2003 (10) TMI 638 - SC - Indian Laws

Court reduces interest rate for Coalfields, upholds obligations, dismisses appeals.

SOUTH EASTERN COALFIELDS LTD. Versus STATE OF M.P. & ORS.

SOUTH EASTERN COALFIELDS LTD. Versus STATE OF M.P. & ORS. - 2003 AIR 4482, 2003 (4) Suppl. SCR 651, 2003 (8) SCC 648, 2003 (2) Suppl. JT 443, 2003 (8) ... Issues Involved:1. Liability of Coalfields to pay interest to the State Government.2. Liability of the consumers/purchasers to pay interest to the Coalfields for the period without a court restraint order.3. Liability of the consumers/purchasers to pay interest to the Coalfields for the period during which a court restraint order was in operation.Detailed Analysis:1. Liability of Coalfields to pay interest to the State Government:The mining rights granted to the Coalfields by the State Government under the Mines and Minerals (Regulation and Development) Act, 1957, include provisions for the payment of royalty and interest on delayed payments. Rule 64A of the Mineral Concession Rules, 1960, mandates a simple interest rate of 24% per annum on overdue royalties. The lease agreements executed by the Coalfields incorporate this rule, making the liability to pay interest both statutory and contractual. The court upheld the validity of Rule 64A, stating that the Central Government has the authority to make such provisions under Section 13 of the Act. The Coalfields, having entered into these lease agreements knowingly, cannot later contest their obligation to pay interest. The court cited precedents affirming that parties must adhere to contractual obligations, including interest payments, as agreed upon in their leases.2. Liability of the consumers/purchasers to pay interest to the Coalfields for the period without a court restraint order:The sale of minerals by Coalfields to consumers is governed by the Sale of Goods Act, 1930. Section 61 of the Act allows for the recovery of interest as damages in the absence of a contrary contract. The court emphasized that this principle is based on equity, ensuring that neither the seller nor the buyer unjustly benefits at the expense of the other. The royalty, although paid to the State, is passed on to consumers as part of the price of the minerals. The court held that the consumers' obligation to pay interest on delayed payments is justified, as the Coalfields themselves must pay interest to the State. This ensures that the Coalfields are compensated for the period during which they did not receive the enhanced royalty from the consumers.3. Liability of the consumers/purchasers to pay interest to the Coalfields for the period during which a court restraint order was in operation:The court addressed the consumers' argument that they should not be liable for interest during the period protected by judicial restraint orders. The principle of restitution, which mandates restoring parties to their original position before the court's intervention, was applied. The court explained that interim orders, once reversed, necessitate compensating the party that suffered due to the order. The consumers, having withheld payment under the court's protection, must pay interest to the Coalfields to ensure equitable restitution. The court emphasized that this principle ensures justice and prevents unjust enrichment resulting from interim orders. The court also clarified that the interest awarded in restitution is not governed by the Interest Act but is a standard relief in such cases.Conclusion:The court dismissed all appeals, affirming the High Court's decision to impose a 12% per annum interest rate instead of 24%, considering the prolonged litigation and varying commercial interest rates. The court specified that this concession applies only to the present case and should not set a precedent for overriding Rule 64A. Payments must be cleared within six weeks to benefit from the reduced interest rate; otherwise, the 24% rate will apply. The court's decision ensures that all parties fulfill their contractual and statutory obligations, maintaining fairness and equity in the resolution of the disputes.