Section 129 of the C.G.S.T. Act – A Draconian Law?

(By Gayathri Poti, Advocate, Ernakulam)

The transport of goods, intra-state or inter-state, is an integral facet of trade and business.Usually, the movement of such goods is preceded by the sale of such goods. Apart from regular transactions involving purchase and sale, there are other situations that warrant the transport of goods from one place to another, be it a stock transfer or transport of goods back from the premises of the job worker. Whilst several of these transactions giving rise to the transport of goods are bona fide transactions in which the tax payable, if any, is accounted for, there is always scope for unaccounted transfer of goods wherein the parties deliberately dodge payment of tax. It is to curb such illegal transactions that the legislature installed an elaborate system of verification of the genuineness of transfer or movement of goods from one place to another under the C.G.S.T. Act, 2017. This is a two-fold mechanism, the first part of which is set in motion by the prescription of certain documents that have to be compulsorily carried along during the transportation of goods. The second aspect of this mechanism is the installation of check-posts, where the authorized officers are required to verify if the relevant documents accompany such transport. However, it is important to note that such a system of ensuring compliance with the taxation norms is far from new. Rather, it can be said that the legislature has borrowed from the previous indirect tax regime, which comprised of similar measures to provide against tax evasion. In order to understand why the current apparatus for imposition of penalty for failing to produce requisite documents at the check post is flawed, it is vital to revisit the corresponding provisions under the previous indirect tax regime.

Under the Kerala Value Added Tax Act, 2003, it is Section 47 that prescribed the procedure for inspection of goods that are in transit. As per sub-section (2) of Section 47, if an officer, upon inspection at the check post, has a reason to suspect that the goods under transport are not covered by proper and genuine documents or that the person transporting the goods is attempting to evade payment of the tax, he is empowered to detain the goods and allow for it to be transported only after the security is furnished by the owner of the goods or the vehicle. Pursuant to this, under sub-section (5), an inquiry is conducted by an officer appointed by the Government. Under sub-section (6), before conducting such an inquiry, the authorized officer is expected to serve a notice on the owner of the goods and provide him with an opportunity of being heard. After such enquiry, if the authorized officer finds that there has been an attempt to evade tax,he can pass an order imposing, on the owner of the goods, a penalty not exceeding twice the amount of tax attempted to be evaded. A conjoint reading of the above provisions makes it clear that that irrespective of the detention of the goods at the first stage, in which the check post officer suspects that the relevant documents are absent or that there is an attempt to evade tax, the final order penalizing the owner of goods can be passed only if the authorized officer comes to the concrete conclusion that the transport of such goods was an attempt to evade tax that legitimately due to the Government. The phrasing of sub-section (6), which permits for imposition of penalty only on a finding of an attempt to evade tax, is of significance. This is so because it shields those bona fide taxpayers whose transportation of goods suffer from procedural infirmities, while the transactionin itself is genuine. In other words, there is a requirement of mens rea that has to be satisfied before the authorized officer can impose the hefty penalty as provided for under the aforesaid sub-section. The authorized officer has to not only record that the transport of the goods lacked the requisite document but must also be convinced and able to establish that the absence of such documents during the transport was attributable to the attempt of the owner to evade tax. Therefore, mere non-availability of the documents during the movement of goods in itself would not call for penalty under Section 47. It is only when the documents are not made present during the transport because there is an intent to evade tax will there be grounds to issue an order under Section 47(6).

The Courts too have constantly reaffirmed the necessity to carve out a case of tax evasion for justifying the issuance of a penalty order by referring to the language employed in Section 29A of the Kerala General Sales Tax Act, 1963 which is in pari materia with Section 47(6) of the Kerala Value Added Tax Act, 2003. In Sunitha Diesel Sales & Services v. State of Kerala¹,the consignment was subjected to penalty under S.29A of the Kerala General Sales Tax Act, 1963 on the ground that the delivery note was not in the form prescribed under the K.G.S.T. Act and that there was no proof of title of the good that was being transported. The High Court of Kerala observed that even though the documents, which would prove that the transaction was a sale-in-transit, was produced at a subsequent stage, the enquiry officer did not consider the same while passing the penalty order. The Court observed that in order to attract the provisions of S.29A, it is necessary for the assessing authority to establish that the assessee attempted to evade tax. It was held that though the petitioner was not carrying the relevant documents at the stage of transport of the goods, the fact that it was able to produce them at a later stage and explain the bona fidesof the transaction, would absolve the petitioner of the liability cast under S.29A (4) as there was an absence of tax evasion.The High Court of Kerala again, in India Food Exports v. State of Kerala,² held that merely because the assessee produced the duplicate copy of the delivery note instead of the original would not attract penalty under Section 29A,since the assessee produced the original delivery note during the time of inquiry and thus proved that there was no mens rea to avoid tax. Similarly, in Sangeetha Ready Made World v. State of Kerala,³the Court held that a penalty order under S.29A(4) could not be imposed for a mere technical breach, the breach here being the absence of the registration number of the consignee. In Sagar Dye Chem v. State of Kerala,⁴ the Court observed that even though the assessee had failed to prepare a delivery note as mandated by the Act, the subsequent production of the books of account in which the sale had been recorded prior to the transport would serve as proof that there was no attempt by the assessee to evade tax and hence no penalty could be imposed.

