History Repeated

‘State’ – as Sovereign as well as Proprietor of the Mineral

By M.K.S. Menon, Advocate, Supreme Court of India
      E-mail : mksmenon@gmail.com         Mob. 9810240999

A critical analysis of the recent Supreme Court judgment of 9 Judges’ bench in Mineral Area Development Authority v. Steel Authority of India (2024 KLT OnLine 1945 (SC), Civil Appeal Nos.4056-4064of 1999 dated July 25, 2024.

1. INTRODUCTION

Recent judgment by the 9 (nine) Judges’ bench of Hon’ble Supreme Court of India is definitely a source of relief for all the States mainly the mineral rich States like Bihar, Jharkhand, Karnataka etc. This beautifully crafted precedent, is touching almost every aspect of ‘royalty’ and ‘tax’ in relation to mines and minerals. This masterpiece resolved a conflict between India Cement Case₁  as well as West Bengal v. Kesoram Industries Ltd.,₂ by overruling the reasoning in both of them, and thereby brought out a new line of interpretation, which needs a second look. Hon’ble Supreme Court clarified that, (i) Royalty is no Tax’ and (ii) Only owner is entitled to collect Royalty. To this extent there is absolute clarity but power of taxation on mineral got confused with mineral development beyond Entry-50 of List-II and wrongly interpreted Entry-97 of List-I ‘residuary power to tax’. Means:

“Checkered  history yet to be liberated.”

BACKGROUND:

Is Royalty a Tax -

This question was a deep-rooted doubt entertained by the Indian Courts right from the date Mines and Minerals (Development and Regulation) Act 1957 was enacted because nowhere in the said enactment, a discussion appears regarding private ownership except in Section 17-A(3) where in it is stated that even the State has to pay Royalty to the private owner.  However the legislative competence of the State to enact a lawimposing tax on mineral or mineral right including Royalty was always remained as a grey area. Various Constitution Benches expressed different opinions. Major canvas was the legislative field consisting of Entry 54 of List-I qua Entry 49 & 50 read with Entry 23 of List-II. Present controversy mainly revolves around Entry 49 & 50 of List -II regarding power of the State to enact a law as ‘Tax on Land’ or is there any limitation imposed by the Central Govt. as stated in Entry 50 of List-II. More specifically, as to whether the State can make an impost on land based on the quality of the land as a mineral bearing land under Entry 49 of List -II of Seventh Schedule or on the mineral itself under Entry 50 of the same list, because the declaration under Section 2 of Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter shall be referred to as “MMDR Act”) created a cloud over the sovereign right of the State to impose tax on mineral or mineral rights. Constitution Bench of 9 Judges was trying to find a permanent solution to this fluid situation.

Till independence, British Government used to exercise their prerogative right imposing land revenue as ‘share in the produce’ commuted into money value on acreage basis. They were also imposing additional Tax in the same fashion as and when minerals were operated/excavated. The usage ‘share in the produced’ led many courts to mis-interpret as ‘Royalty’ (e.g.Dalmia Cements). However in N.R.Reddy & Ors. v. State of A.P. & Ors.₃,Andhra Pradesh High Court clarified that what was claimed by the State as ‘share in the produce’ was only revenue. The said conclusion is now accepted by the 9 Judges as well. Still the difference between a sovereign exercising it’s prerogative right to impose ‘tax’ and otherwise exercising the proprietary right to claim ‘Royalty’ is still a grey area. Till passing of the Mines and Minerals (Development and Regulation) Act, 1948 followed by MMDR Act1957, State’s prerogative right was never questioned. Only when the declaration of the Central Government came under Section 2 of MMDR Act 1957 covering the entire field of mines and minerals covered by Entry 54 of List -I, the doubt regarding the extent of the restriction imposed by such a declaration started bothering the Court. Whether such a declaration brought in a restriction against the States in exercising their prerogative right under the federal system was deliberated upon repeatedly.

Present controversy started when 7 Judges in 1990 interpreted Section 30 of MMDR Act and declared that ‘Royalty is Tax’. In the case of India Cement₄ a 7 (seven) Judges’ bench took support of Section 9(3) of the Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter shall be referred to as “MMDR Act”) and held, that by imposing cess/tax on royalty, royalty stands inflated and the State is trenching into the authority of the Central Government under Section 9 and thereby violated the declaration under Section 2, because with regards to major minerals only the Central Government is entitled to enhance royalty under Section 9(3) of the MMDR Act and the State can enhance the royalty only with regards to minor minerals₅ as per proviso of Section 15(3)(c)₆ of the MMDR Act. In effect the case proceeded on the footing that royalty is tax. It was held that by imposing cesson royalty in exercise of ‘prerogative right,it will inflate royalty and thereby violate Section 9(3) of MMDR Act. The above anomaly was sought to be clarified by 5 (five) Judges’ Constitution Bench in State of West Bengal v. Kesoram Industries Ltd.,₇ by stating that the observation in India Cement case (supra) - that ‘royalty is tax’ is a typographical error by observing as follows:

“We hold that royalty is not tax. Royalty is paid to the owner of land who may be a private person and may not necessarily be State. A private person owning the land is entitled to charge royalty but not tax. The lessor receives royalty as his income and for the lessee the royalty paid is an expenditure incurred. Royalty cannot be tax. We declare that even in India Cement it was not the finding of the Court that royalty is a tax. A statement caused by an apparent typographical or inadvertent error in a judgment of the Court should not be misunderstood as declaration of such law by the Court.”

However, an inert analysis of the judgment in India Cement case (supra) would demonstrate that it was not a typo but was the ratio decided in the said judgment. The said controversy is now put to rest by the Hon’ble 9 (nine) Judges’ bench in the present Judgment, by holding that ‘royalty is not tax’ ₈.This conclusion was cradled and nurtured by the author and narrated in another article published in Kerala Law Times in 2023.₉

In para.266 of 9 Judge bench judgment, Hon’ble Court clarified as follows:

“…Resultantly, the payment of Royaltyunder Section 9 of the MMDR Act is paid either to the State Government or to private landowner, as the case may be.”

In Thressiamma Jacob v. Geolgist ₁₀,the Hon’ble Supreme Court had earlier consideredthe effect of private ownership and held that the private landowners of land in Malabar District of Kerala, are also the owners of minerals in their land because there was no legislation vesting mineral rights in the State. However, the question as to whether the State can claim royalty, was left open because the question as to whether ‘royalty is tax’ was pending consideration before the 9 (nine) Judge Bench. The said controversy also now stands resolved in the present judgment of Hon’ble 9 (nine) Judges’ bench, wherein under para 330 it was observed that 

“330…...Therefore royalty is relatable to the yield of the mineral bearing land as well as the income in case the minerals vest in a private person.”

1.1. General Principles of Interpretation of the judgments:

It is highly necessary to reckon the dangers of wrong interpretation highlighted by the Hon’ble Supreme Court in the judgment of Union of India v. Amrit Lal Manchanda & Anr.,₁₁.Hon’ble Court was narrating the difference between interpretation of a statute and interpretation of a judgment, wherein it was observed as follows:

“15…Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid’s theorems nor as provisions of the statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for Judges to embark into lengthy discussions but the discussion is meant to explain and not to define…..”

“17…Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.”

Hon’ble Supreme Court also reproduced the following words of Lord Denning in the matter of applying precedents that have become locus classicus:

“Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cardozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive.”

“Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it.”

In this regard, in London Graving Dock Co. Ltd. v. Horton₁₂, Lord Mac Dermot observed:

“The matter cannot, of course, be settled merely by treating the ipsissima vertra of Willes, J. as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished Judge.”

In Home Office v. Dorset Yacht Co₁₃, Lord Reid said, “Lord Atkin’s speech...is not to be treated as if it was a statute definition.It will require qualification in new circumstances.”In Megarry, J. in(1971) 1 WLR 1062 observed that “One must not, of course, construe even a reserved judgment of even Russell L.J. as if it were an Act of Parliament.” And, in Herrington v. British Railways Board₁₄, Lord Morris said that, “There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the facts of a particular case.”

1.2 Concept of Share in the Produce

In this backdrop, a cursory reading of para.51 in Thressiamma Jacob case (supra) would reveal that the Hon’ble Supreme Court never declared that State was collecting royalty during British regime but was collecting ‘tax’ as ‘share in the produce’. Para.51 in Thressiamma case (supra) reads as follows:

“…In the instant case, the State asserted its ‘right’ to demand a share in the ‘produce of the minerals worked’ though the expression employed is right – it is in fact the Sovereign authority which is asserted. From the language of the BSO No.10 it is clear that such right to demand the sharecould be exercised only when thepattadar or somebody claiming through the pattadar, extracts/works the minerals – the authority of the State to collect money on the happening of an event – such a demand is more in the nature of an excise duty/a tax.The assertion of authority to collect a duty or tax is in the realm of the sovereign authority, but not a proprietary right.”

