# M/s Sharad Enterprises v. State of U.P. & Ors

- **Citation:** (2026) 1 ILRA 1203
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2026-01-21
- **Case number:** Writ C No. 14386 of 2019
- **Bench:** Saral Srivastava, Amitabh Kumar Rai
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-sharad-enterprises-v-state-of-u-p-ors-54771
- **Pages:** 36

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1 All. M/s Sharad Enterprises Vs. State of U.P. & Ors.
1203
(2026) 1 ILRA 1203
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 21.01.2026

BEFORE

THE HON'BLE SARAL SRIVASTAVA, J.
THE HON'BLE AMITABH KUMAR RAI, J.

Writ C No. 14386 of 2019

M/s Sharad Enterprises ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Issue(s) for consideration
 (a) Whether the security money which had been deposited at the time of grant of lease under Rules, 1963
could be forfeited when a lease was determined for the non-payment of royalty, rent or other dues?
(b) Whether once the petitioner knowingly and voluntarily entered into a contract with the respondent-State
by executing a registered lease deed incorporating the condition of forfeiture and agreed to it, can he resile
from it or challenge condition of forfeiture of security in the lease deed?
(c) Whether the petitioner can invoke the writ jurisdiction u/Article 226 of the Constitution of India to wriggle
out of a condition stipulated in the contract?
(d) Whether the matter can be remanded on the ground of violation of principles of natural justice?

Headnotes
A. Mines and Minerals Law - U.P. Minor Minerals (Concession) Rules, 1963: Rule 58(1), 58(2),
41-H(1), Rule 27 and Schedule-IV; The Mines and Minerals (Development and Regulation) Act,
1957: Section 15(3) - A decision passes sub-silentio, in the technical sense that has come to be
attached to that phrase, when the particular point of law involved in the decision is not
perceived by the court or present to its mind."(Para 54)

In two judgements Ajay Raj Dwivedi (infra) and Smt. Kalpana Karwariya (infra), the Court after considering
Rule 58 and Clause 19(3) of the GO dated 14.08.2017 which provides for consequences of non-payment of
any amount which includes the royalty held that since these provisions do not provide for forfeiture of security
in the event of failure of payment of any amount due from the lessee including royalty, therefore, the State
Government cannot forfeit the security and can recover the amount as arrears of land revenue with
prescribed interest u/Rule 58(2) of the Rules, 1963. (Para 52)

While deciding the two cases i.e. Ajay Raj Dwivedi (infra) and Smt. Kalpana Karwariya (infra), one vital
aspect of the matter was not brought to the notice of the Court that if the MMDR Act or the Rules,
1963 or the GO dated 14.08.2017 do not prohibit the forfeiture of security in part or full in the event of nonpayment of installment amount of the royalty as per the terms and conditions in the lease deed on the due
date whether the incorporation of condition of forfeiture of security (in part or whole) in the lease deed in the
event of violation of any terms and conditions of the lease deed is bad in law for the reason that the State has
no power under MMDR Act or the Rules, 1963 or the GO dated 14.08.2017 to forfeit the security. (Para 56)

B. Whether once the petitioner knowingly and voluntarily entered into a contract with the
respondent-State by executing a registered lease deed incorporating the said condition and
agreed to it, can he resile from it or challenge condition of forfeiture of security in the lease
deed. (Para 57)
1204 INDIAN LAW REPORTS ALLAHABAD SERIES
The petitioner does not dispute the execution of the lease deed nor it is the case of the petitioner in the writ
petition that the petitioner did not voluntarily accept the general condition no.1 of Part-3 of the lease deed
providing for forfeiture of the security. (Para 58)

The petitioner has averred that while cancelling the mining lease, the security amount of the
petitioner could not be forfeited which has no relation with the condition of advertisement or the
mining plan. (Para 62)

The petitioner was well aware of the condition no.22 of the E-Tender notice-cum-E-Auction proceeding in the
advertisement that Clause-22, puts an obligation on the bidder to inspect the leased area and the petitioner
should get himself satisfied about the availability of estimated quantity of mineral on the site and also about
the approach road. The petitioner had inspected the area thrice before execution of the mining lease and
after having been satisfied, voluntarily entered into the contract and executed the lease deed. (Para 59, 60)

The petitioner was also well aware of the fact that after participating in the E-Tender-cum-E Auction
proceeding, the petitioner would not be permitted to raise any grievance with regard to non-availability of
mineral or any defect in the approach road. So, this condition of E-Tender is binding upon the
petitioner. (Para 63)

