Biswanath Prasad vs Union of India and Others

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

Court: Supreme Court of India

Case Number: Writ Petition No. 14 of 1964

Decision Date: 14 August 1964

Coram: S.M. Sikri, P.B. Gajendragadkar, M. Hidayatullah, J.C. Shah, Raghubar Dayal

In the matter Biswanath Prasad versus Union of India and others, the judgment was delivered on 14 August 1964 by a five‑Judge Bench of the Supreme Court comprising S.M. Sikri, P.B. Gajendragadkar, M. Hidayatullah, J.C. Shah and Raghubar Dayal, with the report authored by Justice S.M. Sikri. The petitioner was Biswanath Prasad and the respondents were the Union of India together with other parties. The decision is reported in 1965 AIR 821 and 1965 SCR (1) 49. The dispute involved the Mines and Minerals (Regulation and Development) Act, 1948 (Act 53 of 1948), specifically section 5, and raised questions concerning acquisition notification, alleged mala‑fide conduct, the effect of delay, evidence of the opening of mines, the validity of Rule 39 when authorised by section 17, the meaning of “transfer of property” in section 5, the constitutional validity of Rule 39, and whether a person lacking sufficient interest could challenge the rule. It also concerned the Coal Mines (Conservation and Safety) Act, 1952 (Act 12 of 1952), section 17, the Coal Mines (Conservation and Safety) Rules, 1954, Rule 39, the Mineral Concession Rules, 1948, rules 37 and 48, and Articles 14 and 19 of the Constitution of India.

By way of the factual background, the Central Government, relying on section 4(1) of the Coal Bearing Areas (Acquisition and Development) Act, 1957, issued notifications indicating its intention to prospect for coal in the colliery owned by the petitioner. The petitioner did not lodge any objection to the proposed acquisition under clause a‑8 of the same Act. When the Government informed the petitioner that the area appeared to have been notified, the petitioner asserted that the notifications did not bind him in law because he had commenced working the colliery immediately after purchasing it in 1956. The respondents denied this contention, and the High Court, on the issue of actual working of the mines, held against the petitioner. Section 4(4) of the 1957 Act prohibits the Union Government from acquiring “that portion of land in which coal mining operations are actually being carried on in conformity with the provisions of any enactment, rule, or order for the time being in force”. The respondents, relying on this provision, further argued that even assuming the petitioner was working the mines, such work was not being carried out in compliance with law; on this point also the High Court decided against the petitioner.

The petitioner then advanced several arguments. He claimed that Rule 39 of the Coal Mines (Conservation and Safety) Rules, 1954, under which the Coal Board had refused permission to open the colliery, was ultra‑vires because the Union Government could not make that rule under section 17 of the 1952 Act. He contended that the illegal refusal to grant permission resulted in the colliery remaining unworked at the time of the notifications. Moreover, the petitioner alleged that even if Rule 39 were valid, the refusal of permission was made mala‑fide, with the ulterior motive of circumventing the prohibition contained in section 4(4) of the 1957 Act. The respondents objected to these contentions, asserting that the petitioner had acquired the lease in contravention of the law and therefore possessed no right to challenge the validity of Rule 39.

In this case, the petitioner argued that Rule 39 of the Coal Mines (Conservation and Safety) Rules infringed the right guaranteed by Article 19 of the Constitution. The respondent objected that the petitioner could not raise that contention because the petitioner had obtained the lease in violation of other statutory provisions. To defeat that objection, the petitioner contended that Rules 37 and 48 of the Mines & Minerals (Regulation and Development) Rules were beyond the competence of the Mines & Minerals (Regulation and Development) Act of 1948 and therefore ultra vires.

The Court held that the notifications issuing the denial of permission were not impaired by any mala fide intent. It observed that although there was a delay in dealing with the petitioner’s representations, delay alone does not constitute proof of bad faith, especially since the Coal Board had previously refused to revise its earlier decision not to grant permission to reopen the mines. The Court further held that Rule 39 was not invalid; it was properly authorised by section 17 of the Coal Mines (Regulation of Development) Act of 1952. The purpose of Rule 39, the Court explained, is to secure the conservation of coal, and when a mine is to be opened or reopened, the Coal Board must consider whether such action is necessary and must take into account the country’s requirements for the particular grade of coal at that time.