Therefore, larger bench of Hon’ble Supreme Court in Thressiamma Jacob case (supra) never stated that ‘share in the produce’was ‘royalty’. This position also stands clarified in the 9 (nine) Judges’ bench in Mineral Area Development Authority case (supra) in the following words in para.255, as follows:

“255. The Board of Revenue recognizes the rights of Zemindars to the minerals through Standing Orders. The Standing Orders also governed the rights of the Ryotwari holders with respect to the minerals. For example, Resolution No.277 of 1888 declared that the State lays no claim to minerals in estates held on sanads of permanent settlement, enfranchised inam lands etc. Moreover ryotwari Patta lands it was declared that right of the State in minerals is limited ‘to a share in the produce of the minerals worked’, commuted into money payment, if thought necessary by Government, in like manner with and in addition to the land assessment… Thus, the colonial State did not claim subsoil rights with respect to lands held under permanent settlement, and only a limited right in land held under ryotwari pattas. The system of law continued until independence and even there after. ”

In fact, in India Cement case (supra), the 7 (seven) Judges observed in para 20 that,
“It is not necessary to refer in detail how land revenue developed in India after the advent of the British Rule. There was an appeal from the said decision of the High Court of Andhra Pradesh and this Court dismissed the appeal in State of A.P. v. N.R. Reddy & Ors. [1967] 3 SCR 28.] ” Further, the Hon’ble Court in 7 Judges observed that,

“2 1.It is, however, clear that over a period of centuries, land revenue in India has acquired a connotative meaning of share in the produce of land to which the King or the Govt. is entitled to receive. It was contended on behalf of the appellants that the impugned measure being a tax, not on share of the produce of the land but on royalty; royalty being the return received from the produce of the land,revenue was payable for winning minerals from the land. In the premises it was contended that it cannot be attributable to Entry 45 of List II of the 7th Schedule, being not a land revenue. It has, however, to be borne in mind that Explanation to Section 115(1) was added and there was an amendment as we have noted before. That very Explanation makes a distinction between land revenue as such and royalty which by amendment is deemed to be land revenue. It is, therefore, recognised by the very force of that Explanation and the amendment thereto that the expression ‘royalty’ in Sections 115 & 116 of the Act cannot mean land revenue properly called or conventionally known, which is separate and distinct from royalty.”

On account of the Section 2 declaration under MMDR Act, the entire field of legislation with regards to the development and regulation has been vested in the Central Govt. and the State is deprived of such a right. India Cements wanted to declare that MMDDR Act 1957 restricted the States from enacting a law imposing cess/tax on mineral or on Royalty. As stated earlier, unless royalty is accepted as ‘tax’, Section 9 of MMDR Act₁₅ has no role to play because ‘royalty’ can get ballooned only if it has characteristics of tax. Therefore India Cement (supra) held to be incorrect and stood overruled by 9 Judges bench. What is imposed on royalty is ‘cess’, means tax. Tax on tax alone can escalate the original levy so as to violate Section 9 of MMDR Act. Kesoram case (supra) holding that, the observation in India Cement (supra) that ‘Royalty is tax’ is a typo also held to be incorrect. The said anomaly is now settled in the judgment by 9 Judge bench, clarifying that ‘royalty is not tax.₁₆. Both 7 Judges bench and 5 Judges bench are now overruled as a new dimension is sought to be achieved, correctness of which, gave birth to another debatable question.

2. STATE’S IDENTITY AS ‘PROPRIETOR’ AS WELL AS ‘SOVEREIGN’

2.1.   Taxing mineral-bearing land

In para.288 of the Judgment, 9 Judges’ bench explained incidence of tax as follows:

“288. From the above discussion, we can derive the following principles:           

(i)   the incidence of a tax on lands and buildings will likely be on the owner or occupier’ as the case may be;

(ii)  legislature may adopt a suitable measure for levying the tax on lands and buildings under Entry 49 of List I; and

(iii)the measure adopted by legislature does not determine the nature of the tax.”

First mistake happened here when the court mentioned the word ‘occupier’. Occupier is not the proprietor or owner of the land or mineral. [Position of an occupier is discussed later part in this article]. Attention is sought to para 291 as well pertaining to the analysis of Entry-49 of List-II of the Constitution of India, 1950 (“Constitution of India”), which reads as follows:

“291….Tax on lands and Buildings under Entry 49 of List-II is often measured with respect to the income derived from the land or building sought to be taxed. The income derived from land and building is normally measured in terms of the annual value. Section 23 of the Income Tax Act provides that the annual value of property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year. Thus, where a land or building is let, the valuation is based on the rent at which it is let.”

Various judgments referred to thereafter shows that the measure of taxation can relate to the actual or potential productivity of the land and in para 294 it is stated that,

“294…If the State legislature utilizes the income derived from the land as a measure to quantify a tax on land., it does not trench upon the legislative domain of Union to tax income...”

Moving forward, after discussing catena of judgments, Hon’ble Supreme Court concluded that MMDR Act does bring in any restriction on imposing a tax on land under Entry 49 of List-II of the Constitution of India. To this extent it is correct but the observation that tax can be imposed on the occupier is a debatable point.

2.2.   Measure of tax on mineral-bearing land as ‘tax on land’.

Decoupling: ‘physical decoupling’ and ‘statutory decoupling’.

Hon’ble Supreme Court proceeded as though the decoupling can take place only physically. Halsbury’ Law of England touching on the point, specifically provided that a mine can be owned or possessed independent of surface right. Hon’ble Supreme Court had already quoted with approval the said concept inShri Tarkeshwar Sio Thakur Jiu v. Dar Dass Dey & Co.In para 28 it is observed as follows:

Para 899 of Halsbury’s Laws of England (ibid) reads, thus:

“A lease may be granted of land or any part thereof, and since minerals are a part of the land it follows that a lease can be granted to the surface of the land and the A minerals below, or of the surface alone, or of the minerals alone. It has been said that a contract for the working and getting of minerals alone though for convenience called a mining lease, is not in reality a Lease, at all in the sense in which one speaks of an agricultural lease, and that such a contract, properly considered, is really a sale of a portion of the land at a price payable by instalments, that is, by way of rent or royalty, spread over a number of years”.

Tressiamma Jacob’scase (supra) also narrated a situation where a statutory decoupling of mineral right can happen when State vests mineral right alone in the State. Then the question is, regarding the pattas or sanads being issued to private persons. State can impose tax on land for agricultural purpose as long as the land is conveyed without reserving the right. Still the ownership remains with the surface owner. During British regime, tax on mineral was optional and imposed as and when thought necessary. In para 255 of the 9 Judges Bench judgment in fact accepted this in so many words as follows:

“Moreover ryotwari Patta lands it was declared that right of the State in minerals is limited ‘to a share in the produce of the minerals worked’, commuted into money payment, if thought necessary by Government, in like manner with and in addition to the land assessment…”

Then an enquiry is necessary to find out as to whether the minerals were reverted back to the Government. Through agrarian reform legislations, excess land was vested in the Government. However there are lands lying within the ceiling limit and covered by Second Proviso to Article 31-A of the Constitution. In those lands State is not the owner and the State cannot collect Royalty. In those lands which were assigned, but no reservation is made in favour of the State, then also the State cannot be the owner and cannot collect royalty. In Kerala, land vested in the State through agrarian reforms are assigned through Kerala Land Assignment Act 1960. Section 7(i) mandates that the ‘Royalties of the State’ in the land are to be protected. Form of some of the Pattas specifically contains a provision as follows:

“If minerals are found, Right of the State to Minerals are not affected”

In different sanads/pattas different usages are found. In some pattas, it is stated that “right of the State to ‘a share in mines and minerals’ and subjacent quarries are reserved and are not affected by the grant”. In this case, ‘share in the produce’ can be tax. Therefore it is dependant on the land tenure and a blanket order cannot be given. Each case is required to be considered on it’s own merits and based on the land tenure. If State is the owner and exercising ‘Proprietary right on minerals, State can impose Royalty and not tax on land (Entry-49 of List-II) or tax on mineral right (Entry-50 of List -II). In the other case,
it is the private person who collects Royalty and the State can impose tax on mineral rights covered by Entry -50 of List-II but not under Entry-49.

