
requires'.· The expressibn 'managing contractor' finds place in Chapter
VI, which deals with the power, functions and duties of the Commis-
sioner of Payments ai:»pointed: under stib-s. (1) of s. 20, for the purpose
of disbursing the amotintS payable to the owner of eacl:i coking coal
mine or coke ovei:J. plant. If appears in sub-s. (2) of s. 26, which D
provides:
"(2) Iii relation to a coking coal mine or coke oven plant,
the operations of which were, immediately before the 17th day
of October, 1971 urider the control of a managing contractor, the
amount specified in the First Schedule against such cokilig coal
mine or irt the Second Schedule against such coke oven pfant shall E
be apportioneq between the owner of the coking coal mine or
coke oven plant and such managing contractor in such propor-
tions as ma.y be a.greed upon by or between the owner and such
managing contractor, and in the event of there being no such
agreement, by such proportions as may be determined by 'the
F
Court."
Under cl. 25 of the agreement, it was agreed upon between the
parties that (i) in the event the colliery was nationalised, the agreement
shall stand determined and al! moneys then due and owing by the
owners to the petitioners and vice .versa shall at once become due and
payable, and (ii)' in the event of such nationalisation, if the machinery, G
chatt.eis and utensils installed at and/ or brought into the colliery by
the petitioners or the buildings and structures erected by them are
taken over by the authorities, they shall become entitled to compensa-
tion payable for or attributable to the said machinery, chattels and
utensils and buildings and structures so taken over and the owners
shall be entitled to receive compensation for all other properties H
comprised in the said colliery. The expression 'managing contractor'
:as defined in s. 3(i) of the Nationalisation Act comes into play only
SUPREME COURT REPORTS [19811 ·1 S.C.R.

A for the purpose of appointment of compensation under sub-s. (2) of
s. 26. The submission that the term 'owner' used in sub-s. (1) of s. 4
of the Natimplisation Act excludes a 'managing contract9r' is against
the scheme of the Act. The term 'owner' in sub-s. (1) of s. 4 of the
Act must bear the meaning given in the definition contained in s. 3(n).

B It was asserted that the petitioners were really not the managing
contractors but wrongly described as such in the agreement. A bare
• perusal of the agreement would, however, be destructive of the argu-
ment. It is a document drawn consisting of 46 clauses defining the
mutual rights and obligations of the parties. The petitioners were
conferred all the rights to work the mine for winning, getting and
c raising coal. The so-called 'remuneration' payable to them was
virtually the price of coal supplied leaving tQ the owners a margin
of profit. Even the liability for payment of rent, royalty, taxes etc.,
in relatio~ to the mine was saddled on the petitioners. In view of
these terms, they cannot be heard to say that they were not the manag-
ing contractors though they have been so described in the preamble
D to the agreement and in each and every clause thereof. It is, however.
asserted that the functions of a managing contractor, namely, appoint-
ment of managers, were not entrusted 'to the petitioners but were
actually assigned to Messrs Madhusudan & Co. under a separate
agreement. The submission is spelled out from the terms of cl. 11
relating to employment of workers of the colliery. All that was done
E was that the erstwhile owners had by this clause reserved to them-
selves the power to appoint managers. Such reservation does not take
the petitioners out of the definition of managing contractor under
s. 3(i) of the Nationalisation Act, as they still had substantial c011trol
over the mine. The plea that not they but someone else was the
managing contractor is only an after thought. The petitioners having
F bbund themselves by the terms of the agreement, cannot be permitted
to escape from the provisions· of sub-s. (1) of s. 4, as they come within
the purview of the definition of 'owner' in s. 3(n) of the Nationalisation
Act.
It is then argued, in the alternative, that the term 'owner' as
G defined in s. 3(n) of the Nationalisation Act read with s. 2(1) of the
Mines Act, .1952 does not in any event, include a raising contractor.
It is not suggested that a raising contractor does not come within the
description of a contractor in s. 2(1), but it is urged that the word
'includes' is not there. There was no need for Parliament to insert
the word 'includes' because of the words 'as if he were'. Although
H the term 'owner' in common parlance, in its usual sense, connotes
ownership of a mine, the term has to be understood in the legal sense.
as defined.
INDUST!UAL SUPPLIES v. UNION (Sen, J.) 387