Regarding the petitioner’s standing, the Court explained that the term “grant” in section 5 of the Mines & Minerals (Regulation of Development) Act of 1948 signifies a transfer of property, and that mining leases constitute property. The Parliament, while using “grant” in section 13(1) of the Coal Mines (Regulation of Development) Act of 1957, specifically provided in section 13(2)(1) for rules governing the manner and conditions under which a prospecting licence or a mining lease may be transferred. Because those rules were intra vires, the Court concluded that the petitioner had acquired the colliery in contravention of those rules and therefore did not possess a sufficient proprietary interest to question the constitutional validity of Rule 39 of the Coal Mines (Conservation and Safety) Rules, 1954. The Court distinguished the decision in Mason, Herring and Brooks v Harris [1921] 1 K.B. 653.

Finally, the Court found that no discrimination occurred in breach of Article 14 of the Constitution. It noted that demand for Grade IIIB coal could change significantly over a period of five years, and that the Coal Board was entitled to decide the lease of the other colliery based on the factual circumstances prevailing in 1959 and 1963. The judgment concerned the original jurisdiction writ petition numbered 14 of 1964, filed under Article 32 for enforcement of fundamental rights, and the accompanying civil appeal numbered 143 of 1964, which was filed by special leave against the Patna High Court’s order dated 23 May 1963 in M.J.C. No. 1069 of 1962. Counsel for the petitioner and appellant were addressed, as were counsel for the respondents, and the judgment was delivered by Justice Sikri. The Court indicated that two matters were before it for disposal, namely the special‑leave appeal against the High Court judgment and the writ petition under Article 32.

The Court noted that two separate matters were pending before it. The first matter concerned an appeal by special leave from an order of the Patna High Court that had dismissed an application filed by Biswanath Prasad under article 226 of the Constitution. The second matter was a petition filed under article 32 of the Constitution. In the petition under article 32, the petitioner raised several points that had not been the subject of argument before the High Court, and he also introduced documentary material that had not been produced in the earlier proceedings. Given these circumstances, the Court found it convenient to dispose of the petition under article 32 first, while indicating, where appropriate, the findings and reasoning of the High Court on specific issues that overlapped with the present petition.

To examine the submissions of Mr C. B. Agarwala, who appeared as counsel for the petitioner, the Court found it necessary to set out the factual background in some detail, because the petitioner alleged that the Union Government had acted in bad faith in acquiring his mines. According to the petitioner, a deed of sale dated 29 November 1956 conveyed the Dhobidih Colliery to him for a purchase price of Rs. 20,000 from the Bengal Coal Co. Ltd., Calcutta. He asserted that he possessed a certificate of approval issued under rule 6 of the Mineral Concession Rules, 1949, and that he commenced working the colliery immediately after the sale. The respondents denied that any mining operations had actually begun and this issue was litigated before the High Court, which ultimately found the petitioner’s claim of immediate operation to be untenable. The Court emphasized that this point was crucial because section 4, sub‑section (4), of the Coal Bearing Areas (Acquisition and Development) Act, 1957, bars the Government from acquiring “that portion of land in which coal mining operations are actually being carried on in conformity with the provisions of any enactment, rule, or order for the time being in force.” The respondents, relying on that statutory bar, argued that even assuming the petitioner had begun work, such work was not carried out in accordance with the law, and the High Court again ruled against the petitioner on that basis. The petitioner, however, contended that after acquiring the colliery he had proceeded to work the mine diligently. He said he had appointed a Mines Manager authorised by the Chief Inspector of Mines, had deposited Rs. 2,000 with the Assistant Electrical Engineer at Giridih to obtain an electric supply, and had exploited the Hill Seam using two shifts. He maintained that he filed the required statutory returns, paid sales tax and excise on the coal produced, and in the annual return for the year ending 31 December 1958 claimed to have raised 4,200 tons of coal, including coal consumed at the colliery and coal used for coke production. He further asserted that he employed labour, paying approximately Rs. 41,000 in 1957 for 1,103 man‑days of work. In support of the respondents’ case, the Court was referred to an affidavit filed before the Calcutta High Court on behalf of the Coal Board, which alleged that the petitioner had commenced mining operations in violation of rule 39(1) of the Coal Mines (Conservation and Safety) Rules, 1954, and that coal was being dispatched contrary to rule 39(4) of the same Rules.