Hon’ble Supreme Court in 9 Judge Bench gave a blanket declaration that the State can impose tax and value of the mineral right can be a medium to assess productivity of the land. Hon’ble Supreme Court also failed to consider the concept of decoupling through mineral vesting enactments like Land Reforms Act, even though highlighted and discussed ‘physical decoupling’.Rather the concept of‘statutory decoupling’ is not seen discussed at all in the judgment. 9 Judges bench answered only the other argument advanced by the respondents in defence based on the concept of decoupling when a lease of mineral right is entered into between the parties. Hon’ble Supreme Court refused to accept the argument of notional decoupling, ‘ when lease is granted to the lessee ’and failed to consider possible ‘statutory decoupling’, based on a mineral vesting enactment. Statutory decoupling happens when the State severe the title on mineral from it’s original owner and vests it in itself through an enactment. Hon’ble Court was considering a situation where the private owner of the land who is also the owner of mineral and a lease is executed to a third party. Judgment also considered the impact of Rule 22(3)(h) of the Mineral Concession Rules, 1960 (“1960 Rules”), when owner of the surface granted permission to the prospective lessee of the mineral. Under Rule 22(3)(h), prospecting lessee will have to submit a consent letter from the owner of the surface land, from where the minerals are to be excavated, in a case where the said person is not the owner of minerals and also is not the lessor. In this regard the court observed as the last sentence in para 324 that,

“324...Thus, the transfer of interest in the minerals is distinct from the exercise of the mineral rights. In view of the above discussion, it is clear that minerals are “decoupled” from land only upon the exercise of mineral rights by the lessee.”

This demonstrates only the physical decoupling. Change of ownership on minerals was never in contemplation. According to the Hon’ble Court, no decoupling takes place until the mining activity starts. Thereafter, the judgment considered as to whether income from minerals can be used as a measure tax on land. In this regard court considered the rateable value assessed in the case of mineral bearing lands under English principles and held that in such cases ‘royalty’ was regarded as rent, for the purposes of assessing mineral hereditaments.

In para.327, Hon’ble Supreme Court held that ‘royalty is not tax’, and clarified that it is a consideration payable by the lessee to the lessor for the exercise of mineral rights. Thereafter Hon’ble Court directly went on to discuss the constitutional scheme under Entry-49 of List-II of the Constitution of India and held that there is no restriction imposed by the Centre on this constitutional right of the State. Most importantly, the Hon’ble Supreme Court observed that

“330...Therefore, Royalty is relatable to the yield of the mineral-bearing land as well as the income in case the minerals vest in a private person.”

In this regard, reliance was placed on the judgment in Burrakur Coal Field Ltd. v. UOI₁₇ in which the petitioners therein challenged the provisions of Coal Bearing Areas (Acquisition and Development) Act, 1957(“Coal Bearing Areas Act”)as being violative of Article 19(1) & Article 31(2) of the Constitution of India. However, the case was dismissed by Constitution Bench because the said enactment was protected under Article 31-A of the Constitution of India.

In para 319 of 9 Judges bench discussed the challenge in Burrakur case (supra), that reads as follows:

“...The main thrust of the petitioner’s submission was that a notification under Section 4 cannot be issued with respect to mines which have been ‘worked’ by the lessees…”

[Note -- second mistake occurred in relying on Burrakur case which provides a totally different canvas of different set of facts].

Petitioners in Burrakur case (supra) had also argued that ‘already worked mines’ cannot be vested without providing additional compensation for minerals lying underneath. The discussion in para.17 of Burrakur case (supra) is quoted and from the quote it is clear that the argument was straining towards the ‘separation of tenement through act of parties’ when a lease is created. Hon’ble Constitution Bench of 5 Judges in that case answered the question as follows:

“17…It is however, difficult to see how the owner or the lessee of land who has right to win minerals can effect such severance between the mineral rights and surface rights by opening and operating the mines of  the  land.  For,  even  while  he  is  carrying  on  mining operations, he continues to enjoy the surface rights also. We cannot therefore accept the contention that there was any severance of the mineral rights and surface rights in either of these two cases.”

The argument of the parties therein was that, the worked mine through a lease abandoned it’s identity as ‘part and parcel of the land’ and it is a separate tenement entitled for separate and additional compensation.

With great respect, it is hereby pointed out that there was no severance of right between surface right and subsoil right in Burraku case (supra) unlike in the present case, where the legislative decoupling took place long back when the mineral right in the land was vested through legislation like Land Reforms. On the contrary, in the present case there was a ‘severance of surface right and sub-soil right through legislation’. In the present case, owner of mineral is the State itself through land reforms enactments and that is why the State is collecting royalty, unlike the landowner in Burrakur (supra) where both land and mineral stands vested in the land owner who’s land is sought to be vested along with the mineral namely ‘Coke’. In the present set of facts, severance between the surface right and the subsoil right already took place through agrarian reform legislation. In Burrakur case (supra) justification was given by the Constitution Bench based on twin ownership of both the surface as well as subsoil rights in one person namely the land owner, which has hardly any relevance in the present case. Moreover, the said enactment namely the Coal Bearing Areas Act by itself was treated as an agrarian reform and the Act had the protective umbrella under Article 31A of the Constitution of India in that case. Factual matrix in both cases cannot be placed at par. Statutory decoupling was not under discussion in Burrakur (supra), whereas the present case involves statutory decoupling, which changes the ownerships and incidence of tax on land based on the value of the land or productivity of the land capable of producing mineral.

Principles propounded by the Hon’ble Supreme Court in Amrit Lal Manchanada case (supra), squarely applies in this context. What logically appears is not a precedent. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Burrakur case (supra) was a judgment considering whether physical decoupling by creating a lease by parties entitle the parties to claim separate compensation, by treating ‘the leased mine as a separate tenement’. Physical decoupling was negatived on different set of facts and circumstances and the case in hand involves ‘statutory decoupling’ that has been ignored and never discussed in the present case.

Halsbury’s Laws of England state the legal position as follows:

“19. Meaning of ‘land’ and cognate terms. Prima facie ‘land’ or ‘lands’ includes everything on or under the surface, although this meaning has in some cases been held to have been restricted by the context. ‘Soil’ is apt to denote the surface and everything above and below it, but similarly its meaning may be restricted by the context so as to exclude the mines. ‘Subsoil’ includes everything from the surface to the centre of the earth…

20…Mines, quarries and minerals in their original position are part and parcel of the land. Consequently, the owner of surface land is entitled prima facie to everything beneath or within it, down to the centre of the earth. This principle applies even where title to the surface has been acquired by prescription, but it is subject to exceptions. Thus, at common law, mines of gold and silvery belong to the Crown, and by statute unworked coal which was, at the restructuring date, vested in the British Coal Corporation is vested in the Coal Authority. Any minerals removed from land under a compulsory rights order or opencast working of coal become the property of the person entitled to the rights conferred by the order. The property in petroleum existing in its natural condition in strata is vested by statute in the Crown.”

2.3. Concept of ‘Statutory decoupling’ not dealt with in the Judgment

Difference in the present context is that a ‘decoupling of ownership/proprietorship’ took place through some legislative process i.e., through land reforms enactments etc, which has specifically vested mineral rights and decoupled the mineral right from the rest of the right of the landowner, which was originally part and parcel of the land as highlighted in Halsbury’s Law of England.

The landowner is no more the owner of mineral rights in those States. Then the question is, as to whether the said surface-owner who is not the owner of the mineral and not earning anything from the so-called mineral bearing land of which he is only the surface owner, can be burdened with a tax based on mineral value of the land under Entry-49 List-II of the Constitution of India. Somehow it appears that this aspect is not drawn the attention of the Hon’ble Court. Judgment proceeded onthe premise that an occupier can be burdened with tax under Entry 49 as stated in para. 288. The judgment had probably only discussed the physical decoupling of minerals and not the decoupling of right through legislative process which alone crystallises the taxability based on value of minerals. The State can tax a ‘mineral-bearing-area’ capable of mineral excavation as long as minerals are vested in the landowner or lessee of the owner of minerals, even if the minerals are not physically decoupled. However, the situation is different when the State itself become the owner of the area through a legislative process and thus becomes the owner of the minerals. In that case, the State will be taxing its own property namely the minerals.If tax is imposed on a third party who is not the owner of the minerals,who enjoys only the surface right enabling him to claim ‘dead rent’ or ‘surface rent’ but not the ‘Royalty’, can Entry-49 of List-II [providing federal boundary] salvage the situation. If that be so, how can he be held liable for a levy under Entry-49 of List-II, for which the medium of measurement is ‘Royalty’ and not ‘surface rent’. No doubt MMDR Act 1957 did not bring in any limitation but who should be the subject depends upon the
ownership/proprietorship. State’s authority to tax under Entry-49 List-II is not under dispute, but the incidence of tax is the questionable one, especially when the State being the proprietor of the mineral, cannot take the mineral productivity to tax a person who is not the beneficiary of the minerals available in the land. It is State who is the beneficiary by collecting Royalty. State is giving the lease to a third party or to the surface owner.

