STATE OF RAJASTHAN & ANR.versusM/S. DEEP JYOTI COMPANY & ANR.

                         f20161 2 S.C.R. I



                STATE OF RAJASTHAN & ANR.                               A
                                 v.
             MIS. DEEP JYOTI COMPANY & ANR.
                (Civil Appeal No. 1854 of2016 etc.)
                       FEBRUARY 26, 2016                                B

            [T. S. THAKUR, CJI, A. K. SIKRI AND
                     R. BANUMATHI, JJ.)
       Mines and Minerals - Circular dated 06.10.2008 providing
for deduction of royalty from Government contractors using minor
minerals in Government work - Before starling the work the
                                                                    c
contractor required to obtain short term permit for the minerals
used in the work - Circular challenged - Single Judge of High
Court upheld the validity of the Circular - Division Bench of High
Court quashed the Circular - On appeal, held: It is duty of the
Government to ensure that only royalty paid minerals are used in D
the work - The purpose which is sought to be achieved viz. non-
royalty paid mineral is not used in the execution of the Government
work - Thus, the Circular cannot be treated as unreasonable or
arbitrary - Circular No.P 13(6)Khan!Group-2/80-Part dated
06. 10. 2008.
                                                                        E
      Allowing the appeals, the Court
       HELD: 1. The minor minerals removed from the quarries,
admittedly are the property of the Government and the same
cannot be removed and used without payment of royalty. It is
therefore the duty of the Government to ensure that only royalty        F
paid minerals are used in the work. The purpose of short-term
permit is to ensure that the material and minerals etc. used by
the contractor in the construction work arc royalty paid. It only
means that such material is purchased by the contractor from the
market which is legally mined and on which due royalty is paid.
In other words, the objective is to see that illegally mined mineral/   G
material is not purchased by the contractor and used in the
construction work which is awarded by the Government. Not only
it is a laudable object, such a stipulation is inserted in order to
check illegal mining which has assumed serious proportions in
                                                                        H
2             SUPREME COURT REPORTS                    [2016) 2 S.C.R.



A   the recent past. Otherwise, the respondents do not stand to
    loose anything inasmuch as the moment evidence is produced to
    the effect that royalty was paid on the minerals by the leaseholder
    which was used in the construction, the construction contractor
    like the respondents would be refunded the royalty so paid by it
    in terms of circular dated 06.10.2008. In terms of clauses (5) and
B
    (7) of the said circular, the contractor has to pay royalty at the
    rates specified in the circular depending upon the nature of work
    and on production of bills showing payment of royalty, the
    contractor can get refund of royalty. There is, thus, no financial
    burden on the respondents of any nature. The purpose which is
c   sought to be achieved, viz., non-royalty paid mineral (which would
    naturally be illegally mined mineral) is not used in the execution
    of the Government work and it cannot be treated as unreasonable
    or arbitrary. There is a complete justification for providing such
    a provision. [Paras 10 and 11) [6-G-H; 7-A-D]
D       2. The clauses stipulating deduction of royalty payable to
  the mineral department at the rates stipulated in the circular
  cannot be said to be a levy. The circular only provides the
  procedure for payment of royalty for the minerals used by the
  contractors who have been given the works contract by the
  Government department. The High Court did not keep in view
E the object of the circular and erred in quashing the impugned
  circular. [Para 12] [7-H; 8-B]
         CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1854
    of2016.

F         From the Judgment and Order dated 17.0i.2011 in D.B. Civil
    Special Appeal No. 369 of2009 passed by the fiigh Court of Judicature
    for Rajasthan at Jodhpur
                                   WITH
          C.A.N0.18550F2016
G
           Shiv Mangal Sharma. AAG. Ankit Shah, Adhirey Singh, Punet
    Parihar,Anjali Choudhari, Ms. Ruchi Kohli, Kunal Narayan. Lalitendu
    Mahapatra, Mil ind Kumar, Manish Singhvi, B.D. Thanvi, H.D. Thanvi,
    Rishi Matoliya, Mukul Kumar, Ms. Aruna Gupta, Ms. Nandini Gupta,
    Ad vs. for the appearing parties.
H
· STATE OF RAJASTHAN v. M/S. DEEP JYOTI COMPANY                               3