Since, the condition no.22 of the advertisement is binding upon the petitioner, therefore, it is not
open to the petitioner to take a plea that after the rainy season when he visited the site for commencing
the mining operation after 01.10.2018, he found the mining area was submerged with water to deny his
liability to pay third installment. (Para 64)

C. Whether the petitioner can invoke the writ jurisdiction u/Article 226 of the Constitution of
India to wriggle out of a condition stipulated in the contract? (Para 67)

"Having entered into agreements voluntarily, containing the conditions aforesaid and having
done the business under the licences obtained by them, cannot be allowed to either wriggle out
of the agreements nor can they be allowed to challenge the validity of the Rules which
constitute the terms of the contract. The High Court should not have exercised its extraordinary
discretionary jurisdiction u/Article 226 of the Constitution in aid of such licencees." (Para 75)

The lease deed stipulates for forfeiture of security amount in part or full which is the term and condition of
the lease deed, and till the petitioner demonstrates that such a condition is unconscionable or
pricks the conscious of the Court or against the public policy, the petitioner having agreed to the
said condition knowingly and voluntarily cannot wriggle out of the said condition contending that
non-payment of installment on a particular date stipulated in the lease deed does not amount to violation of
the lease deed nor he can contend that the respondent-State has no jurisdiction to forfeit the security
inasmuch as Rule 58 of the Rules, 1963 or Clause-19 (3) of the GO dated 14.08.2017 do not confer power
upon the State Government to forfeit the security. (Para 78)

D. Courts cannot substitute their own view of the presumed understanding of commercial terms
by the parties, if the terms are explicitly expressed. The explicit words of the contract are always
the final word with regard to the intention of the parties. Therefore, denying or restraining the
respondent-State from forfeiting the security which is permitted under the lease deed in case of violation of
any condition of lease or violation of any Rules of 1963 would amount to rewriting a contract which power
Court does not possess while interpreting a contract. (Para 79)

If for any reason, petitioner is of the view that the authority should have forfeited the security of
lessor amount than the entire security, the petitioner has a remedy to claim damage on the
aforesaid ground under Civil Law, and this Court cannot interfere nor substitute the terms and conditions
1 All. M/s Sharad Enterprises Vs. State of U.P. & Ors.
1205
of the contract by assessing the amount of security which the respondent-State could forfeit under the
agreement. (Para 98)

E. Recovery of royalty as arrears of land revenue is the consequence of nonpayment of
installment on the due date which is evident from clause (3) of Part-II of the lease deed while
forfeiture of security is the consequence of violation of any condition of the lease deed as per
clause (1) of Part-III of the lease deed which has been accepted by the petitioner voluntarily.
Therefore, in the event of any breach of the condition of the lease deed, the respondents are well
within their rights to forfeit the security. Therefore, the contention of the petitioner that if the
installment of royalty is not paid on the due date, the same can be recovered as arrears of land revenue is
misconceived. (Para 80)

F. Authority or jurisdiction to forfeit the security - Neither Rule 58 of Rules, 1963 nor Clause
19(3) of the GO dated 14.08.2017 nor Rule 59 of the Rules, 1963 or any provision either in the
MMDR Act or Rules, 1963 prohibits the incorporation of a condition in the lease deed that in the
event of violation of any terms and conditions of the lease deed, the security in part or full can
be forfeited. Rule 59 of Rules, 1963 deals with consequences of contravention of certain conditions on
existence of which the penalty provided in the said provision for violating the condition of the lease deed
u/Rule 59 can be imposed and can also be recovered from the security of lessee. (Para 81)

Since the lease deed executed between the petitioner and the respondents is to be executed in
Form MM-6 as per Rule 29(1) of Rules, 1963, which contains a clause of forfeiture of security in
clause (1) of Part-III of the 'Model Form of Auction Lease for Mining', therefore, the nature of
lease deed is a statutory lease deed, and the condition incorporated w.r.t. the forfeiture of
security in the lease deed also has its root in Rule 29 (1) of the Rules, 1963, therefore, the
argument of learned counsel for the petitioner that the respondent State has no authority or jurisdiction to
forfeit the security as neither Rule 58 nor Clause-19(3) of the GO dated 14.08.2017 confers any power upon
the respondent State to forfeit the security is misconceived. (Para 83)

