Monnet Ispat and Energy Ltd. Vs Union of India .

26 July 2012
Supreme Court
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MONNET ISPAT AND ENERGY LTD. Vs UNION OF INDIA .

Bench: R.M. LODHA,H.L. GOKHALE
Case number: C.A. No.-003285-003285 / 2009
Diary number: 12998 / 2007
Advocates: E. C. AGRAWALA Vs D. S. MAHRA

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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3285 OF 2009

Monnet Ispat and Energy Ltd. …… Appellant

Vs.

Union of India and Ors. …… Respondents

WITH

CIVIL APPEAL NO. 3286 OF 2009

CIVIL APPEAL NO. 3287 OF 2009

CIVIL APPEAL NO. 3288 OF 2009

CIVIL APPEAL NO. 3289 OF 2009

CIVIL APPEAL NO. 3290 OF 2009

JUDGMENT

R.M. LODHA, J .

Introduction

This group of six appeals occupied considerable judicial time.

These matters were heard on ten days between November 2, 2011 and

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November 29, 2011. Although the facts differ from one another in some

respects but since fundamental issues appeared to be common and all

these matters arise from a common judgment dated April 4, 2007 passed

by the Division Bench of the Jharkhand High Court at Ranchi, we have

heard all these matters together which are being disposed of by this

common judgment.

Prayers

2. The prayers in the writ petitions filed by the appellants before

the High Court also differ. However, principally the reliefs prayed for by

the appellants in their writ petitions were for quashing (i) the decision of

the Department of Mines and Geology, Government of Jharkhand

contained in the letter dated September 13, 2005 whereby the State

Government sought to withdraw the recommendation for grant of mining

lease made in favour of the appellants in the subject iron ore bearing

areas in Mauza Ghatkuri, West Singhbhum District, Jharkhand (ii) the

order of the Ministry of Mines, Government of India whereunder the said

Ministry returned the recommendation made by Government of Jharkhand

in favour of each of the appellants (iii) for declaring the Notifications

dated December 21, 1962 and February 28, 1969 issued by the

Government of Bihar and the Notification dated October 27, 2006 issued

by the Government of Jharkhand null and void and (iv) directing the

respondents to proceed under Rule 59(2) of the Mineral Concession

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Rules, 1960 (for short, ‘1960 Rules’) for grant of mining lease to each of

the appellants in the iron ore bearing areas in Ghatkuri as applied.

Bihar Land Reforms Act

3. Bihar Land Reforms Act, 1950 (for short, ‘1950 Bihar Act’)

came to be enacted by the Bihar Legislature to provide for the transference

to the State of the interest of proprietors and tenure holders in land of the

mortgagees and lessees of such interest including interest in mines and

minerals and other matters connected therewith. It came into force on

September 25, 1950. Chapter II of the 1950 Bihar Act deals with vesting of

an estate or tenure in the State and its consequences. The State

Government has been empowered under Section 3 to declare that the

estates or tenures of a proprietor or tenure holder, as may be specified in

the notification/s from time to time, to become vested in the State. Section

4 provides for consequences of vesting of an estate or tenure in the State.

Section 4 has undergone amendments on few occasions. To the extent it

is relevant, Section 4 of the 1950 Bihar Act reads as follows :

“4. Consequences of the vesting of an estate or tenure in the State.—Notwithstanding anything contained in any other law for the time being in force or any contract and notwithstanding any non-compliance or irregular compliance of the provisions…………..on the publication of the notification under sub-section (1), of section 3 or sub-section (1) or sub- section (2) of section 3A, the following consequences shall ensue and shall be deemed always to have ensued, namely;

(a) Such estate or tenure including the interests of the proprietor or tenure-holder in any building or part of a building comprised in such estate or tenure ……… as also

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his interest in all sub soil including any rights in mines and minerals whether discovered or undiscovered or whether been worked or not, inclusive of such rights of a lessee of mines and minerals, comprised in such estate are tenure (other than the interests of raiyats or under - raiyats) shall, with effect from the date of vesting, vest absolutely in the State free from all encumbrances and such proprietor or tenure-holder shall cease to have any interest in such estate or other than the interests expressly saved by or under the provisions of this Act”.

4. The brief facts relating to each of these appeals may be

noticed now.

Factual features

Civil Appeal No. 3285 of 2009, Monnet Ispat and Energy Ltd. Vs.Union of India and Ors.

5. The appellant company, referred to as Monnet, is registered

under the Companies Act, 1956. Monnet is engaged in the business of

mining, production of steel, ferro-alloys and power. Monnet decided to set

up an integrated steel plant in Hazaribagh District with a proposed

investment of Rs. 1400 crores. A Memorandum of Understanding (MOU)

was entered into between Monnet and the State Government on

February 5, 2003. The main raw material for the integrated steel plant is

iron ore. On January 29, 2004, Monnet made an application to State of

Jharkhand, referred to as State Government, for mining lease of iron ore

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over an area of 3566.54 hectares in Mauza Ghatkuri for the purpose of

the proposed steel plant.

5.1. It is the case of Monnet that after consideration of the

application and following the necessary procedure contemplated under the

Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter

referred to as 'the 1957 Act’) and the 1960 Rules, the State Government in

August, 2004 recommended Monnet’s application to the Government of

India for grant of mining lease of iron ore over an area of 705 hectares in

Mauza Ghatkuri under Section 5(1) and Section 11(5) of the 1957 Act. The

recommendation was made after the State Government was satisfied that

the said mining block was suitable for exploitation and met the

requirement of Monnet. The recommendation was also made on priority

basis as Monnet fulfilled the essential objectives of the industrial policy of

the State with commitment for investment and growth of employment and

social sector under its aegis.

5.2. The Ministry of Mines, Government of India, on receipt of the

recommendation of the State Government, sought for certain clarifications

from the State Government vide their communication dated September 6,

2004. The State Government is said to have responded to the said

communication and clarified the position in their reply of November 17,

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2004. The State Government reiterated the recommendation in favour of

Monnet setting out the comparative merit of all such proposals.

5.3. On November 17, 2004, the District Mining Officer, Chaibasa

informed the Secretary, Department of Mines and Geology, Government of

Jharkhand that certain portions of Mauza Ghatkuri and the adjoining areas

were reserved for public sector exploitation under the two Notifications

issued by the Government of Bihar on December 21, 1962 and February

28, 1969. He further suggested that approval of the Central Government

under Rule 59(2) of the 1960 Rules should be obtained by the State

Government for grant of leases in this area to avoid complications.

5.4. The Central Government vide its letter dated June 15, 2005

informed that a joint meeting of officers of Ministry of Mines, Government

of India and concerned officers of the State Government be held to clarify

certain issues in connection with the Ghatkuri Reserve Forest.

5.5. On June 29, 2005, a joint meeting of the officials of the

Central Government and State Government on the issues relating to

proposals for grant of mining leases in Ghatkuri was held wherein the

Secretary of the State Government is stated to have requested the Central

Government to hold on the processing of the pending applications.

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5.6. On September 13, 2005, the State Government requested the

Central Government to return the proposals of mining lease of nine out of

ten applicants, including Monnet.

5.7. On September 14, 2005, a joint meeting of the officials of the

State Government and the Central Government took place. In that meeting

also the officials of the State Government informed the Central

Government that it has decided to withdraw nine pending mining lease

proposals, including that of Monnet.

5.8. Monnet has averred that compartment no. 5 which was

recommended for allocation to it was not at all affected by reservation.

Block No. D (500 acres) which is overlapping with compartment no. 5

(recommended in favour of Monnet) was earlier lease area of M/s. Rungta

Sons Pvt. Ltd. (for short, ‘Rungta’). The said lease was granted to

Rungta for twenty years upto September 3, 1995. Monnet claims that

application for renewal was not submitted by Rungta one year prior to

expiry of their lease and their lease automatically expired on September

3, 1995. Moreover, only 102.25 hectares area has been overlapping with

compartment no. 5 (out of the 705 hectares recommended by the State

Government for Monnet). Monnet has thus, set up the case that the area

recommended by the State Government for grant of mining lease to it was

not under any previous reservation for any public sector undertaking.

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5.9. On March 6, 2006, the Government of India passed an order

accepting the request of the State Government dated September 13, 2005

for withdrawal of the mining proposals made in favour of applicants,

including Monnet.

Civil Appeal No. 3286 of 2009, Adhunik Alloys & Power Ltd. Vs. Union of India and Ors.

6. The appellant M/s. Adhunik Alloys & Power Limited, referred

to as Adhunik, is a company registered under the provisions of the

Companies Act, 1956. It carries on business of iron and steel. Adhunik

intended to set up 2.2 MTPA integrated steel plant at Kandra in the State

of Jharkhand. The first phase of this integrated steel plant is said to have

been completed and commissioned in June, 2005. The work for

completion of phase-II has been going on. On September 1, 2003,

Adhunik made an application to the State Government for grant of mining

lease over an area of 8809.37 acres (3566.54 hectares) in Mauza Ghatkuri

for iron ore for captive consumption of its proposed integrated steel plant at

Kandra, Jharkhand.

6.1. On September 16, 2003, the Deputy Commissioner, Chaibasa

forwarded Adhunik’s application along with few others to the Director of

Mines, Jharkhand.

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6.2. As the applications were overlapping, the Director of Mines

called Adhunik and other applicants for a meeting on December 26, 2003.

The Director of Mines gave hearing to the applicants, including

Adhunik.

6.3. On February 26, 2004, an MOU was entered into between the

State Government and Adhunik in connection with an integrated steel plant

at Village Kandra in the District of Seraikela – Kharswan setting out the

details of the project; capacity per annum, project cost and implementation

period.

6.4. On August 4, 2004, the State Government recommended

Adhunik’s case to the Central Government for grant of mining lease for

iron ore for captive consumption over an area of 426.875 hectares. In its

letter dated August 4, 2004 seeking prior approval of the Central

Government for grant of mining lease for iron ore in favour of Adhunik, the

State Government gave various reasons justifying grant of mining lease to

Adhunik.

6.5. Adhunik claims that substantial progress has been made in

construction of its Rs. 790 crores integrated steel plant and the plant has

been seriously affected due to shortage of iron ore.

Civil Appeal No. 3287 of 2009, Abhijeet Infrastructure Ltd. Vs. Union of India and Ors.

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7. The appellant M/s. Abhijeet Infrastructure Limited, referred to

as Abhijeet, was earlier known as Abhijeet Infrastructure Pvt. Limited.

Abhijeet has been in the business of iron and steel for last many years.

On November 21, 2003, Abhijeet submitted the application to the State

Government for mining lease over an area of 1633.03 hectares in Mauza

Ghatkuri for iron ore and manganese for captive consumption of its

proposed Sponge Iron Plant and Ferro-Alloys Plant in Village Rewali,

Block Katkamsandi, District Hazaribagh. On February 26, 2004, an MOU

was entered into between Abhijeet and the State Government for setting

up a Sponge Iron Plant and Ferro-Alloys Plant at suitable location in the

State of Jharkhand.

7.1. On August 5, 2004, the State Government took a decision to

grant a mining lease to Abhijeet for iron ore for captive consumption over

an area of 429 hectares not overlapping with the area of any other

applicant in Mauza Ghatkuri. The State Government sought prior approval

of the Central Government vide its letter dated August 5, 2004 for grant of

mining lease to Abhijeet.

7.2. Abhijeet has averred that based on firm and definite

commitment of the State Government in the form of MOU dated February

26, 2004 it has taken all required steps including the steps for getting

acquisition of land in village Kud, Rewali and Damodih.

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Civil Appeal No. 3288 of 2009, Ispat Industries Limited Vs. Union of India and Ors.

8. The appellant, Ispat Industries Limited, referred to as Ispat,

is a company registered under the Companies Act, 1956. According to

Ispat, it is one of the largest steel producers in the private sector and has

got vast resources and technical experience. Ispat intended to set up an

integrated steel plant in the State of Jharkhand and accordingly made an

application to the State Government for grant of mining lease over an

area of 725.32 hectares in Village Rajabeda in West Singhbhum District for

iron ore.

8.1. The State Government took a decision on August 5, 2004 to

grant a mining lease over an area of 470.06 hectares for captive

consumption of iron ore in respect of the area not overlapping with the

area of any other major mineral. The State Government on August 5, 2004

also wrote to the Central Government seeking their prior approval in the

matter.

Civil Appeal No. 3289 of 2009, Jharkhand Ispat Private Limited Vs. Union of India and Ors.

9. Jharkhand Ispat Private Limited, to be referred as Jharkhand

Ispat, is a registered company having their registered office in Ramgarh,

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District Hazaribagh, State of Jharkhand. Jharkhand Ispat runs a Sponge

Iron and Steel Plant in Ramgarh.

9.1. Jharkhand Ispat applied to the State Government for grant of

iron ore mining lease over an area of 950.50 hectares at Mauza Ghatkuri.

It also entered into an MOU dated February 26, 2004 with the State

Government for establishment of sponge iron and steel plant in the

Hazaribagh District. As per para 4 of the MOU, State Government would

assist Jharkhand Ispat in selecting the area for iron and other minerals as

per requirement depending upon quality and quantity. The State

Government agreed to grant mineral concession as per existing law.

9.2. On August 4, 2004, the State Government prepared a report

containing its decision and proposal in favour of Jharkhand Ispat for grant

of mining lease over an area of 346.647 hectares at Mauza Ghatkuri and

forwarded the same to the Ministry of Mines, Government of India.

Civil Appeal No. 3290 of 2009, Prakash Ispat Limited Vs. Union of India and Ors.

10. The appellant Prakash Ispat Limited, referred to as Prakash, is

a company registered under the Companies Act, 1956. Prakash carries on

business in steel and claims to have annual turnover of Rs.2200 crores.

Prakash applied to the State Government for mining lease of iron ore over

an area of 1000 hectares in Mauza Ghatkuri on January 20, 2004 for

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captive consumption of the proposed Steel Plant at Amadia Gaon in

West Singhbhum District.

11. On March 26, 2004, the State Government entered into an

MOU with Prakash for setting up Mini Blast Furnace etc., at the proposed

investment of Rs. 71.40 crores. On August 4, 2004, the State Government

took a decision to grant mining lease for iron ore to Prakash for captive

consumption over an area of 294.06 hectares and recommended to the

Central Government for their prior approval.

12. It may be mentioned here that the facts concerning various

meetings between the officials of the State Government and Central

Government; the communications exchanged between the two, including

the communication of the State Government dated September 13, 2005;

the communication of the District Mining Officer, Chaibasa dated

November 17, 2004 to the Department of Mines and Geology, State of

Jharkhand and the rejection of the proposal have not been repeated while

narrating the facts of the appellants –Adhunik, Abhijeet, Ispat, Jharkhand

Ispat and Prakash as these facts have already been noted while narrating

the facts in the matter of Monnet.

The main issue

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13. The foremost point that arises for consideration is whether

the Notifications dated December 21, 1962 (to be referred as 1962

Notification) and February 28, 1969 (to be referred as 1969 Notification)

issued by the State of Bihar and the Notification dated October 27, 2006

(referred to as 2006 Notification) issued by the State of Jharkhand are

legal and valid. It is a little complex point, because it involves threading

one’s way through statutory provisions contained in 1957 Act and 1960

Rules. I shall set them out to the extent these are relevant after noticing

the arguments advanced on behalf of the parties.

14. Mr. Ranjit Kumar, learned senior counsel for Monnet , did

initially raise the plea that 1962 and 1969 Notifications were never

published in the official gazette but on production of gazette copies of

these Notifications by learned senior counsel for the State of Jharkhand,

the plea with regard to the non-publication of these Notifications was not

carried further.

1962 Notification

15. The 1962 Notification issued by the erstwhile State of Bihar

reads as under:

“NOTIFICATION The 21st December, 1962

No. A/MM-40510/62-6209/M - It is hereby notified for the information of public that the

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following iron ore bearing areas in this State are reserved for exploitation of the mineral in the public sector:-

Name of the district - Shinghbhum

Description of the areas reserved.

1. Sasangda Main Block –

BOUNDARY

South - The southern boundary is the same as the northern boundary. It starts from the Bihar, Orissa boundary opposite the gorge of the southern tributary of Megnahatu nala and runs west-north-west along the gorge till the foot of the hill.

East - The boundary between the States of Bihar and Orissa.

East & South - East Bihar-Orissa boundary from 2680 upto a point 2-3/4 miles north-east of it, meeting the southern boundary of Sasangda Main Block.

North - The northern boundary is the same as the southern boundary of Sasangda Main Block and follows the gorge at just over one mile northwards of .2935.

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5. Dirisumburu Block –

BOUNDARY

South and South-West Starting from the Churu Ikir Nala at about 5 furlongs east – north-east of Kiriburu Kolaiburu village (220 11’30” : 85 14’), in east- south-east direction for one mile.

South-East - From the above end towards north-east for 2-1/2 miles to reach a point ½ miles north west of Bahada village (22 11’30”: 85 17’30”).

North-East - From the above end north – westwards upto the gorge at coordinate location 20 13’ : 85 18”.

North-West - From the above location south- westwards along the fact of the hill Dirishumburu and the foot of the adjoining Hakatlataburu to meet the starting point of the Churu Ikir Nala east-north- east of Kolaiburu village.

6. Banalata Block –

BOUNDARY

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South-East - A line running west- north-west-east- south-east passing through 2.20 feet contour at the south- western and of the Banlata ridge south- east – From 2 -1/2 furlongs east of 2187 north east wards upto ½ mile north- west of Pechahalu village (22 16’ : 85 20’) and from here north-north – east upto 3 furlongs east- south-east of 2567 Painsira Buru).

North - From the above and in west-north-west direction across the hill for five furlongs to reach the north- west slope of the hill.

West - From above end in general south-south- west directing along the flank of the hill to reach the south-west boundary at three furlongs north-west 2187.

By order of the Governor of Bihar Sd/- (B.N. Sinha)

Secretary to Government”

1969 Notification

16. Then, on February 28, 1969 the following Notification was

issued:

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“GOVERNMENT OF BIHAR DEPARTMENT OF MINES & GEOLOGY

NOTIFICATION

Patna, the 28th February, 1969 Phalgun, 1890 – S

No.B/M6-1019/68-1564/M

It is hereby notified for information of public that Iron Ore bearing areas of 416 acres (168.349 Hectares) situated in Ghatkuri Reserved Forest Block No. 10 in the district of Singhbhum are reserved for exploitation of mineral in the public sector. For full details in this regard District Mining Officer, Chaibasa should be contacted.

By order of the Governor of Bihar Sd/- (C.P. Singh)

Dy. Secretary to Government”

2006 Notification

17. The State of Jharkhand issued a Notification on October 27,

2006 which reads as follows:

“DEPARTMENT OF MINES & GEOLOGY, RANCHI

NOTIFICATION The 27th October, 2006

No. 3277 - It is hereby notified for the information of the general public that optimum utilization and exploitation of the mineral resources in the State and for establishment of mineral based industry with value addition thereon, it has been decided by the State Govt. that the iron ore deposits at Ghatkuri would not be thrown open for grant of prospective licence, mining lease or otherwise for the private parties. The deposit was at all material times kept reserved vide gazette notification No. A/MM-

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40510/62-6209/M dated the 21st December, 1962 and No. B/M-6-1019/68-1564/M dated the 28th February, 1969 of the State of Bihar. The mineral reserved in the said area has now been decided to be utilized for exploitation by Public Sector undertaking or Joint Venture project of the State Govt. which will usher in maximum benefits to the State and which generate substantial amount of employment in the State.

The aforesaid notification is being issued in public interest and in the larger interest of the State.

The defining co-ordinates of the reserved area enclosed here with for reference.

By order of the Governor S.K. Satapathy

Secretary to Government

Description of the area reserved in Ghatkuri is given below:-

District: Singhbhum

Main Block: Ghatukuri

Limiting co-ordinate points of the reserved area of Ghatkuri as per the notification dated 21st December 1962 and 28th February 1969 published in the Bihar Gazette are given below:

xxx xxx xxx

Sd/- Vijoy Kumar

Director I/c Geology Directorate”

Contentions

18. Learned senior counsel for the appellants highlighted different

aspects while setting up challenge to the 1962, 1969 and 2006

Notifications. Mr. Ranjit Kumar, learned senior counsel for Monnet

focussed more on factual aspects peculiar to Monnet. I shall refer to the

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factual aspects highlighted by Mr. Ranjit Kumar in the later part of the

judgment. While assailing validity of 1962, 1969 and 2006 Notifications, he

referred to the provisions of 1957 Act and submitted that reservation was

part of a regulatory regime. According to him, 'regulation of mines’ means

regulatory regime which has been taken over by the Central Government

and that would include 'reservation’. He would submit that a proprietary

right should not be mixed up with inherent right insofar as mining is

concerned.

19. Mr. C.A. Sundaram, learned senior counsel for Ispat argued

that the 2006 Notification was bad in law for (1) 1962 and 1969

Notifications were not valid and as such could not be relied upon to give

sanctity to the 2006 Notification; (2) 2006 Notification attempted to reserve

the area for exploitation by public sector undertaking or joint ventures

when Section 17A of the 1957 Act only allows the State Government to

reserve area for public sector undertakings and non-joint ventures;

Section 17A does not envisage a private participation and (3) under

Section 17A of the 1957 Act, the prior approval of the Central Government

was needed before the State could reserve any area for public sector

undertakings and no such prior approval was taken.

20. Mr. C.A. Sundaram would submit that 1962 and 1969

Notifications were invalid since Section 18 of the 1957 Act vests power of

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conservation and systematic development of minerals with Central

Government; there was statutory prohibition on the State Government to

make law with regard to conservation and development of minerals in

India. Rule 59 as it stood in 1962 and 1969 envisaged a situation where

reservation could be made only for a temporary purpose or for an

emergency and it did not empower the State to reserve the area for public

sector undertaking. Learned senior counsel submitted that power of

reservation by the State Government for public sector undertakings was

introduced for the first time by way of amendment to Rule 58 of the 1960

Rules in 1980 and as such no power existed prior to 1980 for the State

Government to reserve areas for public sector undertakings. Alternatively,

he submitted that even if 1962 and 1969 Notifications were held to be

validly issued with proper authority of law at that point of time, the fact that

Rule 58 was omitted in 1988 without any saving clause necessarily meant

that 1962 and 1969 Notifications were no longer valid and could not be

relied upon. He argued that current power of reservation contained in

Section 17A of the 1957 Act is consistent with the erstwhile Rules 58/59

since Section 17A expressly requires the prior approval of the Central

Government before State Government issues any notification for

reservation of mining area for public sector undertakings.

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21. The decisions of this Court in Hingir-Rampur Coal Co. Ltd. &

Ors. v. State of Orissa & Ors.a; State of Orissa & Anr. v. M/s M.A. Tulloch

& Co.b; Baijnath Kadio v. State of Bihar and Othersc; Amritlal Nathubhai

Shah and Ors. v. Union Government of India and Anotherd; India Cement

Ltd. & Ors. v. State of Tamil Nadu and Otherse; Orissa Cement Ltd. v.

State of Orissa & Othersf and Maya Mathew v. State of Kerala and Ors.g

were cited. Mr. C.A. Sundaram sought to distinguish Amritlal Nathubhai

Shahd and submitted that in any case Amritlal Nathubhai Shahd was not

a good law.

22. Mr. L. Nageswara Rao and Dr. Abhishek Manu Singhvi,

learned senior counsel, appeared for Adhunik and argued that 1962 and

1969 Notifications were issued in contravention of law without the statutory

prior approval of the Central Government under the 1957 Act. The 2006

Notification was only a reiteration of what was contained in the 1962 and

1969 Notifications. 2006 Notification is bad in law and ultra vires of

Section 17A of the 1957 Act. It was submitted that the State Government

never adopted the 1962 and 1969 Notifications and, therefore, these

Notifications had lapsed even if passed with due authority of law. In this

a AIR 1961 SC 459 b AIR 1964 SC 1284 c 1969 (3) SCC 838 d 1976 (4) SCC 108 e 1990 (1) SCC 12 f 1991 Suppl. (1)SCC 430 g 2010 (4) SCC 498

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regard, the judgment in Pratik Sarkar, M.B. Suresh and Jitendra Laxman

Thorve v. State of Jharkhandh was relied upon.

23. Mr. G.C. Bharuka, learned senior counsel appeared for

Abhijeet and submitted that till July 1963, the State Government had no

power to reserve any mineral bearing land for grant of prospecting licence

or mining lease to any given class of persons, including the public sector

undertakings. It was submitted that on declaration under Section 2 of the

1957 Act, the State Legislature was completely denuded of its power to

legislate in respect of mines and minerals and consequently, the State

Government had ceased to have any Executive power in respect of mines

and minerals though it remained to be owner of the land and the minerals.

In this regard, learned senior counsel referred to decisions of this Court in

M.A. Tulloch & Co.b; Baijnath Kadioc and Bharat Coking Coal Ltd. v. State

of Bihar & Ors.i. Mr. Bharuka also distinguished the decision of this Court

in Amritlal Nathubhai Shahd and submitted that though there was no

specific statutory provision of vesting power with the State Government for

reservation, but in that case the Court inferred such power from Rule 59 of

the 1960 Rules. Rule 59, as originally framed in 1960, permitted

reservation only for “any purpose other than prospecting or mining for

minerals”. Vide Notification dated July 9, 1963, the words “other than

h 2008 (56) 1 BLJR 660 i 1990 (4) SCC 557

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prospecting or mining for minerals” were deleted and, therefore, on

December 21, 1962 when the Notification was issued by the State of Bihar

reserving the lands in dispute for exploitation by public sector, it had no

power to do so. Learned senior counsel submitted that Amritlal Nathubhai

Shahd dealt with situation post 1963 amendment in Rule 59 and not pre-

amendment.

24. Learned senior counsel submitted that the “reservation of

mineral bearing areas for exploitation by public sector” is covered under

the declaration made by Parliament under Section 2 of the 1957 Act in

view of List I, Entry 54 of Seventh Schedule to the Constitution of India.

The topic relating to “reservation” is covered within the field of “regulating

the grant of mining lease” and that would include the power to grant or not

to grant mining lease to a particular person. The “reservation” would come

within the scope of “regulating the grant of mining lease” for which the

Central Government is given the power to make rules. The Central

Government, as a delegate of the Parliament, can frame rules with respect

to “regulating the grant of mining lease”. By placing reliance upon Baijnath

Kadioc and Bharat Coking Coali, it was submitted that whether the rules

are made or not, the topic is covered by Parliamentary Legislation and to

that extent the power of State Legislature ceased to exist. With reference

to Rule 58, it was submitted that by amendment brought in 1960 Rules in

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1980, the State Governments became competent to reserve areas for

exploitation by Government or a Corporation established by any Central,

State or Provincial Act or a government company within the meaning of

Section 617 of the Companies Act. The Central Government could frame

the above rule under its rule-making power in Section 13 of 1957 Act only

because the topic of reservation was covered within the declaration under

Section 2 of the 1957 Act and was well within the scope of “to the extent

hereinafter provided”.

25. In respect of validity of Notification dated October 27, 2006

issued by the State Government, it was submitted that 2006 Notification

seeks to reserve the area for “joint venture” but that is not permissible

under Section 17A of the 1957 Act. Section 17A(2) mandates that the area

should be reserved “with the approval of the Central Government” and

there was no approval granted to the 2006 Notification. Moreover, 2006

Notification by its own words, is nothing but merely an informatory

Notification having no legal significance or consequence.

26. Dr. Rajiv Dhavan, learned senior counsel made his

submissions on behalf of Jharkhand Ispat. He vehemently contended that

the 1962 Notification was wholly illegal and invalid as it was totally contrary

to Rule 59 of 1960 Rules as it then stood which specifically allowed

reservation for any purpose other than prospecting or mining for minerals.

Page 26

In this connection, he relied upon a decision of this Court in Janak Lal v.

State of Maharashtra and Othersj.

27. Learned senior counsel referred to changes that occurred in

1957 Act and 1960 Rules with effect from February 10, 1987. He

submitted that by virtue of Section 17A(3) which was brought in 1987 the

State Governments acquired power of reservation for specific areas with

the approval of the Central Government. From April 13, 1988 under Rule

59(2) of the 1960 Rules, the Central Government could relax the

provisions of sub-rule (1) in any special case. According to learned senior

counsel, reservation under 1969 Notification was technically permissible

because Rule 59 was amended in 1963 by removing ‘no mining restriction’

but reservations after 1980 and especially 1988 could be made only under

a new statutory regime.

28. Dr. Rajeev Dhavan also based his argument on the doctrine of

federalism and submitted that the State of Bihar had no legal power to

reserve the area de hors the 1957 Act. He submitted that 1957 Act was

wholly occupied field on the subject of mines and minerals and that ousts

the state legislative and congruent executive power wholly and squarely.

In support of his submissions, he referred to the decisions of this Court in

Hingir-Rampur Coal Co.a , Baijnath Kadioc , State of Assam and others v.

j 1989 (4) SCC 121

Page 27

Om Prakash Mehta and othersk, State of W.B. v. Kesoram Industries Ltd.

and othersl and Sandur Manganese and Iron Ores Limited v. State of

Karnataka and Othersm.

29. Dr. Rajeev Dhavan submitted that merely because State

happens to be the owner of the land including mines, it does not give it

power to mine or reserve outside the regime of 1957 Act and 1960 Rules.

He submitted that Amritlal Nathubhai Shah’s cased must be confined to its

own facts. The decision in Amritlal Nathubhai Shahd was founded on the

specific finding that the State’s action was consistent with Rule 59; it does

not test the proposition of a conflict between the State’s power over land

and the Union’s take over of the field of mines and minerals. Moreover,

learned senior counsel would submit that Amritlal Nathubhai Shahd failed

to take note of earlier Constitution Bench decisions of this Court. Learned

senior counsel also submitted that the decision of this Court in Kesoraml

has no application as the said decision deals with the State’s power to tax.

30. Mr. Dhruv Mehta, learned senior counsel for Prakash

submitted that prior to November 16, 1980, there was no power with the

State Governments to reserve any area for exploitation by the Government

or a Corporation established by Central or State Act or a government

k 1973 (1) SCC 584 l 2004 (10) SCC 201 m 2010 (13) SCC 1

Page 28

company. It was only by way of amendment to Rule 58 on November 16,

1980 that for the first time the State Governments were conferred power to

reserve any area for exploitation by the Government or a Corporation

established by the Central, State or Provincial Act or a government

company. According to him, the question for consideration in the present

context should be whether prior to 1980, the State had power either to

‘prohibit mining’ or to ‘reserve mining for public sector undertaking’. In this

regard, he referred to decisions of this Court in Baijnath Kadioc, D.K.

Trivedi and Sons and Others v. State of Gujarat and Othersn, State of

Tamil Nadu v. M/s. Hind Stone and Otherso and Indian Metals and Ferro

Alloys Ltd. v. Union of India & Orsp. He submitted that in view of the above,

1962 Notification reserving iron ore area in the State of Bihar for

exploitation of mineral in public sector was clearly beyond the power of the

State. He submitted that the State did not have any inherent power to

reserve any area for mining in view of the declaration made by Parliament

under Section 2 of the 1957 Act and in any case Rule 59 of the 1960

Rules, as it originally stood, specifically excluded reservation with regard to

prospecting or mining of mineral prior to June 9, 1963.

31. As regards 2006 Notification, Mr. Mehta submitted that the

said Notification firstly, was not a fresh exercise of reservation as it refers n 1986 (Suppl.) SCC 20 o 1981 (2) SCC 205 p 1992 Supp (1) SCC 91

Page 29

to reservation already made by 1962 and 1969 Notifications. Secondly,

even if it is assumed that 2006 Notification is a fresh order for reservation

in exercise of the power under Section 17A(2) of the 1957 Act, yet the

said Notification suffers from diverse infirmities, namely, (a) there is no

approval by the Central Government and (b) being an exercise of

subordinate legislation, it cannot be given retrospective effect. Reliance

was placed by the learned senior counsel on Hukam Chand etc. v. Union

of India & Orsq.

Central Government’s Stand

32. Mr. Ashok Bhan, learned senior counsel for the Union of India

referred to Entry 54 of the Union List, Entry 23 of the State List, Article 246

of the Constitution, various Sections of 1957 Act and Rules of 1960 Rules

and submitted that Central Government having taken power on to itself by

enacting 1957 Act, the legislative field relating to ‘minerals — regulation

and development’ is occupied and the Central Government was the sole

regulator. Mr. Ashok Bhan submitted that under the scheme of law, the

State Government was denuded of its power other than what flows from

the 1957 Act. In matters of regulation of mines and development of

minerals, according to Mr. Ashok Bhan, public interest is paramount.

Reply on behalf of the State Government

q 1972 (2) SCC 601

Page 30

33. Mr. Ajit Kumar Sinha, learned senior counsel for the State of

Jharkhand, in reply, strongly contested the contentions of learned senior

counsel appearing for the appellants. He vehemently contended that the

State Government had the inherent power to reserve any area for

exploitation as the owner of the land and minerals vested in it. He

submitted that the Bihar Legislature enacted 1950 Bihar Act which

received the assent of the President and came into force on September

25, 1950. Section 4(a) thereof vested all pre-existing estates or tenures

including rights in mines and minerals absolutely in the State free from all

encumbrances. 1950 Bihar Act has been held to be constitutionally valid

by a decision of this Court in The State of Bihar v. Maharajadhiraja Sir

Kameshwar Singh of Darbhanga and Ors.r. In any event, Mr. Ajit Kumar

Sinha, learned senior counsel submitted that 1950 Bihar Act has been put

in the Ninth Schedule of the Constitution and was, therefore, beyond the

pale of challenge. Moreover, the sovereign executive power of the State

Government under Article 298 of the Constitution to carry on any trade or

business and to acquire, hold and dispose of property for any purpose

comprehends and includes the power to reserve land for exploitation of its

minerals in the public sector. He heavily relied upon the decisions of this

Court in Amritlal Nathubhai Shahd, Indian Metals and Ferro Alloys Ltd.p

and Bhupatrai Maganlal Joshi and Others v. Union of India and anothers .

r 1952 SCR 889 s 2001 (10) SCC 476

Page 31

34. Mr. Ajit Kumar Sinha, leaned senior counsel submitted that the

source of power for issuance of 1962, 1969 and 2006 Notifications is

clearly traceable to the relevant statutory provisions. Learned senior

counsel would submit that source of 1962 and 1969 Notifications issued

by the then State of Bihar was traceable to Rule 59 of 1960 Rules as it

then stood followed by amendment in that rule on July 9, 1963, while

2006 Notification is traceable to Section 17A(2) of 1957 Act read with Rule

59(1)(e) as inserted with effect from April 13, 1988.

35. Mr. Ajit Kumar Sinha, learned senior counsel submitted that

even otherwise there was no conflict or encroachment by the State of any

occupied field. The State has neither been divested nor barred nor

prohibited by 1957 Act or 1960 Rules. Instead, the unfettered power of

reservation vested with the State alone under Rule 59 of 1960 Rules from

1962 to 1987 and thereafter under Section 17A(2). According to him, after

1987 there is a concurrent power of reservation both with State

Governments as well as Central Government as provided in Section 17A

of the 1957 Act and Rule 59(1)(e) of the 1960 Rules. He relied upon

decisions of this Court in Lord Krishna Textile Mills v. Its Workment, Life

Insurance Corporation of India v. Escorts Limited and othersu, Municipal

t AIR 1961 SC 860 u 1986 (1) SCC 264

Page 32

Corporation for City of Pune & Ors. v. Bharat Forge Co. Ltd. & Ors.v and

High Court of Judicature for Rajasthan v. P.P. Singh and Anotherw.

