# Ayodhya Prasad Mishra v. State Of U.P. & Ors

- **Citation:** (2016) 8 ILRA 215
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2016-08-01
- **Bench:** Tarun Agarwala, Vipin Sinha
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/ayodhya-prasad-mishra-v-state-of-u-p-ors-44238
- **Pages:** 11

## Text

8 All. Ayodhya Prasad Mishra Vs State Of U.P. & Ors.
215
(2016) 8 ILRA 215
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 01.08.2016

BEFORE

THE HON'BLE TARUN AGARWALA, J.
THE HON'BLE VIPIN SINHA, J.

Writ C No.- 11171 Of 2016
&
Connected With Other Cases

Ayodhya Prasad Mishra ...Petitioner
Versus
State Of U.P. & Ors. ...Respondents

Counsel for Petitioner:
Syed Mohd. Fazal, S.G. Hasnain

Counsel for Respondents:
C.S.C.

In the present writ petition the petitioners have questioned the veracity of the Government Order dated 15th
October 2015 and its competence to demand royalty on minor minerals and cost of minor minerals to the
extent of five times the royalty which the contractors supply to the Government Department and public
undertakings pursuant to the contract entered between the parties. For facility, the facts of Writ-C No. 11171
of 2016 is being taken into consideration.

Submission made by the learned counsel for the petitioner is that the royalty is payable by the holder of the
mining lease as per the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter referred to
as the Act of 1957) read with Uttar Pradesh Minor Minerals Concession Rules, 1963 (hereinafter referred to as
the Rules of 1963). The petitioner contends that he is neither a holder of the mining lease nor carrying any
mining operation and therefore, the realisation of royalty on purchase of minor minerals is wholly arbitrary
and illegal. Similarly the Government Order charging cost of the mineral equivalent to five times the royalty
was also illegal.

Court observed that it would be essential to dwell upon the impugned Government Order dated 15.10.2015.
The impugned Government Order states that earlier the Government Order dated 02.02.2001 directed all the
Principal Secretaries and Secretaries to the Government of U.P. to ensure that minor minerals supplied to the
Government Departments/public undertakings for use in construction works or are transported only after
payment of royalty and that the suppliers should ensure evidence of payment of royalty. The Government
Order further stated that in case the royalty was not paid, requisite amount of royalty would be deducted
from their bills and that the royalty amount would be deposited in the appropriate Government's head. The
impugned Government Order further states that it has come to the knowledge of the Government that the
contractors were still purchasing minor minerals from unauthorized sources without obtaining Form MM-11
and were getting the royalty deducted from their bills, which was in violation of Section 4 (1-A) of the Act of
1957 and Rule 3 of the Rules of 1963. The Government Order further indicates that the procedure adopted by
216 INDIAN LAW REPORTS ALLAHABAD SERIES

the contractors only increased the sale of illegal minor mineral, which was also in violation of Section 21 (5) of
the Act of 1957. The Government, therefore, issued the impugned Government Order directing that if Form
MM-11 was not filed evidencing payment of royalty, in which case, the amount of royalty would be deducted
from the bills of the contractors and further cost of material would also be charged from the contractor, which
would be five times the royalty. The said Government order was issued in order to stop illegal mining and sale
of unauthorized minor minerals. To understand the impact of the Government Order dated 15.10.2015, it
would be appropriate to refer to certain provisions of the Act of 1957 and the Rules of 1963.

Court observed that as per provision of Section 9 read with Rule 21 of the Rules, the royalty is required to be
paid by the holder of a mining lease. A question arose as to whether royalty can be paid by a contractor, who
is supplying minor minerals for execution of the contract entered by him with the Government Department.
This issue was examined by a Division Bench of this Court in J.K. Construction Engineers and Contracor and
others Vs. Union of India and Others 2006 (3) ADJ 471

The Division Bench held that the liability to pay royalty is primarily on the person holding a mining lease or a
mining permit. The Division Bench further held that if a person does not hold any mining lease or mining
permit, the liability would not cease and that any person holding any minor mineral was required to maintain
and keep documents to show that the royalty had been paid. The Division Bench also held that such
restriction can not be said to be unreasonable nor could it be said that it was issued without any authority of
law. The said decision of the Division Bench of this Court in J. K. Construction Engineers and Contractor
(supra) was affirmed by the Supreme Court in Som Datt Builders Ltd. Vs. Union of India and others 2010 (1)
SCC 311.