The Central Goods and Services Tax Act, 2017 too mandates the carrying of certaindocuments when goods are being transported. Section 129 of the C.G.S.T. Act, 2017 provides for the procedure to be followed for the detention, seizure and release of conveyances in transit. A perusal of Section 129 will make clear the concerns surrounding itand an extract of the same is as follows:

“129. Detention, seizure and release of conveyances in transit:

(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the Rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure, shall be released, -

(a) on payment of the applicable tax and penalty equal to one hundred per cent of the tax payable on such goods and, in case of exempted goods, on payment of an amount equal to two per cent of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty;

(b) on payment of the applicable tax and penalty equal to the fifty per cent of the value of the goods reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount equal to five per cent of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods does not come forward for payment of such tax and penalty;

(c) upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such form and manner as may be prescribed:

Provided that no such goods or conveyance shall be detained or seized without serving an order of detention or seizure on the person transporting the goods.

(2) The provisions of sub-section (6) of Section 67 shall, mutatis mutandis, apply for detention and seizure of goods and conveyances.

(3) The proper officer detaining or seizing goods or conveyances shall issue a notice specifying the tax and penalty payable and thereafter, pass an order for payment of tax and penalty under clause (a) or clause (b) or clause (c).

(4) No tax, interest or penalty shall be determined under sub-section (3) without giving the person concerned an opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in sub-section (3) shall be deemed to be concluded.

(6) Where the person transporting any goods or the owner of the goods fails to pay the amount of tax and penalty as provided in sub-section (1) within seven days of such detention or seizure, further proceedings shall be initiated in accordance with the provisions of Section 130:

Provided that where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate in value with passage of time, the said period of seven days may be reduced by the proper officer.”

On a combined reading of the substantive and procedural aspects of Section 129, it is clear that the order of detention is issued if there is a procedural irregularity with the transport of goods which are in contravention of the provisions of this Act or the Rules made thereunder.Subsequently, a notice is issued by the proper officer in which he proposes to impose tax and penalty owing to such irregularity. Then the owner of the goods is provided with an opportunity to tender an explanation against the purported infraction for which the goods and conveyance have been detained. The proceedings culminate with a final order, in which the proper officer determines the amount that is payable as tax and penalty, if any. The issue here lies with the fact that the section does not lay down parameters that the proper officer is expected to follow while passing the final order quantifying the tax and penalty payable. While sub-section (1) explicitly states that the grounds for issuing an order of detention is when the goods are being transported in contravention of the Act and rules, sub-section (3) which authorizes the proper officer to pass a final order, does not lay down any guidelines or factors that have to be taken into consideration before the final order is passed. As discussed above, the grounds for detaining the consignment under Section 47(2) of the K.V.A.T. Act is if the proper officer has a reason to suspect that (a) the goods are not covered by proper and genuine documents or (b) there is an attempt to evade tax, the final order imposing penalty under Section 47(6) can be passed only if the proper officer comes to the finding that there has been an attempt to evade tax and not merely on the grounds that the transport was not accompanied by the proper documents. In sub-section (3) of Section 129 of the C.G.S.T. Act, there is no mention of tax evasion as a pre-condition for passing the final order imposing penalty. An omission of such nature can have profound consequences as it obliterates the requirement of a finding of tax evasion to impose penalty. Therefore, the grounds for issuing the initial detention order and the final order subjecting the transaction to tax and penalty would be one and the same, the ground here being, the contravention of the provisions of the Act and Rules. Under such circumstances, even a procedural discrepancy would attract the obligation to suffer tax and penalty. This would result in disproportionately harsh repercussions as it would subject bona fide taxpayers, who might have unknowingly failed to comply with the rules surrounding the transport of goods, to both tax and penalty. For example, if the supplier issues an invoice for the transport and duly reflects it in his returns but fails to carry it during transport, he can be penalized under the said sub-section even if he produced a valid e-way bill during the transport. Had mens rea or intention to evade tax been made a rider to the imposition of penalty, as was done under the K.V.A.T. and K.G.S.T. period, honest taxpayers would have been protected against a situation such as the one above. Furthermore, if the assessee has already recorded the transaction in his books of accounts and duly paid tax, holding him responsible for a technical breach that took place during the transport of goods and imposing the tax component, as seen from sub-clause (a) and (b) and (c) of Section 129(1), despite the fact that tax has already been paid, would lead to double taxation.

The proposition that Section 129 has been framed in a manner that deliberately encompasses technical breaches is further strengthened by the fact that there is a higher degree of penalty if it is found that there was an attempt to evade tax during the transportation of goods. Section 130 of the Act is the provision that deals with confiscation of goods. The said section stipulates that goods and the conveyance are liable for confiscation if it is found, inter alia, that(a) it is being supplied or received in contravention of any of the provisions of this Act or the rules with intent to evade payment of tax (b) the person contravenes provisions of the Act or rules with an intent to evade tax. Once confiscation takes place, the goods and conveyance can be released only if the owner of the goods pays penalty under Section 122 and fine as determined by the authorized officer. This fine should not be more than the market value of the goods confiscated but the aggregate of the fine and penalty under Section 122 should not be less than the amount of penalty leviable under sub-section (1) of Section 129. The  High Court of Gujarat, in Synergy Fertichem Pvt. Ltd. v. State of Gujarat,⁵delved into the distinction between Section 129 and 130 and indicated the guidelines to be followed in respect of these provisions.It was held that in order to detain goods-in-transit and invoke proceedings under Section 129, a mere contravention of the Act or Rules would be sufficient whereas confiscation proceedings for goods-in-transit, as per Section 130, could only be invoked if there was an attempt to evade tax. The Court further went on to clarify that the mere fact that the owner of goods had paid tax and penalty under Section 129 would not bar confiscation of his goods under Section 130 and that if the  authorities found something incriminating against the owner of the goods in the course of the inquiry, if any, then it would be permissible to initiate confiscation proceedings under Section 130 of the Act.