In this context, may be para 332 required to be reconsidered since it reads as follows:

“332…Resultantly, if the State legislature has classified mineral bearing land as a separate unit for the purpose of levy of tax on land, the minerals produced or any other measure directly connected to the minerals produced can be used as a measure to quantify the tax”.

Hon’ble Supreme Court came to the conclusion that mineral value or mineral produce could be used as a measure on the ‘tax on land’. It was also held that ‘royalty’ can be a measure to determine the tax. If it is tax on mining activity, it is understandable. If it is tax on minerals then it will fall under Entry-50 and not under Entry-49 which in any case cannot be levied as long as the State is the owner. Land as a unit can never allow productivity based on minerals as an incident of tax, as long as the State is the beneficiary by collecting Royalty. State’s benefit cannot be the basis for a citizen’s tax liability.

3. SOVEREIGNTY -VS- PROPREITORSHIP

The Hon’ble Supreme Court in the Judgment by 9 Judges declared that productivity
of the land as‘mineral bearing land’as well as ‘royalty’ can be the basis for assessing the land under Entry-49 of the List-II of the Constitution of India. As stated earlier, it is not indispute that power to tax as a sovereign is a prerogative right and neither MMDR Act nor any other enactment does not bring in any limitation to this power as provided under Entry-50 of List-II of the Constitution of India.

However, a microscopic analysis of fundamental principles revolving around the ‘prerogative right and proprietary right’, while considering Entry-49 of List-II of the Constitution of India enabling State to impose land revenue under the federal system, the State is entitled to exercise its prerogative right, provided the State is not exercising ‘proprietary right’ over the land, much less the minerals.

The fundamentals of mining law have been considered in Sri Tarakeshwar Sio Thakur case (1979) 3 SCC 106), referring to Halsbury Law of England, 3rd edition₁₈ and also in D.K.Trivedi v. State₁₉.

Under the British regime, in 1908, the court of appeal in Madras Presidency had occasion to consider the concept of land assessment qua prohibitary assessment. Question as to whether ‘merely because a person is an ‘occupier’of the land can enable the State to assess an occupier for tax when the Government is the owner. In Madathappau Ramaya v. Secretary of State₂₀,a 3 (three) Judges ’bench consisting of Chief Justice S.Subramania Ayyer, Justice Boddam and Justice Bhashyam Iyyengar (concurrent) in page 389 observed as follows:

“These various provisions show beyond the possibility of a doubt, that the land in respect of which land-revenue is exigible is vested in some person or persons other than the Crown;and that the Crown possesses nothing more than a charge (though a first charge) in respect of revenue due to it, upon the interest of such person or persons, realisable by State thereof. They absolutely preclude the supposition that any Crown demand is recoverable as land revenue, unless it be something due from one who is a land holder as defined by the Act.”

The Hon’ble Court discarded the argument of the State, that revenue recovery is permissible for every demand of the crown even if the crown is the owner of the land. Land in question was a street vested in the Government. Such an assessment was termed as prohibitary assessment according to the State. Therefore, the State claimed that they can make assessment, but the Hon’ble Court held that they could do it only if the State is not the owner of the subject under assessment. In the present case probably, there could possibly a tangent argument that the surface owner or the lessee of mining lease obtained from the Government as occupier can be assessed. When ‘surface owner is also the lessee of mining lease is another situation. In all these cases, mineral is the medium based on which the taxability is arrived at and that mineral is vested in the Government, and income is ‘Royalty’ which also goes to the Government. Sovereign seizes to be the Sovereign with regards to a subject matter when it becomes the owner of the same and sovereign cannot impose tax on itself or it’s income. [in this case -mineral and royalty’] Government’s income as proprietor of the mineral namely ‘Royalty’, cannot be the basis for tax on the citizen.

Therefore, the fundamental principle ensue from these discussions is, that the State cannot assess the land based on the characteristic of the land as mineral bearing land on the basis of the mineral wealth belonging to the State. Royalty being the income of the State cannot be the basis/measure to assess the land of a subject. Therefore,royalty due to the Government when recovered through revenue recovery proceedings, will not assume the colour of tax. Principle flowing from the above-mentioned judgment demonstrate that sovereign once become the owner of the land or any of the rights out of those bundle of rights, it cannot impose tax/revenue as a sovereign on that land or part of the right in land which is vested in the State.

4. SOVEREIGNTY AND NOT THE ENTRIES IN 7TH SCHEDULE DECIDES
TAXING POWER OF MINERAL RIGHT

The Hon’ble Supreme Court in the Judgment held that mineral right can be a basis for assessment of land as ‘mineral bearing land’ or royalty can be the basis as a measure to assess productivity of the land. When the normal surface is assessed under Entry-49 in List-1 of the Constitution of India, the assessment is on a commuted money value similar to the measure as provided in Board’s Standing Orders of British Government which has been appreciated and quoted with approval in the Judgment under discussion. When we analyse the tax regime during British era, especially in Madras, the following aspects are very relevant. This has been referred to both in Thressiamma Jacob case (supra) as well as Dalmia Cement case (supra), i.e., ‘a share in the produce’ commuted into money value is the revenue assessed on land. As and when minerals are worked, an additional tax is levied if necessary. RESOLUTION-dated 19.03.1888, No.277 of the Boards Standing Orders.

The above discussion without demur accepts the fact that the State was assessing tax on minerals, but State was not the owner of the minerals, and the proprietor of the soil is assessed only when he operates the mine or extracts the mineral under British regime. 9 Judges bench also accepted this totally and stated that even after the British era the same condition continued. It is stated by 9 Judges in Mineral Area Development Authority case (supra) in the following words in para 255:

“255. ……right of the State in minerals is limited ‘toa share in the produce of the minerals worked’, commuted into money payment,if thought necessary by Government, in like manner with and in addition to the land assessment… Thus, the colonial state did not claim subsoil rights with respect to lands held under permanent settlement, and only a limited right in land held under ryotwari pattas, The system of law continued until independence and even thereafter.”

Britishers taxed minerals because mineral was not vested in them at that point of time. Vesting took place only after independence and during the agrarian reforms enactment in 1960s and 1970s. The State’s right to assess tax minerals is no doubt a sovereign right constitutionally protected and structured through constitutional scheme of delimitation, as long as they are not the proprietors of the mineral. In the present case, mineral bearing land as a unit is under assessment and the value of mineral has been considered as an element in deciding the value of the land, or royalty is taken as the measure irrespective of the fact that the royalty is not the income of the landowner when the mine is leased to a third person by the State by obtaining consent under Rule 22(3)(h) of 1960 Rules from the land owner.

Even otherwise, by looking from another angle, one can observe that, in most of the lands in India, minerals are vested through a legislative process like the Land Reforms Act, wherein the private person lost his right to operate the mineral and he has to apply to the State by paying royalty. We are also bound to visualise a situation where the minerals are leased to a third party by following the provisions contained in Rule 22(3)(h) of 1960 Rules by taking consent from the surface owner. Surface owner being the assessee of land revenue under Entry-49 List-II of the Constitution of India, has no benefit from the land as the mineral bearing land. He may be entitled for dead rent or surface rent and not royalty. Substantial beneficiaries are the State who is collecting the royalty and the lessee of the Government, who is only an occupier of the land with permission. Question now arises is as to why the surface owner shall pay additional land revenue as the land being a mineral bearing land, for the benefit of some other person namely the lessee or the State with regards to minerals sought to be excavated or capable of being excavated.Therefore, whether it is mineral bearing area or an ordinary land with no identified minerals makes no difference for him. If inflated amount is charged as land revenue for the mineral bearing land based on royalty paid by someone else to the State, even though minerals are not decoupled from the land physically, through the leasing process or any other process, then that collection cannot be considered as one under due process of law because legislative decoupling happened much before and the assessee is no more a beneficiary of the so-called medium of assessment namely ‘Royalty’. Even if the dead rent is paid, it has no connection with the royalty and the owner is getting nominal benefit as in the case of an ordinary land, because mineral is not improving the value of the land. Moreover, assessment of land revenue will have to satisfy the test that the State is exercising only ‘sovereign right’ and not ‘proprietary right’ with regards to that item under assessment. Even otherwise, how can the royalty being the income of the State be the basis for making an assessment on a person who has no interest either in the minerals or in the Royalty?

