REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE TO APPEAL (C) NO. 19166 OF 2017

M/s. Sunder Marketing Associates                .…Petitioner  

  versus

State of  Haryana & Ors.                                   …Respondents  

J U D G M E N T

Madan B. Lokur, J.

1. This  is  a  classic  case  of  someone  (the  petitioner  in  this  case)

apparently having influence in high places, using that influence to violate the

law and get a benefit that would ordinarily not be granted to anybody else.

We cannot say with any degree of certainty how high is the reach of the

petitioner but it is quite apparent from the facts of the case, that the reach is

pretty high.

2. The only real issue before us arising out of the judgment and order

dated 1st June, 2017 passed by the High Court of Punjab and Haryana in a

writ  petition  filed  by  the  petitioner  is  whether  the  petitioner  should  be

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allowed to surrender the mining lease granted to it and if so, under what

conditions, if any.  

3. The facts of the case reveal that a joint venture (for short JV) was

formed between the petitioner and Karamjeet Singh and Co. Ltd. (for short

KJSL). The JV was formed on or about 18th September, 2012 but the terms

of the arrangement or partnership are not available on the record of the case.  

4. Be that as it may, it transpires that on 30th November, 2013 the Mines

and Geology Department of the Government of Haryana issued an auction

notice for the grant of several mining leases. One of the quarries sought to be

auctioned for mining purposes was the Dadam quarry in District Bhiwani

from which stone could be extracted.  The reserve price  (or  dead rent  or

royalty) mentioned for this quarry in the auction notice was Rs. 6.25 crores

per annum and the lease period was for 10 years. The JV of the petitioner

and KJSL gave the highest bid for this quarry in the auction conducted on

30th December, 2013. Some of the terms and conditions of the auction need

mention.

5. Condition No. 4 provided that the period of the lease shall commence

with  effect  from  the  date  of  environmental  clearance  by  the  competent

authority as required under the EIA notification dated 14th September, 2006

issued by the Ministry of Environment and Forests of the Government of

India as amended from time to time or on expiry of a period of 12 months

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from the date of acceptance of the highest bid or the issuance of a letter of

intent, whichever is earlier.

6. Condition No. 7 provided that all prospective bidders were expected

and presumed to have surveyed the areas to make their own assessment for

the potential of the areas for which bids are to be offered.

7. Condition No. 19 provided that after acceptance of the highest bid by

the State Government and on the issuance of a letter of intent, its holder

shall execute an agreement in form ML-1 appended to the Haryana Minor

Mineral Concession, Stocking, Transportation of Minerals and Prevention of

Illegal Mining Rules, 2012 (for short the Rules) within a period of 90 days

of the grant of a letter of intent.

8. Condition  No.  36  provided  that  no  transfer  of  the  lease  shall  be

permissible for the first 5 years of the grant. However, on submission of an

application,  in  accordance  with  the  provisions  of  the  Rules  and  after

satisfying itself, the State Government may allow inducting other partners or

shareholders to the extent of 49% of the total shareholding of the original

lease holder. It may be mentioned that the petitioner had a 49% share while

KJSL had a 51% share in the JV.  

9. As mentioned above, the auction was held on 30th December, 2013

and the JV was the highest bidder for the Dadam quarry in District Bhiwani

with  a  bid  of  Rs.  115  crores  per  annum  towards  dead  rent  or  royalty

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whichever is higher. At this stage, it may also be mentioned that the admitted

position is that the JV was qualified to participate in the auction, but the

petitioner  by  itself  was  not  qualified  to  participate  in  the  auction.  The

relevance of this will become apparent at a later stage.

10. As  required  by  Rule  55(3)(iii)  of  the  Rules,  the  JV deposited  Rs.

28.75 crores  with  the  State  Government  towards  25% of  the  annual  bid

amount as security deposit.  

11. On  3rd January,  2014  the  JV  received  a  letter  of  intent  from  the

Director, Department of Mines and Geology of the Government of Haryana

to the effect that its bid was the highest for the Dadam quarry and had been

accepted by the State Government.  The letter of intent  laid down certain

terms and conditions which were not at variance with the terms mentioned in

the auction notice. In any event, there is no dispute in this regard.