      The Judgment of the Court was delivered by                              A
      R. BANUMATHI, J.          I. Leave granted.
      2. These appeals assail the order of Division Bench of the High
Court ofRajasthan at Jodhpur allowing Special Appeal No.369 of2009
dated 17.01.2011 filed by the respondent thereby quashing the circular
dated 06. I 0.2008 which provided for deduction ofroyalty payable to the      B
mining department from the bills of the contractors who have been given
the work contract by the government department. Relying upon the order
in Special Appeal No.369 of2009, the High Cou11 dismissed the Special
Appeal No. 753 of 2012 filed by the State.
       3. Necessary facts which led to filing of the appeal arising out of    C
SLP (C) Nos.33894 of 2011 are as follows:-Respondent-Deep Jyoti
Company, a partnership firm registered as 'A' class contractor with
various departments of Government ofRajasthan was awarded contract
for construction of link road. On 06.10.2008, the Mines(Group-2)
Department, Government of Rajasthan issued a Circular being                   D
No.Pl 3(6)Khan/Group-2/80-P_art dated 06. I0.2008, concerning collection
of royalty from the contractors involved in construction work using mineral
masonry stone, grit, boulder, river sand, kankar, murrum, ordinary sand
(excluding brick earth) in government department, autonomous bodies,
government undertaking. As per circular dated 06.10.2008, before starting
the work, the respondents had to obtain a short term permit (STP) from        E
the concerned Mining Engineer by paying a requisite short term permit
fees and the cost ofrawanna book for the minerals which were being
used as raw material for the work. Clause (5) of the circular deals with
the deduction of royalty at the rates provided in the circular from the
bills of the contractors. Clause (7) of the said circular provided that if    F
the contractor had purchased the royalty paid mineral from a leaseholder
then he can get refund of the same by submitting due receipts/rawanna
 issued by the lessee within a period of thirty days. Clauses (2), (3), (5)
and (7) of the said circular dated 06.10.2008, which are relevant read as
 under:-
                                                                              G
"2. Before commencing the work the contractor shall get a permit from
the concerned Mining Engineer/Assistant Mining Engineer office by
applying in Scheduled Proforma and enclosing an affidavit duly notary
certified with requisite short term permit fees and the cost of rawanna
book according to the quantity of mineral specified in G-Schedule.
                                                                              H
4                 SUPREME COURT REPORTS                      [2016] 2 S.C.R.



A   3. Contractor shall produce the certified copy of the above permit to the
    concerned department alongwith the first bill, otherwise construction
    department should not make payment of the bill and if by any construction
    department the payment for the first bil I or any other bill is made without
    getting certified copy of short time permit, the said department shall be
    liable to deposit the cost of the mineral.
B
    4 ....... .
    5. The concerned construction department shall deduct the royalty
    depending on the type of construction in the following manner from the
    bills of the contractor and shall pay through cheque to the concerned
c   Mining Engineer/Assistant Mining Engineer or get adjusted through
    auditor general and the details shall be informed within 15 days.
    I. Road Construction       I. 75%
    2. Building Construction            1.00%
    3. Road Renewal                     0.75%
D
    4. Other works in which             0. 5%
         mineral is used
    6.
E   7. If any contractor purchases royalty paid mineral from a lease holder
    and he wants the refund of royalty, then he has to submit an application
    to the concerned Mining Engineer/Assistant Mining Engineer office
    alongwith rawanas issued by the lease holder, receipts of RCC/ERCC
    contractors and copy of bill within 30 days of the completion of the
    construction work. The refund of those rawannas which is desired shall
F   be issued on the name of the concerned construction department
    contractor. No assessment shall be required ifrefund application is not
    111ake."
           4. Respondent-Deep Jyoti Company filed Writ Petition No.1309
    of2009 before the High Cou11. challenging the legality of the said circular
G   dated 06.10.2008 and prayed for restraining the authorities from
    implementing the said circular. Learned Single Judge dismissed the writ
    petition, holding that the condition imposed by the circular dated
    06.10.2008 was a reasonable restriction and in public interest. Aggrieved
    thereof, the respondent preferred appeal before the Division Bench of
H   the High Court. By the impugned order, Division Bench quashed the
   STATE OF RAJASTHAN v. M/S. DEEP JYOTI COMPANY                              5
                  [R. BANUMATHI. J.]

