28 March 2024 Contract Law >> Corporate Law   |   Property/Real Estate Law >> Property & Real Estate  

Facts:

A contractor (hereinafter "Petitioner") engaged in laying an underground sewerage pipeline network in Thane, Maharashtra, faced a penalty and royalty demand from the state revenue department. The department claimed the Petitioner had undertaken unauthorized excavation of earth in contravention of Section 48(7) of the Maharashtra Land Revenue Code (MLRC), which governs the extraction of minerals.

Petitioner's Contention:

The Petitioner contested the assessment, arguing that the excavation was an integral aspect of the project – specifically, the digging of trenches for pipe placement and subsequent refilling. The extracted earth, they asserted, was not commercially exploited but merely reused for backfilling, thereby negating any violation of Section 48(7).

Legal Framework and Reasoning:

The court adopted the reasoning established in Promoters and Builders Association of Pune vs. State of Maharashtra (2015). This precedent underscores the critical role of excavation purpose in determining applicability of Section 48(7). In this case, the court found the excavation to be incidental to the legitimate objective of laying pipelines, devoid of any commercial intent.

Supporting Factors:

The court's decision was further bolstered by:

• A 2011 Government Resolution issued by the state itself, granting a complete waiver on royalty for excavation undertaken in public works projects.
• A prior judgment from a separate division bench of the same court, which quashed similar penalties imposed on other contractors involved in the same sewerage project.

Coal Mines (Nationalisation) Act, 1973