Although there exists a different standard of penalty for an attempt to evade tax, it does not take away from the fact that the amount made payable by way of tax and penalty for a procedural breach under Section 129 is exorbitant and unwarranted. In fact, vires of Section 129 has already been challenged in various High Court sincluding, Rajasthan⁶and Kerala.⁷One of the main contentions raised by the petitioners in these cases is that the Section suffers from the vice of gross unreasonableness and disproportionality as it does not permit for the release of goods without payment of tax and penalty even if the owner is able to satisfy the proper officer of the bona fides of the transaction. Another contention raised before the Hon’ble High Court of Kerala is that the section does not make any distinction between a) taxable transactions and non-taxable transactions b)minor contraventions and major contraventions c) bona fide mistakes or intentional evasion as it provides for a uniform penalty of 100% across all situations. Therefore, in light of the fact that unequals are treated as equals, it is contended that the Section violates the test of reasonableness and equity as guaranteed under Article 14 of the Constitution. Though all of the petitions have been admitted, the matter is still pending before the respective Courts, and therefore, the constitutional validity of Section 129 is still in question.

Foot Note:

1.     1996 (2) KLT 571.

2.     (2009) 21 VST 436.

3.     2008 (3) KLT SN 58 (C.No.71) = (2008) 17 VST 51.

4.     (2003) 133 STC 478.

5.    2020 (33) G.S.T.L. 513.

6.     CW/26491/2018.

7.     W.P. (C) 859/2020.

Legal Impact of Covid 19 on Shipping Industry and its Aftermath

(By Hari Narayan, LL.M. (U.K.), Advocate, High Court of Kerala)

The World Health Organisation has declared Covid 19, a pandemic which has already affected the lives of millions world over. What is the after effect of this pandemic on the business and trading community is a matter which still remains unpredictable. It is quite possible that the financial crunch caused by the pandemic could remain for some more time destabilizing or practically threatening the very backbone of economy of many nations. Needless to say that the ripple effect will be there in the shipping industry as well.

Among the several industries, it is estimated that the shipping sector is most likely to be hit hard by the pandemic. When we say that, if shipping is affected, certainly it is going to affect the entire supply chain industry for the simple reason that 90% of the world trade happens through sea.

China, for instance, has been one of the prominent industrious nation exporting a sizable portion of equipments and accessories needed by the rest of the world including but not limiting to life saving devices. Once the manufacture and supply gets disrupted on account of lockdown declared by China and followed by rest of the world to contain the spread of virus, the supply chain mechanism is facing critical issues.

Another concern which has caught the attention of stakeholders in the industry is the treatment of crew members. It is estimated that around 1.6 million crew are working in merchant ships all over the world out of which a sizable contribution is from countries like India, China and Philippines. From March 2020 onwards, thousands of crew are stranded in several parts of the world unable to return back to their home safe. Even if the ship owners are willing for replacements, it is practically impossible for crew change due to various restrictions imposed by several countries including movement of people and goods.

Similar to the situation of crew is the condition of several Ports which are unable to handle the storage of goods in the limited space available within Ports. This cause congestion of cargo at ports and warehouses , resulting in closure of port activities more particularly, the cargo storage, loading and unloading operations.

Accumulation of cargo in ports, inability of purchasers to clear the cargo within the permissible time will entail them with risk of demurrage charges in addition to liability exposure on account of failure to fulfil contractual obligations. Delay in clearing is also a serious concern for cargo especially those which are perishable in nature.

What is the legal implication of such disruptions? English law does not recognize ‘Force Majeure’ unless it is clearly specified in the contract of affreightment. Therefore, atleast in respect of those charter party and sale contracts governed by English law, the parties may have difficulty in taking recourse to ‘force majeure’ unless a pandemic of this nature is specifically covered under the contract. Needless to say that the defaulting party will be contractually liable for all loss caused on account of the disruption due to Covid 19. In such circumstances, the party will have to rely on the doctrine of frustration which can potentially apply to contract. However, whether frustration is available will depend on the circumstances of each contract and is most likely to be disputed. Further, legal changes such as any Covid 19 emergency legislation may render performance of certain contractual obligations impossible.

That apart, once ‘lock down’ has been declared, many of the ports may turn to be, ‘unsafe ports’ making it impossible for ships to call at such ports for discharge of cargo. In such situation, the option available to charterer is to nominate another safe port or deviation. Both would amount to breach of charter party from the owners point of view unless specifically permitted under the contract.

