Case Background
The case arose out of a dispute between a private mining company and the State of Bihar over royalty payable for sand mining in Patna district.
Under a written agreement dated 16.09.2015, Broad Son Commodities Private Limited obtained rights to mine sand in accordance with the Bihar Minor Mineral Concession Rules, 1972. This grant, commonly called “settlement”, was for five calendar years, from 2015 up to 2019.
The settlement amount was fixed year-wise and increased by 20% every year on the previous year’s amount. The agreement clearly provided that:
For 2015, the settlement amount was Rs. 41,15,41,390/-. For 2016, it was 120% of 2015 (Rs. 49,38,49,668/-). For 2017, it was 120% of 2016 (Rs. 59,26,19,602/-). For 2018, it was 120% of 2017 (Rs. 71,11,43,522/-). For 2019, it was 120% of 2018 (Rs. 85,33,72,226/-).
The agreement did not contain any clause giving the company a right to either extension or renewal of the lease beyond 2019. Under Rule 34 of the 1972 Rules, the lease could have been renewed only if the lessee applied for it, but no such application was made.
Meanwhile, issues relating to sand mining in the concerned area, though in an unrelated matter, were pending before the Hon’ble Supreme Court and the National Green Tribunal. Due to these pending proceedings, the State Government could not auction the sand ghats or grant fresh mining leases as per the normal procedure.
Faced with this situation, the State took a policy decision. Through government notifications and communications dated 27.12.2019 (Annexures 8 and 9), the State allowed existing sand ghat lessees whose settlements were ending on 31.12.2019 to continue mining operations for an extended period, subject to new financial conditions.
Under this policy, the earlier settlement period was extended up to 31.10.2020, or till the date when new leases could be granted after environmental clearance, whichever was earlier. The key change was that the royalty or settlement amount for the extended period would be 50% higher than the amount for the settlement year 2019, meaning 150% of the 2019 rate, instead of the 120% yearly increase stipulated in the original 2015–2019 agreement.
The communications also laid down how the settlement amount for the 10-month extension up to October 2020 would be realised in four equal instalments, and provided that a fresh agreement had to be executed for the extended period. It further provided that along with settlement instalments, other dues like DMF, GST and Income Tax would also be collected.
It was undisputed before the Court that the petitioner company accepted this policy decision. It continued mining after 31.12.2019, executed the necessary documents for extension, and paid royalty at the enhanced 150% rate without raising any objection during the extended period.
Only later, on 30.01.2021, after the extended period (up to 31.10.2020 and later up to 31.12.2020) had run its course and the company had enjoyed the benefit of continued mining, the petitioner approached the Patna High Court by filing Civil Writ Jurisdiction Case No. 3337 of 2021.
In this writ petition, the company sought mandamus to direct the State to charge royalty for the extended period strictly according to the 2013 Sand Policy, the 2015–2019 tender document and the original settlement agreement, and to refund the alleged excess royalty already paid. The petitioner also asked the Court to declare that the extensions granted were merely extensions of the existing settlement on the same terms and that the State could not legally charge 150% of the 2019 rate.
What the Court Examined and Decided
The Division Bench of the Patna High Court, comprising Hon’ble the Chief Justice and Hon’ble Mr. Justice S. Kumar, framed the central question in simple terms: does the conduct of the petitioner disentitle it from claiming that the State’s decision to grant extension of the mining lease on a slightly higher amount is unconscionable, illegal, arbitrary or unreasonable?
The Court first noted the admitted factual position. The 2015 agreement was for a fixed five-year period ending with calendar year 2019. It contained no clause granting the petitioner any automatic right to extension or renewal.
Though Rule 34 of the 1972 Rules allowed renewal, it required an application by the lessee. The petitioner did not file any such application. Therefore, its legal right to continue mining after 2019 did not flow either from the original agreement or from the statutory rules.
Instead, its right to continue beyond 31.12.2019 flowed only from the State Government’s policy decision dated 27.12.2019 (Annexure 8), issued under Rule 77(2) of the Bihar Minerals (Concession, Prevention of Illegal Mining, Transportation & Storage) Rules, 2019.
Rule 77(2), reproduced in the judgment, empowers the State Government, in public interest, to grant a mining lease or settlement, and even movement permits, on terms and conditions different from those prescribed in the Rules, provided reasons are recorded in writing. It also allows such special terms for government departments and state-owned corporations.
Relying on this rule, the Court held that the State was legally competent to frame a special policy for the continuance of mining operations during the pendency of matters before the Supreme Court and NGT, and to fix a higher settlement amount at 150% of the 2019 rate instead of 120%.
The Bench observed that this 30% increase could not, in its considered view, be called “grossly disproportionate” or excessively high in the circumstances.
The petitioner’s counsel argued that Annexure 8 amounted to a mere “extension” of the existing lease and not a fresh “renewal”, and that any extension had to be strictly on the same terms as the original grant. To support this, reliance was placed on the Supreme Court’s decision in Provash Chandra Dalui v. Biswanath Banerjee, 1989 Supp (1) SCC 487, particularly the explanation that “extension” means prolongation of the existing lease on the same terms, unlike “renewal”, which requires a fresh lease.
The petitioner also cited State of Gujarat v. Nirmalaben S. Mehta, (2016) 9 SCC 240, which followed the same principle, and contended that the State’s action was a case of unjust enrichment where the government, being in a dominating position, exploited the weaker contracting party.
The Court, however, found these arguments unpersuasive in the facts of this case.
First, the Bench emphasised the petitioner’s conduct. After the State announced the extended policy with 150% royalty, the petitioner chose to continue mining, signed the necessary documents, and paid royalty at the higher rate. At no stage during the extended period did the petitioner protest or decline the terms. Only after fully availing the benefit of extension did it challenge the 150% rate by filing the writ in January 2021.
