Singh Sial & Anr Vs. M/S. Karam Chand Thapar & Ors  INSC 529 (25 September 1995)
M.M. Punchhi, M.M. Manohar Sujata V. (J) Punchhi, J.
1996 AIR 247 1995 SCC (6) 166 JT 1995 (7) 56 1995 SCALE (5)500
required in this appeal to ascribe a meaning to the word "royalty"
figuring in a deed of assignment of mining rights between two beings, both
devoid of regalia.
primary and natural sense "royalty", in the legal world, is known as
the equivalent or translation of jura regalia or jura regia. Royal rights and
prerogatives of a sovereign are covered thereunder. In its secondary sense the
word "royalty" would signify, as in mining leases, that part of the reddendum,
variable though, payable in cash or kind, for rights and privileges obtained.
It is found in the clause of the deed by which the grantor reserves something
to himself out of that which he grants. It may even be a clause reserving rent
in a lease, whereby the lessor reserves something for himself out of that which
"What is in a name? A rose by any other name would smell as sweet". So
will now get on to the merit of the matter.
appellants are the plaintiffs. They are the heirs of one Sardar Pishora Singh Sial.
By deed Ex. D-2 dated 19-
11-1938, Pishora Singh
obtained a mining lease from the erstwhile Government of Central Provinces for
extraction of coal in 420.27 acres of land in village Dighawani, District Chhindwara.
He also obtained in the same village a prospecting licence vide deed Ex. D-3
dated 22-11-1938 to prospect of coal in an area measuring 242.29 acres.
on 16-11-1938 in anticipation of obtaining the
lease and the licence he entered into a contract with Karam Chand Thaper and Brothers
Ltd. to assign his rights in the lease and prospecting licence when maturing.
On obtaining, he sought and received permission from the Government on 7- 3-1939 vide Document Ex.D-4 for transferring those two
rights to Karam Chand Thapar and Brothers Ltd. The Government however secured thereunder
for itself payment of due royalty from Pishora Singh uptill a particular date
and thereafter from the said company. On such permission being granted, a sale
deed was executed by Pishora Singh Sial in favour of Karam Chand Thapar and
Bros. Ltd. on 13th
June, 1939/30th June,
1939 vide document Ex.D-5. This first assignee later assigned its rights,
interests and obligations in favour of the second assignee M/s. Rawanawara
Collieries vide document Ex.D-8 dated 5-7-1940 and in the same pattern, the second
assignee sold its rights, interests and obligations to the third assignee M/s.
Oriental Coal Company Ltd. The lease and licence was for a period of thirty
years starting from particular dates as embodied in the initial deeds.
assignment deed Ex.D-5, the consideration settled has been detailedly
mentioned. We would advert to the same later. At this juncture, we need only to
highlight that there are distinct two royalties which are playing their part.
First is the royalty which Pishora Singh, legally bound, had undertaken to pay
to the State Government on obtaining mining and prospecting rights. The State
Government while sanctioning subsequent transfers had to and specifically kept
preserved that right against all the subsequent transferees. That royalty
undeniably was in assertion of the State's right to the minerals gotten or to
be gotten, and for the rights and privileges conferred in regard thereto. That
the State had such right in such venture as known to law, in the primary or
secondary sense, is beyond dispute. The second "royalty" figuring is
embodied in the assignment deed Ex.D-5 wherein royalty has been undertaken to
be paid by Karam Chand Thapar and Bros. Ltd. to Pishora Singh to the extent and
manner stipulated therein as part of the consideration for assignment, over and
above the royalty payable to the State. The liability to pay such stipulated
royalty to Pishora Singh ultimately rested on the three afore-mentioned
assignees, jointly as well as severally. And in the discharge of that liability
undisputably periodic payments had been made to Pishora Singh (including his
heirs) for about 20 years. Then suddenly, as is the case, the assignees cooled
off and stopped making payments. Correspondence then ensued between the
parties, but to no avail. Ultimately, the heirs of Pishora Singh Sial filed a
suit against the three assignees for recovery of the sums of royalty then
fallen due, together with interest; total claim then being for Rs.2,32,627.18 upto
a certain period and on quantities of coal despatched.