Parliament, with due deliberation, in s. 3{n) adopted by incorpora- A
tion the enlarged definition of owner in s. 2(1) of the Mines Act, 1952
to' make the Nationalisation Act all embracing and fully effective. The
definition is wide enough to include three categories of persons: (i) in
relation to a mine, the person who is the immediate proprietor or a
Uessee or occupier of mine or any part thereof, (ii) in the case' of a
mine the business whereof is. carried on by a,liquidator or a receiver, B
such liquidator or receiver, and (iii) in the case of a mine owned by
· a company, the business whereof is carried on by a managing agent.
such managing agent. Each is a separate and distinct category of
persons and the concept of ownership does not. come in. Then come
the crucial last words : "but. any contractor for the working of a mine
or any part thereof shall be sub11ect to this Act in like manner as if c
he were an owner, but not so as to exempt the .owner from any .
liability". The insertion of this clause is to make both the owner as
well as the contractor equally liable for the due observance of the
Act. It is needless to stress that the Mines Act, 1952 contains various
provisions for the safety of the mines and the persons employed
therein. In the case of a mine, the working whereof is being carried
D
on by a raising contractor, he is primariiy responsible to comply with
the provisions of the Act. Though a contractor for the working of a
mine or any part thereof is not an owner, he shall be subject to the
provisions of the Act; in the like manner 'as if he were an owner' but
not so as to exempt the owner from any liability. E
It is now axiomatic .that when a legal fiction is incorporated in a
statute, the Court has to ascertain for what purpose the fiction is
created. After ascertaining tlie purpose, full effect must be given to
the statutory fiction and it should be carried to its logical conclusion.
The Court has to assume all the facts and consequences which are
incidental or inevitable corollaries 'lo giving effect to the fiction. The F
legal effect of the words "as if he were" in the definition of owner in
s. 3(n) of the Nationalisation Act read with s. 2(1) of the Mines Act
is that although thei petitioners were not the owners, they being the
contractors.for the working of the mine in question, were to be treated
as such though, in fact, they were not so. The oft-quoted passage in
the judgment of Lord Asquith in East End Dwelling Co. Ltii. v. Fine- G
bury Borough Council(1) brings out the legal effect of a legal fiction
in these words :
"If you are bidden ·to treat an imaginary state of affairs as
real, you must 'surely, unless prohibited from doing so, also
imagine as real the consequence and incidents wliich, if the puta- · H
tive state of affairs had in fact existed, must inevitably have
(I) L.R. [1952] A.C. 109, p. 132.
388· SUPREME' COURT REPOll.TS [1981] 1 S.C.R.

A flowed from or accompanied it. ".. .. . The statute says that you
must imagine a certain state of affairs ; it does not say that having
done so, you must cause or permit your imagination to boggle
when it comes to the inevitable corollaries of that state of affairs."
The whole object and purpose of the Nationalisation Act is to
B expropriate private ownership of coking coal mines and all interests
created therein. it provides by sub-s. (1) of s. 4 that on the appointed
day, the right, title and interest of the owners in relation to the coking
coal mines specified in the First Schedule shall· stand transferred to,
and shall vest absolutely in the Central G.ovemment, free from all
incumbrances. Now unless the tenn 'owner' in sub-s. (1) of s. 4 is
c given an extended meaning so as to include a contract~r for the
working of a mine or any part thereof, the very object of the legisla·
tion would be frustrated. It has to be presumed that Parliament was
fully aware' of .the normal pattern of working of all the coal mines,
Le., by employment of raising contractors. Any other construction
D would lead to a manifest absurdity and attribute to Parliament a result
which it never intended. It would result in the contractors escaping
from the consequences of vesting under sub-s. (1) of s. 4 of the Act
and pennit them to dismantle and remove the additional machinery,
plants and equipment. which were being utilised for the working of
niines.
E
This brings us to the next question, namely whether the amount
of Rs. 4,50,000 receivable by the petitioners from the erstwhile Coal
Board, was an amount impressed with a trust; being advanced for a
specific purpose, i.e., for the purpose of stowing and other safety
operations and conservation of coal mines, and could no.t be regarded
F. as "any money due to the coking coal mines" within sub-s. (3) of
s. 22 of the Act and the Central Government, therefore, could not
appropriate the amount of subsidy and utilize it under sub-s. (4)
thereof for meeting the liabilities of the coking coal mines.
The conclusion of the High Court upon this point is contained
G in the following passage:
"The amount of subsidy due could not be current assets of
the coking coal mine because it had to be utilised for a certain
definite specified purpose. In the instant case cost of stowing and
other safety operations had already been' incurred and the. subsidy
H was by way of reimbursement. The amount was already identi-
fied as belonging to the petitioner and is on the analogy or in the
nature of trust money impressed with a specific purpose."
! INDUSTRIAL SUPPLIES v. UNION (Sen, J.) 389