Court held that The Government Order dated 15th October 2015 only provides for obtaining Form MM-11.
Court is of the opinion that if a contractor purchases royalty paid minor minerals from a licence holder for
storage of minerals against Form-C, the same should be accepted by the authority as an evidence depicting
the payment of royalty.

The Government Order dated 15th October, 2015 should be read accordingly, namely, that if the contractors
produces Form MM-11 or Form-C evidencing payment of royalty, the same should be accepted by the
authority while processing the bills of the contractors. Court directed the Chief Secretary to issue a
clarification in this regard to all the Principal Secretaries and the Secretaries of the Government of U.P. and to
the Divisional Commissioners and the District Magistrates in the State of U.P. immediately within four weeks
from the date of production of a certified copy of this order. The learned Standing Counsel will ensure that a
certified copy of this order is sent to the Chief Secretary within two weeks.

Court do not find any merit in the writ petitions. All the writ petitions fail and are hereby dismissed.

(Delivered by Hon'ble Tarun Agarwala, J.)

1. In this group of writ petitions, the petitioners have questioned the veracity of the
Government Order dated 15th October 2015 and its competence to demand royalty on minor
minerals and cost of minor minerals to the extent of five times the royalty which the contractors
supply to the Government Department and public undertakings pursuant to the contract entered
between the parties. For facility, the facts of Writ-C No. 11171 of 2016 is being taken into
consideration.
8 All. Ayodhya Prasad Mishra Vs State Of U.P. & Ors.
217
2. The petitioner is a registered contractor in Category-D with the Public Works
Department (PWD). The petitioner was awarded a contract for reconstruction of a road from Shiv
Marg to Kali Theeka, Mau. A contract was executed in this regard. For execution of the work, the
petitioner purchased ballast/grits, sand, moram, etc. from stone crushers and from other sources.

3. The petitioner contends that the State of U.P. was deducting royalty on the raw-material
used by the contractors, who failed to produce form MM-11 but, pursuant to the Government Order
dated 15th October 2015, in addition to the royalty to be charged for non-production of Form-MM11, the Government is now realising the cost of material to the extent of five times the royalty. The
petitioners, being aggrieved by the charging of royalty and cost of the material upto five times the
royalty, have filed the present writ petitions.

4. The contention of the petitioner in this regard is, that the royalty is payable by the holder
of the mining lease as per the Mines and Minerals (Regulation and Development) Act, 1957
(hereinafter referred to as the Act of 1957) read with Uttar Pradesh Minor Minerals Concession
Rules, 1963 (hereinafter referred to as the Rules of 1963). The petitioner contends that he is neither
a holder of the mining lease nor carrying any mining operation and therefore, the realisation of
royalty on purchase of minor minerals is wholly arbitrary and illegal. Similarly the Government
Order charging cost of the mineral equivalent to five times the royalty was also illegal.

5. In support of their submissions, the petitioners have relied upon the decision in M.P.
Contractors Sangh Indore and others Vs. State of M.P. And others reported in AIR 1987 Madhya
Pradesh 74, Ahmedabad Urban Development Authority Vs. Sharad Kumar Jayanti Kumar
Pasawalla and others reported in AIR 1992 Supreme Court 2038, Virendra Giri Vs. State of U.P.
and others reported in AIR 2008 Allahabad 75, M/s. Om Contractors Vs. State of U.P. and others
reported in 2008 (2) ALJ 438 and the decision dated 14th March, 2016 of the Division Bench of
this Court in Abhimanyu Singh and 12 others Vs. State of U.P. and 9 others.

6. On the other hand, the respondents have submitted that earlier a Government Order
dated 2nd February 2001 was issued directing the Principal Secretaries and the District Magistrate
to ensure that minor minerals are supplied to the Government Departments and public undertakings
for use in construction works or are transported only after payment of royalty and that the suppliers
should ensure evidence of the payment of royalty, failing which, the amount of royalty would be
deducted from their bills.