Fundamentals of lease of the surface as well as mining lease under mining law as per para 899 of Halsbury’s Law of England 3rd Edn. Volume -26 reads as follows:

“ Lease may be granted of land or any part thereof, and since minerals are part of the land it follows thata lease can be granted to the surface of the land and minerals below or of the surface alone or of the minerals alone. It has been said that a contract for working and getting of minerals alone…..though for convenience called a mining lease, is not reality a lease at all in the sense in which one speaks of an agricultural lease , and that such a contract, properly considered , is really a sale of the portion of the land at a price payable by instalments, that is by way of rent or Royalty, spread over a number of years”

Therefore, when the State is collecting Royalty, State being the owner of the mineral (part of the land) collects ‘Royalty’ as price for the portion of the land namely the mineral. How can that be a measure of taxation, is the moot question. It is a sale between the State and the lessee, where a portion of the land owned by the State is sold to the lessee for a price and the lessee need not be the surface owner. The above principles are quoted with approval by Hon’ble Supreme Court in Sri Tarakeshwar Sio Thakur case (supra).

Lessee under the mining lease also cannot be the assessee because he is only an occupier and land revenue can be assessed only on the surface owner under Entry-49
List-II. If tax is on the mineral, assessment shall be under the head covered by Entry-50 and not under Entry-49 of List-II. If the surface owner is also the lessee of mineral concession, he has two different identities. (i) As the surface owner and also as (ii) occupier as a lessee of the Government for mineral right/subsoil right. Both these identities are distinct and cannot be clubbed as per the fundamental principles mining laws. That is why there are two different Entries in Part-II itself namely Entry-49 for rights other than mineral rights and Entry-50 for tax on mineral rights. There is a difference between ‘mineral’ and ‘mineral right’. Entry-50 deals with ‘mineral right’ and not ‘minerals’. Mineral right indicates its existence in the original form as part and parcel of the land and specifically incorporated in Entry-50 which is carved out of Entry-49 so as to provide limitations that could possibly be imposed through a legislative process by Central Government under Entry-54 of Part-I of Seventh Schedule. When the word ‘mineral’ is purposefully not used in Entry-50 by the framers of the Constitution, court cannot widen the scope by reading word ‘tax on mineral’ in to that Entry. It is more so in the case of Entry-49. When the word ‘mineral’ as such is not mentioned independently anywhere in the Entries either in Entry-49 or 50 of List-II, court cannot read the word ‘mineral’ independently in to Entry-49. ‘Mineral right’ is specifically included in Entry-50 of List-II for the reason as already stated. Entry-54 of List-I  and Entry 23 in List-II are specifically dealing with mineral development and not ‘tax on mineral’ as such. Tax on mineral right is a permitted field but subject to Central Government regulation. Land is separately provided under Entry-18 of List-II andtax on land is specifically provided under Entry-49. In this back ground it would be advisable to look at the residual entry namely Entry-97 of List -I and it could be seen that the words ‘any tax not mentioned in either of the list’ finds place in the said Entry. Therefore, when ‘tax on mineral’ does not find place in any of the list, then it has to find place only in Entry-97 of List-I.

In fact the judgment in para 41 while concluding it’s findings made the following finding:

“41(C). Parliament is not using its residuary power with respect to imposing any limitation on the taxing power of the State under Entry 50 – List-II. In fact, even the Validation Act, 1992 enacted by Parliament was upheld having regard to Entry 54 - List-I read with Section 2 of the MMDR Act, 1957 and not Entry 97 - List-I.

Here it appears that the judgment failed to analyse as to why the word ‘tax on mineral’ is purposefully not used in Entry-50 and used the words ‘mineral right’ alone. Entry-50 enable the State to legislate on ‘mineral right’ which is in a decoupled form (where there is no mineral vesting enactment) but is part and parcel of Entry-49. However Entry-50 in effect carved out ‘mineral rights’ and not ‘minerals’ as such. Mineral right’ exists when it is part and parcel of the land in it’s coupled form. Unless and until mineral is extracted physically (decoupled physically), it remained as part and parcel of land as ‘mineral right’. Para 40 of Justice Ojha’s descending judgment in India Cements case (supra) gives a clue as to how minerals are separated/decoupled physically from the land and it says:

40………it could only be extracted if there are three things:

(1)   Land from which mineral could be extracted.                                               

(2)  Capital  for providing machinery, instruments and other requirements

(3)  Labour

This analysis throw enough light to appreciate the difference between ‘mineral’ and mineral right’. One is physically decoupled and the other is not.

Therefore ‘tax on mineral’ is an independent subject which is not part and parcel of land under Entry-49 and 50 of List-II. No doubt MMDR Act is not bringing in any limitation but that was under Entry-50, whereas taxation is an independent legislative field and only Entry which mentions about ‘tax on mineral rights’ is Entry -50 and there also the words ‘tax on mineral’ did not find place. This conscious exclusion reflects the wisdom of the farmers of the Constitution, and not happened by accident. This omission cannot empower the State to seek shelter under Entry-49 and thereby legislate on ‘tax on minerals’. Otherwise an anomalous situation shall ensue. ‘Tax on mineral right’ is regulated under Entry-50 which specifically states that ‘subject to any limitation imposed by Parliament by law relating to mineral development’ falling under Entry-54 of List-I. ‘Tax on mineral’ is intentionally not used here because legislative field to ‘tax mineral’ always remained with the central Govt. under the residuary power in Entry-97. As per the law of interpretation laid down by Hon’ble Supreme Court: ‘what is stated and what is not stated, both are to be seen’. May be,that interpretation of Statute is different from interpretation of Constitution but logically the intention of the framers of the Constitution in not including the words ‘tax on minerals’ in Entry-50 of List-I cannot be ignored.

It is well settled, that entries in various Lists of the Seventh Schedule of the Constitution are not sources of power but are only providing the limits or the boundaries between the State and the Centre regarding their eligibility to legislate under the federal scheme in the constitutional framework. Schedule-VII is only an instrument of self-discipline, where under the sharing the power between the Centre and the States is provided, so as to enable them to exercise self-restraint to remain in the allotted field. A discussion on Entry-49 or 50 of List-II of the Constitution of India cannot decide the source of power to tax. Sovereignty is the source of power and said power is fenced between Centre and the State through various entries in different lists. It is also trite to mention, that the source of power is no doubt arises from the sovereignty,but the moment State becomes the owner of minerals, it looses the sovereign right to impose tax with regard to that subject matter.

CONCLUSION:

This article is only highlighting the blanket declaration that State can take mineral right in the land as a measure of productivity to assess land under Entry-49 List-II. Words ‘mineral right’ is not finding its presence in Entry-49 and‘tax on minerals’ is intentionally not mentioned in Entry-50 of List-II, is with a purpose and not an accidental error. Thisarticle wish to high light the anomaly where the land in question is a mineral bearing land but the minerals are vested in the Govt. and the surface remains with the surface owner. The lease for excavation is given to the lessee to occupy the surface land through permission from the surface owner under Rule 22(3)(h) of the Mineral Concession Rules, 1960. Lessee of the Govt., is entitled to excavate and in that scenario, if the surface owner is made liable under Enry-49 of List-II, then the value of land cannot be based on mineral right or royalty which he does not own. [Halsbury para 899 (supra)] Occupier also cannot be taxed on the basis of minerals sold by the State by collecting Royalty to the occupier [Halsbury para 899 (supra)]. Occupier is using his capital and labour to extract the mineral owned by the State by paying Royalty to the Government. Mineral in it’s coupled form physically remains with the land and the same is called ‘mineral rights’ and not ‘mineral’ because in order to get it physically decoupled from its’ identity as ‘mineral right’, 3 elements are necessary i.e land + Capital + labour. Only land is covered by Entry-49 and 50 of List-I when it is in a physically coupled form, but the remaining are necessary to convert a ‘mineral right’ into ‘mineral’. Judgment proceeded on the wrong premises that both‘mineral right’ and ‘mineral’ are one and the same as a subject falling under Entry-49. Entry-54 of List-I has no role to play in the field of taxation except to the extent as provided in Entry-50 of List-II, where in, if the Centre thinks it appropriate to impose a limitation in the interest of mineral development. Such a limitation is not in existence as on today.

It is concluded by pointing out that:

(i) Royalty and Tax are mutually exclusive. ‘Tax on land’ arises out of prerogative right of the sovereign and in some cases State can claim ‘Royalty’ when it has acquired ‘proprietary right’ on minerals through a valid legal process.

(ii) ‘Tax on mineral’ is an independent subject not covered by the usage ‘tax on mineral right’ and hence falls under Entry-97 as it does not fall under any of the Entries in the VIIth Schedule. More specifically it falls under the category : ‘any tax not mentioned in either of the lists’.

The Need for Application of Mischief/Golden Rule of
Interpretation in Sexual Harassment Cases

(By Sridhar Rajagopalan, Chief Legal Officer & Head,
Corporate Affairs, Automotive Robotics India (Pvt.) Ltd., Chennai)
E-mail : sri_raja62@yahoo.com      Mob. 9940049221

“Making innumerable statutes, men merely confuse what God achieved in ten”  – Humbert Wolfe –  British Poet

Curtain-raiser: The objective of this article is to ascertain the significant role of mischief/golden rule of interpretation in construing the statutes pertaining to sexual harassment with a view to make the relevant laws serve the purpose for which they were enacted.In other words, this article underlies the necessity of application of one of these rules to serve justice.