defendants-respondents contested the suit. The execution of the documents inter
se, reference of which has been made earlier, was not denied. The main thrust
of the defendants was that deed Ex.D-5 postulated payment of royalty,
descriptively well known to the mining world, which is representive of the
State's share in the mineral for such rights conferred, but not by a
prerogative exercised by an individual. It was further pleaded that the
situation of law at that point of time, when the suit was being contested, was
that demand of any payment as royalty by an individual was prohibited. Past
payments of almost 20 years were termed by the defendants as having been made
mistakenly. The Trial Court then on interpreting the terms of document Ex.D-5
held that the obligation of the defendants-respondents to pay the so called
royalty to the plaintiffe-appellants was merely a periodic payment, as in the
deed stipulated, and was thus not royalty as such. Accordingly, the Trial Court
decreed the suit but reduced the interest on the sum claimed to 4 per cent per
annum till payment, details of which are evident from its judment and decree.
defendants' first appeal before the High Court of Madhya Pradesh was placed
before a Division Bench of two Hon'ble Judges. One of whom took the view that
the stipulated payment was meant to be royalty as such and thus not claimable
by the plaintiffs as individuals. We would rather quote the very words employed
by the Hon'ble Judge:
tenor of the document clearly shows that a distinction was drawn between consideration
for assignment of the lessee's interest which was to be paid to the vendor in
addition to this consideration for the remaining period of the lease subsequent
to the transfer of the lessee's interest by the vendor.
distinction has also been maintained in the plaint averments and the suit is
expressly for recovering the amount claimed as royalty subsequent to the
transfer of the lessee's interest.
thus no ambiguity in the plaintiffs' case contained in the plaint which clearly
shows that the claim is not for payment of a part of the consideration but is
only for payment of the royalty claimed in addition to the consideration of
Rs.30,000/- for transfer of the lessee's interest. The endorsement of
registration on Ex.D-5 also indicates that the consideration for the transfer
was treated to be the sum of Rs.30,000/- only. It is also significant that
Ex.D-5 is drafted as a formal document apparently by some lawyer and the
parties thereto were persons quite conversant with mining leases and
consequently with the meaning of the expressions `consideration' and `royalty'.
That being so, there is no reason to construe the word `royalty' in a manner
different than that in which it is used and understood by persons in the mining
business. All these facts clearly show that royalty as it is ordinarily
understood by persons in the mining business and it was in that sense that the
word was used also in Ex.D-5 as distinct from the consideration for assignment
of the lessee's interest.
is thus no basis to contend that the suit is for recovery of a part of the
unpaid consideration and the term providing for payment of royalty must be
construed as one providing for deferred payment of a part of the
consideration." The other Hon'ble Judge agreed with the view so expressed
by his colleague. Yet he went on to hold that the term in the deed Ex.D-5
directing payment of royalty or rent would be offensive to the enjoyment of
absolute rights and thus hit by the provisions of Section 11 of the Transfer of
Property Act. The appeal of the defendants-respondents was thus allowed and the
suit was dismissed. This gave birth to this appeal.
was sought from the High Court by the appellants, to appeal to this Court inter
alia on the basis that when the Hon'ble Judges on applying Section 11 of the
Transfer of Property Act had voided an important element of consideration of
payment of royalty fixed in the assignment deed, it raised an important
question of law of public importance. The Hon'ble Judges hearing the matter met
the claim of the appellants by observing that the point regarding the
applicability of Section 11 was not the basis of decision and was only incidently
mentioned by one of the Hon'ble Judges. Further it was viewed that in the
circumstances, it could not be said that the case involved a question relating
to the interpretation of Section 11 of the Transfer of Property Act requiring
decision of this Court.
way, the application for leave was summarily dismissed. On such expressed views
of the High Court with regard to Section 11 of the Transfer of Property Act not
having any role to play, we are absolved of the need to prod the provision, for
the High Court itself has virtually reviewed its decision on that point, by
declaring that the said provision of law was not the basis of the High Court's
time has now arrived to take stock of the term which has raised all this
argument. Even though lengthy it is worth reproduction:
Rs.10,000/- Ten Thousand has been paid to the vendor by the vendee as earnest
money at Calcutta at the time of the Execution of the
agreement of sale d/-
16th November 1938.