7. The respondents contended that this imposition was made in order to ensure that
contractors purchased minor minerals from authorized sources and to ensure that royalty was paid.
The respondents submitted that in spite of the Government Order, the contractors were purchasing
the minor minerals from unauthorized sources and were getting the royalty deducted from their
bills, which has only increased the sale of illegal minor minerals. Consequently, in order to curb
this menace, the Government Order dated 15.10.2015 was issued to ensure that the registered
contractors, who were awarded a government contract, should purchase minor minerals from
authorized sources, failing which, they would not only pay the amount of royalty but would also
218 INDIAN LAW REPORTS ALLAHABAD SERIES

pay the cost of the material, which would be equivalent to five times the royalty. It was contended
that the Government Order has been issued in public interest and in consonance with the provisions
of the Act and the Rules.

8. In support of their submissions, the respondents have placed reliance upon a decision of
a Division Bench of this Court in M/s. J. K. Construction Engineers and Contractor and others
Vs. Union of India and Others reported in 2006 (3) ADJ 471 and the decision of the Supreme
Court in Som Datt Builders Ltd Vs. Union of India and others reported in 2010 (1) SCC 311.

9. We have heard Sri Syed Mohd Fazal Advocate, Sri Amit Khanna Advocate, Sri Ram
Kishore Gupta Advocate and Sri Om Prakash Chaudhary Advocate for the petitioners and Sri
Vishnu Pratap, the learned Standing Counsel for the respondents.

10. In order to appreciate the submissions of the rival parties, it would be essential to dwell
upon the impugned Government Order dated 15.10.2015. The impugned Government Order states
that earlier the Government Order dated 02.02.2001 directed all the Principal Secretaries and
Secretaries to the Government of U.P. to ensure that minor minerals supplied to the Government
Departments/public undertakings for use in construction works or are transported only after
payment of royalty and that the suppliers should ensure evidence of payment of royalty. The
Government Order further stated that in case the royalty was not paid, requisite amount of royalty
would be deducted from their bills and that the royalty amount would be deposited in the
appropriate Government's head. The impugned Government Order further states that it has come to
the knowledge of the Government that the contractors were still purchasing minor minerals from
unauthorized sources without obtaining Form MM-11 and were getting the royalty deducted from
their bills, which was in violation of Section 4 (1- A) of the Act of 1957 and Rule 3 of the Rules of
1963. The Government Order further indicates that the procedure adopted by the contractors only
increased the sale of illegal minor mineral, which was also in violation of Section 21 (5) of the Act
of 1957. The Government, therefore, issued the impugned Government Order directing that if Form
MM-11 was not filed evidencing payment of royalty, in which case, the amount of royalty would
be deducted from the bills of the contractors and further cost of material would also be charged
from the contractor, which would be five times the royalty. The said Government order was issued
in order to stop illegal mining and sale of unauthorized minor minerals.

11. To understand the impact of the Government Order dated 15.10.2015, it would be
appropriate to refer to certain provisions of the Act of 1957 and the Rules of 1963.

12. Section 4 (1- A) of the Act of 1957 provides as under:

" (1-A) No person shall transport or store or cause to be transported or stored any
mineral otherwise than in accordance with the provisions of this Act and the rules made
thereunder."

13. The aforesaid provision makes it clear that no person shall transport or store any
mineral otherwise in accordance with the provisions of the Act and Rules made thereunder.
8 All. Ayodhya Prasad Mishra Vs State Of U.P. & Ors.
219
14. Section 21 (5) of the Act of 1957 provides as under:-

" (5) Whenever any person raise without any lawful authority, any, mineral from any
land, the State Government may recover from such person the mineral so raised, or where such
mineral has already been disposed of, the price thereof, and may also recover from such person
rent, royalty or tax as the case may be, for the period during which the land was occupied by such
person without any lawful authority"

15. The aforesaid provision provides that any person who raise without any lawful
authority, any, mineral from any land in which case the State Government may recover from such
person the price of such minerals and may also recover from such person the royalty.

16. Section 15 of the Act of 1957 gives power to the State Government to make Rules in
respect of minor minerals pursuant to which the Uttar Pradesh Minor Minerals (Concession)
Rules 1963 was enacted. Rule 3 of the said Rules provides as under:

"3. Mining operations to be under a mining lease or mining permit-- (1) No
person shall undertake any mining operations in any area within the State of any minor mineral to
which this rules are applicable except under and in accordance with the terms and conditions of a
mining lease or mining permit granted under these rules:

Provided that nothing shall affect any mining operations undertaken in accordance
with the terms and conditions of a mining lease or permit duly granted before the commencement
of these rules.

