# M. Hassanji & Sons v. Stal• of

- **Citation:** [1963] Supp. 2 S.C.R. 235
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Bench:** B. P. Sinha, P. B. Gajendragadkar, K. N. Wanchoo, K. c. DAS GUPTA, J.C. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-hassanji-sons-v-stal-of-2768
- **Pages:** 9

## Headnote

Mining Leaae-Reali•alion of royally al enhanced rate
under contracl-Oonatit1'tional Validity-Agreement, if void~
Mininy Rules, 1913, r. 50-Mines and Mineral• (Regulation
a11d Development) Act, 1948 (LIII of 1948), s. 4-Mineral
Ooncemon R·u!ea, 1949-0omtitution of India, Art. 31(1).
The appellants took an assignment of a mining lease for
extracting coal in respect of 189.76 acres of land. They were
anxious to acquire other lands adjacent to the afores~id area
from their respective owners.
The transfers in favour of
the appellants could not take place without
the sanction
of the
State
Government.
After
protracted correspondence
and negotiations, the
Government
agreed
to
grant the necessary sanction subject to the condition that they
took a consolidated lease in respect of the whole additional
area ?t an enhanced rate of royalty, The appellants entered
into an agreement with the Government on January II, 1949
by which the rate of royalty payable to Government was
raised from Rs. 5/- to Rs. 10/- per ton. Though no formal
lease-deed was executed, the· appellants worked the mines with
the permission of the Government during the period October
27, 1947, to June 30, 1949 and paid a sum of R1. 40865/- including interest, by way of royalty. They paid the aforesaid sum
under protest in February-March, 1960.
The plailltifl'sappellants brought a suit before Additional District Judge for a
declaration that they were not bound by the terms . of the agreement datep January ll,) 949 and were not liable to pay to
Government any sum id excess of that fixed by the lease of
1923 and~by the lease of January 21, 1944, and also.claimed
other consequential reliefs •. The suit was decreed on contest by
she Government. On ap~ by the dcfendant-n:spondent, the
High Court reversed tl;ie judgment and d~ of the trial court
and dismissed the suit with costs.
Held, that from the . agreement dated January 11, 1949, it
is clear that the Governor was ill the pooition of the 1->r,
1962
1962
M /s. Khan Safrtb
M. Hassanji & Sons
v.
Stal• of
Madhya Prad6sh
SinA., C. /,
236 SUPREME COURT REPORTS [1963] SUPP.
hence, even assuming that the Mineral Rules of 1913 had
statutory force and applied to the instant case, the Governor
having been the grantor of the lease it must be presumed that
he decided that the revised terms were in the interest of the
State, and, therefore, the revised terms of the lease were binding
on the parties; furth~r ultimately the appellants having conceded
that the rules were not statutory, the agreement aforesaid was
not void.
The Mineral Concession Rules, 1949 came into effect on
October 25, 1949, having no retrospective effect and the agree·
ment in question was finalised inJanuary 1949. There were
thus no such Rules in existence which could have been contravened.
Held, further, that since the payment to the Government
was realisable under the terms of the contract which is not
vitiated, it could not be said that the State deprived them of any
property within the meaning of Art. 31 (I) of the Constitution.

## Text

-
.-
2 S.C.R.
SUPREME COURT 'REPORTS
235
M/S. KHAN SAHEB M. HASSANJI & SONS
fl.
ST ATE OF MADHYA PRADESH
(B. P. SINHA, c. J., P. B. GAJENDRAGADKAR,
K. N. WANCHOO, K. c. DAS GUPTA
and J.C. SHAH, JJ.)
Mining Leaae-Reali•alion of royally al enhanced rate
under contracl-Oonatit1'tional Validity-Agreement, if void~
Mininy Rules, 1913, r. 50-Mines and Mineral• (Regulation
a11d Development) Act, 1948 (LIII of 1948), s. 4-Mineral
Ooncemon R·u!ea, 1949-0omtitution of India, Art. 31(1).
The appellants took an assignment of a mining lease for
extracting coal in respect of 189.76 acres of land. They were
anxious to acquire other lands adjacent to the afores~id area
from their respective owners.
The transfers in favour of
the appellants could not take place without
the sanction
of the
State
Government.
After
protracted correspondence
and negotiations, the
Government
agreed
to
grant the necessary sanction subject to the condition that they
took a consolidated lease in respect of the whole additional
area ?t an enhanced rate of royalty, The appellants entered
into an agreement with the Government on January II, 1949
by which the rate of royalty payable to Government was
raised from Rs. 5/- to Rs. 10/- per ton. Though no formal
lease-deed was executed, the· appellants worked the mines with
the permission of the Government during the period October
27, 1947, to June 30, 1949 and paid a sum of R1. 40865/- including interest, by way of royalty. They paid the aforesaid sum
under protest in February-March, 1960.
