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Odisha High Court Orders State to Refund to Timber Industries for Wrongly Charged Royalties

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The Odisha High Court division bench of Chief Justice Dr S. Muralidhar and Justice B. P. Routray gave a verdict in  W.P.(C) No.6885 of 2006 and W.P.(C) No.13363 of 2006. 


In 1985 the government granted permission to three paper industries including J. K. Paper Ltd for exploiting eucalyptus and acacia plantation in the Machhkund Catchment area. As per the terms of the contract the company had to arrange for replantation. But in 1988 the government representative wrote to JKPL saying that due to a change in the policy of the government of India it was the state’s duty to carry on replantation. The state also increased the rate of royalty for the land.  JKPL approached the High court against this and won. The state unsuccessfully appealed to the Supreme Court. Thus the government in 2004 calculated JKPL had to be refunded Rs.66,69,207.76 but wrote to them claiming Rs.72,44,828.95 as cost of replantation and license fees. The government wanted both the costs to be adjusted. JKP approached the court requesting it to quash the government letter and give the refund. 

Mangalam Timber Products Limited (MTPL) was also given land in the same area for the same purpose by a contract similar to that of JKPL. The state enhanced the royalty for it in 1989. In 1992 the enhancement was withdrawn retrospectively and the extra amount was adjusted. But in 1993 the royalty was again enhanced retrospectively. MTPL approached the court pointing out the principle of promissory estoppel. MTPL also won its case but just as it had happened with JKPL state wrote to it demanding compensation for the area it had to replant.

Arguments of the Petitioners

Counsels for both the petitioners pointed out that the main contention put forward by the government for increasing the royalty was that the central government had written to the state that private companies cannot do replantation. It had to be done by the state. So the expenditure incurred by the state went up. But this contention had been refused by the Supreme Court judgement dated 11th November 2003. So there was no justification for the demand of the state.

Arguments of the State

The state contended that it was entitled to recover money for the area which had been replanted by it because of the terms of the agreement. It contended that the Supreme Court judgement was related solely to the enhancement of royalty and not applicable in this context. Independent of the submissions the counsel for the state also pointed out that the petitioners were liable to compensate for the damage to the environment done by them.

Analysis of the Court

The court observed that the Supreme Court had negativated the plea of the State about compensation for replantation. The Supreme Court had observed that it was the duty of the State to find out who would be responsible for replantation and obtain the requisite permissions from the government. The observations of the Supreme Court were applicable in the context of this case. So the state cannot take that plea. Also, the cutting of trees by the petitioners was authorised by the court. So there was no merit in the contention that the petitioners caused pollution. 


The court allowed the writ petitions. The state was instructed to refund the petitioners with due interest. The letters sent by the state to the petitioners were quashed. 

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