It would be germane to reproduce the paragraph from the Case Analysis and Statutory Interpretations: Cases and Materials (R C Beckman - National University of Singapore, 1992, Page 370) which reads as under:

“The Judge must set to work on the construction task of finding the tone of Parliament, and he must do this  not only from the language of the statute but also from a consideration of the social conditions which give rise to it , and of the mischief which it was passed to remedy and then he must supplement the written word so as to give force and life to the intention of the legislature. That was clearly laid down by the resolution of the Judges in Heyden’s case (1584) 76 ER 637”.

With this prelude, let us move forward.

In X v. State of Kerala & Anr. (2024 KLT OnLIne 2165) Crl.M.C. No.7541 of 2023 (Neutral Citation: 2024:Ker:62605),the Kerala High Court quashed an FIR registered against two women under Section 354A of the IPC while observing that the provision for sexual harassment would not apply when the alleged acts are done by a woman against another woman on the ground that to attract the offence under Section 354A of IPC, the alleged perpetrator under Section 354A(1), (2) and (3), should be  “a man”.

The court has observed as follows:

“So, the legislature diligently used the term ‘a man’ instead of ‘any person’ in the statutory provision and the legislative intent is to exclude woman/women from the purview of Section 354A of IPC. It must be held that Section 354A of IPC would not apply when the overt acts dealt therein was done by a woman against another woman/women. If so, the allegation of prosecution that the petitioners herein committed offence punishable under Section 354A of IPC is, prima facie, not sustainable and the proceeding for said offence is liable to the quashed.”

While the reasoning as stated above is strictly in accordance with the phraseology employed in Section 354A read with Section 10 of the IPC, this order gives us an opportunity to study the nuances of the implications of the judgement and to ascertain the  way forward.

The IPC was a comprehensive Criminal Code that continued to be in force until it was replaced by the new law namely Bharatiya Nyaya Sanhita of 2023, which came into effect on 1 July 2024.

Against this backdrop, the Sexual Harassment of Women at Workplaces (Prevention, Prohibition and Redressal) Act, 2013 (hereinafter referred to as “PoSH law”) was brought into force from 9th December 2013 which is an exclusive Code to protect women from sexual harassment at workplaces. It is pertinent to note that this is not a gender-neutral law.

In 2020, the Calcutta High Court had an opportunity deal with a case in Dr. Malabika Bhattacharjee v. Internal Complaints Committee, Vivekananda College and Others (W.P.A 9141 of 2020 -- decided on 27.11.2020), in which the Court has made a watershed move on the question whether POSH law would cover  same sex sexual harassment though the said law has clear cut annotations to the perpetrator and the impacted woman. In other words, the Court has given a clear-cut answer to the mind-boggling question whether the harasser can be a person of the same gender?The crux of the decision of the Court reads as under:

“Thedefinition of “sexual harassment” in Section 2(n) cannot be a static concept but has to be interpreted against the backdrop of the social perspective.As sexual harassment pertains to the dignity of a person which relates to her/his gender and sexuality, it does not mean that any person of the same gender cannot hurt the modesty or dignity as envisaged by the 2013 Act and held that a person of any gender may feel sexually harassed as contemplated in Section 2(n), irrespective of the sexuality and gender of the perpetrator of the act and thus under Section 3(2) is looked into, it is seen that the acts contemplated therein can be perpetrated by the members of any gender, even inter se and thus included the recognition of sexual harassment between persons of the same gender”.  

To be precise, the Calcutta High Court has clearly held that the complaints which are related to same-gender sexual harassment are maintainable under the POSH law.It is pertinent to note that, despite PoSH law being a gender biased law, the Calcutta High Court has taken an encyclopedic view to protect the rights of the women from sexual harassment.

Lord Denning in The Discipline of Law at Page No. 12 observed as under: Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision.  This is where the draftsmen of Acts of Parliament have often been unfairly criticized. A Judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that or have been guilty of some or other ambiguity.

It would certainly save the Judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a Judge cannot simply fold his hands and blame the draftsmen. He must set to work on the constructive task of finding the intention of Parliament. It is clear that when one has to look to the intention of the Legislature, one has to look to the circumstances under which the law was enacted. The Preamble of the law, the mischief which was intended to be remedied by the enactment of the statute and in this context, Lord Denning, in the same book at Page No. 10, observed as under:

“At one time the Judges used to limit themselves to the bare reading of the Statute itself-to go simply by the words, giving them their grammatical meaning and that was all. That view was prevalent in the 19th century and still has some supporters today. But it is wrong in principle. The Statute comes to them as men of affairs--who have their own feeling for the meaning of the words and know the reason why the Act was passed--just as if it had been fully set out in a preamble. So, it has been held very rightly that you can enquire into the mischief which gave rise to the Statute--to see what was the evil which it was sought to remedy.” (U.P. Bhoodan Yagna Samiti v. Braj Kishore & Ors. (1988 (2) KLT OnLine 1126 (SC) = (1988) 4 SCC 274).

In 1959, the Street Offences Act was enacted in the United Kingdom to prohibit prostitutes from soliciting on the roads to the passing public. Taking advantage of the phraseology employed in Section 1(1) of the said Act, the prostitutes started soliciting from their balconies and windows.The said prostitutes were proceeded against under this Section as their actions destroyed the very intention of the legislation.

InSmith v. Hughes, Lord Parker C.J., observed as follows:

“She, being a common prostitute, did solicit in a street for the purpose of prostitution, contrary to Section 1(1) of the Street Offences Act, 1959. It was found that the defendant was a common prostitute, that she had solicited, and that the solicitation was in a street. The defendants in this case were not themselves physically in the street but were in a house adjoining the street, on a balcony and she attracted the attention of men in the street by tapping and calling down to them. At other part, the defendants were in ground-floor windows, either closed or half open. The sole question here is whether in those circumstances each defendant was soliciting in a street or public place. The words of Section 1(1) of the Act of 1959 are in this form: ‘It shall be an offence for a common prostitute to loiter or solicit in a street or public place for the purpose of prostitution.

The purpose of this Act was to make the streets safer for individuals to go down without being harassed or approached by common prostitutes. The objective of the law is achieved by applying “mischief rule of interpretation’ by Lord Parker C.J.

In Conway v. Rimmer (1968) AC 910, it was noted that Judges have the authority to employ the mischief rule during statutory interpretation to discern Parliament’s intent. This rule prompts the court to inquire into the specific problem or “mischief” that the previous law failed to address, which Parliament aimed to rectify through the enactment under review.

In Haydon’s case (vide supra), for the first time, the court stated Judges are supposed to construe statutes by seeking the true intent of the makers of the Act, which is presumed to be intent for the public good.

Lord Coke described the process through which the court must interpret legislation:

For the true interpretation of all statutes in general, four things are to be discerned and considered:

●   What was the common law before the making of the Act?

●   What was the mischief and defect for which the common law did not provide.

●   What remedy the Parliament hath resolved and appointed to cure the disease
of the commonwealth, and,

●   The true reason for the remedy.

In the case of Bengal Immunity Company v. State of Bihar (1955 KLT OnLine  1007 = AIR 1955 SC 661), the mischief rule was applied to the construction of Article 286 of the Constitution of India and the court held that it was to cure the mischief of multiple taxation and to preserve the free flow of the inter-state trade or commerce in the Union of India regarded as one economic unit without any provincial barrier that the Constitution makers adopted Article 286 in the Constitution.

Thumbnail sketch:

1) After the advent of the Vishaka Guidelines from the Supreme Court in 1997, since the Central Government had felt the need of exclusive penal provisions in the Indian Penal Code to prevent and prohibit sexual harassment,by virtue of Criminal Law (Amendment) Act, 2013 which was brought into force from 3rd February 2013, several new offences have been recognized and incorporated into the Indian Penal Code which inter alia, included attempt to disrobe a woman (Section 354B), and sexual harassment (Section 354A) etc.

2) After this, the PoSH law was brought into force on 9th December 2013.

3) Neither of these laws has a specific provision to deal with same sex sexual harassment.

4) Against this backdrop, the order of the Calcutta High Court in the matter of Dr. Malabika Bhattacharjee v. Internal Complaints Committee, Vivekananda College and Others, is a silver lining.This landmark judgement recognized the same sex sexual harassment.

5) In the absence of a specific law/provision which prohibits same sex sexual harassment, is it not the correct approach to apply the mischief rule of interpretation?

