The Mineral Development Ltd., Calcutta vs The Union Of India And Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No. 231/1955

Decision Date: 31 August 1960

Coram: K.N. Wanchoo, Bhuvneshwar P. Sinha, J.L. Kapur, P.B. Gajendragadkar

The case titled The Mineral Development Ltd., Calcutta versus The Union of India and another was decided on 31 August 1960 by the Supreme Court of India. The judgment was authored by Justice K. N. Wanchoo, and the bench included Justices K. N. Wanchoo, Bhuvneshwar P. Sinha, J. L. Kapur, and P. B. Gajendragadkar. The petitioner in the proceeding was The Mineral Development Ltd., Calcutta, while the respondents were The Union of India and another party.

The citation for the judgment is reported as 1960 AIR 1373 and 1961 SCR (1) 445. The matter concerned the interpretation of a mining lease and the question of whether a sub‑lease falls within the definition of “mining lease” under the Mines and Minerals (Regulation and Development) Act, 1948, specifically section 3(d). The issue also involved the applicability of the Mineral Concession Rules, 1949, which were framed under sections 5 and 6 of the Act. The appellant, a limited company, held a mining lease and had granted a sub‑lease covering two villages that formed part of its original grant. The secretary and two directors of the company were prosecuted for alleged violations of the provisions of the Act and the Rules. The appellant advanced two principal arguments. First, it contended that the term “mining lease” as defined in section 3(d) of the Act did not encompass a sub‑lease, and therefore the Act and the Rules should not apply to a sub‑lease. Second, it argued that because the Rules were made under sections 5 and 6 of the Act and not under section 7, they could not be applied to a sub‑lease granted by a lessor, even though the lessor’s own lease pre‑dated the coming into force of the Act and the Rules.

The Court held that the definition of “mining lease” contained in section 3(d) of the Mines and Minerals (Regulation and Development) Act, 1948, does not require the lessor to be a proprietor. The Court read the plain language of the definition in conjunction with section 5 of the Transfer of Property Act, 1882, and concluded that a mining lease includes both a lease executed by a proprietor and a lease executed by a lessee who obtains the lease from such proprietor. The Court further determined that the fact that the lessor is himself a lessee, and that the transaction between the lessor and the person to whom he transfers the lease is termed a sub‑lease, does not alter the essential nature of the transfer. Consequently, a sub‑lease remains a mining lease within the meaning of the Act. The Court also held that the Rules made under sections 5 and 6 of the Act would apply to a mining sub‑lease if that sub‑lease was created after the Act and the Rules came into force.

The judgment arose from Civil Appeal No. 231 of 1955, which was an appeal against the judgment and decree dated 16 February 1954 rendered by the Patna High Court in Title Suit No. 105 of 1953. Counsel for the appellant consisted of N. C. Chatterjee, Sanjeev Choudhuri, and Ganpat Rai. Counsel for respondent No. 1 comprised C. K. Daphtary, Solicitor‑General of India, together with P. K. Chatterjee and T. M. Sen. Counsel for respondent No. 2 included Lal Narayan Sinha, Bajrang Sahai, and additional representatives.

Counsel for respondent No. 2 was R. C. Prasad. The judgment was delivered on 31 August 1960 by Justice Wanchoo. The matter before the Court was an appeal against a decree of the Patna High Court. The appellant was a public limited company whose registered office was in Calcutta. On 29 December 1947 the Raja of Ramgarh granted the appellant a mining lease covering three thousand twenty‑six villages situated in the Ramgarh Estate, the lease being for a term of nine hundred ninety‑nine years, and the appellant subsequently took possession of the leased area. On 1 February 1950 the appellant entered into a sub‑lease of two of those villages to a person named Bhagat Singh for a period of fifteen years. After that date the Mines and Minerals (Regulation and Development) Act of 1948, hereinafter referred to as the Act, and the Mineral Concession Rules of 1949, hereinafter referred to as the Rules, came into force in the region containing the two villages.

Bhagat Singh then applied to the Deputy Commissioner of Hazaribagh for a certificate of approval required under the Rules. The Deputy Commissioner, concluding that the sub‑lease contravened both the Act and the Rules, lodged a complaint on 25 September 1951 before a magistrate. The complaint named two directors and the secretary of the appellant and alleged violations of rule 45 of the Rules as well as rules 47 and 49 (now rule 51) read with rule 51 (now rule 53) and section 9 of the Act. While the criminal proceeding was pending, the appellant instituted a civil suit challenging the validity and constitutionality of the Act and the Rules. Although the suit raised many grounds, the appellant’s counsel limited the argument to two principal points: first, that a sub‑lease did not fall within the definition of “mining lease” contained in section 3(d) of the Act and consequently the Act and the Rules could not apply to the sub‑lease; and second, that because the Rules were made under sections 5 and 6 of the Act—not under section 7—they could not be applied to a sub‑lease granted by a lessor whose original lease pre‑dated the commencement of the Act and the Rules.

