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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2537 OF 2017

M/s. Geomysore Services (I) Pvt. Ltd.  & Anr.              …. Appellant(s)

Versus

M/s. Hutti Goldmines Co. Ltd. & Ors.      … Respondent(s)

With

CIVIL APPEAL NO. 2538 OF 2017

J U D G M E N T

Deepak Gupta J.

1. What is the role and power of the Central Government

while  dealing  with  the  request  of  a  State  Government  for

reservation  of  lands  for  government  companies  or

corporations owned and controlled by the State Government

under section 17A (2) of the Mines and Minerals (Development

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and Regulations)  Act,  1957 (hereinafter  referred  to  as  “the

Act”), is the main issue involved in this case.

THE FACTUAL BACKGROUND

2. This case has a long and chequered history. There are

gold mines in the State of Karnataka and parties are litigating

in respect of their rights to exploit those mines. We have two

appellants  before  us,  M/s.  Geomysore  Services  (India)  Pvt.

Ltd., Appellant No.1 (hereinafter referred to as “Geomysore”)

and Deccan Gold Exploration Services Pvt. Ltd., Appellant No.

2 (hereinafter referred to as “Deccan”).

3. On  01.04.2000  Geomysore  applied  for  grant  of

Reconnaissance  Permit  (for  short  ‘RP’)  for  315 sq.  kms.  of

land in Hutti South Belt Gold Mines area.  After approval by

the Central Government, the State Government granted RP on

03.11.2000 for a period of  3 years.  Similarly,  Deccan was

granted RP in Northern part of Hutti Gold Mines for an area

measuring  501.48  sq.  kms.  for  a  period  of  3  years  on

09.01.2003 after completing all formalities.  The respondent

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no. 1 i.e. M/s Hutti Gold Mines Co. Ltd. (hereinafter referred

to as “HGML”) did not file any application for grant of RP for

either of the two areas.

4.  Geomysore  conducted  the  reconnaissance  and

submitted  a  consolidated  report  on  30.11.2003.   Deccan

submitted its consolidated report on 21.04.2006.  Both the

Companies found evidence to suggest  the existence of  gold

deposits and need to carry out further prospecting in certain

areas.   On the  basis  of  the  results  of  the  reconnaissance,

Geomysore  filed  4  applications  for  grant  of  Prospecting

Licence (for short ‘PL’) under Section 11(1) of the Act.  Deccan

filed 7 applications for  grant of  PL with regard to the area

where it had conducted reconnaissance.   

5.    On 28.11.2006, HGML sent a letter to the Commissioner,

Geological Resources Development and Director, Department

of  Mines and Geology,  Bangalore praying for  reservation of

area  for  the  purpose  of  conservation  exclusively  for  public

sector undertakings under Section 17A(2) of the Act.  It was

stated  that  HGML  was  keen  to  continue  prospecting

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investigations in the area in question. It was submitted that

grant of Mining Lease (for short ‘ML’) to different organizations

would create severe problems including safety hazards and as

such it was prayed that the entire area, including the area for

which RP had been granted to Geomysore and Deccan,  be

reserved under  Section 17A(2)  of  the  Act.   It  appears  that

Geomysore came to know about this proposal and it sent a

letter  on 28.11.2006 itself  to  the Government  of  India and

opposed the contemplated action of the State of Karnataka to

forward a proposal to the Ministry of Mines for reservation of

the mining area.  

6. In  the  meantime,  two  other  developments  took  place.

The Ministry of Mines published the National Mineral Policy,

2008  (for  short  ‘the  NMP  2008’)  and  the  Government  of

Karnataka released the Karnataka Mineral Policy, 2008 (for

short  ‘the  KMP,  2008)  in  consonance  with  NMP,  2008  to

which we shall advert later.   

7. On 27.12.2008, the Government of Karnataka wrote to

Government of India for reservation of area in favour of HGML

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and recommended that 161 sq. kms. of land be allocated to

HGML for mining.  This covered the areas for which RPs had

been  granted  to  Geomysore  and  Deccan  and,  therefore,

Geomysore  and  Deccan  filed  revision  petitions  before  the

Central Government.  The main challenge to the decision of

the State Government was that the appellants were entitled to

preference while considering their application for grant of PL

and also their PL applications have been filed earlier in time.

It  was also urged that in terms of the NMP, 2008 and the

KMP,  2008  reservation  could  not  be  made.   The  Central

Government allowed the revision petitions and directed the

State  of  Karnataka to consider the PL applications filed by

Geomysore as well as Deccan.   

8. Thereafter, HGML filed a writ petition in the Karnataka

High Court.  The High Court held that the reservation of the

area  had  not  yet  taken  place  and  since  the  Central

Government was still to take a decision on the request of the

State Government, it was not necessary to determine whether

the  preferential  right  claimed  by  Geomysore  and  Deccan

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under Section 11 of the Act could defeat the right of the State

Government  to  seek  reservation  of  the  area  under  Section

17A(2)  of  the  Act.   The  High  Court,  after  considering  the

judgment of this Court in the case of Indian Charge Chrome

Ltd. & Anr. v. Union of India & Ors.1 held as follows:

“10.  Having held so, the Hon’ble Court has further held  that  the  power  under  Section  17A(2)  is  the statutory  power  and  normally  there  could  be  no estoppel against the exercise of statutory power and upheld the recommendation of the State Government seeking for approval of the Central Government.  It is clear that, in the instant case, the undisputed fact is that  the  contesting  respondents  in  any  event  have not been granted the prospecting licence or mining lease and as such the area in question is not the one which is already held under a prospecting licence or mining lease.  Therefore, if the above decision is kept in  view,  the  State  Government  was  well  within  its powers to seek approval of the Central Government to reserve  the  area  in  question.   In  any  event,  the Central  Government  before  granting  its  approval would have to consider all these aspects of the matter and  any  such  consideration  by  the  Central Government  could  not  have  been  stifled  by  the contesting  respondents  in  the  form  of  revision application and the revision authority was also not justified in interfering.  The preferential right claimed by the contesting respondents cannot be accepted at this stage and a direction could not have been issued to  consider  the  applications  of  the  contesting respondents  by  setting  aside  the  communication dated 27.12.2008.  The appropriate procedure would be to allow the Central Government to take a decision on the approval sought by the State Government by its communication dated 27.12.2008.  Thereafter, the consideration  or  otherwise  of  the  applications  for prospecting licence by any other person including the contesting respondents would arise depending on the

1  (2006) 12 SCC 331

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result  of  such  consideration  by  the  Central Government.   If  for  any  reason,  the  Central Government does not accede to the proposal of the State  Government  and  in  such  situation  if  the applications remain open for consideration, then and only  then  the  question  of  preferential  right  would arise for consideration.”