36. Mr. Ajit Kumar Sinha, learned senior counsel referred to the

provisions of the 1957 Act, particularly Sections 2, 4(3), 4A, 10(1), 13(2)

(e), 16(1)(b), 17(1), 17A(1)(A), 18A(6), 21(5), 28 and 30 to show that

Parliament itself contemplated state legislation for vesting of lands

containing mineral deposits in the State Government and Parliament did

not intend to trench upon powers of State legislatures under Entry 18 of

List II. He relied upon the decisions of this Court in State of Haryana and

Another v. Chanan Mal and Othersx, Ishwari Khetan Sugar Mills (P)

Limited & Ors. v. State of Uttar Pradesh and Othersy and Kesoraml. He

heavily relied upon the expression employed in Entry 54, ‘to the extent to

which such regulation and development under the control of Union is

declared by Parliament by law’ and the expression ‘to the extent

hereinafter provided’ in Section 2 of 1957 Act and submitted that what

follows from this is that only when there is a bar or a prohibition in the law

declared by the Parliament in the 1957 Act and/or the Rules made

thereunder and if the State encroaches on the field covered/occupied then

to that extent, the act or action of the State would be ultra vires. Thus, Mr.

v 1995 (3) SCC 434 w 2003 (4) SCC 239 x 1977 (1) SCC 340 y 1980 (4) SCC 136

Page 33

Ajit Kumar Sinha would submit that the power or competence of the state

legislatures to enact laws or of the State Government to issue notification

remains unaffected if the field is neither occupied nor disclosed nor

prohibited. In this regard, he referred to few decisions of this Court,

namely, Hingir-Rampur Coal Co.a, M.A. Tulloch & Cob., Baijnath Kadioc,

India Cement Limitede, Bharat Coking Coali, Orissa Cement Limitedf and

Kesoraml .

37. Learned senior counsel would submit that the Central

Government also upon examination of the applications made by the

appellants rejected the proposals on the ground of reservation made by

the then State of Bihar under 1962 and 1969 Notifications and, thus, it can

be inferred that these Notifications received post facto approval from the

Central Government. In this regard, learned senior counsel relied upon

M/s Motilal Padampat Sugar Mills Co. Ltd. V. State of U.P. & Ors.z, Amrit

Banaspati Ltd. and Another v. State of Punjab and Anotheraa , State of

Punjab v. Nestle India Ltd. and Anotherbb, M.P. Mathur and Others v. DTC

and Otherscc and Sandur Manganese and Iron Ores Limitedm .

38. Mr. Ajit Kumar Sinha, learned senior counsel submitted that

1962 and 1969 Notifications issued by the then State of Bihar have been

z 1979 (2) SCC 409 aa 1992 (2) SCC 411 bb 2004 (6) SCC 465 cc 2006 (13) SCC 706

Page 34

reiterated by the State Government on its formation by 2006 Notification.

He referred to Section 85 of the Bihar Reorganization Act, 2000 that

provides that the appropriate government may, before the expiration of two

years adapt and/or modify the law and every such law shall have effect

subject to the adaptations and modifications so made until altered,

repealed or amended by a competent legislature. He, thus, submitted that

by virtue of Section 85 of Bihar Reorganization Act, 2000 read with

Sections 84 and 86 thereof, it is clear that the existing law shall have effect

till it is altered, repealed and/or amended.

Interveners’ view

39. Mr. Vikas Singh, Mr. Krishnan Venugopal and Mr. P.S.

Narasimha, learned senior counsel, appeared for interveners. While

adopting the arguments advanced on behalf of State of Jharkhand, Mr.

Vikas Singh submitted that reservation of minerals is inherent right vested

in the State. Mr. Krishnan Venugopal, learned senior counsel heavily relied

upon the decision of this Court in Amritlal Nathubhai Shahd and submitted

that the said decision was binding and not per incuriam as contended on

behalf of the appellants. He submitted that many provisions in 1957 Act

and 1960 Rules acknowledge that all minerals vest in the State and that

power to reservation is contemplated by Rule 59 of 1960 Rules.

Page 35

40. After this group of appeals was fully argued before us and the

appeals were reserved for judgment, a Special Leave Petition, Geo-

Minerals and Marketing (P) Ltd. v. State of Orissa & Ors., arising out of the

judgment of Orissa High Court in W.A. © No. 6288/2006 came up for final

disposal wherein one of the issues concerning reservation of mining area

by the Government of Orissa for exploitation in public sector was found to

be involved. We thought fit that learned senior counsel and counsel

appearing in that matter were also heard so that we can have benefit of

their view-point as well. Accordingly, we heard M/s. Harish Salve, K.K.

Venugopal and R.K. Dwivedi, learned senior counsel, on the common legal

aspect.

41. I would have preferred not to burden this judgment with the

text of Entry 54 of List I, Entry 23 of List II and the relevant provisions

contained in 1957 Act and 1960 Rules but reproduction of some of the

provisions is necessary for having the point under consideration in proper

perspective.

Relevant Entries

42. Entry 54, List I, is as follows :

“54. Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest.”

Page 36

43. Entry 23, List II, is as under :

“23. Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union.”

Mines and Minerals (Regulation and Development) Act, 1948

44. The Mines and Minerals (Regulation and Development) Act,

1948 (for short, ‘1948 Act’) was enacted to provide for the regulation of

mines and oilfields and for the development of the minerals under Entry

36 of the Government of India Act, 1935. It received the assent of the

Governor General on September 8, 1948 and came into effect from that

date. Under 1948 Act, the Central Government framed Mineral Concession

Rules, 1949.

45. 1948 Act was repealed by 1957 Act. The introduction of 1957

Act reads as follows :

“In the Seventh Schedule of the Constitution in Union List entry 54 provides for regulation of mines and minerals development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest. On account of this provision it became imperative to have a separate legislation. In order to provide for the regulation of mines and the development of minerals, the Mines and Minerals (Regulation and Development) Bill was introduced in the Parliament.”

Page 37

Mines and Minerals (Regulation and Development) Act, 1957 and the Amendments

46. 1957 Act came into effect on June 1, 1958. It has been

amended from time to time.

47. Section 2 of the 1957 Act reads as follows :

“S. 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.”

48. Section 3(a),(c),(d),(e),(f), (g) and (h) defines ‘minerals’,

‘mining lease’, ‘mining operations’, ‘minor minerals’, ‘prescribed’

‘prospecting licence’ and ‘prospecting operations’ in the 1957 Act as under:

“3(a) “minerals” includes all minerals except mineral oils;

(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;

(e) “minor minerals” means building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral which the Central Government may, by notification in the Official Gazette, declare to be a minor mineral;

(f) “prescribed” means prescribed by rules made under this Act;

Page 38

(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;”

49. The original Section 4 in 1957 Act read as follows :

“S.4. (1) No person shall undertake any prospecting or mining operations in any area, except under and in accordance with the terms and conditions of a prospecting licence or, as the case may be, a mining lease, granted under this Act and the rules made thereunder:

Provided that nothing in this sub-section shall affect any prospecting or mining operations undertaken in any area in accordance with the terms and conditions of a prospecting licence or mining lease granted before the commencement of this Act which is in force at such commencement.

(2) No prospecting licence or mining lease shall be granted otherwise than in accordance with the provisions of this Act and the rules made thereunder.”

50. In 1986, 1987 and 1999, Section 4 of the 1957 Act came to be

amended. After these amendments, Section 4 reads as under :

“S.4.- Prospecting or mining operations to be under licence or lease.—(1) dd[No person shall undertake any reconnaissance, prospecting or mining operations in any area, except under and in accordance with the terms and conditions of a reconnaissance permit or of a prospecting licence or, as the case may be, of a mining lease, granted under this Act and the rules made thereunder]:

dd Subs. by Act 38 of 1999, sec. 5, for certain words (w.e.f.18-12-1999).

Page 39

ee[Provided further that nothing in this sub-section shall apply to any prospecting operations undertaken by the Geological Survey of India, the Indian Bureau of Mines, ff[the Atomic Minerals Directorate for Exploration and Research] of the Department of Atomic Energy of the Central Government, the Directorates of Mining and Geology of any State Government (by whatever name called), and the Mineral Exploration Corporation Limited, a Government company within the meaning of section 617 of the Companies Act, 1956:]

gg[Provided also that nothing in this sub-section shall apply to any mining lease (whether called mining lease, mining concession or by any other name) in force immediately before the commencement of this Act in the Union Territory of Goa, Daman and Diu.]

hh[(1A) No person shall transport or store or cause to be transported or stored any mineral otherwise than in accordance with the provisions of this Act and the rules made thereunder.]

(2) ii[No reconnaissance permit, prospecting licence or mining lease] shall be grated otherwise than in accordance with the provisions of this Act and the rules made thereunder.

jj[(3) Any State Government may, after prior consultation with the Central Government and in accordance with the rules made under section 18,

ee Ins. by Act 37 of 1986, sec. 2 (w.e.f. 10-2-87) ff Subs. by Act 38 of 1999, sec. 5, for “the Atomic Minerals Division” (w.e.f. 18-12-1999) gg Ins. by Act 16 of 1987, sec. 14 (w.r.e.f. 1-10-1963). hh Ins. by Act 38 of 1999, sec. 5 (w.e.f. 18-12-1999) ii Subs. by Act 38 of 1999, sec. 5, for “No prospecting licence or mining lease” (w.e.f. 18-12-

1999) jj Ins. by Act 37 of 1986, sec. 2 (w.e.f. 10-2-1987)

Page 40

kk[undertake reconnaissance, prospecting or mining operations with respect to any mineral specified in the First Schedule in any area within that State which is not already held under any reconnaissance permit, prospecting licence or mining lease].”

51. Section 5 of the 1957 Act, as originally enacted, provided that

no prospecting licence or mining lease should be granted by a State

Government to any person unless the conditions prescribed therein were

satisfied. It mandated previous approval of the Central Government before

grant of prospecting licence or mining lease by the State Government.

52. The original Section 5 came to be amended in 1986, 1994 and

1999. After these amendments, Section 5 now provides that a State

Government shall not grant a reconnaissance permit, prospecting licence

or mining lease to any person unless he satisfies the requisite conditions.

The provision mandates that in respect of any mineral specified in the First

Schedule, no reconnaissance permit, prospecting licence or mining lease

shall be granted except with the previous approval of the Central

Government.

53. Section 6 of 1957 Act provides for maximum area for which a

prospecting licence or mining lease may be granted. Section 7 makes

provision for the periods for which prospecting licence may be granted or

renewed and Section 8 provides for periods for which mining lease may be

granted or renewed.

kk Subs. by Act 38 of 1999, sec. 5, for certain words (w.e.f. 18-12-1999)

Page 41

54. Section 10 of the 1957 Act provides that application for

reconnaissance permit, prospecting licence or mining lease in respect of

any land in which the minerals vest in the Government shall be made to

the State Government concerned. Inter alia, it empowers the concerned

State Government to grant or refuse to grant the permit, licence or lease

having regard to the provisions of 1957 Act or 1960 Rules.

55. The original Section 11 of the 1957 Act read as follows :

“S.11.(1) Where a prospecting licence has been granted in respect of any land, the licensee shall have a preferential right for obtaining a mining lease in respect of that land over any other person:

Provided that the State Government is satisfied that the licensee has not committed any breach of the terms and conditions of the prospecting licence and is otherwise a fit person for being granted the mining lease.

(2) Subject to the provisions of sub-section (1), where two or more persons have applied for a prospecting licence or a mining lease in respect of the same land, the applicant whose application was received earlier shall have a preferential right for the grant of the licence or lease, as the case may be, over an applicant whose application was received later:

Provided that where any such applications are received on the same day, the State Government, after taking into consideration the mattes specified in sub- section (3), may grant the prospecting licence or mining lease, as the case may be, to such one of the applicants as it may deem fit.

(3) The matters referred to in sub-section (2) are the following :-

Page 42

(a) any special knowledge of, or experience in, prospecting operations or mining operations, as the case may be, possessed by the applicant;

(b) the financial resources of the applicant;

(d) such other matters as may be prescribed.

(4) Notwithstanding anything contained in sub- section (2) but subject to the provisions of sub-section (1), the State Government may for any special reasons to be recorded and with the previous approval of the Central Government, grant a prospecting licence or a mining lease to an applicant whose application was received later in preference to an applicant whose application was received earlier.”

56. The above provision was substituted by Act 38 of 1999 with

effect from December 18, 1999. After substitution, Section 11 now reads

as under :

“S.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,—

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

Page 43

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

(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.

(2) Subject to the provisions of sub-section (1), where the State Government has not notified in the Official Gazette the area for grant of reconnaissance permit or prospecting licence or mining lease, as the case may be, and two or more persons have applied for a reconnaissance permit, prospecting licence or a mining lease in respect of any land in such area, the applicant whose application was received earlier, shall have the preferential right to be considered for grant of reconnaissance permit, prospecting licence or mining lease, as the case may be, over the applicant whose application was received later:

Provided that where an area is available for grant of reconnaissance permit, prospecting licence or mining lease, as the case may be, and the State Government has invited applications by notification in the Official Gazette for grant of such permit, licence or lease, all the applications received during the period specified in such notification and the applications which had been received prior to the publication of such notification in respect of the lands within such area and had not been disposed of, shall be deemed to have been received on the same day for the purposes of assigning priority under this sub-section:

Provided further that where any such applications are received on the same day, the State Government, after taking into consideration the matter specified in sub- section (3), may grant the reconnaissance permit, prospecting licence or mining lease, as the case may be, to such one of the applicants as it may deem fit.

Page 44

(3) The matters referred to in sub-section (2) are the following :--

(a) any special knowledge of, or experience in, reconnaissance operations, prospecting operations or mining operations, as the case may be, possessed by the applicant.

(b) the financial resources of the applicant;

(d) the investment which the applicant proposes to make in the mines and in the industry based on the minerals;

(e) such other matters as may be prescribed.

(4) Subject to the provisions of sub-section (1), where the Sate Government notifies in the Official Gazette an area for grant of reconnaissance permit, prospecting license or mining lease, as the case may be, all the applications received during the period as specified in such notification, which shall not be less than thirty days, shall be considered simultaneously as if all such applications have been received on the same day and the State Government, after taking into consideration the matter specified in sub-section (3), may grant the reconnaissance permit, prospecting licence or mining lease, as the case may be, to such one of the applicants as it may deem fit.

(5) Notwithstanding anything contained in sub- section (2), but subject to the provisions of sub-section (1), the State Government may, for any special reasons to be recorded, grant a reconnaissance permit, prospecting licence or mining lease, as the case may be, to an applicant whose application was received later in preference to an applicant whose application was received earlier:

Provided that in respect of minerals specified in the First Schedule, prior approval of the Central Government

Page 45

shall be obtained before passing any order under this sub- section.”

57. Section 13 of the 1957 Act empowers Central Government to

make rules in respect of minerals. By virtue of the power conferred upon

the Central Government under Section 13(2)(e), 1960 Rules have been

framed for regulating the grant of, inter alia, mining leases in respect of

minerals and for purposes connected therewith.

58. Section 14 states that the provisions of Sections 5 to 13 (both

inclusive) shall not apply to quarry leases, mining leases or other mineral

concessions in respect of minor minerals. Section 15 empowers State

Governments to make rules in respect of minor minerals.

59. Section 16 provides for power to modify mining leases granted

before 25th October, 1949. The original sub-section (1) of Section 16

mandated that all mining leases granted before October 25, 1949 shall be

brought into conformity with the provisions of 1957 Act and the Rules

made under Sections 13 and 18 after the commencement of 1957 Act.

Then it provided that if the Central Government was of the opinion that in

the interest of mineral development it was expedient so to do, it might

permit any person to hold one or more such mining leases covering in any

one State a total area in excess of that specified in clause (b) of Section 6

or for a period exceeding that specified in sub-section (1) of Section 8.

Sub-section (1) of Section 16 has been amended in 1972 and 1994.

Page 46

60 By virtue of Section 17, the Central Government has been

given special powers to undertake prospecting or mining operations in

certain cases. Section 17(1) was amended in 1972. After amendment,

Section 17(1) reads as under :

“S. 17.- Special powers of Central Government to undertake prospecting or mining operations in certain lands.—(1) The provisions of this section shall apply in respect of land in which the minerals vest in the Government of a State or any other person.”

61. Section 17A was inserted in the 1957 Act by Act 37 of 1987.

Thereafter, sub-section (1A) was added in Section 17A by Act 25 of 1994.

Section 17A, after its amendment in 1994, reads as follows :

“S. 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.

(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.

Page 47

(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.”

62. Section 18 states that it shall be the duty of the Central

Government to take all such steps as may be necessary for the

conservation and systematic development of minerals in India and for the

protection of environment by preventing or controlling any pollution which

may be caused by prospecting or mining operations and for such purposes

the Central Government may make rules. Sub-section (2) of Section 18

empowers the Central Government to make rules and provide for the

matters stated in clause (a) to clause (q).

63. Section 18A was inserted in 1957 Act to enable the Central

Government to authorize Geological Survey of India to carry out necessary

Page 48

investigation for the purpose of obtaining information with regard to

availability of any mineral in or under any land in relation to which any

prospecting licence or mining lease has been granted by a State

Government or by any other person. Proviso that follows sub-section (1) of

Section 18A provides that in cases of prospecting licences or mining

leases granted by a State Government, no such authorization shall be

made except after consultation with the State Government. To the extent

Section 18A is relevant, it is reproduced as under :

“S. 18A. Power to authorize Geological Survey of India, etc., to make investigation.—(1) Where the Central Government is of opinion that for the conservation and development of minerals in India, it is necessary to collect as precise information as possible with regard to any mineral available in or under any land in relation to which any prospecting licence or mining lease has been granted, whether by the State Government or by any other person, the Central Government may authorize the Geological Survey of India, or such other authority or agency as it may specify in this behalf, to carry out such detailed investigation for the purpose of obtaining such information as may be necessary:

Provided that in the cases of prospecting licences or mining leases granted by a State Government, no such authorization shall be made except after consultation with the State Government.

xxx xxx xxx xxx xxx

(6) The costs of the investigation made under this section shall be borne by the Central Government.

Provided that where the State Government or other person in whom the minerals are vested or the holder of

Page 49

any prospecting licence or mining lease applies to the Central Government to furnish to it or him a copy of the report submitted under sub-section (5), that State Government or other person or the holder of a prospecting licence or mining lease, as the case may be, shall bear such reasonable part of the costs of investigation as the Central Government may specify in this behalf and shall, on payment of such part of the costs of investigation, be entitled to receive from the Central Government a true copy of the report submitted to it under sub-section (5).”

64. Section 19 provides that any prospecting licence or mining

lease granted, renewed or acquired in contravention of the provisions of

1957 Act or any rules or orders made thereunder shall be void and of no

effect. Section 19 underwent amendments in 1994 and 1999 but these

amendments are not of much relevance for the purposes of these matters.

65. By virtue of Section 29, the rules made or purporting to have

been made under the 1948 Act insofar as consistent with the matters

provided in 1957 Act were made to continue until superseded by the rules

made under the 1957 Act. Thus, the rules framed under 1948 Act

continued to operate until 1960 Rules were framed.

Mineral Concession Rules, 1960 and the Amendments

66. 1960 Rules were framed by the Central Government in

exercise of the powers conferred by Section 13 of the 1957 Act. These

Rules were published on November 11, 1960. As noticed above, until

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these Rules came into effect, the Rules framed under 1948 Act remained

operative.

67. By virtue of Rule 8, the provisions of Chapters II, III and IV

have been made applicable to the grant of reconnaissance permits as well

as grant and renewal of prospecting licences and mining leases in respect

of the land in which the minerals vest in the State Government.

68. Rule 9 provides that an application for a prospecting licence

and its renewal in respect of land in which the minerals vest in Government

shall be made to the State Government in Form B and Form D

respectively. The State Government is empowered to relax the provisions

of clause (d) of sub-rule (2) of Rule 9.

69. Chapter-IV deals with grant of mining leases in respect of land

in which the minerals vest in the Government. Sub-rule (1) of Rule 22

provides that an application for the grant of a mining lease in respect of

land in which the minerals vest in the Government shall be made to the

State Government in Form I. Sub-rule (4) of Rule 22 provides that on

receipt of the application for the grant of a mining lease, the State

Government shall take decision to grant precise area and communicate

such decision to the applicant. The applicant, on receipt of communication

from the State Government of the precise areas to be granted, is required

to submit a mining plan within a period of six months or such other period

as may be allowed by the State Government, to the Central Government

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for its approval. The applicant is required to submit the mining plan, duly

approved by the Central Government or by an officer duly authorized by

the Central Government, to the State Government to grant mining lease

over that area. Sub-rule (4A) of Rule 22 is a non-obstante clause and

empowers the State Government to approve mining plan of open cast

mines (mines other than the underground mines) in respect of non-metallic

or industrial minerals set out in clauses (i) to (xxix) in their respective

territorial jurisdiction. Such power of approval of mining plan has to be

exercised by the State Government through officer or officers having

qualification, experience and post and pay-scale as set out therein. Under

sub-rule (4B) of Rule 22, the Central Government or the State Government

has to dispose of the application for approval of mining plan within a period

of ninety days from the date of receiving such application.

70. Rule 22D substituted by Notification dated January 17, 2000

makes provision for a minimum size of the mining lease.

71. Rule 26 that was substituted by Notification dated July 18,

1963 was amended in 1979, 1988, 1991 and 2002. Rule 26 now reads as

under:

“26. Refusal of application for grant and renewal of mining lease.— (1) The State Government may, after giving an opportunity of being heard and for reasons to be recorded in writing and communicated to the applicant, refuse to grant or renew a mining lease over the whole or part of the area applied for.

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(2) An application for the grant or renewal of a mining lease made under rule 22 or rule 24A, as the case may be, shall not be refused by the State Government only on the ground that Form I or Form J, as the case may be, is not complete in all material particulars, or is not accompanied by the documents referred to in sub-clauses (d),(e),(f),(g) and (h) of clause (i) of sub-rule 22.

(3) Where it appears that the application is not complete in all material particulars or is not accompanied by the required documents, the State Government shall, by notice, require the applicant to supply the omission or, as the case may be, furnish the documents, without delay and in any case not later than thirty days from the date of receipt of the said notice by the applicant.

72. Rule 31 provides for the time period within which lease is to be

executed. It also provides for the date of commencement of the period.

73. Rule 58, as it originally stood, read as under:

“58. Availability of areas for regrant to be notified. (1) No area which was previously held or which is being held under a prospecting licence or a mining lease as the case may be, or in respect of which the order granting licence or lease has been revoked under sub-rule (1) of rule 15 or sub-rule (1) of rule 31, shall be available for grant unless-

(a) an entry to the effect made in the register referred to in sub-rule (2) of rule 21 or sub-rule (2) of rule 40, as the case may be in ink; and

(b) the date from which the area shall be available for grant is notified in the Official Gazette at least thirty days in advance.

(2) The Central Government may, for reasons to be recorded in writing, relax the provisions of sub-rule (1) in any special case.”

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Rule 58 was amended on November 16, 1980 and the amended Rule 58

read as under :

“58. Reservation of area for exploitation in the public sector etc.- The State Government may, by notification in the Official Gazette, reserve any area for the exploitation by the Government, a Corporation established by the Central, State or Provincial Act or a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956).”

Later on, Rule 58 has been omitted.

74. Rule 59, as originally framed in 1960 Rules, read as under:

“59. Availability of certain areas for grant to be notified.- In the case of any land which is otherwise available for the grant of a prospecting licence or a mining lease but in respect of which the State Government has refused to grant a prospecting licence or a mining lease on the ground that the land should be reserved for any purpose, other than prospecting or mining for minerals, the State Government shall, as soon as such land becomes again available for the grant of a prospecting or mining lease, grant the licence or lease after following the procedure laid down in rule 58.”

The original Rule 59 was amended vide Notification dated July 9, 1963.

After the said amendment, the Rule read as under :

“59. - Availability of certain areas for grant to be notified.- In the case of any land which is otherwise available for the grant of a prospecting licence or a mining lease but in respect of which the State Government has refused to grant a prospecting licence or a mining lease on the ground that the land should be reserved for any purpose, the State Government shall, as soon as such land becomes again available for the grant of a prospecting or mining lease, grant the licence or lease after following the procedure laid down in rule 58.”

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Rule 59 was again amended in 1980. After amendment, the said rule read

as under :

“59. Availability of area for regrant to be notified-(1) No area-

(a) which was previously held or which is being held under a prospecting licence or a mining lease; or

(b) in respect of which an order had been made for the grant of a prospecting licence or mining lease, but the applicant has died before the grant of the licence or the execution of lease, as the case may be; or

(c) in respect of which the order granting a licence or lease has been revoked under sub-rule (1) of rule 15 or sub-rule (1) of rule 31; or

(d) in respect of which a notification has been issued under sub-section (2) or sub-section (4) of section 17; or

(e) which has been reserved by Government under rule 58,

shall be available for grant unless-

(i) an entry to the effect that the area is available for grant is made in the register referred to in sub-rule (2) of rule 21 or sub-rule (2) of rule 40, as the case may be, in ink; and

(ii) the availability of the area for grant is notified in the Official Gazette and specifying a date (being a date not earlier than thirty days from the date of the publication of such notification in the Official Gazette) from which such area shall be available for grant:

Provided that nothing in this rule shall apply to the renewal of a lease in favour of the original lessee or his legal heirs notwithstanding the fact that the lease has already expired:

Page 55

Provided further that where an area reserved under rule 58 is proposed to be granted to a Government Company, no notification under clause (ii) shall be required to be issued.

(2) The Central Government may, for reasons to be recorded in writing relax the provisions of sub-rule (1) in any special case.

Rule 59 was further amended on April 13, 1988. The amended Rule 59

reads as under :

“59. Availability of area for regrant to be notified:- (1) No area-

(a) which was previously held or which is being held under a prospecting licence or a mining lease; or

(b) in respect of which an order had been made for the grant of a prospecting licence or mining lease, but the applicant has died before the grant of the licence or the execution of the lease, as the case may be; or

(c) in respect of which the order granting a licence or lease has been revoked, under sub-rule (1) of rule 15 or sub-rule (1) of rule 31; or

(d) in respect of which a notification has been issued under sub section (2) or sub-section (4) of section 17; or

(e) which has been reserved by State Government under Rule 58, or under section 17-A of the Act shall be available for grant unless-

(i) an entry to the effect that the area is available for grant is made in the register referred to in sub-rule (2) of rule 21 or sub-rule (2) of rule 40, as – the case may be, in ink; and

(ii) the availability of the area for grant is notified in the Official Gazette and specifying a date (being a date not earlier than thirty days from the date of the publication, of such notification in the Official Gazette) from which such area shall be available for grant:

Page 56

Provided that nothing in this rule shall apply to the renewal of a lease in favour of the original lessee or his legal heirs notwithstanding the fact that the lease has already expired:

Provided further that where an area reserved under Rule 58 or under section 17-A of the Act to be granted to a Government Company, no notification under clause (ii) shall be required to be issued;

(2) The Central Government may, for reasons to be recorded in writing relax the provisions of sub-rule (1) in any special case.

75. Rule 60 of the 1960 Rules has been amended twice, first vide

Notification dated January 16, 1980 and thereafter by the Notification

dated January 17, 2000. After amendment, Rule 60 reads as under :

“60.Premature applications.—Applications for the grant of a reconnaissance permit, prospecting licence or mining lease in respect of areas whose availability for grant is required to be notified under rule 59 shall, if—

(a) no notification has been issued, under that rule; or

(b) where any such notification has been issued, the period specified in the notification has not expired, shall be deemed to be premature and shall not be entertained.”

76. Rule 63 of the 1960 Rules provides that where previous

approval of the Central Government is required under the 1957 Act or the

1960 Rules, the application for such approval shall be made to the Central

Government through the State Government.

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77. The above provisions give us complete view of the statutory

framework and legal regime with regard to regulation of mines and mineral

development and the role and powers of the State Governments in that

regard.

Decisions

Hingir-Rampur Coal Co. Ltd.

78. A Constitution Bench of this Court in Hingir-Rampur Coal Co.

Ltd.a was concerned with the question of the validity of Orissa Mining

Areas Development Fund Act, 1952. Inter-alia, the contention raised on

behalf of the petitioners was that even if the cess imposed thereunder was

a ‘fee’ relatable to Entries 23 and/or 66 of List II, the same would be ultra

vires Entry 54 of List I in light of declaration made in Section 2 of the 1948

Act which read, ‘it is hereby declared that it is expedient in the public

interest that the Central Government should take under its control the

regulation of mines and oilfields and the development of minerals to the

extent hereinafter provided’ and other provisions.

79. The majority view considered the above contention as

follows:

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to the provisions of List I with respect to regulation and development under the control of the Union; and that takes us to Entry 54 in List I. This Entry reads thus: “Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest”. The effect of reading the two Entries together is clear. The jurisdiction of the State Legislature under Entry 23 is subject to the limitation imposed by the latter part of the said Entry. If Parliament by its law has declared that regulation and development of mines should in public interest be under the control of the Union, to the extent of such declaration the jurisdiction of the State Legislature is excluded. In other words, if a Central Act has been passed which contains a declaration by Parliament as required by Entry 54, and if the said declaration covers the field occupied by the impugned Act the impugned Act would be ultra vires, not because of any repugnance between the two statutes but because the State Legislature had no jurisdiction to pass the law. The limitation imposed by the latter part of Entry 23 is a limitation on the legislative competence of the State Legislature itself. This position is not in dispute.

24. ………… If it is held that this Act contains the declaration referred to in Entry 23 there would be no difficulty in holding that the declaration covers the field of conservation and development of minerals, and the said field is indistinguishable from the field covered by the impugned Act. What Entry 23 provides is that the legislative competence of the State Legislature is subject to the provisions of List I with respect to regulation and development under the control of the Union, and Entry 54 in List I requires a declaration by Parliament by law that regulation and development of mines should be under the control of the Union in public interest. Therefore, if a Central Act has been passed for the purpose of providing for the conservation and development of minerals, and if it contains the requisite declaration, then it would not be competent to the State Legislature to pass an Act in respect of the subject-matter covered by the said declaration. In order that the declaration should be effective it is not necessary that rules should be made or enforced; all that this required is a declaration by Parliament that it is expedient in the public interest to take the regulation and development of mines under the control of the Union. In such a case the test must be whether the legislative declaration covers the field or not. Judged by this test there can be no doubt that the field

Page 59

covered by the impugned Act is covered by the Central Act LIII of 1948.

25. It still remains to consider whether S. 2 of the said Act amounts in law to a declaration by Parliament as required by Article 54. When the said Act was passed in 1948 the legislative powers of the Central and the Provincial Legislatures were governed by the relevant Entries in the Seventh Schedule to the Constitution Act of 1935. Entry 36 in List I corresponds to the present Entry 54 in List I. It reads thus: “Regulation of Mines and Oil Fields and mineral development to the extent to which such regulation and development under Dominion control is declared by Dominion law to be expedient in public interest”. It would be noticed that the declaration required by Entry 36 is a declaration by Dominion law. Reverting then to S. 2 of the said Act it is clear that the declaration contained in the said section is put in the passive voice; but in the context there would be no difficulty in holding that the said declaration by necessary implication has been made by Dominion law. It is a declaration contained in a section passed by the Dominion Legislature and so it is obvious that it is a declaration by a Dominion law, but the question is: Can this declaration by a Dominion law be regarded constitutionally as declaration by Parliament which is required by Entry 54 in List I.”

The majority view found that the declaration by Parliament required under

Entry 54, List I was absent as the declaration under Section 2 of the 1948

Act by the Dominion Legislature was not held equivalent to declaration by

the Parliament under Section 2 of the 1957 Act.

M.A. Tulloch & Co.

80. In M.A. Tulloch & Co.b , a Constitution Bench of this Court

was concerned with legality of certain demands of fee under the Orissa

Mining Areas Development Fund Act, 1952 (Orissa Act). The Constitution

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Bench considered the question, ‘whether the extent of control and

regulation provided by the 1957 Act takes within its fold the area or the

subject covered by Act 27 of 1952 Act’. The High Court had held that fee

imposed by the Orissa Act was rendered ineffective in view of the 1957

Act. The State of Orissa was in appeal from that judgment. The Court in

para 5 and para 6 of the Report noted as follows:

“5. Before proceeding further it is necessary to specify briefly the legislative power on the relevant topic, for it is on the precise wording of the entries in the 7th Schedule to the Constitution and the scope, purpose and effect of the State and the Central legislations which we have referred to earlier that the decision of the point turns. Article 246(1) reads:

“Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the Union List)”

and we are concerned in the present case with the State power in the State field. The relevant clause in that context is clause (3) of the Article which runs:

“Subject to clauses (1) and (2), the legislature of any State ... has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the seventh Schedule (in this Constitution referred to as the ‘State List').”

Coming now to the Seventh Schedule, Entry 23 of the State List vests in the State legislature power to enact laws on the subject of ‘regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union'. It would be seen that “subject” to the provisions of List I the power of the State to enact Legislation, on the topic of “mines and mineral development” is plenary. The relevant provision in List I is, as already noticed, Entry 54 of the Union List. It may be

Page 61

mentioned that this scheme of the distribution of legislative power between the Centre and the States is not new but is merely a continuation of the State of affairs which prevailed under the Government of India Act, 1935 which included a provision on the lines of Entry 54 of the Union List which then bore the number Item 36 of the Federal List and an entry corresponding to Entry 23 in the State List which bore the same number in the Provincial Legislative List. There is no controversy that the Central Act has been enacted by Parliament in exercise of the legislative power contained in Entry 54 or as regards the Central Act containing a declaration in terms of what is required by Entry 54 for it enacts by Section 2:

“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.”

It does not need much argument to realise that to the extent to which the Union Government had taken under “its control” “the regulation and development of minerals” so much was withdrawn from the ambit of the power of the State legislature under Entry 23 and legislation of the State which had rested on the existence of power under that entry would to the extent of that “control” be superseded or be rendered ineffective, for here we have a case not of mere repugnancy between the provisions of the two enactments but of a denudation or deprivation of State legislative power by the declaration which Parliament is empowered to make and has made.

6. It would, however, be apparent that the States would lose legislative competence only to the “extent to which regulation and development under the control of the Union has been declared by Parliament to be expedient in the public interest”. The crucial enquiry has therefore to be directed to ascertain this “extent” for beyond it the legislative power of the State remains unimpaired. As the legislation by the State is in the case before us the earlier one in point of time, it would be logical first to examine and analyse the State Act and determine its purpose, width and scope and the area of its operation and then consider to what “extent” the Central Act cuts into it or trenches on it.

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In para 9, the question under consideration was whether ‘the extent of

control and regulation’ provided by 1957 Act took within its fold the area or

the subject covered by the Orissa Act. This Court in para 11 observed that

the matter was concluded by earlier decision in Hingir-Rampur Coal Co.

Ltd.a. While following Hingir-Rampur Coal Co. Ltd.a, it was observed in

para 12 of the Report that sub-sections (1) and (2) of Section 18 of 1957

Act were wider in scope and amplitude and conferred larger powers on the

Central Government than the corresponding provisions of the 1948 Act.

Baijnath Kadio

81. In Baijnath Kadioc , the validity of proviso (2) to Section 10(2)

added by Bihar Land Reforms (Amendment) Act, 1964 (Bihar Act 4 of

1965) and the operation of Rule 20(2) added on December 10, 1964 by

a Notification of Governor in the Bihar Minor Mineral Concession Rules,

1964 were in issue. The Court referred to the Government of India Act,

1935, 1948 Act and 1957 Act in light of Entry 54 of List I and Entry 23 of

List II and the earlier decisions in Hingir-Rampur Coal Co. Ltd.a and M.A.

