Sri Lanka Law Reports
(1982) 2 S L R
STATE GRAPHITE CORPORATION
K.S.P.D. FERNANDO AND ANOTHER
SAMARAKOON, C.J., WEERARATNE, J., AND WIMALARATNE, J.
SC. APP. 87/81, C.A. 1182/80SEPTEMBER 6, 7 AND 8, 1982
Mines and Minerals Law, No. 4. of 1973, s. 58 — Date of vesting of property- Date of Gazette notification – Construction of deed.
The 2nd respondent was owner of Kahatagaha Mines and the appellant is astatutory Corporation. By Agreement dated 21.4.72 and attested by T. Sri
SC Stale Graphite Corporation v. K.S.P.D. Fernando (Samarukoon, CJ I 685
Ramanathan "the Corporate – shall take over the said mines, equipment andgraphite on certain terms and conditions." Some of which were –
The Graphite Corporation will take over and the Company will hand over
The Company will arrange to hand over and the Graphite Corporation will •take over all uncured, partly cured and cured plumbago.
The Mining Company agrees to accept the terms and conditions which will
be embodied in the proposed legislation Which will cover the acquisition of
The proposed legislation became the Mines and Mineral. Law No. 4 of* 1973,which was certified by the Speaker on.24.2.73. By vesting order dated 18.12.73Kahatagaha Mines were vested in the Corporation.' ;■ ■
The Court of Appeal frimed the questions:
• 1) Did the mines property vest-in the. Corporation;on.21..4.72 upon:executionof the Agreement?
2) Was 21.4.72 the date of vesting of the' property in terms of Section 58(B)(ii)of the Mines and Minerals Act No.4 of-.1973?.
The 2nd respondent asked for Writ of Mandamus on the ground that the appellantwas unduly delaying payment of compensation.
On the construction of the Deed of 21.4.72 it was only an Agreement to.transfer and title to the property passed only upon the Vesting Order dated18.12.73 and not on date of Agreement.
No Writ of Mandamus is due as the time ripe for payment of compensationwill arise only after order of this Court is pronounced.
Case referred to:
Maharaja Mahindra Chandra Nandi v. Raja Durga Prashad Singh A.l.R.1917, PC., 23.
Regina v. National Joint Council for the Craft of Dental Technicians 1 Q.B.704, 708.
APPEAL from judgment of the Court of Appeal.
N. Sinnatamby with Ajantha Cooray for petitioner-appellant.
H. W. Jayewardene, Q.C. with H.L. de Silva, S.A:, and L.C. Seneviratne for2nd respondent-respondent.
Cur. adv, vult.
October 12, 1982.
The appellant in this case is the,State Graphite Corporation (nowknoy/n as the State Mining and Minerals Corporation by virtue ofan order published in Government Gazette No. 25/6 of 26th February,
Sri Lanka Law Reports
(1982) 2 S.L.R.
1979.) The 2nd respondent wds the owner of the property knownas Kahatagaha Mines situated in Kurunegala which at some point of-time became the. property of the appellant. The 1st respondent, whois the Chief Valuer of the State awarded the'2nd respondent a. sumof Rs. 2,923,640/- (award marked P12) as compensation for theproperty. The appellant disputed this valuation'land, applied to theCourt of Appeal for a Writ of Certiorari to quash , the; award P12.The Court of Appeal refused this application. Hence this appeal tothis#Court with the leave of the Court of Appeal. The resolution ofthe dispute on valuation.of the property depends largely on the exactdate on which the Corporation became entitled in law to the property.The Corporation contends that its title accrued on 21st .April 1972upon the execution of agreement marked P2 and the valuation shouldtherefore be based on the audited Balance Sheet dated 22; 11.1971(P6). The 2nd respondent counters that the property' vested irt theCorporation on the 18th December 1973 by virtue of a Vesting Orderof that date made in terms of section 52(1) of the.Mines and MineralsLaw. No.4 of 1972, In the result, he states, the valuation of theproperty should be based on the audited Balance Sheet dated 8.10.73marked Pll. To decide this dispute it is necessary to go back intime to the month of October 1971.
