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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3608 OF 2016

(ARISING OUT OF S.L.P.(C) NO.1490 OF 2015)

STATE OF KERALA & ORS. ..APPELLANTS VERSUS

M/S KERALA RARE EARTH & MINERALS LIMITED & ORS. ..RESPONDENTS

WITH CIVIL APPEAL NO. 3609 OF 2016

(ARISING OUT OF S.L.P.(C) NO.1840 OF 2015) STATE OF KERALA & ORS. ..APPELLANTS

VERSUS M/S. KERALA RARE EARTHS & MINERALS  LIMITED & ORS. ..RESPONDENTS

WITH CIVIL APPEAL NO. 3610        OF 2016   

(ARISING OUT OF S.L.P(C) NO.1914 OF 2015) STATE OF KERALA & ORS. ..APPELLANTS

VERSUS M/S. KERALA RARE EARTHS & MINERALS  LIMITED & ORS. ..RESPONDENTS

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J U D G M E N T T.S. THAKUR, CJI. 1.   Leave granted.

2. These appeals arise out of a common judgment and  order dated 13th November, 2014 passed by the High Court  of Kerala at Ernakulam, whereby, Writ Appeals Nos.1610,  1611 and 1621 of 2014 filed by the appellants-State of  Kerala have been dismissed affirming thereby an order  passed by a Single Bench of that Court, allowing the  writ petitions filed by the respondent.   

3. By  an  order  dated  15th September,  2004  the  Government  of  Kerala  sanctioned  the  grant  of  mining  leases  for  Ilmenite,  Rutile,  Leucoxene,  Zircon  and  Sillimanite (non-scheduled mineral) for a period of 20  years. The order came in exercise of the powers vested  in  the  State  Government  under  Section  11(5)  of  the  Mines and Minerals (Development and Regulation) Act,  1957 and was preceded by the approval of the Government  of  India  in  terms  of  Section  5(1)  thereof.  Shortly  after the issue of the sanction order, however, the  State Government by another order dated 25th September,

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2004 stayed further action in the matter on the ground  that a detailed study on the environmental impact of  the proposed leases need be undertaken before taking  any further steps. This was followed by nine letters  dated  12th October,  2006,  16th October,  2006  and  9th  

November,  2006  addressed  to  the  respondent-company  stating in no uncertain terms that the Government of  Kerala did not consider it necessary to grant mining  leases for mineral sand to private parties. Aggrieved  by the said letters and communications, the respondents  filed nine revision applications No. 14(1)/2007-RC-II  to  14(3)/2007-RC-II  and  14(6)/2007-RC-II  to  14(11)/2007-RC-II  under  Section  30  of  the  Act  aforementioned before the Government of India. These  revision  applications  were  heard  and  allowed  by  the  prescribed revisional authority by a common order dated  30th November, 2009, setting aside the impugned orders  and remanding the matters to the State Government to  reconsider the cases in the light of the observations  made in the order passed by the revisional authority.  The  operative  portion  of  the  order  passed  by  the  revisional authority was in the following words:

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“......... 9. After hearing both the sides, we  find that the State Government had recommended  the mining lease applications of the applicant  for  seeking  prior  approval  of  the  Central  Government in line with the policy resolution  dated  22.10.2002.  In  7  cases  the  Central  Government  had  also  accorded  its  prior  approval under Section 5(1) of the MMDR Act,  1957 for the proposal of the State Government  for grant of mining lease for mineral sand in  favour  of  the  revision  applicant.   The  impugned orders have been passed by the State  Government after obtaining the prior approval  of  the  Central  Government  in  7  cases,  the  State  Government  is  required  to  pass  order  under Section 10(3) of the MMDR Act. In all  the 9 cases, including those in which prior  approval  of  Central  Government  has  been  conveyed, the impugned orders passed by the  State Government are against competitive edge  of the mining industry. The policy decision of  the  State  Government  appears  to  be  not  in  consonance with the MMDR Act, 1957 and also  against the National Mineral Policy, 2008.

10. The impugned orders in all the 9 revision  applications  mentioned  above  are  set  aside  with a direction to the State Government to  reconsider nil 9 cases in the light of the  discussions  made  in  para  9  above  and  pass  appropriate orders accordingly.