9. Consequently,  the  orders  passed  by  the  Central

Government were set aside and the matter was remanded to

the  Central  Government  to  take  decision  on  the

recommendation  made  by  the  State  Government  with  a

direction to dispose of the same in accordance with law.  The

Central  Government  examined  the  matter  and  rejected  the

proposal  of  the  State  Government  for  reservation  of  land

under Section 17A(2) of the Act for Government undertakings.

The order notes that Geomysore and Deccan had already filed

PL applications after completing reconnaissance pursuant to

the  RPs  granted  to  them.  Instead  of  dealing  with  the  PL

applications of Geomysore and Deccan, the State Government

suddenly  decided  to  make  a  request  to  the  Central

Government  to  reserve  the  land.   The Central  Government

held that the action of the State Government is against the

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stated purpose of Para 3.3 of the NMP, 2008 which provides

that  there  should  a  regulatory  environment  conducive  to

private investment; that the procedure for grant of concession

should  be  transparent  and  seamless  transition  shall  be

guaranteed to the concessionaires; that the action of the State

Government was not transparent or fair; that land could only

be reserved where private players are not holding the land or

have  not  applied  for  exploration  or  mining  unless  security

considerations or specific public interests are involved; that

since Geomysore and Deccan had completed their RPs and

applied for seamless transition to PL, the proposal of the State

Government   to  reserve  the  land  in  favour  of  HGML  was

neither in public interest nor in terms of the NMP, 2008 and,

therefore, proposal of the State Government to reserve land

was  rejected  and  again  a  direction  was  issued  that  the

request  of  Geomysore  and  Deccan  for  grant  of  PL  be

considered expeditiously.   

10. HGML then filed  another  writ  petition challenging  the

order  of  the  Central  Government  dated  31.05.2011.

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Geomysore and Deccan filed a joint reply in the writ petition

and  the  High  Court  allowed  the  writ  petition  vide  the

impugned judgment, which is under challenge before us.  

11. The main factor which weighed with the High Court in

allowing the writ petition was that whereas under Section 11

of  the  Act,  a  party  which  had  carried  out  reconnaissance

pursuant  to  RP,  was  entitled  to  preference  at  the  time  of

granting  PL,  under  Section  17A(2)  of  the  Act,  the  words

“reconnaissance  permit”  do  not  find  mention.   The  Court

further held that in its earlier judgment dated 18.02.2011, it

had  been  held  that  while  taking  a  decision  under  section

17A(2) of the Act, the preferential right under Section 11 of

the Act had no role to play and, therefore, the claim of the

State  Government  could  not  be  defeated  on  this  ground.

Since the judgment had attained finality, the matter should

not be reopened.  It further held that the NMP, 2008 cannot

overrule the provisions of Section 17A of the Act. The Court

further held that the policy has to give way to the statutory

provisions.  It was held that the second order passed by the

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Central  Government  contains  the  same  flaws  which  were

there  in  the  earlier  order  and  hence  the  writ  petition  was

allowed and the order of the Central Government refusing to

reserve the land was quashed.

THE LEGAL PROVISIONS

12. At the outset, we may point out that as far as this case

is  concerned,  we  are  dealing  with  the  Act  prior  to  its

amendment in the year 2015.  Sub-sections (ha) and (hb) of

Section 3 of the Act were introduced w.e.f.  18.12.1999 and

define  ‘reconnaissance  operations’  and  ‘reconnaissance

permit’ respectively.  The same read as follows:

“(ha) “reconnaissance  operations”  means  any operations undertaken for preliminary prospecting of a  mineral  through  regional,  aerial,  geophysical  or geochemical  surveys  and  geological  mapping,  but does  not  include pitting,  trenching,  drilling  (except drilling of boreholes on a grid specified from time to time  by  the  Central  Government)  or  sub-surface excavation;

(hb) “reconnaissance  permit”  means  a  permit granted  for  the  purpose  of  undertaking reconnaissance operations;”

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13. A  reconnaissance  permit  allows  the  permit  holder  to

carry  out  reconnaissance  operations.   A  reconnaissance

permit holder carries out operations to determine whether the

area is fit for mining only by way of non-invasive techniques,

except  for  some minimal  drilling.  Normally,  reconnaissance

permits are granted for huge areas of land.   

14. Sub-sections (g)  and (h) of  Section 3 of  the Act define

‘prospecting licence’ and ‘prospecting operations’ respectively.

The same read as follows:

“(g) “prospecting licence” means a licence granted for the purpose of undertaking prospecting operations;

(h)  “prospecting  operations”  means  any  operations undertaken for the purpose of exploring, locating or proving mineral deposits;”

15. Normally,  after  reconnaissance is  done,  a party would

determine  which  is  the  best  part  of  the  huge  area  fit  for

prospecting to determine with greater exactitude the location

of mineral deposits.  Thus, PL is granted for an area which is

much less  than that  of  the  RP area.   During  prospecting,

invasive methods can be used to the extent allowed under law

for determining the extant mineral deposits and whether they

can be exploited commercially.