By letter dated October 1971 (marked B) the then Minister ofIndustries and Scientific Affairs wrote to Sir John Kotelawela, ManagingDirector of the 2nd respondent inter alia as follows:
“As you are aware the Government has decided that ownershipof all minerals should be vested in the State and in pursuanceof this objective has also decided that the three graphite minesshould be taken over1 and operated by the State.”
It further stated that Bogala Mines had been requisitioned underEmergency Regulations and would soon be formally vested in theCorporation under the provisions of the Business Acquisition Act.and that the Kolongaha Mines had been voluntarily transferred bythe owners to the Corporation: The Minister indicated that he desiredto have an early discussion towards this declared end. Sir Johnappears to have met and discussed the matter with the Minister onthe 24th.January 1972. Cordial and friendly relations seemed to havecharacterised the discussion and agreement was reached on certainmatters which were incorporated'in the Minister’s letter to Sir Johndated 31st January 1972 (Document A also marked PI). It statesthat the Minister agrees to the “transfer taking effect from 31st
SC Slate Graphite Corporation r. K.S.P.D. Fernando (Samarakoon, C.J.)6$7
March 1972”. Other points of agreement were –
Representatives of the Corporation will commence checkingitems against the inventory as early as possible.
"Engineers and-Technicians of theCorporation will commence
working in the Mine from; then onwards to familiarisethemselves with the work, of the operations.
It wi.ll. be useful if the 2nd. Respondent would make someaccommodation available to these Technicians,i9nd Officers
‘ who .would be working in the'- Mines.
The MihrsteV’ also suggested that exports to buyersVabroad shouldbe taken over early and therefore that all exports should be routedthrough'the Corporation from the middle of February. These twoDocuments marked A and B were subsequently madepart and parcelof the Notarial Agreement. That was the Agreement P2 entered intobetween the Corporation and the 2nd -Respondent andattfested byT. Sri Ramanathan, Notary Public on 21st April 1972;ifArecites thatthe Corporation “shall take over*(he said Mines;1‘Equipment andGraphite” on certain terms" arid7 coflditfons. They are ’inter alia –
“1. The Graphite Corporation will take over arid the Companywill arrange to hand over the Mines morefully describedin the Schedule t6 this Agreements wellas^hand overto the Corporation the said equipment in the annexure‘C’ as well'as the cured and' uncured plumbago lying atthe «aid Mines premises at Kururiegala and at the premisesof the Company in Colombo.'
2. The Company -will; also .arrange to hand, over and thegraphite Corporation will take over..all. uncured,, partly..cured and cured pilumbago not packed for., export and lyingat the Head Office Stores in Colombo as well ^s uncured,plumbago in transit to the said. Stores, from the saidKahatagaha Mines and it is .agreed, the same shall be,valued at the current market value and such, value shall',form part .of. .the,.compensation payable in .terms of ..the-proposed .legislation.,
All.,plymbago,packed-^and:,.ready .for despatch, awaiting'shipment-'shall be,shipped.to.the foreign buyers and, thdmarket value thereof plusFEECs less: .expenses.-connected'with export shall be^ paid to the. Companyv as,, and whensuch, proceeds, are realised..
The mining ^Company shall furnish . the, Corporation >^vithill information pertaining to contracts,Cntered ■info'hy the
0982) 2 S L .lt.
Sri Lanka Law Reports
Company for the supply of plumbago to buyers in Ceylonand abroad, which said contracts will 'be' assigned to theCorporation from the date thereof.
The mining Company agrees to .accept the. terms andconditions which will be embodied in the proposedlegislation which will cover the acquisition of GraphiteMines provided that in the event of the proposed legislationnot being enacted or unduly delayed, the payment ofcompensation will be in accordance with the provisions ofthe law obtaining at the time of the said acquisitionapplicable to the said acquisition..