Further, the quarantine process of crew and goods would also delay the movement of goods thus exposing the party to huge financial risk and even third party liability. Claim against cargo damage on account of delay will also be an issue likely to be addressed before legal forums. From the cargo receivers point of view, even if the cargo is insured under ICC standard terms, the same may not cover financial loss in so far as ‘damage due to delay’ is an exclusion.

Though the determination of liability and legal disputes may not commence immediately, it is almost certain that such legal issues will surface once the nations recover from the crippling effect of Covid 19.

It Is Worth Getting Back

(By Aruna A ., Advocate, High Court of Kerala)

The High Court of Kerala has now reopened after a long break of eight weeks. It surely gives me a hope that, everything will get back to normal. After college, my office is one of the few places where I have felt like ‘I belong here’. I had to take a small break due to health issues. It was really hard to take that decision and stay home. Within few days, the pandemic outbreak began, and soon, lockdown was declared in India. One of my colleagues said, “the entire country took a break with you.”

Since the first day of lockdown, I have gone out of the house only four times. Twice for buying grocery and twice for morning walks. Now that lawyers are gearing up, to get back on track, the realization that many things as I know have changed make me nervous as well. Earlier, while at courts or office, my worries were mostly about work. Now, I will carry a lot of virus induced anxieties too.

I am used to many things; rushing to a colleague’s desk for help, standing close to each other during every day meetings, using neck band of others, eating near the crowded food joint or in the canteen, shaking hands, sharing food, drinking from bottle of others, doing quick research from the Association library, heading to the filing section to cure defects noted by the filing section, finding a way towards our files in the crowded 3A courtroom, leaning towards the handrail of the escalator. I may not be able do any of this anymore. It is difficult to let all those habits go.

I know that everybody is scared and there was a shadow of realization on the virtual faces of my colleagues that we will have to learn to live with this virus. But all are scared about the chances of carrying the virus home. Therefore, everyone will try to keep a distance from each other. These are hard times and we need to fight it to go forward. Or as my Senior told me, “no more fights, we need to deal with it.”

The physical distancing may not affect warmth of any relation. But, how can I stay 6 feet away when I see my friends again. It is going to be really hard to re-learn things like, how to express emotions and how to contain it. While going outside with a mask glued to my face, what affected me the most is, the vanished smiles. It looks like one grim world, with all those smiles hiding behind the masks. However, nothing can hide the reflections of a beautiful smile in one’s eyes.

Sometimes, it feels like living in a fictional world of Hollywood movies. And I am afraid that, our world will be remembered as ‘before and after Covid’. There may not be any more time on the beaches. There may no longer be sudden plans for a Munnar trip. There may not be any stand-up comedy nights anymore. There may not be any drive to Queen’s Way. Even then I am happy.Scared, but happy.

I am really glad that there is a ray of hope, and I have decided to cling on to it. I am happy that we are far ahead of many countries in preventing the spread of Covid. It was on January 30 that the first case of Covid was reported in Kerala, and all Keralites stood as one and the Government did their best. I am grateful to all. I am happy that I am able to go back to my office and see those familiar faces. I will be able to do what I know and forget about the bleak news I hear every day. There will be a sense of purpose every day.

So I am getting out to resume work – intending to develop some new habits to stay alive, and importantly, stay happy.

The Ad Coelum Doctrine andSub Soil Rights in India

(By P.B.Krishnan, Advocate, High Court of Kerala and
Dhanya Prasad, Fifth Year B.A ., LLB (Hons.) NUALS, Kochi)

 The Kerala Minerals (Vesting of Rights) Ordinance, 2019 promulgated on 29.12.2019 and kept alive through The Kerala Minerals (Vesting of Rights) Ordinance, 2020 vests the subsoil and mineral rights of all lands, irrespective of ownership and tenure in Kerala, in the State. This law making exercise gives a contemporary flavor to a long running tussle among various stakeholders in regard to these rights.

 The Latin maxim, Cujus Est Solum Ejus Est Usque Ad Caelum (“He who possessesland possesses also that which is above it”)⁽¹⁾ and its broader formulation Cujus Est Solum Ejus Est Usque Ad Caelum Et Ad Inferos (“Whoever’s is the soil, it is theirs all the way to Heaven and all the way to Hell”) is better known in its abbreviated form as the Ad Coelum doctrine. The maxim suggests that property holders have rights not only to the plot of land itself but also the air above and (in the broader formulation) the ground below. William Blackstone in his 18^th century treatise, ‘Commentaries on the Laws of England’ coined a theory of Ownership to the center of the Earth on the footing that Ownership extended “…an indefinite extent, upwards as well as downwards”. Blackstone elaborated that downwards means whatever is in a direct line between the surface of any land and the center of the earth, belongs to the owner of the surface.⁽²⁾ The early decided cases in England see a selective and limited application of the maxim mainly in the matter of disputes relating to airspace.