The authority under rule 39(4) of the Coal Mines (Conservation and Safety) Rules, 1954, was invoked on the basis of an old grade that had been granted by the Coal Commissioner before the colliery was closed in 1948. That grade, however, was withdrawn by the Coal Board in February 1958. From the material placed before the Court, it appears that the petitioner created an appearance of raising coal, but those activities do not satisfy the statutory definition of “carrying on coal mining operations” contained in sub‑section (4) of section 4 of the Coal Bearing Areas (Acquisition and Development) Act, 1957. The counsel for the respondents argued that the coal was extracted in contravention of the applicable law and that, at the moment the Government acquired the colliery, no mining operations were actually being conducted. In reply, the petitioner’s counsel contended that rule 39 of the 1954 Rules, which formed the basis for the Coal Board’s refusal to grant permission to reopen the colliery, was ultra vires because the Union Government did not have the authority to make that rule under section 17 of the Coal Mines (Conservation and Safety) Act, 1952 (Act 12 of 1952). The petitioner’s counsel further maintained that this illegal refusal to permit the reopening of the mines caused the colliery to remain idle at the time of the notification. Even assuming that rule 39 was valid, the petitioner’s counsel asserted that the refusal was made mala fide, with the ulterior purpose of evading the prohibition prescribed in section 4(4) of the 1957 Act.

The factual background relevant to this issue begins with the Bengal Coal Company, from which the petitioner acquired the colliery. The Bengal Coal Company had ceased operations at the colliery in 1949. This fact was recorded in an application filed by the petitioner on 19 January 1957, seeking to reopen the mines under rule 39 of the 1954 Rules. In that application, the petitioner stated that the reasons for the previous owner’s closure were unknown, but it seemed that a lack of power and transport had led to poor coal‑raising results and eventual shutdown. Consequently, when the petitioner purchased the colliery, it had been idle for more than eight years. The petitioner later claimed that the 1957 application had been made by clerical mistake, a claim the Court found implausible. On 10 October 1957, after some correspondence, the Coal Board informed the petitioner that permission to reopen the colliery was not granted because “production of more coal of the quality expected from the seams proposed to be worked by you is not now required for the Giridih area.” Despite this refusal, the petitioner continued to correspond with the Regional Inspector of Mines, Dhanbad Inspection Region, regarding the colliery’s working plan, a line of correspondence that the Court stated could not advance the petitioner’s case. Subsequently, on 24 February 1958, the Coal Board withdrew the Grade IIIB that had been fixed for the colliery with immediate effect and expressly requested that the petitioner refrain from dispatching any coal from the colliery thereafter.

From the foregoing narration it became evident that, assuming the petitioner had indeed undertaken mining operations, such work had been carried out in violation of rule thirty‑nine. Consequently, if that rule were deemed valid, the prohibition contained in section four sub‑section four of the Coal Bearing Areas (Acquisition and Development) Act would not have been triggered. After these events the petitioner began to approach the Coal Board seeking the cancellation of the Board’s orders. In a letter dated twenty‑four March 1958 the Coal Board reiterated its position in unequivocal terms and warned the petitioner that he had raised and dispatched coal in contravention of the Coal Mines Conservation and Safety Rules, 1954. On thirty‑thirty January 1959 the Government of India declined to intervene in the Board’s decision. Subsequently, on twentieth July 1959 the Board also refused to amend its earlier decision. Nevertheless the petitioner persisted in his representations. For reasons not reflected in the record, the Coal Board appeared to adopt a more receptive stance thereafter. In October 1959 the Board requested the petitioner to produce a licence or registration certificate pursuant to the Industries (Development and Regulation) Act, 1951. Correspondence on this matter ensued. The petitioner then appealed to the Union Government, which asked for further information. In response the petitioner stated that, having received several letters from the concerned department, the colliery’s operations had been halted effective one August 1958. Additional inquiries were later raised by the Union Government, to which the petitioner supplied the requested details. Ultimately the petitioner was told that a licence under the 1951 Act was not required for him. Thereafter the Coal Board repeatedly informed the petitioner that the matter remained under consideration, while the petitioner continued to press his claim. On seventeenth October 1960 the petitioner was notified that the issue had been referred to the Government of India and that the government’s instructions were awaited. From that point the responsibility shifted to the Ministry of Steel, Mines and Fuel, which consistently acknowledged the petitioner’s letters. An inquiry was conducted in April 1961 to determine whether the colliery was idle. On first July 1961 the Central Government issued Notification number S.O. 1581 under sub‑section one of section four of the Coal Bearing Areas (Acquisition and Development) Act, 1957, indicating its intention to prospect for coal in the petitioner’s colliery. A second notification, number S.O. 484, issued on sixth February 1962 under the same provision, concerned an additional area of twenty‑five point fifteen acres. The petitioner did not lodge any objection to the proposed acquisition under section eight of the Act. Only on twenty‑third November 1961 did the Government inform the petitioner that the area in question appeared to have been notified under sub‑section one of section four of the 1957 Act. In reply, the petitioner asserted that he was not legally bound by the said notification.