All plumbago which is on the surface of the ground aswell as all plumbago which is mined but not hoisted tothe surface shall be valued at the current market valueand such value shall form part of the compensation payableto the Company.
10. Both parties shall try to settle any disputes relating to anymatter contained in this Agreement or incidental theretoin good faith and in mutual trust, should the parties,however, fail to arrive at mutually satisfactory settlementthen the same shall be referred to, two Arbitrators, oneto be appointed by each party.”.
The proposed legislation referred to in Clause 5 was presented tothe House of Representatives in the form of a Bill and was, on 18thMay 1972, ordered to be. printed. The.first Republican Constitutioncame into operation bn the.22nd May 1972. The Mines and MineralsLaw No.4 of 1973 based on the Bill was passed by the NationalState Assembly. It was certified by the Speaker on the 24th February1973 and became law. By a Vesting Order (PS) dated -18.12.73, madein terms of section 52(i) of that Law by the Minister,-KahatagahaMines was vested in. the Corporation. The property was fully describedin the Schedule to the Vesting Order. The Board of Directors ofdie Corporation acting in terms of section 64(1) of the said Lawreferred ..the determination of compensation for the vested propertyto the Chief Valuer of the State and he made his award P12. It isundated. He states that the .valuation is made in accordance withthe provisions of section. 58 of the Law on the basis that legal titlewas vested in the Corporation'on 18th December, 1973, by VestingOrder PS.
SC Slate Graphite Corporation v. K.S.P.D. Fernando (Samarakoon. C.J.) 689
The first point of contest relates to the exact date of vesting of. title in the Corporation. The Court of Appeal has framed the relevantquestions thus –
“1. Did the mines property in question vest in the petitionercorporation on 21st April, 1972, upon the execution of P2?
2. Was 21st April, 1972, the date of vesting of the propertyin terms of section 58(B)(ii) of the Mines & Minerals Law?”
The answers to these questions depend mainly on the constructionof the words used in Document P2 and its attendant Documents Aand B. Counsel for the appellant points to the use of the word“transfer” in PI. A transfer was what was intended by the Ministerin January 1972 and that is what was in fact done by P2 in April1972 – so goes the argument. “In construing the terms of a Deed,the question is not what the parties may have intended, but whatis. the meaning of the words which they used” per Lord Parmoor inMaharaja Mahindra Chandra Nandi vs. Raja Durga Prashad Singh (1).
I adopt the same canon of construction. The first ever reference tothis transaction is in Document B written in October 1971 by theMinister to Sir John. It contains in it the words “vested”, requisitioned”and “transferred”. The word “vested!’ in the first paragraph inreference to “ownership” is a clear indication that title would passto the State by statute. How else could title to minerals, whereverthey may exist in the Island, be owned by the State? Ownershiphad to be of minerals traced as well as untraced. The latter kindcould well exist anywhere in the. Island and cannot be acquired byprivate treaty. The next use of the word “vested” is in the secondparagraph of Document B and that expressly states that the vesting.is to take place in terms of- the Business Acquisition Act. It alsomentions that Kolongaha Mines had been voluntarily transferred byits owners to the Corporation. This may be a transfer of possessionpending vesting thereby obviating a requisition, or it may be a transferof title. There is no clarification of this either in the document orin the evidence. It is probably the former because that is consonantwith the declared intention of vesting title in the State not only ofall minerals but also of the three major graphite mines. The mannerof implementing this decision was left open for discussion. Thatdiscussion took place on the 24th January, 1972. Document PI of31st January, 1972, incorporates matters discussed and agreementsreached. In it the Minister refers to the fact that there has beensome “delay, in the taking over” of the Kahatagaha Mines and..indicates his agreement" to the transfer taking effect.from the 31stMarch 1972.” Counsel for the Corporation' laid great stress on the
690Sri Lanka Low Reports(198& r s.'L.R.