(2) No mining lease or mining permit shall be granted otherwise than in accordance
with the provisions of these rules."

17. A perusal of the aforesaid provision indicates that no person shall undertake any mining
operation except in accordance with the terms and conditions of the mining lease or mining permit
granted under the Rules.

18. Rule 70 of the Rules of 1963 places restrictions on transport of minerals. For facility,
the said provision is extracted hereunder:-

" 70. Restrictions of transport of minerals-- (1) The holder of mining lease or
permit or a person authorised by him in this behalf may issue a pass in Form MM-11 to every
person carrying a consignment of minor mineral by a vehicle, animal or any other mode of
transport. The State Government may, through the District Officer, make arrangements for the
supply of printed MM-11 Form books on payment basis.

(2) No person shall carry, within the State, a minor mineral by a vehicle, animal or any other
mode of transport, excepting railway, without carrying a pass in From MM-11 issued by Sub-rule (1).
220 INDIAN LAW REPORTS ALLAHABAD SERIES

(3) Every person carrying any minor mineral shall, on demand by any officer authorised
under Rule 66 or such officer as may be authorised by the State government in this behalf, show the said pass
to such officer and allow him to verify the correctness of the particulars of the pass with reference to quantity
of the minor mineral.

(4) The State Government may establish a check post for any area included in any mining
lease or permit, and when a check post is so established public notice shall be given of this fact by
publication in the Gazette and in such other manner as may be considered suitable by the State Government.

(5) No person shall transport a minor mineral for which these rules apply from such area
without first presenting the mineral at the check post established for that area for verification of the weight or
measurement of the mineral.

(6) Any person found to have contravened any provision of this rule shall, on convictions, be
punishable with imprisonment of either description for a term which may extend to six months or with fine
which may extend to one thousand rupees or with both."

19. The aforesaid Rule indicates that the holder of a mining lease or mining permit is authorised to
issue a pass in From MM-11 to every person carrying a consignment of minor minerals. Sub-clause (2) of the
Rule 70 provides that no person shall carry minor minerals without carrying a pass in Form MM-11.

20. Section 23-C of the Act of 1957 gives power to the State Government to make Rules for
preventing illegal mining, transportation and storage of minerals. In exercise of powers provided under
Section 23-C of the Act of 1957, the State Government enacted the Uttar Pradesh Minerals (Prevention of
Illegal Mining, Transportation and Storage) Rules, 2002 (hereinafter referred to as the Rules of 2002.)
Rule 3, 4 and 5 of the Rules of 2002, being relevant to the issue, are extracted hereunder:

"3. Prohibition Section 23.C (1)-- No person shall transport, carry or cause to be
transported, carried any mineral by any means from its raising place to any other place without a valid
transit pass issued by the holder of mining lease or mining permit or prospecting licence as the case may be.

4. Supply of transit passes and fee therefor.-(1) The holder of mining lease or mining permit
or prospecting licence or licence for storage of minerals, as the case may be, shall make an application to the
district officer or the officer authorised by the State Government in this behalf along with fee and in the
manner, as determined by the State Government from time to time for obtaining book of transit pass for
transportation of any mineral.

(2) The book of transit pass will be supplied by the District Officer of the respective district
or any other officer authorised by the State Government in this behalf by notification under these rules or the
Act or any other rules made thereunder.
8 All. Ayodhya Prasad Mishra Vs State Of U.P. & Ors.
221

(5) Issue of Transit Pass.--(1) The transit pass shall be issued by the holder of mining lease
or mining permit or prospecting licence for major minerals in 'Form G' appended to these rules and for
minor minerals in 'Form MM-11' appended to Rules 1963.

(2) The holder of licence for storage of minerals shall issue the transit pass in 'Form C' for
lawful transportation of minerals from the store."