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16. After  prospecting is  done,  comes the stage of  grant of

mining   lease.  ‘Mining lease’ and  ‘mining  operations’   are

defined  in sub-sections  (c)  and (d)  of  Section 3  of  the  Act

respectively.  The same read as under:

“(c)  “mining  lease”  means  a  lease  granted  for  the purpose  of  undertaking  mining  operations,  and includes a sub-lease granted for such purpose;

(d)  “mining  operations”  means  any  operations undertaken for the purpose of winning any mineral;”

17.   Investments  during reconnaissance  or  prospecting are

very large.  These are not small  investments.   Therefore,  a

person who had conducted reconnaissance is given preference

for grant of PL and a person who had conducted prospecting

is given preference while being considered for grant of ML.  In

this behalf we may refer to Section 11 (1) of the Act which

reads as follows:  

“11. Preferential right of  certain persons.-  (1) Where  a  reconnaissance  permit  or  prospecting licence has been granted in respect of any land, the permit holder or the licensee shall have a preferential right  for  obtaining  a  prospecting licence or  mining lease, as the case may be, in respect of that land over any other person:

Provided  that  the  State  Government  is  satisfied that the permit holder or the licensee,  as the case may be,-

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(a)has  undertaken  reconnaissance  operations  or prospecting  operations,  as  the  case  may  be,  to establish mineral resources in such land;

(b)has  not  committed  any  breach  of  the  terms  and conditions  of  the  reconnaissance  permit  or  the prospecting licence;

(c)          has not become ineligible under the provisions of this      Act; and  

(d)has not failed to apply for grant of prospecting licence or  mining  lease,  as  the  case  may  be,  within  three months after the expiry of reconnaissance permit or prospecting  licence,  as  the  case  may  be,  or  within such further period as may be extended by the said Government.”

18. The purpose of the aforesaid Section is that in view of

the  money,  effort  and  time  spent  in  undertaking

reconnaissance or prospecting operations and preparation of

detailed  reports  of  the  mineral  discoverable  or  likely  to  be

discovered pursuant to such operations, such RP or PL holder

would get a preferential right for undertaking the next stage of

operations.

19. Section17A of the Act reads as follows:

“17A.  Reservation  of  area  for  purposes  of conservation.- (1) The Central Government, with a view to conserving any mineral and after consultation with the State Government, may reserve any area not already held under any prospecting licence or mining lease  and,  where  it  proposes to  do so,  it  shall,  by notification  in  the  Official  Gazette,  specify  the boundaries of such area and the mineral or minerals in respect of which such area will be reserved.

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(1A) The  Central  Government  may  in consultation with the State Government, reserve any area not already held under any prospecting licence or  mining  lease,  for  undertaking  prospecting  or mining operations through a  Government  company or corporation owned or controlled by it, and where it proposes  to  do  so,  it  shall,  by  notification  in  the Official Gazette, specify the boundaries of such area and the mineral or minerals in respect of which such area will be reserved.]

(2) The  State  Government  may,  with  the approval of the Central Government, reserve any area not  already  held  under  any  prospecting  licence  or mining lease, for undertaking prospecting or mining operations  through  a  Government  company  or corporation owned or controlled by it  and where it proposes  to  do  so,  it  shall,  by  notification  in  the Official Gazette, specify the boundaries of such area and the mineral or minerals in respect of which such areas will be reserved.   

(3) Where in exercise of the powers conferred by sub-section  (1A)  or  sub-section  (2)  the  Central Government  or  the  State  Government,  as  the  case may be, undertakes prospecting or mining operations in any area in which the minerals vest in a private person,  it  shall  be  liable,  to  pay  prospecting  fee, royalty, surface rent or dead rent, as the case may be, from time to time at the same rate at which it would  have  been  payable  under  this  Act  if  such prospecting  or  mining  operations  had  been undertaken  by  a  private  person  under  prospecting licence or mining lease.”   

20. Though, in this case we are dealing mainly with Section

17A(2),  we feel  that it  would be appropriate  to analyze the

provisions  of  the  various  parts  of  Section  17A  of  the  Act.

Under Section 17A(1), the Central Government has the power

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to  reserve  any  area  to  conserve  any  mineral.  The  Central

Government has to exercise this power after consultation with

the State Government.  There is, however, one caveat, which

is, that if a PL or ML for the said area is held by any person

then the Central Government cannot reserve the area.  Under

sub-section (1A) of Section 17A, the Central Government has

similar power to reserve areas for undertaking prospecting or

mining  operations  through  Government  companies,  but

again, such areas should not have been held under any PL or

ML.  As far as Section 17(2) is concerned, this provision gives

power to the State Government to reserve an area not held

under  a  PL  or  ML  for  prospecting  or  mining  by  State

Government owned companies.  However,  this can be done

only  with the approval  of  the Central  Government  and the

area so reserved should be notified in the official gazette along

with the mineral and minerals for which the area has been

reserved.   Though  we  are  not  directly  concerned  with

sub-section (3) of Section 17A of the Act in this case, the said

sub-section provides that where the Central Government or

the  State  Government,  as  the  case  may  be,  undertakes

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prospecting  or  mining  operations  in  any  area  in  which

mineral  vests  in  the  private  person,  then  the  Central

Government  or  the  State  Government  concerned  shall  be

liable to pay prospecting fee, royalty, surface rent, dead rent

etc..

21. We may also, at this stage, refer to Section 2 of the Act,

which reads as follows:

“2.  Declaration  as  to  the  expediency  of  Union control. – It is hereby declared that it is expedient in the public interest that the Union should take under its  control  the  regulation  of  mines  and  the development  of  minerals  to  the  extent  hereinafter provided.”

CONTENTIONS

22.  Mr. Maninder Singh, learned Additional Solicitor General

appearing  for  the  Union  of  India,  submitted  that  Section

17A(2) of the Act empowers the State Government to reserve

any area not held under PL or ML for any State Government

undertaking.  However, this is subject to the prior approval of

the Central Government.  It is his contention that the State

Government cannot reserve an area (not held under a PL or

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ML)  without  obtaining  the  prior  approval  of  the  Central

Government.  He  further  submits  that  the  Central

Government,  while  considering  the  request  of  the  State

Government, has to apply its mind independently and while

dealing with the request, it  can take into consideration the

mineral policy.  Therefore, according to him, the High Court

erred  in  holding  that  the  Union  could  not  take  into

consideration the parameters set out in the mineral  policy.