Tulloch & Co.b and observed as under :

“13. ………….Entry 54 of the Union List speaks both of Regulation of mines and minerals development and Entry 23 is subject to Entry 54. It is open to Parliament to declare that it is expedient in the public interest that the control should rest in Central Government. To what extent such a declaration can go is for Parliament to determine and this must be commensurate with public interest. Once this declaration is made and the extent laid down, the subject of

Page 63

legislation to the extent laid down becomes an exclusive subject for legislation by Parliament. Any legislation by the State after such declaration and trenching upon the field disclosed in the declaration must necessarily be unconstitutional because that field is abstracted from the legislative competence of the State Legislature. This proposition is also self-evident that no attempt was rightly made to contradict it. There are also two decisions of this Court reported in the Hingir Rampur Coal Co. Ltd. & Ors. v. State of Orissa & Ors. and State of Orissa v. M.A. Tulloch and Co. in which the matter is discussed. The only dispute, therefore, can be to what extent the declaration by Parliament leaves any scope for legislation by the State Legislature. If the impugned legislation falls within the ambit of such scope it will be valid; if outside it, then it must be declared invalid.

14. The declaration is contained in Section 2 of Act 67 of 1957 and speaks of the taking under the control of the Central Government the regulation of mines and development of minerals to the extent provided in the Act itself. We have thus not to look outside Act 67 of 1957 to determine what is left within the competence of the State Legislature but have to work it out from the terms of that Act. In this connection we may notice what was decided in the two cases of this Court. In the Hingir Rampur case a question had arisen whether the Act of 1948 so completely covered the field of conservation and development of minerals as to leave no room for State legislation. It. was held that the declaration was effective even if the rules contemplated under the Act of 1948 had not been made. However, considering further whether a declaration made by a Dominion Law could be regarded as a declaration made by Parliament for the purpose of Entry 54, it was held that it could not and there was thus a lacuna which the Adaptation of Laws Order, 1950 could not remove. Therefore, it was held that there was room for legislation by the State Legislature.

15. In the M.A. Tulloch case the firm was working a mining lease granted under the Act of 1948. The State Legislature of Orissa then passed the Orissa Mining Areas Development Fund Act, 1952 and levied a fee for the development of mining areas within the State. After the provisions came into force a demand was made for payment of fees due from July 1957 to March 1958 and the demand was challenged. The High Court held that after the coming into force of Act 67 of

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1957 the Orissa Act must be held to be non existent. It was held on appeal that since Act 67 of 1957 contained the requisite declaration by Parliament under Entry 54 and that Act covered the same field as the Act of 1948 in regard to mines and mineral development, the ruling in Hingir Rampur’s case applied and as Sections 18(1) and (2) of the Act 67 of 1957 were very wide they ruled out legislation by the State Legislature. Where a superior legislature evinced an intention to cover the whole field, the enactments of the other legislature whether passed before or after must be held to be overborne. It was laid down that inconsistency could be proved not by a detailed comparison of the provisions of the conflicting Acts but by the mere existence of two pieces of legislation. As Section 18(1) covered the entire field, there was no scope for the argument that till rules were framed under that Section, room was available.”

Amritlal Nathubhai Shah

82. In Amritlal Nathubhai Shahd, a three-Judge Bench of this

Court was concerned with an issue similar to the controversy presented

before us. That was a case relating to grant of mining leases for bauxite in

the reserved areas in the State of Gujarat. On December 31, 1963, the

Government of Gujarat issued a Notification intimating that lands in all

talukas of Kutch district and in Kalyanpur taluka of Jamnagar district had

been reserved for exploitation of bauxite in the public sector. By another

Notification of February 26, 1964 in respect of all areas of Jamnagar and

Junagarh districts, the exploitation of bauxite was reserved in the public

sector. The appellants therein made applications to the Government of

Gujarat for grant of mining leases for bauxite in the reserved areas.

Though there were no other applications, the State Government rejected

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the applications of the appellants on the ground that areas had already

been notified as reserved for the public sector. The appellants, aggrieved

by the order of the State Government moved the Central Government

invoking its revisional jurisdiction. The Central Government rejected the

revision applications. The appellants then moved the High Court but they

were unsuccessful there and from the common judgment of the High Court

and the certificate granted by it, the matter reached this Court. The Court

considered Entry 54 of List I, declaration made by Parliament in Section 2

of 1957 Act and State Legislature’s power under Entry 23 of List II, and

observed that in pursuance of its exclusive power to make laws with

respect to the matters enumerated in Entry 54 of List I, Parliament

specifically declared in Section 2 of the 1957 Act that it was 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 provided

in the Act. The State Legislature’s power under Entry 23 of List II was,

thus, taken away and the regulation of mines and development of minerals

had to be in accordance with 1957 Act and 1960 Rules. While saying so,

this Court held as follows:

“3. ………The mines and the minerals in question (bauxite) were, however, in the territory of the State of Gujarat and, as was stated in the orders which were passed by the Central Government on the revision applications of the appellants, the State Government is the “owner of minerals” within its territory, and the minerals “vest” in it. There is nothing in the Act or the Rules to detract from this basic fact. That was why the Central Government stated further in its revisional orders

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that the State Government had the “inherent right to reserve any particular area for exploitation in the public sector”. It is therefore quite clear that, in the absence of any law or contract etc. to the contrary, bauxite, as a mineral, and the mines thereof, vest in the State of Gujarat and no person has any right to exploit it otherwise then in accordance with the provisions of the Act and the Rules. Section 10 of the Act and Chapters II, III and IV of the Rules, deal with the grant of prospecting licences and mining leases in the land in which the minerals vest in the Government of a State. That was why the appellants made their applications to the State Government.”

83. In Amritlal Nathubhai Shahd, this Court referred to Section 4 of

the 1957 Act and held that there was nothing in 1957 Act or 1960 Rules to

require that the restrictions imposed by Chapters II,III and IV of the 1960

Rules would be applicable even if State Government itself wanted to exploit a

mineral for, it was its own property. The Court held :

“4. ………There is therefore no reason why the State Government could not, if it so desired, “reserve” any land for itself, for any purpose, and such reserved land would then not be available for the grant of a prospecting licence or a mining lease to any person.”

84. The Court then considered Section 10 of 1957 Act and held

as follows :

“5……The section is therefore indicative of the power of the State Government to take a decision, one way or the other, in such matters, and it does not require much argument to hold that that power included the power to refuse the grant of a licence or a lease on the ground that the land in question was not available for such grant by reason of its having been reserved by the State Government for any purpose.”

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85. With reference to Section 17, particularly, sub-sections (2) and

(4) thereof, the Court held that the said provisions did not cover the entire

field of the authority of refusing to grant a prospecting licence or a mining

lease to anyone else and the State Government’s authority to reserve any

area for itself was not taken away. It was further held :

“6. ………As has been stated, the authority to order reservation flows from the fact that the State is the owner of the mines and the minerals within its territory, which vest in it. But quite apart from that, we find that Rule 59 of the Rules, which have been made under Section 13 of the Act, clearly contemplates such reservation by an order of the State Government………”

86. In Amritlal Nathubhai Shahd, the Court also considered Rules

58, 59 and 60 of the 1960 Rules and it was observed that it was not

permissible for any person to apply for a licence or a lease in respect of a

reserved area until after it becomes available for such grant. It was held on

the facts of the case that the areas under consideration had been reserved

by the State Government for the purpose stated in its notifications and as

those lands did not become available for the grant of prospecting licence

or a mining lease, the State Government was well within its rights in

rejecting the applications of the appellants under Rule 60 as premature

and the Central Government was also justified in rejecting the revision

applications which were filed against the orders of rejection passed by the

State Government.

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87. In Chanan Malx, a four-Judge Bench of this Court was

concerned with constitutional validity of Haryana Minerals (Vesting of

Rights) Act, 1973 (for short, ‘Haryana Act;). One of the contentions in

challenging the Haryana Act was that enactment was beyond the

competence of the State Legislature inasmuch as the filed in which the

Haryana Act operated was necessarily occupied by the provisions of 1957

Act under Entry 54 of the Union List (List I) of the Seventh Schedule to the

Constitution. The Bench considered extensively the provisions contained

in the 1957 Act and earlier decisions of this Court in Hingir-Rampur Coal

Co Ltd.a, M.A. Tulloch & Companyb and Baijnath Kadioc . The Court then

referred to Section 16(1)(b) and Section 17 of the 1957 Act and held as

under :

“38. We are particularly impressed by the provisions of Sections 16 and 17 as they now stand. A glance at Section 16(1)(b) shows that the Central Act 67 of 1957 itself contemplates vesting of lands, which had belonged to any proprietor of an estate or tenure holder either on or after October 25, 1949, in a State Government under a State enactment providing for the acquisition of estates or tenures in land or for agrarian reforms. The provision lays down that mining leases granted in such land must be brought into conformity with the amended law introduced by Act 56 of 1972. It seems to us that this clearly means that Parliament itself contemplated State legislation for vesting of lands containing mineral deposits in the State Government. It only required that rights to mining granted in such land should be regulated by the provisions of Act 67 of 1957 as amended. This feature could only be explained on the assumption that Parliament did not intend to trench upon powers of State legislatures under Entry 18 of List II, read with Entry 42 of List III. Again, Section 17 of the Central Act 67 of 1957

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shows that there was no intention to interfere with vesting of lands in the States by the provisions of the Central Act.”

Ishwari Khetan Sugar Mills

88. In Ishwari Khetan Sugar Millsy although question related to

constitutional validity of U.P. Sugar Undertakings (Acquisition) Act, 1971

enacted by the State of U.P. and different entries in List I and List II were

involved but with reference to the declaration made in Section 2 of the

Industries (Development and Regulation) Act, 1951 (for short, ‘IDR Act’)

vis-à-vis the State Act under challenge, the majority judgment relying upon

the earlier decisions of this Court in Baijnath Kadioc and Chanan Malx,

held that to the extent the Union acquired control by virtue of declaration in

Section 2 of the IDR Act, as amended from time to time, the power of the

State Legislature under Entry 24 of List II to enact any legislation in respect

of declared industry so as to encroach upon the field of control occupied by

IDR Act would be taken away. It was held that 1957 Act only required that

rights to mining granted in such land should be regulated by the provisions

contained therein.

M/s. Hind Stone

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89. In M/s. Hind Stoneo, the question under consideration was

about the validity of Rule 8-C of the Tamil Nadu Minor Mineral Concession

Rules, 1959 which provided for lease for quarries in respect of black

granite to the government corporation or by the government itself and that

from December 7, 1977 no lease for quarrying black granite should be

granted to private persons. The matter arose out of the application for

renewal of lease. The Court considered Entry 23 of List II and Entry 54 of

List I of Seventh Schedule and the earlier decisions of this Court in Hingir-

Rampur Coal Co.a, M.A. Tulloch & Companyb and Baijnath Kadioc. The

Court made the following general observations with regard to minerals and

natural resources and the scheme of 1957 Act:

“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. It is recognised by Parliament. Parliament has 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. It has enacted the Mines and Minerals (Regulation and Development) Act, 1957. We have already referred to its salient provisions. Section 18, we have noticed, casts a special duty on the Central Government to take necessary steps for the conservation and development of minerals in India. Section 17 authorises the Central Government itself to undertake prospecting or mining operations in any area not already held under any prospecting licence or mining lease. Section 4-A empowers the State Government on the request of the Central Government, in the case of minerals other than minor minerals, to prematurely terminate existing mining leases and grant fresh leases in favour of a Government company or corporation owned or controlled by

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government, if it is expedient in the interest of regulation of mines and mineral development to do so. 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 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. To view such a rule made by the subordinate legislating body as a rule made to benefit itself merely because the State Government happens to be the subordinate legislating body, is, but, to take too narrow a view of the functions of that body……….”

90. The Court then considered Rule 8-C in light of the statement

made in the counter affidavit filed by the State of Tamil Nadu and it was

held that Rule 8-C was made in bona fide exercise of the rule making

power of the State Government. In paragraph 10 of the Report, the Court

stated thus:

“10. One of the arguments pressed before us was that Section 15 of the Mines and Minerals (Regulation and Development) Act authorised the making of rules for regulating the grant of mining leases and not for prohibiting

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them as Rule 8-C sought to do, and, therefore, Rule 8-C was ultra vires Section 15. Well-known cases on the subject right from Municipal Corporation of the City of Toronto v. Virgo [1896 AC 88] and Attorney-General for Ontario v. Attorney- General for the Dominions [1896 AC 348] up to State of U.P. v. Hindustan Aluminium Corporation Ltd. [1979 (3) SCC 229] were brought to our attention. We do not think that “regulation” has that rigidity of meaning as never to take in “prohibition”. Much depends on the context in which the expression is used in the statute and the object sought to be achieved by the contemplated regulation. It was observed by Mathew, J. in G.K. Krishnan v. State of Tamil Nadu [1975 (1) SCC 375]: “The word ‘regulation’ has no fixed connotation. Its meaning differs according to the nature of the thing to which it is applied.” In modern statutes concerned as they are with economic and social activities, “regulation” must, of necessity, receive so wide an interpretation that in certain situations, it must exclude competition to the public sector from the private sector. More so in a welfare State. It was pointed out by the Privy Council in Commonwealth of Australia v. Bank of New South Wales [1950 AC 235]— and we agree with what was stated therein — that the problem whether an enactment was regulatory or something more or whether a restriction was direct or only remote or only incidental involved, not so much legal as political, social or economic consideration and that it could not be laid down that in no circumstances could the exclusion of competition so as to create a monopoly, either in a State or Commonwealth agency, be justified. Each case, it was said, must be judged on its own facts and in its own setting of time and circumstances and it might be that in regard to some economic activities and at some stage of social development, prohibition with a view to State monopoly was the only practical and reasonable manner of regulation. The statute with which we are concerned, the Mines and Minerals (Development and Regulation) Act, is aimed, as we have already said more than once, at the conservation and the prudent and discriminating exploitation of minerals. Surely, in the case of a scarce mineral, to permit exploitation by the State or its agency and to prohibit exploitation by private agencies is the most effective method of conservation and prudent exploitation. If you want to conserve for the future, you must prohibit in the present. We have no doubt that the prohibiting of leases in certain cases is part of the regulation contemplated by Section 15 of the Act.”

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D.K. Trivedi and Sons

91. In D.K. Trivedi and Sonsn, this Court was concerned with the

constitutional validity of Section 15(1) of 1957 Act; the power of the State

Governments to make rules under that Section to enable them to charge

dead rent and royalty in respect of leases of minor minerals granted by

them and enhance the rates of dead rent and royalty during the

subsistence of such lease, the validity of Rule 21-B of the Gujarat Minor

Mineral Rules, 1966 and certain notifications issued by the Government of

Gujarat under Section 15 amending the said Rules so as to enhance the

rates of royalty and dead rent in respect of leases of minor minerals. The

Court traced the legislative history of the enactment; referred to Baijnath

Kadioc and in paragraph 27 of the Report (Pgs. 46-47) observed as follows:

“27. The 1957 Act is made in exercise of the powers conferred by Entry 54 in the Union List. The said Entry 54 and Entry 23 in the State List fell to be interpreted by a Constitution Bench of this Court in Baijnath Kedia v. State of Bihar. In that case this Court held that Entry 54 in the Union List speaks both of regulation of mines and mineral development and Entry 23 in the State List is subject to Entry 54. Under Entry 54 it is open to Parliament to declare that it is expedient in the public interest that the control in these matters should vest in the Central Government. To what extent such a declaration can go is for Parliament to determine and this must be commensurate with public interest but once such declaration is made and the extent of such regulation and development laid down the subject of the legislation to the extent so laid down becomes an

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exclusive subject for legislation by Parliament. Any legislation by the State after such declaration which touches upon the field disclosed in the declaration would necessarily be unconstitutional because that field is extracted from the legislative competence of the State legislature. In that case the court further pointed out that the expression “under the control of the Union” occurring in Entry 54 in the Union List and Entry 23 in the State List did not mean “control of the Union Government” because the Union consists of three limbs, namely, Parliament, the Union Government and the Union Judiciary, and the control of the Union which is to be exercised under the said two entries is the one to be exercised by Parliament, namely, the legislative organ of the Union, which is, therefore, the control by the Union. The court further held that the Union had taken all the power in respect of minor minerals to itself and had authorized the State Governments to make rules for the regulation of leases and thus by the declaration made in Section 2 and the enactment of Section 15 the whole of the field relating to minor minerals came within the jurisdiction of Parliament and there was no scope left to the State legislatures to make any enactment with respect thereto. The court also held that by giving the power to the State Governments to make rules, the control of the Union was not negatived but, on the contrary, it established that the Union was exercising the control. One of the contentions raised in that case was that Section 15 was unconstitutional as the delegation of legislative power made by it to the rule-making authority was excessive. This contention was, however, not decided by the court as the appeals in that case were allowed on other points.”

While dealing with the meaning of the word ‘regulation’, particularly the

expression, ‘the act of regulating, or the state of being regulated’ and

Entry 54 in the Union List, this Court stated in paragraph 31 of the Report

(Pgs. 48-49) as follows :

“31. Entry 54 in the Union List uses the word “regulation”. “Regulation” is defined in the Shorter Oxford English Dictionary, 3rd Edn., as meaning “the act of regulating, or the state of being regulated”. Entry 54 reproduces the language of Entry 36 in the Federal Legislative List in the

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Government of India Act, 1935, with the omission of the words “and oilfields”. When the Constitution came to be enacted, the framers of the Constitution knew that since early days mines and minerals were being regulated by rules made by Local Governments. They also knew that under the corresponding Entry 36 in the Federal Legislative List, the 1948 Act had been enacted and was on the statute book and that the 1948 Act conferred wide rule-making power upon the Central Government to regulate the grant of mining leases and for the conservation and development of minerals. It also knew that in the exercise of such rule- making power the Central Government had made the Mineral Concession Rules, 1949, and that by Rule 4 of the said Rules the extraction of minor minerals was left to be regulated by rules to be made by the Provincial Governments. Thus, the makers of the Constitution were not only aware of the legislative history of the topic of mines and minerals but were also aware how the Dominion legislature had interpreted Entry 36 in the Federal Legislative List in enacting the 1948 Act. When the 1957 Act came to be enacted, Parliament knew that different State Governments had, in pursuance of the provisions of Rule 4 of the Mineral Concession Rules, 1949, made rules for regulating the grant of leases in respect of minor minerals and other matters connected therewith and for this reason it expressly provided in sub-section (2) of Section 15 of the 1957 Act that the rules in force immediately before the commencement of that Act would continue in force until superseded by rules made under sub-section (1) of Section 15. Regulating the grant of mining leases in respect of minor minerals and other connected matters was, therefore, not something which was done for the first time by the 1957 Act but followed a well recognized and accepted legislative practice. In fact, even so far as minerals other than minor minerals were concerned, what Parliament did, as pointed out earlier, was to transfer to the 1957 Act certain provisions which had until then been dealt with under the rule-making power of the Central Government in order to restrict the scope of subordinate legislation……….”

Then in paragraph 33 of the Report (Pgs. 50-51), the Court with reference

to sub-section (2) of Section 13 of the 1957 Act further held:

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“33. ………The opening clause of sub-section (2) of Section 13, namely, “In particular, and without prejudice to the generality of the foregoing power”, makes it clear that the topics set out in that sub-section are already included in the general power conferred by sub-section (1) but are being listed to particularize them and to focus attention on them. The particular matters in respect of which the Central Government can make rules under sub-section (2) of Section 13 are, therefore, also matters with respect to which under sub-section (1) of Section 15 the State Governments can make rules for “regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals and for purposes connected therewith”. When Section 14 directs that “The provisions of Sections 4 to 13 (inclusive) shall not apply to quarry leases, mining leases or other mineral concessions in respect of minor minerals”, what is intended is that the matters contained in those sections, so far as they concern minor minerals, will not be controlled by the Central Government but by the concerned State Government by exercising its rule-making power as a delegate of the Central Government. Sections 4 to 12 form a group of sections under the heading “General restrictions on undertaking prospecting and mining operations”. The exclusion of the application of these sections to minor minerals means that these restrictions will not apply to minor minerals but that it is left to the State Governments to prescribe such restrictions as they think fit by rules made under Section 15(1). The reason for treating minor minerals differently from minerals other than minor minerals is obvious. As seen from the definition of minor minerals given in clause (e) of Section 3, they are minerals which are mostly used in local areas and for local purposes while minerals other than minor minerals are those which are necessary for industrial development on a national scale and for the economy of the country. That is why matters relating to minor minerals have been left by Parliament to the State Governments while reserving matters relating to minerals other than minor minerals to the Central Government. Sections 13, 14 and 15 fall in the group of sections which is headed “Rules for regulating the grant of prospecting licences and mining leases”. These three sections have to be read together. In providing that Section 13 will not apply to quarry leases, mining leases or other mineral concessions in respect of minor minerals what was done was to take away from the Central Government the power to make rules in respect of minor minerals and to confer that power by Section 15(1) upon the State Governments. The ambit of the

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power under Section 13 and under Section 15 is, however, the same, the only difference being that in one case it is the Central Government which exercises the power in respect of minerals other than minor minerals while in the other case it is the State Governments which do so in respect of minor minerals. Sub-section (2) of Section 13 which is illustrative of the general power conferred by Section 13(1) contains sufficient guidelines for the State Governments to follow in framing the rules under Section 15(1), and in the same way, the State Governments have before them the restrictions and other matters provided for in Sections 4 to 12 while framing their own rules under Section 15(1).”

Janak Lal

92. In Janak Lalj, this Court had an occasion to consider meaning

and scope of Rule 59 of 1960 Rules. The Court considered Rule 59, as it

stood prior to amendment in 1963, and the provision after amendment. In

paragraph 6 of the Report (Pg. 123) the Court held as under :

“6. Earlier the expression “reserved for any purpose” was followed by the words “other than prospecting or mining for minerals”, which were omitted by an amendment in 1963. Mr. Dholakia, learned counsel for the respondents, appearing in support of the impugned judgment, has contended that as a result of this amendment the expression must now be confined to cases of prospecting or mining for minerals and all other cases where the earlier reservation was for agricultural, industrial or any other purpose must be excluded from the scope of the rule. We are not persuaded to accept the suggested interpretation. Earlier the only category which was excluded from the application of Rule 59 was prospecting or mining leases and the effect of the amendment is that by omitting this exception, prospecting and mining leases are also placed in the same position as the other cases. We do not see any reason as to why by including in the rule prospecting and mining leases, the other cases to which it applied earlier would get excluded. The result of the amendment is to extend the rule and not to curtail its area of operation. The words “any purpose” is of wide connotation and there is no reason to restrict its meaning.”

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The Court clarified that intention of amendment in 1963 was to extend the

rule and not to curtail its area of operation.

Bharat Coking Coal

93. In the case of Bharat Coking Coal l, the Court said that the

State Legislature was competent to enact law for the regulation of mines

and mineral development under Entry 23 of State List but such power was

subject to the declaration which may be made by Parliament by law as

envisaged by Entry 54 of the Union List. It was held that the legislative

competence of the State Legislature to make law on the topic of mines and

mineral was subject to parliamentary legislation. While dealing with

Section 18(1) prior to its amendment by amending Act 37 of 1986 and after

amendment, the Court held in paragraph 16 of the Report (Pg. 572) as

under :

“16. ……..The amended and unamended sections both lay down that it shall be the duty of the Central Government to take all such steps as may be necessary “for the conservation and development of minerals” in India and for that purpose it may make such rules as it thinks fit. The expression “for the conservation of minerals” occurring under Section 18(1) confers wide power on the Central Government to frame any rule which may be necessary for protecting the mineral from loss, and for its preservation. The expression ‘conservation’ means “the act of keeping or protecting from loss or injury”. With reference to the natural resources, the expression in the context means preservation of mineral; the wide scope of the expression “conservation of minerals” comprehends any rule reasonably connected with the purpose of protecting the loss of coal through the waste of coal mine, such a rule may also regulate the discharge of

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slurry or collection of coal particles after the water content of slurry is soaked by soil. In addition to the general power to frame rules for the conservation of mineral,………….”

The Court further held in para 19 of the Report (Pgs. 575-576) as follows:

“………No doubt under Entry 23 of List II, the State legislature has power to make law but that power is subject to Entry 54 of List I with respect to the regulation and development of mines and minerals. As discussed earlier the State legislature is denuded of power to make laws on the subject in view of Entry 54 of List I and the Parliamentary declaration made under Section 2 of the Act. Since State legislature's power to make law with respect to the matter enumerated in Entry 23 of List II has been taken away by the Parliamentary declaration, the State Government ceased to have any executive power in the matter relating to regulation of mines and mineral development. Moreover, the proviso to Article 162 itself contains limitation on the exercise of the executive power of the State. It lays down that in any matter with respect to which the legislature of a State and Parliament have power to make laws, the executive power of State shall be subject to limitation of the executive power expressly conferred by the Constitution or by any law made by Parliament upon the Union or authority thereof……….”

Orissa Cement Ltd.

94. A three-Judge Bench of this Court in Orissa Cement Limitedf

was concerned with the validity of the levy of a cess based on the royalty

derived from mining lands by States of Bihar, Orissa and Madhya Pradesh.

The case of the petitioners therein was that similar levy had been struck

down by a seven-Judge Bench of this Court in India Cement Limitede . The

contention of the States, on the other hand, was that issue was different

from the India Cement Limitede as the nature and character of the levies

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imposed by these States was different from Tamil Nadu levy. The Bench

considered Entries 52 and 54 of the Union List and Entries 18, 23, 45, 49,

50 and 66 of the State List and also considered earlier decisions of this

Court in HRS Murthy v. Collector of Chittoorll, Hingir-Rampur Coal Co.a ,

M.A. Tulloch & Co.b , Ishwari Khetan Sugar Mills (P) Ltd.y , Baijnath

Kadioc, M. Karunanidhi v. Union of India and Anr.mm, M/s. Hind Stoneo,

I.T.C. & Ors. v. State of Karnataka & Ors.nn and Western Coalfields

Limited v. Special Area Development Authority Korba & Anr.oo. I shall cite

paragraphs 49, 50, 51 and 53 (Pgs. 480-486) of the Report which read as

follows:

“49. It is clear from a perusal of the decisions referred to above that the answer to the question before us depends on a proper understanding of the scope of M.M.R.D. Act, 1957, and an assessment of the encroachment made by the impugned State legislation into the field covered by it. Each of the cases referred to above turned on such an appreciation of the respective spheres of the two legislations. As pointed out in Ishwari Khetan, the mere declaration of a law of Parliament that it is expedient for an industry or the regulation and development of mines and minerals to be under the control of the Union under Entry 52 or entry 54 does not denude the State legislatures of their legislative powers with respect to the fields covered by the several entries in List II or List III. Particularly, in the case of a declaration under Entry 54, this legislative power is eroded only to the extent control is assumed by the Union pursuant to such declaration as spelt out by the legislative enactment which makes the declaration. The measure of erosion turns upon the field of the enactment framed in pursuance of the declaration. While the legislation in Hingir-Rampur and

ll AIR (1965) SC 177 mm (1979) 3 SCC 431 nn 1985 (Supp) SCC 476 oo 1982 (1) SCC 125

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Tulloch was found to fall within the pale of the prohibition, those in Chanan Mal, Ishwari Khetan and Western Coalfields were general in nature and traceable to specific entries in the State List and did not encroach on the field of the Central enactment except by way of incidental impact. The Central Act, considered in Chanan Mal, seemed to envisage and indeed permit State legislation of the nature in question.”

“50. To turn to the respective spheres of the two legislations we are here concerned with, the Central Act (M.M.R.D. Act, 1957) demarcates the sphere of Union control in the matter of mines and mineral development. While concerning itself generally with the requirements regarding grants of licences and leases for prospecting and exploitation of minerals, it contains certain provisions which are of direct relevance to the issue before us. Section 9, which deals with the topic of royalties and specifies not only the quantum but also the limitations on the enhancement thereof, has already been noticed. Section 9A enacts a like provision in respect of dead rent……..”

“51. If one looks at the above provisions and bears in mind that, in assessing the field covered by the Act of Parliament in question, one should be guided (as laid down in Hingir- Rampur and Tulloch) not merely by the actual provisions of the Central Act or the rules made thereunder but should also take into account matters and aspects which can legitimately be brought within the scope of the said statute, the conclusion seems irresistible, particularly in view of Hingir- Rampur and Tulloch, that the State Act has trespassed into the field covered by the Central Act. The nature of the incursion made into the fields of the Central Act in the other cases were different. The present legislation, traceable to the legislative power under Entry 23 or Entry 50 of the State List which stands impaired by the Parliamentary declaration under Entry 54, can hardly be equated to the law for land acquisition or municipal administration which were considered in the cases cited and which are traceable to different specific entries in List 11 or List III.

“53. These observations establish on the one hand that the distinction sought to be made between mineral development and mineral area development is not a real one as the two types of development are inextricably and

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integrally interconnected and, on the other, that, fees of the nature we are concerned with squarely fall within the scope of the provisions of the Central Act. The object of Section 9 of the Central Act cannot be ignored. The terms of Section 13 of the Central Act extracted earlier empower the Union to frame rules in regard to matters concerning roads and environment. Section 18(1) empowers the Central Government to take all such steps as may be necessary for the conservation and development of minerals in India and for protection of environment. These, in the very nature of things, cannot mean such amenities only in the mines but take in also the areas leading to and all around the mines. The development of mineral areas is implicit in them. Section 25 implicitly authorises the levy of rent, royalty, taxes and fees under the Act and the rules. The scope of the powers thus conferred is very wide. Read as a whole, the purpose of the Union control envisaged by Entry 54 and the M.M.R.D. Act, 1957, is to provide for proper development of mines and mineral areas and also to bring about a uniformity all over the country in regard to the minerals specified in Schedule I in the matter of royalties and, consequently prices ………”

Indian Metals and Ferro Alloys Ltd.

95. In Indian Metals and Ferro Alloys Ltd.p , a two-Judge Bench

of this Court was concerned with the principal question as to whether the

petitioners therein were entitled to obtain leases for the mining of chrome.

While dealing with the principal question and other incidental questions,

the Court considered Entry 54 of List I, Entry 23 of List II, the 1957 Act,

particularly, Sections 2, 4, 10, 11, 17A and 19 thereof and the 1960 Rules

including Rules 58, 59 and 60 thereof. While dealing with the reservation

policy of the State Government in having the area reserved for exploitation

in the public sectors, the Court observed in paragraphs 39 and 40 (Pg.

133) as follows :

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“39. The principal obstacle in the way of ORIND as well as the other private parties getting any leases was put up by the S.G., OMC and IDCOL. They claimed that none of the private applications could at all be considered because the entire area in all the districts under consideration is reserved for exploitation in the public sector by the notification dated August 3, 1977 earlier referred to. All the private parties have therefore joined hands to fight the case of reservation claimed by the S.G., OMC and IDCOL. We have indicated earlier that the S.G. expressed its preparedness to accept the Rao report and to this extent waive the claim of reservation. Interestingly, the OMC and IDCOL have entered caveat here and claimed that as public sector corporations they could claim, independently of the S.G.'s stand, that the leases should be given only to them and that the Rao report recommending leases to IMFA, FACOR and AIKATH should not be accepted by us.

40. The relevant provisions of the Act and the rules have been extracted by us earlier. Previously, Rule 58 did not enable the S.G. to reserve any area in the State for exploitation in the public sector. The existence and validity of such a power of reservation was upheld in A.Kotiah Naidu v. State of A.P. (AIR 1959 AP 485) and Amritlal Nathubhai Shah v. Union Government of India (AIR 1973 Guj. 117), the latter of which was approved by this Court in Amritlal Nathubhai Shah v. Union of India ([1977] 1 SCR 372). (As pointed out earlier, Rule 58 has been amended in 1980 to confer such a power on the S.G.). It is also not in dispute that a notification of reservation was made on August 3, 1977. The S.G., OMC and IDCOL are, therefore, right in contending that, ex facie, the areas in question are not available for grant to any person other than the S.G. or a public sector corporation [rule 59(1), proviso] unless the availability for grant is renotified in accordance with law [rule 59(1)(e) ] or the C.G. decides to relax the provisions of Rule 59(1) [rule 59(2) ]. None of those contingencies have occurred since except as is indicated later in this judgment. There is, therefore, no answer to the plea of reservation put forward by the S.G., OMC and IDCOL.”

Then in paragraph 45 (Pgs. 136-138), while considering Section 17A (1)

that was inserted in 1957 Act by amendment in 1987, the Court held :

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“45. Our conclusion that the areas in question before us were all duly reserved for public sector exploitation does not, however, mean that private parties cannot be granted any lease at all in respect of these areas for, as pointed out earlier, it is open to the C.G. to relax the reservation for recorded reasons. Nor does this mean, as contended for by OMC and IDCOL, that they should get the leases asked for by them. This is so for two reasons. In the first place, the reservation is of a general nature and does not directly confer any rights on OMC and IDCOL. This reservation is of two types. Under Section 17A (1), inserted in 1986, the C.G. may after consulting the S.G. just reserve any area- not covered by a PL or a ML-with a view to conserving any mineral. Apparently, the idea of such reservation is that the minerals in this area will not be exploited at all, neither by private parties nor in the public sector. It is not necessary to consider whether any area so reserved can be exploited in the public sector as we are not here concerned with the scope of such reservation, there having been no notification Under Section 17A(1) after 1986 and after consultation with the S.G. The second type of reservation was provided for in Rule 58 of the rules which have already been extracted earlier in this judgment. This reservation could have been made by the S.G. (without any necessity for approval by the C.G.) and was intended to reserve areas for exploitation, broadly speaking, in the public sector. The notification itself might specify the Government, Corporation or Company that was to exploit the areas or may be just general, on the lines of the rule itself. Under Rule 59(1), once a notification under Rule 58 is made, the area so reserved shall not be available for grant unless the two requirements of Sub-rule (e) are satisfied: viz. an entry in a register and a Gazette notification that the area is available for grant. It is not quite clear whether the notification of March 5, 1974 complied with these requirements but it is perhaps unnecessary to go into this question because the reservation of the areas was again notified in 1977. These notifications are general. They only say that the areas are reserved for exploitation in the public sector. Whether such areas are to be leased out to OMC or IDCOL or some other public sector corporation or a Government Company or are to be exploited by the Government itself is for the Government to determine de hors the statute and the rules. There is nothing in either of them which gives a right to OMC or IDCOL to insist that the leases should be given only to them and to no one else in the public sector. If, therefore the claim of reservation in 1977 in favour of the public sector is upheld absolutely, and

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if we do not agree with the findings of Rao that neither OMC nor IDCOL deserve any grant, all that we can do is to leave it to the S.G. to consider whether any portion of the land thus reserved should be given by it to these two corporations. Here, of course, there are no competitive applications from organisations in the public sector controlled either by the S.G. or the C.G., but even if there were, it would be open to the S.G. to decide how far the lands or any portion of them should be exploited by each of such Corporations or by the C.G. or S.G. Both the Corporations are admittedly instrumentalities of the S.G. and the decision of the S.G. is binding on them. We are of the view that, if the S.G. decides not to grant a lease in respect of the reserved area to an instrumentality of the S.G., that instrumentality has no right to insist that a ML should be granted to it. It is open to the S.G. to exercise at any time, a choice of the State or any one of the instrumentalities specified in the rule. It is true that if, eventually, the S.G. decides to grant a lease to one or other of them in respect of such land, the instrumentality whose application is rejected may be aggrieved by the choice of another for the lease. In particular, where there is competition between an instrumentality of the C.G. and one of the S.G. or between instrumentalities of the C.G. inter se or between the instrumentalities of the S.G. inter se, a question may well arise how far an unsuccessful instrumentality can challenge the choice made by the S.G. But we need not enter into these controversies here. The question we are concerned with here is whether OMC or IDCOL can object to the grant to any of the private parties on the ground that a reservation has been made in favour of the public sector. We think the answer must be in the negative in view of the statutory provisions. For the S.G. could always denotify the reservation and make the area available for grant to private parties. Or, short of actually dereserving a notified area, persuade the C.G. to relax the restrictions of Rule 59(1) in any particular case. It is. therefore, open to the S.G. to grant private leases even in respect of areas covered by a notification of the S.G. and this cannot be challenged by any instrumentality in the public sector.”