21. Rule 3 of the Rules of 2002 provides that no person shall transport any mineral unless it is
accompanied by a valid transit pass issued by a holder of mining lease or mining permit or prospecting
licence or licence for storage of minerals as the case may be. Rule 4 of the Rules of 2002 provides that the
holder of a mining lease or holder of a licence for storage of minerals shall make an application for obtaining
a book of transit pass for transportation of any mineral. Rule 5 of the the Rules of 2002 provides that transit
form in Form MM-11 would be issued by the holder of a mining lease or mining permit and Form C would
be issued by the holder of licence for storage of minerals.

22. Section 9 of the Act of 1957 and Rule 21 of the Rules of 1963 provides that royalty is required to
be paid by a holder of a mining lease. For facility, Section 9 of Act 1957 and Rule 21 of the Rule of 1963 are
extracted hereunder:

"9. Royalties in respect of mining lease.- (1) The holder of a mining lease granted before
the commencement of this Act shall, notwithstanding anything contained in the instrument of lease or in any
law in force at such commencement, pay royalty in respect of [any mineral removed by or consumed by him
or by his agent, manager, employee, contractor or sub-lease] from the leased area after such,
commencement, at the rate for the time being specified in the Second Schedule in respect of that mineral.

(2) The holder of a mining lease granted on or after commencement of this Act shall pay
royalty in respect of [any mineral removed by or consumed by him or by his agent, manager, employee,
contractor or sub-lessee] from the leased area at the rate for the time being specified in the Second Schedule
in respect of that mineral.

[(2-A) The holder of a mining lease, whether granted before or after the commencement of
the Mines and Minerals (Regulations and Development) Amendment Act, 1972 shall not be liable to pay any
royalty in respect of any coal consumed by a workman engaged in a colliery provided that such consumption
by the workman does not exceed one third of a tonner per month.]

(3) The Central Government may, by notification in Official Gazette amend the Second
Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with
effect from such date as may be specified in the notification:

[Provided that the Central Government shall not enhance the rate of royalty in respect of
any mineral more than once during any period of three years.
222 INDIAN LAW REPORTS ALLAHABAD SERIES

21. Royalty.-- (1) The holder of a mining lease granted on or after the commencement of
these rules shall pay royalty in respect of any mineral removed by him from the leased area at the rates for
the time being specified in the First Schedule to these rules.

(2) The State Government may, by notification, in the Gazette amend the First Schedule so as
to include therein or exclude therefrom or enhance or reduce the rate of royalty in respect of any mineral
with effect from such date as may be specified in the notification:

Provided that the State Government shall not enhance the rate of royalty in respect of any
mineral for more than once during any period of three years and shall not fix the royalty at the rate of more
than 20 percent of the pit's mouth values.

(3) Where the royalty is to be charged on the pit's mouth value of the mineral the State
Government may assess such value at the time of the grant of the lease and the rate of royalty will be
mentioned in the lease deed. It shall be open to the State Government to re-assess not more than once in a
year the pit's mouth value, if it considers that an enhancement is necessary."

23. No doubt under the aforesaid provision of Section 9 read with Rule 21 of the Rules, the royalty
is required to be paid by the holder of a mining lease. A question arose as to whether royalty can be paid by a
contractor, who is supplying minor minerals for execution of the contract entered by him with the
Government Department. This issue was examined by a Division Bench of this Court in J.K. Construction
Engineers and Contracor and others Vs. Union of India and Others 2006 (3) ADJ 471 wherein the
Division Bench in paragraph 101 held as under:

" 101. Now coming to the question as to whether the amount of royalty can be recovered
from the petitioners who are the contractors and suppliers of ordinary earth and other minor minerals, we
are of the considered opinion that the royalty is payable on excavation of any minor minerals. The liability is
primarily of the person holding the mining lease or a mining permit but if a person does not hold any mining
lease or mining permit, the liability does not cease. Any person dealing in a minor mineral is required to
maintain and keep documents to show that the royalty has been paid and in order to ensure that due royalty
or minor minerals has been paid within the State of U.P., the State Government by the three Government
Orders have provided for producing copies of declaration in form MM 11 and treasury challan evidencing
deposit of royalty. It cannot be said that any undue restrictions have been placed upon the right to carry on
trade or business or it is without the authority of law."