According to him, the absence of the words ‘reconnaissance

permit’  from Section  17A(2)  of  the  Act  only  indicates  that

whereas for those areas for which PL or ML has been granted,

there is an absolute bar, but where only RP is granted, there

is no bar and the State Government can, with the approval of

the Central Government, reserve that area.   

23. Ms. Meenakshi Arora, learned senior counsel appearing

for  the  appellants adopted the arguments  of  Mr.  Maninder

Singh,  but  she  also  urged  that  in  view  of  the  huge

investments required to be made by the RP holder, it is his

legitimate  expectation under  Section 11 of  the  Act  that  he

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would get the PL.  She further submits that HGML had not

submitted any application for grant of RP or PL.  Therefore,

the  applications  of  Geomysore  and  Deccan  being  prior  in

time,  should  have  been  considered.   She  has  referred  to

various  provisions  of  the  Act  both  prior  to  and  after  its

amendment in the year 2015 to emphasize that the intention

of the Government is to encourage private investment in the

industry and to ensure that such private investors are not left

in lurch after investing huge amount and there is seamless

transition  from the  stage  of  reconnaissance  to  prospecting

and then to mining.

24.  Mr.  Basava  Prabhu  S.  Patil,  learned  senior  counsel

appearing for the State of Karnataka, submitted that it is the

State which is the owner of the minerals and keeping in view

the  federal  structure  of  our  country,  the  Union  cannot

override the power of the State.  According to him, Section 2

of the Act does not empower the Union to reject the claim of

the State Government on grounds which are not provided for

in  the  statute  itself.   He  also  submits  that  the  judgment

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rendered  by  the  Karnataka  High  Court  in  the  first  Writ

Petition No.39969/39970 of 2010 decided the issues between

the parties and that will operate as res-judicata.  He submits

that in the earlier judgment the High Court had clearly held

that the preferential right claimed by Geomysore and Deccan

cannot  override  the  power  of  the  State  Government  under

Section 17A(2) of the Act.  He submits that the grounds taken

in  both  the  orders  passed  by  the  Central  Government  are

virtually  identical.   According  to  him,  since  the  words

‘reconnaissance  permit’  have  been  omitted  from  Section

17A(2)  of  the  Act,  the  Central  Government  could  not  have

rejected the claim of the State Government on grounds which

are directly related to the fact that Geomysore and Deccan

had  carried  out  reconnaissance  in  furtherance  of  such

reconnaissance  permit.   He further  submits  that  the NMP,

2008 was not binding and has made reference to clause 3.2 of

the NMP, 2008, which indicates that what is set out in the

policy  are  the  goals   and  that  the  Act,  the  Mineral

Concessions Rules and the Mineral Concessions Development

Rules will  be amended in line with the policy.  He submits

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that  these  amendments  took  place  in  the  year  2015  and,

therefore, the policy could not have been resorted to by the

Central Government to reject the claim of the State.   

25. Mr. C.U. Singh and Mr. Jaideep Gupta, learned senior

counsel,  appearing  on behalf  of  HGML,  submit  that  before

Geomysore and Deccan were granted RP, HGML had already

done a lot of work in the area.  According to them, after the

amendment  of  the  Act,  now  these  mines  can  only  be

auctioned.  Reliance has been placed on Para 160 of Monnet

Ispat & Energy Ltd.  v. Union of India & Ors2. case.  It was

urged that the factors taken into consideration by the Central

Government  while  rejecting  the  proposal  of  the  State

Government were not relevant factors.  According to them, the

right of the State to reserve area under Section 17A(2) flows

from the paramount right of the State as owner of the land

and minerals.

THE ISSUES

2   (2012) 11 SCC 1

21

26. There  are  four  main  questions  which  need  to  be

answered:

(i) Whether the State Government being the owner of land

and minerals can claim that its proposal to reserve such land

for  exploitation of  minerals  by  its  undertakings  is  virtually

binding on the Central Government?

(ii) What are the considerations which can weigh with the

Central Government while dealing with a request of the State

Government for reservation of land under Section 17A(2) of

the Act?

(iii)  Whether  Section  11(1)  and  Section  17A(2)  of  the  Act

operate in totally separate spheres and what is the effect of

the  right  of  preference  granted  to  RP  holder  in  terms  of

Section 11(1)  of  the Act while dealing with a matter  under

Section 17A(2) of the Act?

(iv) Whether, in the present case, the Central Government is

justified in rejecting the proposal of the State of Karnataka?

22

27. The Act was initially enacted as the Mines and Minerals

(Regulation and Development) Act (for short ‘the MMRD Act’).

At that time,  there was no Section 17A in the MMRD Act,

which was later introduced w.e.f. 10.02.1987.  Section 17 of

the  MMRD  Act  dealt  with  those  lands  in  which  minerals

vested with the State Government.  Under sub-section (2), the

Central Government was empowered to carry out prospecting

or mining operations in any area not already held under any

PL  or  ML.   This  could,  however,  be  done  only  after

consultation  with  the  State  Government  concerned.

Therefore,  Section  17  of  the  MMRD  Act  empowered  the

Central  Government  to  undertake  prospecting  operations.

Vide Act 38 of 1999 the name of the MMRD Act was changed

from ‘The Mines and Minerals (Regulation and Development)

Act’ to ‘The Mines and Minerals (Development and Regulation)

Act’ w.e.f. 18.12.1999.  By the same Act, in Section 17 of the

Act, the words ‘reconnaissance’ and ‘reconnaissance permit’

were introduced w.e.f. 18.12.1999.  Prior to that, there was no

concept of reconnaissance.  Under the provisions of the Act,

prior  to  the  introduction  of  Section  17A,  there  was  no

23

statutory provision which empowered the State Government

to reserve any land.  However, under the Mineral Concession

Rules, 1960, (hereinafter referred to as the ‘Rules’) there was

a provision in Rule 58, empowering the State Government to

reserve  such  lands.   After  Section  17A was  introduced  on

10.02.1987,  Rule  58  was  omitted  on  13.04.1988.   We  are

pointing out these facts because some of the judgments cited,

being prior to introduction of Section 17A, have to be read in

the context of Rule 58 of the Rules.