The respondents opposed the suit, contending that the term “mining lease” embraced a sub‑lease and that the Rules framed under sections 5 and 6 of the Act were applicable to every sub‑lease created after the Act and the Rules became effective. The Patna High Court rejected the appellant’s challenges to the validity and constitutionality of the Act and the Rules. It further held that the definition of “mining lease” in section 3(d) of the Act included a sub‑lease, and therefore the provisions of the Act and the Rules were applicable to the sub‑lease in question.

The Court held that the mining regulations and the Rules were applicable to any sub‑lease that was created after the statutory enactments and the Rules became operative, and that it was irrelevant that the original lease granted to the appellant had been executed before those enactments came into force. On that basis, the Court dismissed the suit. After the dismissal, the appellant sought a certificate under the relevant provisions, the certificate was issued, and the issuance of that certificate is what brought the present dispute before the Court.

The principal issue for determination was whether the expression “mining lease” as defined in section 3(d) of the Act encompassed a sub‑lease. Section 3(d) defines a mining lease as follows: “mining lease means a lease granted for the purpose of searching for, winning, working, getting, making merchantable, carrying away, or disposing of mineral oils or for purposes connected therewith, and includes an exploring or a prospecting licence.” The definition does not expressly refer to a sub‑lease. However, when the ordinary meaning of the words in section 3(d) is applied, it is evident that the term covers any lease granted for the purposes of searching for, winning, working, getting, making merchantable, carrying away or disposing of minerals, or for activities related to those purposes. Importantly, the definition does not impose a condition that the lessor must be the proprietor of the land; consequently, a plain reading would include a lease granted by the proprietor as well as a lease granted by a lessee who has obtained the lease from the proprietor.

To further elucidate the matter, the Court referred to section 105 of the Transfer of Property Act, which defines a lease of immovable property as a transfer of the right to enjoy such property for a determinate period, whether expressed or implied, or perpetually, in consideration of a price paid or promised, or of money, a share of crops, services or any other valuable consideration to be rendered periodically or on specified occasions to the transferor by the transferee who accepts the transfer on those terms. Accordingly, a lease requires the presence of a transferor and a transferee and the conveyance of an interest in immovable property on the terms enumerated in section 105. How the transferor obtained the title to make the lease is immaterial, provided the transaction conforms to the description in section 105. Applying the literal wording of section 3(d) together with the definition of lease in section 105, the Court found that in the present case there was a transferor – the appellant – and a transferee – Bhagat Singh – who had accepted the transfer. The transaction concerned immovable property, created a right to enjoy that property for a defined term, and was supported by consideration as required. Although the instrument could be described as a sub‑lease because the transferor was not the owner of the property but a lessee, the Court concluded that, under the statutory definitions, the arrangement nonetheless qualified as a mining lease.

The Court observed that the arrangement between the appellant and Bhagat Singh amounted to a mining lease. It explained that terms such as “sub‑lease”, “under‑lease” and “derivative lease” are used merely to indicate that the transferor is a lessee rather than the owner of the land. Nevertheless, a transfer made by a lessee to a sub‑lessee remains a lease so long as it satisfies the definition contained in section 105 of the Transfer of Property Act. The Court further noted that Chapter V of that Act, which governs leases of immovable property, makes no distinction between a lease and a sub‑lease; consequently, every provision that applies to a lease also applies to a sub‑lease. Section 108(j) of the same Act deals with the rights and liabilities of a lessee and expressly permits the lessee to transfer, mortgage or sub‑lease the whole or any part of his interest, thereby acknowledging that a sub‑lease is simply a lease made by a person who himself is a lessee. The Court emphasized that the fact that the lessor is also a lessee and that the instrument is called a sub‑lease does not alter the essential character of the transfer between them. Accordingly, on the plain words of section 3(d) read with section 105, there can be no doubt that the term “mining lease” includes a sub‑lease.

Learned counsel for the appellant then referred to several statutes that expressly state that a sub‑lease is included within the meaning of “lease”. He pointed out that the Mines and Minerals (Regulation and Development) Act, 1957, which supplanted the earlier Act, defines “mining lease” in section 3(c) as a lease granted for the purpose of carrying out mining operations and expressly includes a sub‑lease. He observed that this legislation was enacted after the High Court’s decision in the present case, and that the legislature apparently deemed it prudent to clarify that a sub‑lease falls within the term “mining lease”. Counsel also cited the corresponding English legislation and the English Law of Property Act 1925, both of which define a lease to include a sub‑lease. He argued that while some statutes define “lease” to include a sub‑lease, this does not preclude the possibility that a lease may elsewhere be interpreted to include a sub‑lease as well. He illustrated this point by referring to the Transfer of Property Act, where the definition of “lease” clearly embraces a sub‑lease. Additionally, counsel relied on certain judicial decisions that held a lease did not include a sub‑lease; however, those decisions were limited to the specific statutes under consideration and therefore did not assist in deciding whether the term “mining lease” in the present Act encompasses a mining sub‑lease.