G. (a) Section 15(3) of the MMDR Act cannot be interpreted in a manner so as to confer benefit
upon the lessees for not paying installments where mineral has not been removed or consumed
by him. (Para 93)

Normal principle of statutory interpretation is that when the words used in the statute are clear
and unambiguous, the same should be given their normal meaning without adding or rejecting
any word. However, there is an exception to this general rule. The literal interpretation of statute is not
sacramental rule. In case, the Court finds that the provision is vague and ambiguous or the normal
meaning may lead to confusion, absurdity or the repugnancy with other provisions, the Court
may by using the interpretative tools, set right the situation by adding or omitting or
substituting words in the statute. This flexible approach allows Courts to consider legislative intent to
prevent absurd outcome and give effect to public good. (Para 85, 86, 88)

If the interpretation of Section 15(3) put forth by the petitioner that the petitioner is liable to
pay royalty for the quantity of mineral consumed by the petitioner is accepted, (since the
petitioner has not excavated the mineral after 01.10.2018) that would lead to absurdity since it
could never be the intention of the legislature, further such interpretation would render the other
provision of Rules, 1963 and the terms and condition of the lease deed which is in Form MM6 as per Rule 29
of Rules, 1963 redundant. (Para 84, 92)

(b) As per Black's Law Dictionary (5th Edition), the meaning of word 'only' is solely, merely,
exclusive or necessary in a particular situation, in contrast to all the other things that are not
true, appropriate or necessary. (Para 89, 90)
1206 INDIAN LAW REPORTS ALLAHABAD SERIES
If the legislature had intended that lessee is liable to pay royalty or lease rent or dead rent whichever is
higher only for the quantity removed or consumed by the lessee, the legislature would have incorporated the
word 'only' before the words 'in respect of minor mineral removed or consumed'. (Para 91)

H. Petitioner's submission in respect to the fact that the respondent can forfeit the security only
if the conditions enumerated in Rule 29 of the Rules, 1963 are present, also lacks merit for the
reason that it contemplates the forfeiture of security if the lease deed is not executed within one month by
the lessee because of default on the part of the lessee from the issuance of lease deed or LOI, or as the case
may be. However, Rule 29 of the Rules, 1963 does not prohibit the respondent-State to forfeit the
security nor prohibits the induction of forfeiture clause in the lease deed in case of violation of
terms and conditions of lease deed. Lease deed is prepared in Form MM-6 named as 'Model Form of
Auction Lease for Mining' u/Rule 29 of Rules, 1963 which contains forfeiture clause in para-1 of Part-III. (Para
94)

I. Violation of principles of natural justice - Before forfeiting the security, a notice and
opportunity of hearing ought to be given to the lessee for the reason that the forfeiture of
security prejudices the rights of lessee and entails civil consequences.

With regards to the petitioner's contention w.r.t. violation of principle of natural justice by the respondent
State in forfeiting the security, it may be noted that the rule as well as lease deed prescribes for
providing opportunity of hearing before cancellation of lease deed and not before forfeiting the
security. (Para 95)

The petitioner has raised all the contentions challenging the action of the respondent-State in forfeiting the
security of the petitioner, and this Court has given ample opportunity of hearing to the petitioner and has
deliberated and dealt with all contentions which he could have advanced before the authority challenging the
legality of action of respondent in forfeiting the security. Therefore, no useful purpose would be served in
remanding the matter to the authority on the ground of violation of principles of natural justice
as such an exercise would be an empty formality and a wasteful exercise. Therefore, matter is
not remitted to the authority. (Para 97)

J. The law is settled that benefit of Article 14 of the Constitution of India cannot be extended to
perpetuate an illegality. If some wrong benefit has been conferred or some benefit which is contrary to
the scheme has been granted, it would not bestow a right upon the others to claim it as a right of equality by
reference to Article 14 of the Constitution of India. (Para 102)

Petitioner urges that the action of the respondent in not adjusting the security amount in the third installment
is arbitrary and is violative of Article 14 of the Constitution of India inasmuch as in other districts, the District
Magistrate has cancelled the lease deeds while passing orders u/Rule 58 of Rules, 1963 and has adjusted the
security amount deposited by the lessee in the dues of the lease amount/royalty, therefore, forfeiture of
security cannot be sustained. (Para 99)

