WESTERN COALFIELDS LTD. Vs. CENTRAL BANK OF INDIA

JUDGEMENT

(1.) Respondents 2 to 6 were the lessees of two coal mines, one at Damua and the other at Kalichhapar, both in the State of Madhya Pradesh. These respondents had obtained overdraft facilities from Respondent 1 in 1969. In consideration for the grant of such facilities, these respondents had executed promissory notes as well as an agreement of hypothecation and personal guarantees of Respondent 6 and another. The hypothecation agreement covered the tangible movable property of Respondent 2 which included machinery and plant utilised for the purpose of the mining operations. These respondents failed to pay the royalty in respect of their mining activities to the State Government. As a result, the leases were cancelled. These respondents impugned the said cancellation by way of writ proceedings. The writ petitions being dismissed, the matter ultimately came up for hearing before this Court.

(2.) During these proceedings, pursuant to the Coal Mines (Taking Over of Management) Act, 1973 the management of Damua and Kalichhapar collieries was taken over by the predecessor-in-interest of the appellants. This was followed by the Coal Mines (Nationalisation) Act, 1973. The respondents challenged the Nationalisation Act under Article 32 of the Constitution. All these proceedings were disposed of by an order dated 6.4.1976. The order records that the writ petitions filed by the private respondents were withdrawn.

(3.) In the meanwhile, Respondent 1 filed a suit against the private respondents as well as the appellants for recovery of a sum of Rs. 68,128.86p. in respect of outstanding in the said overdraft facilities which had been granted by Respondent 1 to the private respondents. Despite the submissions of the appellants before the civil court that the claim of Respondent 1 against the appellants was not maintainable by virtue of the provisions of Sec. 6 of the Coal Mines (Nationalisation) Act, the trial court held that since the management of the coal mines was already under the Central Government, the Coal Mines (Nationalisation) Act, 1973 did not apply, inasmuch as government property could not be nationalised. It was also held that the charge in favour of Respondent 1 Bank had been created by the private respondents prior to the cancellation of the leases; and that Respondent 1 could proceed to realise its claim from those hypothecated securities which were in the hands of the appellants. Being aggrieved, the appellants impugned the decision of the trial court before the High Court. The High Court rejected the first appeal and affirmed the decision of the trial court on a different ground, namely, an interim order passed by this Court on 19.4.1973 in the writ petition filed by the private respondents before this Court.