The legal position post amendment in 1957 Act by Central Act 37 of 1987

was explained (para 46; Pgs. 138-139) in the following manner:

“46. Before leaving this point, we may only refer to the position after 1986. Central Act 37 of 1986 inserted Sub-

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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 17A(2) and rule 58 could not stand together as Section 17A 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. Perhaps because of this Rule 58 has been omitted by an amendment of 1988 (G.S.R. 449E of 1988) made effective from April 13, 1988. Rule 59, however, contemplates a relaxation of the reservation only by the C.G. By an amendment of 1987 effective on February 10, 1987, (G.S.R. 86-E of 87) the words "reserved by the State Government" were substituted for the words "reserved by the Government" in Rule 59(1)(e). Later, Rule 59(1) has been amended by the insertion of the words "or Under Section 17-A of the Act" after the words "under Rule 58" in Clause (e) as well as in the second proviso. The result appears to be this:

(i) After March 13, 1988, certainly, the S.G. cannot notify any reservations without the approval of the C.G., as Rule 58 has been deleted. Presumably, the position is the same even before this date and as soon as Act 37 of 1986 came into force.

(ii) However, it is open to the S.G. to denotify a reservation made by it under Rule 58 or Section 17A. Presumably, dereservation of an area reserved by the S.G. after the 1986 amendment can be done only with the approval of the C.G. for it would be anomalous to hold that a reservation by the S.G. needs the C.G.'s approval but not the dereservation. Anyhow, it is clear that relaxation in respect of reserved areas can be permitted only by the C.G.

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(iii) It is only the C.G. that can make a reservation with a view to conserve minerals generally but this has to be done with the concurrence of the S.G.”

Dharambir Singh

96. In Dharambir Singh vs. Union of India & Ors.pp , a three-Judge

Bench of this Court while considering Section 10(3) and 11(2) of the 1957

Act, observed that in grant of mining lease of a property of the State, the

State Government has a discretion to grant or refuse to grant any

prospective licence or licence to any applicant. No applicant has a right,

much less vested right, to the grant of mining lease for mining operations

in any place within the State. But, the State Government is required to

exercise its discretion subject to the requirement of the law.

Bhupatrai Maganlal Joshi

97. In Bhupatrai Maganlal Joshis, a Constitution Bench of this

Court was concerned with the correctness of the High Court’s decision on

the question whether the reservation of land for exploitation of mineral

resources in the public sector was permissible under the 1957 Act read

with 1960 Rules. The High Court had answered the question in the

affirmative from which the matter reached this Court. In a very brief order

this Court agreed with the reasoning and conclusion of the High Court.

pp 1996 (6) SCC 702

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M.P. Ram Mohan Raja

98. In the case of M.P. Ram Mohan Raja vs.State of T.N.& Ors.qq ,

this Court relied upon the decision of this Court in M/s. Hind Stoneo and

reiterated that so far as grant of mining and mineral lease is concerned no

person has a vested right in it.

Sandur Manganese and Iron Ores Limited

99 . In a comparatively recent decision in Sandur Manganese and

Iron Ores Limited.,m the diverse issues which were under consideration are

noted in paragraph 6 of the Report. The Court considered statutory

provisions contained in the 1957 Act, 1960 Rules and decisions of this

Court in Hingir-Rampur Coal Co.a , M.A. Tulloch & Co.b , Baijnath Kadioc ,

Bharat Coking Coali and few other decisions, and it was observed with

reference to Section 2 of the 1957 Act that State Legislature was denuded

of its legislative power to make any law with respect to the regulation of

mines and minerals development to the extent provided in the 1957 Act. In

paragraphs 61, 62 and 63 (Pgs. 30-31) of the Report, the Court held as

follows :

“61.- In addition to what we have stated, it is relevant to note that Section 11(5) again carves out an exception to the preference in favour of prior applicants in the main provision of Section 11(2). It permits the State Government, with the

qq 2007 (9) SCC 78

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prior approval of the Central Government, to disregard the priority in point of time in the main provision of Section 11(2) and to make a grant in favour of a latter applicant as compared to an earlier applicant for special reasons to be recorded in writing. It also gives an indication that it can have no application to cases in which a notification is issued because, in such a case, both the first proviso to Section 11(2) and Section 11(4) make it clear that all applications will be considered together as having been received on the same date. In view of our interpretation, the proceedings of the Chief Minister and the recommendation dated 06.12.2004 are contrary to the Scheme of the MMDR Act as they were based on Section 11(5) which had no application at all to the applications made pursuant to the notification dated 15.03.2003.

62. We have already extracted Rules 59 and 60 and analysis of those rules confirms the interpretation of Section 11 above and the conclusion that it is Section 11(4) which would apply to a Notification issued under Rule 59(1). Rule 59(1) provides that the categories of areas listed in it including, inter alia, areas that were previously held or being under a mining lease or which have been reserved for exploitation by the State Government or under Section 17A of the Act, shall not be available for grant unless (i) an entry is made in the register and (ii) its availability for grant is notified in the Official Gazette specifying a date not earlier than 30 days from the date of notification. Sub-rule (2) of Rule 59 empowers the Central Government to relax the conditions set out in Rule 59(1) in respect of an area whose availability is required to be notified under Rule 59 if no application is issued or where notification is issued, the 30- days black-out period specified in the notification pursuant to Rules 59(1)(i) and (ii) has not expired, shall be deemed to be premature and shall not be entertained.

63. As discussed earlier, Section 11(4) is consistent with Rules 59 and 60 when it provides for consideration only of applications made pursuant to a Notification. On the other hand, the consideration of applications made prior to the Notification, as required by the first proviso to Section 11(2), is clearly inconsistent with Rules 59 and 60. In such circumstances, a harmonious reading of Section 11 with Rules 59 and 60, therefore, mandates an interpretation under which Notifications would be issued under Section 11(4) in the case of categories of areas covered by Rule

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59(1). In these circumstances, we are unable to accept the argument of the learned senior counsel for Jindal and Kalyani with reference to those provisions.”

Paragraph 7 of Amritlal Nathubhai Shahd was considered in paragraph 65

of the Report and then in paragraph 66 (Pg. 32), the Bench observed

as follows :

“66.- Even thereafter, this Court has consistently taken the position that applications made prior to a Notification cannot be entertained. In our view, the purpose of Rule 59(1), which is to ensure that mining lease areas are not given by the State Governments to favour persons of their choice without notice to the general public would be defeated. In fact, the learned single Judge correctly interpreted Section 11 read with Rules 59 and 60. The said conclusion also finds support in the decision of this Court in State of Tamil Nadu v. Hindstone, (1981) 2 SCC 205 at page 218, where it has been held in the context of the rules framed under the MMDR Act itself that a statutory rule, while subordinate to the parent statute, is otherwise to be treated as part of the statute and is effective. The same position has been reiterated in State of U.P. v. Babu Ram Upadhya (1961) 2 SCR 679 at 701 and Gujarat Pradesh Panchayat Parishad v. State of Gujarat (2007) 7 SCC 718.”

As regards the legislative and executive power of the State under Entry 23

List II read with Article 162 of the Constitution, the Court in Sandur

Manganese and Iron Ores Limitedm in paragraph 80 (Pg. 36) stated as

under :

“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,

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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).”

Whether 1962 and 1969 Notifications are ultra vires?

100. Now, in light of the above, I have to consider whether 1962

and 1969 Notifications issued by the Government of erstwhile State of

Bihar notifying for the information of public that iron ore in the subject area

was reserved for exploitation in the public sector are ultra vires and de

hors 1957 Act and 1960 Rules.

Constitutional philosophy about law making in relation to mines and minerals

101. Entry 36 in List I (Federal List) and Entry 23 in List II

(Provincial List) in the Seventh Schedule of Government of India Act, 1935

correspond to Entry 54 in List I (Union List) and Entry 23 in List II (State

List) in our Constitution. It is interesting to note that in the course of debate

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in respect of the above entries in the Government of India Bill, the Solicitor

General in the House of Commons stated that the rationale of including

only the ‘regulation of mines’ and ‘development of minerals’ and that too

only to the extent it was considered expedient in the public interest by a

Federal law was to ensure that the Provinces were not completely cut-out

from the law relating to mines and minerals and if there was inaction at the

Centre, then the Provinces could make their own laws. Thus, powers in

relation to mines and minerals were accorded to both the Centre and

States. The same philosophy is reflected in our Constitution. The

management of the mineral resources has been left with both the Central

Government and State Governments in terms of Entry 54 in List I and

Entry 23 in List II. In the scheme of our Constitution, the State Legislatures

enjoy power to enact legislation on the topics of ‘mines and mineral

development’. The only fetter imposed on the State Legislatures under

Entry 23 is by the latter part of the said entry which says ‘subject to the

provisions of List I with respect to regulation and development under the

control of the Union’. In other words, State Legislature loses its jurisdiction

to the extent to which Union Government had taken over control, the

regulation of mines and development of minerals as manifested by

legislation incorporating the declaration and no more. If Parliament by its

law has declared that regulation of mines and development of minerals

should in the public interest be under the control of Union, which it did by

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making declaration in Section 2 of the 1957 Act, to the extent of such

legislation incorporating the declaration, the power of the State Legislature

is excluded. The requisite declaration has the effect of taking out

regulation of mines and development of minerals from Entry 23, List II to

that extent. It needs no elaboration that to the extent to which the Central

Government had taken under ‘its control’ ‘the regulation of mines and

development of minerals’ under 1957 Act, the States had lost their

legislative competence. By the presence of expression ‘to the extent

hereinafter provided’ in Section 2, the Union has assumed control to the

extent provided in 1957 Act. 1957 Act prescribes the extent of control and

specifies it. We must bear in mind that as the declaration made in Section

2 trenches upon the State Legislative power, it has to be construed strictly.

Any legislation by the State after such declaration, trespassing the field

occupied in the declaration cannot constitutionally stand. To find out what

is left within the competence of the State Legislature on the declaration

having been made in Section 2 of the 1957 Act, one does not have to look

outside the provisions of 1957 Act but as observed in Baijnath Kadioc ,

‘have to work it out from the terms of that Act’. In order that the declaration

made by the Parliament should be effective, the making of rules or

enforcement of rules so made is not decisive.

102. The declaration made by Parliament in Section 2 of 1957 Act

states that it is expedient in the public interest that the Union should take

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under its control the regulation of mines and the development of minerals

to the extent provided in the Act itself. Legal regime relating to regulation of

mines and development of minerals is thus guided by the 1957 Act and

1960 Rules. Whether reservation made by 1962 and 1969 Notifications is

in any manner contrary or inconsistent with 1957 Act? In my view not at all.

Whether the impugned Notifications impinge upon the legislative power of

the Central Government? My answer is in negative. Whether the

Government of erstwhile State of Bihar did not have the power to make

reservation which it did by 1962 and 1969 Notifications? I think there was

no lack of power in the State in making such reservation. I indicate the

reasons therefor.

Management of minerals : general observations

103. First, few general observations. Minerals – like rivers and

forests – are a valuable natural resource. Minerals constitute our national

wealth and are vital raw-material for infrastructure, capital goods and basic

industries. The conservation, preservation and intelligent utilization of

minerals are not only need of the day but are also very important in the

interest of mankind and succeeding generations. Management of minerals

should be in a way that helps in country’s economic development and

which also leaves for future generations to conserve and develop the

natural resources of the nation in the best possible way. For proper

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development of economy and industry, the exploitation of natural

resources cannot be permitted indiscriminately; rather nation’s natural

wealth has to be used judiciously so that it may not be exhausted within a

few years.

No fundamental right in mining

104. The appellants have applied for mining leases in a land

belonging to Government of Jharkhand (erstwhile Bihar) and it is for iron-

ore which is a mineral included in the First Schedule to the 1957 Act in

respect of which no mining lease can be granted without the prior

approval of the Central Government. It goes without saying that no person

can claim any right in any land belonging to Government or in any mines in

any land belonging to Government except under 1957 Act and 1960 Rules.

No person has any fundamental right to claim that he should be granted

mining lease or prospecting licence or permitted reconnaissance operation

in any land belonging to the Government. It is apt to quote the following

statement of O. Chinnappa Reddy, J. in M/s. Hind Stoneo , albeit in the

context of minor mineral, ‘The public interest which induced Parliament to

make the declaration contained in Section 2……. has naturally to be the

paramount consideration in all matters concerning the regulation of mines

and the development of minerals’. He went on to say, ‘The statute with

which we are concerned, the Mines and Minerals (Development and

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Regulation) Act, is aimed ………..at the conservation and the prudent and

discriminating exploitation of minerals. Surely, in the case of a scarce

mineral, to permit exploitation by the State or its agency and to prohibit

exploitation by private agencies is the most effective method of

conservation and prudent exploitation. If you want to conserve for the

future, you must prohibit in the present.’

State Government’s ownership in mines and minerals within its territory and the power of reservation

105. It is not in dispute that all rights and interests, including rights

in mines and minerals in the subject area, had vested absolutely in the

erstwhile State of Bihar free from all encumbrances. At the

commencement of Constitution, the erstwhile State of Bihar was a Part-A

State specified in the First Schedule of the Constitution and prior thereto

the Province of Bihar. By virtue of Article 294, all properties and assets

which were vested in His Majesty for the purposes of the Government of

Province of Bihar stood vested in the corresponding State of Bihar. By

1950 Bihar Act, all other lands i.e., estates and tenures of whatever kind,

including the mines and minerals therein, stood vested in the State of

Bihar. Thus, all lands and minerals on or under land situate in the

erstwhile State of Bihar came to vest in it. Thereafter with effect from

November 15, 2000, the State of Jharkhand was carved out of the State of

Bihar pursuant to the Bihar Re-Organisation Act, 2000. Accordingly, all

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lands, inter alia, belonging to the then State of Bihar and situated in the

transferred territories of Singhbhum (East) and Singhbhum (West)

Districts, passed to the newly created State of Jharkhand. The admitted

position is that the State Government (erstwhile Bihar and now Jharkhand)

is the owner of the subject area. Mines and minerals within its territory vest

in it absolutely. As a matter of fact it is because of this position that the

appellants made their application for grant of mining lease to the State

Government. The question now is, the regulation of mines and

development of minerals having been taken under its control by the

Central Government, whether the provisions contained in 1957 Act or 1960

Rules come in the way of the State Government to reserve any particular

area for exploitation in the public sector.

106. The legislation on the subject of mines and minerals as

contained in 1957 Act and 1960 Rules has been extensively quoted in the

earlier part of the judgment. Suffice it to say that Section 4 is a pivotal

provision around which the legal framework for the regulation of mines

and development of minerals as laid down in 1957 Act revolves.

107. The character of the impugned Notifications making

reservation of the area set out therein for exploitation of iron ore in public

sector has to be judged in light of the provisions in 1957 Act and 1960

Rules. The object and effect of declaration made by Parliament in Section

2 and the provisions that follow Section 2 in 1957 Act, which have been

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extensively referred to above, even remotely do not suggest that the

Government of the erstwhile State of Bihar lacked authority or competence

to make reservation of subject mining areas within its territory relating to

iron ore which vested in it for public sector undertaking by 1962 and 1969

Notifications. Whatever way it is seen, whether ‘reservation’ topic was

covered by 1957 Act when 1962 and 1969 Notifications were issued and

published by the State Government or whether the provisions of 1957 Act,

as were then existing, enabled the State Government to reserve the

subject area for its own use through the agency in public sector, I am of

the opinion that since the State Government’s paramount right over the

iron ore being the owner of the mines did not get affected by 1957 Act, the

power existed with the State Government to reserve subject areas of

mining for exploitation in public sector undertaking. It was, however,

argued that by 1957 Act the State’s ownership rights insofar as

‘development of minerals’ was concerned stood frozen. ‘Development’

includes exploitation of mineral resources and to allow to exploit or not to

allow to exploit is all covered by 1957 Act and by Section 4 the right of the

State Government with regard to development of minerals was taken away

and the State Government ceased to have any inherent right of

reservation.

108. I do not agree. In the first place, the declaration made by

Parliament in Section 2 and the provisions that follow Section 2 in 1957

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Act have left untouched the State’s ownership of mines and minerals within

its territory although the regulation of mines and the development of

minerals have been taken under the control of the Union. Section 4 deals

with activities in relation to land and does not extend to extinguish the

State’s right of ownership in such land. Section 4 regulates the right to

transfer but does not divest ownership of minerals in a State and does not

preclude the State Government from exploiting its minerals. Section 4(1)

can have no application where the State Government wants to undertake

itself mining operations in the area owned by it. On consideration of

Section 5, I am of the view that the same conclusion must follow. Section 5

or for that matter Sections 6, 9, 10, 11 and 13(2)(a) also do not take away

the State’s ownership rights in the mines and minerals within its territory.

The power to legislate for regulation of mines and development of

minerals under the control of the Union may definitely imply power to

acquire mines and minerals in the larger public interest by appropriate

legislation, but by 1957 Act that has not been done. There is nothing in

1957 Act to suggest even remotely – and there is no express provision at

all – that the mines and minerals that vested in the States have been

acquired. Rather, the scheme and provisions of 1957 Act themselves

show that Parliament itself contemplated State legislation for vesting of

lands containing mineral deposits in the State Government and that

Parliament did not intend to trench upon powers of State Legislatures

100

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under Entry 18, List II. As noted above, the declaration made by

Parliament in Section 2 of 1957 Act states that it is expedient in the public

interest that the Union should take under its control the regulation of mines

and development of minerals to the extent provided in the Act itself. The

declaration made in Section 2 is, thus, not all comprehensive.

109. The regulation of mines and development of minerals has

been taken over under its control by the Central Government to the extent

it is manifested in 1957 Act which does not contemplate acquisition of

mines and minerals. By the presence of keynote expression ‘to the extent

hereinafter provided’ in Section 2, the Union has assumed control to the

extent specified in the provisions following Section 2. In my view, although

the word `regulation’ must in the context receive wide interpretation, but

the extent of control by Union as specified in 1957 Act has to be construed

strictly. The decisions of this Court in M.A. Tulloch & Co.b, Baijnath Kadioc,

Bharat Coking Coali and few other decisions where this Court has held

with reference to declaration made by Parliament in Section 2 of 1957 Act

and the provisions of that Act that the whole of the legislative field was

covered were in the context of specific State legislations under

consideration. In the context of subject State legislation, the whole

legislative field was found to be occupied by the Central law. The same is

the position in the case of Hingir-Rampur Coal Co.a where whole of the

legislative field relating to ‘minerals’ was found to be covered by the

100

101

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declaration made in Section 2 of the 1948 Act in the context of the State

legislation under consideration. In Hingir-Rampur Coal Co.a while

examining the constitutional validity of the Orissa Mining Areas

Development Fund Act, 1952 this Court held that the State Act was

covered by the 1948 Act. In M.A. Tulloch & Companyb , this Court was

concerned with the same Orissa Act which was under consideration in

Hingir-Rampur Coal Co.a and in light of Section 18(1) of the 1957 Act

which was under consideration it was held that the intention of Parliament

was to cover the entire field. In Baijnath Kadioc, this Court was concerned

with the constitutional validity of proviso (2) to Section 10(2) added by

Bihar Land Reforms (Amendment) Act, 1964. While examining the

constitutional validity of the above provision, the Constitution Bench of this

Court analysed 1957 Act. In light of Entry 54 in List I and Entry 23 in List II

the observation that whole of the legislative field was covered by the

Parliamentary declaration read with 1957 Act was with reference to the

State legislations under consideration and the whole of the legislative field

was found to be occupied by 1957 Act. Similar observations in various

other decisions by this Court were made in the context of the topic under

consideration.

110. I am supported in my view by a three-Judge Bench decision of

this Court in Orissa Cement Limitedf wherein it was emphatically asserted

that in the case of a declaration under Entry 54, the legislative power of the

101

102

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State Legislatures is eroded only to the extent control is assumed by the

Union pursuant to such declaration as spelt out by the legislative

enactment which makes the declaration. The three-Judge Bench on

careful consideration said, ‘The measure of erosion turns upon the field of

the enactment framed in pursuance of the declaration. While the

legislation in Hingir-Rampur Coal Co.a and M.A.Tulloch & Co.b was found

to fall within the pale of the prohibition, those in Chanan Malx, Ishwari

Khetan Sugar Millsy and Western Coalfields Limitedoo were general in

nature and traceable to specific entries in the State List and did not

encroach on the field of the Central enactment except by way of incidental

impact’.

111. Secondly, after enactment of 1957 Act and 1960 Rules made

thereunder, the Central Government has all throughout understood that

the State Governments as owner of mines and minerals within their

territory have inherent right to reserve any particular area for exploitation in

the public sector. This position is reflected from the order of the Central

Government that was passed by it and which was under challenge in

Amritlal Nathubhai Shahd. In its order the Central Government had stated,

‘….The State Government had the inherent right to reserve any particular

area for exploitation in the public sector. Mineral vest in them and they are

owners of minerals…….and Central Government are in agreement with the

State Government in so far as the reservation of areas is concerned…..”

102

103

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112. The above position held by the Central Government has been

approved by this Court in Amritlal Nathubhai Shahd. I have already

referred to the facts in the case of Amritlal Nathubhai Shahd and the issue

involved therein – an issue similar to the controversy presented before us

– in earlier part of this judgment. In Amritlal Nathubhai Shahd, the Court

referred to Section 4 of 1957 Act and it was held that there was nothing in

1957 Act or 1960 Rules to conclude as to why the State Government could

not , if it so desired, ‘reserve’ any land for itself, for any purpose, and such

reserved land would then not be available for the grant of a prospecting

licence or a mining lease to any person. The Court then pointed out, ‘the

authority to order reservation flows from the fact that the State is the owner

of the mines and the minerals within its territory’. It was also held that quite

apart from that, Rule 59 of 1960 Rules clearly contemplated reservation

by an order of the State Government. The above legal position has been

reiterated by this Court in Indian Metals and Ferro Alloys Ltd.p .

Whether Amritlal Nathubhai Shah is not a binding precedent

113. Learned senior counsel for the appellants, however,

vehemently contended that Amritlal Nathubhai Shahd is not a binding

precedent being per incuriam inasmuch as earlier judgments of this Court

have not been considered and applied. It was argued that decision in

103

104

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Amritlal Nathubhai Shahd was limited to its own facts and that decision

did not deal with reservation prior to amendment in Rule 59. In that case

Notification was of December 31, 1963 whereunder lands in particular

areas had been reserved for exploitation of bauxite in the public sector. At

that time Rule 59 of 1960 Rules had been amended and, moreover, that

was a case of exploitation of mineral by the State itself and in case of

exploitation other than by State it could only be done in accord with the

1957 Act and 1960 Rules.

114. I am afraid that the distinguishing features highlighted by

learned senior counsel for the appellants are not substantial and do not

persuade me not to follow Amritlal Nathubhai Shahd. The judgment of this

Court in Amritlal Nathubhai Shahd establishes the distinction between the

power of reservation to exploit a mineral as its own property on the one

hand and the regulation of mines and mineral development under the 1957

Act and the 1960 Rules on the other. The authority of the State

Government to make reservation of a particular mining area within its

territory for its own use is the offspring of ownership; and it is inseparable

therefrom unless denied to it expressly by an appropriate law. By 1957 Act

that has not been done by Parliament. Setting aside by a State of land

owned by it for its exclusive use and under its dominance and control, in

my view, is an incident of sovereignty and ownership. There is no

incongruity or inconsistency in the decisions of this Court in Hingir-

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Rampur Coal Co.a, M.A. Tulloch & Co.b, Baijnath Kadioc and Amritlal

Nathubhai Shahd . The Bench in Amritlal Nathubhai Shahd was alive to the

legal position highlighted by this Court in Hingir-Rampur Coal Co.a, M.A.

Tulloch & Co.b and Baijnath Kadioc although it did not expressly refer to

these decisions. This is apparent from the observations made in para 3

wherein it has been stated that in pursuance of its exclusive power to

make laws with respect to the matters enumerated in Entry 54 of List I in

the Seventh Schedule, Parliament specifically declared in Section 2 of the

1957 Act that it was expedient in the public interest that the Union should

take under its control, regulation of mines and the development of minerals

to the extent provided therein. The Bench noticed that State Legislature’s

power under Entry 23 of List II was, thus, taken away and regulation of

mines and mineral development had therefore to be in accordance with the

1957 Act and 1960 Rules. The legal position exposited in Amritlal

Nathubhai Shahd is that even though the field of legislation with regard to

regulation of mines and development of minerals has been covered by the

declaration of the Parliament in Section 2 of the 1957 Act, but that can not

justify the inference that the State Government has lost its right to the

minerals which vest in it as a property within its territory and hence no

person has a right to exploit the mines other than in accordance with the

provisions of the 1957 Act and the 1960 Rules. The authority of the State

Government to order reservation flows from the fact that it is the owner of

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the mines and the minerals within its territory. Such authority is also

traceable to Rule 59 of 1960 Rules.

115. Yet another considerable point was made that 1962 and 1969

Notifications are not relatable to statutory provisions contained in 1957 Act

and 1960 Rules. Reference was made to Sections 17 and 18 and Rules 58

and 59 of 1960 Rules and it was argued that these provisions are

indicative of the position that reservation made by the State Government

for exploitation of minerals in public sector was unsupportable and

unsustainable in law.

Section 17 – not all - comprehensive provision

116. I am of the opinion that Section 17 is not all - comprehensive

on the subject of refusal to grant prospecting licence or mining lease.

Section 17 has nothing to do with public or private sector. It does not deal

directly or indirectly with the State Government’s right for reservation of its

own mines and minerals. Its application is not general but it is confined to a

specific situation where the Central Government proposes to undertake

prospecting or mining operations in any area not already held under any

prospecting licence or mining lease. The above view with regard to Section

17 finds support from Amritlal Nathubhai Shahd. Insofar as Section 18 is

concerned, it basically confers additional rule making power upon the

Central Government for achieving the objectives, namely, conservation

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and systematic development of minerals articulated therein. If the State

Government makes reservation in public interest with respect to minerals

which vest in it for exploitation in public sector, I fail to see how such

reservation can be seen as impairing the obligation cast upon the Central

Government under Section 18.

Rule 59 and Janak Lal

117. It is true that Rule 58 as it existed originally did not enable the

State Government to reserve any area in the State for exploitation of

minerals in public sector. But Rule 59 did recognise the State

Government’s authority to make reservation for any purpose. It was,

however, argued by Dr. Rajiv Dhavan that Rule 59, as it then stood,

allowed reservation for any purpose other than prospecting or mining for

minerals. He relied upon decision of this Court in Janak Lalj. In Janak Lalj,

admittedly the disputed area was reserved for nistar purposes. When an

application for grant of mining lease was earlier made by a third party it

was rejected on the ground that it was so reserved. It was also an admitted

position before this Court that the procedure under Rule 58 was not

followed before grant was made in favour of respondent no. 4 therein and

no opportunity was given to any other person before entertaining

application of respondent no. 4. In the backdrop of the above admitted

position, the Court considered the question whether Rule 59 was attracted

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or not. The High Court had accepted the argument of the respondents that

the expression ‘reserved for any purpose’ in Rule 59 did not cover a case

where the area was reserved for nistar purposes or for any purpose other

than mining. This Court did not accept the High Court’s view. While

construing Rule 59 as it originally existed and the amendment brought in

Rule 59 by deleting the words, ‘other than prospecting or mining for

minerals’, the Court said that the result of the amendment was to extend

the rule and not to curtail its area of operation. It was held that words ‘any

purpose’ was of wide connotation and there was no reason to restrict its

meaning.

118. Janak Lal,j in my opinion, does not help the contention

canvassed on behalf of the appellants. The expression, ‘other than

prospecting or mining for minerals’ that formed part of original Rule 59, in

my view, was not of much significance and did not impede the State

Government’s authority to make reservation of any area for exploitation in

public sector founded on its ownership over that area. It was because of

this that this insignificant and inconsequential expression was later on

deleted from Rule 59 in 1963. Rule 59, accordingly, continued to

recognise the State Government’s right to reserve any area for mining

within its territory for any purpose including exploitation in public sector. In

Amritlal Nathubhai Shahd, this position has been expressly affirmed when it

said, “but quite apart from that, we find that Rule 59 of the Rules which

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have been made under Section 13 of the Act, clearly contemplates such

reservation by an order of the State Government”.

Repeal of Rule 58 and Section 17A

119. Rule 58 was amended in 1980 whereby it expressly provided

that the State Government may by Notification in the official gazette

reserve any area for exploitation by the Government, a corporation

established by the Central, State or Provincial Act or a Government

company within the meaning of Section 617 of the Companies Act. Rule 58

has been omitted from 1960 Rules as the provision for reservation has

now been expressly made by insertion of Section 17A in 1957 Act.

According to Section 17A(2), the State Government with the approval of

the Central Government may reserve any area not already held under any

prospecting licence or mining lease to undertake prospecting or mining

operations through a Government company or a corporation owned or

controlled by it. In terms of Section 17A(2), any reservation made by the

State Government after coming into force of that Section must bear

approval of the Central Government.

120. From the above, it becomes clear that what was implied by the

provisions originally contained in 1957 Act and 1960 Rules insofar as

authority of the State Government to reserve any area within its territory for

mining in public sector has been made explicit first by amendment in Rule

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58 in 1980 and later on by introduction of Section 17A in 1957 Act by virtue

of amendment effective from 1987.

121. It was also argued by Mr. C.A. Sundaram, learned senior

counsel for one of the appellants that even if 1962 and 1969 Notifications

were held to be validly issued with proper authority of law at that point of

time, the fact that Rule 58 was omitted in 1988 without any saving clause

necessarily meant that these Notifications were no longer valid and could

not be relied upon. He argued that current power of reservation contained

in Section 17A of 1957 Act is consistent with erstwhile Rules 58/59 since

Section 17A expressly requires the approval of the Central Government

before any State Government issues any notification for reservation of

mining area in public sector.

122. The impact of omission of Rule 58 in 1988 from 1960 Rules

and the introduction of Section 17A in 1957 Act in the context of

reservation of the mining area by the State Government for public sector

exploitation came up for direct consideration by this Court in Indian Metals

and Ferro Alloys Ltd.p. In the earlier part of the judgment I have already

quoted the relevant portion of the decision of this Court in Indian Metals

and Ferro Alloys Ltd.p. The Court referred to the relevant amendments in

1957 Act and 1960 Rules and categorically held that reservations made

prior to insertion of Section 17A continue in force even after the

introduction of Section 17A. The reservations made by the State

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Government in 1977 before omission of Rule 58 and amendment in Rule

59 and insertion of Section 17A in 1957 Act were, thus, held to be

unaffected.

123. Having carefully considered Section 17A, I have no hesitation

in holding that the said provision is prospective. There is no indication in

Section 17A or in terms of the Amending Act that by insertion of Section

17A the Parliament intended to alter the pre-existing state of affairs. The

Parliament does not seem to have intended by bringing in Section 17A to

undo the reservation of any mining area made by the State Government

earlier thereto for exploitation in public sector. The Parliament has no

doubt plenary power of legislation within the field assigned to it to legislate

prospectively as well as retrospectively. As early as in 1951 this Court in

Keshavan Madhava Menon v. State of Bombayrr had stated about a

cardinal principle of construction that every statue is prima facie

prospective unless it is expressly or by necessary implication made to

have retrospective operation. Unless there are words in the statute

sufficient to show the intention of the Legislature to affect existing rights, it

is deemed to be prospective only. In Principles of Statutory Interpretation

(Seventh Edition, 1999) by Justice G.P. Singh, the statement of Lord

Blanesburg in Colonial Sugar Refining Co. v. Irvingss and the observations

rr AIR 1951 SC 128 ss (1905) AC 369

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of Lopes, L.J. in Pulborough Parish School Board Election, Bourke v. Nutttt

have been noted as follows :

“In the words of Lord Blanesburg, “provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the absence of express enactment or necessary intendment.” “Every statute, it has been said”, observed Lopes, L.J., “which takes away or impairs vested rights acquired under existing laws, or creates a new obligation or imposes a new duty, or attaches a new disability in respect of transactions already past, must be presumed to be intended not to have a retrospective effect”.

124. Where an issue arises before the Court whether a statute is

prospective or retrospective, the Court has to keep in mind presumption of

prospectivity articulated in legal maxim nova constitutio futuris formam

imponere debet non praeteritis, i.e., ‘a new law ought to regulate what is to

follow, not the past’. The presumption of prospectivity operates unless

shown to the contrary by express provision in the statute or is otherwise

discernible by necessary implication.

125. The aspects, namely, (i) 1993 mineral policy framed by the

Central Government envisaged permission of captive consumption of

minerals across the country; (ii) in 1994 Central Government asked all the

state governments to de-reserve 13 minerals including iron ore and

directed them to take steps accordingly; (iii) confirmation by the tt (1894) 1 QB 725, p. 737

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Government of Bihar to the Central Government in 1994 that no mining

areas were reserved for public sector undertaking in the then State of

Bihar; (iv) confirmation by the State Government in 2001 to Central

Government that there are no reserved areas in the State and (v) in 2004,

the recommendation by the State Government in favour of the appellants

to the Central Government for grant of prior approval and reminder in

2005, in my view, have no impact and effect on the validity of 1962 and

1969 Notifications. The above acts of the Government of Bihar and the

Government of Jharkhand in ignorance of 1962 and 1969 Notifications

cannot be used as a sufficient ground for invalidating these Notifications. If

a state government has power to reserve mineral bearing area for

exploitation in public sector – and I have already held that the then

Government of Bihar had such power – the act of reservation vide 1962

and 1969 Notifications is not rendered illegal or invalid. I am clearly of the

view that lack of knowledge on the part of the State Government about the

reservation of areas for exploitation in public sector vide 1962 and 1969

Notifications does not affect in any manner the legality and validity of these

Notifications once it has been found that these Notifications have been

issued by the erstwhile State of Bihar in valid exercise of power which it

had.

Validity of 2006 Notification

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126. On October 27, 2006, the State Government issued a

Notification declaring its decision that the iron ore deposits at Ghatkuri

would not be thrown open for grant of prospecting licence, mining licence

or otherwise for private parties. In the said Notification, it was noted that

the deposits were at all material times kept reserved by 1962 and 1969

Notifications issued by the State of Bihar. It was further mentioned in the

Notification that mineral reserved in Ghatkuri area has now been decided

to be utilized for exploitation by public sector undertaking or joint venture

project of the State Government as they would usher in maximum benefits

to the State and would generate substantial amount of employment in the

State. 2006 Notification states that it has been issued in the public interest

and in the larger interest of the State for optimum utilization and

exploitation of the mineral resources in the State and for establishment of

mineral based industry with value addition thereon. It was argued that

2006 Notification is bad for the same reasons for which 1962 and 1969

Notifications are bad in law and invalid. The argument is noted to be

rejected. For 1962 and 1969 Notifications are not and have not been found

by me to suffer from any legal infirmity. 2006 Notification mentions factum

of reservation made by 1962 and 1969 Notifications. It is founded on the

policy of the State Government that such reservation will usher in

maximum benefits to the State and would also generate substantial

amount of employment in the State. The public interest is, thus,

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paramount. The State Government had authority to do that under Section

17A(2) of 1957 Act read with Rule 59(1)(e) of 1960 Rules.