The security amount may have been adjusted by the District Magistrates of some of the Districts
as stated by the petitioner, but that would not give a right to the petitioner to get the security
amount adjusted in the third installment inasmuch as neither Rules,1963 nor clause (1) of Part-III of the
mining lease permits the security amount to be adjusted against any installment or any amount due from the
petitioner. (Para 101)

K. Rule 50 of 1963 - Refund of security - It states that after determination of a mining lease, the amount
of security deposit lying in deposit with the State Government not required to be applied for any of the
purposes mentioned in the Rules shall be refunded to the lessee ordinarily within a period of six months from
the date of determination of lease. The said rule talks of refund of security only if the security
deposit lying in deposit with the State Government after the lease deed is determined is not to
1 All. M/s Sharad Enterprises Vs. State of U.P. & Ors.
1207
be used for any of the purposes mentioned in the Rules shall be refunded to the lessee within a
period prescribed in the said Rule. (Para 103)

In the present case, the security amount has been forfeited by the respondent authority on the
violation of terms and conditions of the lease deed as held above, therefore, Rule 50 of the
Rules, 1963 is not attracted in the instant case nor Rule 50 would become redundant since it will have
its application in all those cases where the lease deed has been determined and no amount is due from the
lessee under the Rules to the respondent State, in such an event, respondent-State is under obligation to
refund the security lying in deposit with the respondent-State. (Para 104)

Petitioner has not raised any contention challenging the recovery of third installment. The petitioner has
emphasised for adjustment of security money towards third installment. (Para 105)

Writ petition dismissed. (E-4)

Case Law Cited
1. Ajay Raj Dwivedi Vs. State of U.P. and Others, Writ-C No.13569 of 2019 (Para 48)
2. Smt. Kalpana Karwariya Vs. State of U.P. and Others, Writ-C No.28355 of 2021 (Para 48)
3. State of U.P. and Another Vs. Synthetics and Chemicals Ltd. & Another, 1991 (4) SCC 139 (Para 54)
4. A-One Granites Vs. State of U.P. and Others, 2001 (3) SCC 537 (Para 55)
5. M/s. Gauri Shankar Singh Vs. State of U.P. & Others, Writ-C No.12041 of 2020 (Para 65)
6. State of Orissa & Others Vs. Narain Prasad & Others, AIR 1997 SC 1493 (Para 68)
7. Venkataraman Krishnamurty and Another Vs. Lodha Crown Buildmart Private Limited, 2024 (4) SCC 230
(Para 76)
8. Independent Sugar Corporation Ltd. Vs. Girish Sriram Juneja & Others, (2025) 5 SCC 209 (Para 86)
9. Palm Groves Cooperative Housing Society Ltd. Vs. Magar Girme & Gaikwad Associates etc., 2025 SCC
OnLine SC 1790 (Para 87)
10. Afcons Infrastructure Ltd. Vs. Cherian Varkey Construction Company Private Ltd. (Para 87)
11. Raj Pratap Yadav Vs. State of U.P. and Others, Writ-C No.28087 of 2023 (Para 93)
12. Tinku Vs. State of Haryana and Others, 2024 SCC OnLine SC 3292 (Para 102)

List of Acts
 U.P. Minor Minerals (Concession) Rules, 1963; The Mines and Minerals (Development and Regulation) Act,
1957

List of Keywords
forfeiture, security, minerals, concession, environmental, impact, mines, illegal, jurisdiction.

Appearances for Parties
For Petitioner(s): Adarsh Bhushan, Shri Ashok Khare (Senior Advocate)
For Respondent(s): C.S.C.

(Delivered by Hon'ble Saral Srivastava, J.)

1. Heard learned counsel for the petitioner and Sri Rajeshwar Tripathi, learned Chief Standing
Counsel-II for the State-respondents.

2. The petitioner by means of the present writ petition has prayed mainly for the following
relief:-
1208 INDIAN LAW REPORTS ALLAHABAD SERIES

"i. Issue a writ, order or direction in the nature of certiorari, quashing the impugned
order dated 29.12.2018, only to the extent of forfeiture of the security amount of Rs. 8,51,68,215/-
passed by Respondent no.3 and quashing the impugned recovery Certificate dated 14.01.2019
issued by the District Magistrate, Jalaun and impugned recovery Citation dated 23.01.2019 issued
by the Tehsildar, Jhansi and to further to quash impugned Revisional order dated 12.03.2019
passed by Respondent no.2.

ii. Issue a writ, order or direction in the nature of mandamus directing the respondents to
adjust
the
security
deposit
of
Rs.
8,51,68,215/-
towards
unpaid
quarterly
lease
amount/installments.

iii. Issue a writ order or direction in the nature of mandamus of directing the respondents
to refund the amount of Rs.2,00,00000/- (Rs. Two Crore) forcefully taken from the petitioner in
pursuance of the impugned recovery certificate and citation, along with the 18% interest."