These principles of English law were borrowed and applied in some measure in British India while adjudicating subsoil rights. In Kumar Hari Narayan,decided in 1910, the dispute between a Zamindar and his lessee related to the right to mine coal in respect of a parcel of land in Bengal. The Zamindar contended that he had leased only the surface rights for cultivation and retained proprietorship of the mineral rights. This argument was accepted by the Privy Council holding that “…. he must be presumed to be the owner of the underground rights thereto appertaining in the absence of evidence that he ever parted with them…”. ⁽³⁾ This principle was followed by the Privy Council in Raja Sri Sri Durga Prasad Singh ⁽⁴⁾and elaborated in Sashi Bhushan Misra holding that the even if the tenure is permanent, heritable and transferable, the right of the Zamindar in the minerals remains intact.⁽⁵⁾

The cases aforesaid did not consider the right of the Sovereign in the minerals in as much as the dispute was between Zamindars and their lessees. There were 565 recognized and many unrecognized Princely states at the time of withdrawal of British rule. The Princely states were considered to be Sovereign within their territorial limits. Each Princely state had its own sets of rules and regulations on the rights of the owners and occupants of land, land tenure and the status of the lands at settlement. The rights of the Zamindars or Jenmis and occupants of lands in the minerals also consequently varied from State to State. In some States, the Sovereign had declared or notified that the minerals belonged to the State. The Travancore Proclamation dated l4th day of June, 1881 and the Cochin Proclamation of 1905 are ready examples of this kind of exercise. In some other provinces, there was no such declaration or notification. A ready example is the Jenmamlands of Malabar. These variations have great significance to the present day rights of citizens of India in the subsoil and minerals.

It may be noted that there were significant changes in land tenures in the pre Constitutional era. Survey and settlement processes also made significant changes in the rights of the individuals, who owned the properties in title or were in possession as occupants or tenants. Some of these processes led to resumption of land by the Sovereign and conferment of rights in the Occupant by the Sovereign. In respect of land that were resumed by the Government, extinguishing the rights of the Zamindar and settled permanently in favour of the Occupants, it is held that the right to minerals under the soil vests with the Occupant in whose favour the land is permanently settled.⁽⁶⁾

The significance of the changes in the local law is best illustrated by reference to the Madras Estates Land Act, 1908 and the changes brought about by the Tamil Nadu Estates (Abolition and Conversion into Ryotwari) Act, 1948. The former Actenables a land holder, as defined in Section 3 (5) of the Act, to make a reservation of the mineral rights under Section 7 of the Act while admitting a person in possession. This obviously meant that the landholder was the owner of the mineral rights and no reservation was made in favour of the sovereign. Pattas are to be issued by the landholder and therefore the Pattadar (when no reservation is made under S.7 remains the owner of the minerals.⁽⁷⁾ However, Section 3 (b)
of the later Act vests the mineral rights as well in the State.⁽⁸⁾ The question whether the holders of Ryotwari Patta holders under the later Act are entitled to subsoil rights is pending adjudication before the Supreme Court.

The advent of the Constitution does not appear to have made any significant change in the rights of the sovereign vis a visthe citizen. While Article 297 of the Constitution expressly vests the rights in off shore minerals in the Union a similar formulation is absent in respect of on shore minerals. Articles 294 and 295 of the Constitution do not expressly refer to mineral rights and/or conceive of vesting of such rights in the Union. The rights of the Union are subject to liabilities and obligations incurred by the earlier Sovereign. The rights of the Union of India in on shore minerals are not enhanced in any manner by the provisions of the Constitution. If the citizen had a right in the minerals under the law or custom or usage in vogue prior to the advent of the Constitution, such rights remained intact in the post Constitution scenario as well.

The enactments made immediately after the advent of the Constitution also do not appear to significantly enhance the right of the Sovereign in the matter of title to minerals or sub soil rights. Entries 53, 54 and 55 in list I of the Seventh Schedule of the Constitution enables the Union Government to make laws for regulating and developing mines, oil resources etc….as also to regulate labour and safety in such facilities. The Mines Act, 1952 was enacted to regulate labour and safety in mines. The Mines and Minerals (Development and Regulation) Act, 1957 sought to provide for development and regulation of mines and minerals. In terms of the declaration made in Section 2 of that Act, the Union could in public interest “ …take under its control the regulation of mines and the development of minerals to the extent provided.” Consistent with the object and declaration aforesaid, all activities related to mining or proposed mining require a permit or license. The Mines and Minerals (Development and Regulation) Act, 1957 does not vest any mineral or subsoil rights but only regulates activities connected therewith. There were other enactments of that period like the Coal Bearing Areas (Acquisition and Development) Act, 1957 that provided for the acquisition by the Union of the coal bearing areas.

In the post Constitution era the decisions on the subject have not been uniform. The mere existence of an Inam grant is held insufficient to infer that the sub soil rights belong to the Inamholder.⁽⁹⁾ In Raja Anand Brahma Shah,another Constitution bench held that the passing of a Regulatory law in the matter of revenue settlement will not confer any proprietary right in the minerals in the State.⁽¹⁰⁾ Consistent with these principles, the right of the land holder to claim compensation for minerals in acquired lands has been upheld.⁽¹¹⁾The Full Bench of the Karnataka High Court considered the case of lands that originally was part of Madras and on reorganization of states became part of Karnataka. In such lands, the Pattaholders were recognized to be the full owners of the mineral rights and the Ryotwari Patta holders were part owners, entitled to a share in the mineral rights.⁽¹²⁾ In the Kesoramcase, the Constitution bench has observed, in the context inter aliaof disputes between the Union and some States on the right to collect of Royalty, that the owner of the land owns the minerals as well.⁽¹³⁾ However, there are a number of other weighty issues also thrown up by that Judgement. Its correctness has been doubted and the matter stands referred to a bench of Nine Judges.⁽¹⁴⁾

 The application of the Ad Coelumdoctrine, in the conflicting claims of the citizen and the State to subsoil rights, finds expression in Thressiamma Jacob.⁽¹⁵⁾ The Supreme Court while adjudicating the rights in Jenmamlands in Malabar held

“25…... The necessary inference is that the British recognised that the State had no inherent right in law to be the owner of all mineral wealth in this country. They recognised that such rights could inhere in private parties, at least Zamindars and Inamdars or ryots claiming under them in a given case.”

