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Judgment
Sunita Agarwal, J—Heard Sri Navin Sinha, learned Senior Advocate assisted by Sri S.S. Chauhan, learned counsel for the petitioners and Sri A.K. Upadhyay, learned Standing Counsel on behalf of the State.
The petitioner is a partnership firm which was granted lease for the period with effect from 13.7.1995 to 12.7.2005 for excavation of minor minerals from the lease area. The initial period of lease was upto 12.7.2005 and as such for fresh lease, the petitioner has applied and got "No Objection Certificate" from the District Magistrate. Permission was granted on 30.12.2009 for executing the lease in the name of the partnership firm M/s. Krishna Stone Crushing Co., consisting of two partners namely Sri Awdhesh Kumar Pandey, petitioner No. 2 and Sri Kishore Kumar Pandey. Pursuant to the approval order dated 30.12.2009, a lease agreement was executed on 13.3.2010 and was registered. The period of lease was with effect from 13.3.2010 to 12.3.2020.
In the meantime, a complaint has been received by the Principal Secretary, Department of Geology and Mining Civil Secretariat, U.P., Lucknow on which a direction has been given to the District Magistrate, Sonbhadra on 30.7.2013 to inquire into the matter. A report was submitted by the District Magistrate on 9.12.2013, pursuant to the show cause notice which was served on 13.9.2013 to the petitioner and the reply submitted by Sri Awadesh Kumar Pandey, petitioner No. 2. Another show cause notice for cancellation of the lease agreement was issued on 23.1.2014 to which the reply was submitted by Kishore Kumar Pandey on 29.1.2015. After consideration of the reply submitted by Sri Awadesh Kumar Pandey and Sri Kishore Kumar Pandey and the report submitted by Mines Officer on the representation of the complainant, the cancellation order was passed on 3.3.2015 on the ground of violation of Rule 19 of U.P. Minor Minerals (Concession) Rules, 1963.
The consequential order was passed by the District Magistrate on 11.3.2015 restraining the petitioners from excavation and transportation of minor mineral under the lease agreement. Another order dated 13.3.2015 was passed asking the petitioner to deposit the MM-11 forms issued for Arazi No. 2751 area 4.00 acre pursuant to the lease agreement dated 13.3.2010, hence this writ petition.
Challenging the order of cancellation, contention of learned Senior Counsel for the petitioners is that the only ground for cancellation is that one of the partners namely Kishore Kumar Pandey had inducted a third person namely Sri Vishnu Datt Pandey in the partnership firm on 1.4.2003. As per the partnership deed executed between Kishore Kumar Pandey and Vishnu Datt Pandey, third partner was made beneficiary of 30% share in the profits of Sri Kishore Kumar Pandey.
Submission is that this arrangement was made by Sri Kishore Kumar Pandey one of the partners without taking consent from the other partner i.e. petitioner No. 2 Sri Awadesh Kumar Pandey, hence in view of Section 31(ii) of the Indian Partnership Act, the partnership firm cannot be said to have violated the contract or any provision of Rules 1963. For the first time, the petitioner No. 2 came to know that a new partner has been inducted by Sri Kishore Kumar Pandey, when show cause notice was served upon him. The arrangement made by Sri Kishor Kumar Pandey by itself would not amount to assignment/ subletting/ mortgage/ transfer of the mining lease by the partnership firm as contemplated under Rule 19 of 1963. And as such there is no violation of terms and conditions of the lease deed or the Rules, 1963.
The alleged partnership deed dated 1.4.2003 signed by one of the partners without the consent of another partner, will not have the effect of transferring of the mining lease of the partnership firm in favour of the third partner. Mere execution of the deed dated 1.4.2003 cannot led to an irrebuttable presumption about the firm having transferred the mining lease.
There is no finding in the cancellation order that the deed dated 1.4.2003 has the effect of transferring the mining lease.
Alongwith the supplementary affidavit, a deed of retirement of the new partner executed between Sri Kishore Kumar Pandey and Vishnu Datt Pandey on 23.1.2013, has been brought on record.
Referring to this deed, submission is that the mistake, if any, on the part of one of the partners of the firm has been rectified. This fact was brought before the respondents authority and therefore, there was no justification for cancellation of the lease agreement on the alleged violation of Rule 19.
Lastly in a feeble attempt, learned Senior Counsel for the petitioners submits that respondent No. 1 has erred in exercise of suo motu power. The revisional power could not have been exercised on the complaint of a person who himself claims to be a co-lessee of the mining lease through the third partner. The complaint itself was not maintainable and was required to be rejected out rightly.
On the other hand, learned Standing Counsel vehemently submits that the transfer of share of one of the partners in the firm to a third party is clear violation of Rule 19 of 1963 Rules. Sri Kishore Kumar Pandey has sublet/assigned 30% of his share/right/interest in the mining lease by executing a Sub Partnership deed on 1.4.2003.
A bare perusal of the said deed shows that the third party has been inducted for proper and smooth running of the business of the firm to the share of one of the partners. The third party has been termed as working partner with other partners in the firm and has been authorised to do any act on behalf of the firm which has been termed as binding on all the partners. The working partners have been authorised to manage the business of the partnership for the common benefit of the partners. Further the new inducted partner was entitled to receive the share in the profit of the partnership firm to the extent of the 30% of the share of one of the partners Sri Kishore Kumar Pandey. Thus Sub Partnership deed in unequivocal terms establish the induction of a new partner or a third party to the business of mining lease which is clear cut violation of Rule 19. Bar of Rule 19(1)(a)(b) of the 1963 Rules is therefore attracted.