3. The facts, in brief, are that as per the Government Policy-2017, a Government Order for
settlement of leases under Chapter-IV by E-Tender/E-Auction dated 14.08.2017 was issued. The
mining leases were to be granted as per the procedure prescribed under the Government Order
dated 14.08.2017. The District Magistrate, Jalaun published an E-Tender notice dated 16.11.2017
for settlement of mining leases of sand and morang under U.P. Minor Minerals (Concession) Rules,
1963 (hereinafter referred to as the 'Rules, 1963') in District Jalaun for several mining blocks.

4. The petitioner pursuant to the aforesaid E-Tender notice submitted an online application on
MSTC Portal for grant of mining lease in Village-Himanpura, Tehsil-Kaalpi, Khand No.2,
measuring 20.242 hectares for a quantity of 03,03,630 cubic meters. The reserve price for the area
applied by the petitioner was Rs.150/- per cubic meter. The petitioner gave bid of Rs.1122/- cubic
meter as against the reserve price of Rs.150/- per cubic meter. The petitioner's bid was found to be
the highest bid. Consequently, the same was accepted by the respondents.

5. The respondent no.3-District Magistrate, Jalaun issued a Letter of Intent (hereinafter
referred to as 'LOI') in favour of the petitioner for grant of mining lease in respect to the aforesaid
area. The LOI was issued to the petitioner for a quantity of 03,03,630 cubic meters in an area of
20.242 hectares and the annual lease amount which the petitioner was to pay was Rs.34,06,72,860/-
.

6. The petitioner after receiving the LOI deposited the requisite amount, namely, security
money and first installment of the annual lease amount and applied for the mining plan. After
obtaining the mining plan, the petitioner applied for Environment Clearance Certificate which was
granted to the petitioner by the State Environmental Impact Assessment Authority (hereinafter
referred to as 'SEIAA'). Thereafter, the lease deed dated 04.04.2018 was executed in favour of the
petitioner for a period of five years commencing from 04.04.2018 to 03.04.2023.

7. The further case of the petitioner was that as per the policy of the State Government, the
mining operation was prohibited from 01.07.2018 to 30.09.2018 during monsoon season. After the
monsoon season, respondent no.3 issued a notice on 01.10.2018 under Rule 58 (2) of the Rules,
1963 stating therein that if third quarterly installment of the lease amount which was due upon the
1 All. M/s Sharad Enterprises Vs. State of U.P. & Ors.
1209
petitioner on 01.10.2018 was not paid within time, the same would be recovered along with
interest.

8. The petitioner further stated that after the monsoon season, when he tried to restart the
mining operation, he found that the entire lease area was submerged into the river and no mining
was possible. Since there is prohibition in Rule 41-H (1) of Rules, 1963 of mining in the water
level, therefore, under such compelling circumstances, the petitioner submitted a representation
dated 23.10.2018 for cancellation/surrender of mining lease. The petitioner further stated that when
the respondent no.3 did not pay any heed to the representation of the petitioner, he submitted
representation dated 05.12.2018 to the Director, Geology and Mining, and another representation
dated 10.12.2018 to the State Government praying therein to inspect the mining lease area and
revise the annual quantity of mineral.

9. The petitioner submitted another representation on 29.12.2018 to the respondent no.3 for
making a spot inspection and assessing the quantity of mineral, but respondent no.3 did not pay any
heed to the said representation.

10. The respondent no.3 vide order dated 29.12.2018 cancelled the mining lease of the
petitioner under Rule 58 of the Rules, 1963 and forfeited the security deposit of Rs.8,51,68,215/-
on the ground of non-deposit of third quarterly installment of the lease amount treating the same as
breach of lease condition.

11. The petitioner, thereafter, preferred Revision No.08 (R)/V.S.M. of 2019 against the order
dated 29.12.2018 which was dismissed by the Revisional Authority vide order dated 12.03.2019.

12. The forfeiture of security amount has been assailed by the petitioner with other prayers
which have been extracted above on various grounds which shall be noted at the appropriate stage.

