Royalty on metals, not slime

Written by Indu Bhan | Indu Bhan | Updated: Mar 20 2013, 08:31am hrs
Royalty to be paid only on metal that can be used

The Supreme Court has upheld the Rajasthan High Courts judgment that quashed the state governments demand for additional royalty on lead and zinc extracted by Hindustan Zinc Ltd (HZL) in three districts. In this case, HZL was leased land in the districts of Bhilwara, Rajsam and Udaipur for extraction of lead and zinc under the provisions of the Mines and Minerals (Development and Regulation) Act, 1957.

On HZLs plea, the HC had quashed the additional demand raised on it in December 2001 and subsequent notices issued by the state government for recovery of royalty in respect of the minerals extracted by the firm.

Earlier, the royalty was to be charged on the basis of mineral concentrate produced, but by virtue of the notification of September 2000, royalty was to be charged on an ad valorem basis on the contents of metal found in the ore produced.

Both the parties had filed cross-appeals against the HCs July 2007 order in the apex court. While the Rajasthan government challenged the impugned judgment on the ground that by virtue of methodology directed to be employed, it would suffer substantial loss as HZL would be paying much less royalty than what it was supposed to pay.

The Supreme Court accepted HZLs contention that the negligible metal contained in the tailings, slimes or the rejects can never be the subject matter of calculation of royalty as that portion of metal was returned to the earth by dumping the same in the leased area without being taken out of the leased area and that cannot be included in the contents of the metal produced.

The arbitrator has the discretion to fix interest

The Supreme Court in the case of P Radhakrishna Murthy vs NBCC Ltd has said that a high court cannot interfere with the discretionary power of the arbitrator to fix the rate of interest in the award.

Where the agreement between the parties does not prohibit the grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite, it said.

According to the apex court, this is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and, therefore, when the parties refer all their disputes to the arbitrator, he shall have the power to award interest. However, it said that such discretion has to be exercised in the light of all the facts and circumstances of a case.

In this case, National Buildings Construction Corporation Ltd (NBCC) awarded a contract for construction of five 5,000 metric tonne food storage godowns in West Godawari district of Andhra Pradesh to Murthy. After the completion of work, the contractor allegedly didnt get money for all the works. This led to the appointment of a retired director general of Central Public Works Department as a sole arbitrator to examine the claims. The contractor claimed various payments and also interest at the rate of 24% from December 1987 till the date of payment.

The arbitrator in 1988 rejected the Murthys claim of interest. Aggrieved by the award, Murthy challenged it before a civil court, which awarded 16.5% from the date of reference till realisation.

Adjournment, re-opening requests should be avoided if possible

While setting aside the judgment of the Delhi High Court in the case of Bagai Constructions vs Gupta Building Material Store, the Supreme Court has told the courts to follow the time schedule set in the Civil Procedure Code (CrPC) so that the purpose of the code is not defeated.

Bagai Constructions, an interior decoration firm, and Gupta Building Material Store, the supplier of building materials, had certain disputes over payments. This lead the Gupta firm to file a recovery suit before a civil court. After the arguments were concluded and the judgment was reserved in 2009, the Gupta firm moved two applications under CrPC for placing on record certain documents and for seeking permission to recall a witness. While the additional district judge in 2010 dismissed both the applications, the HC allowed them.

On appeal, the Supreme Court restored the trial courts order by stating that applications for adjournments, reopening and recalling could as far as possible be avoided and only in compelling and acceptable reasons those applications are to be considered.