28. In  Amritlal  Nathubhai  Shah  and  Others v.  Union

Government of India and Another  3,  this Court held that

the State being the owner of the land, was entitled to reserve

the  land  and,  therefore,  was  justified  in  rejecting  the

applications  of  the  private  parties.   This  judgment  was

delivered in the context of Rule 58 of the Rules, as it existed

at that time.

29.  In  State of T.N. v.  M/s Hind Stone and Others  4, the

State of Tamil Nadu formulated the Tamil Nadu Minor Mineral

3  (1976) 4 SCC 108 4  (1981) 2 SCC 205

24

Concession Rules.  Under Rule 8-C, the right to quarry black

granite, a minor mineral, was reserved in favour of the State

Government and its Corporations etc..   The validity of  this

Rule was challenged on various grounds including the ground

that  the  MMRD  Act,  1957  did  not  empower  the  State

Government to make such a reservation.  This Court rejected

this submission on the ground that the State was the owner

of the land and minerals and also that minor minerals vest in

the State Government.  The Court held as follows:

“6.     Rivers,  Forests,  Minerals  and  such  other resources constitute a nation’s natural wealth.  These resources are not to be frittered away and exhausted by any one generation.  Every generation owes a duty to all succeeding generations to develop and conserve the natural resources of the nation in the best possible way.   It  is  in the interest  of  mankind.   It  is  in the interest of the nation………………  In the case of minor minerals,  the  State  Government  is  similarly empowered,  after  consultation  with  the  Central Government.   The  public  interest  which  induced Parliament  to  make  the  declaration  contained  in Section 2 of the Mines and Minerals (Regulation and Development)  Act,  1957,  has  naturally  to  be  the paramount consideration in all matters concerning the regulation of mines and the development of minerals. Parliament’s  policy  is  clearly  discernible  from  the provisions of the Act.  It is the conservation and the prudent  and discriminating  exploitation  of  minerals, with  a  view  to  secure  maximum  benefit  to  the community.   There  are  clear  signposts  to  lead  and guide  the  subordinate  legislating  authority  in  the matter of the making of rules.  Viewed in the light shed by the other provisions of the Act, particularly Sections

25

4-A, 17 and 18, it cannot be said that the rule making authority under Section 15 has exceeded its powers in banning leases for quarrying black granite in favour of private  parties  and  in  stipulating  that  the  State Government  themselves  may  engage  in  quarrying black  granite  or  grant  leases  for  quarrying  black granite in favour of any corporation wholly owned by the State Government…….”

It would be pertinent to point out that in this very case this

Court, in the opening para, held as follows:

“……..It  is  now common ground between the parties that as a result of the declaration made by Parliament, by  Section  2  of  the  Act,  the  State  legislatures  are denuded of  the whole  of  their  legislative  power  with respect  to  regulation  of  mines  and  mineral development  and that  the  entire  legislative  field  has been taken over by Parliament……”

30. It  would  also  be  pertinent  to  point  out  that  both

Amritlal  Nathubai  Shah (supra)  and  Hind Stone (supra)

were decided before the introduction of  Section 17A in the

Act.  

31.  In  Indian Metals and Ferro Alloys Ltd.  v.  Union of

India & Ors.5, this Court was dealing with Section 17A of the

Act.   Following observations are pertinent:

5  1992  Supp.(1 ) SCC 91

26

“46. Before leaving this point, we may only refer to the position after 1986. Central Act 37 of  1986 inserted sub-section (2) which empowers the State Government to reserve areas for exploitation in the public sector. This  provision differs  from that  in  Rule  58 in some important respects—

(i)  the reservation requires the approval  of  the C.G.;

(ii)  the  reservation  can  only  be  of  areas  not actually held under a PL or ML;

(iii) the reservation can only be for exploitation by  a  government  company  or  a  public  sector corporation (owned or controlled by the S.G. or C.G.) but not for exploitation by the government as such.

Obviously,  Section  17-A  (2)  and  Rule  58  could  not stand together as Section 17-A empowers the S.G. to reserve only with the approval of the C.G. while Rule 58  contained  no  such  restriction.  There  was  also  a slight difference in their wording…..”

32. In State of T.N. v. M.P.P. Kavery Chetty6, dealing with

Section 17A(2) of the Act, this Court held as follows:

“15………Section  17-A(2)  applies  when  an  area  is sought  to  be  reserved  by  the  State  Government  for undertaking mining operations exclusively through a Government company or corporation. When such area is notified the mineral or minerals in respect of which it  is  notified  must  also  be  stated.  Such  reservation cannot be made without the approval of the Central Government…….”

33. The High Court has placed reliance on a judgment of

this  Court  delivered  by  a  three-Judge  Bench  in  Indian

6  (1995) 2 SCC 402

27

Charge Chrome (supra).  Dealing with the interplay between

Section 11 and Section 17A of  the Act,  this  Court held as

follows:

“16. As we see it, the power under Section 17-A is an independent power. It is not related to the power available under Section 11 of the Act. It is open to the Central  Government  to  reserve  an  area  in  terms  of Section 17-A(1) if it is thought expedient and it is in the interests of the nation or that it  is necessary to conserve  a  particular  metal  or  ore  or  the  area producing it. It is also open to the Central Government to  decide  that  such  area  should  be  exploited  by  a company or corporation owned or controlled by it. Of course,  that  situation  has  not  arisen  in  this  case. Under  sub-section  (2)  of  Section  17-A,  with  the approval  of  the  Central  Government,  the  State Government  may  reserve  any  area  not  already  held under  any  prospecting  licence  or  mining  lease  for undertaking  the  exploitation  through  a  government company or corporation owned or controlled by it and on fulfilling the conditions referred to in sub-section (2) and in an appropriate case, also the conditions of sub-section (3).  Again,  the  exercise  of  power  by  the State  Government  under  sub-section  (2)  of  Section 17-A  has  no  reference  to  the  entertaining  of applications  under  Section  11  or  the  preferences available thereunder…..”