The plailltifl'sappellants brought a suit before Additional District Judge for a
declaration that they were not bound by the terms . of the agreement datep January ll,) 949 and were not liable to pay to
Government any sum id excess of that fixed by the lease of
1923 and~by the lease of January 21, 1944, and also.claimed
other consequential reliefs •. The suit was decreed on contest by
she Government. On ap~ by the dcfendant-n:spondent, the
High Court reversed tl;ie judgment and d~ of the trial court
and dismissed the suit with costs.
Held, that from the . agreement dated January 11, 1949, it
is clear that the Governor was ill the pooition of the 1->r,
1962
1962
M /s. Khan Safrtb
M. Hassanji & Sons
v.
Stal• of
Madhya Prad6sh
SinA., C. /,
236 SUPREME COURT REPORTS [1963] SUPP.
hence, even assuming that the Mineral Rules of 1913 had
statutory force and applied to the instant case, the Governor
having been the grantor of the lease it must be presumed that
he decided that the revised terms were in the interest of the
State, and, therefore, the revised terms of the lease were binding
on the parties; furth~r ultimately the appellants having conceded
that the rules were not statutory, the agreement aforesaid was
not void.
The Mineral Concession Rules, 1949 came into effect on
October 25, 1949, having no retrospective effect and the agree·
ment in question was finalised inJanuary 1949. There were
thus no such Rules in existence which could have been contravened.
Held, further, that since the payment to the Government
was realisable under the terms of the contract which is not
vitiated, it could not be said that the State deprived them of any
property within the meaning of Art. 31 (I) of the Constitution.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 645/1961.
Appeal from the judgment and decree dated
April 20, 1957, of the Madhya Pradesh High Court
in First Appeal No. 181/52.
HardayalHardy, S. N. Andley and Rameshwar
Nath, for the appellant.
B. Sen and I. N. Shroff, for the respondent.
1962. November 19. The Judgment of the Court
was delivered by
SINHA, C. J.-This appeal on a certificate
granted by the High Court of Madhya Pradesh at
Jabalpur on April 16, 1958, under Art. 133 of the
Constitution, is directed against the judgmerit and
decree of that Court in First Appeal No. 181 of
1962, reversing those of the Additional District
Judge, Chindwara, in Civil Suit No. 3,A of 1951,
decided on September 25, 1952, by which the trial
Court had decreed the plaintiffs' claim for Rs.
40865/·and interest.
2 S.C.R.
SUPREME COURT REP.ORTS
237
It is necessary to state the following facts in
order to bring out the points in controversy between
the parties. One Haji Syed Zahiruddin of Bhopal
held a mining lease-Ex. P-2-dated .May 29, 1923
in respect of 189-76 acres of land in the . district of
Chindwara, for extracting coal. The appellants took
an assignment of that lease by Ex. Pl dated September 4, 1940. There were coal bearing areas adjacent
to the area covered by the lease aforesaid. The
appellents were anxious to acquire those adjacent
collieries from their respective owners. The transfers
in favour of the appellants could not take place
without the sanction of the State Government. After
protracted correspondence and negotiations, the
Government agreed to grant the neces5ary sanction
to the transfer of those adjacent. lands to the appellants subject to. the condition that they took a
consolidated lease in respect of the whole additional
area at an enhanced rate of royalty. The appellants
entered into an agreement with the Government on
January II, 1949 (Ex.P3) by which the rate of
royalty payable to Government was. raised from Rs.
5/-to Rs. 10/-per ton. Though no formal lease deed
was executed, the appellants worked the mines with
the permission of the Government during the period
October 27, 1947 to June 30, 1949. In respect of the
coal thus extracted, the appellants• paid to the
Government the sum of Rs. 40865/-, including interest, by way of royalty. The plaintiffs paid the
aforesaid sum under protest in February-March,
1960.
The plaintiffs commenced the present action in
February 1951, for a declaration that they were not
bound by the terms of the agreement dated
January II, 1949, aforesaid, and that, therefore,. they
were not liable to pay to Government any sum in
excess of that fixed by the lease of 1923, and by the
lease of January 21, 1944, in respect of lands transferred to them. They also claimed ·an injunction against
1962
M/1. Khan Saheb
M. Hassanji & Sar.1
v.
Stall of
M•dh.ya Pradesh
Sinha, C. J.
1962
M /s. Khan Salub
M. Hassanji & SOtls
v.
Slal1 of
Mddlryo Prar/f!sh
Sinha, C . .I.
238 SUPREME COURT REPORTS[I9G3] SUPP.
the defendant, the State of Madhya Pradesh, which
was the sole defendant, now respondent.