24. The Division Bench held that the liability to pay royalty is primarily on the person holding a
mining lease or a mining permit. The Division Bench further held that if a person does not hold any mining
lease or mining permit, the liability would not cease and that any person holding any minor mineral was
required to maintain and keep documents to show that the royalty had been paid. The Division Bench also
held that such restriction can not be said to be unreasonable nor could it be said that it was issued without any
authority of law. The said decision of the Division Bench of this Court in J. K. Construction Engineers and
Contractor (supra) was affirmed by the Supreme Court in Som Datt Builders Ltd. Vs. Union of India and
8 All. Ayodhya Prasad Mishra Vs State Of U.P. & Ors.
223
others 2010 (1) SCC 311. The Supreme Court held that the view taken by the High Court does not call for
any interference.

25. In the light of the aforesaid, the issue with regard to payment of royalty stands concluded. It is no
longer open to the petitioners to contend that they are not liable to pay the royalty. The decisions cited by the
petitioners are distinguishable and are not applicable inasmuch as the Court did not consider the provisions of
the Rules of 2002 and Section 21 (5) of the Act of 1957.

26. The purpose of issuance of impugned Government Order is just and valid and has been issued in
public interest. The Government Order has been issued to ensure that royalty is paid and that the royalty paid
material is used for construction work in the government department. Such intention is laudable. The
requirement of Form MM-11/Form-C is a proof that royalty has been paid and the material is purchased
from an authorized source either from a holder of a mining lease or from a licence storage holder. The
Government Order imposing such conditions is required only for the purpose of undertaking of that work,
which is awarded by the Government and its department, for which purpose, the conditions imposed in the
Government Order is fair and reasonable and is not arbitrary. The purpose is to ensure that no mineral is
excavated/transported and used without payment of royalty. The purpose of providing Form MM-11/Form-C
is to ensure that the material and minerals etc. used by the contractors in the construction works, are royalty
paid. It only indicates that such material, which is purchased by the contractors, is legally mined on which
royalty has been paid. The object behind the issuance of the Government Order is to see that illegally mined
material is not purchased by the contractors and used in the construction works, which is awarded by the
Government and its department. This, in our view, is a laudable object and such a stipulation contained in the
Government Order is to check the illegal mining. Consequently, the Government Order dated 15th of
October 2015 directing further that if mineral is not purchased from a valid source and without production of
From MM-11, the cost of material to the extent of five times royalty would become payable by the
contractors. This imposition is in terms of Section 21 (5) of the Act of 1957. The said provision clearly
indicates that where any person raise without any lawful authority, any mineral from any land, then such
person would be liable to pay not only the royalty but also the price thereof. The word 'raise' means 'move'
and therefore, if any person moves any mineral without a valid Form MM-11 or Form-C in which case the
person would not only be liable to pay royalty but would also be liable to pay the price of the material. In the
instant case, by the Government Order, the price of the material is equivalent to five times the royalty, which
is not arbitrary.

27. The submission of the learned counsel for the petitioners that they are purchasing raw-material
from the stone crushers, who are purchasing the same from the holders of a mining lease/mining permit
through From MM-11 and that these stone crushers cannot further issue any Form MM-11 to the petitioners
is misconceived inasmuch as the stone crushers are liable to take a licence for storage of minerals under the
Rules of 2002. Once the stone crushers obtain a licence for storage of minerals, they would be obliged to
issue Form-C under Rule 5 of the Rules of 2002 after obtaining necessary book of transit pass from the
appropriate authority under Rule 4.

28. We find that a similar circular was issued by the State of Rajsthan for deduction of royalty from
the bills of contractors, who were using minerals without submitting proof of the fact that royalty was paid on
224 INDIAN LAW REPORTS ALLAHABAD SERIES

such minerals. The said circular was held to be a valid circular issued in public interest by the Supreme Court
in State of Rajsthan and another Vs. Deep Jyoti Company and another reported in (2016) 6 SCC 120.
In paragraph 11, the Supreme Court held as under:-

"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 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 of revenue because royalty can be very conveniently evaded by
the contractors either by not purchasing the material from the mining leaseholders or obtaining it from
unauthorised excavators. In case, if the contractor purchases the material from unauthorised person who 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."

