BHAN, J. - (1.)THESE sets of appeal arise from a common judgment of the Division Bench of the High Court of Judicature at Andhra Pradesh whereby the said High Court has rejected the appellants' challenge to the fixation of rates of royalty on bamboo and hardwood to the paper industry in Andhra Pradesh. For the sake of convenience, we would refer to the facts and contentions in Civil Appeals Nos. 7519-20 of 1995 arising from Writ Appeal No. 591 of 1984 and Writ Petition No. 3927 of 1987 filed by Sree Rayalaseema Paper Mills Ltd. It was stated by the counsel for both the parties before us, as was done before the High Court, that these appeals can be taken as representative of the facts and contention in all the appeals.
(2.)RELEVANT facts for determining the points raised in these appeals are:
Till the year 1975 there were only two Paper Mills in the State of Andhra Pradesh, namely, (1) Sirpur Paper Mills, and (2) Andhra Pradesh Paper Mills Ltd. to which the Government was supplying hard and soft wood for manufacture of paper at concessional rates. These rates were being fixed every five years. By a memorandum dated 2/09/1975 the Government of Andhra Pradesh in Forest and Rural Development Department, fixed royalty rates at Rs. 30.00 per tonne for barked hardwood and Rs. 60.00 per tonne for barked softwood for a period of 5 years commencing from 1-10-1975. The chief Conservator of Forests was requested to get the agreement drafted and furnish to the Government for approval after enquiring into the needs of the mills and after locating the areas in consultation with the mills for the supply of hard and soft wood. The duration of agreement was to be for 20 years. Pending the finalisation of the agreement, the Chief Conservator of Forests was requested to allow to mills to have the wood on payment of royalty, as indicated above, on ad hoc basis after obtaining an undertaking from the mills that they would abide by the conditions prescribed by the Government for the supplies to be effected.

Another factor which needs to be mentioned although not relevant for the purpose of these appeals is that on a representation made by Rayalaseema Paper Mills Limited and Bhadrachalam Paper Board Limited which were set up in a backward area, Government of Andhra Pradesh by G.O.Ms. No. 665, dated 15/07/1976, a further concession in the rate of royalty on bamboo and hard wood by 50% was extended to these two mills for a period of 5 years from the date of their going into production. On a further request made by them the period of concession was extended from 5 to 10 years subject to the condition that Government reserved its right to review the position after first 5 years. This concession commenced from 1-10-1978. Concessional period of first five years expired on 30/09/1983. The Government of Andhra Pradesh reviewed the matter and issued orders contained in G.O.Ms. No. 65, dated 9-2-1984 withdrawing the said concession altogether w.e.f. 1-10-1983. G.O.Ms. No. 65, dated 9-2-1984 was challenged by filing writ petitions which were dismissed by the single Judge of the High Court. Further appeal filed before the Division Bench was also dismissed. However, it was held that the said G.O.Ms. being administrative in character, could not be given retrospective effect. This judgment became final between the parties.

To continue with the facts from the previous paragraph the rates of royalty fixed by the Government Memorandum dated 2-9-1975 @ Rs. 60.00 per tonne for barked soft including Bamboo and Rs. 30.00 per tonne for barked hard wood were valid for the period 1-10-1975 to 30/09/1980. The Government desired to fix revised royalty rates for the next five years. It appears that the Chief Conservator of Forests submitted proposals in February and June, 1980 suggesting a rate of Rs. 425.00 per metric tonne for bambooo and Rs. 75.00 per metric tonne for mixed hardwood for supply to Paper Mills. He based his figures on the minumum cost of production as per policy accepted by the Central Board of Forests.

Year(Bamboo per M.T. w.e.f. 1-10-1980)Hardwood per M.T. (w.e.f. 1-4-1980)

123

1980-81210100

1981-82233111

1982-83258123

1983-84287137

1984-85318152... ... "

The Government, however, appointed a Committee of officials to consider the factors relating to fixation of royalty rates on the forest produce to be supplied to wood based industries on a sustained basis, and to make recommendations to the Government. The Committee consisted of

1. Secretary to Government, Forests and Rural Development Department (Chairman),

2. Joint Secretary, Industries and Commerce Department (Member),

3. Deputy Secretary, Finance and Planning (Member),

4. Managing Director, A. P. Forest Development Corporation (Member), and

5. Chief Conservator of Forests (Member/Secretary).

(3.)THE Committee called upon the wood-based industries for such information, as they liked, for consideration of the committee. After looking into the material supplied by the Mills and other material gathered by it, and after examining the several alternative methods for determining the price of forest produce, the committee was of the opinion that the cost of regeneration be taken to be the price at which the forest produce shall be supplied to these industries. On this basis, it opined that for the five year period commencing from 1-10-1980, the rate of royalty for bamboo may be fixed at Rs. 284.00 per metric tonne and for hardwood at Rs. 135.00 per metric tonne. THE Committee further recommended that instead of fixing a uniform flat rate for the entire 5 year period, it would be desirable to fix royalty at a sliding rate with annual increases limited to the prevailing rates of interest. THE Government accepted the recommendations of the Committee and accordingly issued G.O.Ms. No. 538, dated 4-11-1981. It directed that the "rates for royalty on the forest raw materials, namely, the bamboo and the hardwood which are to be supplied to the wood based industries shall, with effect from the base year 1980-81 be as follows : JUDGEMENT_361_JT8_2002Html1.htm
In paragraph 6 of the said G.O., the Government stated :-

"6. THE committee has also envisaged that the arrangements should be worked out to ensure that adequate funds are provided for raising pulpwood plantations and for improving the management of forests for sustained supply to the industries. Accordingly, the Government have to decide to create the 'Industrial Plantation Fund' from out of the additional royalty revenues revised annually to meet the said requirements."

As per this G.O., the rates of royalty for bamboo suddenly went up from Rs. 60.00 to Rs. 210 per metric tonne and the rates continued to rise with each passing year. However, so far as Rayalaseema Paper Mills and Bhadrachalam Paper Boards Limited were concerned, they were entitled to 50% concession for a period of five years commencing from 1-10-1978. It was liable to pay only half of the said royalty rate. The five year concession period expired on 30/09/1983. It was not extended further as indicated earlier in para No. 3 of this judgment.