In this case, the Court observed that the petitioner had alleged bad faith by stating that the entire purpose of the orders issued by respondent No 2, the Coal Board, together with the notification issued by respondent No 1, the Union Government, and the subsequent postponement of the matter on various pleas, were “quite mala fide.” The petitioner further claimed in paragraph 21 that the respondents and their officials had colluded and conspired against him with ulterior motives and secondary reasons, and that they had ignored the petitioner’s representations. The Court found these allegations to be vague and insufficient to sustain a finding of a conspiracy between the Coal Board and the Union Government intended to deprive the petitioner of his colliery. Moreover, the factual recital provided did not support any inference of such a conspiracy. While the Court acknowledged that there was a delay in disposing of the petitioner’s representations, it emphasized that delay alone did not constitute proof of bad faith, especially because the Coal Board had, as early as July 1959, declined to revise its earlier decision not to grant permission to reopen the mines. The Court also noted a criminal proceeding under section 147 of the Criminal Procedure Code between the petitioner and the Superintendent of Giridih Collieries, who was employed by respondent No 3, the National Coal Development Corporation (Pvt.) Ltd. The petitioner attempted to use this litigation to demonstrate bad faith, but the Court could not see how the alleged hostile relationship between the superintendent and the petitioner could be imputed to the Union Government as evidence of mala fides. Consequently, the Court held that the notifications numbered S.O. 1581 and S.O. 484 were not invalidated on the ground of any bad faith. The discussion then turned to the question of whether rule 39 of the Coal Mines Conservation and Safety Rules, 1954, was beyond the powers of the legislature. The Court reproduced rule 39, which provides that “No coal mine or seam shall be opened and no coal mine or seam the working whereof has been continued for a period exceeding six months shall be reopened and no operation shall be commenced without the prior permission in writing of the Board and except in accordance with such directions as the Board may give.” The Court also reproduced section 17 of the Coal Mine (Conservation and Safety) Act, 1952, noting that subsection 1 authorises the Central Government to make rules by notification in the Official Gazette, subject to prior publication. Subsection 2 lists specific matters on which rules may be made, none of which expressly includes rule 39. Nevertheless, the Court expressed the opinion that the impugned rule was valid. It explained that the object of the Act was to ensure the conservation of coal and to provide for safety in coal mines, and that section 7 empowers the Central Government to take any measures it deems necessary or proper for that purpose. Accordingly, the Court concluded that rule 39 was designed, inter alia, to secure the conservation of coal and therefore was not ultra vires and was authorised by section 17 of the 1952 Act.

The Court observed that Section 7 of the Coal Mine (Conservation and Safety) Act empowers the Central Government to exercise any powers it deems necessary or proper and to take or cause to be taken any measures that may be prescribed. In this context, the Court considered that Rule 39, which governs the opening and reopening of coal mines, is intended, among other purposes, to ensure the conservation of coal. The Court explained that whenever a mine is to be opened or reopened, the Coal Board must examine whether such action is required. In doing so, the Board must take into account the country's demand for the specific grade of coal at that time. If the particular grade is not presently needed, the Board may decide to conserve the coal for future use by refusing to allow its extraction. Consequently, the Court held that Rule 39 is not invalid and that it is duly authorized by Section 17 of the Act of 1952.