Upon the complaint received by respondent No. 1, direction was given to the District Magistrate to conduct an enquiry and grant opportunity of hearing to the petitioners. The petitioner''s reply has been considered and further a second show cause notice was issued before passing the order of cancellation. The impugned order has been passed in exercise of suo motu power by the State Government under Rule 19 (3) of the 1963 Rules. There is no infirmity in the order impugned.
Reliance placed upon section 31 of the Partnership Act is misplaced as it is not attracted in the facts and circumstances of the case.
Having heard learned counsel for the parties and perused the record.
To deal with the rival contentions of learned counsel for the parties, it would be apt to go through the relevant Rule 19 of the Rules, 1963 as under:--
"19. Transfer of lease.- (1) A lessee shall not-
(a) assign, sublet, mortgage, or in any other manner transfer the mining lease, or any right, title or interest therein; or
(b) enter into or make any arrangement, contract or understanding whereby the lessee may be directly or indirectly financed to a substantial extent or may be substantially controlled in mining operations by any person or body of persons other than himself :
Provided that a lessee may, with the prior approval of the State Government and subject to such conditions and restrictions, as may be imposed by it, mortgage to a finance corporation owned and controlled by the State Government or to a scheduled Bank as defined in clause (a) of Section 2 of the Reserve Bank of India Act, 1934 or a Bank specified in Column 2 of the First Schedule to the Banking Companies (Acquisition and transfer of undertaking) Act 1970; or, assign to any other person a mining lease or any right, title or interest therein.
(2) The State Government, may by an order in writing, determine any lease at any time if the lessee has, in the opinion of the State Government assigned, sublet, mortgaged or in any other manner transferred the mining lease or any right, title or interest therein or entered into or made any arrangement, contract or understanding without its prior approval or has committed breach of any condition or restriction specified by the State Government in this behalf:
Provided that no such order shall be made without giving the lessee a reasonable opportunity of stating his case."
Sections 29 and 31 of the Indian Partnership Act are also relevant for the controversy in hand and are quoted as under:--
"Section 29. Rights of transferee or a partner''s interest:--
(1) A transfer by a partner of his interest in the firm, either absolute or by mortgage, or by the creation by him of a change on such interest, does not entitle the transferee, during the continuance of the firm, to interfere in the conduct of the business, or to require accounts, or to inspect the books of the firm, but entitles the transferee only to receive the share of profits of the transferring partner, and the transferee shall accept the account of profits agreed to by the partners.
(2) If the firm is dissolved or if the transferring partner ceases to be a partner, the transferee is entitled as against the remaining partners to receive the share of the assets of the firm to which the transferring partner is entitled, and, for the purpose of ascertaining that share, to an account as from the date of the dissolution.
Section 31. Introduction of a partner.-
(1) Subject to contract between the partners and to the provisions of section 30, no person shall be introduced as a partner into a firm without consent of all the existing partners.
(2) Subject to the provisions of section 30, a person who is introduced as a partner into a firm does not thereby become liable for any act of the firm done before he became a partner."
Section 29 provides that the transfer by a partner of his interest in the firm either absolute or by mortgage, or by creation of the charge on such interest, entitles the transferee to receive the share of profits of the transferring partner agreed to by the partners but does not entitle him to interfere in the conduct of the business, or to require accounts, or to inspect the books of the firm.
In the instant case, however, the third partner who had been inducted by Sri Kishore Kumar Pandey was given charge of carrying on day to day business of the partnership firm. The contention that other partner''s consent has not been obtained, cannot be accepted for the simple reason that the third person was inducted as working partner and he was given share of his profits through cheque issued by one of the partners.
These facts are sufficient to conclude that the petitioner was well aware of this arrangement and his consent is explicitly clear from the record. He may or may not be the signatory of the partnership deed or the relinquishment/retirement deed executed between one of the partners and the third person. The dissolution of this arrangement later on would not rectify the illegal act in violation of Rule 19 of the Rules 1963.
The contention of the respondent that one of the partner of partnership firm has contravened the provisions of the rules and hence the petitioner firm is not entitled to hold the mining lease, is perfectly justified in the facts and circumstances of the case.
Petitioner No. 1 is admittedly a partnership firm. The liability of the firm for wrongful acts of a partner is described in Section 26 of the Partnership Act. The firm being a legal entity is managed by its partners. The firm itself cannot transact its business. Contravention of any law by one of the partners of the firm would be contravention by the firm itself. In M/s. R.S. Exports Bangalore Vs. State of Karnataka and Another, AIR 2000 Kar 332 : (2000) 5 KarLJ 131 : (2000) 3 KCCR 2179 , it has been held that the firm cannot take shelter on the ground that it had not committed any contravention.
Lastly in a feeble attempt, the learned Senior counsel for the petitioner submits that the order of cancellation was straight way passed by the State Government and remedy of revision under the Rules 1963 available to the petitioner, has virtually been taken away. This contention is not acceptable as the State Government has power to take suo motu cognizance under Rule 19 (2) of the Rules, 1963.
There is no infirmity in the order impugned.
The writ petition is dismissed.