circular dated 06.10.2008 and allowed the appeal holding that the             A
contractor cannot be compel led to obtain short term permit for conducting
mining operations and also cannot be asked to pay royalty from the bills
payable and then seek for refund of the same. Relying upon Mis Deep
Jyoti Company:~ case. the High Court dismissed Special Appeal No. 753
of 2012 by order dated 14.01.2013. These appeals challenge the
                                                                              B
correctness of the impugned orders.
       5. Learned counsel for the appellants Mr. Shiv Mangal Sharma,
Additional Advocate General submitted that the circular dated 06. I 0.2008
merely provides the procedure for payment ofroyalty by the contractors
who have been given the works contract by the department of government
and that the said condition was imposed by the State Government in            c
public interest. It was contended that the High Court erred in not noticing
clause (7) of the circular dated 06.10.2008 which takes care of the
situation that the contractor can get refund of the royalty deducted from
his bills by the department if the contractor satisfies by producing
necessary bil Is showing that he used 1·oyalty paid mineral in execution of   D
the contract.
      6. Per contra, learned counsel for the respondent Mr. Manish
Singhvi contended that the High Court rightly quashed the circular dated
06.10.2008 as the State cannot compel a work contractor to obtain short
term permit and also to pay royalty in advance and then claim refund of       E
the royalty as the same is unreasonable and arbitrary.
      7. We have carefully considered the rival contentions and perused
the impugned orders and material on record.
       8.         The circular dated 06. I 0.2008 came to be issued by ·
the State Government which provides the procedure for payment of F
royalty by the contractors who have been given the works contract by
depaitment of government. According to the appellants, the said circular
was issued in order to ensure the payment ofroyalty and that the royalty
paid mineral is used for construction work. As noticed earlier, clause (2)
of the circular provides that before starting the work, the contractor was G
to obtain short term permit and rawanna book and contractor was also
required to submit an affidavit to that effect that he had obtained the
short term permit for mining the required mineral and rawanna book.
Clause (3) of the said circular provides that if the contractor fails to
produce copy of the sho1t term permit. the works depaitment will withhold
the payment of bills. Clause (3) of the said circular further provided that H
6              SUPREME COURT REPORTS                          [2016] 2 S.C.R.


A   in case, the government department which allots the work to the
    contractor makes the payment of contract bills without obtaining the
    copy of short term permit and rawanna book, then the works department
    shall be liable to deposit the cost of the mineral. Thus in terms of clauses
    (2) and (3), it is incumbent upon the works contractor to obtain short
    term permit before starting the work.
B
           9.           Some of the fundamental aspects, while dealing with
    the validity of the aforesaid circular dated 06. l 0.2008, need to be kept in
    mind. The said circular which mandates the contractors to obtain short-
    term perm it fess is meant for those contractors who are registered as
    ; A' class contractors with various departments of Government of
c   Rajasthan. Such registration qualifies them to bid for and obtain
    Government contracts, which are construction contracts. The circular
    dated 06. l 0.2008 imposing the conditions, thus, is required only for the
    purpose ofundertaking that work which is awarded by the Government/
    Government Departments etc. Otherwise, there is no such requirement
D   or obligation on the part of contractors while doing any other private
    work. It is trite that for awarding Government work, it can impose and
    stipulate conditions, eligibility criteria as well as terms and conditions on
    which the contract would be executed. If any person wants to bid foror
    undertake the work, such persons has to fulfill those conditions. The
    only limitation is that conditions so imposed should meet the test of fairness
E   and reasonableness and such conditions should not be arbitrary or contrary
    to any law. The question, therefore, is as to whether imposition of the
    condition to obtain short-term permit as provided in circular dated
    06.10.2008 is reasonable and not arbitrary.
           I 0. In so far as the contention that in terms of the circular there
F   is compulsion to obtain short term permit, in our view, as such there is no
    such compulsion. It is only to ensure that no mineral is excavated and
    used without payment of royalty. The purpose of short-term permit is to
    ensure that the material and minerals etc. used by the contractor in the
    construction work are royalty paid. It only means that such material is
G   purchased by the contractor from the market which is legally mined and
    on which due royalty is paid. In other words, the objective is to see that
    illegally mined mineral/material is not purchased by the contractor and
    used in the construction work which is awarded by the Government.
    Not only it is a laudable object, such a stipulation is inserted in order to
    check illegal mining which unfortunately has assumed serious proportions
H   in the recent past. Otherwise, the respondents herein do not stand to
  STATE OF RAJASTHAN v. MIS. DEEP JYOTI COMPANY                          7
                 [R. BANUMATHI, J.]

