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State of Rajasthan & Anr. v. M/s Deep Jyoti Company & Anr.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 1854 of 2016)Decided 26 Feb 2016
Civil Appeal No. 1854 of 2016
Chief Justice T.S. Thakur · Justice A.K. Sikri · Justice R. Banumathi

Background

The Mines Department of the Rajasthan Government issued a 2008 circular requiring government work contractors to obtain a short-term mining permit before use of minerals like stone, sand and grit, and allowing royalty to be deducted from their bills (refundable later on proof the mineral was royalty-paid). Deep Jyoti Company, a registered contractor, challenged the circular, and the High Court's Division Bench quashed it as an unreasonable condition; a connected appeal by another contractor was also allowed following that ruling.

Decision Breakdown

The Supreme Court held the circular was not arbitrary: it merely laid down a procedure to ensure that minerals used in government construction work were legitimately mined and royalty-paid, with the deducted amount fully refundable on production of proof of payment. Since there was no real financial burden on contractors and the measure served the legitimate public purpose of preventing illegal mining and revenue leakage, the condition met the test of fairness and reasonableness. The High Court's orders quashing the circular were set aside, both appeals were allowed, and the writ petitions filed by the contractors were dismissed, with each side bearing its own costs.

Lesson Learnt

A government department can validly impose reasonable conditions (like requiring proof of royalty payment) on contractors bidding for its works contracts, as long as those conditions are not arbitrary and any amount collected is genuinely refundable: such conditions will not be struck down merely because contractors find them inconvenient.

Official source (sci.gov.in)View Judgment (PDF)

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