In this context, the Court invoked Section 8 of the Indian Contract Act, 1872, which provides that the performance of the conditions of a proposal, or acceptance of consideration for a reciprocal promise, amounts to acceptance of the proposal. By continuing mining operations and paying royalty at the enhanced rate, the petitioner had accepted the State’s offer.
To reinforce this principle, the Court cited Bharat Petroleum Corporation Ltd. v. Great Eastern Shipping Co. Ltd., (2008) 1 SCC 503, where the Supreme Court held that acceptance of contractual terms can be inferred from conduct and need not always be expressed in words. Silence coupled with positive conduct may form an “agreement sub silentio”.
The Bench also referred to M.P. Mittal v. State of Haryana, (1984) 4 SCC 371, to underline that writ jurisdiction under Article 226 is discretionary. High Courts can refuse relief where the petitioner seeks to secure a dishonest advantage or perpetuate an unjust gain. A writ court is not bound to assist a litigant who has acted in a manner that would defeat the interests of justice.
On the plea that the revised terms were unconscionable and against public policy, the petitioner relied on Central Inland Water Transport Corporation Limited v. Brojo Nath Ganguly, (1986) 3 SCC 156. That judgment discusses unconscionable bargains and recognises that contracts with terms so unfair and unreasonable as to “shock the conscience of the court” can be declared void as opposed to public policy.
The Patna High Court carefully examined these passages and concluded that the present case did not meet the high threshold set in Brojo Nath Ganguly. A 30% higher charge during a special extension period, adopted under statutory power and for stated public interest reasons, could not be said to shock the conscience of the court.
The Court also rejected the argument that the policy would harm public interest by increasing the retail price of sand. No retailer had complained, and the decision was a policy measure of the State. There was nothing to show it was arbitrary, capricious, illegal or unreasonable.
Most importantly, the Court found no evidence that the State had abused a dominant position or engaged in unjust enrichment. The company was not forced to accept the extension. It could have declined the offer and handed back the site if it found the higher rate unacceptable. Instead, it continued to mine and profit from the extended period and then, as an afterthought, challenged the very terms under which it had operated.
On these combined grounds—statutory competence of the State under Rule 77(2), the petitioner’s clear acceptance under Section 8 of the Contract Act, the discretionary nature of writ jurisdiction, and the failure to show any unconscionability—the Court held that there was no reason to interfere with the State Government’s decision dated 27.12.2019 (Annexure 8) and the related communication (Annexure 9).
The writ petition was therefore dismissed. Any interlocutory applications also stood dismissed.
Why This Judgment Matters
This decision is significant for existing and future lessees of sand ghats and other minor minerals in Bihar.
First, it clarifies that when a lessee voluntarily accepts a government policy for extension of a lease and continues operations under changed financial terms, they cannot later turn around and label those terms as illegal or unconscionable.
Second, the judgment reinforces the power of the State Government under Rule 77(2) of the 2019 Rules to relax normal conditions and frame special terms in public interest, especially in exceptional situations like pending environmental litigation.
Third, it sends a clear message that writ courts will not assist parties who have enjoyed the fruits of a policy or contract and then seek to avoid their corresponding obligations by belatedly approaching the court.
For mining operators and other government contractors, this case underlines the importance of promptly objecting to any term they find unacceptable. Silent acceptance followed by later challenge is unlikely to succeed.
Legal Issues and Answers
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Issue: Whether the petitioner, after accepting and acting upon the State’s policy decision charging 150% of the 2019 settlement amount for the extended period, could challenge that decision as unconscionable, illegal, arbitrary or unreasonable.
Answer: No. The Patna High Court held that the petitioner’s conduct amounted to acceptance of the new terms under Section 8 of the Contract Act; the State was empowered under Rule 77(2) of the 2019 Rules to fix higher rates; the 30% increase was not unconscionable; and writ relief could be declined where the petitioner sought to gain a dishonest advantage after enjoying the benefits of the extension.
Cases Cited by the Court
- Provash Chandra Dalui v. Biswanath Banerjee, 1989 Supp (1) SCC 487 (relied upon by the petitioner; distinction between extension and renewal of leases).
- State of Gujarat & Ors. v. Nirmalaben S. Mehta & Ors., (2016) 9 SCC 240 (reiterating principles on extension versus renewal).
- Bharat Petroleum Corpn. Ltd. v. Great Eastern Shipping Co. Ltd., (2008) 1 SCC 503 (acceptance of contractual terms can be inferred from conduct).
- M.P. Mittal v. State of Haryana & Ors., (1984) 4 SCC 371 (discretionary nature of writ jurisdiction; relief can be refused to prevent dishonest advantage).
- Central Inland Water Transport Corporation Limited v. Brojo Nath Ganguly & Ors., (1986) 3 SCC 156 (unconscionable contracts and public policy; distinguished on facts).
Case Details
Case Number: Civil Writ Jurisdiction Case No. 3337 of 2021
Case Title: Broad Son Commodities Private Limited v. The State of Bihar & Ors.
Citation: 2022 (1) PLJR 113
Court: High Court of Judicature at Patna
Coram: Hon’ble the Chief Justice; Hon’ble Mr. Justice S. Kumar
Date of Judgment: 14.12.2021
Advocates: For the petitioner – Mr. Suraj Samdarshi, Advocate. For the respondents – Mr. Sunil Kumar Mandal, SC-3; Mr. Ravi Ranjan Kumar Singh, AC to SC-3.
Nature of the Case: Writ petition (civil) under Article 226 challenging State Government policy and demand of higher royalty during extended sand mining settlement period.
Link to Judgment: Patna High Court Judgment in CWJC No. 3337 of 2021
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