29. In the light of the aforesaid, reliance placed by the petitioners of the decision of the Division
Bench of this Court in Abhimanyu Singh and 12 others (supra) is misconceived. The contention that the
Division Bench held that the payment of royalty to the extent of five times is illegal, is misconceived. The
Division Bench had only noted the submission of the petitioner and held that there was no illegality in the
Government Order and that it would be the responsibility on the part of the contractors to ensure that
minerals are purchased through the authorized mining lease holder/suppliers on which royalty has been paid.
The Division Bench also held that the petitioner of that writ petition should ensure that the royalty has been
paid and copy of the Form MM-11 should be provided, failing which, they would have to pay the penalty.
The Government Order dated 15th October 2015 only provides for obtaining Form MM-11. We are of the
opinion that if a contractor purchases royalty paid minor minerals from a licence holder for storage of
minerals against Form-C, the same should be accepted by the authority as an evidence showing the payment
of royalty.

30. The Government Order dated 15th October 2015 only provides for obtaining Form MM-11. We
are of the opinion that if a contractor purchases royalty paid minor minerals from a licence holder for storage
of minerals against Form-C, the same should be accepted by the authority as an evidence depicting the
payment of royalty. The Government Order dated 15th October, 2015 should be read accordingly, namely,
that if the contractors produces Form MM-11 or Form-C evidencing payment of royalty, the same should be
accepted by the authority while processing the bills of the contractors. We, accordingly, direct the Chief
Secretary to issue a clarification in this regard to all the Principal Secretaries and the Secretaries of the
Government of U.P. and to the Divisional Commissioners and the District Magistrates in the State of U.P.
immediately within four weeks from the date of production of a certified copy of this order. The learned
Standing Counsel will ensure that a certified copy of this order is sent to the Chief Secretary within two
weeks.

31. For the reasons stated aforesaid, we do not find any merit in the writ petitions. All the writ
petitions fail and are hereby dismissed. There shall be no order as to cost.
----------
8 All. Janta Chini Mill Mazdoor Sangh & Anr. Vs Industrial Finance Corporation Of India
 & Ors.
225
(2016) 8 ILRA 225
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 23.08.2016

BEFORE

THE HON'BLE V.K. SHUKLA, J.
THE HON'BLE MAHESH CHANDRA TRIPATHI, J.

Writ C No.- 20805 Of 2011

Janta Chini Mill Mazdoor Sangh & Anr. ...Petitioners
Versus
Industrial Finance Corporation Of India & Ors. ...Respondents

Counsel for Petitioners:
Manish Kumar Nigam, Arun Kumar Gupta, Ashok Kumar

Counsel for Respondents:
SC, Anoop Trivedi, Chandan Sharma, Gyan Prakash, O.P.Misra, Praveen Shukla, Ravindra Singh, Santosh
Kumar Singh, Santosh Kumar Srivastava, Satish Chaturvedi,Vr Tiwari
Held

SARFAESI Act is a complete code for enforcement of security interest, and secured creditors can enforce
rights without court intervention.
Section 13(9) SARFAESI Act already incorporates Sections 529 & 529A of the Companies Act,
thereby protecting workmen's dues in cases of liquidation.
Workmen and cane growers cannot claim pari passu distribution of sale proceeds under SARFAESI
proceedings unless the company is in liquidation.
Where no winding up proceedings are pending, workmen and other claimants do not attain status of
secured creditors and cannot seek distribution from SARFAESI sale proceeds.
In absence of liquidation, workmen and cane growers are treated as unsecured creditors, and their
dues must be recovered through statutory mechanisms provided under respective laws.
The High Court cannot expand statutory provisions or legislate by extending Companies Act provisions
(Sections 529, 529A) to SARFAESI proceedings beyond what is expressly provided.
Remedy against SARFAESI proceedings lies under Section 17 of the SARFAESI Act, not by invoking writ
jurisdiction directly in such disputes.
Sale proceedings under SARFAESI Act cannot be quashed merely to protect workmen's dues
when statutory framework already governs distribution.
Secured creditors are entitled to utilize sale proceeds, subject to statutory provisions; courts cannot
impose additional distribution mechanisms.
Workmen and cane growers are free to recover dues through appropriate statutory forums, such as
recovery as arrears of land revenue.
Court may issue equitable directions (e.g., asking company to frame scheme for payment of dues), but
cannot override statutory scheme.

CASE LAW CITED

Transcore v. Union of India, (2008) 1 SCC 125