There was
also a prayer for refund of the said amount of
Rs. 40865/- plus interest amounting to Rs. 1985/-
from the date of payment of those several sums
aggregating to Rs. 40865/-.
Interest pendente lite
and future interest at 6 per cent on the decretal
amount was also claimed.
The contentions raised on
behalf of che
plaintiffs in support of their claim were that the
agreement aforesaid was void as it was in contravention ofr. 50 of the Mining Rules of 1913, as also
that the same was in contravention of s.
4 of the
Mines and Minerals (Regulation and Development)
Act (XIII of 1948). It was also contended that a
representation was made by the Government in the
correspondence that passed between the parties that
Government was going to adopt a new policy in
respect of mining leases, including grant of leases at
enhanced royalty.
The
agreement, the plaintiffs
further asserted, had been entered into under the
influence of that misrepresentation and was, therefore,
not enforceable against them.
The suit was contested by the Government on
the ground that the Mineral Rules of 1913 had no
binding effect after the Constitution Act of 1935, so
far as the Provinces were concerned; those Rules were
mere departmental instructions for the guidance of
suborclinate officers of the Government; and that the
Government was free to make its own bargain in
respe.ct of fresh leases. It was also contended that the
Mines and Minerals (Regulation and Development)
Act of 1948, read with the Rules made thereunder,
did not apply to the leases in question as these Rules
came into force later.
The Government also denied
that there
was
any misrepresentation made by
Government to the plaintiffs, though it was true that
Government b.ll.d intended to promulgate fresh rules
2 S.C.R.
SUPREME COURT REPORTS
239
which envisage revised scales of royalty, but which
ultimately did not materialise. It was, therefore,
contended that the plaintiffs had no cause of action
for the reliefs claimed in the plaint.
·
The
learned
Additional
District Judge,
Chindwara, by his
judgment and decree dated
September 25, 1952, decreed the suit with costs
holding that the plaintiffs were entitled to the
declaration mught by them, as also to the consequen·
tial relief of refund of the amount paid by them
under protest, as aforesaid, namely, the sum of
Rs. 40865/- together with the sum of Rs. 992/8/- on
account of interest at 3% per annum up to the date
of the suit, as also interest pendente lite up to the date
of realisation at the same rate of 3%.
On appeal by the defendant, the state of
Madhya Pradesh, the High Court reversed the judgment and decree passed by the trial Court and passed
a decree dismissing the suit with costs throughout.
The High Court held that the Government was not
bound by the Rules of 1913, which had no statutory
force, and that the Rules of 1949 made under the Act
of 1948 aforesaid did not apply to the transaction in
question, because they had no retrospective operation.
The High Court also· held that there was no misrepresentation by the Government and that the plaintiffs were anxious to enter into the agreement in
order to start their mining operations to take advantage of the High market in respect of coal, and that
they entered into the agreement with their eyes open
and without any vitiating influence.
The appellants applied for and obtained the necessary certificate from the High Court.
That is how the matter
is before us.
In this Court it was strenuously argued on
behalf of the appellants that the Rules of 1913 were
in terms imperative and had statutory force which
bound the State Governμient, and that any lease or
1912
M/s. KJ.• Sdtb
M. H:waoji & Sons
v.
SW.of
MadhJ• PrOlluh
Sinha, C. /.
1962
111/s. Jrhan Sali1h
M -Hass onj1 & Soni
v.
Slat,.f
. Madh,. '', desh
Sinha, C. · J.
240 SUPREME COURT REPORTS [1963] SUPP.
agreement entered into between the parties in violation of the terms of these Rules would be wholly
void. It is contended on behalf of the appellants,
that the Government was not entitled to recover the
amount at the higher rate of royalty from the
plaintiffs, and that their suit was well-founded in
law. But it was argued on behalf of the respondent
that those rules were promulgated by the GovernorGeneral in Council, under the sanction of the Secretary of State for India in Council, and as such they
were binding on the officials of the Government as
departmental instructions, but were not binding on
the Government itself. In our opinion, this contention is well-founded. Rule I, which runs as follows,
itself makes it clear that the Government concerned
may make an exception to the general rule laid
down in the rule :
"l. No license to prospect for minerals or
lease of mines and minerals can be granted by
any Local Government otherwise
than in
accordance with these rules, except with the
previous sanction of the Secretary of State
for India in Council, or with that of the
Governor-General
in
Council , under any
general or special authority which he may have
received in this behalf from the Secretary of
State in Council."
The general rule is that the Rules have to be followed by the officials of the Government in the matter
of granting licences to
prospect for minerals,
or leases of mines and minerals
But exception may be made with the previous sanction
of the rule making authorities aforesaid.