13. The respondent-State has filed counter affidavit contending inter alia that there was
specific condition in the advertisement dated 16.11.2017 that before participating in E-Tender-cumE-Auction proceeding, the bidder himself may inspect the mining area about the availability of the
estimated quantity of mineral and approach road to the mining area. No representation about the
non-availability of mineral would be entertained after participating in E-Tender-cum-E-Auction
proceeding. According to the respondent, the petitioner as per terms and conditions of the
advertisement after fully satisfying himself about the availability of the estimated quantity of
mineral and approach road, participated in E-Tender-cum-E-Auction proceeding and submitted the
bid of Rs.1122/- per cubic meter. Since, the petitioner was the highest bidder, therefore, his bid was
accepted and LOI dated 27.01.2018 was issued to him.

14. The further case of the respondent is that the petitioner got prepared the draft mining plan
through expert as per Rule 34 of the Rules,1963 and submitted the same for approval before the
Director, Geology and Mining, U.P. It is stated by the respondent that while preparing the draft
mining plan, the petitioner and his expert to whom the petitioner entrusted the work of preparation
of draft mining plan again inspected the area. It is further stated that in the draft mining plan, the
entire details with regard to the availability of mineral in mining area and method of mining and
1210 INDIAN LAW REPORTS ALLAHABAD SERIES
closure of mining was mentioned by the petitioner himself. Accordingly, the mining plan submitted
by the petitioner was approved on 09.12.2018. The petitioner, thereafter, got prepared the draft
proposal for presentation of the same before the SEIAA to get the Environment Clearance
Certificate from the SEIAA which was issued to the petitioner on 31.03.2018.

15. As per the case of the respondent, the petitioner got inspected the area thrice before
executing mining lease; before participating in E-Tender-cum-E-Auction proceeding as per the
condition mentioned in the advertisement; secondly, while preparing the draft mining plan; thirdly,
while preparing the draft proposal for Environment Clearance Certificate. It is stated that after
completing the entire procedure, the mining lease was got registered on 04.04.2018 for a period of
five years from 04.04.2018 to 03.04.2023.

16. The further case of the respondent is that the lease deed contained the terms and conditions
and the consequences for violation of the terms and conditions. The petitioner with open eyes
accepted the terms and conditions of the mining lease and executed a registered contract/mining
lease voluntarily.

17. According to the respondent, Part-2 of the mining lease related to Schedule of payment of
royalty/installment which has been as per the provisions of Rule 27 and Schedule-IV of Rules,
1963. Part-3 of the mining lease is related to the general condition and additional condition. The
general condition no.1 specifically provides that on violation of any Rule of Rules, 1963 or
covenant and condition of mining lease, the mining lease may be determined and the security
deposit may be forfeited wholly or in part. The specific case of the respondent is that there is no
specific condition in the mining lease for adjustment of the amount of security if the decision for
determination of lease is taken as per Part-3 of Clause-1 of mining lease.

18. The respondent states that since the petitioner had violated the terms and conditions of the
mining lease as well as provisions of Rules, 1963 and did not deposit the royalty as per the agreed
schedule for payment, the petitioner's security amount was liable to be forfeited under the terms
and conditions of the mining lease.

19. It is also the case of the respondent that the petitioner violated the provision of Rules, 1963
since he excavated the mineral and had done mining without depositing the royalty and other
amount like DMF (District Mineral Foundation Trust Fund), TCS etc. The petitioner was also
involved in illegal mining for which action had been taken.

20. The respondent also stated that it is stipulated in the lease deed that the consequence of
non-deposit of installment is forfeiture of security deposit. The respondent denied the fact that
security deposit is liable to be adjusted towards unpaid installment.

21. It is also stated that due to determination of mining lease in mid term because of the fault
of lessee and in not closing the mining as per the mining closure plan, the State has to suffer huge
loss since fresh grant takes considerable time, therefore, specific provision has been made in
mining lease for forfeiture of security deposit, and petitioner has agreed upon the said terms and
conditions. The respondent in reply to the averments made by the petitioner that in several districts,
1 All. M/s Sharad Enterprises Vs. State of U.P. & Ors.
1211
the District Magistrates have adjusted the security amount towards installment has stated that it was
done by the District Magistrate of the concerned district on their own discretion, but the said
benefit cannot be extended to the petitioner in view of stipulation contained in the mining lease.