 “57..... For the above-mentioned reasons, we are of the opinion that there is nothing in the law which declares that all mineral wealth sub-soil rights vest in the State, on the other hand, the ownership of sub-soil/mineral wealth should normally follow the ownership of the land, unless the owner of the land is deprived of the same by some valid process.”

A similar approach is noticed in the later decision of the Supreme Court regarding the Hill Districts of Meghalaya. ⁽¹⁶⁾

“75.... Thus, looking to the nature of the land tenure as applicable in the Hills Districts of State of Meghalaya, the most of the lands are either privately or community owned in which State does not claim any right. Thus, private owners of the land as well as community owners have both the surface right as well as sub-soil right. We are, thus, of the opinion that tribals owned the land and also owned the minerals, which is an inescapable conclusion. We, thus, proceed to examine the issues on the premise that in privately owned land or community land minerals also vest in the owner....”.

It can therefore be concluded on good authority that a land holder in India has subsoil and mineral rights by application of the Ad Coelumdoctrine unless the State can show that such rights are reserved in the Sovereign. The title and tenure under which the land is held in the pre Constitution era appears to be of paramount importance. Much will also depend on whether a vesting or declaration of vesting is made by the State or prior Sovereign that has the effect of reserving the subsoil and mineral rights to itself.

 The promulgation of the Ordinance referred to suprasuggests that the last word is not out on this subject. It is obviously intended to get over the rigour of the Judgement in Thressiamma Jacob (supra). The legislative competence of the State may get questioned. It may be attacked as being expropriatory. A more fundamental issue may also get addressed when a challenge is mounted to the new law. Are subsoil and mineral rights merely part of the right to property or is it a natural resource to which the public trust doctrine applies? The answer to this key issue will determine if the rights, Ad inferno live onAd Coelum.

Foot Note:

(1). Broom’s Legal Maxims New Eleventh Edition, Page 290.

(2).  Blackstone, Commentaries on the Laws of England 4^th Ed. (1770) Vol. II. Page 18 ‘Land hath also in its legal signification a definite extent upwards as well as downwards. Cujus est solum ejus est usque ad coelum is the maxim of the law upwards...... So that the word land includes not only the surface of the earth, but everything under it or over it’

(3).  Kumar Hari Narayan Singh Deo Bahadur & Anr. v. Sriram Chakravarthi & Ors., XXXVII Indian Appeals page 136 at 146.

4.     Raja Sri Sri Durga Prasad Singh v. Braja Nath Bose & Ors. XXXIX Indian Appeals page 133.

5.     Sashi Bhushan Misra and others v. Jyoti Prashad Singh Deo & Ors. XLV Indian Appeals page 46.

6.     Lodna Colliery Co. Ltd v. Bhola Nath Roy(AIR 1964 SC918).

7.        Madras Estates Land Act, 1908 - Section 3(5) -”Landholder” means a person owning an estate or part thereof and includes every person entitled to collect the rents of the whole or any portion of the estate by virtue of any transfer from the owner or his predecessor-in-title or of any order of a competent Court or of any provision of law. Where there is a dispute between two or more persons as to which of them is the landholder for all or any of the purposes of this Act or between two or more joint landholders as to which of them is entitled to proceed and be dealt with as such landholder, the person who shall be deemed to be the landholder for such purposes shall be the person whom the Collector subject to any decree or order of a competent Civil Court may recognize or nominate as such landholder in accordance with rules to be framed by the State Government in this behalf.”

        Madras Estates Land Act, 1908- Section 7 - Reservation of mining right- “Nothing in this Act shall affect any right of a landholder to make a reservation of mining rights on admitting any person to possession of ryoti land.”

(8)  Tamil Nadu Estates (Abolition and Conversion into Ryotwari) Act, 1948 - Section 3(b) - “The entire estate including minor imams (Post- settlement or pre-settlement) included in the assets of the zamindari estate at the permanent settlement of that estate; all communal lands and porambokes; other non-ryoti lands; waste lands; pasture lands; Lanka lands; forests; mines and minerals; quarries; rivers and streams; tanks and irrigation works; fisheries; and ferries, shall stand transferred to the Government and vest in them, free of all encumbrances; and the Andhra Pradesh (Andhra Area) Revenue Recovery Act, 1864 the Andhra Pradesh (Andhra Area) Irrigation Cess Act, 1865 and all other enactments applicable to ryotwari areas shall apply to the estate;”c

(9)--- State Of Andhra Pradesh v. Duvvuru Balarami Reddy, AIR 1963 SC 264

(10)- Raja Anand Brahma Shah v. State Of Uttar Pradesh And Ors, AIR 1967 SC 1081

(11)- The Special Tahsildar v. Kamalagangi Reddy And Others, AIR 1990 AP 124

(12)- State Of Karnataka v. Dundamada Shetty, ILR 1993 KAR 2605 Also see State of Tamil

        Nadu v. Hind Stone Etc, 1981 KLT OnLine 1004 (SC) = AIR 1981 SC 711

(13)- State of West Bengal v. Kesoram Industries, AIR 2005 SC 1646

(14)- Mineral Area Development Authority v. Steel Authority of India, 2011 (2) KLT Suppl.2(SC)  = (2011) 4 SCC 450

(15)  Thressiamma Jacob & Ors v. Geologist, Department Of Mining (2013) 9 SCC 725. The maxim is not quoted in the Judgement.