12. Surprisingly, a short while after having received the letter of intent,

the JV filed a writ petition in the High Court of Punjab and Haryana seeking

an order quashing the grant of a mining lease in favour of the Haryana State

Industrial  and  Infrastructure  Development  Corporation  (a  public  sector

undertaking under the control and management of the State of Haryana – for

short HSIIDC). The grievance of the JV was that while it had given a bid of

Rs. 115 crores per annum as the dead rent, the HSIIDC had been granted a

mining lease in a different area at a negligible amount. According to the JV

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this was not disclosed to it and the grant of the lease in favour of HSIIDC

and  the  failure  of  the  State  Government  to  disclose  this  to  the  JV  had

seriously prejudiced their commercial interests since it would give HSIIDC

an unfair advantage because of the low dead rent payable by it. The writ

petition came to be dismissed by the High Court on 4th March, 2015.

13. An alternative submission was made by the JV in the writ petition to

the effect that the JV desired the cancellation of its contract in view of the

grant of a mining lease to HSIIDC. In this regard, it was stated by learned

counsel appearing on behalf of the Government of Haryana that it would

refund the amount paid by the JV and that no penalty would be imposed if it

wanted the contract to be cancelled and if the proposal was accepted by the

State Government. The High Court granted time to the JV to exercise the

option to either continue with the contract or rescind it by 30 th April, 2015. It

was  made clear  that  if  the  JV chooses  to  rescind the contract,  the State

Government  shall  refund  all  the  amounts  paid  within  8  weeks  of  the

demand. The JV was entitled to take appropriate proceedings for recovery of

compensation or damages on its own merits.

14. Feeling  aggrieved,  the  JV preferred  a  petition  for  special  leave  to

appeal in this Court and on 1st May, 2015 the following order was passed:

“Dr.  A.M.Singhvi,  learned  senior  counsel,  on  instructions, would submit that the petitioner(s) is/are not carrying on with the mining activities.

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We take on record the statement so made by learned senior counsel.  

The Division Bench of the High Court of Punjab & Haryana while dismissing the writ petition filed by the petitioners had granted time to the petitioners till 30.04.2015 to exercise their option either to continue with the contract or to rescind the same.

The time has expired and therefore, the learned senior counsel requests us to grant ten days more to exercise the aforesaid option.

In our opinion, if such permission is granted, it may not cause any prejudice to either of the parties.  Therefore, we extend the time that  was  granted  to  the  petitioners  for  exercising  its  option  till 10.05.2015.

Accordingly, the special leave petitions are disposed of.”

15. On 7th May, 2015 the State Government was informed of its decision

by KJSL to rescind the contract and it also sought a refund of the deposit of

Rs. 28.75 crores with interest thereon. On the other hand on 14th May, 2015

the petitioner wrote to the Chief Minister  of the State of Haryana to the

effect that it would have no objection if the other partner in the JV that is

KJSL surrenders its share. In such an eventuality, the State Government may

consider the transfer of 51% share of KJSL in favour of the petitioner or

permit any other mining agency to replace KJSL. It is not clear why the

petitioner chose to write to the Chief Minister of the State but the fact is that

it did.

16. Acting on the communication sent  by the petitioner as  well  as the

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decision of KJSL to rescind the contract, a detailed note was prepared by the

concerned Mining Engineer on 25th May, 2015. The note drew attention to

the  anomalous  situation  where  one  partner  in  the  JV  was  desirous  of

rescinding the contract while the other partner was desirous of continuing

with the contract. The note also drew attention to Condition No. 36 of the

auction notice and recorded that  the request  of  one partner  in  the  JV to

rescind the contract does not qualify to be accepted as such but at the same

time it might be better to allow KJSL to withdraw its share. Accordingly, it

was  proposed  that  the  State  Government  may  consider  allowing  the

petitioner  to  continue  with  the  lease  and allowing KJSL to  surrender  its

share. It was also proposed that the surrendered 51% share of KJSL could

either be allowed retention by the petitioner or the petitioner may induct a

new partner. It was suggested that before a final decision is taken, it would

be appropriate to take the opinion of the Advocate General of the State of

Haryana.  This  proposal  was  accepted  by the  next  superior  authority  and

eventually the opinion of the Advocate General of the State of Haryana was

obtained.

17. On the basis of the opinion given as well as on the basis of official

notings, it was proposed by the concerned Mining Engineer on 10th June,

2015  to  allow the  transfer  of  the  entire  share  of  KJSL in  favour  of  the

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petitioner subject to certain conditions. This was approved by the superior

authorities including the Chief Minister of the State of Haryana.

18. At this stage, it is useful to recall that the petitioner by itself was not

qualified to participate in the auction and this is the admitted position. Only

the JV was qualified to bid in the auction. Therefore, it is not clear how and

why the petitioner alone was allowed to take over the share of KJSL and be

the sole beneficiary of the dissolution of the JV and to acquire the mining

rights when it was originally not even qualified to participate in the auction.