word “transfer" and contended that PI read with P2 passed title in.the mines to the Corporation. The words “taking over” and “transfer”in Pl.both refer to the same transaction. That transaction is evidencedby-Document P2. It is- significant that in P2 the word “transfer”does fioff6ccur. It is not characterised as a “Deed of Transfer” ora “Deed-Of'Sa‘te*V>'.It expre&ly; states that it is an “AGREEMENT”between the pertiesl*-Nowhere does if use the words “vendor” and“purchaser” of the words *fsale” and “purchase”. A habendum clauseis non-existent. Counsel stated that Clause 1 of-the conditions setout in P2 replaces the habendum clause and has achieved the sameobject of-passing title. It states that the Corporation “will take over'and the Company will arrange to hand over” the. mines, mineralsand equipment referred to therein. (The emphasis is mine.) Themines are described in the schedule and Comprise immovable property.The term “hand over” is not necessarily a legal term. -In the Englishlanguage it means “succeed to possession or control ofThat is-justwhat it means in this clause and the Company agrees—to makearrangements to give such possession and control. Such words cannotpass title. There are other features which militate against the assertionthat it is a Document of title. P2 is stamped as an agreement andnot as a Deed of. Sale. Counsel for the Corporation argued that itcould not be stamped on the price to be paid for the property asthat was to be ascertained later according to Clause S. If so thenthe law required it to be stamped on the market value. Clause S ofP2 expressly refers to acquisition of Graphite Mines in the proposedlegislation. Clauses. 2, 8 and 9(b) provide for the payment “ofcompensation payable under the proposed legislation”'. “Acquisition”and “Compensation” are the very antithesis of “voluntary transfer”and “sale price”. The former.^category flows from the unilateralexercise of State power while the latter flows from consent andmutual agreement. It is the practice in* Sri Lanka for the vendee'sNotary to attest the Deed of Transfer*after examining title. P2'isattested by the Company’s Notary and nowhere is there a warrantyof title. One must bear in mind that the Notary-who attested'thisAgreement Was at the time- a very senior practitioner with manyyears of experience of notarial work' Counsel'for-the Corporationargued that if it was only a-transfer of possession then some kindof payment would have been stipulated for the exploitation of themine by the Corporation until the date of vesting. This is a plausibleargument but considering the fact that compensation was to be paid“in terms of the proposed legislation” and the fact that the Company
'SC Slate (Iraphite Corporation r. K.S.I' 1) Fernando (Samarakoon. C J.)691
agreed to "accept the terms and conditions which will be embodiedin the proposed legislation which will cover the acquisition of GraphiteMines" and also the provision for arbitration in case of dispute, thisargument is not a tenable one. The Company may well have expectedthis aspect of the matter to be covered by the proposed legislation.Counsel for the Corporation submitted that Clause 5 of P2 merelyindicated the mode of assessing the value payable and nothing more.
I cannot agree. It bound the Company to abide by all the termsaqd conditions of the proposed,,, legislat;on relating to acquisi-tion ..of Graphite Mines. That – legislation lid see the light of dayin.;th,e Mines .and, ,thej,Minerals. Law No.4 of 1973. That law provid-ed,, for 'acquisition ,by .Vesting Order which was the declaredintention of the Government as stated in Document B. A VestingOrder dated 18th December, 1973, under the hand of the Ministerin terms of section 52(1) of the Law vesting the property of theCompany with effect from 18.12.1973 was published in the GovernmentGazette (P5). Counsel stated that this was to clear the title acquiredon P2, of encumbrances. It nowhere states so. On the contrary, itvests in the Corporation the identical property described in theSchedule to P2. The Minister cannot by Vesting Order vest in- theCorporation its own title. If it was meant to release encumbrancesthen such an exercise was an abuse of power and in fraud of thestatute. P2 will not stand the test in an action ret vindicatio. It willfail miserably in contest in a partition action. The assessment ofcompensation was referred to the Chief Valuer by the Board ofDirectors' of the Corporation acting in terms of the provisions ofsection 64(1) of the Law. If it was an arbitration in terms of P2then there would have been a joint reference to arbitration uponagreed terms. The Chief Valuer proceeded to' rriake the award uponthe power vested in him by section 64(1)" of the Law. He was astatutory arbitrator performing duties of a judicial character. That isthe reason’for this application for a Writ of Certiorari. If he wasacting as a private arbitrator upon consent and mutual reference bythe contending parties a Writ of Certiorari cannot'lie and could nothave been applied for at all. Such an arbitrator is a "private Judge”set up by parties to a dispute. Vide Regina vs. * National JointCouncil for the Craft of Dental Technicians (2). Both partieshave acted on the basis that the property was vested on VestingOrder- P5. I reject the oootention that title passed on P2 and I holdthat title passed to the Corporation upon the Vesting Order, datedU-l 18.12.1973(P5) and not on.Agreement ,P2.rri
692Sri Lanka Law Reports(1982) 2 S.L.R.