J:n reaching that conclusion, it relied upon the decisions in Barclays A
Bank Ltd. v. Quistclose Investments Ltd.(1) and Coal Products Private
Ltd. v. I.T.0.,(2) which are both distinguishable. They enunciate the
]principle that when property is entrusted for specific purpose, it is
·clothed with a trust It seems somewhat illogical that the equitable
doctrine of resulting trust should be' brought into play in the construc-
iion of the provisions of a legislation dealing with nationalisation like B
1he Coking Coal Mines (Nationalisation) Act, 1972. Iri Barclays Bank
Ltd. v. Quistclose lnvestinents Ltd., the House of Lords dealt with a
·question as to rights of set off following the liquidation of a company.
The principle was applied to a sum of money lent to a company (later
' .vound up) for a specific purp<ise, viz., payment of dividend, which c-
·was not implemented; the money, being still identifiable, was held
10 be impressed with a trust, and accordingly did riot en1lre to the
benefit of the general body of creditors, but was recoverable by the
lender. In Coal Products Private Ltd. v. I.T.O. there was an extension
·(Jf this principle by a Single Judge of the Calcutta High Court to
"assistance" which was payable to the assessee and was sought to be D
attached by the Income-tax Department by way of garnistiee proceed·
iings under s. 226(3Xi) of the Income-tax Act, 1961. There was an
.application made for grant of assistance under r. 49 of the Coal Mines
-(Conservation and Safety) Rules,'1952. There were conditions attached
1o the grant under r. 54. There was an affidavit filed before the
Calcutta High Court showing that the grant was subject to the condi- E
·tion that it would be utilised for the purpose of stowing and other
·connected operations in the coal mine. Tue High Court quashed the
garnishee notice on the ground that the Income-tax Department was
not entitled to any part of the money for .the payment of income-tax
liabilities of the assessee, as it could only be utilized for the purpose
·Of stowing and other safety operations and conservation of coal mines. F
Two questions arise, both of which must be answered in favour
-of the Union of India. The first is whether the payment of Rs. 4,50,000
was advanced for a special purpose, i.e., as 'assistance' under r. 49
and not 'by way of reimbursement'. The second is whether, in that
event, the money having been advanced for a special purpose, and
ihat being so clothed with a specific trust, it could not be adjusted G
by the Central Government under sub-s. (4) of s. 22 of the Nationa·
1isation Act towards the liabilities of the coking coal mines.
It is not difficult to establish precisely on what terms the money
was advanced by the erstwhile Coal Board. On behalf of the peti·
>tioners, it is not disputed that the bills for the subsidy were for, the H
(I) L.R. [1970] A.C. 567.
(2) (1972) 85 ITR 347.
390 SUPREME COURT REPORTS [19811 1 S.C.R.

A cost of stowing and connected safety operations and of hard mining.
operations which, the petitioners had already prior to October 17, 1971.
at their own cost, carried out. If that be so, the inevitable conclusion
is that the amount of subsidy in question was like any other amount
due to the coking coal mine, prior to the appointed day, and therefore,
did not fall outside the purview of sub-s. (3) of s. 22.
B
The payment in question was not by way of 'assistance' receivable
from the erstwhile Coal Board for carrying out of stowing and other
safety operations and conservation of the coal mines. In the present
case, the petitioners cin their own showing had already carried out
sand stowing and hard mining operations and had admittedly applied
c for subsidy by way of reimbursement. The payment of Rs. 4,50,000•
was, therefore, one to reimburse for the expenditure already under- ·~.
taken. Indubitably, the amount in dispute was payable 'by way of
reimbursement'. The petitioners were, therefore, free to utilise the
money in any manner they liked. · In other words, the grant was not
impressed with any particular purpose or purposes.
D
Even if the subsidy receivable from the erstwhile Coal Board was
by way of 'assistance', the amount of Rs. 4,50,000 was recoverable
by the Central Government in whom the coking coal mines have vested
,under sub-s. (1) of s. 4 of the Nationalisation Act and not by the
petitioners. It is, however, needless to stress that if the grant were
E by way of 'assistance' under r. 49 of the Coal Mines (Conservation
and Safety} Rules, 1952, the grant being conditional, the Central
Government would in that event, be bound to comply with the require-
ments of r. 54 and apply the same 'for the purposes for which it was
granted viz., for the purposes of stowing or other safety operations and
conservation of coal mines.
F-
For these reasons, the judgment of the High Court partly allow-
ing the claim of the petitioners with regard to the subsidy amount of
Rs. 4,50,000 is set aside, and the writ · petition is dismissed.
Accordingly, the appeal of the Union of India is allowed and that of
the Industrial Supplies Pvt. Ltd., is dismissed with costs throughout.
G
Civil Appeal No. 815 /78 ·dismissed,
and CivVZ Appeal No. 1284/7&
S.R. a/lowed.