The Supreme Court has observed that the State Government being the original owner was a deemed lessor and was the ‘person interested’ entitled to the compensation and surface land rent from the Government Company in whom the rights under the mining lease were vested by the Central Government.

The Bench of Justice M.R. Shah and Justice C.T. Ravikumar observed that “as per Section 11, the Government company in whose favour the order has been issued by the Central Government shall be deemed to be the lessee and shall be liable to pay the compensation/rental, etc., to the State Government being ‘person interested’...Therefore, the High Court is absolutely justified in confirming the respective demand(s). The amount of royalty cannot be mixed with the compensation/loss caused to the State Government due to loss of land and surface land rent as the State Government is entitled for the adequate compensation”

In this case, the lands in question were owned by the State Government of Odisha and were acquired by the Central Government of India under Section 9 of the Coal Bearing Areas (Acquisition and Development) Act, 1957. The Central Government exercised its power under section 11(1) of the Act and directed that the said lands and rights should be vested in the Government Company.

Notice was issued by the respondent-State demanding a sum of Rs. 70 lakhs towards premium for Government land and Rs. 40 lakhs towards compensation. These demand notices were challenged by the appellant by way of writ petition before the High Court. The High Court observed that the State Government was a person interested in land and therefore, entitled to the compensation over and above in lieu of losing the rights over the land.

Aggrieved with the said order of the High Court, the appellant preferred the appeal before the Apex Court.

ASG K.M. Nataraj appeared for the appellant and Advocate Umakant Mishra appeared for the State.

The Apex Court noted that as per Sections 4 to 10 of the Act when a declaration was issued of the acquisition, the land/rights in or over the land, should be vested absolutely in the Central Government free from all encumbrances. And the Central Government, on being satisfied that the Government company was willing to comply, could vest the land or the rights in or over the land in the Government Company.

Subsequently, where the rights under any mining lease acquired under the Act, vested in the Government company, such company was deemed to have become lessee of the State Government as if a mining lease under the Mineral Concession Rules had been granted by the State Government and all the rights and liabilities of the Central Government should be deemed to have become the rights and liabilities of the Government company.

Further, with regard to Royalty, the Court said that Royalty was for extraction of minerals in the lands in question and the compensation/rental payable with respect to the lands by the lessee/deemed lessee was altogether different than the royalty.

Therefore, the Apex Court observed that the High Court was absolutely right in observing and taking the view that being ‘person interested’ the State Government was entitled to the compensation/rent, etc and the respondent were liable to pay Royalty along with compensation/rental, etc.

Accordingly, the appeal was dismissed and the judgment of the high Court was upheld.

Cause Title- Mahanadi Coalfields Ltd. v. State of Odisha & Ors

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Justice MR ShahJustice CT Ravikumar

Sanjoli N Srivastava