If there is a vacuum, Judges have the liberty to set right the provision/law to attain the objective. Whether it is the then Indian Penal Code or the PoSH law or the new Bhartiya Nyaya Sanhita, 2023 , the objective is to protect the women from sexual harassment by the harasser. As clearly held by the Supreme Court of United States in Oncale v. Sundowner Offshore Services Inc 523 U.S.75 (1998), sexual harassment by someone of the same gender can be just as illegal as harassment by a member of the opposite sex.

Epilogue:

Keeping in view the current position, it is the appropriate time for the Central Govern-ment to consider the possibility of amending the relevant provisions pertaining to sexual harassment in Bharatiya Nyaya Sanhita, 2023 to make those provisions gender neutral with a view to protect women from the same sex sexual harassment as well.

The Repeal and Savings Clause Incorporated in Section 170 of the Bharatiya Sakshya Adhiniayam

(By A.S.Madhu sudanan, Advocate, Thalassery)
E-mail :asmadhusudanan@gmail.com      Mob. 9846240366

The Bharatiya Sakshya Adhiniyam, 2023 unlike the Indian Evidence Act, 1872 contains a repeal and savings clause which reads as follows: -

“170. Repeal and savings -- (1) The Indian Evidence Act, 1872 is hereby repealed.

(2) Notwithstanding such repeal, if, immediately, before the date on which this Adhiniyam comes into force, there  is any application, trial, inquiry, investigation, proceedings or appeal pending, then, such application, trial, inquiry, investigation, proceedings or appeal shall be dealt with under the provisions of the Indian Evidence Act, 1872, as in force immediately before such commencement, as if this Adhiniyam had not come into force.”

The said repeal and savings provision present in the Bharatiya Sakshya Adhiniyam would require judicial interpretation and explanation by the Apex Court or the High Courts.

The sub-section (1) of the said Section repeals the application of the Indian Evidence Act, 1872. The sub-section (2) of the said Section however provides that in pending appli-cations, appeals, trial, inquiry, investigation or other proceedings the Indian Evidence Act, 1872 would continue to apply and in fresh proceedings the Bharatiya Sakshya Adhiniyam, 2023 would apply.

The confusion arises when a trial is culminated and Judgment is pronounced by employing principles of evidence as laid down in The Indian Evidence Act and thereafter the aggrieved party or the State proceeds in appeal or files revision after 01.07.2024. As per Section 531 of the Bharatiya Nagrik Suraksha Sanhita the said appeal or revision has to be filed under The Bharatiya Nagarik Suraksha Sanhita, 2023 and not under the Code of Criminal Procedure, 1973 (Abdul Khader v. State of Kerala (2024 (4) KLT 516).

The confusion arises whether such an appeal or revision filed after 01.07.2024 is to be treated as fresh proceedings or as pending proceedings.If sub-section (2) of the Section 170 of the Bharatiya Sakshya Adhiniyam is literally understood since the appeal or revision is filed after coming into force of the Adhiniyam, the Indian Evidence Act would not apply to the said proceedings and the evidence in such an appeal or revision has to be appreciated as per the provisions mandated in the Bharatiya Sakshya Adhiniyam.

Even though the Bharatiya Sakshya Adhiniyam is a carbon copy of the Indian Evidence Act in most respects, there are substantial changes as for as procedure mandated for admissibility of electronic evidence is concerned. The scope of electronic evidence is considerably widened and the electronic record is more or less treated on par with other documents. Hence in a case involving admissibility of electronic or digital records it may cause difficulty when the trial was conducted under the Indian Evidence Act and in the ensuing appeal or revision, the evidence has to be appreciated under the Bharatiya Sakshya Adhiniyam, as the principles for appreciation of evidence of electronic record laid down under the Indian Evidence Act, 1872 is slightly different from the corresponding provisions in the Bharatiya Sakshya Adhiniyam and what may be strictly not admissible without certificate under Section 65B of the Indian Evidence Act may become admissible without any proof (like data stored in cloud storage) under the Bharatiya Sakshya Adhiniyam.

Similarly the scope of the admissibility of the confession of a co-accused under Section 30 of the Indian Evidence Act is slightly different due to the introduction of the Explanation II of the corresponding provision under Section 24 of the Bharatiya Sakshya Adhiniyam. More particularly the Section 133 of the Indian Evidence Act provides thata conviction is legal even if it proceeds upon the uncorroborated testimony of the accomplice.However the corresponding provision under Section 138 of the Bharatiya Sakshya Adhiniyam mandates that if a conviction is to proceed upon the testimony of the accomplice it must definitely be corroborated. In a hypothetical situation where in a trial conducted under the Indian Evidence Act, judgment of conviction is pronounced by believing the uncorroborated testimony of the accomplice and the same is appealed after the coming into force of the Bharatiya Sakshya Adhiniyam. The entire appreciation of evidence would change and the conviction would become illegal merely because there is no corroboration.

This would cause application of two different standards in appreciation of evidence during trial and the subsequent appeal or revision proceedings.   

Hence the said anomaly arising due to Section 170(2) of the Bharatiya Sakshya Adhiniyam requires interpretation by our Courts vide judicial precedents. The said Section would have to be interpreted in such a manner, that in a case where trial was conducted by employing the provisions of the Indian Evidence Act in which appeal or revision is filed after 01.07.2024,then such appeal or revision must be deemed to be a continuation of the earlier trial proceedings and hence deemed to have been pending at the time when the Bharatiya Sakshya Adhiniyam came into force,which would pave the way for application of principles of evidence laid down under the Indian Evidence Act and remove the same from the purview of The Bharatiya Sakshya Adhiniyam.

‘Once Admitted, Always Admitted’ – Stamp Act Theory Explored in
G.M.Shahul Hameed v. Jayanthi R.Hegde

–2024 KLT OnLine 1808 (SC) = AIR 2024 SC 3339

(By Saji Koduvath, Advocate, Kottayam)
E-mail : Sajikoduvath@gmail.com    Mob. 9400230025

Introduction

The following two forceful propositions stood paradoxical and incongruent to each other-

• 1. Section 33 of the Stamp Act (both Indian Stamp Act and State Stamp Act) casts a duty on every authority including the Court to examine the document to find out whether it is duly stamped or not, irrespective of the fact whether an objection to its marking is raised or not. There is a duty upon every Judge, under Section 35 of the Indian Stamp Act (Section 34 of the State Act), not to admit a document that is not duly stamped (even if no objection raised to   mark it).

• 2. The court should not excludean insufficiently stamped (or unstamped) deed once marked without objection under Section 36 of the Indian Stamp Act (Section 35 of the State Act).

• Note: This incongruity is pointed out by this author in the article “Unstamped Documents – Should the Court Sit Silent if Marking Unopposed and Question it Afterwards?” (Published in 2023 (2) KLT Page 17, Journal Section).

The Law Applied in India – Once Admitted, Always Stand Admitted

RVE Venkatachala Gounder v. Arulmigu(R.C. Lahoti & Ashok Bhan, JJ.), (2004 (1) KLT OnLine 1227 (SC) = AIR 2003 SC 4548 = (2003) 8 SCC 752), is the well-established decisive leading decision in the following propositions of law.

• Objection as to the irregularity of modeadopted for proving the document should be taken when the evidence is tendered;

• Once the document has been marked as an exhibit, the objection cannot be allowed to be raised at any subsequent stage.

• Failure to raise a prompt and timely objection amounts to waiver of that right.

• The objection enables the court to apply its mind and pronounce its decision on the question of admissibility.

• Itis a rule of fair play for it would have enabled the party tendering the evidence to cure the defect by giving formal proof of a document.

Law on Unstamped or Insufficiently Stamped Instrument

The law applied in India, hitherto, invoking Section 35 of the (State) Act was the same that was laid down in RVE Venkatachala Gounder v. Arulmigu (supra). It was the following –

• Once an unstamped or insufficiently stamped instrument has been admitted in evidence, (even if mechanically or inadvertently), its admissibility cannot be contested at any stage of the proceedings.

Section 35 of the State Act (Section 36 of the Indian Stamp Act) reads as under:

• “35. Admission of instrument where not to be questioned– Where an instrument has been admitted in evidence, such admission shall not, except as provided in
Section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped.”

In Javer Chand v. Pukhraj Surana (1961 KLT OnLine 1291 (SC) = AIR 1961 SC 1655 = 1962-2 SCR 333), it was observed as under:

• “4….Where aquestion as to the admissibility of a document is raised on the ground that it has not been stamped, or has not been properly stamped, it has to be decided then and there when the document is tendered in evidence. Once the court, rightly or wrongly, decides to admit the document in evidence, so far as the parties are concerned, the matter is closed. Section 35 is in the nature of a penal provision and has far-reaching effects. Parties to a litigation, where such a controversy is raised, have to be circumspect and the party challenging the admissibility of the document has to be alert to see that the document is not admitted in evidence by the court. The court has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case. … Once a document has been marked as an exhibit in the case and the trial has proceeded all along on the footing that the document was an exhibit in the case and has been used by the parties in examination and cross-examination of their witnesses, Section 36 of the (Indian) Stamp Act comes into operation. Once a document has been admittedin evidence, as aforesaid,it is not open either to the trial court itself or to a court of appeal or revisionto go behind that order. Such an order is not one of those judicial orders which are liable to be reviewed or revised by the same court or a court of superior jurisdiction.”