The Court then turned to the next issue that emerged from the pleadings, namely whether Rules 37 and 48 of the Mineral Concession Rules, 1949, exceed the powers conferred by the Mines and Minerals (Regulation and Development) Act, 1948. The petitioner raised this point in his counter‑affidavit in order to counter the respondents’ objection that the petitioner had obtained the lease of the colliery in contravention of law and therefore could not claim that Rule 39 of the Coal Mine (Conservation and Safety) Rules, 1954 violated Article 19 of the Constitution. The Court noted that the Mineral Concession Rules, 1949, were made under the authority of Section 5 of the 1948 Act. Prior to its amendment by Act 67 of 1957, Section 5(1) provided: “The Central Government may, by notification in the Official Gazette, make rules for regulating the grant of mining leases or for prohibiting the grant of such leases in respect of any mineral or in any area.” The Court reproduced the text of Rules 37 and 48 for consideration. Rule 37, titled “Transfer of lease,” stipulates that the lessee may, with prior sanction of the State Government and subject to the conditions specified in the first proviso to Rule 35 and in Rule 38, transfer his lease or any right, title or interest therein to a person holding a certificate of approval upon payment of a fee of Rs 100 to the State Government, provided that no mining lease or any right, title or interest therein in respect of any mineral specified in Schedule IV shall be so transferred except with the prior approval of the Central Government. Rule 48, titled “Transfer of assignment,” provides that a prospecting licence or mining lease to which the provisions of the Chapter apply, or any right, title or interest in such licence or lease, shall be transferred only to a person holding a certificate of approval from the State Government having jurisdiction over the land concerned, and that no prospecting licence or mining lease or any right, title or interest therein in respect of any mineral specified in Schedule IV shall be transferred except with the prior approval of the Central Government.

These rules expressly forbid the transfer of a coal‑mine lease unless prior approval is obtained from the Central Government. The petitioner contended that the rules did not govern the grant of a mining lease because, in his view, the term “grant’’ does not include a transfer or assignment of a lease. It is correct that, in the specific context of Mason, Herring and Brooks v. Harris(1), the word “grant’’ was held not to cover an assignment. However, the Court was not convinced that the term “grant’’ in Section 5 should be given that narrow construction. The word “grant’’ ordinarily signifies a transfer of property, and a mining lease is recognised as property. Moreover, mining leases are generally granted for long periods, and it would be unreasonable to assume that Parliament intended not to regulate the assignment of such long‑term interests. This view is reinforced by the fact that Parliament, while using the term “grant’’ in Section 13(1) of Act 67 of 1957, expressly made provisions in Section 13(2)(1) for rules governing the manner and conditions under which a prospecting licence or a mining lease may be transferred. Assuming that these rules are within legislative competence, the petitioner’s acquisition of the colliery was in breach of those rules. Consequently, the petitioner did not acquire a sufficient interest in the property to challenge the constitutional validity of Rule 39 of the Coal Mines Conservation and Safety Rules, 1954.

The petitioner also raised a claim of discrimination, set out in paragraph 31 of his petition. The petition quoted: “That although respondent No. 2 refused permission to the petitioner to open the colliery and withdrew the grade on the plea that no more of the quality was required from the Giridih area, it granted permission on 6 June 1959 for reopening of Kabur Bad Colliery in the same area of Karhabaree for raising Grade IIIB coal which was lying unworked for the last about ten years although the colliery lies in the midst of collieries being worked by respondent No. 3 due to which the latter had to allow them to use its (N.C.D.C.’s) own road in the area.” The respondent argued that permission to reopen the mines had indeed been denied to the petitioner in October 1957, while permission for Kabur Bad Colliery was only given on 6 June 1959. The respondent further asserted that the grade for this colliery was fixed as IIIB on 30 March 1963, five years after the petitioner’s grade was withdrawn. The Court noted that the demand for Grade IIIB coal could reasonably change over a five‑year period, and that the Coal Board was entitled to decide the Kabur Bad Colliery case based on the factual circumstances prevailing in 1959 and 1963. In light of these considerations, the Court was not persuaded that any discrimination in violation of Article 14 of the Constitution had occurred.

The Court observed that it was not satisfied that any discrimination had occurred in contravention of Article 14 of the Constitution. Having considered the material placed before it, the Court concluded that the petitioner’s claim could not be sustained and therefore the petition was dismissed. In view of the circumstances surrounding the case, the Court directed that each party should bear its own costs, without any award of costs against the opposite side. The Court further noted that no additional issues remained to be addressed in the appeal, and consequently the appeal was also dismissed. The dismissal of the appeal was made without any order as to costs, meaning that the parties would not be required to pay the costs of the other side. Accordingly, the appeal was closed, and the Court’s final order stated simply that the appeal was dismissed.