127. It was, however, argued on behalf of the appellants that 2006

Notification has attempted to reserve the area for exploitation by public

sector undertaking or in joint venture project whereas Section 17A(2) of

1957 Act allows the State Government to reserve area for a government

company or corporation owned or controlled by it and not in joint venture

project. The submission was that 2006 Notification is an attempt to bring

in indirectly private companies through joint venture project although,

Section 17A clearly does not envisage private participation.

128. The mineral reserved in the said area by 2006 Notification

has been decided to be utilized for exploitation by public sector

undertaking or joint venture project of the State Government. 2006

Notification does mention reservation for joint venture project of the State

Government but, in my opinion, the said expression must be understood to

be confined to an instrumentality having the trappings and character of a

government company or corporation owned or controlled by the State

Government and not outside of such instrumentality.

129. The types of reservation under Section 17A and their scope

have been considered by this Court in Indian Metals and Ferro Alloys Ltd.p

in paragraphs 45 and 46 (pgs. 136-139) of the Report. I am in respectful

agreement with that view. However, it was argued that Section 17A(2)

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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 incorrect reading of Section 17A(2). This

provision does not use the expression, ‘prior approval’ which has been

used in Section 11. On the other hand, Section 17A(2) uses the words,

‘with the approval of the Central Government’. These words in Section

17A(2) can not be equated with prior approval of the Central Government.

According to me, the approval contemplated in Section 17A may be

obtained by the State Government before the exercise of power of

reservation or after exercise of such power. The approval by the Central

Government contemplated in Section 17A(2) may be express or implied. In

a case such as the present one where the Central Government has relied

upon 2006 Notification while rejecting appellants’ application for grant of

mining lease, it necessarily implies that the Central Government has

approved reservation made by State Government in 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 2006 Notification.

130. Two more contentions advanced on behalf of the appellants,

one, with regard to 2006 Notification and the other with regard to 1962

and 1969 Notifications may be briefly noticed. As regards 2006 Notification

it was contended that it was not legally valid as it has been made operative

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with retrospective effect. In respect of 1962 and 1969 Notifications, it was

argued that the State Government had never adopted these Notifications

and, accordingly, these Notifications lapsed. None of these two arguments

has any merit. 2006 Notification has not been given retrospective operation

as contended on behalf of the appellants. I have already held that 2006

Notification is prospective. Mere reference to 1962 and 1969 Notifications

in 2006 Notification does not make 2006 Notification retrospective.

131. The other argument that 1962 and 1969 Notifications had

lapsed as the State Government never adopted them is also without any

merit and substance. The new State of Jharkhand was carved out of the

erstwhile State of Bihar and it came into existence by virtue of the Bihar

Reorganisation Act, 2000. Section 85 of that Act provides that the

appropriate Government may before expiration of two years adapt and/or

modify the law and every such law shall have effect subject to adaptation

and modification so made until altered, repealed or amended by a

competent Legislature. In light of Section 85 of the Bihar Reorganisation

Act read with Sections 84 and 86 thereof, position that emerges is that the

existing law shall have effect until it is altered, repealed and/or amended.

Since the new State of Jharkhand had not altered, repealed and/or

amended 1962 and 1969 Notifications issued by the erstwhile State of

Bihar, it cannot be said that 1962 and 1969 Notifications had lapsed.

Moreover, in 2006 Notification, 1962 and 1969 Notifications and their effect

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have been mentioned and that also shows that 1962 and 1969

Notifications continued to operate. The expression, ‘the deposit was at all

material times kept reserved vide Gazette Notification No. A/MM-

40510/62-6209/M dated 21st December, 1962 and No. B/M-6-1019/68-

1564/M dated 28th February, 1969 of the State of Bihar’ leaves no manner

of doubt that 1962 and 1969 Notifications continued to operate and did not

lapse.

Principles of promissory estoppel

132. The doctrine of promissory estoppel is now firmly established

and is well accepted in India. Its nature, scope and extent have come up

for consideration before this Court time and again. One of the leading

cases of this Court on the doctrine of promissory estoppel is the case of

Motilal Padampat Sugar Millsz . In that case, the Court elaborately and

extensively considered diverse facets and aspects of doctrine of

promissory estoppel. That was a case where the appellant was primarily

engaged in the business of manufacture and sale of sugar and it had also

a cold storage plant and a steel foundry. On October 10, 1968 a news item

was carried in the newspaper/s that the State of Uttar Pradesh had

decided to give exemption from sales tax for a period of three years under

Section 4-A of the U.P. Sales Tax Act to all new industrial units in the State

with a view to enabling them, “to come on firm footing in developing stage”.

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Motilal Padampat Sugar Millsz on the basis of the above news, addressed

a letter to the Director of the Industries stating that in view of the Sales Tax

Holiday announced by the Government, it intended to set up a

hydrogeneration plant for manufacture of vanaspati and sought

confirmation whether proposed industrial unit would be entitled to sales tax

holiday for a period of three years from the date it commenced production.

The Director of Industries replied that there would be no sales tax for three

years on the finished product of the vanaspati from the date it got power

connection for commencing production. Motilal Padampat Sugar Millsz then

started taking steps for establishment of the factory. It entered into

agreement for procuring plant and machinery and also took diverse steps

and considerable progress in the setting up of the vanaspati factory took

place. Later on, the State Government had a second thought on the

question of exemption of sales tax and, ultimately, the government took a

policy decision that new vanaspati units in the State which go into

commercial production by September 30, 1970 would be given only partial

concession in sales tax for a period of three years. Motilal Padampat

Sugar Millsz took up the matter with the Government and in the meanwhile

its production started on July 2, 1970 which was also intimated to the

functionaries of the State. Having been denied total sales tax holiday

although promised earlier by the Director of Industries, it filed a writ petition

before the High Court. The principal argument advanced on behalf of

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Motilal Padampat Sugar Millsz was that on a categorical assurance of the

State Government that it would be exempted from payment of sales tax for

a period of three years from the date of commencement of production that

it established a hydrogeneration plant for manufacture of vanaspati. The

assurance was given by the State Government intending or knowing that it

would be acted on by it and in fact by acting on it, it altered its position and,

therefore, the State Government was bound on the principle of promissory

estoppel to honour the assurance and exempt it from sales tax for a period

of three years. In backdrop of these facts, when the matter reached

this Court, the Court considered the nature, scope and extent of the

doctrine of promissory estoppel. In paragraph 8 of the Report, the Court

considered the view of Justice Denning, as he then was, in the Central

London Property Trust Ltd. v. High Trees House Ltd.uu wherein Denning,

J. had considered Jorden v. Moneyvv. This Court also referred to in

paragraph 8, the opinions in Hughes v. Metropolitan Railway Companyww ,

Birmingham and District Land Co., v. London and North Western Rail Co.xx

which were considered by Justice Denning in the High Treesuu case. The

Court also considered the decisions in Durham Fancy Goods Ltd. v.

Michael Jackson (Fancy Goods) Ltd.yy, Evenden v. Guildford City

uu (1956) 1 All ER 256 vv (1854) 5 HLC 185 ww (1877) 2 AC 439 xx (1889) 40 Ch D 268 yy (1968) 2 All ER 987

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Association Football Club Ltd.zz and Crabb v. Arun District Councilaaa and

culled out the legal position as follows :

“8. …… The true principle of promissory estoppel, therefore, seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre- existing relationship between the parties or not.”

Then in para 9, the Court stated that it was a doctrine evolved by equity in

order to prevent injustice. The Court pointed out that where promise is

made by a person knowing that it would be acted on by the person to

whom it is made and in fact it is so acted on, it is inequitable to allow the

party making the promise to go back upon it.

133. In para 13, the development of doctrine of promissory

estoppel in England was noticed by observing, “that even in England

where the Judges, apprehending that if a cause of action is allowed to be

founded on promissory estoppel it would considerably erode, if not

completely overthrow, the doctrine of consideration, have been fearful to

allow promissory estoppel to be used as a weapon of offence, it is

zz (1975) 3 All ER 269 aaa (1975) 3 All ER 865

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interesting to find that promissory estoppel has not been confined to a

purely defensive role”.

134. In Motilal Padampat Sugar Millsz, the Court also referred to

American law on the subject. In para 14 after observing, ‘the doctrine of

promissory estoppel has displayed remarkable vigour and vitality in the

hands of American Judges and it is still rapidly developing and expanding

in the United States”, the Court referred to Article 90 of American Law

Institute’s “Restatement of the Law of Contracts” and the statement at

page 657 of Volume 19 of American Jurisprudence.

135. The Court then considered the view of Justice Cardozo in

Allengheny College v. National Chautauque County Bankbbb and Orennan

v. Star Paving Companyccc and noted as follows :

“14. There are also numerous cases where the doctrine of promissory estoppel has been applied against the Government where the interest of justice, morality and common fairness clearly dictated such a course. We shall refer to these cases when we discuss the applicability of the doctrine of equitable estoppel against the Government. Suffice it to state for the present that the doctrine of promissory estoppel has been taken much further in the United States than in English and Commonwealth jurisdictions and in some States at least, it has been used to reduce, if not to destroy, the prestige of consideration as an essential of valid contract. Vide Spencer Bower and Turner's Estoppel by Representation (2d) p. 358.

bbb 57 ALR 980 ccc (1958) 31 Cal 2d 409

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136. The Court then considered to what extent the doctrine of

promissory estoppel was applicable against the Government. After

referring to few decisions of the English courts and the American courts,

the decisions of this Court in Union of India v. Indo-Afghan Agenciesddd,

Collector of Bombay v. Municipal Corporation of the City of Bombayeee,

Century Spinning and Manufacturing Co. Ltd. v. Ulhasnagar Municipal

Councilfff, M. Ramanatha Pillai v. State of Keralaggg, Assistant Custodian v.

Brij Kishore Agarwalahhh, State of Kerala v. Gwalior Rayon Silk

Manufacturing Co. Ltd.iii, Excise Commissioner, U.P., Allahabad v. Ram

Kumarjjj, Bihar Eastern Gangetic Fishermen Co-operative Society Ltd. v.

Sipahi Singhkkk and Radhakrishna Agarwal v. State of Biharlll were

considered.

137. After entering into detailed consideration as noted above, in

Motilal Padampat Sugar Millsz , this Court exposited the legal position that

the doctrine of promissory estoppel may be applied against the State even

in its governmental, public or sovereign capacity where it is necessary to

prevent fraud or manifest injustice. The following position was culled out:

ddd (1968) 2 SCR 366 eee (1952) SCR 43 fff (1970) 1 SCC 582 ggg (1974) 1 SCR 515 hhh (1975) 1 SCC 21 iii (1973) 2 SCC 713 jjj (1976) 3 SCC 540 kkk (1977) 4 SCC 145 lll (1977) 3 SCC 457

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“The promissory estoppel cannot be invoked to compel the Government or even a private party to do an act prohibited by law.

To invoke the doctrine of promissory estoppel it is not necessary for the promisee to show that he suffered any detriment as a result of acting in reliance on the promise. The detriment is not some prejudice suffered by the promisee by acting on the promise but the prejudice which would be caused to the promisee, if the promisor were allowed to go back on the promise.

Whatever be the nature of function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied the Government can be compelled to carry out the promise made by it.”

138. In Union of India and Others v. Godfrey Philips India

Limitedmmm (para 9, page 383 of the Report), this Court stated as follows:

“9. Now the doctrine of promissory estoppel is well established in the administrative law of India. It represents a principle evolved by equity to avoid injustice and, though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. The basis of this doctrine is the interposition of equity which has always, true to its form, stepped in to mitigate the rigour of strict law. This doctrine, though of ancient vintage, was rescued from obscurity by the decision of Mr. Justice Denning as he then was, in his celebrated judgment in Central London Property Trust Ltd. v. High Trees House Ltd. The true principle of promissory estoppel is that where one party has by his word or conduct made to the other a clear and unequivocal promise or representation which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the promise or representation would be binding on the party making it and

mmm (1985) 4 SCC 369

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he would not be entitled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which have taken place between the parties. It has often been said in England that the doctrine of promissory estoppel cannot itself be the basis of an action: it can only be a shield and not a sword: but the law in India has gone far ahead of the narrow position adopted in England and as a result of the decision of this Court in Motilal Padampat Sugar Mills v. State of U.P. it is now well settled that the doctrine of promissory estoppel is not limited in its application only to defence but it can also found a cause of action. The decision of this Court in Motilal Sugar Mills case contains an exhaustive discussion of the doctrine of promissory estoppel and we find ourselves wholly in agreement with the various parameters of this doctrine outlined in that decision.”

139. The doctrine of promissory estoppel also came up for

consideration before this Court in Delhi Cloth and General Mills Limited v.

Union of Indiannn. In para 18 (page 95) of the Report the Court stated as

follows :

“18. Here the Railways Rates Tribunal apparently, appears to have gone off the track. The doctrine of promissory estoppel has not been correctly understood by the Tribunal. It is true, that in the formative period, it was generally said that the doctrine of promissory estoppel cannot be invoked by the promisee unless he has suffered “detriment” or “prejudice”. It was often said simply, that the party asserting the estoppel must have been induced to act to his detriment. But this has now been explained in so many decisions all over. All that is now required is that the party asserting the estoppel must have acted upon the assurance given to him. Must have relied upon the representation made to him. It means, the party has changed or altered the position by relying on the assurance or the representation. The alteration of position by the party is the only indispensable requirement of the doctrine. It is not necessary to prove further any damage, detriment or prejudice to the party asserting the estoppel. The court, however, would compel the opposite party to adhere to the representation acted

nnn (1988) 1 SCC 86

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upon or abstained from acting. The entire doctrine proceeds on the premise that it is reliance based and nothing more.”

140. A two-Judge Bench of this Court in Amrit Banaspati Company

Limitedaa entered into consideration of the extent and applicability of

doctrine of promissory estoppel and after considering earlier decisions of

this Court in Indo-Afghan Agenciesddd , Motilal Padampat Sugar Millsz ,

Godfrey Philips India Limitedmmm and Delhi Cloth and General Mills

Limitednnn culled out the legal position that if a representation was made

by an official on behalf of the Government then unless such representation

is established to be beyond scope of authority it should be held binding on

the Government. However, if such representation was contrary to law then

such representation was unenforceable. Then the Court stated (para 10,

page 424) as follows:

“10. But promissory estoppel being an extension of principle of equity, the basic purpose of which is to promote justice founded on fairness and relieve a promisee of any injustice perpetrated due to promisor's going back on its promise, is incapable of being enforced in a court of law if the promise which furnishes the cause of action or the agreement, express or implied, giving rise to binding contract is statutorily prohibited or is against public policy……”

141. In Kasinka Trading & Anr. v. Union of India and Anr.ooo , the

Court was principally concerned with the invocation of the doctrine of

promissory estoppel in the facts and circumstances of the case obtaining

therein. The Court considered the decision of this Court in Indo-Afghan ooo 1995 (1) SCC 274

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Agenciesddd and the successive decisions. The Court held in (paras 11-12,

pages 283-284) as under:

“11. The doctrine of promissory estoppel or equitable estoppel is well established in the administrative law of the country. To put it simply, the doctrine represents a principle evolved by equity to avoid injustice. The basis of the doctrine is that where any party has by his word or conduct made to the other party an unequivocal promise or representation by word or conduct, which is intended to create legal relations or effect a legal relationship to arise in the future, knowing as well as intending that the representation, assurance or the promise would be acted upon by the other party to whom it has been made and has in fact been so acted upon by the other party, the promise, assurance or representation should be binding on the party making it and that party should not be permitted to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings, which have taken place or are intended to take place between the parties.

12. It has been settled by this Court that the doctrine of promissory estoppel is applicable against the Government also particularly where it is necessary to prevent fraud or manifest injustice. The doctrine, however, cannot be pressed into aid to compel the Government or the public authority “to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make”. There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. In our opinion, the doctrine of promissory estoppel cannot be invoked in the abstract and the courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must for ever be present to the mind of the court, while considering the applicability of the doctrine. The doctrine must yield when the equity so

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demands if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the Government or the public authority to its promise, assurance or representation.”

Then in paragraph 20 of the Report while distinguishing the facts under

consideration which were not found to be analogous to the facts in Indo-

Afghan Agenciesddd and Motilal Padampat Sugar Mills, the Court stated

(Para 20-21, pages 287-288) as follows:

“20. The facts of the appeals before us are not analogous to the facts in Indo-Afghan Agencies or M.P. Sugar Mills. In the first case the petitioner therein had acted upon the unequivocal promises held out to it and exported goods on the specific assurance given to it and it was in that fact situation that it was held that Textile Commissioner who had enunciated the scheme was bound by the assurance thereof and obliged to carry out the promise made thereunder. As already noticed, in the present batch of cases neither the notification is of an executive character nor does it represent a scheme designed to achieve a particular purpose. It was a notification issued in public interest and again withdrawn in public interest. So far as the second case (M.P. Sugar Mills case) is concerned the facts were totally different. In the correspondence exchanged between the State and the petitioners therein it was held out to the petitioners that the industry would be exempted from sales tax for a particular number of initial years but when the State sought to levy the sales tax it was held by this Court that it was precluded from doing so because of the categorical representation made by it to the petitioners through letters in writing, who had relied upon the same and set up the industry.

21. The power to grant exemption from payment of duty, additional duty etc. under the Act, as already noticed, flows from the provisions of Section 25(1) of the Act. The power to exempt includes the power to modify or withdraw the same. The liability to pay customs duty or additional duty under the Act arises when the taxable event occurs. They are then subject to the payment of duty as prevalent on the date of the entry of the goods. An exemption notification issued

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under Section 25 of the Act had the effect of suspending the collection of customs duty. It does not make items which are subject to levy of customs duty etc. as items not leviable to such duty. It only suspends the levy and collection of customs duty, etc., wholly or partially and subject to such conditions as may be laid down in the notification by the Government in “public interest”. Such an exemption by its very nature is susceptible of being revoked or modified or subjected to other conditions. The supersession or revocation of an exemption notification in the “public interest” is an exercise of the statutory power of the State under the law itself as is obvious from the language of Section 25 of the Act. Under the General Clauses Act an authority which has the power to issue a notification has the undoubted power to rescind or modify the notification in a like manner. From the very nature of power of exemption granted to the Government under Section 25 of the Act, it follows that the same is with a view to enabling the Government to regulate, control and promote the industries and industrial production in the country. Notification No. 66 of 1979 in our opinion, was not designed or issued to induce the appellants to import PVC resin. Admittedly, the said notification was not even intended as an incentive for import. The notification on the plain language of it was conceived and issued on the Central Government “being satisfied that it is necessary in the public interest so to do”. Strictly speaking, therefore, the notification cannot be said to have extended any ‘representation’ much less a ‘promise’ to a party getting the benefit of it to enable it to invoke the doctrine of promissory estoppel against the State. It would bear repetition that in order to invoke the doctrine of promissory estoppel, it is necessary that the promise which is sought to be enforced must be shown to be an unequivocal promise to the other party intended to create a legal relationship and that it was acted upon as such by the party to whom the same was made. A notification issued under Section 25 of the Act cannot be said to be holding out of any such unequivocal promise by the Government which was intended to create any legal relationship between the Government and the party drawing benefit flowing from of the said notification. It is, therefore, futile to contend that even if the public interest so demanded and the Central Government was satisfied that the exemption did not require to be extended any further, it could still not withdraw the exemption.”

The Court went on to observe (paras 24 and 25, pages 289-290) as under:

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“24. It needs no emphasis that the power of exemption under Section 25(1) of the Act has been granted to the Government by the Legislature with a view to enabling it to regulate, control and promote the industries and industrial productions in the country. Where the Government on the basis of the material available before it, bona fide, is satisfied that the “public interest” would be served by either granting exemption or by withdrawing, modifying or rescinding an exemption already granted, it should be allowed a free hand to do so. We are unable to agree with the learned counsel for the appellants that Notification No. 66 of 1979 could not be withdrawn before 31-3-1981. First, because the exemption notification having been issued under Section 25(1) of the Act, it was implicit in it that it could be rescinded or modified at any time if the public interest so demands and secondly it is not permissible to postpone the compulsions of “public interest” till after 31-3-1981 if the Government is satisfied as to the change in the circumstances before that date. Since, the Government in the instant case was satisfied that the very public interest which had demanded a total exemption from payment of customs duty now demanded that the exemption should be withdrawn it was free to act in the manner it did. It would bear a notice that though Notification No. 66 of 1979 was initially valid only up to 31-3-1979 but that date was extended in “public interest”, we see no reason why it could not be curtailed in public interest. Individual interest must yield in favour of societal interest.

25. In our considered opinion therefore the High Court was perfectly right in holding that the doctrine of promissory estoppel had no application to the impugned notification issued by the Central Government in exercise of its powers under Section 25(1) of the Act in view of the facts and circumstances, as established on the record.”

142. In State of Orissa and Ors. v. Mangalam Timber Products

Limitedppp , this Court held that to attract applicability of the principle of

estoppel it was not necessary that there must be a contract in writing

entered into between the parties. Having regard to the facts of the case

ppp (2004) 1 SCC 139

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under consideration, the Court held that it was not satisfied even prima

facie that it was a case of an error committed by the State Government of

which it was not aware. While observing that the State cannot take

advantage of its own omission, the Court held that having persuaded the

respondent therein to establish an industry and that party having acted on

the solemn promise of the State Government, purchased the raw material

at a fixed price and also sold its products by pricing the same taking into

consideration the price of the raw material fixed by the State Government,

the State Government cannot be permitted to revise the terms for supply of

raw material adversely to the interest of that party.

143. In Nestle India Limitedbb, the applicability of doctrine of

promissory estoppel again came up for consideration before this Court.

Inter alia, the Court considered the earlier decisions of this Court in Indo-

Afghan Agenciesddd, Motilal Padampat Sugar Millsz, Godfrey Philips India

Limitedmmm, Mangalam Timber Products Limitedppp , Amrit Banaspati

Company Limitedaa and Kasinka Tradingooo . The Court followed Godfrey

Philips India Limitedmmm which was found to be close to the facts of that

case. The Court did not accept the argument canvassed on behalf of the

State of Punjab that the overriding public interest would make it inequitable

to enforce the estoppel against the State Government.

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144. In Bannari Amman Sugars Ltd. v. Commercial Tax Officer &

Ors.qqq, the development of doctrine of promissory estoppel was noted

(paras 5-7, pages 631-633) and it was held as under:

“5. Estoppel is a rule of equity which has gained new dimensions in recent years. A new class of estoppel has come to be recognised by the courts in this country as well as in England. The doctrine of “promissory estoppel” has assumed importance in recent years though it was dimly noticed in some of the earlier cases. The leading case on the subject is Central London Property Trust Ltd. v. High Trees House Ltd., (1947) 1 K.B. 130 The rule laid down in High Trees case again came up for consideration before the King's Bench in Combe v. Combe [(1951) 2 KB 215]. Therein the Court ruled that the principle stated in High Trees case is that, where one party has, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the party who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relationship as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualification which he himself has so introduced, even though it is not supported in point of law by any consideration, but only by his word. But that principle does not create any cause of action, which did not exist before; so that, where a promise is made which is not supported by any consideration, the promise cannot bring an action on the basis of that promise. The principle enunciated in High Trees case was also recognised by the House of Lords in Tool Metal Mfg. Co. Ltd. v. Tungsten Electric Co. Ltd. [(1955) 2 All ER 657]. That principle was adopted by this Court in Union of India v. Anglo Afghan Agencies (AIR 1968 SC 718) and Turner Morrison and Co. Ltd. v. Hungerford Investment Trust Ltd.[(1972) 1 SCC 857]. Doctrine of “promissory estoppel” has been evolved by the courts, on the principles of equity, to avoid injustice. “Promissory estoppel” is defined in Black's Law Dictionary as an estoppel.

“which arises when there is a promise which promisor should reasonably expect to induce action or forbearance

qqq (2005) 1 SCC 625

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of a definite and substantial character on part of promisee, and which does induce such action or forbearance, and such promise is binding if injustice can be avoided only by enforcement of promise”.

So far as this Court is concerned, it invoked the doctrine in Anglo Afghan Agencies case in which it was, inter alia, laid down that even though the case would not fall within the terms of Section 115 of the Indian Evidence Act, 1872 (in short “the Evidence Act”) which enacts the rule of estoppel, it would still be open to a party who had acted on a representation made by the Government to claim that the Government should be bound to carry out the promise made by it even though the promise was not recorded in the form of a formal contract as required by Article 299 of the Constitution. [See Century Spg. & Mfg. Co. Ltd. v. Ulhasnagar Municipal Council, [(1970) 1 SCC 582], Radhakrishna Agarwal v. State of Bihar, [(1977)3 SCC 457], Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., [(1979) 2 SCC 409], Union of India v. Godfrey Philips India Ltd. [(1985) 4 SCC 369] and Ashok Kumar Maheshwari (Dr.) v. State of U.P. [(1998) 2 SCC 502].

6. In the backdrop, let us travel a little distance into the past to understand the evolution of the doctrine of “promissory estoppel”. Dixon, J., an Australian jurist, in Grundt v. Great Boulder Gold Mines Pty. Ltd. [(1939) 59 CLR 641 (Aust HC) laid down as under:

“It is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumptions were deserted that led to it.”

The principle, set out above, was reiterated by Lord Denning in High Trees case. This principle has been evolved by equity to avoid injustice. It is neither in the realm of contract nor in the realm of estoppel. Its object is to interpose equity shorn of its form to mitigate the rigour of strict law, as noted in Anglo

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Afghan Agencies case and Sharma Transport v. Govt. of A.P. [(2002) 2 SCC 188]

7. No vested right as to tax-holding is acquired by a person who is granted concession. If any concession has been given it can be withdrawn at any time and no time-limit should be insisted upon before it was withdrawn. The rule of promissory estoppel can be invoked only if on the basis of representation made by the Government, the industry was established to avail benefit of exemption. In Kasinka Trading v. Union of India [(1995) 1 SCC 274] it was held that the doctrine of promissory estoppel represents a principle evolved by equity to avoid injustice.”

145. In M.P. Mathurcc , the Court was concerned with the question

whether on the facts of the case, the plaintiffs could compel transfer of

tenements in their favour on the basis of promissory estoppel. The Court

(para 14, page 716 of the Report) observed as follows :

“………The term “equity” has four different meanings, according to the context in which it is used. Usually it means “an equitable interest in property”. Sometimes, it means “a mere equity”, which is a procedural right ancillary to some right of property, for example, an equitable right to have a conveyance rectified. Thirdly, it may mean “floating equity”, a term which may be used to describe the interest of a beneficiary under a will. Fourthly, “the right to obtain an injunction or other equitable remedy”. In the present case, the plaintiffs have sought a remedy which is discretionary. They have instituted the suit under Section 34 of the 1963 Act. The discretion which the court has to exercise is a judicial discretion. That discretion has to be exercised on well-settled principles. Therefore, the court has to consider— the nature of obligation in respect of which performance is sought, circumstances under which the decision came to be made, the conduct of the parties and the effect of the court granting the decree. In such cases, the court has to look at the contract. The court has to ascertain whether there exists an element of mutuality in the contract. If there is absence of mutuality the court will not exercise discretion in favour of the plaintiffs. Even if, want of mutuality is regarded as

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discretionary and not as an absolute bar to specific performance, the court has to consider the entire conduct of the parties in relation to the subject-matter and in case of any disqualifying circumstances the court will not grant the relief prayed for (Snell's Equity, 31st Edn., p. 366)……..”

146. In my view, the following principles must guide a Court where

an issue of applicability of promissory estoppel arises:

(i) Where one party has by his words or conduct made to the other clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is, in fact, so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre-existing relationship between the parties or not.

(ii) The doctrine of promissory estoppel may be applied against the Government where the interest of justice, morality and common fairness dictate such a course. The doctrine is applicable against the State even in its governmental, public or sovereign capacity where it is necessary to prevent fraud or manifest injustice. However, the Government or even a private party under the doctrine of promissory estoppel cannot be asked to do an act prohibited in law. The nature and function which the Government discharges is not very relevant. The Government is subject to the rule of promissory estoppel and if the essential ingredients of this doctrine are satisfied, the Government can be compelled to carry out the promise made by it.

(iii) The doctrine of promissory estoppel is not limited in its application only to defence but it can also furnish a cause of action. In other words, the doctrine of promissory estoppel can by itself be the basis of action.

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(iv) For invocation of the doctrine of promissory estoppel, it is necessary for the promisee to show that by acting on promise made by the other party, he altered his position. The alteration of position by the promisee is a sine qua non for the applicability of the doctrine. However, it is not necessary for him to prove any damage, detriment or prejudice because of alteration of such promise.

(v) In no case, the doctrine of promissory estoppel can be pressed into aid to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. No promise can be enforced which is statutorily prohibited or is against public policy.

(vi) It is necessary for invocation of the doctrine of promissory estoppel that a clear, sound and positive foundation is laid in the petition. Bald assertions, averments or allegations without any supporting material are not sufficient to press into aid the doctrine of promissory estoppel.

(vii) The doctrine of promissory estoppel cannot be invoked in abstract. When it is sought to be invoked, the Court must consider all aspects including the result sought to be achieved and the public good at large. The fundamental principle of equity must forever be present to the mind of the court. Absence of it must not hold the Government or the public authority to its promise, assurance or representation.

Principles of legitimate expectation

147. As there are parallels between the doctrines of promissory

estoppel and legitimate expectation because both these doctrines are

founded on the concept of fairness and arise out of natural justice, it is

appropriate that the principles of legitimate expectation are also noticed

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here only to appreciate the case of the appellants founded on the basis

of doctrines of promissory estoppel and legitimate expectation.

148. In Union of India and Others v. Hindustan Development

Corporation and Othersrrr, this Court had an occasion to consider nature,

scope and applicability of the doctrine of legitimate expectation. The

matter related to a government contract. This Court in paragraph 35 (Pgs.

548-549) observed as follows :

“35. Legitimate expectations may come in various forms and owe their existence to different kind of circumstances and it is not possible to give an exhaustive list in the context of vast and fast expansion of the governmental activities. They shift and change so fast that the start of our list would be obsolete before we reached the middle. By and large they arise in cases of promotions which are in normal course expected, though not guaranteed by way of a statutory right, in cases of contracts, distribution of largess by the Government and in somewhat similar situations. For instance discretionary grant of licences, permits or the like, carry with it a reasonable expectation, though not a legal right to renewal or non- revocation, but to summarily disappoint that expectation may be seen as unfair without the expectant person being heard. But there again the court has to see whether it was done as a policy or in the public interest either by way of G.O., rule or by way of a legislation. If that be so, a decision denying a legitimate expectation based on such grounds does not qualify for interference unless in a given case, the decision or action taken amounts to an abuse of power. Therefore the limitation is extremely confined and if the according of natural justice does not condition the exercise of the power, the concept of legitimate expectation can have no role to play and the court must not usurp the discretion of the public authority which is empowered to take the decisions under law and the court is expected to apply an objective standard which leaves to the deciding authority the full range of choice which the legislature is presumed to have intended. Even in a case where the decision is left entirely to the discretion of the deciding authority without any such legal bounds and if the decision is taken fairly and objectively, the court will not interfere on the ground of procedural fairness to a person whose interest based on legitimate expectation might be affected. For instance if an authority who has full discretion to grant

rrr (1993) 3 SCC 499

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a licence prefers an existing licence holder to a new applicant, the decision cannot be interfered with on the ground of legitimate expectation entertained by the new applicant applying the principles of natural justice. It can therefore be seen that legitimate expectation can at the most be one of the grounds which may give rise to judicial review but the granting of relief is very much limited. It would thus appear that there are stronger reasons as to why the legitimate expectation should not be substantively protected than the reasons as to why it should be protected. In other words such a legal obligation exists whenever the case supporting the same in terms of legal principles of different sorts, is stronger than the case against it. As observed in Attorney General for New South Wales case: [(1990) 64 Aust LJR 327]: “To strike down the exercise of administrative power solely on the ground of avoiding the disappointment of the legitimate expectations of an individual would be to set the courts adrift on a featureless sea of pragmatism. Moreover, the notion of a legitimate expectation (falling short of a legal right) is too nebulous to form a basis for invalidating the exercise of a power when its exercise otherwise accords with law.” If a denial of legitimate expectation in a given case amounts to denial of right guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power or violation of principles of natural justice, the same can be questioned on the well-known grounds attracting Article 14 but a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles. It can be one of the grounds to consider but the court must lift the veil and see whether the decision is violative of these principles warranting interference. It depends very much on the facts and the recognised general principles of administrative law applicable to such facts and the concept of legitimate expectation which is the latest recruit to a long list of concepts fashioned by the courts for the review of administrative action, must be restricted to the general legal limitations applicable and binding the manner of the future exercise of administrative power in a particular case. It follows that the concept of legitimate expectation is “not the key which unlocks the treasury of natural justice and it ought not to unlock the gates which shuts the court out of review on the merits”, particularly when the element of speculation and uncertainty is inherent in that very concept. As cautioned in Attorney General for New South Wales case the courts should restrain themselves and restrict such claims duly to the legal limitations. It is a well-meant caution. Otherwise a resourceful litigant having vested interests in contracts, licences etc. can successfully indulge in getting welfare activities mandated by directive principles thwarted to further his own interests. The caution, particularly in the changing scenario, becomes all the more important.”

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While observing as above, the Court observed that legitimacy of an

expectation could be inferred only if it was founded on the sanction of law

or custom or an established procedure followed in regular and natural

sequence. Every such legitimate expectation does not by itself fructify into

a right and, therefore, it does not amount to a right in the conventional

sense.

149. A three-Judge Bench of this Court in P.T.R. Exports (Madras)

Pvt. Ltd. & Ors. v. Union of India & Ors.sss while dealing with the doctrine

of legitimate expectation in paras 3, 4 and 5 (Pages. 272-273) stated as

follows :

“3………The doctrine of legitimate expectation plays no role when the appropriate authority is empowered to take a decision by an executive policy or under law. The court leaves the authority to decide its full range of choice within the executive or legislative power. In matters of economic policy, it is a settled law that the court gives a large leeway to the executive and the legislature. Granting licences for import or export is by executive or legislative policy. Government would take diverse factors for formulating the policy for import or export of the goods granting relatively greater priorities to various items in the overall larger interest of the economy of the country. It is, therefore, by exercise of the power given to the executive or as the case may be, the legislature is at liberty to evolve such policies.

4. An applicant has no vested right to have export or import licences in terms of the policies in force at the date of his making application. For obvious reasons, granting of licences depends upon the policy prevailing on the date of the grant of the licence or permit. The authority concerned may be in a better position to have the overall picture of

sss (1996) 5 SCC 268

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diverse factors to grant permit or refuse to grant permission to import or export goods. The decision, therefore, would be taken from diverse economic perspectives which the executive is in a better informed position unless, as we have stated earlier, the refusal is mala fide or is an abuse of the power in which event it is for the applicant to plead and prove to the satisfaction of the court that the refusal was vitiated by the above factors.

5. It would, therefore, be clear that grant of licence depends upon the policy prevailing as on the date of the grant of the licence. The court, therefore, would not bind the Government with a policy which was existing on the date of application as per previous policy. A prior decision would not bind the Government for all times to come. When the Government is satisfied that change in the policy was necessary in the public interest, it would be entitled to revise the policy and lay down new policy. The court, therefore, would prefer to allow free play to the Government to evolve fiscal policy in the public interest and to act upon the same. Equally, the Government is left free to determine priorities in the matters of allocations or allotments or utilisation of its finances in the public interest. It is equally entitled, therefore, to issue or withdraw or modify the export or import policy in accordance with the scheme evolved. We, therefore, hold that the petitioners have no vested or accrued right for the issuance of permits on the MEE or NQE, nor is the Government bound by its previous policy. It would be open to the Government to evolve the new schemes and the petitioners would get their legitimate expectations accomplished in accordance with either of the two schemes subject to their satisfying the conditions required in the scheme. The High Court, therefore, was right in its conclusion that the Government is not barred by the promises or legitimate expectations from evolving new policy in the impugned notification.”

