Seigniorage fees that have been deducted from another bill owed to the lessee cannot be demanded again: Telangana High Court

If the lessor has already deducted seigniore fees from another bill owed to the lessee, he cannot demand for the fees to be paid again. The order passed by a Telangana High Court bench of Justice A. Abhishek Reddy on 3rd June 2021 in B. Chandulal Naik v. State of Telangana [Writ Petition No: 22233 of 2020] dealt with this issue.

Chandulal Naik, the petitioner had been granted a ten year lease for the excavation of metal and stone from a four hectare area in Nagireddypalli Village by the deputy director of mines and geology, Hyderabad. The petitioner had established a metal crusher unit at the quarry and had been given a contract for the widening of two-lane roads of a particular section of the National Highway in Telangana, the contract included the supply of numerous construction materials for the road widening. On 11th January 2019, the additional director of mines and geology who is the 3rd respondent, inspected the quarry without any intimation and furthermore issued three notices for failing to submit documentary evidence of excavation, failing to obtain permits for the dispatch of materials and for failing to maintain proper records of dispatch and production of materials, furthermore he also asked the petitioner to pay the seigniorage fee for the leasing of the quarry. The director of mines and geology, who is the 2nd respondent, passed an order prohibiting the petitioner and from quarry activities without giving any notice and based solely on the third respondent’s inspection report. As a result of this, the petitioner filed a revision before the principal secretary of the Mines and Industries Department, who is the first respondent in this case. The petitioner contended that the seigniorage fee was already being reduced from the bills since he was supplying materials for the state government’s work, however ignoring this explanation, the third respondent directed the petitioner to remit the normal seigniorage fee in addition to a penalty at 5 times and 10 times for quantity excavated and material dispatched respectively. The first respondent, however, brought down the penalty charges from 5 times to 1 time for excavation and from 10 times to 2 times for the materials dispatched.

The court found that once the normal seigniorage fee has been deducted from the contractor’s bills by the concerned department, imposing the same seigniorage fee again would be unwarranted, arbitrary and in fact illegal. However the bench also stated that it is undeniably the responsibility of the lessee alone to ensure that no unauthorised quarrying or transportation of materials take place from the leased area and hence the court had to reason to revoke the penalties imposed for the same.

It was declared by the court that, “Accordingly, the writ petition is partly allowed. The prohibitory order, dated 17.01.2019 passed by the respondent No. 2 is set aside. The order dated 15.04.2019 passed by respondent No. 1 insofar it directs the petitioner to pay the normal seigniorage fee on the quantity of mineral, within the leased area, is also set aside. The petitioner shall pay the penalties i.e., one time penalty for the quantity excavated and transported within the leased area, for which prior permission was not obtained, and normal seigniorage fee plus two times penalty for the quantity excavated and transported outside the leased area.”

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