34. In Indian Charge Chrome (supra), an area of 1812.993

hectares of land was granted to Tata Iron and Steel Company

Ltd. (TISCO) for mining of chromite ore.  Initially, lease was

granted in 1952, which was renewed in 1972.  However, at

the  time  of  renewal,  the  area  was  reduced  to  1261.476

28

hectares.  In 1991, TISCO again applied for renewal of lease

but the renewal was granted only in respect of 650 hectares.

TISCO  challenged  the  said  reduction  in  its  area.   In  the

meantime, various private companies challenged renewal  of

lease in favour of TISCO.  The High Court allowed the writ

petition and directed reconsideration of the matter.  Appeal

filed  by  TISCO  in  this  Court  was  dismissed.  The  Union

Government, on reconsideration, renewed lease in favour of

TISCO for 406 hectares and directed that the balance area of

855.476  hectares  be  distributed  by  way  of  lease  amongst

other claimants.  Subsequently, the State Government made a

recommendation to  the  Union Government  that  half  of  the

area of 855.476 hectares be reserved under Section 17A(2) of

the  Act  and  the  remaining  half  could  be  allotted  to  the  4

applicants  who  had  filed  writ  petitions  in  the  Court.

Thereafter, some other parties filed writ petitions in the High

Court claiming that they should also be given mining rights.

The  Orissa  Government  then  decided  to  grant  the  balance

land to the extent to 436.295 hectares on lease to the State

public sector undertaking i.e.,Orissa Mining Corporation Ltd.

29

(hereinafter referred to as “OMC”).  This action of the State

Government was set aside by the High Court.  This Court in

Indian Charge Chrome (supra) was dealing with the appeals

filed  by  those  applicants  other  than  the  4  who  had  been

granted mining leases and also the appeal filed by OMC and

the State Government.   This Court came to the conclusion

that the Central Government had not taken a decision on the

request of  the State Government to reserve the area under

Section 17A(2) and finally directed the Central Government to

first  consider  the  request  of  the  State  Government  for

reservation  of  land  and  held  that  this  contingency  of  the

private  applicants  being  granted  mining  leases  would  only

arise in case the Central Government does not grant approval

to the request of the State Government under Section 17A(2)

of the Act.  This Court held as follows :-

“32.  ………This  contingency  may  arise  only  if  the Central  Government  does  not  grant  approval  to  the request of the State Government under Section 17-A(2) of the Act……”  

35. This clearly envisages that this Court held that the State

Government could not make a reservation without approval of

30

the Central Government.  It would be pertinent to mention

here that this Court directed the State Government to make a

fresh request to the Central Government and further directed

that prior directions of this Court or the High Court cannot

and do not stand in the way of the Central Government in

applying its mind to exercise its power under Section 17A(2)

of the Act and in taking an independent decision.   

36. In the case of  Sandur Manganese and Iron Ores Ltd.

v.  State of Karnataka & Ors.7, dealing with the powers of

the State, this Court held that in view of Section 2 of the Act,

the State is denuded of its accepted power with regard to the

matters  which  fall  within  the  domain  of  the  Central

Government.  It further held that the State Government has

to act and justify its actions only in accordance with the Act

and the Rules, and the State Government cannot be permitted

to justify its actions on criteria de hors the Act and the Rules.

Dealing with Section 11 of the Act, the Court held that an RP

holder or PL holder will have a preferential right to get a PL or

7  (2010) 13 SCC 1

31

ML as the case may be.   The following observations of  the

Court are relevant:

“80. It is clear that the State Government is purely a delegate of Parliament and a statutory functionary, for the  purposes  of  Section  11(3)  of  the  Act,  hence  it cannot act in a manner that is inconsistent with the provisions of  Section 11(1)  of  the  MMDR Act  in the grant of mining leases. Furthermore, Section 2 of the Act  clearly  states  that  the  regulation  of  mines  and mineral development comes within the purview of the Union Government and not the State Government. As a matter of fact, the respondents have not been able to point out any other provision in the MMDR Act or the MC Rules permitting grant of mining lease based on past  commitments.  As rightly pointed out,  the State Government has no authority under the MMDR Act to make  commitments  to  any  person  that  it  will,  in future,  grant  a  mining  lease  in  the  event  that  the person  makes  investment  in  any  project.  Assuming that  the  State  Government  had  made  any  such commitment, it could not be possible for it to take an inconsistent position and proceed to notify a particular area.  Further,  having  notified  the  area,  the  State Government certainly could not thereafter honour an alleged commitment by ousting other applicants even if  they  are  more  deserving  on  the  merit  criteria  as provided in Section 11(3).”

37. In  Monnet Ispat (supra), Justice Lodha, in his leading

judgment held that Section 2 of the Act does not affect the

State’s ownership of mines and minerals within its territory

although the regulation of mines and development of minerals

have been taken under the control of the Union.  It was held

32

that the Central Government may have taken over the power

to regulate the mines and development of minerals but the

State  could  not  be  denuded  of  its  rights  and  followed  the

decision of  this  Court  in  the  case  of  Amritlal  Nathubhai

Shah (supra) wherein it was held that “the authority to order

reservation flows from the fact that the State is the owner of

the mines and minerals  within its  territory”.   Dealing with

Section 17A of the Act, it was held that this section would

have prospective operation only and, therefore, it  could not

affect the earlier notifications.  Thereafter, this Court in Para

160 of the judgment held as follows:

“160. The types of reservation under Section 17-A and their  scope  have  been  considered  by  this  Court  in Indian Metals and Ferro Alloys Ltd. in paras 45 and 46 (pp.  136-39)  of  the  Report.  I  am  in  respectful agreement with that view. However, it was argued that Section 17-A(2) requires prior approval of the Central Government  before  reservation  of  any  area  by  the State Government for  the public sector undertaking. The argument is founded on an incorrect  reading of Section  17-A(2).  This  provision  does  not  use  the expression, “prior approval” which has been used in Section 11. On the other hand, Section 17-A(2) uses the  words,  “with  the  approval  of  the  Central Government”. These words in Section 17-A(2) cannot be  equated  with  prior  approval  of  the  Central Government.  According  to  me,  the  approval contemplated in Section 17-A may be obtained by the State  Government  before  the  exercise  of  power  of reservation  or  after  exercise  of  such  power.  The

33

approval by the Central Government contemplated in Section 17-A(2) may be express or implied. In a case such  as  the  present  one  where  the  Central Government  has  relied  upon  the  2006  Notification while rejecting the appellants’ application for grant of mining lease,  it  necessarily  implies  that  the  Central Government  has  approved  reservation  made  by  the State Government in the 2006 Notification otherwise it would not have acted on the same. In any case, the Central Government has not disapproved reservation made  by  the  State  Government  in  the  2006 Notification.”