150. In the case of M.P. Oil Extraction and Another v. State of

M.P. and Ors.ttt, this Court considered an earlier decision in Hindustan

Development Corporationrrr and in paragraph 44 (pg. 612) of the Report

held that the doctrine of legitimate expectation had been judicially ttt (1997) 7 SCC 592

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recognized. It operates in the domain of public law and in an appropriate

case, constitutes a substantive and enforceable right.

151. In J.P. Bansal v. State of Rajasthan and Anr.uuu , it was stated

that both doctrines – promissory estoppel and legitimate expectation –

require satisfaction of the same criteria and arise out of the principle of

reasonableness.

152. A note of caution sounded in Bannari Amman Sugars Ltd.qqq is

worth noticing. The Court observed that legitimate expectation was

different from anticipation; granting relief on mere disappointment of

expectation would be too nebulous a ground for setting aside a public

exercise by law and it would be necessary that a ground recognized under

Article 14 of the Constitution was made out by a litigant.

153. It is not necessary to multiply the decisions of this Court .

Suffice it to observe that the following principles in relation to the doctrine

of legitimate expectation are now well established:

(i) The doctrine of legitimate expectation can be invoked as a substantive and enforceable right.

(ii) The doctrine of legitimate expectation is founded on the principle of reasonableness and fairness. The doctrine arises out of principles of natural justice and there are parallels between the doctrine of legitimate expectation and promissory estoppel.

(iii) Where the decision of an authority is founded in public interest as per executive policy or law, the court would be reluctant to interfere with such decision by invoking doctrine of legitimate expectation.

uuu (2003) 5 SCC 134

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The legitimate expectation doctrine cannot be invoked to fetter changes in administrative policy if it is in the public interest to do so.

(iv) The legitimate expectation is different from anticipation and an anticipation cannot amount to an assertible expectation. Such expectation should be justifiable, legitimate and protectable.

(v) The protection of legitimate expectation does not require the fulfillment of the expectation where an overriding public interest requires otherwise. In other words, personal benefit must give way to public interest and the doctrine of legitimate expectation would not be invoked which could block public interest for private benefit.

Whether doctrines of promissory estoppel and legitimate expectation attracted

154. I may now examine whether the doctrines of promissory

estoppel and the legitimate expectation help the appellants in obtaining the

reliefs claimed by them and whether the actions of the State Government

and the Central Government are liable to be set aside by applying these

doctrines.

155. Each of the appellants has raised the pleas of promissory

estoppel and legitimate expectation based on its own facts. It is not

necessary to narrate facts in each appeal with regard to these pleas as

stipulations in the MOUs entered into between the respective appellants

and the State Government are broadly similar. For the sake of

convenience, the broad features in the matter of Adhunik may be

considered. The MOU was made between the State Government and

Adhunik on February 26, 2004. Adhunik is involved in diversified activities

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such as production of sponge iron and steel, generating power etc. The

preamble to the MOU states that the Government of Jharkhand is desirous

of utilization of its natural resources and rapid industrialization of the State

and has been making efforts to facilitate setting up of new industries in

different locations in the State. It is stated in paragraph 2 of the MOU, “ in

this context the Government of Jharkhand is willing to extend assistance to

suitable promoters to set up new industries ” (emphasis supplied). Adhunik

expressed desire of setting up manufacturing/generating facilities in the

State of Jharkhand. Proposed Phase-I comprised of setting up Sponge

Iron Plant and Pelletaisation Plant while Phase-II comprised of Sponge

Iron Plant, Power Plant, Coal Washery, Mini Blast Furnace, Steel

Melting/LD/IF and Iron Ore Mining and Phase-III comprised of

establishment of Power Plant. Para 4 of MOU states that Adhunik requires

help and cooperation of the State Government in several areas to enable

them to construct, commission and operate the project. The State

Government’s willingness to extend all possible help and cooperation is

stated in the above MOU. Para 4.3 of MOU records that the State

Government shall assist in selecting the area for Adhunik for iron ore and

other minerals as per requirement of the company depending upon quality

and quantity. The State Government also agreed to grant mineral

concession as per existing Acts and Rules.

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156. In pursuance of the above MOU, the State Government

through its Deputy Secretary, Mining and Geology Department

recommended to the Government of India through its Joint Director,

Mining Ministry on August 4, 2004 to grant prior approval under Section

11(5) and Section 5(1) of the 1957 Act for grant of mining lease to

Adhunik for a period of 30 years in the area of 426.875 hectares. The

reasons for such recommendation were stated by the State Government in

the above communication. In the above communication, it was stated that

Adhunik had signed MOU with the State Government for making a capital

investment of Rs. 790 crores in establishment of an industry based on

iron ore mineral in the State. The steps taken by Adhunik were also

highlighted.

157. Adhunik’s case is that on the basis of definite commitment and

firm promise made by the State Government for grant of captive mines as

stipulated in the MOU and the State’s Industrial Policy, it acted

immediately on the MOU and has invested more than Rs. 100 crores to

construct and commission the plant and facilities in Phase-I of the MOU

and it has employed about 3500 people directly and indirectly for

construction and operation of plant in Phase-I. According to Adhunik, it

has ordered equipments and machinery for Phase-II and Phase-III at a

cost of Rs. 25 crores and has also made further financial commitments for

more than Rs. 1000 crore to set up the expansion. Adhunik claims to have

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also borrowed a sum of Rs. 60 crores from banks and financial institutions

and invested that sum in the proposed project.

158. According to Adhunik, no integrated steel plant can be viable

in the State of Jharkhand without captive iron ore mines and without the

definite promise of the State Government to grant the captive mines and it

would not have acted on the MOU to make such a huge investment if the

State Government were not to make available captive iron ore mines.

Adhunik has also stated that in the absence of grant of captive iron ore

mines, it has been suffering huge and irreparable losses due to (a)

shortage in supply of iron ore due to poor availability, (b) it has to purchase

from the market poor quality of iron ore and (c) extra cost due to abnormal

market prices compared to the actual cost of captive iron ore.

159. What the State Government had expressed in MOU is its

willingness to extend all possible help and cooperation in setting up the

manufacturing/generating facilities by Adhunik. The clause in MOU states

that the State Government shall assist in selecting the area for iron ore and

other minerals as per requirement of the company depending upon quality

and quantity. The State Government agreed to grant mineral concession

as per existing Act and Rules. As a matter of fact, when the MOU was

entered into, the State Government was not even aware about the

reservation of the subject mining area for exploitation in the public sector. It

was on November 17, 2004 that the District Mining Officer, Chaibasa

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informed the Secretary, Department of Mines and Geology, Government of

Jharkhand that certain portions of Mauza Ghatkuri and the adjoining areas

were reserved for public sector under 1962 and 1969 Notifications issued

by the erstwhile State of Bihar. The District Mining Officer suggested to the

State Government that approval of the Central Government should be

obtained for grant of leases to the concerned applicants. In his

communication, he stated that the fact of reservation of the subject area in

public sector vide 1962 and 1969 Notifications was brought to the

knowledge of the Director of Mines, Jharkhand but he did not take any

timely or adequate action in the matter. In view of the fact that the subject

mining area had been reserved for exploitation in pubic sector under 1962

and 1969 Notifications, in my opinion, the stipulation in the MOU that the

State Government shall assist in selecting the area for iron ore and other

minerals as per requirement of the company and the commitment to grant

mineral concession cannot be enforced. For one, the stipulation in the

MOU is not unconditional. The above commitment is dependent on

availability and as per existing law. Two, if the State Government is asked

to do what it represented to do under the MOU then that would amount to

asking the State Government to do something in breach of these two

Notifications which continue to hold the field. The doctrine of promissory

estoppel is not attracted in the present facts, particularly when promise

was made – assuming that some of the clauses in the MOU amount to

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promise – in a mistaken belief and in ignorance of the position that the

subject land was not available for iron ore mining in the private sector. I do

not think that the State Government can be compelled to carry out what it

cannot do in the existing state of affairs in view of 1962 and 1969

Notifications. In my opinion, the State Government cannot be held to be

bound by its commitments or assurances or representations made in the

MOU because by enforcement of such commitments or assurances or

representations, the object sought to be achieved by reservation of the

subject area is likely to be defeated and thereby affecting the public

interest. The overriding public interest also persuades me in not invoking

the doctrines of promissory estoppel and legitimate expectation. For the

self-same reasons none of the appellants is entitled to any relief based on

these doctrines; their case is no better.

160. As a matter of fact, on coming to know of 1962 and 1969

Notifications, the State Government withdrew the proposals which it made

to the appellants and reiterated the reservation by its Notification dated

October 27, 2006 expressly “in public interest and in the larger interest of

the State”.

161. The act of the State Government in withdrawing the

recommendations made by it to the Central Government in the above

factual and legal backdrop cannot be said to be bad in law on the

touchstone of doctrine of promissory estoppel as well as legitimate

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expectation. The act of the State Government is neither unfair nor

arbitrary nor it suffers from the principles of natural justice. The

Government of India upon examination of the proposals rejected them on

the ground that subject area was under reservation and not available for

exploitation by private parties. In these circumstances, if the clauses in the

MOU are allowed to be carried out, it would tantamount to enforcement of

promise, assurance or representation which is against law, public interest

and public policy which I am afraid cannot be permitted.

162. On behalf of the appellants, it was also argued that the 1962

and 1969 Notifications had remained in disuse for about 40 years and it is

reasonable to infer that these two Notifications no longer operated. In this

regard, the doctrine of quasi repeal by desuetude was sought to be

invoked.

Doctrine of desuetude

163. The doctrine of desuetude and its applicability in Indian

Jurisprudence have been considered by this Court on more than one

occasion. In the case of State of Maharashtra v. Narayan Shamrao

Puranik & Ors.vvv, the Court noted the decision of Scrutton, L.J. in R. v.

London County Councilwww and the view of renowned author Allen in “Law

in the Making” and observed that the rule concerning desuetude has

vvv (1982) 3 SCC 519 www LR (1931) 2 KB 215 (CA)

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always met with general disfavour. It was also held that a statute can be

abrogated only by express or implied repeal; it cannot fall into desuetude

or become inoperative through obsolescence or by lapse of time.

164. In Bharat Forge Co. Ltd.v, inter alia, the argument was raised

that the Notifications of June 17, 1918 have not been implemented till date

and therefore these Notifications were dead letter and stood repealed

“quasily”. A three-Judge Bench of this Court entered into consideration of

the doctrine of desuetude elaborately. After noticing the English law and

Scots law in regard to the doctrine of desuetude, the Court noted the

doctrine of desuetude explained in Francis Bennion’s Statutory

Interpretation; Craies Statute Law (7th Edn.) and Lord Mackay’s view in

Brown v. Magistrate of Edinburghxxx.

165. The Court also referred to “Repeal and Desuetude of

Statutes”, by Aubrey L. Diamond wherein a reference has been made to

the view of Lord Denning, M.R. in Buckoke v. Greater London Councilyyy.

Having noticed as above, the Court in paragraph 34 (pages 446-447) of

the Report stated :

“34. Though in India the doctrine of desuetude does not appear to have been used so far to hold that any statute has stood repealed because of this process, we find no objection in principle to apply this doctrine to our statutes as well. This is for the reason that a citizen should know whether, despite a statute having been in disuse for long duration and instead

xxx 1931 SLT (Scots Law Times Reports) 456, 458 yyy (1970) 2 All ER 193

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a contrary practice being in use, he is still required to act as per the “dead letter”. We would think it would advance the cause of justice to accept the application of doctrine of desuetude in our country also. Our soil is ready to accept this principle; indeed, there is need for its implantation, because persons residing in free India, who have assured fundamental rights including what has been stated in Article 21, must be protected from their being, say, prosecuted and punished for violation of a law which has become “dead letter”. A new path is, therefore, required to be laid and trodden.”

166. In Cantonment Board, MHOW and Anr. v. M.P. State Road

Transport Coroporationzzz, this Court had an occasion to consider the

doctrine of desuetude while considering the submission that the provisions

of Madhya Pradesh Motor Vehicles Taxation Act, 1947 stood repealed

having been in disuse. The Court considered the earlier decision in Bharat

Forge Co. Ltd.v and held that to apply principle of desuetude it was

necessary to establish that the statute in question had been in disuse for

long and the contrary practice of some duration has evolved. It was also

held that neither of these two facts has been satisfied in the case and

therefore the doctrine of desuetude had no application.

167. From the above, the essentials of doctrine of desuetude may

be summarized as follows :

(i) The doctrine of desuetude denotes principle of quasi repeal but this doctrine is ordinarily seen with disfavour.

zzz (1997) 9 SCC 450

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(ii) Although doctrine of desuetude has been made applicable in India on few occasions but for its applicability, two factors, namely, (i) that the statute or legislation has not been in operation for very considerable period and (ii) the contrary practice has been followed over a period of time must be clearly satisfied. Both ingredients are essential and want of anyone of them would not attract the doctrine of desuetude. In other words, a mere neglect of a statute or legislation over a period of time is not sufficient but it must be firmly established that not only the statute or legislation was completely neglected but also the practice contrary to such statute or legislation has been followed for a considerable long period.

Whether doctrine of desuetude attracted in respect of 1962 and 1969 Notifications

168. Insofar as 1962 and 1969 Notifications are concerned, I am of

the view that doctrine of desuetude is not attracted for more than one

reason. In the first place, the Notifications are of 1962 and 1969 and non-

implementation of such Notifications for 30-35 years is not that long a

period which may satisfy the first requirement of the doctrine of desuetude,

namely, that the statute or legislation has not been in operation for a very

considerable period. Moreover, State of Jharkhand came into existence on

November 15, 2000 and it can hardly be said that 1962 and 1969

Notifications remained neglected by the State Government for a very

considerable period. As a matter of fact, in 2006, the State Government

issued a Notification mentioning therein about the reservation made by

1962 and 1969 Notifications. Thus, the first ingredient necessary for

invocation of doctrine of desuetude is not satisfied. Secondly, and more

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importantly, even if it is assumed in favour of the appellants that 1962 and

1969 Notifications remained in disuse for a considerable period having not

been implemented for more than 30-35 years, the second necessary

ingredient that a practice contrary to the above Notifications has been

followed for a considerable long period and such contrary practice has

been firmly established is totally absent. As a matter of fact, except stray

grant of mining lease for a very small portion of the reserved area to one or

two parties there is nothing to suggest much less establish the contrary

usage or contrary practice that the reservation made in the two

Notifications has been given a complete go by.

Additional submissions on behalf of Monnet

169. The main submissions raised on behalf of the appellants

having been dealt with, I may now consider certain additional submissions

made on behalf of Monnet. It was argued by Mr. Ranjit Kumar, learned

senior counsel for Monnet that the State Government in its letter to recall

the recommendation made in favour of the appellant set up the ground of

overlapping with the lease of Rungta but it mala fide suppressed the fact

of expiry of lease of Rungta in 1995 and also that the said area had been

notified for regrant in the Official Gazette on July 3, 1996. He would

contend that Rule 24A of the 1960 Rules provides for an application for

renewal of lease to be made one year prior to the expiry of lease but no

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application for renewal was made by Rungta within this time and,

therefore, Rungta had no legal right over the overlapping area.

170. It was submitted by Mr. Ranjit Kumar that the appellant –

Monnet had produced two maps before the High Court and this Court (one

was prepared by the District Mining Officer in 2004) that depicted that the

area recommended for grant to the appellant was not covered by 1962 or

1969 Notifications.

171. It was submitted on behalf of Monnet that the case of Monnet

was identical to the case of M/s. Bihar Sponge Iron Ltd. and the State

Government had discriminated against the appellant vis-à-vis the case of

M/s. Bihar Sponge Iron Ltd.

172. Mr. Ranjit Kumar also submitted that there has been violation

of the statutory right of hearing in terms of Rule 26 of the 1960 Rules. He

submitted that order was not communicated to Monnet by the State

Government and thereby its remedy under Rule 54 of 1960 Rules was

taken away. The violation of principles of natural justice goes to the root of

the matter and on that ground alone the decision of the State Government

to recall the recommendation and the decision of the Central Government

in summarily rejecting and returning application are bad in law. Reliance in

this regard was placed on a decision of Privy Council in Nazir Ahmad v.

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King-Emperoraaaa and also a decision of this Court in Nagarjuna

Construction Company Ltd. v. Government of Andhra Pradesh & Ors.bbbb.

173. Mr. Ranjit Kumar also argued that once recommendation was

made by it to the Central Government, in view of proviso to Rule 63A of

the 1960 Rules, the State Government had become functus officio and

ceased to have any power to recall the recommendation already made on

any ground whatsoever. In this regard he relied upon Jayalakshmi Coelho

v. Oswald Joseph Coelhocccc.

174. Relying upon the decision of this Court in Mohinder Singh Gill

and Anr. v. The Chief Election Commissioner, New Delhi, & Ors.,dddd it

was submitted that the reasons originally given in an administrative order

cannot be supplanted by other reasons in the affidavits or pleadings before

the Court. He submitted that as regards Monnet, the initial reason by the

State Government was not founded on reservation but later on it tried to

bring the ground of reservation in fore by supplanting reasons.

175. Mr. Ranjit Kumar vehemently contended that as per the State

Government’s own case initially, the land that was recommended for

mining lease to Monnet was not under the reserved area and, therefore,

Monnet’s writ petition ought not to have been heard and decided with the

group matters. He also referred to interim order passed by this Court on aaaa AIR 1936 PC 253 bbbb (2008) 16 SCC 276 cccc (2001) 4 SCC 181 dddd (1978) 1 SCC 405

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August 18, 2008, the meeting that took place between the Central

Government and the State Government pursuant thereto and the

subsequent interim order of this Court dated December 15, 2008.

176. I have carefully considered the submissions of Mr. Ranjit

Kumar. Most of the above submissions were not argued on behalf of

Monnet before the High Court. The submissions were confined to the issue

of reservation, the legality and validity of 1962, 1969 and 2006

Notifications, consequent illegal action of the State Government in recalling

the recommendation and of the Central Government in summarily rejecting

the appellant’s application.

177. In paragraph 17 of the impugned judgment, the arguments of

the learned senior counsel for Monnet have been noticed. It transpires

therefrom that many of the above arguments were not advanced

including the issue of overlapping with the area of Rungta. In the list of

dates/synopsis of the special leave petition, Monnet has not raised any

grievance that arguments made on its behalf before the High Court were

not correctly recorded or the High Court failed to consider any or some of

its arguments. Criticism of the High Court judgment is thus not justified

and I am not inclined to go into above submissions of Mr. Ranjit Kumar for

the first time.

178. It is too late in the day for Monnet to contend that its case

could not have been decided with group matters and in any case the

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matter should be remanded to the High Court for reconsideration on the

issues, namely, (a) whether the area recommended for the appellant was

overlapping with Rungta only to the extent of 102.25 hectares out of total

705 hectares recommended for appellant; (b) whether after expiry of lease

Rungta’s area was renotified for grant in 1996; (c) what was the reason for

the State Government to withdraw the recommendation made in favour of

the appellant when the alleged overlapping with Rungta was only to the

extent of 102.25 hectares and (d) is withdrawal of appellant’s

recommendation arbitrary when reservation vide 1962 Notification did

not apply to the area recommended in favour of the appellants. Monnet’s

writ petition was decided by the High Court with group matters as the

arguments advanced on its behalf were identical to the arguments which

were canvassed on behalf of other writ petitioners. The State Government

recalled its recommendations by a common communication and the

Central Government returned the recommendations and rejected

applications for mining lease made by the writ petitioners by a common

order.

179. The State Government had full power to recall the

recommendation made to the Central Government for some good reason.

Once 1962 and 1969 Notifications issued by the erstwhile State of Bihar

and 2006 Notification issued by the State of Jharkhand have been found

by me to be valid and legal, the submissions of Mr. Ranjit Kumar noted

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above pale in insignificance and are not enough to invalidate the action of

the State Government in recalling the recommendation made in favour of

Monnet. The valid reservation of subject mining area for exploitation in

public sector disentitles Monnet - as well as other appellants - to any

relief.

180. It is well settled that no one has legal or vested right to the

grant or renewal of a mining lease. Monnet cannot claim a legal or vested

right for grant of the mining lease. It is true that by the MOU entered into

between the State Government and Monnet certain commitments were

made by the State Government but firstly, such MOU is not a contract as

contemplated under Article 299(1) of the Constitution of India and

secondly, in grant of mining lease of a property of the State, the State

Government has a discretion to grant or refuse to grant any mining lease.

Obviously, the State Government is required to exercise its discretion,

subject to the requirement of law. In view of the fact that area is reserved

for exploitation of mineral in public sector, it cannot be said that the

discretion exercised by the State Government suffers from any legal flaw.

181. The case of discrimination vis-a-vis M/s Bihar Sponge Iron

Limited argued on behalf of Monnet was not pressed before High Court

and is not at all established. The argument with regard to violation of

principles of natural justice is also devoid of any substance. The

recommendation in favour of Monnet to the Central Government was

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simply a proposal with certain pre-conditions. For withdrawal of such

proposal by the State Government, in my view, no notice was legally

required to be given. Moreover, no prejudice has been caused to it by not

giving any notice before recalling the recommendation as it had no legal or

vested right to the grant of mining lease. The area is not available for

grant of mining lease in the private sector. For all these reasons, I do not

find that the case of Monnet stands differently from the other appellants.

Conclusion

182. In view of the foregoing reasons, there is no merit in these

appeals and they are dismissed. There shall be no order as to costs.

…………………….J. (R. M.Lodha)

July 26, 2012 New Delhi.

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IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

CONTEMPT PETITION © NO. 14 OF 2009 IN

CIVIL APPEAL NO. 3287 OF 2009

Abhijeet Infrastructure Ltd. …… Petitioner

Vs.

Chief Secretary, State of Jharkhand …… Respondent

ORDER

I find from the proceedings that no notice has been issued in the

contempt petition. The proceeding of January 28, 2009 reveals that the Court

only ordered copy of the contempt petition to be supplied to learned counsel

appearing for the State of Jharkhand to enable it to file its response. In the

order passed on January 28, 2009, the Court made it very clear that it was

not inclined to issue any notice in the contempt petition. Now, since the

appeal preferred by Abhijeet Infrastructure Ltd., has been dismissed, the

contempt petition is also liable to be dismissed and is dismissed.

…………………….J. (R. M.Lodha)

New Delhi July 26, 2012

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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

Civil Appeal No. 3285 OF 2009

Monnet Ispat & Energy Ltd. ... Appellant Versus

Union of India and Ors. ... Respondents with

Civil Appeal No. 3286 OF 2009

Adhunik Alloy and Power Ltd. ... Appellant Versus

Union of India and Ors. ... Respondents with

Civil Appeal No. 3287 OF 2009

Abhijeet Infrastructure Pvt. Ltd. ... Appellant

Versus

Chief Secretary, State of Jharkhand and Ors. ... Respondents

with

Civil Appeal No. 3288 OF 2009

Ispat Industries Ltd. ... Appellant Versus

Union of India and Ors. ... Respondents

with

Civil Appeal No. 3289 OF 2009

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Jharkhand Ispat Pvt. Ltd. ... Appellant

Versus

Union of India and Ors. ... Respondents with

Civil Appeal No. 3290 OF 2009

Prakash Ispat Ltd. ... Appellant Versus

Union of India and Ors. ... Respondents

and

Contempt Petition (C) No.14 OF 2009

Civil Appeal No.3287 OF 2009

J U D G E M E N T

H.L. Gokhale J.

All these appellants claim to be companies interested in

developing iron and steel projects, and therefore sought grant of

leases of iron-ore mines situated in the state of Jharkhand. Applications

of ten such companies including the appellants were forwarded by the

Government of Jharkhand sometime around August 2004 to the Union

of India, for its consideration for grant of lease in certain areas.

Subsequently, on realising that those areas were reserved for

exploitation in the public sector, the State Government by its letter

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dated 13.09.2005, sought to withdraw nine of these proposals

including those of all the appellants. The Central Government

however, did not merely return the nine proposals, but rejected the

same by its letter dated 6.3.2006 addressed to the Government of

Jharkhand. All these appellants therefore, along with some others filed

writ petitions to challenge these two letters dated 13.9.2005 and

6.3.2006, and sought a direction to grant the mining leases to them in

the proposed areas, and to seek appropriate reliefs. The Writ Petitions

filed by the six appellants herein were respectively bearing following

nos. (1) W.P. (C) No. 4151 of 2006, (2) W.P. (C) No. 1769 of 2006, (3)

W.P. (C) No. 2629 of 2006, (4) W.P. (C) No. 5527 of 2006, (5) W.P. (C)

No. 7636 of 2006 and (6) W.P. (C) No. 7363 of 2006. All those writ

petitions were dismissed by a Division Bench of the Jharkhand High

Court by a common judgment and order dated 4.4.2007. Being

aggrieved by the same, six of them have filed these appeals to this

Court.

2. An interim order came to be passed in these appeals on

7.5.2007, that until further orders no fresh leases shall be granted in

respect of the disputed mining area. We may note that at one stage

same workable arrangements were considered by this Court but they

did not materialise. These appeals have been admitted thereafter on

30.4.2009. The Union of India and the State of Jharkhand are the main

contestants in all these appeals, though a few other entities like the

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National Mineral Development Corporation (NMDC), Tata Iron Steel

Company (TISCO) and Arclor Mittal (India) Ltd. have intervened to

oppose them. Learned Senior Counsels Sarvashri C.A. Sunderam, Dr.

Rajeev Dhawan, Ranjit Kumar, Dhruv Mehta, Dr. Abhishek Manu

Singhvi, L. Nageswara Rao, and G.C. Bharuka have appeared in

support of these appeals. Senior Counsels Shri Dilip Sinha, and Shri

Ashok Bhan have appeared for the State of Jharkhand, and Union of

India respectively. Shri P.S. Narasimha, Senior counsel for NMDC, Shri

Vikas Singh, Senior Counsel for TISCO, Shri Krishnan Venugopal, Senior

counsel for Arclor Mittal (India) Ltd. and Shri J.K. Das, learned counsel

for M/s Rungta Sons Pvt. Ltd., have appeared to oppose these appeals.

Facts leading to these appeals:-

3. The facts in all these appeals are by and large similar. We

may refer to the facts of the first Civil Appeal in the case of M/s Monnet

Ispat and Energy Ltd. (for short ‘Monnet’) as somewhat representative.

It is the case of Monnet that it wanted to set-up an iron and steel plant

in the State of Jharkhand. It was ready to invest an amount of Rs.1400

crores on this project, and for that purpose it was interested in the

allotment of iron and manganese ore mines situated in the Ghatkhuri

Forest area of West Singhbhum District (which has its headquarters at

Chaibasa). A high level meeting was held in Ranchi for that purpose on

7.7.2002 between the officers of Monnet and Jharkhand Government,

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subsequent to which, minutes of the meeting were drawn recording

the discussion between the two parties. Thereafter, a memorandum of

understanding (MOU) was arrived at between the Government of

Jharkhand and Monnet on 5.2.2003, for the establishment of an

integrated steel plant. The MOU reaffirmed the commitment of Monnet

to establish the integrated steel plant, and that of the Government of

Jharkhand to provide therefor the land containing iron and manganese

ore mines, a coal block and other facilities. The MOU recorded that the

plant will produce sponge iron of the capacity of 4 lac tonnes per

annum, and mild steel of 2 lac tonnes and alloy steel of 2 lac tonnes. It

was expected to provide employment to 10,000 persons. The MOU

recorded that the State Government agrees to recommend the

proposal of Monnet to Government of India, for the allotment of areas

containing iron ore and manganese ore deposits and coal blocks

situated in Ghatkhuri Forest area of West Singhbhum District. This

clause reads as follows:-

III. MINES: COAL:……..

IRON ORE AND MANGANESE ORE: The State Government agrees to recommend to Government of India for the allotment of iron ore and manganese ore deposits expected to contain sufficient reserves to cater the needs of the project. The iron ore reserves suitable for sponge iron making as identified are Ghatkhuri area in Chaibasa District. The State Government also agrees to recommend to Government of India for allotment of additional mines able deposits in West Singhbhum area to cater the project need.”

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We may as well note that paragraph VII (d) of the MOU stated as

follows:-

In the event of non-implementation of the project, support/commitment of the State Government in the MOU shall be deemed to be withdrawn.

4. Accordingly, the Jharkhand Government vide its letter

dated 6.8.2004 recommended the proposal of Monnet to Union of India

under Section 5 (1) and 11 (5) of the Mines and Minerals (Development

and Regulation) Act, 1957 (hereinafter referred to “MMDR Act”). The

letter stated that some 58 applications were received, seeking grant of

the mining leases over an area of 3566.54 hectares in Ghatkhuri

reserved forest. All applicants were given sufficient opportunity of

hearing. As far as Monnet is concerned, State Government had

recommended the amended area of 705 hectares for the consent of

the Central Government for grant of lease under Section 5 (1) of the

Act. The letter also stated that priority was being given to Monnet in

terms of Section 11 (3) of the Act on the basis of its technical mineral

based industry and financial capacity.

5. On receiving that application and after considering that the

mining lease was to be granted for a period of 30 years, the Central

Government asked the State Government, vide its letter dated

6.9.2004, to forward its justification in support of the proposal, since in

its view an adequate justification, in the interest of mineral

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development, had not been sent. The State Government explained its

position, vide its reply dated 17.11.2004, as to why priority was given

to Monnet, and sought the approval of Government of India under

Sections 5 (1) and 11 (5) of MMDR Act. It enclosed therewith a

comparative statement of the claims of 58 applicants who had applied

for grant of mining leases of iron ore on 3566.54 hectares area in the

reserved forest at Mauza Ghatkhuri in West Singhbhum District.

6. It so happened that at that stage the District Mining Officer

of Chaibasa brought it to the notice of the concerned authorities of

State Government, by his letter dated 17.11.2004, that the undivided

state of Bihar (when Jharkhand was a part of it) had reserved certain

areas for the exploitation of minerals in the public sector, by its

notification dated 21.12.1962, and it included the recommended area

of Singhbhum District. This notification had been followed by another

notification of the undivided State of Bihar dated 28.2.1969 which

reiterated that an area of 168.349 hectares in Ghatkhuri reserved

forest block no.10 in district of Singhbhum was reserved for

exploitation of minerals in public sector. A copy of the said notification

had been marked to the District Mining Officer, Chhaibasa.

7. The two notifications read as follows:-

(1) Government of Bihar Department of Industries & Mines (Mines)

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NOTIFICATION: Patna, the 21 December, 1962

30th Agrahand, 1884-S

Memo No. A/MM-40510/6209/M. It is hereby notified for the information of public that the following iron ore bearing areas in this State are reserved for exploitation of the mineral in the public sector. Name of the District

Description of the areas reserved

Singhbhum 1. Sasangda Main Block:- Boundary South The southern boundary is the same as the

northern boundary. It starts from the Bihar, Orissa Bound Opposite the George of southern tributary of Meghahatu nala and runs west-north-west along with the gorge till the foot of the hill.

East The boundary between the States of Bihar and Orissa.

North and North- West

The south western boundary of the property of Shri M.L. Jain (M.L. 20) which starts from Bihar-Orissa boundary south. South-West of 3039 and runs in a north- west direction upto 8 miles north west of 2939. From here the boundary reaches the sadly south of 2069.

West From saddle south of 2069, southwards along the foot of the main hill, meeting the north-west corner of Kiriburu Block.

Sasangda North- East Block South East North West

Bihar, Orissa boundary Property of Shri W.V. Upto northern corner of M.L. No. 20

6. Bhalata Block Boundary South- West

A line running west-north-west-east-south each passing the ugh 2200 feet contour at the south-western and of the Bhanalata ridge south-east-From 21 furlongs east of 2181 north-east wards upto north-west pochanalu village (22016’850 20’) and from here north-north-east upto 3 furlongs

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east-sough-east of 2567 (Painsira Buru) North From the above end in west north west

direction across the hill for five furlongs to reach the north west sloped the hill

West From above and in general south-south- west direction along the flank of the hill to reach the south-west boundary at three furlongs north-west 2187.

By the order of the Governor of Bihar

Sd/- B.N. Sinha

Secretary to Government

Memo No. 6209/M Patna, the 21st Dec., 1962

30 Agrah

Copy forwarded to the Superintendent, Secretariat Press, Gulzarbagh, Patna for publication of the notification in the next issue of the Bihar Gazette.

2. He is also requested to kindly supply two hundred copies of the Gazette notification to this Department.

Sd/- B.N. Sinha

Secretary to Government

Memo No. 6209/M Patna, the 21st Dec., 1962

30 Agrahan, 1884-S

Copy forwarded to the Commissioner of Chhotanagpur Division, Ranchi/All District Officers/All District Mining Officers for information.

Sd/- B.N. Sinha

Secretary to Government

(2) GOVERNMENT OF BIHAR

DEPARTMENT OF MINES AND GEOLOGY NOTIFICATION

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Patna, the 28th February, 1969 Phalgun, 1890-S

No. B/M6-1019/68-1564/M. It is hereby notified for information of public that Iron Ore bearing areas of 416 acres (168.348 hectares) situated in Ghatkuri Reserved Forest Block No. 10 in the district of Singhbhum are reserved for exploitation of mineral in the public sector. For full details in this regard District Mining Officer, Chaibasa should be contacted.

By the order of Governor of Bihar Sd/-

C.P. Singh Dy. Secretary to Government

Memo No. 1564/M Patna, the 28th February, 1969.

Copy forwarded to the Superintendent, Secretariat Press, Gulzarbagh, for favour of public of the Notification in the Extra-ordinary issue of the Bihar Gazette at any early date.

2. 100 spare copies of the notification may also be sent to this Department immediately.

Sd/- Dy. Secretary to Government

Memo No. 1564/M Patna, the 28th February, 1969

Copy forwarded to the Dy. Commissioner, Singhbhum/Dy. Director of Mines, 2, College Road, Circuit House Area, Jamshedpur 7/ District Mining Officer, Singhbhum, Chaibasa/Director, Mines, Bihar/Dy. Director of Geology, Bihar/Advisor in Geology, Bihar for information.

Sd/- C.P. Singh

Dy. Secretary to Government

8. Thereafter, in continuation with the correspondence with

the State Government, the Central Ministry of Mines by its letter dated

15.6.2005, wrote to the Secretary to the State Government,

Department of Mines, seeking a meeting of the concerned officers of

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the State Government and the Ministry of Mines of the Central

Government for the clarification on the following issues:-

(i) The State Government had rejected even those applicants who were prior applicants but were not willing to set up the mineral based industry in the State. This stipulated condition of State Government is not as per the National Mineral Policy.

(ii) As against the applicants at Sl. Nos.18, 20, 23, 29, 33, 41, 44 and 58, the State Government had stated that they had not submitted any solid proposals. The Central Government wanted to know what the State Government meant by ‘solid proposals’.

(iii) There was wide variation between the area recommended and the proposed plant capacity.

(iv) The total area of the ten proposals came to 3693.05 hectares whereas the total area reported to be available in Ghatkhuri was 3566.54 hectares. It was also stated that in the case of the proposal of M/s Bihar Sponge Iron Ltd., the total area in Ghatkhuri reserve forest was shown as 4692.46 hectares.