This
position continue( in law until the Government of
India Act of 1935 came into operation.
A~ a result
of the constitutional changes effected by that Act,
the Secretary of State and the Governor-General had
to be sul;>stituted by the Governor with effect from
April 1, 1937. From that date it would be tht>
•
2 S.C.R.
SUPREME COURT REPORTS
241
Governor who would be empowered to make the ex·
ceptions to the general rule laid down. In this
case, it is clear from Ex. P. 3-tbe agreement dated
January 11, 1949-tbat the Governor was in the
position of the lessor.
Hence, even if we assume
that the Rules had statutory force and applied to
the instant case, the Governor having been the
grantor of the lease it must be presumed that be
decided that the revised terms were in the interest
of the State. and, therefore, the revised terms of the
lease were binding on the parties.
Though
in
opening the appellants' case their counsel was vehe·
ment in the assertion that the Rules of 1913 were
statutory, he was unable to point out the statutory
source of it. Ultimately, he had to concede that the
Rules were not statutory. That being so, there is
no force in the contention that the agreement of
January Jl, 19J9 (Ex. P. 3.) was void.
In this connection it is necessary to consider
the .alternative ground of attack based on the provisions of the !\ct of 1948 and the Rules made
thereunder.
The Act came into force on September
8, 1948, and the Rules, called the Mineral Concession Rules, 1949, were promulgated under s. 5 of
the Act. But these Rules
came into effect on
October 25, 1919.
These rules apparently have no
retrospective effect.
Section 4 of the Act is as
under :
"No mmmg lease shall
be granted
after
the
commencement of this Act except in
accordance with the rules made under this Act."
Hence, any mining lease granted on or .after October
25, 1949 will have to conform to the Rules aforesaid. But the agreement in question was the result
of negotiatio11s between the parties, extending over
several years and was finalised in January 1949.
The appellants, with the permission of the Government, carried on mining operations on the terms
M/1. Khan Saheb
M. Hauanji & Son1
••
Stat1 ·of
Madhya PraJ.•h
Sinlia, C. J.
1962
M/s. Irh01t S•loeb
M. Hilssanj i & Srms
v.
Stal• of
M4"11jo P1athsh
finh•, C. /,
242 SUPREME COURT REPORTS (1963] SUPP.
insisted upon by the Government, and for the period
for which the royalty was realised from the appellants there were no such Rules in existence, which
could be said to have been contravened. Hence,
we are not concerned with the effect of the Rules
which were promulgated in 1949 and came into
effect, as already stated, on October 25, 1949. We
need not, therefore, stop to consider what the legal
position would have been if an agreement like the
one before us were questioned with reference to its
operation on and after October 25, 1949.
The only other ground on which the enforceability of the terms of the agreement has been
questioned is that there was a misrepresentation by
Government to the effect that it was going to enhance
the rate of royalty all round, and that it was under
the influence of that belief that
the appellants
entered into the agreement in question. It is a
little difficult to appreciate this ground of attack.
The agreement is not questioned on the ground that
there was any undue influence or coercion exercised
by the grantor in insisting upon the more onerous
terms under the agreement.
As pointed out by the
High Court, the appellants were m a hurry to take
the additional area and work the coal mines on
terms which were mutually agreed between the
parties. It was not alleged that there was any
mutual mistake which could be said to have vitiated
the agreement. But simply because the draft amendment to the Mining Rules published for inviting
objections from the public on July 12, 1947 (vide
Ex. Dl3) was not finalised would not afford any
cause of action to the plaintiffs. They, with their
eyes open and after thoroughly discussing the matter
between themselves and the Government, had entered into those terms of agreement.
Those terms may
be more onerous than any other lease granted to
other lessees, but that would not vitiate the contract
between them.
2 S.C.R.
SUPREME COURT REPORTS
243
There was a faint attempt made on behalf of
the appellants to put their objections on a constitu·
ti on al basis. It was contended that the terms imposed upon the appellants by the State would amount
to deprivation of property without the authority of
law. It is manifest that this ground of attack is
wholly devoid of any force because the State has
not deprived them of auy property. What they
ha.ve paid to the Govemment was realisable under
the terms of the contract, which on the findings re·
corded above is not vitiated. Under the agreement
which we hold to be enforceable, the defendant may
have struck a hard bargain but that cannot be
brought under the prnhibition of Art. 31 (1) of the
Constitution, even
assuming
that
the
Con·
stitution applied to the transaction in question.
As all the grounds of attack urged in support
of the appeal fail, it is hereby directed that the
appeal be dismissed with costs.
Appeal dismissed.
1962
M/s. EA .. Sah16
M. Hasaji & Stms
v.
Stau ef
M•iAy• Pr<1n1i
Sinba, C. J,