2000 (Two thousand) FULLY PAID ORDINARY SHARES of the value of Rs.10/- (ten)
each in the Capital of the Proposed "RAWANWARA COLLIERIES LIMITED"
shall be allotted to the VENDOR by the VENDEE within SIX MONTHS hereof, on the
said "RAWANWARA COLLIERIES LIMITED" being incorporated under the
Indian Companies Act 1913. In the event of such a company being not
incorporated for any reason whatsoever within the said period of SIX months THE
VENDEE shall pay the sum of Rs.20,000/- (Twenty Thousand) only to the SAID
VENDOR in cash.
addition to the consideration paid as stated in clause (a) of this paragraph
and that agreed to be paid by the VENDEE to the said VENDOR as per clause (b)
of this Paragraph the said VENDEE company effectively binds itself, its
successors, transferees, assigns and liquidators to pay to the SAID VENDOR, his
heirs, executors, representatives, administrators, and assigns, Royalty at the
rates mentioned below and subject to the terms stated in Clauses hereinafter
following in this paragraph:- (d) (i) Royalty or rent at -/4/- (annas four) per
ton on all coal despatched from the properties hereby conveyed subject to the
minimum stated in clause (d) (iii) below.
The payment of the said Royalty or the guaranteed minimum Royalty as per Clause
(d) (iii) below shall commence a year after the execution of these presents
i.e. no Royalty is payable to the VENDOR for the aforesaid period of one year.
It is however definitely expressed and declared that the VENDEE shall pay to
the VENDOR Rs.1500/- (one thousand and five hundred) as minimum guaranteed
Royalty or rent every half year from the second year reckoned from the date of
the execution of these presents, that is to say, after the one year stated in
clause (d) (ii) above and thereafter that is to say from the THIRD YEAR
reckoned as above, Rs.3600/- (Three Thousand and six hundred only), every half
year at Chhindwara during the whole of the unexpired term of the hereincited
mining lease and the prospecting license or mining lease granted to the VENDEE
over all or any portion of the lands covered by the aforesaid prospecting
license d/- 19-11-1938 as well as during the entire term of fresh leases of the
said concessions if and when granted or renewed by the Government to or in favour
of the VENDEE.
The aforesaid half yearly Royalty or rent as per clause (d)(iii) above shall be
paid to THE VENDOR by the VENDEE irrespective of whether any coal be raised and
despatched from the mines or not. If in any half year no coal is won or despatched
or sufficient coal is not won and despatched to produce for that half year at
the rates mentioned in clause (d)(i) above Royalties aggregating the amount of
the minimum Royalty, mentioned in clause (d)(iii) above the VENDEE shall either
pay the said minimum Royalty or such a sum as shall along with Royalty on the
coal actually won and despatched during that half year, be required to make up
the minimum royalty guaranteed above.
the VENDEE Company at any time desires to transfer its rights and title in the
colliery properties hereby conveyed THE VENDEE hereby undertakes to keep the
said VENDOR FULLY AND EFFECTIVELY covered, to his satisfaction, to the extent
of his (VENDOR'S) Royalty-rights, the transferee agreeing and covenanting to
comply with the several stipulations and obligations as embodied in these
presents." It is manifest that four reasons have been advanced by the High
Court to upset the judgment and decree of the trial court. These are (i) that
deed Ex.D-5 was drafted as a formal document apparently by some lawyer and
parties thereto were persons quite conversant with mining leases;
consequently with the meaning of the words "consideration" and
"royalty"; (ii) the word "royalty" used in the document
must be understood the way it is used and understood by the persons in the
mining business; (iii) the consideration money was Rs.30,000/- only as the
endorsement of registration on the deed indicates and that was the total
consideration; and (iv) in the plaint distinction has been kept between the
words "consideration" and "royalty" and so royalty could
not be part of the consideration.