9. It was in this background that the Government of

Jharkhand called back nine out of the ten proposals (excluding the one

in favour of Bihar Sponge Iron Ltd.), by its letter dated 13.9.2005. The

letter specifically stated that the proposals overlapped the areas

reserved for the public undertakings and the areas already held by two

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other companies. This was one of the two letters impugned in the writ

petitions to the High Court. This letter reads as follows:-

“Government of Jharkhand Mines and geological department No.Khni (Chaya)-78/03 (Part)-501/M-C Ranchi

Dated 13.09.2005

From: Arun Kumar Singh Secretary to the Government

To,

Sh. Anil Subramaniam Under Secretary Ministry of Mines Government of India Shastri Bhawan, New Delhi – 110 001.

Sub: In connection with return of recommendations sent for mining lease of Iron ore in the reserved Forest Land in Mauza Ghat Khuri, under the West Singhbhum District.

Sir,

Kindly refer to your letter No.5/40/2004/MIV dated 30.08.2005 on the above mentioned subject. Proposal was sent by the mines and mineral department Jharkhand, for sanction of mining lease to 10 companies for mining of iron ore and Manganese Mineral, in the reserved Forest Land in Mauza Ghat Kuri (West Singhbhu District), in the light of Section 5(1) and 11(5) of the Mines and Mineral (Regulation and Development) Act, 1957.

Sl. No. Name of the company 1. S/Shri Bihar Sponge Iron Ltd. 2. S/Shri Ispat Industriest Ltd. 3. S/Shri Vimal Deep Steel Pvt. Ltd. 4. S/Shri Abhijeet Infrastructure Pvt. Ltd. 5. S/Shri Ujjwal Minerals Pvt. Ltd. 6. S/Shri Adhunik Alloy and Power Ltd. 7. S/Shri Prakash Ispat Ltd.

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8. S/Shri Monnet Ispat Ltd. 9. S/Shri Steeko Power Ltd. 10. S/Shri Jharkhand Ispat Pvt. Ltd.

On analysis in the department, it has become clear that out of the 10 proposals above said sent in the past, leaving apart Bihar Sponge and Iron Ltd. at Sl. No.1, the rest of the nine proposals over-lap the public undertaking/ S/Shri General Produce Company Madhu Bazar Chhaibasa and S/Shri Rungta Sons Ltd. Chhaibasa.

After complete consideration, the Government has taken this decision that out of the ten proposals sent in the past, leaving apart the proposal of S/Shri Bihar Sponge Iron Ltd., in connection with the rest of the nine proposals, for consideration as per law, they may be called back from the ministry of mines Government of India.

In the light of the above said it is requested that kindly return the above said mines proposals to the mines and minerals department Jharkhand Ranchi, so that by reconsidering on them, further action could be taken at the level of the State Government.

Yours faithfully Sd/-

(Arun Kumar Singh)

Secretary to the Government”

10. The Government of India, however, did not merely return

those nine proposals, but summarily rejected the same on the very

grounds stated in the letter of Government of Jharkhand. It sent a

letter accordingly to the Government of Jharkhand on 6.3.2006. This is

the other letter which was under challenge in the writ petitions to the

High Court. The letter reads as follows:-

“REGISTERED

GOVERNMENT OF INDIA

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MINISTRY OF MINES

No. 5/55/2004-M.IV New Delhi, the 6th March, 2006 To

The Secretary to the Government of Jharkhand, Deptt. of Mines and Geology Ranchi (Jharkhand)

Sub: Request made by State Government to return various proposals for grant of mining lease for iron and manganese ore in Mauza Bokna, District West Singhbhum, Jharkhad.

Sir, I am directed to refer to the request made by the State

Government vide its letter no. 501/M dated 13.9.2005 on the subject mentioned above and to summarily reject and return (in original) the following nine proposals which had been earlier sent to this Ministry for grant of prior approval under section 5(1) of the Mines and Minerals (Development and Regulation) Act, 1957 on the ground that the recommended areas in said the nine proposals either fall in areas or overlap areas which are either reserved for exploitation by Public Sector Undertaking (PSU) or held by the other applicants namely M/s Rungta Sons Pvt. Ltd. and M/s General Produce Company:-

S.No Name of applicant Company

State Government Ref/ date

Area (in hects.) in Mauja Ghatkuri Dist. West Singhbhum

Details of overlappin g areas

1. M/s Ispat Industries Ltd.

i) Kh. Ni. (Pa. Singhbhum)-78/03- 115/D.S.M./M dated 5.8.2004 ii) 1516/M dt. 24.11.2004

470.06 Held by M/s General Produce Company

2. M/s Bimal Deep Steel Pvt. Ltd.

i) Kh. Ni. (Pa. Singhbhum)-78/03- 131/D.S.M./M dated 4.8.2005 ii) 519/M dated 24.11.2004

112.072 Reserved for PSU

3. M/s Abhijeet Infrastructure Pvt. Ltd.

i) Kh. Ni. (Pa. Singhbhum)-78/03- 117/D.S.M./M dated 4.8.2004 ii) 519/M dated 24.11.2004

429.00 Reserved for PSU

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4. M/s Ujjawal Mineral Pvt. Ltd.

i) Kh. Ni. (Pa. Singhbhum)-78/03- 114/D.S.M./M dated 4.8.2004 ii) 1520/M dated 24.11.2004

103.00 Reserved for PSU

5. M/s Adunik Alloya & Power Ltd.

i) Kh. Ni. (Pa. Singhbhum)-78/03- 111/D.S.M./M dated 4.8.2004 ii) 1518/M dated 24.11.2004

426.875 Reserved for PSU

6. M/s Prakash Ispat Lgtd.

i) Kh. Ni. (Pa. Singhbhum)-78/03- 110/D.S.M./M dated 4.8.2005 ii) 1515/M dated 24.11.2004

294.06 Reserved for PSU

7. M/s Monnet Ispat

i) Kh. Ni. (Pa. Singhbhum)-78/03- 118/D.S.M./M dated 6.8.2005 ii) 1497/M dated 17.11.2004

705.00 Held by M/s Rungta Sons Pvt. Ltd.

8. M/s Steco Power Ltd.

i) Kh. Ni. (Pa. Singhbhum)-78/03- 101/03-134/M dated 16.10.2004 ii) 1515/M dated 22.1.2005

400.00 Held by M/s Rungta Sons Pvt. Ltd.

9. M/s Jharkhand Ispat Pvt. Ltd.

i) Kh. Ni. (Pa. Singhbhum)-78/03- 12/D.S./M dated 4.8.2004

346.647 Held by M/s General Produce company

Yours faithfully Sd/-

(Anil Subramaniam) Under Secretary to the Government

of India”

11. In these appeals we are basically concerned with the

legality of the decision of the State Government seeking to withdraw

its recommendations for mining leases, and the subsequent decision of

the Central Government to reject those very recommendations. We

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may record that the Government of Jharkhand had issued one more

notification subsequently, dated 27.10.2006, by which it was decided

that the areas described in the 1962 and 1969 notifications will not be

given to anyone, except to the public sector undertakings or joint

venture projects of the State. The appellants amended their Writ

Petitions in the High Court and challenged the subsequent notification

also. This notification reads as follows:-

THE JHARKHAND GAZETTE

EXTRA ORDINARY PUBLISHED BY AUTHORITY

No. 581 8 Kartik 1928 (S) Ranchi, Monday the 30th October, 2006

DEPARTMENT OF MINES & GEOLOGY, RANCHI NOTIFICATION

The 27th October, 2006

No. 3277 It is hereby notified for the information of the general public that for optimum utilization and exploitation of the mineral resources in the State and for establishment of mineral based industry with value addition thereon, it has been decided by the State Government that the iron ore deposits at Ghatkuri would not be thrown open for grant of prospecting licence, mining lease or otherwise for the private parties. The deposit was at all material times kept reserved vide gazette notification No. A/MM-40510/62-6209/M dated the 21st

December, 1962 and no. B/M-6-1019/68-1564/M dated the 28th

February, 1969 of the State of Bihar. The mineral reserved in the said area has now been decided to be utilized for exploitation by Public Sector undertaking or Joint Venture Project of the State Government which will usher-in maximum benefit to the State and which generate substantial amount of employment in the State.

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The aforesaid notification is being issued in public interest and in the larger interest of the State.

The defining co-ordinates of the reserved area enclosed here with for reference.

By order of the Governor. S.K. Satapathy.

Secretary to Government

Submissions on behalf of the appellants:-

12. (i) There is not much difference between the facts of the

other appellants and Monnet, except that as far as the appellant in

Civil Appeal No.3286/2009 i.e. Adhunik Alloy and Power Ltd. (‘Adhunik’

for short) is concerned, it contends that based on the forwarding of its

proposal by the State Government to the Central Government, it had

made some substantial investment. It had already invested some 82

crores of rupees out of its proposed investment of Rs.790 crores, and

therefore it had a better case on the basis of promissory estoppel.

Additional material is placed on the record of its Civil Appeal in

justification the investment made by the appellant.

(ii) Since the facts of all these appeals are by and large similar,

though various submissions have been raised on behalf of the

appellants, they are also by and large similar, and complimentary to

each other. The learned senior counsels appearing for the respective

parties have, however, emphasised various facets of facts and law with

good research put in.

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13. (i) Shri C.A. Sunderam, learned senior counsel appearing for

Ispat Industries Ltd. (‘Ispat’ for short) firstly submitted that after the

MMDR Act was passed in exercise of the power of the Union

Government under List I Entry 54 of the Seventh Schedule of the

Constitution of India, the State Government had no longer any power

to issue the notifications making any reservations in favour of public

sector undertakings and the notifications of the 1962 and 1969 were

bad in law. These notifications which were defended as being issued

under Section 4(a) of the Bihar Land Reforms Act, 1950, could not be

valid after the passing of the MMDR Act. This is because Entry No. 23

List II (State List) of the Seventh Schedule giving power to the State

Government specifically stated that it was subject to the provisions of

the entries in List I (Union List) in this behalf. Entry No. 54 of List I

states that Regulation of Mines and Mineral development is within the

power of the Union Government, to the extent a declaration is made by

Parliament in that behalf in public interest, and such a declaration has

been made and is to be found in Section 2 of the MMDR Act. This

being the position, the provisions of Bihar Land Reforms Act 1950 (Act

No. XXX of 1950) (Bihar Act, for short) cannot be pressed into service

by the respondents.

(ii) Shri Sundaram contended that the field was already occupied by

the MMDR Act when these notifications were issued, since the

Parliament had already legislated on the field. Section 17 and 17A of

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the MMDR Act give special power to the Central Government to

undertake the mining operations and effect reservations. Section 18 of

the Act casts a duty on the Central Government to take steps for the

conservation and systematic development of minerals and for the

protection of environment by preventing or controlling any pollution

which may be caused by the prospecting or mining operations. These

powers were not with the State Government. The reservations in the

notifications of 1962 and 1969 will therefore have to be held as outside

the powers of the State Government

(iii) This will be the position even when read with Rule 59 (1) (e) of

the Mineral Concession Rules, 1960 (M.C. Rules 1960 in short) which

speaks about reservation of areas by the State Government and re-

grant thereof. Even the subsequent notification of 27.10.2006,

providing for a joint venture is contrary to 17A of MMDR Act, and

therefore bad in law.

(iv) Shri Sundaram submitted that the High Court’s view that the

State Government had the inherent power over the mining areas was

equally erroneous.

14. (i) Learned senior counsel Dr. Rajeev Dhawan appearing for

the appellant in C.A. No. 3289/2009 i.e. Jharkhand Ispat Pvt. Ltd.

(‘Jharkhand Ispat’ for short) mainly canvassed two submissions. Firstly,

in view of the federal structure of Indian Constitution, and the

provisions of MMDR Act, any mining can be done only under the MMDR

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Act with Central permission, though mining is included is in the State

List. In this behalf, Dr. Dhawan took us through the Constitution Bench

judgments of this Court in Hingir-Rampur Coal Co. Ltd. & Ors. Vs.

State of Orissa & Ors. reported in AIR 1961 SC 459, State of

Orissa & Anr. Vs. M/s M.A. Tulloch & Co. reported in AIR 1964 SC

1284 and Baijnath Kadio Vs. State of Bihar and Others reported

in 1969 (3) SCC 838, and submitted that the subsequent judgment of

this Court in Amritlal Nathubhai Shah Vs. Union of India reported

in 1976 (4) SCC 108 which has been relied upon by the State of

Jharkhand and accepted by the High Court to repel the challenge, did

not consider these three judgments and the true import of the

propositions laid down therein.

(ii) Secondly, the Learned Counsel submitted that the State

Government’s decision was ultra-vires to Section 17A (2) of the MMDR

Act. He relied upon Para 6 of the judgment of this Court in Janak Lal

Vs. State of Maharashtra reported in 1989 (4) SCC 121 to draw

the distinction between un-amended Rule 59 and new Rule 59. In his

view, the 2006 notification was also invalid since it was only a revival

of 1962 and 1969 notifications.

(iii) It was then submitted that the appellant has also set up a factory

and reliance was placed on the doctrine of promissory estoppel and

legitimate expectations. It was also contended that the two

notifications were not acted upon and suffered from Desuetude.

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Lastly, it was submitted that the State Government cannot act

unreasonably in view of the provision of Article 19 (1) (g) of the

Constitution.

15. Learned Senior Counsel Shri Ranjit Kumar, appearing for

Monnet raised the following additional submissions.

(i) The State Government did not have the power to issue the two notifications in 1962 and 1969 under the rules as they then existed, particularly the notification of 1962, since the Rule 58 of the concerned rules as then existing did not give any such power to the State Government.

(ii) Rule 58 has been deleted without any saving clause by the amendment Act No. 36 of 1986.

(iii) The two notifications of 1962 and 1969 providing for reservation in favour of the public sector undertakings suffered on account of ‘Desuetude’, since they were never acted upon.

(iv) In view of the proviso Rule 63A, once a recommendation is made, the State Government becomes functus officio, and it has no power to recall the recommendation.

(v) The right of hearing of Monnet was affected in as much as the decision of the State Government to reject its application was taken behind its back. It was not provided with any opportunity of being heard under Rule 26, of the M.C. Rules 1960 before refusing to grant the mining lease. Besides, their remedy to file a revision to the Central Government under Rule 54 thereof was affected.

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(vi) The appellants disputed the fact that at the time of rejection of their applications, M/s Rungta Sons were having any subsisting allotment in their favour. It was submitted that the grant in favour of M/s Rungta Sons had already expired, and in fact they had applied for renewal in 2006. The area recommended to Monnet was not under any previous reservation of any public sector undertaking or otherwise.

(vii) There was unjustified discrimination in favour of Bihar Sponge Iron Ltd. since their case was supposed to be similar to that of Monnet.

(viii) The decision of the State Government was hit by the doctrine of promissory estoppel, since in the meanwhile Monnet had deposited Rs.50 lacs with the State Government for allotment of land, and it was taking further steps expecting the allotment.

(ix) The provisions of the MMDR Act and the MC Rules will have to be read to mean that the regulatory regime has been taken over by the Central Government, and the State Government will have to be held as without any power to impose reservations.

16. Learned senior counsel Shri Dhruv Mehta, appearing for

Prakash Ispat Ltd. in C.A. No.3290/2009 submitted that as stated in

Section 14 of MMDR Act, Sections 5 to 13 of the act do not apply to

minor minerals, and the State Govt’s. power is only to regulate the

minor minerals under Section 15 of the Act. In this behalf he referred

to the judgment of this Court in D.K. Trivedi and Sons Vs. State of

Gujarat reported in 1986 Supp (1) SCC 20. He submitted that the

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rule making power with respect to major minerals was only with the

Central Government. The State Government had no power until Rule

59 was amended in 1980 to provide reservation for public sector

concerning the major minerals. He further submitted that rule making

power cannot be exercised retrospectively and relied upon Hukam

Chand Vs. Union of India reported in 1972 (2) SCC 601. He

contended that in view of the provision in Rule 59 of the MC Rules

1960, an area which has been reserved can be made available for re-

grant to private sector, and in support of this proposition he referred to

the judgment of this Court in Indian Metals and Ferro Alloys Ltd.

VS. Union of India reported in 1992 Supp (1) SCC 91.

17. Learned senior counsel Shri Abhishek Manu Singhvi and L.

Nageswara Rao, appearing for Adhunik submitted that the High Court

had committed an error in relying upon the above referred amended

Rule 59. The 1962 notification was issued when prospecting and

mining was not within the jurisdiction of the State Government The

judgment of this Court in Air India Vs. Union of India reported in

1995 (4) SCC 734 (para 4 to 8) was relied upon to submit that

subordinate legislation can survive the repeal of a statute only when it

is saved. It was further submitted that the impugned notifications

were issued without prior approval of the Central Government and

were therefore bad in law.

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18. (i) Learned senior counsel Shri G.C. Bharuka, appearing for

Abhijeet Infrastructure Pvt. Ltd. (‘Abhijeet’ for short) submitted that

Central Government had opened up the minerals for private

participants. In 1962, the Government had no power to issue the

notification in the absence of any legislation conferring any executive

power. He relied upon the judgment of this Court in Bharat Coking

Coal Ltd. Vs. State of Bihar reported in 1990 (4) SCC 557 (para

19), and submitted that the State can act only under a legislation or

under Article 162 by way of an executive order and not otherwise. He

submitted that the 1962 notification was issued under the un-amended

Rule 59, and that time there was no power to issue such notification.

In his view the subsequent notification dated 27.10.2006 which is

issued under Section 17A (2) was also bad in law because it was issued

without the prior approval of the Central Government

(ii) It was then submitted by Shri Bharuka, that Abhijeet’s proposal

was sent to the Central Government on 06.08.2004. State

Government withdrew it on 13.09.2005, and Central Government

rejected it on 06.03.2006. In the meanwhile the petitioner took steps

for investment. He relied upon two judgments to explain the import of

the doctrine of promissory estoppel, namely M/s Motilal Padampat

Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh reported in 1979

(2) SCC 409 and State of Punjab Vs. Nestle India Ltd. reported in

2004 (6) SCC 465. He canvassed the Contempt Petition moved by

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Abhijeet by contending that Abhijeet ought to have been granted lease

in pursuance of this Court’s earlier order dated 15.12.2008.

Reply on behalf of the State of Jharkhand

19. Learned Senior Counsel Shri Ajit Kumar Sinha, appearing

for the State of Jharkhand, traced the power of the State Government

to reserve the mines situated within its territory for Public Sector

Undertakings, to begin with, to the State’s ownership of the Mines. He

submitted that these mines and minerals vested absolutely in it, and

this position was fortified in view of the declaration of the

consequences of vesting to be found in Section 4(a) of the Bihar Act.

The validity of this provision had been upheld by a Constitution Bench

of this Court way back in State of Bihar Vs. Kameshwar Singh

reported in AIR 1952 SC 252. In any case, the Act had been placed

at Entry No. 1 in Ninth Schedule which was added by Constitution (First

Amendment) Act, 1951 and was protected by Article 31-B. As held by

this Court in Waman Rao Vs. Union of India reported in 1981 (2)

SCC 362, the Act was clearly beyond the pale of challenge. The State

had the inherent power to reserve any area for exploitation in its

capacity as the owner of the land and the minerals vested therein. The

Sovereign executive power of the State under Article 298 of the

Constitution to carry on any trade or business and to acquire, hold and

dispose of the property and make contracts, certainly included the

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power to reserve the land for exploitation of its minerals by the public

sector.

20. It was further submitted by Shri Sinha, that there was no

conflict between the right of the State Government to deal with the

mines as the owner thereof, and the provisions of the MMDR Act. The

MMDR Act does not disturb the ownership of the mines and minerals of

the State in the land situated within its territory. The power to issue

appropriate notifications concerning the mines and minerals situated

within the State is not taken away by any of the provisions of the

MMDR Act. In the instant case the Central Government, in its counter

affidavit at para 5 (a) and para 10 filed before the High Court, had

given deemed/de-jure approval to the reservation upon examination of

the 1962 & 1969 notifications. This was apart from the impugned

order, dated 6.3.2006, rejecting the proposals of the appellants on the

ground that the recommended areas in the said nine proposals were

either reserved for public sector undertakings, or overlapped the areas

held by M/s. Rungta Sons Pvt. Ltd. and M/s. General Produce Company.

In the counter affidavit filed in this appeal by the Central Government,

it has been specifically stated in paragraph 5 that the State

Government is the ‘owner of the minerals.’

21. It was submitted by Shri Sinha that the notifications of

1962 and 1969 continued to be applicable and protected even after

the creation of state of Jharkhand by virtue of Section 85 of the Bihar

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Reorganisation Act, 2000, which provides that the existing laws prior to

reorganization shall have effect till they are altered, repealed or

amended. Shri Sinha, pointed out that the notifications of 1962 and

1969 had, in fact, been reiterated by the State of Jharkhand vide its

notification dated 27.10.2006.

22. He submitted that the power to issue the impugned

notifications was very much available under the MMDR Act and the

Rules 58 and 59 of the M.C. Rules as they stood at the relevant time.

The notification dated 27.10.2006 was clearly traceable to Section 17A

(2) of the MMDR Act. The mere absence of mentioning of the source of

power in the concerned notifications did not make them ineffective.

Shri Sinha relied upon paragraph 13 of the judgment of this Court in

Dr. Ram Manohar Lohia Vs. State of Bihar reported in AIR 1966

SC 740 in support of this proposition.

23. With respect to doctrine of Desuetude, Shri Sinha

submitted that for this doctrine to apply, two conditions have to be

satisfied, viz. (i) there must be a considerable period of neglect, and (ii)

there must be a contrary practice for a considerable time. In the

instant case no such neglect or contrary practice had been shown. The

area of mines has been kept reserved, and no mining lease in the

reserved area has been granted to anyone contrary to the

notifications. He relied in this behalf upon paragraph 15 of the

judgment of this Court in State of Maharashtra vs. Narayan

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Shamrao Puranik reported in 1982 (3) SCC 519, and paragraphs 30

to 36 of Municipal Corporation for City of Pune vs. Bharat Forge

Co. Ltd. reported in 1995 (3) SCC 434, as well as paragraph 16 of

Cantonment Board Mhow vs. M.P. State Road Transport Corpn.

reported in 1997 (9) SCC 450.

24. With respect to the submissions on promissory estoppel

and legitimate expectations, Shri Sinha submitted that these principles

were based on equity, and when a matter was governed by a statute,

equity will give way. Besides, the promises as claimed were against

the public policy and could not be enforced. He relied upon paragraph

10 of Amrit Vanaspati Co. Ltd. vs. State of Punjab reported in

1992 (2) SCC 411, paragraph of 12 M.P.Mathur vs. DTC reported

in 2006 (13) SCC 706, and paragraph 83 of Sandur Manganese &

Iron Ores Ltd. vs. State of Karnataka reported in 2010 (13) SCC

25. Shri Sinha submitted that MOU between the Appellants and

the State Government could not be treated as a contract under Article

299 (1) of the Constitution of India. It was neither enforceable nor

binding. Based on the MOU, the State Government had made a

recommendation which was only a proposal. Besides, no one had any

legal or vested right for the grant or renewal of a mining lease. In this

behalf, he relied upon paragraph 13 of State of Tamil Nadu vs. M/s

Hind Stone reported in 1981 (2) SCC 205, paragraph 4 of

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Dharambir Singh vs. Union of India reported in 1996 (6) SCC 702,

paragraph 13 of M.P. Ram Mohan Raja vs. State of Tamil Nadu

reported in 2007 (9) SCC 78, paragraphs 19 to 22 and 28 of State of

Kerala vs. B. Six Holiday Resorts (P) Ltd. reported in 2010 (5) SCC

186, and paragraph 4 of Sandur Manganese & Iron Ores Ltd. vs.

State of Karnataka reported in 2010 (13) SCC 1.

26. Last but not the least, Shri Sinha pointed out that the

controversy in the present matter was fully covered by the judgment of

a bench of three Judges of this Court in Amritlal (supra) wherein the

facts were by and large similar. This Court has clearly held in that

judgment that the mines and minerals within its territory did vest in

the State Government, and it had the full authority to reserve the

exploitation thereof for the benefit of public undertakings. There was

no conflict between this judgment, and the three judgments in the

cases of Hingir-Rampur Coal Co., M.A. Tulloch & Co. and

Baijnath Kadio (supra).

Reply on behalf of Union of India

27. The Learned Senior Counsel Shri Ashok Bhan, appearing for

Union of India supported the submissions of Shri Sinha. He submitted

that the mines and minerals in the State of Jharkhand were owned by

the State of Jharkhand, and it had the right to deal with the same

appropriately within the scheme of the MMDR Act. It had every right to

reserve certain areas for the exclusive utilisation of the Public Sector

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Undertakings, or to give a direction to avoid overlapping. He pointed

out that the proposals forwarded by the State Government were

examined by the Central Government . It had accepted the reasons

contained in the State Government’s letter dated 13.9.2005, and

therefore rejected nine out of the ten proposals. He drew our attention

to the following paragraphs from the affidavit filed by the Central

Government in the High Court. In para 5 (a) of its Counter Affidavit in

reply to the Writ Petition filed by Monnet in the High Court, the Under

Secretary, in the Ministry of Mines stated that ‘the request of the State

Government has been examined by the Central Government, and all

nine proposals including the proposal recommended in favour of the

petitioner have been rejected and returned to the State Government

on 06.03.2006.’ In para 10, it was further stated as follows:-

“10. That, as referred herein above, as per information of the State Government the proposals which were submitted to the Central Government seeking prior approval u/s 5 (1) of the Mines and Minerals (Development & Regulation) Act, 1957, either fall in the areas reserved for exploitation by the Public Sector or overlap with the area earlier held or being presently held by others and therefore on the request of State Government, examined by Central Government, and after rejection returned the proposal to the State Government on 06.03.2006. Under the circumstances if the State Government desires to grant the area under mining lease to a person other than a public sector, it is required to firstly de-reserve the area, notify the same under Rule 59 (1) of the Mineral Concession Rules, 1960 and therefore in present situations the petitioner has no case and writ petition is liable to be dismissed.”

Submissions on behalf of the intervenors

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28. (i) Shri Das Learned Counsel appearing for M/s Rungta Sons

pointed out that Rungta had a mining lease in their favour and were

entitled to seek the renewal thereof. Therefore, the appellants could

not have been granted any lease, in any way overlapping with the

mining area allotted to Rungta Sons.

(ii) Learned Senior Counsels Sarvashri Narasinha, Vikas Singh &

Krishnan Venugopal have appeared for the interveners to oppose these

appeals. Their submissions have been similar to that of Shri Sinha.

29. After the hearing of these appeals was concluded, another

SLP arising out of the judgment of Orissa High Court in W.A. No.6288 of

2006 (Geo Minerals and Marketing (P) Ltd. V. State of Orrisa & ors.)

came up for consideration wherein one of the issues involved was

regarding reservation of mining areas for public sector. The counsel

appearing in that matter for the respective parties viz. Senior counsel

Sarvashri Harish Salve, KK Venugopal and RK Dwivedi were therefore

heard on this issue. Their submissions were similar to those of the

respective parties appearing in the present appeals.

Consideration of the submissions of the rival parties:

Authority of the State of Jharkhand to deal with the mines and minerals within its territory

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30. It was submitted on behalf of the State of Jharkhand as well

as by Union of India that the mines and minerals within the territory of

the State are owned by the State of Jharkhand, and it has full authority

to deal with the same. This authority flows from Section 4 (a) of the

Bihar Land Reforms Act, 1950. As against that, the counsel for the

appellants have challenged the authority of the State of Jharkhand to

deal with the mines and minerals on the ground that after the passing

of the MMDR Act, the authority of the State Government has come to

be curtailed. To examine this issue we may look into some of the

salient provisions of the Bihar Act. To begin with the Preamble of the

Act declares its objective in following terms:

‘ An Act to provide for the transference to the State of the interests of proprietors and tenure holders in land of the mortgagees and lessees of such interests including interests in trees, forests , fisheries , jalkars, ferries, hats, bazaars, mines and minerals and to provide for the constitution of a Land Commission for the State of Bihar with powers to advise the State Government on the agrarian policy to be pursued by the State Government consequent upon such transference and for other matters connected therewith.’

Section 3 of the Act provides for issuance of notifications of vesting of

estates and tenures in the state. Section 4 provides for the

consequences of the vesting namely that they shall vest absolutely in

the state free from all encumbrances. Section 4(a) of the Bihar Act

reads as follows:

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4. Consequences of the vesting of an estate or tenure in the State-

[Notwithstanding anything contained in any other law for the time being in force or any contract and notwithstanding any non- compliance or irregular compliance of the provisions of sections 3, 3A and 3B except the provisions of sub-section (1) of section 3 and sub-section (1) of section 3A , on the publication of the notification under sub-section (1) , of section 3 or sub-section (1) or sub-section (2) of section 3A, the following consequences shall ensue and shall be deemed always to have ensued, namely:]

(a) 2[xxx] Such estate or tenure including the interests of the proprietor or tenure-holder in any building or part of a building comprised in such estate or tenure and used primarily as office or cutchery for the collection of rent of such estate or tenure, and his interests in trees, forests, fisheries, jalkars, hats, bazars, 3[mela] and ferries and all other sairati interests , as also his interest in all subsoil including any rights in mines and minerals whether discovered or undiscovered, or whether been worked or not, inclusive of such rights of a lessee of mines and minerals, comprised in such estate or tenure (other than the interests of raiyats or under - raiyats) shall, with effect from the date of vesting, vest absolutely in the State free from all incumbrances and such proprietor or tenure- holder shall cease to have any interest in such estate or other than the interests expresslly saved by or under the provisions of this Act.

Besides, we must also note that the Constitutional validity of this

provision has already been upheld by a Constitution Bench of this

Court in State of Bihar Vs. Kameshwar Singh reported in AIR

1952 SC 252 by a detailed judgment where at the end of it in Para

237 the Court has declared the Bihar Act to be valid except as regards

S. 4(b) and S.23 (f), which were declared to be unconstitutional and

void.

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31. Ownership denotes a complex of rights as the celebrated

author Salmond states in his treatise on Jurisprudence (see page 246

of the Twelfth Edition):

‘44. The idea of ownership

Ownership denotes the relation between a person and an object forming the subject-matter of his ownership. It consists in a complex of rights, all of which are rights in rem, being good against all the world and not merely against specific persons. Though in certain situations some of these rights may be absent, the normal case of ownership can be expected to exhibit the following incidents.

First, the owner will have a right to possess the thing which he owns……….

Secondly, the owner normally has the right to use and enjoy the thing owned: the right to manage it, i.e., the right to decide how it shall be used; and the right to the income from it. Whereas the right to possess is a right in the strict sense, these rights are in fact liberties: the owner has a liberty to use the thing, i.e. he is under no duty not to use it, in contrast with others who are under a duty not to use or interfere with it.’

The right of the State of Jharkhand to deal with the mines and minerals

within its territory including reserving the same for Public Sector

Undertakings, or to direct avoidance of overlapping while granting

leases of mines, obviously flows from its ownership of those mines and

minerals.

32. (i) It was submitted by the appellants that the power of the

State Government under Entry 23, List II of the Seventh Schedule was

subject to the provision of Entry No. 54 of List I. Entry 54 of List I

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states that regulation of Mines and Minerals Development is within the

power of the Union Government to the extent a declaration is made by

the Parliament in that behalf, and such a declaration has been made in

Section 2 of the MMDR Act. Having stated so, it becomes necessary to

understand the extent of this control of the Union Government, and for

that we must see the scheme of the Act with respect to the powers of

the Central Government and the State Government to deal with the

mines and minerals. This was also the approach adopted by a

Constitution Bench of this Court in Ishwari Khetan Sugar Mills (P)

Ltd. Vs. State of U.P. reported in 1980 (4) SCC 136 and later by a

bench of three Judges in Orissa Cement Ltd. Vs. State of Orissa

reported in 1991 Supp.(1) SCC 430.

(ii) In Ishwari Khetan (supra) the Constitution Bench was

concerned with the validity of the provisions of U.P. Sugar

Undertakings (Acquisition) Act, 1971 enacted by the State of U.P. It

was canvassed that the State’s power to legislate in respect of

industries under Entry 24 of List II is taken away to the extent of the

declaration in that respect made by Parliament under Entry 52 of List I.

After examining the relevant provisions, the Constitution Bench held in

para 24 as follows:-

“24. It can, therefore, be said with a measure of confidence that legislative power of the States under Entry 24, List II is eroded only to the extent control is assumed by the Union pursuant to a declaration made by the Parliament in respect of declared industry as spelt out by legislative enactment and the field occupied by such

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enactment is the measure of erosion. Subject to such erosion, on the remainder the State legislature will have power to legislate in respect of declared industry without in any way trenching upon the occupied field…….”

(iii) In Orissa Cement Ltd. (supra) a bench of three Judges of this

Court was concerned with the validity of the levy of a cess on mining

imposed by State of Orissa, and the competence of the State

Legislation was challenged on the backdrop of MMDR Act and Entry 54

of the Union List. After referring to the judgment in Ishwari Khetan

(supra) the Court stated as follows in paragraph 49:-

“…..As pointed out in Ishwari Khetan, the mere declaration of a law of Parliament that it is expedient for an industry or the regulation and development of mines and minerals to be under the control of the Union under Entry 52 or Entry 54 does not denude the State Legislatures of their legislative powers with respect to the fields covered by the several entries in List II or List III. Particularly, in the case of declaration under Entry 54, this legislative power is eroded only to the extent control is assumed by the Union pursuant to such declaration as spelt out by the legislative enactment which makes the declaration. The measure of erosion turns upon the field of the enactment framed in pursuance of the declaration……”

33. On this background we may look to the relevant provisions

of the MMDR Act. Section 4 (1) of the MMDR Act lays down that

prospecting or mining operations are to be done as per the provisions

of the license or lease. Section 4(3) does not restrain the State

Government from undertaking these operations in the area within the

State though, when it comes to the minerals in the First Schedule, it

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has to be done after prior consultation with the Central Government.

This Section 4 reads as follows:

4. Prospecting or mining operations to be under licence or lease:-

No person shall undertake any reconnaissance, prospecting or mining operations in any area, except under and in accordance with the terms and conditions of a reconnaissance permit or of a prospecting licence or, as the case may be, of a mining lease, granted under this Act and the rules made thereunder]:

[Provided further that nothing in this sub-section shall apply to any prospecting operations undertaken by the Geological Survey of India, the Indian Bureau of Mines, [the Atomic Minerals Directorate for Exploration and Research] of the Department of Atomic Energy of the Central Government, the Directorates of Mining and Geology of any State Government (by whatever name called), and the Mineral Exploration Corporation Limited, a Government company within the meaning of section 617 of the Companies Act, 1956:

Provided also that nothing in this sub-section shall apply to any mining lease (whether called mining lease, mining concession or by any other name) in force immediately before the commencement of this Act in the Union Territory of Goa, Daman and Diu.

(1A) No person shall transport or store or cause to be transported or stored any mineral otherwise than in accordance with the provisions of this Act and the rules made thereunder.

(2) [No reconnaissance permit, prospecting licence or mining lease] shall be granted otherwise than in

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accordance with the provisions of this Act and the rules made thereunder.

[(3) Any State Government may, after prior consultation with the Central Government and in accordance with the rules made under section 18,1[undertake reconnaissance, prospecting or mining operations with respect to any mineral specified in the First Schedule in any area within that State which is not already held under any reconnaissance permit, prospecting licence or mining lease.