22. The petitioner filed rejoinder affidavit denying the averments contained in the counter
affidavit. The petitioner again reiterated that the respondent has no power to forfeit the security.

23. Challenging the order of forfeiture of security, learned counsel for the petitioner has
contended that respondent no.3 is not conferred with the power of forfeiture of security under The
Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as 'MMDR
Act') or Rules, 1963, therefore, the forfeiture of security by the respondent no.3 is illegal and
beyond jurisdiction.

24. He further submits that the respondent no.3 has erroneously treated the non-deposit of
royalty/lease amount as violation of terms and conditions of the lease deed by the petitioner
inasmuch as consequence of non-deposit of lease amount/royalty in time has been provided under
Rule 58 of Rules, 1963, condition no.3 of Part-2 of the lease deed dated 04.04.2018 and Clause
19(3) of the Government Order dated 14.08.2017 which provides realization of the said amount as
arrears of land revenue along with interest prescribed.

25. In other words, learned counsel for the petitioner submits that since Rule 58 of the Rules,
1963, condition no.3 of Part-2 of the lease deed dated 04.04.2018 and clause 19(3) of the
Government Order dated 14.08.2017 do not provide for forfeiture of security in case of non-deposit
of lease amount/royalty in time, therefore, respondent no.3 does not have any jurisdiction to forfeit
the security treating the non-deposit of installment of royalty in time as a violation of terms and
conditions of the lease deed, and respondent no.3 can recover the said amount only as arrears of
land revenue along with interest.

26. It is further contended that payment of installment is provided under Part-2 of the lease
deed which stipulates that royalty of removed sand/morang shall be payable as per provision
contained in First Scheduled of the Rules, 1963. Therefore, non-deposit of third quarterly
installment does not constitute violation of any rule or condition of the lease deed.

27. It is further contended that non-payment of third installment would have been a violation
of terms and conditions of lease deed if the petitioner had removed the mineral after 01.10.2018
from the site allotted under the lease deed, therefore, non-payment of third installment is not a
violation of any condition as payment of installment is linked with the removal of mineral as
provided under Clause-1 of Part-2 and Section 15(3) of the MMDR Act. According to the learned
counsel for the petitioner, clause-1 of Part-2 of the lease deed finds it statutory backing under
Section 15(3) of MMDR Act and thus, the action of the respondent in forfeiting the security is
illegal and arbitrary.

28. It is further contended that the respondent no.3 has not given any show cause notice to the
petitioner before forfeiting the security or cancelling the mining lease as provided under the
aforesaid condition of the lease deed nor any opportunity of hearing was afforded to the petitioner,
1212 INDIAN LAW REPORTS ALLAHABAD SERIES
therefore, respondent no.3 has wrongly placed reliance upon the aforesaid clause of lease deed for
forfeiting the security. It is contended that the action had been taken by the respondent no.3 under
Rule 58(1) of the Rules, 1963 for non-deposit of quarterly installment of the lease, consequence of
which has been provided in Rule 58(2) of the Rules, 1963.

29. He further contends that Rule 29 of Rules, 1963 contemplates forfeiture of security deposit
if the conditions enumerated under Rule 29 are present. To elaborate the said argument, he submits
that if lessee does not get the lease deed registered within three months, then in such an event, the
lease deed shall be treated null and void and the security money deposited by the lessee shall be
forfeited, but in the present case no contingency as contemplated under Rule 29 of the Rules, 1963
for forfeiting the security is present.

30. It is further submitted that if for the sake of argument, it is accepted that security may be
forfeited, such action would render Rule 50 of Rules, 1963 redundant which provides for refund of
security deposit on determination of lease deed.

31. It is also contended that the reading of Clause-1 of Part-3 of the lease deed gives a
discretion to the authority to forfeit the security deposit in part or full and as a matter of principle
whenever a discretion is to be exercised that must be supported by reason, and since in the instant
case, the forfeiture of entire security is not supported by any reason, therefore, forfeiture of security
is bad.

32. Per contra, learned Chief Standing Counsel-II would contend that perusal of Rule 58 of
Rules, 1963 discloses that the aforesaid provision is inclusive in nature enumerating certain
consequences of non-payment of royalty. He submits that in Rule 58(1) of Rules, 1963, the
legislature has mentioned that "this right shall be in addition to and without prejudice to the right
of the State Government to realise such dues" reveals the intention of the legislature that the
aforesaid provision is in addition to the other consequences of non-payment of royalty.
Accordingly, it is contended that forfeiture of security money in case of failure to deposit of royalty
on due date is in conformity with the terms and conditions of lease deed, and the same shall be
valid, more so, when petitioner knowing well about the said condition in the lease deed voluntarily
without any objection executed the mining lease deed and got it registered.