loose anything inasmuch as the moment evidence is produced to the A
effect that royalty was paid on the minerals by the leaseholder which
was used in the construction, the construction contractor like the
responden~s would be refunded the royalty so paid by it in terms of
circular dated 06.10.2008. In terms of clauses (5) and (7) of the said
circular, the contractor has to pay royalty at the rates specified in the
                                                                          B
circular depending upon the nature of work and on production of bills
showing payment of royalty, the contractor can get refund of royalty.
There is, thus, no financial burden on the respondents of any nature.
The purpose which is soughtto be achieved, viz., non-royalty paid mineral
(which would naturally be illegally mined mineral) is not used in the
execution of the Government work and it cannot be treated as c
unreasonable or arbitrary. In our view, there is a complete justification
for providing such a provision.
       11. The minor minerals removed from the quarries, admittedly
are the property of the government and the same cannot be removed
and used without payment of royalty. It is therefore the duty of the D
government to ensure that only royalty paid minerals are used in the
work and the purpose of issuing such circular was to avoid pilferage/
leakage ofrevenue because royalty can be very conveniently evaded by
the contractors either by not purchasing the material from the mining
leaseholders or obtaining it from unauthorized excavators. In case, if
the contractor purchases the material from unauthorized person who E
has not paid royalty, there would be loss to the public exchequer and the
circular was issued to check evasion or loss to the public exchequer.
Such condition cannot be said to be unreasonable and arbitrary and
therefore no prejudice could be said to have been caused to the
contractors.                                                              F
       12. Learned counsel for the respondents contended that the royalty
can be levied in respect of the mineral removed or consumed from lease
areas at the rates prescribed in Mines and Mineral (Development and
Regulation) Act 1957 and any such levy can only be by a legislation and
not by any circular and the impugned circular dated 06.10.2008 which is G
in the nature of levy of royalty was rightly quashed by the High Court
and the impugned orders warrant no interference. The clauses stipulating
deduction of royalty payable to the mineral department at the rates
stipulated in the circular cannot be said to be a levy. As noticed earlier,
the circular stipulates that the royalty is deducted at the rates prescribed
in the circular, on production of bills by the contractor to the .mining H
8              SUPREME COURT REPORTS                         [2016] 2 S.C.R.



A   department showing that they had purchased the royalty paid mineral
    from the leaseholder and thus it only provides the procedure for collection
    ofroyalty. The circular only provides the procedure for payment ofroyalty
    for the minerals used by the contractors who have been given the works
    contract by the government department. The High Court did not keep in
    view the object of the circular and erred in quashing the impugned circular.
B
           13. The impugned orders of the High Court in Special Appeals
    No.369 of 2009 and 753 of 2012 arc set aside and these appeals arc
    allowed. Consequently the Writ Petitions filed by the respondents herein
    stand dismissed. The parties are to bear their respective costs.
C   Kalpana K. Tripathy                                         J\ppi:als all<nvcd.