Sd/- (R. Raghupathi)

Joint Secretary and  Legal Advisor

Sd/- (Ajita Bajpal Pande)

Joint Secretary  (Mines)”

4. Upon remand, the Government of Kerala once again  examined the matter and by an order dated 15th December,  2010  rejected  all  the  applications  filed  by  the  respondents on the ground that although, as per Entry

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54  List-I  (Union  List),  Schedule  VII  of  the  Constitution of India, the Parliament is competent to  make  laws  for  regulation  of  mines  and  mineral  development  to  the  extent  such  regulation  and  development is declared by the Parliament by law to be  expedient  in  public  interest,  yet,  the  power  of  granting mining leases for mining minerals vested only  in the State Government under Section 10 of the Act  aforementioned. The Government referred to and relied  upon its own industrial policy of 2007 according to  which  mining  and  exploitation  of  minerals  were  permissible  only  through  State/Central  Public  Sector  Undertakings in order to restrict indiscriminate mining  and  exploitations  of  minerals  having  regard  in  particular  to  the  geographical  and  ecological  conditions as well as the density of the population in  the State of Kerala. The State Government took the view  that it had the power and control over the minerals  lying in the land within its territory and that it was  entitled  to  safeguard  the  same  in  larger  public  interest  by  formulating  suitable  policies  on  the  subject.  Relying upon the decisions of the High Court  of Kerala in Shibu v. Tahsildar [1993 (2) KLT 870] and

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Gem Granites v. State of Kerala and Ors. [2006 (2) KLT  899] the Government declared that as the owner of the  minerals  lying  in  the  land  within  its  territorial  limits it was entitled to determine in public interest  that  mining  and  exploitation  of  minerals  will  be  permitted  only  through  State/Central  Public  Sector  Undertakings. The State Government insisted that such a  policy was not contrary to the Act nor did it suffer  from any constitutional infirmity. It also relied upon  the fact that minerals in question were categorised as  Atomic Minerals as per Part-B of the First Schedule to  the Act aforementioned. The Government declared that  environmental  protection  being  one  of  its  constitutional mandates, any decision that may affect  environment or sections of people living in the coastal  areas or which may affect environmental conditions in  those areas cannot be said to be in public interest.  

5. Aggrieved  by  the  order  passed  by  the  State  Government, the respondent-company filed Writ Petitions  No.34345 of 2010, 34346 of 2010 and 5420 of 2011 before  the High Court of Kerala inter alia praying for a writ  of  mandamus directing  the  State  to  implement  the

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revisional order issued by the Government of India and  grant in favour of the respondents mining leases in  respect of all the areas which were the subject matter  of the said order. The respondents also prayed for a  declaration to the effect that the order passed by the  Central  Government  in  exercise  of  its  powers  under  Section 30 of the Act aforementioned was binding upon  the State Government and that any policy decision by  the State Government contrary to the said decision will  not  affect  the  rights  of  the  respondents  to  obtain  mining leases for the areas applied for. The respondent  also  prayed  for  a  mandamus directing  the  State  Government to forward to the Government of India for  approval all the mining lease applications made by the  respondent-Company which had not so far been forwarded  for such approval.  

6. By an order dated 21st February, 2013 passed by a  Single  Judge  of  High  Court  of  Kerala,  the  Writ  Petitions mentioned above were allowed in part by the  High Court inasmuch as the order passed by the State  Government was quashed and the matter remitted back to  the  Government  to  pass  orders  in  the  light  of  the

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observations made by the High Court.  The High Court  quashed the order by which further action in the matter  was stayed by the Government with a direction to the  Government to consider the applications pending with it  in accordance with law. The High Court took the view  that the State Government had not reserved, in terms of  Section 17 A(2) of the 1957 Act, the areas covered by  the applications filed by the respondents and that so  long as no such reservation was made, the direction  issued  by  the  Central  Government  to  the  State  Government to reconsider the applications could not be  negated.  The  High  Court  also  held  that  the  State  Government  had  overlooked  the  provisions  of  the  National  Mineral  Policy,  2008,  which  permitted  facilitation of private entrepreneurs and that since  the  Government  of  Kerala  had  already  exercised  its  discretion in terms of the prevalent Mining Policy and  recommended to the Government of India the grant of  approval  for  mining  leases,  the  rejection  of  the  applications on the basis of a changed policy after the  Government  of  India  had  accorded  sanction  for  the  proposed mining leases was unjustified. The High Court  also took note of the fact that Government of Kerala

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had granted mining lease in respect of the area covered  by four other applications and that there could not be  different  policies  in  respect  of  different  areas  covered  by  different  applications  made  by  the  same  Company.  

7. Aggrieved by the order passed by the Single Judge,  the State Government preferred Writ Appeals No.1610,  1611 and 1621 of 2014 which were heard and dismissed by  a Division Bench of that Court in terms of the order  impugned in the present appeals. The High Court, while  doing  so,  held  that  the  State  Government  was  not  justified in declining mining leases on the ground that  it had been simply directed to reconsider the matter.  The refusal of the Government, according to the High  Court, amounted to institutional insubordination. The  appeals were accordingly dismissed with the observation  that  the  State  Government’s  role  in  issuing  the  sanction was minimal, as the subject matter of the law  fell  within  the  domain  of  Central  Government.   The  present  appeals  by  special  leave  question  the  correctness of the above order, as already noted above.