34. The authority to grant the reconnaissance permit,

prospecting license or mining lease on the conditions which are

mentioned in Section 5 of the Act is specifically retained with the State

Government. However, with respect to the minerals specified in First

Schedule, it is added that previous approval of the Central Government

is required. Thus, with respect to the minerals which are specified in

the First Schedule to the Act, this has to be done only after prior

consultation with and approval of the Central Government. The

provision does not in any way detract from the ownership and the

authority of the State Government to deal with the mines situated

within its territory. The only restriction is with respect to the minerals

in the First Schedule which are specified minerals. Part-C of this

schedule includes iron-ore and manganese ore at Entries No. 6 and 9.

This Section 5 reads as follows:-

“5. Restrictions on the grant of prospecting licences or mining leases

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(1) A State Government shall not grant a [reconnaissance permit, prospecting licence or mining lease] to any person unless such person-

a) is an Indian national, or company as defined in sub- section (1) of section 3 of the Companies Act, 1956 (1 of 1956); and

(b) satisfies such conditions as may be prescribed:

Provided that in respect of any mineral specified in the First Schedule, no [reconnaissance permit, prospecting licence or mining lease] shall be granted except with the previous approval of the Central Government.

Explanation.-For the purposes of this sub-section, a person shall be deemed to be an Indian national,-

(a) in the case of a firm or other association of individuals, only if all the members of the firm or members of the association are citizens of India; and

(b) in the case of an individual, only if he is a citizen of India.

(2) No mining lease shall be granted by the State Government unless it is satisfied that-

(a) there is evidence to show that the area for which the lease is applied for has been prospected earlier or the existence of mineral contents therein has been established otherwise than by means of prospecting such area; and

(b) there is mining plan duly approved by the Central Government, or by the State Government, in respect of such category of mines as may be specified by the Central Government, for the development of mineral deposits in the area concerned.”

35. Section 10 of the Act deals with the procedure for

obtaining the necessary licences. It makes it very clear the application

is to be made to the State Government, and it is the right of the State

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Government either to grant or refuse to grant the permit, licence or

lease. This section reads as follows:-

10. Application for prospecting licences or mining leases-

(1) An application for [a reconnaissance permit, prospecting licence or mining lease] in respect of any land in which the minerals vest in the Government shall be made to the State Government concerned in the prescribed form and shall be accompanied by the prescribed fee.

(2) Where an application is received under sub-section (1), there shall be sent to the applicant an acknowledgment of its receipt within the prescribed time and in the prescribed form.

(3) On receipt of an application under this section, the State Government may, having regard to the provisions of this Act and any rules made thereunder, grant or refuse to grant the2[permit, licence or lease].

36. Again, it is the right of the State Government to give

preferences in the matters of granting lease, though this right is

regulated by the provisions of Section 11 of the Act. Sub-section 1 of

this Section lays down that one who has done the reconnaissance or

prospecting work earlier, will have a preferential right for obtaining a

prospective licence or a mining lease in respect of that land. Sub-

section 2 lays down that where any area is not notified for

reconnaissance or prospecting or mining earlier, the application which

is received first will be considered preferentially. It is however, further

stated that where applications are invited by any particular date, then

all of the applications received by that date will be considered

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together. Sub-section 3 of Section 11 lays down the factors to be

considered while granting the licence which are:

(3) The matters referred to in sub-section (2) are the following:- (a) any special knowledge of, or experience in, reconnaissance operations, prospecting operations or mining operations, as the case may be, possessed by the applicant; (b) the financial resources of the applicant; (c) the nature and quality of the technical staff employed or to be employed by the applicant; (d) the investment which the applicant proposes to make in the mines and in the industry based on the minerals; (e) such other matters as may be prescribed.”

Sub-section 5 lays down that if there are any special reasons, the State

can grant the licence to a party whose application might have been

received later in time, but after recording the special reasons. This

sub-section again makes it clear that where any such out of turn

allotment is to be done with respect to a mineral specified in First

Schedule, prior approval of the Central Government will be required.

Thus, although the Central Government is given the authority to

approve the applications with respect to the specified minerals, that

does not take away the ownership and control of the State

Government over the mines and minerals within its territory.

37. Senior Counsel Shri Sundaram had contended that Section

17 and 17A of the MMDR Act give special power to the Central

Government to undertake the mining operations and effect

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reservations. Section 18 of the Act casts a duty on the Central

Government to protect the environment and to prevent pollution that

may be caused by mining operations. These powers were not with the

State Government. Therefore, the reservations in the notifications of

1962 and 1969 were outside the powers of the State Government.

Thus, Sections 17 and 17(A) of the Act were pressed into service to

canvass the reduction in the authority of the State Government.

Section 17 (1) gives the power to the Central Government to undertake

prospecting and mining operations in certain lands. However, such

operations have also to be done only after consultation with the State

Government as stated in sub-section (2) thereof. Besides, sub-section

(3) requires the Central Government also to pay the reconnaissance

permit fee or prospecting fee, royalty, surface rent or dead rent as the

case may be. Section 17A gives the power to the Central Government

to reserve any area not held under any prospecting licence or mining

lease with a view to conserving any minerals. However that power is

also to be exercised in consultation with the State Government.

Similarly, under Sub-section (2) of Section 17A, State Government may

also reserve any such area, though with the approval of the Central

Government. Thus, these sections and the duty cast on the Central

Government under Section 18 do not affect the ownership of the State

Government over the mines and minerals within its territory, or to deal

with them as provided in the statute.

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38. The provisions of the MMDR Act contain certain

regulations. However, to say that there are certain provisions

regulating the exercise of power is one thing, and to say that there is

no power is another. The provisions of the Act do not in any way take

away or curtail the right of the State Government to reserve the area

of mines in public interest, which right flows from vesting of the mines

in the State Government. It is inherent in its ownership of the mines.

In the present case we are concerned with the challenge to the letter

of the State Government dated 13.9.2005, and that of the Central

Government dated 6.3.2006, and the challenge to the notification

dated 27.10.2006 issued by the State Government. There is no

difficulty in accepting that the Central Government does have the

power to issue a direction as contained in the letter dated 6.3.2006.

As far as the notification of 27.10.2006 is concerned, the same is also

clearly traceable to Section 17A (2) of the Act. This Section 17A (2)

reads as follows:-

“(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.”

As can be seen, this sub-section requires the approval of the Central

Government for reserving any new area which is not already held

through a Government Company or Corporation, and where the

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proposal is to do so. The notification of 27.10.2006 refers to the

previous notifications of 1962 and 1969 whereunder the mining areas

in the Ghatkuri forest were already reserved, and reiterates the

decision of the State Government that the minerals which were already

reserved in the Ghatkuri area under the two notifications will continue

to be utilised for exploitation by public sector undertakings or joint

venture projects of the State Government. Therefore this notification

of 27.10.2006 did not require the approval of the Central Government.

39. When it comes to the challenge to the letter dated

13.9.2005, it is seen that the State Government states therein that

nine out of the ten proposals overlap the areas meant for public

undertakings and two other companies, and therefore the proposals

were called back. The power to take such a decision rests in the State

Government in view of its ownership of the mines, though there may

not be a reference to the source of power. Absence of reference to

any particular section or rule which contains the source of power will

not invalidate the decision of the State Government, since there is no

requirement to state the source of power as has already been held by

this Court in the case of Dr. Ram Manohar Lohia (supra).

40. The appellants have referred to Rules 58 and 59 to

contend that there rules do not give the power to the State

Government to reserve the mines for public sector. We may therefore,

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refer to the Rules 58 and 59 of M.C. Rules as amended from time to

time.

Rule 58 and 59 of M.C. Rules as framed in 1960 read as

follows:-

“58. Availability of areas for re-grant to be notified- (I) No area which was previously held or which is being held under a prospecting licence or a mining lease or in respect of which an order had been made for the grant thereof but the applicant has died before the execution of licence or lease, as the case many be, or in respect of which the order, granting licence or lease has been revoked under sub-rule (1) of rule 15 or sub-rule (1) of rule 31, shall be available for grant unless- (a) an entry to the effect is made in the register referred to in

sub-rule (2) of rule 21 or sub-rule (2) of rule 40, as the case may be, in ink; and

(b) the date from which the area shall be available for grant is notified in the official Gazette at least 30 days in advance.

(2) The Central Government may, for reasons to be recorded in writing, relax the provisions of sub-rule (1) in any special case.)

“Rule 59. Availability of certain areas for grant to be notified- In the case of any land which is otherwise available for the grant of a prospecting licence or a mining lease but in respect of which the State Government has refused to grant a prospecting licence or a mining lease on the ground that the land should be reserved for any purpose other than prospecting or mining the minerals, the State Government shall, as soon as such land becomes again available for the grant of a prospecting or mining lease, grant the license or lease after following the procedure laid down in rule 58.

41. (i) Rule 58 was amended on 16.11.1980 and the amended

Rule 58 reads as under:-

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(ii) Rule 59 was amended first on 9.7.1963 and later in 1980 along

with Rule 58. The amended Rule 59 as amended on 9.7.1963 reads as

follows:-

“Rule 59. Availability of certain areas for grant to be notified- In the case of any land which is otherwise available for the grant of a prospecting licence or a mining lease but in respect of which the State Government has refused to grant a prospecting licence or a mining lease on the ground that the land should be reserved for any purpose, the State Government shall, as soon as such land becomes again available for the grant of a prospecting or mining lease, grant the license or lease after following the procedure laid down in Rule 58.”

(iii) Rule 59 when amended in 1980 reads as follows:-

“ 59. Availability of area for regrant to be notified- (1) No area- (a)which was previously held or which is being held

under a prospecting licence or a mining lease; or (b)in respect of which an order had been made for the

grant of a prospecting licence or mining lease, but the applicant has died before the grant of the licence or the execution of the lease, as the case may be; or

(c) in respect of which the order granting a licence or lease has been revoked under sub-rule (1) of rule 15 or sub-rule (1) of rule 31; or

(d)in respect of which a notification has been issued under sub section (2) or sub-section (4) of section 17; or

(e)which has been reserved by Government under rule 58, shall be available for grant unless-

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(i) an entry to be effect that the area is available for grant is made in the register referred to in sub-rule (2) of rule 21 or sub-rule (2) of rule 40, as the case may be, in ink; and

Provided that nothing in this rule shall apply to the renewal of a lease in favour of the original lessee or his legal heirs notwithstanding the fact that the lease has already expired: Provided further that where an area reserved under rule 58 is proposed to be granted to a Government Company, no notification under clause (i) shall be required to be issued.

(2) The Central Government may, for reasons to be recorded in writing relax the provisions of sub-rule (1) in any special case.)”

42. Rule 58 has been subsequently deleted, whereas Rule 59

was amended on 13.4.1988. It now reads as follows:-

59. Availability of area for regrant to be notified- (1)

No area-

(a) which was previously held or which is being held under a reconnaissance permit or a prospecting licence or a mining lease; or

(b) which has been reserved by the Government or any local authority for any purpose other than mining; or

(c) in respect of which the order granting a permit or licence or lease has been revoked under sub- rule (1) of rule 7A or sub-rule (1) of rule 15 or sub-rule (1) of rule 31, as the case may be; or

(d) in respect of which a notification has been issued under sub-section (2) or sub-section (4) of section 17; or

(e) which has been reserved by the State Government or under section 17A of the Act,

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shall be available for grant unless-

(i) an entry to the effect that the area is available for grant is made in the register referred to insub-rule (2) of rule 7D or sub- rule (2) of rule 21 or sub-rule (2) of rule 40, as the case may be; and

Provided that nothing in this rule shall apply to the renewal of a lease in favour of the original lessee or his legal heirs notwithstanding the fact that the lease has already expired.

Provided further that where an area reserved under rule 58 or under section 17A of the Act is proposed to be granted to a Government company, no notification under clause (ii) shall be required to be issued:

Provided also that where an area held under a reconnaissance permit or a prospecting licence, as the case may be, is granted interms of sub-section (1) of section 11, no notification under clause (ii) shall be required to be issued.

(2) The Central Government may, for reasons to be recorded in writing, relax the provisions of sub-rule (1) in any special case.”

43. (i) The notification of 1969 is clearly protected under Rule 59

as amended on 9.7.1963, in as much as the rule clearly states that the

State Government can refuse to grant a mining lease, should the land

be reserved for any purpose. As far as the notification of 1962 is

concerned, it is submitted by the appellants that the Rules 58 and 59

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as they stood prior thereto did not contain a specific power to reserve

the land for any purpose, in the manner it was incorporated in Rule 59

by the amendment of 9.7.1963. As can be seen, these rules provide as

to when the reserved area can be notified for re-grant. The Rules lay

down the requirement of making an entry in the register maintained in

that behalf, and issuance of a notification in the official gazette about

the availability of the area for grant. These provisions are made to

ensure transparency. The reference to the judgment in Janak Lal

(supra) does not take forward the case of the appellants, since as

stated in that judgment the result of the amendment in the rule is only

to extend the rule, and not to curtail the area of its operation. The

judgment in terms states that the purpose of these rules is obviously to

enable the general public to apply for the proposed lease.

(ii) Rule 58 as it originally stood, provided for two contingencies. One

contingency is where the applicant has died before the execution of

licence or lease, and the other is where the order granting licence or

lease has been revoked. Rule 59 as originally drafted provided for the

third contingency, namely, where the State Government had earlier

refused to grant a prospecting licence or mining lease in respect of

certain land on the ground that it was reserved for some other

purpose, (e.g. environmental), and such land becomes available for

grant. For all these three contingencies, the procedure laid down in

Rule 58 was required to be followed, namely making of an entry in the

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specified register, and notifying in the official gazette the date from

which the area will be available for grant.

44. The appellants then contended by referring to the

amended Rule 59 that because the power to reserve the land ‘for any

purpose’ was specifically provided thereunder from 9.7.1963, such

power did not exist in the Rules 58 and 59 as they stood prior thereto.

It is not possible to accept this construction, for the reason as stated

above that the Rules 58 and 59 as they originally stood, merely dealt

with three contingencies where the prescribed procedure was required

to be followed. This cannot mean that when it comes to reservation of

mining areas for public undertakings, such power was not there with

the State Government prior to the amendment of 1963. The over-view

of various sections of the act done by us clearly shows that the power

to grant the mining leases is specifically retained with the State

Government even with respect to the major minerals, though with the

approval of the Central Government. The power to effect such

reservations for public undertakings, or for any purpose flows from the

ownership of the mines and minerals which vests with the State

Government. The amendment of Rule 59 in 1963 made it clear that

the State can reserve land ‘for any purpose’, and the amendment of

Rules 58 and 59 in 1980 clarified that State can reserve it for a public

corporation or a Government company. These amendments have been

effected only to make explicit what was implicit. These amendments

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can not be read to nullify the powers which the State Government

otherwise had under the statute. In the present matter we are

concerned with the challenge to the power of the State Government to

issue the letter of withdrawal dated 13.9.2005 which is issued in view

of the two notifications of 1962 and 1969. The challenge to the validity

of the said letter will therefore have to be repelled.

45. Learned Senior Counsel Shri Mehta had relied upon Indian

Metals and Ferro Alloys Ltd. (supra) to contend that an area which

is reserved can be made available for re-grant to private sector.

However, that situation can arise when the area becomes de-reserved,

and thereafter the specified procedure is followed. The following

statement in para 45 of the very judgment cannot be ignored in this

behalf:-

“…..Under Rule 59(1), once a notification under Rule 58 is made, the area so reserved shall not be available for grant unless the two requirements of sub-rule (e) are satisfied: viz. an entry in a register and a gazette notification that the area is available for grant……”

Thus, when such a decision to de-reserve the area for re-grant is taken,

the above two requirements are expected to be followed. In the

instant case there was no such occasion since no such decision had

been taken by the State Government. Once the State Government

realised that the concerned areas were reserved for the exploitation in

public sector, it withdrew the proposals forwarding the applications of

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the appellants to the Central Government, and it was fully entitled to

do the same.

46. It was then contended by Shri Mehta that the State

Government’s power is only to regulate the minor minerals under

Section 15 of the Act, since, that section gives power to the State

Government to make rules in respect of minor minerals, and since

Section 14 states that Sections 5 to 13 do not apply to minor minerals.

On the other hand the over view of the provisions from sections 4 to

17A as done above clearly shows the power of the State Government

either to grant or not to grant the mining leases, prospecting licenses

and reconnaissance permits and to regulate their operations even with

respect to the major minerals specified in First Schedule to the act

though with the previous approval of the Centre Government. This

would include the power to effect reservations of mining areas for the

public sector. The reliance on Bharat Coking Coal (supra) is also

untenable for the reason that the judgment lays down that the

executive power of the State is subject to the law made by the

Parliament. There is no conflict with the proposition in the facts of this

case. The power of the State flows from its ownership of the mines,

and it is not in any way taken away by the law made by the Parliament

viz. the MMDR Act or the MC rules. It is therefore not possible to

accept the submission of Shri Ranjit Kumar that because a regulatory

regime is created under the Act giving certain role to the Central

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Government, the power to effect reservations is taken away from the

State Government. The reference to the judgment of this Court in D.K.

Trivedi & Sons (supra) in this behalf was also misconceived. In that

matter a bench of two Judges, of this Court, held section 15 (1) of

MMDR Act to be constitutional and valid. The court also held that the

rule making power of the State Government, thereunder, did not

amount to excessive delegation of legislative power to the executive.

In that matter no such submission that the powers of the State

Government were restricted only to section 15 was under

consideration

47. Similarly, the reliance on Hukam Chand (supra) was also

misconceived in as much as in the present case there is no such issue

of exercising rule making power retrospectively. Nor has the

proposition in Air India (supra) any relevance in the present case

since this is not a case of saving any provision after the repeal of a

statute. The action of the State cannot as well be faulted for being

unreasonable to be hit by Article 19(1) (g) of the Constitution of India

since all that the State has done is to follow the Statute as per its letter

and its true spirit.

48. Learned Senior Counsel Shri Ranjit Kumar had contended

that once the State Government had recommended the proposal to the

Central Government for grant of mineral concession it becomes

functus-officio in view of the provision of Rule 63 A of the MC Rules,

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1960, and it cannot withdraw the same. As far as this submission is

concerned, firstly it is seen from the impunged judgment that this plea

was not canvassed before the High Court. Besides, in any case,

‘recommendation’ will mean a complete and valid recommendation

after an application for grant of mining lease is made under Rule 22

with all full particulars in accordance with law. In the instant case the

State Government found that its own proposal was a defective one,

since it was over-lapping a reserved area. In such a case, the

withdrawal thereof by the State Government cannot be said to be hit

by Rule 63A. In any case, the Central Government subsequently

rejected the proposal, and hence not much advantage can be drawn

from the initial forwarding of the appellants’ proposal by the State

Government.

49. It is also contended that Monnet was not afforded

hearing. The submission of denial of hearing under Rule 26 by the

State Government is not raised in the Writ Petition. It is material to

note that another plea is raised in Para 2 (XVI) of their Writ Petition,

namely, that central government ought to have given a hearing before

issuing the rejection order, though no specific provision from the rules

was pointed out in that behalf. The plea that the appellants could not

resort to their remedy of revision under Rule 54 against the letter of

State Government dated 13.9.2005 cannot be accepted for the reason

that it is the appellants who chose to file their writ petition directly to

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the High Court to challenge the same (along with Central Government

letter dated 6.3.2006) without exhausting that remedy. The Central

Government cannot be faulted for the same. Incidentally, the Petition

nowhere states as to how Monnet came to know about these internal

communications between the state and the central government. The

other petitioners claim to have learnt about the same through a

newspaper report, and Adhunik claims to have got the copies thereof

through an application under the Right to Information Act, 2005.

50. The appellants had relied upon three judgments of the

Constitution Benches of this Court in Hingir-Rampur Coal Co., M.A.

Tulloch & Co. and Baijnath Kadio (supra). In Hingir-Rampur Coal

Co. (supra), the Constitution Bench was concerned with the question

of legality of the cess under the Orissa Mining Ares Development Fund

Act, 1952. One of the grounds canvassed was that the said legislation

was bad in law for being in conflict with the previous Mines and

Minerals (Regulation and Development) Act, 1948, which was also a

Central Act. It was contended that the central legislation was referable

to Entry No.54 of the Union List from the Seventh Schedule. It

occupied the field and therefore the state legislation which was

referable to Entry No.53 was beyond the competence of the state

legislature. The Court found that the areas covered by the two acts

were substantially the same. However, the 1948 Act was a pre-

constitution act and the relevant provisions of the constitution were

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held to be prospective. The Court therefore, held that unless the

declaration under Section 2 of the 1948 Act was made after the

Constitution came into force, it will not satisfy the requirement of Entry

No.54. The cess and the Orissa Act were therefore not held to be bad

in law. What this Court observed in Para 23 in this behalf is relevant

for our purpose…………….

“23. The next question which arises is, even if the cess is a fee and as such may be relatable to Entries 23 and 66 in List II its validity is still open to challenge because the legislative competence of the State Legislature under Entry 23 is subject to the provisions of List I with respect to regulation and development under the control of the Union; and that takes us to Entry 54 in List I. This Entry reads thus: “Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest”. The effect of reading the two Entries together is clear. The jurisdiction of the State Legislature under Entry 23 is subject to the limitation imposed by the latter part of the said Entry. If Parliament by its law has declared that regulation and development of mines should in public interest be under the control of the Union to the extent of such declaration the jurisdiction of the State Legislature is excluded . In other words, if a Central Act has been passed which contains a declaration by Parliament as required by Entry 54, and if the said declaration covers the field occupied by the impu8gned Act the impugned Act would be ultra vires, not because of any repugnance between the two statutes but because the State Legislature had no jurisdiction to pass the law. The limitation imposed by the latter part of Entry 23 is a limitation on the legislative competence of the State Legislature itself. The position is not in dispute.”

(emphasis supplied)

51. In M.A. Tulloch & Co. (supra), the Constitution Bench

was concerned with legality of certain demands of fee under the Orissa

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Mining Areas Development Fund Act, 1952, and the same question

arose as to whether the provisions of the Orissa Act were hit by the

MMDR Act, 1957 in view of Entry No.54 of the Union List. The validity

of the state act was canvassed under Entry No.23 of the State List and

was accepted as not hit by the provisions of the MMDR Act, 1957. The

Court held the Orissa Act and the demand of fee to be valid. What this

Court observed in Para 5 is relevant for our purpose………..

“5. ………….It does not need much argument to realise that to the extent to which the Union Government had taken under “its control” “the regulation and development of minerals” so much was withdrawn from the ambit of the power of the State Legislature under Entry 23 and legislation of the State which had rested on the existence of power under that entry would to the extent of that “control” be superseded or be rendered ineffective, for here we have a case not of mere repugnancy between the provisions of the two enactments but of a denudation or deprivation of State legislative power by the declaration which Parliament is empowered to make and has made.”

52. In Baijnath Kadio (supra), this Court was concerned with

the validity of second proviso of Section 10 of the Bihar Land Reforms

Act, 1964 for being in conflict with the provisions concerning miner

minerals under the MMDR Act, 1957. The Court followed the

propositions in Hingir-Rampur Coal Co. and M.A. Tulloch Co. and found

that the field was not open to the State Legislature, since it was

covered under the Central Act.

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53. As can be seen from these three judgments, if there is a

declaration by the Parliament, to the extent of that declaration, the

regulation of mines and minerals development will be outside the

scope of the State Legislation as provided under Entry No.54 of the

Centre List. Presently, we are not concerned with the conflict of any of

the provisions under the MMDR Act, either with any State Legislation or

with any Executive Order under a State Legislation issued by the State

Government. The submission of the appellant is that the Jharkhand

Government was not competent at all to issue the notifications of 1962

and 1969 reserving the mine areas for public undertaking. The answer

of the State Government is that it is acting under the very MMDR Act,

and the notifications are within the four corners of its powers as

permitted by the Central Legislation.

54. All these issues raised by the appellants have already been

decided by a bench of three Judges of this Court in Amritlal

Nathubhai Shah Vs. Union of India reported in 1976 (4) SCC 108.

In that matter also the Government of Gujarat had issued similar

notifications dated 31.12.1963 and 26.2.1964 reserving the lands in

certain talukas for exploitation of bauxite in public sector. The

applications filed by the appellant for grant of mining lease for bauxite

were rejected by the State Government. The revision application filed

by the appellant to the Central Government was also rejected by its

order which stated that the State Government was the owner of the

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minerals within its territory and the minerals vest in it, and also that

the State Government had the inherent right to reserve any particular

area for exploitation in the public sector. The Gujarat High Court had

accepted this view.

55. While affirming this view, this Court in Amritlal

Nathubhai (supra) held in clear terms that the power of the State

Government arose from its ownership of the minerals, and that it had

the inherent right to deal with them. In para 3 of its judgment the

Court observed as follows:-

“3. It may be mentioned that in pursuance of its exclusive power to make laws with respect to the matters enumerated in entry 54 of List I in the Seventh Schedule, Parliament specifically declared in Section 2 of the Act that it was 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 provided in the Act. The State Legislature's power under entry 23 of List II was thus taken away, and it is not disputed before us that regulation of mines and mineral development had therefore to be in accordance with the Act and the Rules. The mines and the minerals in question (bauxite) were however in the territory of the State of Gujarat and, as was stated in the orders which were passed by the Central Government on the revision applications of the appellants, the State Government is the "owner of minerals" within its territory, and the minerals "vest" in it. There is nothing in the Act or the Rules to detract from this basic fact. That was why the Central Government stated further in its revisional orders that the State Government had the "inherent right to reserve any particular area for exploitation in the public sector". It is therefore quite clear that, in the absence of any law or contract etc. to the contrary, bauxite, as a mineral, and the mines thereof, vest in the State of Gujarat and no person has any right to exploit it otherwise than in accordance with the provisions of the

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Act and the Rules. Section 10 of the Act and Chapters II, III and IV of the Rules, deal with the grant of prospecting licences and mining leases in the land in which the minerals vest in the Government of a State. That was why the appellants made their applications to the State Government.”

56. The Court traced the power of the State Government to

refuse to grant lease, to Section 10 of the MMDR Act. It held that this

section clearly included the power either to grant or refuse to grant the

lease on the ground that the land in question was not available having

been reserved by the State Government for any purpose. In para 5 of

its judgment this Court has held as follows:-

“5. Section 10 of the Act in fact provides that in respect of minerals which vest in the State, it is exclusively for the State Government to entertain applications far the grant of prospecting licences or mining leases and to grant or refuse the same. The section is therefore indicative of the power of the State Government to take a decision, one way or the other, in such matters, and it does not require much argument to hold that that power included the power to refuse the grant of a licence or a lease on the ground that the land in question was not available for such grant by reason of its having been reserved by the State Government for any purpose.”

57. In para 6 of the judgment, this Court rejected the argument

that since Section 17 of the Act provides for the powers of the Central

Government to undertake prospecting or mining operations, the State

Government could not be said to have the power for reservations. The

first part of this para reads as follows:-

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“6. We have gone through Sub-sections (2) and (4) of Section 17 of the Act to which our attention has been invited by Mr. Sen on behalf of the appellants for the argument that they are the only provisions for specifying the boundaries of the reserved areas, and as they relate to prospecting or mining operations to be undertaken by the Central Government, they are enough to show that the Act does not contemplate or provide for reservation by any other authority or for any other purpose. The argument is however untenable because the aforesaid sub-sections of Section 17 do not cover the entire field of the authority of refusing to grant a prospecting licence or a mining lease to anyone else, and do not deal with the State Government's authority to reserve any area for itself. As has been stated, the authority to order reservation flows from the fact that the State is the owner of the mines and the minerals within its territory, which vest in it…………….”

58. The Judgment referred to Rule 59 of the M.C. Rules also,

and held that it clearly contemplates such reservation by the order of

the State Government In para 7 this Court held in this behalf as

follows:-

“7..…..A reading of Rules 58, 59 and 60 makes it quite clear that it is not permissible for any person to apply for a licence or lease in respect of a reserved area until after it becomes available for such grant, and the availability is notified by the State Government in the Official Gazette. Rule 60 provides that an application for the grant of a prospecting licence or a mining lease in respect of an area for which no such notification has been issued, inter alia, under Rule 59, for making the area available for grant of a licence or a lease, would be premature, and "shall not be entertained and the fee, if any, paid in respect of any such application shall be refunded." It would therefore follow that as the areas which are the subject matter of the present appeals had been reserved by the State Government for the purpose stated in its notifications, and as those lands did not become available for the grant of a prospecting licence or a mining lease, the State Government was well within its

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rights in rejecting the applications of the appellants under Rule 60 as premature. …..”

59. In view of the discussion as above, the judgment in Amritlal

(supra) cannot be said to be stating anything contrary to the

propositions in Hingir-Rampur Coal Co., M.A. Tulloch & Co. and Baijnath

Kadio (supra), but is a binding precedent. The notifications impugned

by the appellants in the present group of appeals were fully protected

under the provisions of MMDR Act, and also as explained in Amritlal

(supra).

Desueutde

60. The submissions with respect to the two notifications

suffering on account of Desuetude has also no merit, as the law

requires that there must be a considerable period of neglect, and it is

necessary to show that there is a contrary practice of a considerable

time. The appellants have not been able to show anything to that

effect. The authorities of the State of Jharkhand have acted the

moment the notifications were brought to their notice, and they have

acted in accordance therewith. This certainly cannot amount to

deusteude.

Promissory Estoppel and Legitimate Expectations

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61. As we have seen earlier, for invoking the principle of

promissory estoppel there has to be a promise, and on that basis the

party concerned must have acted to its prejudice. In the instant case it

was only a proposal, and it was very much made clear that it was to be

approved by the Central Government, prior whereto it could not be

construed as containing a promise. Besides, equity cannot be used

against a statutory provision or notification.

62. What the appellants are seeking is in a way some kind of a

specific performance when there is no concluded contract between the

parties. An MOU is not a contract, and not in any case within the

meaning of Article 299 of the Constitution of India. Barring one party

(Adhunik) other parties do not appear to have taken further steps. In

any case, in the absence of any promise, the appellants including

Aadhunik cannot claim promissory estoppel in the teeth of the

notifications issued under the relevant statutory powers. Alternatively,

the appellants are trying to make a case under the doctrine of

legitimate expectations. The basis of this doctrine is in reasonableness

and fairness. However, it can also not be invoked where the decision

of the public authority is founded in a provision of law, and is in

consonance with public interest. As recently reiterated by this Court in

the context of MMDR Act, in Para 83 of Sandur Manganese (supra)

‘it is a well settled principle that equity stands excluded when a matter

if governed by statute’. We cannot entertain the submission of

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unjustified discrimination in favour of Bihar Sponge and Iron Ltd. as

well for the reason that it was not pressed before the High Court nor

was any material placed before this Court to point out as to how the

grant in its favour was unjustified.

Epilogue

63. Before we conclude, we may refer to the judgment of this

Court in State of Tamil Nadu Vs. M/s Hind Stone reported in AIR

1981 SC 711 wherein the approach towards this statute came up for

consideration. In that matter this Court was concerned with Rule 8-C

of the Tamil Nadu Minor Mineral Concessions Rule, 1959 framed by the

Government of Tamil Nadu under Section 15 of the MMDR Act. This

rule provided as follows:-

“8-C. Lease of quarries in respect of black granite to Government Corporation, etc.

(1) Notwithstanding anything to the contrary contained in these rules, on and from 7th December 1977 no lease for quarrying black granite shall be granted to private persons.

(2) 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.

Provided that in respect of any land belonging to any private person, the consent of such person shall be obtained for such quarrying or lease”

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64. Although in Hind Stone the Court was concerned with the

provision of this rule which was concerning a minor mineral, while

examining the validity thereof this Court (per O. Chinnappa Reddy J.)

has made certain observations towards the approach and the scope of

MMDR Act which are relevant for our purpose. Thus in para 6, it was

observed as follows:-

“6…………….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……………..”

65. Again in para 9, this Court observed:-

“9……….Whenever there is a switch over from ‘private sector’ to ‘public sector’ it does not necessarily follow that a change of policy requiring express legislative sanction is involved. It depends on the subject and the statute. For example, if a decision is taken to impose a general and complete ban on private mining of all minor minerals, such a ban may involve the reversal of a major policy and so it may require legislative sanction. But if a decision is taken to ban private mining of a single minor mineral for the purpose of conserving it, such a ban, if it is otherwise within the bounds of the authority given to the Government by the Statute, cannot be said to involve any change of policy. The policy of the Act remains the same and it is, as we said, the conservation and the prudent and discriminating exploitation of minerals, with a view to secure maximum benefit to the community. Exploitation of minerals by the private and/or the public sector is contemplated. If in the pursuit of the avowed policy of the Act, it is thought exploitation by the public sector is best

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and wisest in the case of a particular mineral and, in consequence the authority competent to make the subordinate legislation makes a rule banning private exploitation of such mineral, which was hitherto permitted we are unable to see any change of policy merely because what was previously permitted is no longer permitted.”

Last but not least, in para 13 this Court observed as follows:-

“13……No one has a vested right to the grant or renewal of a lease and none can claim a vested right to have an application for the grant or renewal of a lease dealt with in a particular way, by applying particular provisions…….”

66. Mines and minerals are a part of the wealth of a nation.

They constitute the material resources of the community. Article 39(b)

of the Directive Principles mandates that the State shall, in particular,

direct its policy towards securing that the ownership and control of the

material resources of the community are so distributed as best to

subserve the common good. Thereafter, Article 39(c) mandates that

state should see to it that operation of the economic system does not

result in the concentration of wealth and means of production to the

common detriment. The public interest is very much writ large in the

provisions of MMDR Act and in the declaration under Section 2 thereof.

The ownership of the mines vests in the State of Jharkhand in view of

the declaration under the provisions of Bihar Land Reforms Act, 1950

which act is protected by placing it in the Ninth Schedule added by the

First Amendment to the Constitution. While speaking for the

Constitution Bench in Waman Rao (supra) Chandrachud, C.J. had

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following to state on the co-relationship between Articles 39 (b) and (c)

and the First Amendment:-

“26. Article 39 of the Constitution directs by clauses (b) and (c) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. These twin principles of State Policy were a part of the Constitution as originally enacted and it is in order to effectuate the purpose of these Directive Principles that the 1st and the 4th Amendments were passed…..”

67. What is being submitted by the appellants is that the State

Government cannot issue such notifications for the reasons which the

appellats have canvassed. We, however, do not find any error in the

letter of withdrawal dated 13.9.2005 issued by the State of Jharkhand,

and the letter of rejection dated 6.3.2006 issued by the Union of India

for the reasons stated therein. In our view, the State of Jharkhand was

fully justified in declining the grant of leases to the private sector

operators, and in reserving the areas for the public sector undertakings

on the basis of notifications of 1962, 1969 and 2006. All that the State

Government has done is to act in furtherance of the policy of the

statute and it cannot be faulted for the same.

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68. For the reasons stated above we do not find any merit in

these appeals and they are all dismissed. The interim orders passed

therein will stand vacated.

69. The Contempt Petition (C) No.14/2009 is filed by Abhijeet is

for the alleged breach of an earlier order dated 15.12.2008. The order

dated 28.01.2009 makes it clear that no notice was issued on the

Contempt Petition. Since the appeal is being disposed of and

dismissed, the Contempt Petition is also dismissed.

70. Iron is a mineral necessary for industrial development. In

view of the pendency of these appeals, and the stay orders sought by

the appellants therein, grant of lease of iron-ore mines to the public

sector undertakings could not be made for over six years. The State of

Jharkhand and the people at large have thereby suffered. In view

thereof we would have been justified in imposing costs on the

appellants. However, considering that important questions of law were

raised in these appeals, we refrain from doing the same. The parties

will therefore, bear their own costs.

…………………………………..J. ( H.L. Gokhale )

New Delhi Dated: 26 July, 2012

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