Questions 4(a) and (b) and Question S posed by the Court ofAppeal are questions of fact and we ruled them out at the commencementof the hearing. The Court of Appeal has held that Pll is the genuineBalance Sheet for the period ending 31st March, 1972. It has rejectedthe Balance* Sheet PS. The 2nd respondent will therefore be entitledto a sum based on the nett Book Value reflected therein. I thereforeuphold the 1st respondent’s award of compensation in a sum ofRs.3,732,094/74 cts.
The only other matter that this Court need rule on is the counterapplication of the 2nd respondent praying for a Writ of Mandamusto issue on the petitioner to comply with the provisions of section64(3) and (4) of the Mines and Minerals Law. This. application isbased on the averments in para 31 of the petition of the 2ndrespondent which reads as follows:
“31. the property of the 2nd respodent Company wastaken over by the Petitioner. Corporation at the instanceof the then Government on 1st April 1972 with a promise .. of prompt payment of compensation. The PetitionerCorporation continues to deliberately delay the payment,of the above and avoids the performance of. its legal andequitable obligation- whilst taking the income from theMines which were in the first instance voluntarily handedover to the Government bn a promise of expeditiouspayment of compensation.”
The 2nd respondent .therefore prays for the issue of Writ of.Mandamus directing the petitioner-
“(i) to communicate in writing to the 2nd respondent Companythe determination of compensation made by the 1st respondentin compliance with section 64(3) of the Mines and MineralsLaw No.4 of 1973, and
(ii) to forthwith publish the Notice as required under section64(4) of the said Law and to promptly and duly pay to thisrespondent Company the compensation as assessed by the ,1strespondent with interest.”
Although the Documents disclose an undertaking to pay compensationaccording to the proposed Statute Law I cannot find in them apromise of prompt payment upon the award being made. The statuteitself provides for further acts after the award. The provision thatpayment can only be made after the manner stipulated by the Ministerin consultation with the Minister of Finance must necessarily militate
SC Stale Graphite Corporation v. K.S.P.D. Fernando (Samurakoon, C.J.)693
against prompt payment. Indeed no payment of any kind can bemade until this Minister makes up his mind on the mode of payment.The allegation that the Corporation “continues to deliberately delaypayment of the (compensation) above and avoids the payment of itslegal and equitable obligation" is unfounded. The Corporation wasexercising a legal right in seeking a remedy in the Court of Appealand this application cannot in any event be characterised as a frivolousone. Till this application is finally decided the award of compensationis not a final one. Once the order of this Court is pronounced thetime will be ripe for the performance of the duty cast by section63(3). No duty arises till then. Payment of money with interest fromdate of accrual of compensation jn terms of sections 61 and 62 willfollow. I therefore set aside the Order for the issue of a Writ ofMandamus.
The finding that the appellant was lacking in uberimma fides andfailed to disclose material facts is not justified and I would thereforeformally set it aside. For the reasons hereinbefore stated I woulddismiss the appeal with costs.
WEERARATNE, J. – I agree.
W1MALARATNE, J. – I agree.
Appeal dismissed but
Order to issue Mandamus set aside.
STATE GRAPHITE CORPORATION v. K. S. P. D. FERNANDO AND ANOTHER