In Ram Rattan v. Bajrang Lal (1978 KLT OnLine 1032 (SC) = (1978) 3 SCC 236), it was held as under:

• “6. When the document was tendered in evidence by the plaintiff while in witness box, objection having been raised by the defendants that the document was inadmissible in evidence as it was not duly stamped and for want of registration, it was obligatory upon the learned trial Judge to apply his mind to the objection raised and to decide the objections in accordance with law. …. If after applying mind to the rival contentions the trial court admits a document in evidence, Section 36 of the (Indian) Stamp Act would come into play and such admission cannot be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped. The court, and of necessity it would be trial court before which the objection is taken about admissibility of document on the ground that it is not duly stamped, has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case and where a document has been inadvertently admittedwithout the court applying its mind as to the question of admissibility, the instrument could not be said to have been admitted in evidence with a view to attracting Section 36 (see Javer Chand v. Pukhraj Surana (1961 KLT OnLine 1291 (SC) = AIR 1961 SC 1655).
The endorsement made by the learned trial Judge that ‘Objected, allowed subject to objection’, clearly indicates that when the objection was raised it was not judicially determined and the document was merely tentatively marked and in such a situation Section 36 would not be attracted.”

• Note: In Ram Rattan v. Bajrang Lal (supra) ‘objection’ as regards inadmissibility had been raised “as it was not duly stamped”; and this decision was read by our Courts so as to find it relevant only in cases where there was ‘objection’ by the ‘other side’.

• See: Shyamal Kumar Roy v. Sushil Kumar Agarwal (S.B.Sinha & Dalveer Bhandari, JJ.), (2006 (4) KLT OnLine 1148 (SC) = AIR 2007 SC 637 = (2006) 11 SCC 331)
(It was held after referring Ram Rattan v. Bajrang Lal: “If no objection had been made by Appellant herein in regard to the admissibility of the said document, he, at a later stage, cannot be permitted to turn round and contend that the said document is inadmissible in evidence. Appellant having consented to the document being marked as an exhibit has lost his right to reopen the question. …. The question of judicial determination of the matter would arise provided an objection is taken when document is tendered in evidence and before it is marked as an exhibit in the case).

Unless “Judicial Determination”, Section 35 is Not Attracted

This long-stood concept, as regards unstamped or insufficiently stamped instrument, is relooked in the recent decision in G.M.Shahul Hameed v. Jayanthi R. Hegde (Dipankar Datta, Pankaj Mithal, JJ.), (2024 KLT OnLine 1808 (SC) = AIR 2024 SC 3339).

It is held that sheer technicalities should not triumph over the legislative intent and the fiscal interests of the State. It is held as under:

• “10. Despite the GPA having been admitted in evidence and marked as an exhibit without objection from the side of the appellant, we propose to hold for the reasons to follow that the Trial Court did have the authority to revisit and recall the process of admission and marking of the instrument, not in the sense of exercising a power of review under Section 114 read with Order XLVII, C.P.C. but in exercise of its inherent power saved by Section 151 thereof, and that the other remedy made available by the 1957 Act was not required to be pursued by the appellant to fasten the respondent with the liability to pay the deficit duty and penalty.”

• “12. Read in isolation, a literal interpretation of Section 35 of the 1957 Act seems to make the position in law clear that once an instrument has been admitted in evidence, then its admissibility cannot be contested at any stage of the proceedings on the ground of it not being duly stamped. A fortiori, it would follow that any objection pertaining to the instrument’s insufficient stamping must be raised prior to its admission.

• 13. However, Section 35 of the 1957 Act is not the only relevant section. It is preceded by Sections 33 and 34 and all such sections are part of Chapter IV, titled “Instruments Not Duly Stamped”. Certain obligations are cast by Section 33 on persons/officials named therein. Should the presiding officer of the court find the instrument to be chargeable with duty but it is either not stamped or is insufficiently stamped, he is bound by Section 33 to impound the same. Section 34 places a fetter on the court’s authority to admit an instrument which, though chargeable with duty, is not duly stamped. The statutory mandate is that no such instrument shall be admitted in evidence unless it is duly stamped.

• 14. The presiding officer of a court being authorised in law to receive an instrument in evidence, is bound to give effect to the mandate of Sections 33 and 34 and retains the authority to impound an instrument even in the absence of any objection from any party to the proceedings. Such an absence of any objection would not clothe the presiding officer of the court with power to mechanically admit a document that is tendered for admission in evidence. The same limitation would apply even in case of an objection regarding admissibility of an instrument, owing to its insufficient stamping, being raised before a court of law. Irrespective of whether objection is raised or not, the question of admissibility has to be decided according to law. The presiding officer of a court when confronted with the question of admitting an instrument chargeable with duty but which is either not stamped or is insufficiently stamped ought to judicially determine it. Application of judicial mind is a sine qua non having regard to the express language of Sections 33 and 34 and interpretation of pari materia provisions in the Indian Stamp Act, 1899 (1899 Act, hereafter) by this Court. However, once a decision on the objection is rendered – be it right or wrong – Section 35 would kick in to bar any question being raised as to admissibility of the instrument on the ground that it is not duly stamped at any stage of the proceedings and the party aggrieved by alleged improper admission has to work out its remedy as provided by Section 58 of the 1957 Act.”

• “18. On the face of such an order, it does not leave any scope for doubt that on the date the GPA was admitted in evidence and marked as an exhibit, the Trial Court did not deliberate on its admissibility, much less applied its judicial mind, resulting in an absence of judicial determination. In the absence of a ‘decision’ on the question of admissibility or, in other words, the Trial Court not having ‘decided’ whether the GPA was sufficiently stamped, Section 35 of the 1957 Act cannot be called in aid by the respondent. For Section 35 to come into operation, the instrument must have been “admitted in evidence” upon a judicial determination. The words“judicial determination” have to be read into Section 35. Once there is such a determination, whether the determination is right or wrong cannot be examined except in the manner ordained by Section 35. However, in a case of “no judicial determination”, Section 35 is not attracted.”

• “21. We may not turn a blind eye to the fact that the revenue would stand the risk of suffering huge loss if the courts fail to discharge the duty placed on it per provisions like Section 33 of the 1957 Act. Such provision has been inserted in the statute with a definite purpose. The legislature has reposed responsibility on the courts and trusted them to ensure that requisite stamp duty, along with penalty, is duly paid if an unstamped or insufficiently stamped instrument is placed before it for admission in support of the case of a party. It is incumbent upon the courts to uphold the sanctity of the legal framework governing stamp duty, as the same are crucial for the authenticity and enforceability of instruments. Allowing an instrument with insufficient stamp duty to pass unchallenged, merely due to technicalities, would undermine the legislative intent and the fiscal interests of the State. The courts ought to ensure that compliance with all substantive and procedural requirements of a statute akin to the 1957 Act are adhered to by the interested parties. This duty of the court is paramount, and any deviation would set a detrimental precedent, eroding the integrity of the legal system. Thus, the court must vigilantly prevent any circumvention of these legal obligations, ensuring due compliance and strict adherence for upholding the rule of law.”

Conclusion

Following are the outcome of the decision, G.M.Shahul Hameed v. Jayanthi R. Hegde, (2024 KLT OnLine 1808 (SC) = AIR 2024 SC 3339).

•. To attract the bar to question the marking of the document under Section 35 (State Act), the instrument must have been “admitted in evidence” upon a ‘judicial determination‘, “irrespective of whether objection is raised or not”.

•. The words “judicial determination” have to be read into Section 35.

•. If “no judicial determination” (or if the document is mechanically or inadvertently marked), Section 35 is not attracted.

•. In proper cases (such as the senior counsel was not present when the document was marked) the Trial Courts have the authority to revisit and recall the process of admission in exercise of its inherent power saved by Section 151 C.P.C.

•. Once there is such a judicial determination, whether it is right or wrong, it cannot be examined except as provided in Section 35.

Prior to G.M.Shahul Hameed v. Jayanthi R.Hegde (supra) the determinative point considered in various court decisions (as regards the ‘bar to question the marking of the document’) was “objection” from the ‘opposite party’. But, now, for the first time, by virtue of this decision what is taken as decisive is ‘judicial determination’ (alone), “irrespective of whetherobjection is raised or not”.