33. He further submits that Clause-1 of Part-3 of the lease deed is explicit and stipulates that in
case of violation of condition of lease deed, security money can be forfeited. He submits that lease
deed is executed in the form MM-6 in Schedule 3 of Rules, 1963 as per Rule 29 of Rules, 1963,
and this condition of lease deed has been specifically enumerated in form MM-6, therefore,
forfeiture of security money on account of violation of terms and conditions of lease deed has a
statutory force under Rules, 1963. Accordingly, he submits that it is wrong to contend that
respondent no.3 does not have any power to forfeit the security.

34. He submits that the mode and date of payment of installment is enumerated under the lease
deed which binds the petitioner to pay the installment on the date stipulated in the lease deed, and if
any violation in payment of installment on the date fixed in the lease deed is breached, that would
amount to violation of terms and conditions of lease deed. Therefore, respondent no.3 has rightly
1 All. M/s Sharad Enterprises Vs. State of U.P. & Ors.
1213
invoked clause of forfeiture of security money under the lease deed treating it to be violation of
terms and conditions of lease deed.

35. He further submits that though Rule 58(1) of Rules, 1963 or Clause 19(3) of the
Government Order dated 14.08.2017 does not specifically provides for forfeiture of security, but
neither MMDR Act nor Rules, 1963 nor the Government Order dated 14.08.2017 prohibits the
State from forfeiting the security in the event of breach of terms and conditions of lease, and once,
petitioner voluntarily knowing the said stipulation in the lease deed accepted the terms and
conditions of the lease deed, the petitioner is bound by the terms and conditions of the lease deed
and cannot turn around and challenge the forfeiture of security at this stage. Accordingly, it is
submitted that respondent no.3 has rightly forfeited the security money of the petitioner.

36. He further submits that contention of learned counsel for the petitioner that in view of
Section 15(3) of the MMDR Act, royalty can be charged only in respect of mineral removed is
misconceived in as much as language employed in sub-section (3) of Section 15 of MMDR Act
does not suggest any such intention of the legislature that royalty can be charged only in respect of
mineral removed. He further submits that had it been the intention of the legislature, the word only
would have been incorporated before the word in respect of minor mineral removed or consumed in
Section 15(3) of the MMDR Act, whereas no such word has been incorporated in Section 15(3)
before the word in respect of minor mineral removed or consumed.

37. He further submits that once petitioner has entered into a contractual obligation by
executing a registered lease deed wherein installment of royalty and its due date has been
incorporated in the lease deed, the petitioner subsequently after entering into the contract through
lease deed cannot deviate from the terms and conditions of the lease deed as the obligation incurred
under the lease deed is binding upon the parties. It is further contended that purpose of making
penal provision of forfeiture of security money is to ensure that leaseholder does not run away from
the contractual obligations as per his own whims. Thus, he submits that provision of forfeiture
under lease deed has been incorporated with an object that in case lessee violates the terms and
conditions of lease deed which lead to termination of lease deed, in that case, loss of revenue likely
to be caused due to non-operation of mining can be compensated because after termination of the
lease deed, sufficient time is required for executing new lease deed in respect of area declared
vacant because of termination of lease deed.

38. We have considered the rival submissions advanced by the learned counsel for the parties
and perused the record.

39. The undisputed facts, as emanate from the record, are that in pursuance to an
advertisement published by respondent no.3 inviting application for grant of lease for sand and
morang, the petitioner submitted application for carrying mining operation for the area measuring
20.242 hectares for quantity of 03,03,630 cubic meters.

40. After complying with all the requirements, a registered lease deed dated 04.04.2018 was
executed between the petitioner and respondent-State for excavating sand and morang. As the
petitioner could not deposit the third quarterly installment on time, therefore, lease of the petitioner
1214 INDIAN LAW REPORTS ALLAHABAD SERIES
was terminated by order dated 29.12.2018 and security of the petitioner was forfeited, and recovery
for third installment was issued against the petitioner which was challenged by the petitioner in
Revision No.08 (R)/V.S.M.