38. In State of Kerala and Ors. v. Kerala Rare Earth &

Minerals Ltd. & Ors.8,  a three-Judge Bench of this Court

again dealt with the scope of Section 17A of the Act and per

majority held as follows:

“15. There is no gainsaying that the State Government can  reserve  any  area  not  already  held  under  any prospecting  licence  or  mining  lease  for  undertaking prospecting  or  mining  operations  through  a government  company  or  corporation  owned  or controlled  by  it,  but,  in  terms  of  sub-section  (2)  of Section 17-A (supra) where the Government proposes to do so, it shall by notification in the Official Gazette specify the boundaries of such area and the mineral or minerals  in  respect  of  which  such  areas  will  be reserved.  Three  distinct  requirements  emerge  from Section 17-A(2) for a valid reservation viz.:

(i) the reservation can only be with the approval of the Central Government and must confine to areas  not  already  held  under  any  prospecting licence or mining lease; (ii) the reservation must be made by a notification in the Official Gazette; and

8   (2016) 6 SCC 323

34

(iii) the notification must specify the boundaries of  such  areas  and  the  mineral  or  minerals  in respect of which such areas will be reserved.

xxx          xxx       xxx

xxx          xxx       xxx

“19. The upshot of the above discussion then is that while  the  State  Government  is  the  owner  of  the mineral  deposits  in  the  lands  which  vest  in  the Government  as is  the  position in the  case  at  hand, Parliament has by reason of the declaration made in Section 2 of the 1957 Act acquired complete dominion over the legislative field covered by the said legislation. The Act does not denude the State of the ownership of the minerals situate within its territories but there is no manner of doubt that it regulates to the extent set out  in the  provisions of  the  Act  the  development  of mines and minerals in the country. It follows that if the State Government proposes to reserve any area for exploitation  by  the  State-owned  corporation  or company, it must resort to making of such reservation in  terms  of  Section  17-A  with  the  approval  of  the Central  Government  and by a notification specifying boundaries  of  the  area  and  mineral  or  minerals  in respect  of  which  such  areas  will  be  reserved. Inasmuch  as  the  State  Government  has  not  so  far issued any notification in terms of Section 17-A, the Industrial Policy, 2007 of the Kerala State Government does not have the effect of making a valid reservation within the comprehension of Section 17-A. The High Court was, therefore, justified in holding that there is no  valid  reservation  as  at  present  no  matter  the Government can make such a reservation if so advised in the manner prescribed by law. In other words, the dismissal  of  this  appeal  shall  not  prevent  the  State from invoking its right under Section 17-A(2) of the Act by  issuing  notification  in  respect  of  the  mineral deposits in question…..”

35

39. On a careful perusal of the judgments aforesaid, it would

be more than apparent that this Court has consistently held

that  the  State  is  the  owner  of  the  land  and  minerals.

However,  the  control  and  regulation  of  mines  and

development  of  minerals  are  in  the  domain  of  the  Union

Government.   The  State  Government  is  denuded  of  its

legislative power to make any law in respect of regulation of

mines  and  mineral  development  in  so  far  as  that  field  is

covered by the provisions of the Act.  It is only if the field is

vacant  that  the  State  can  exercise  its  legislative  powers.

Otherwise, it has to exercise its power strictly in accordance

with  the  powers  specifically  conferred  on  the  State

Government by the Act and the Rules.  It is also a well settled

position of law that while exercising the powers of reservation

vested in Section 17A(2) of the Act, the State Government has

to take approval of the Central Government.  In this case, we

are not required to deal with the question of prior approval as

there is no approval and, in fact, the request of the State has

been rejected by the Central Government.  

36

40. In  the  light  of  what  has  been  said  in  the  aforesaid

judgments, we have examined the facts of the instant case.

The  State  Government  made  a  request  to  the  Central

Government for reservation.  In the first round of litigation,

the  High  Court  directed  the  Central  Government  to  first

consider  the  request  before  considering  the  applications  of

Geomysore  and Deccan.   The  Central  Government  rejected

the  proposal  of  the  State  Government  on  various  grounds

including the grounds enumerated earlier,  which flow from

the NMP, 2008.  Arguments have been addressed to suggest

that the Central Government can only take into consideration

issues of national interest and security and cannot look into

the  other  aspects.   We  are  not  in  agreement  with  this

submission. Section 17A(2) of the Act clearly provides that the

State  Government  can  reserve  any  area  for  undertaking

prospecting  or  mining  operations  through  a  Government

company  or  corporation  with  the  approval  of  the  Central

Government.   The  Act  does  not  lay  down  the  parameters

which the Central Government is required to follow.  In our

view, the Central Government can take all factors which are

37

relevant  for  the  purpose  of  deciding  whether  reservation

should be made or not.  The NMP, 2008 being a policy of the

country,  can  definitely  be  taken  into  consideration  while

considering such a request.   

41. We  may  note  that  the  policy  of  the  Government  can

sometimes be binding on the Government if the principles of

promissory estoppel or legitimate expectation come into play.

We may make it clear that in this case neither the principle of

promissory estoppel nor the principle of legitimate expectation

is attracted. We are only making reference to these principles

to emphasize that a policy of a Government is an important

document.   It  cannot  be  brushed  aside.   The  Central

Government,  while  considering  the  request  of  the  State

Government,  can  take  into  consideration  various  factors

which may include economic factors, the factors reflecting the

image  of  the  country  internationally  to  the  global  world

community and also other  factors of  national  security  etc..