respect we do not agree with any of those reasons.
be true that the document Ex.D-5, written in English language, may have been
prepared by a lawyer and was entered into between persons conversant with the
vocabulary employed in mining leases. Yet these factors per se cannot conclude
the matter that the word "royalty" used in the document was meant to
be royalty as such. If intelligence and responsibility is to be attributed to
the draftsman and the contracting parties for using the word
"royalty" in that technical sense, then it cannot be imagined that
they would have overlooked the status of the contracting parties inter se. We
cannot thus assume that they were well versed in one aspect and not in the
other. Strictly speaking, had the draftsman and the signatories to the deed
meant "royalty" as such, then they could not have omitted to identify
who had the sovereign prerogative or the State part to play. The word "royalty"
thus, in the deed was used in a loose sense so as to convey liability to make
periodic payments to the assignor for the period during which the lease would
subsist; payments dependent on the coal gotten and extracted in quantities or
on despatch. We have therefore to construe document Ex.D-5 on its own terms and
not barely on the label or description given to the stipulated payments.
Conceivably this arrangement could well have been given a shape by using
another word. The word "royalty" was perhaps more handy for the
authors to be employed for an arrangement like this, so as to ensure periodic
payments. In no event could the parties be put to blame for using the word
"royalty" as if arrogating to themselves the royal or sovereign right
of the State and then make redundant the rights and obligations created by the
commodity goes by its value; not by the wrapper in which it is packed. A man is
known for his worth; not for the clothes he wears. Royal robes worn by a beggar
would not make him a King. The document is weighed by its content, not the
title. One needs to go to the value, not the glitter.
the same, we do not wish to minimise the importance of the right words to be
used in documents. What we mean to express is that if the thought is clear, its
translation in words, spoken or written, may, more often than not, tend to be
faulty. More so in a language which is not the mother tongue. Those faulted
words cannot bounce back to alter the thought. Thus in sum and substance when
the contracting parties and the draftsman are assumed to have known that the
word "royalty" is meant to be employed to secure for the State
something out of what the State conveys, their employment of that word for
private ensuring was not intended to confer on the assignor the status of the
sovereign or the State, and on that basis have the document voided. Therefore,
we are of the view that the word "royalty" was used in the deed misdescriptively
and was really meant to cover an important item of the consideration due for
future payments. Section 54 of the Transfer of Property Act clearly postulates
that sale is a transfer of ownership in exchange for a price paid or promised
to be paid or part paid and part promised. In either situation title to the
property would get transferred. This, in our view, demolishes the first two
third reason about the endorsement of the deed showing consideration of Rs.
30,000/- only which was part of the consideration covered in the deed, the
endorsement itself is the answer. The stamp reads:
who is personally known to me, admits execution of the so called conveyance
deed and receipt of consideration in full/part Rs.30,000/- (thirty thousand
only) as per documents........" Whereas the Sub-Registrar has scored off
whatever was necessary in the alternate words provided in the stamp, he has no
where cancelled the inappropriate word to signify whether Rs.30,000/- was full
consideration or part consideration. Rather he has left the consideration to be
of the nature as reflected in the document. The endorsement per se thus cannot
be so read so as to rule that Rs.30,000/- was the total consideration. It was
plainly a part payment and the balance consideration was meant to be
periodically paid in the sum and manner stipulated in the deed. A fortiori on
such analysis the fourth reason also fails because when in the deed the words
"consideration" and "royalty" have been employed to convey
a meaning, the same has been used in the plaint to convey the same meaning as
originally conceived of by the contracting parties.
in our view, the well reasoned judgment of the trial court was erroneously
upset by the High Court in depriving the plaintiffs-appellants of their
result, we allow this appeal, set aside the impugned judgment and decree of the
High Court and restore that of the trial court, with costs.