19. Be that as it may, on 17th June, 2015 the Director General of the Mines

and Geology Department of the Government of Haryana wrote to both the

partners in the JV that the mining lease would continue with the petitioner

and that KJSL could walk out of the contract. It was also stated that to avoid

any complication it had been decided that the contract may be transferred or

changed  in  the  name  of  the  petitioner  subject  to  certain  conditions.  The

decision to transfer the contract in favour of the petitioner was challenged by

some persons by filing Writ Petition No. 9419 of 2016 in the High Court the

writ petition having been filed on 22nd April, 2016. We shall refer to this a

little later.

20. Subsequent  to the above decision taken and communicated on 17th

June, 2015 the Ministry of Environment, Forests and Climate Change in the

Government of India issued an Environment Clearance to the JV on 3 rd July,

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2015 with a proposed production capacity of 15.0 million tonnes per annum

(RoM) of stone. It is quite clear that the Government of India was not kept

informed of the developments that had taken place including the decision of

the State Government to hand over the quarry to the petitioner alone.

21. On  the  basis  of  the  decisions  taken  as  well  as  the  Environment

Clearance, the State of Haryana granted a mining lease to the petitioner on

5th August, 2015 (actually signed on 19th August, 2015). The dead rent was

fixed at Rs. 115 crores per annum or royalty whichever is higher. There were

certain  other  terms  and  conditions  of  the  mining  lease  but  we  are  not

presently concerned with them.

22. Thereafter  on  the  application  of  the  petitioner,  the  Ministry  of

Environment,  Forests  and  Climate  Change  of  the  Government  of  India

transferred the Environment Clearance granted to the JV in favour of the

petitioner on 28th October, 2015. On the basis of the mining lease granted to

the petitioner as well as the Environment Clearance, the petitioner started

mining operations on 1st November, 2015 and began paying the dead rent or

royalty from that date onwards.

23. As mentioned above, the permission granted to the petitioner on 17 th

June, 2015 by the Director General of the Mines and Geology Department of

the Government of Haryana was challenged by some persons by filing Writ

Petition  No.  9419  of  2016.  These  persons  had,  prior  to  filing  the  writ

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petition, made a query under the Right to Information Act on 12 th of January,

2016 with regard to the transfer of the contract in favour of the petitioner. A

response  was  received  by  these  persons  on  10th March,  2016  from  the

Government of Haryana to the effect that the file dealing with the subject

was not available! The High Court has mentioned in its judgment and order

that till the date of delivery of the judgment and order, the file was not made

available even to the High Court. This is surprising indeed.

24. Be that  as it  may, perhaps as a result  of all  these developments,  a

notice  was  issued  to  the  petitioner  on  9th August,  2016  by  the  Director

General  of  the  Mines  and  Geology  Department  of  the  Government  of

Haryana to show cause why the permission granted to transfer the mining

lease  or  the  share  of  51%  of  KJSL  in  favour  of  the  petitioner  as

communicated on 17th June, 2015 should not be withdrawn with immediate

effect.

25. The show cause notice was challenged by the petitioner by filing Writ

Petition No. 16735 of 2016 in the High Court and that was disposed of on

27th August, 2016. It was directed by the High Court that the petitioner may

file a supplementary response to the show cause notice (it had already filed a

response on 23rd August, 2016). The persons who had filed Writ Petition No.

9419 of 2016 were also given an option to be heard by the Director General

of the Mines and Geology Department before a final decision is taken on the

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show cause notice.

26. The petitioner then filed a supplementary response to the show cause

notice on 2nd September, 2016 and since the Writ Petition No. 9419 of 2016

had become more or less infructuous, it was disposed of on 14th September,

2016.

27. On 29th September, 2016 a detailed order was passed by the Director

General  of  the  Mines  and  Geology  Department  of  the  Government  of

Haryana withdrawing the permission granted to transfer the mining lease or

the share of 51% of KJSL in favour of the petitioner as communicated on

17th June, 2015. Consequently, the lease deed executed on 5th August, 2015

with  the  petitioner  on  the  basis  of  the  letter  dated  17 th June,  2015  was

declared void being not maintainable. However, it was made clear that any

action taken by the petitioner and the State Government in terms of the letter

dated 17th June, 2015 and in terms of the lease deed shall remain valid and

shall  not have any adverse implication for any of the parties.  It was also

directed that the order dated 29th September, 2016 will not be given effect to

for a period of two weeks after which the petitioner will immediately stop its

mining operations.

28. Feeling aggrieved by the order of 29th September, 2016 the petitioner

filed Writ Petition No. 20986 of 2016 in the High Court which came to be

dismissed by the impugned judgment and order dated 1st June, 2017.