The Court observed that the precedents relied upon by the parties did not assist in resolving the issue of whether the expression “mining lease” in the Act embraced a mining sub‑lease. It stated that, as a general rule, a lease ordinarily includes a sub‑lease unless the specific legislation contains language to the contrary. In support of this principle, the Court referred to the observations of Mr Jessel, M. R., in Camberwell and South London Building Society v Holloway at page 759, wherein it was held that the word “lease” is a well‑known legal term of definite meaning and that the title of the lessor does not alter the character of the instrument, whether the lease is granted by a freeholder, a copyholder with the licence of the lord, or by a person who himself is a leaseholder. The passage further explained that a lease granted for a term of years is called a lease, and even when the grantor holds only a leasehold interest, the resulting instrument—whether termed an under‑lease or a derivative lease—remains a lease. The Court found no indication in the Act that the definition of “mining lease” in section 3(d) was intended to exclude a mining sub‑lease. Turning to the purpose and object of the legislation, the Court concluded that the plain wording of section 3(d) and the legislative intent made it clear that a sub‑lease must be included within the definition of “mining lease”. It underscored that the Act was enacted in the public interest to regulate mines and oil fields, to promote the development of minerals, and to ensure that the country’s mineral wealth was conserved, worked efficiently without waste, and placed under the control of qualified persons. Accordingly, section 5 authorises the making of rules relating to the conditions for granting mining leases, the minimum and maximum area and tenure, the amalgamation of contiguous leases, and the fixation of rent, whereas section 6 empowers the framing of rules for the conservation and development of minerals, including the regulation of machinery and equipment. The Court reasoned that these provisions would be substantially frustrated if a mining sub‑lease were excluded from the definition, because such exclusion would allow a person to evade the Act’s regulatory framework by inserting an intermediary and obtaining a sub‑lease free from the Act’s control.

It would be for a person to interpose an intermediary between himself and the owner and obtain a sub‑lease from that owner that would be free from the regulatory control of the Act and the Rules. The Court found that, when the plain wording of section 3(d) was read together with the object and purpose of the Act, it was clear that a mining sub‑lease fell within the definition of the term “mining lease”. The Court observed that nothing in the Act opposed that conclusion. Accordingly, the Court held that any mining sub‑lease executed after the Act and the Rules became operative was included within the definition of “mining lease” in section 3(d) and therefore was subject to the provisions of the Act and to the Rules. The learned counsel then argued that section 4 of the Act stipulated that no mining lease could be granted after the commencement of the Act unless it complied with the rules framed under the Act, and that any mining lease granted in contravention of that requirement would be void and of no effect. Sections 5 and 6 vested the Central Government with the authority to make rules for the purposes already mentioned, and these sections referred to mining leases that were granted under section 4. Section 7 then provided that the Central Government could, by a notification in the official Gazette, make rules aimed at modifying or altering the terms and conditions of any mining lease that had been granted before the Act commenced, in order to bring that lease into conformity with the rules made under sections 5 and 6. It was further urged that where a mining lease had been granted before the Act and the Rules became effective, only the rules made under section 7 could affect any sub‑lease granted by that lessee, even if the sub‑lease was executed after the Act and the Rules came into force. The Court considered that section 7 had been enacted for a purpose entirely different from the present issue, as shown by its subsection (2). The Court expressed that it was unnecessary to examine that provision in detail because, having determined that a sub‑lease falls within the definition of “mining lease”, the rules made under sections 5 and 6 would apply to that sub‑lease, provided it was created after the Act and the Rules became effective. In the facts of the present case, the sub‑lease had been granted after the Act and the Rules had become operative with respect to the area covered by the sub‑lease. Consequently, the sub‑lease was subject to the provisions of the Act and to the Rules. The Court observed that there was no issue of modifying or altering the terms of any mining lease that had been granted before the Act commenced, because the enforcement in this matter concerned a sub‑lease that qualified as a mining lease under the definition in section 3(d) and that had been created after the Act and the Rules became effective.

In this case the Court observed that the statutory Rules, having become operative, did not amend or vary the original terms and conditions of the mining lease that had previously been granted to the appellant. The only issue that arose, according to the Court, was that the directors and the secretary of the appellant company had been taken to trial for having executed a sub‑lease, which under the definition was itself a mining lease, in contravention of the provisions contained in the Act and the Rules after those provisions had come into force. The Court held that the appellant’s argument that the Rules somehow altered the existing lease was without merit and therefore had to be rejected. Consequently, the Court found that the appeal raised no viable point of law or fact and accordingly dismissed it. The dismissal was ordered with costs, and the Court specified that only one set of hearing costs would be awarded to the successful party. Thus, the appeal was dismissed and costs were imposed as directed.