(16)- State of Meghalaya v. All Dimasa Students Union, Dima Hasao District Committee, (2019 (3) KLT OnLine 3017 (SC) = (2019) 8 SCC 17

Common Civil Code —Is it Unknown to Indian Legal System?

(By Devi A.R., Section Officer, Law Department, Government Secretariat, Trivandrum)

Common Civil Code or Uniform Civil Code implies the uniform set of rules applicable to the entire people of the country irrespective of their personal laws. Article 44 of the Indian Constitution requires the State to strive to secure for Citizens of India a uniform civil code throughout India.¹ As per the constitutional provisions the Directive Principles of State policy shall not be enforceable by any Court of law.²  Article 44, being the part of Directive Principles of State Policy its non implementation cannot be challenged before any legal forum.

From the very beginning of the constitutional life itself the implementation of Common Civil Code became an immense question. Except the directive in Article 44, all most all other directives are considered and implemented by the State through its enactments.At various times the Highest Court of the territory, the Law Commission Reports and other various socio-legal forums discussed about the implementation of common civil code. Recently, the 21st Law Commission submitted its report on the consultation paper on family law reforms and recommended that uniform civil code is neither necessary nor desirable at the point of time.³

Common Civil Code during the Pre-constitutional epoch

Implementation of the common set of personal law in the country is a disconcerted issue from the British rule to till the date. During the colonial era itself the discussion over the implementation of uniform set of law took place. In the pre constitutional era especially in the colonial period itself codification of personal law was in said discussions. The Lex Loci Report of October 1840 recommended for codification of law relating to crimes, evidences and contract but it suggested that personal laws of Hindus and Muslims should be kept outside such codification. The Queen’s Proclamation1859 promised absolute non-interference in religious matters.

Constitutional Assembly Debates on Common Civil Code

Common Civil Code found place in Article 35 of the draft constitution and the committee suggested the article in the following words

“35. The State shall endeavour to secure for the citizens a uniform civil code throughout the territory of India.”

Several amendments were proposed in Article 35 by various Muslim members but the Drafting Committee Chairman took an adamant view for the inclusion of the provision without any alteration or modification, subsequently, the motion was negatived by the drafting committee and the same article found place as Article 44 in the approved Constitution.

Observation of  the Apex Court’s  on implementation of Common  Civil Code

Observation of the Apex Court in certain cases about the implementation of Article 44 is very pertinent to be noted. In Mohd.Ahmed Khan v. Shah Bano Begum⁴  the Honb’le Apex Court observed “Article 44 of our Constitution has remained a dead letter. There is no evidence of any official activity for framing a Common Civil Code for the country. A common Civil Code will help the cause of national integration by removing disparate loyalties to laws which have conflicting ideologies. It is the State which is charged with the duty of securing a Uniform Civil Code for the citizens of the country and, unquestionably, it has the legislative competence to do so.A beginning has to be made if the Constitution is to have any meaning”.

 InSarla Mudgal, President, Kalyani & Ors.v Union of India⁵The Honb’le Justice Kuldip Singh J. observed “It appears that even 41 years thereafter, the Rulers of the day are not in a mood to retrieve Article 44 from the cold storage where it is lying since 1949. The Governments - which have come and gone - have so far failed to make any effort towards “unified personal law for all Indians”…Where more than 80 percent of the citizens have already been brought under the codified personal law there is no justification whatsoever to keep in abeyance, any more, the introduction of the ‘Uniform Civil Code’ for all the citizens in the territory of India.”

In John Vallamattom and Anr. v. Union of India⁶Honb’le Chief Justice V.N.Khare observed “I would like to state that Article 44 provides that the State shall endeavour to secure for the citizens a Uniform Civil Code throughout the territory of India.  The aforesaid provision is based on the premise that there is no necessary connection between religious and personal law in a civilized society.”

Recently, the Honb’le Supreme Court in the Jose Pailocoutinho v. Maria Luiza Valentina  Pereira & Anr.⁷Observed that Goa is a shining example of an Indian State which has a uniform civil code applicable to all, regardless of religion except while protecting certain limited rights. At Para 20 of the judgment the Court have made some pertinent observation on the implementation on the directives in Article 44:-

“20.It is interesting to note that whereas the founders of the Constitution in Article 44 Part IV dealing with the Directive Principles of State Policy had hoped and expected that the State shall endeavour to secure for the citizens a Uniform Civil Code through out the territories of India, till date no action has been taken in this regard. Though Hindu laws were codified in the year 1956,   there has been no attempt to frame a Uniform Civil Code applicable to all citizens of the country despite exhortations of this Court in the case of Mohd. Ahmed Khan v. Shah Bano and Sarla Mudgal & Ors. v. Union of India & Ors.”