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29. At the outset, we must mention that the High Court dealt with every

submission raised by learned counsel for the petitioner in a lucid and well

reasoned judgment. We really have nothing to add to the decision rendered

by the High Court. Perhaps that is the reason why detailed submissions on

the merits of the case were not made before us and the only issue agitated

was the desire of the petitioner to walk out of the contract without having to

pay any penalty or suffer any other adverse consequence. It was generally

submitted by learned counsel for the petitioner that the cancellation of the

mining lease granted to the petitioner was illegal but that contention was not

pressed  beyond  a  point  particularly  because  it  was  very  clear  that  the

petitioner alone or by itself was not a qualified bidder and that it was the JV

between the petitioner and KJSL that was qualified to bid at the auction.

That being the position, it was appreciated that under no circumstance could

the letter of intent or the mining lease have been transferred from the JV in

favour of the petitioner. It is this totally illegal transfer carried out within 5

years of the execution of the mining lease that has prompted us to believe

that the petitioner could exercise influence in high places.

30. The surrender of a mining contract is dealt with in Rule 25 and Rule

41(v) of the Rules. These rules read as follows:-

“25.  The  Government  may  accept  the  contractor’s  request  for surrender of a contract or part thereof in cases where it is established

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that it has not been found feasible to operate the contract grant for whatsoever reasons subject to the condition that the contractor:-

(i) has  been  regular  in  furnishing  the  production  returns  as required in terms of the contract agreement;

(ii) has been taking the requisite steps for the progressive mine closure plan as per the conditions of the contract grant;

(iii) is not in default of payment of any dues of the Government as on the date of making such application and undertakes to pay all such dues till the date of expiry of the notice period either in cash in advance or by way of adjustment of the security or both;

Provided that in case the contractor makes an application for surrender of part of the contract area, it shall not result in any prorated  reduction  of  the  contract  money  and  the  rate  of contract amount payable and applicable for the entire area at the time of making such application shall remain intact.”   

“41 (v) The lessee may surrender the lease at any time by giving not less than three calendar months notice in writing to the lessor after paying all outstanding dues to the lessor.”

31. In view of the peculiar facts of the case and the offer of surrender or

rescission of the contract having been accepted by the State Government, we

would not like to place any hurdle in the ‘agreement’ but the provisions of

Rule 25 and Rule 41(v) of the Rules must be complied with by the petitioner

and the State Government.  

32. Learned counsel for the petitioner had made a prayer to the effect that

the petitioner may be permitted to continue its mining operations till 30th

November,  2017 so  that  it  could  wind up its  activities  and put  its  mine

closure plan into operation. We had passed orders on 31st July, 2017 and 3rd

August, 2017 permitting the petitioner to continue its mining activities till

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judgment is delivered.

33. Keeping in view the prayer made:

(i) We permit  the petitioner  to  continue  its  mining operations  till  30 th

November, 2017 in accordance with the Mining Plan. On or before

that date, it shall ensure implementation of the mine closure plan to

the satisfaction of the concerned authorities in the State of Haryana.  (ii) The petitioner will be under an obligation to continue paying the dead

rent or royalty whichever is higher till 30th November, 2017 regardless

of whether it ceases its mining operations before that date or not.       (iii) The petitioner shall ensure that all the dues (including wages etc.) of

all the persons (including labour) employed in the mining operations

in terms of Rule 56(10) of the Rules are paid to the satisfaction of the

concerned  authorities  in  the  State  of  Haryana.   To ensure  that  the

employees and labour (casual or otherwise) are not left in the lurch,

the petitioner is restrained from alienating or transferring or otherwise

creating any charge or encumbrance on the equipment and machinery

and all other moveable property in the lease area and connected with

the mining operations (such as trucks, excavators etc.) so that there is

no difficulty in recovery of dues. (iv) All the laws applicable to the petitioner shall be strictly enforced by

the  State  Government  regardless  of  its  apparent  influence  in  high

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places. We make it clear that we will hold the Chief Secretary of the

State of Haryana responsible for any lapse in this regard. (v) It is not clear whether or not the security deposit of Rs. 28.75 crores

has been refunded to KJSL or the petitioner. If the refund has not been

made,  it  is  deemed to  have  been  forfeited  to  the  State  and  is  not

adjustable against any dues of the petitioner.

34. The petition for special leave filed by the petitioner is disposed of on

the above terms and the judgment and order of the High Court is modified to

the above extent. No costs.  

……………………………J   (Madan B. Lokur)  

……………………………..J   (Deepak Gupta)  

New Delhi; August 11, 2017

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