These are just illustrative and each case has to be decided on

its own facts.  Therefore, we are not in agreement with the

38

Karnataka High Court that only those factors can be taken

into consideration, which flow from the Act or the Rules.   

42. Another  important  aspect  of  the  matter  is  that  under

Section 11(1) of the Act, an RP holder, who has carried out

reconnaissance,  is  entitled  for  preference  when his  case  is

being considered for grant of PL.  However, in Section 17A(2)

of the Act, the bar to reservation is only in those cases where

the land is held under a PL or ML.  When any land is held

under PL or ML, then the said land cannot even be considered

for reservation.  If the land sought to be reserved is not under

PL or ML, then the State can make a proposal to reserve the

land.  If the land sought to be reserved is covered by an RP

there is no bar to reserve the land for exploitation by State

Government  undertakings.   This,  however,  does  not  mean

that while dealing with the proposal of the State, the Central

Government  must  make  the  reservation.   The  Central

Government  while  granting  approval,  has  to  independently

apply  its  mind and while  doing so,  there is  nothing which

debars  the  Central  Government  from  taking  into

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consideration the fact that some entity was granted RP and

the effect thereof.  No doubt, the Central Government cannot

reject the proposal only on the ground that RP was issued

since  that  would  run  counter  to  the  provisions  of  Section

17A(2) of the Act.  However, this is a fact which along with

other facts can be taken into consideration while deciding the

issue of reservation of land.   

43. As  far  as  the  present  case  is  concerned,  the  Central

Government took into consideration various factors and notes

that PL applications had already been filed by Geomysore and

Deccan pursuant to RPs.  It virtually held that the request of

the State Government was at a belated stage and was against

the provisions of the NMP, 2008, the emphasis in which was

to  provide  a  regulatory  environment  which is  conducive  to

private  investment.   It  may  be  true  that  the  Central

Government was influenced by the fact that Geomysore and

Deccan,  pursuant  to  the  RPs,  had  completed  the

reconnaissance and submitted their consolidated reports, but

there were other relevant factors also which were taken into

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consideration  such  as  that  Geomysore  and  Deccan  had

already applied for grant of PL and no security consideration

or  public  interest  was  involved  in  making  reservation  for

HGML.  In our view, the factors taken into consideration by

the  Central  Government  are  relevant  and  germane  to  the

issues  and  cannot  be  said  to  be  such  factors  which  are

extraneous or could not have been taken into consideration.

44. We  may  also  add  that  as  far  as  the  present  case  is

concerned,  when  on  27.12.2008,  the  Government  of

Karnataka recommended that 161 sq. kms. land be allotted to

HGML, no reservation had taken place because approval of

the Central Government had not come.  In fact, the State of

Karnataka had not even notified the area, which was sought

to  be  reserved  nor  it  identified  the  minerals  for  which

reservation was sought.   

45. Section  17A(2)  of  the  Act  envisages  following  four

conditions:

(a) The land is not held under prospecting licence or mining

lease;

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(b) there is approval by the Central Government;

(c) a notification is issued in the Official Gazette specifying

the boundaries of such area; and

(d) such notification should identify the mineral or minerals

in respect of which such areas are sought to be reserved.   

Only the first condition was fulfilled.  None of the other

conditions were satisfied.  Therefore, the State of Karnataka

could not have issued recommendation in favour of HGML on

27.12.2008.   The cart  could  not  have  been put  before  the

horse.   Unless  reservation  takes  place,  a  private  company

stands on the same footing as a Government company and in

that  eventuality,  Section 11 of  the Act would be applicable

and Geomysore and Deccan being the RP holders and also

being earlier PL applicants, had to be given preference.

CONCLUSION   

46. In view of the above discussion, our answers to the four

questions are as follows:

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(i) The State Government being the owner of the land and

minerals,  has  a  right  to  make  a  proposal  to  the  Central

Government  to  reserve lands not  held under  a prospecting

licence  or  mining  lease  for  exploitation  by  the  State

Government companies or undertakings but approval of the

Central Government is necessary;

(ii) The  Central  Government  cannot  be  bound  by  any

specific parameters.  Each case has to be decided on its own

merits.   However,  as  indicated  by  us  above,  the  Central

Government can not only  take into consideration factors of

national security or public interest but also economic factors,

the policy of the Government and all such other factors which

are relevant to decide the issue whether the land should be

reserved  for  exploitation  only  by  State  Government

Undertakings;

(iii) Section  11(1)  and  Section  17A(2)  of  the  Act  have  no

connection with each other.   Section 11(1) of the Act deals

with preference to be given to RP holder and PL holder while

considering their  case for  grant of  PL and ML respectively.

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This has nothing to do with reservation of land under Section

17A(2) of the Act.  The only connection, if it can be called that,

is that if a land is held under a PL or ML, then action under

Section 17A(2) of the Act cannot even be initiated;

(iv) In view of  the discussion held above, we feel  that the

Central Government was justified in rejecting the request of

the State of Karnataka in reserving the land in question.

47. Before  parting  with  the  case,  we  may  note  that

arguments  were  addressed  before  us  on  the  effect  of  the

amendments made in 2015 to the MMDR Act especially with

regard to Section 10A and Section 10B.  We are not dealing

with these issues,  as decision on them is not necessary to

decide the present case.   

48. In view of  the above discussion,  we are clearly  of  the

view that the Karnataka High Court erred in allowing the writ

petition.  Accordingly, the judgment of the High Court passed

in W.P. No.25899 of 2011 on 03.04.2012 is set aside and the

decision  of  the  Central  Government  dated  31.05.2011  is

upheld and the State of Karnataka is directed to consider the

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case of Geomysore and Deccan for grant of PL in accordance

with the provisions of the Act as they now stand amended in

the year 2015.

49. The appeals are allowed in the aforesaid terms with no

order  as  to  costs.   Pending  application(s),  if  any,  stand(s)

disposed of.

………………………..J. (Madan B. Lokur)

…………………………J. (Deepak Gupta)

New Delhi May 08, 2018