21st Law Commission Report on Common Civil Code

The Ministry of Law and Justice made a reference to the 21st Law Commission of India to examine the matters in relation to uniform civil code. Subsequently the Commission presented its consultation paper on reform of family laws in India in August 2018.⁸The Commission opined that Uniform Civil Code is neither desirable or nor wanted at this point of time. At Para 1.13 Commission criticized the judgment in Shah Bano Begum’s case and made the following observation:

“1.13. However, the judgment does not acknowledge the history of attempts made towards reforming family laws in the country. The State is an ‘enabler’ of rights rather than an ‘initiator’, particularly in sensitive matters such as that of religious personal laws…”

The report seems to be trying hard to meet the conclusion that the uniform personal laws are not warranted at the point of time. In order to substantiate this view Commission report categorically criticized the Apex Court’s landmark judgment in  Shah Bano’s case and endorsed   the observations in M.A.Pai Foundation’s case, which is neither warranted nor operative in the discussion on reforms in family law. The Commission focused on the every aspects of the personal law including Marriage, Divorce, Custody, Guardianship,   Adoption, Maintenance, Succession and Inheritance. Commission had made suggestion for gender equality against the customs and usages Some of the suggestion are quoted below:

Para “2.2…At the same time marriage cannot be defined in religious terms alone, and religiously inspired gender roles and stereotypes cannot be allowed to come in the way of women‘s rights”. 

2.21.“ If a universal age for majority is recognized, and that grants all citizens the right to choose their governments, surely, they must then be also considered capable of choosing their spouses.”

“2.42. Thus, it is important to retain the discretion of the Court in such cases but the availability of a no fault divorce must accompany community of self-acquired property. The Hindu Marriage Act, 1955, Special Marriage Act, 1954, the Parsi Marriage and Divorce Act, 1936, the Dissolution of Muslim Marriages Act, 1939 can be amended to reflect this.”

2.48   “….is also urged that a greater study be initiated into rights of all persons who are cohabiting as a conjugal unit”.

The above recommendations directly access the religious customs or so called religious freedom but at Para 2.4 it observed that. “Through codification of different personal laws, one can arrive at certain universal principles that prioritise equity rather than imposition of a uniform code in procedure...”The report recommends for the strong legislative interference in the personal law to meet the gender equality but when it comes to enactment of uniform set of personal law for the purpose it took a different view that uniform civil code is unwarranted at the point of time. That means the Law Commission is of the view that gender equality should be there in every personal law but it should not be uniformly enacted for different religious groups. The report failed to convince, if equality is to be attained within a religion outweighing religious rituals, why not it could be uniformed.

The report of the 21st Law Commission on the family law reforms seems to be against the constitutional provisions and the spirits of various judgments of the Apex Court starting from Shah Bano’s case to Jose Pailocoutinho’s case. It’s the high time to pay attention towards the following words of Dr.B.R.Ambedker, the Drafting Committee Chairman, in the Constitutional Assembly.

“…we have in this country a uniform code of laws covering almost every aspect of human relationship. We have a uniform and complete Criminal Code operating throughout the country, which is contained in the Penal Code and the Criminal Procedure Code. We have the Law of Transfer of Property, which deals with property relations and which is operative throughout the country. Then there are the Negotiable Instruments Acts: and I can cite innumerable enactments which would prove that this country has practically a Civil Code, uniform in its content and applicable to the whole of the country. The only province the Civil Law has not been able to invade so far is Marriage and Succession. It is this little corner which we have not been able to invade so far and it is the intention of those who desire to have Article 35 as part of the Constitution to bring about that change. Therefore, the argument whether we should attempt such a thing seems to me somewhat misplaced for the simple reason that we have, as a matter of fact, covered the whole lot of the field which is covered by a Uniform Civil Code in this country. It is therefore too late now to ask the question whether we could do it. As I say, we have already done it.”

The implementation of Uniform Civil Code always there in discussions from the pre constitutional era itself but no progressive steps achieved so far. In this regard, neither any Court ruling nor any reports of the Law Commission of India contributed more than that of the Drafting Committee Chairman debated in the Constituent Assembly. Common Civil Code is nothing novel or unknown to Indian Legal System. The  issues or   debates  concerning  implementation of Common Civil Code is already settled in the Constituent Assembly itself. Indian legal system is already in Common set of Civil Laws.  The excluded  area is only the personal laws. To get it be included in the Common Code what requires is only the legislative wisdom for it.

Foot Note:

1.    M.P.Jain, Indian Constitutional Law,1386(2007).

2.    Article 37, Constitution of India.

3.    https://economictimes.indiatimes.com.

4.    1985 KLT OnLine 1235 (SC) = 1985 (1) SCALE 767 = 1985 (3) SCR 844 = (1985) 2 SCC 556 =AIR 1985 SC 945.

5.    1995 (2) KLT 45 (SC) = AIR 1995 SC 1531.

6.    https://main.sci.gov.in/jonew/judis/19152.pdf (2003 (3) KLT 66 (SC)).

7.    https://main.sci.gov.in/supremecourt/2008/32704/32704_2008_13_1501_16758_Judgement_13-Sep-2019.pdf.

8.          Law Commission’s Report on Reforms on Family Law at pg.ii.