8. The law relating to mines and minerals development

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and  regulation  as  also  the  interpretation  of  the  provisions of the 1957 Act has been the subject matter  of a long line of decisions of this Court.  It is, in  our view, unnecessary to refer to all such decisions as  have  dealt  with  different  facets  of  the  controversy  relating to the powers of the Central Government and  those  of  the  State  Governments  in  relation  to  regulation  and  development  of  mines  and  minerals  including the power to levy taxes, fee and cesses and  royalties.  Decisions  of  this  Court  in  Hingir-Rampur  Coal Co. Ltd. v. State of Orissa  [AIR 1961 SC 459];  State of Orissa v. M.A. Tulloch and Co.  [AIR 1964 SC  1284]; India Cement Ltd. v. State of Tamil Nadu [(1990)  1 SCC 12]; Orissa Cement Ltd. v. State of Orissa [1991  Supp  (1)  SCC  430];  State  of  Orissa   v.   Mahanadi  Coalfields  Ltd.  [1995 Supp (2) SCC 686];  Saurashtra  Cement & Chemical Industries Ltd. and Anr.  v.  Union  

of  India  and  Ors.  [(2001)  1  SCC  91];  and  State  of  Madhya  Pradesh  v.  Mahalaxmi  Fabric  Mills  Ltd.  [1995  Supp(1)  SCC  642] have  elaborately  dealt  with  the  legislative power of the States to levy taxes, fees and  cesses on the minerals regulated by the Act. Dealing  with various hues and colours of such levies this Court

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held  that  once  the  Parliament  declares  it  to  be  expedient in public interest to bring the regulation  and development of mines and minerals under the control  of the Union in public interest, the subject to the  extent laid down by the Parliament comes within the  exclusive  domain  of  the  Parliament  and  that  any  legislation by the State after such declaration that  has  the  effect  of  trenching  upon  the  field,  must  necessarily be unconstitutional.   

9. We are not, in the present case, dealing with a  challenge to the levy of any tax, fee, cess or royalty  nor is the vires of any legislation enacted by the  State  under  challenge  before  us.   We  are,  instead,  examining whether the State Government was justified in  declining  the  applications  for  grant  of  leases  in  favour of the respondent-company on the ground that the  mineral  wealth  found  in  the  coastal  regions  of  the  State was vested in the State Government and that it  was in exercise of its right of ownership over the said  deposits entitled to reserve in its own favour or in  favour  of  State  owned  companies  or  corporations  the  right to exploit such deposits. The State Government as

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noticed in the earlier part of the judgment has, while  declining applications for grant of lease, relied upon  its own policy according to which the mineral deposits  in question are reserved for exploitation by a State  agency only. Two precise questions, therefore, fall for  consideration in the light of the stance taken by the  State Government viz:

(i) Whether the ownership in the mineral reserves  is vested in the State Government; and

(ii)If it is, whether the Government has the right  to  decline  leases  on  the  ground  that  the  minerals or the areas where the same are found  have  been  reserved  for  exploitation  by  government companies or corporations.

10. In  Monnet  Ispat  and  Energy  Limited  v.  Union  of  India  and  Ors.  2012  (11)  SCC  1,  Lodha,  J.,  as  His  Lordship then was, speaking for the Court, held that no  one can claim any right in any land belonging to the  Government or in any mines in any land belonging to the  Government except under the 1957 Act and 1960 Rules nor  can any person claim any fundamental right to a lease  or prospecting license qua any land belonging to the

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Government. The mines and minerals, observed the Court,  within the territory of a State would vest in the State  Government especially when the land where such minerals  deposits are found is owned by the Government as is  also the position in the case at hand.  In fairness to  counsel for the respondents it must be mentioned that  there was no real dispute as to the ownership of the  minerals found in the Government owned land. What was  strenuously  argued  by  learned  counsel  for  the  respondents was that the State Government could not, on  the  basis  of  its  own  mineral  policy,  decline  consideration  to  the  applications  filed  by  the  respondents, when such policy was in conflict with the  mineral policy of the Government of India.  

11. The Mineral Policy 2008 of the Government of India,  inter alia, provides as under:

“4. ROLE OF THE STATE IN MINERAL DEVELOPMENT

The  role  to  be  played  by  the  Central  and  State  Government  in  regard  to  mineral  development has been extensively dealt in the  Mines  and  Minerals  (Development  and  Regulation)  Act,  1957  and  Rules  made  under  the  Act  by  the  Central  Government  and  the  State  Governments  in  their  respective  domains. The provisions of the Act and the  Rules  will  be  reviewed  and  harmonised  with  the  basic  features  of  the  new  National  Mineral Policy. In future the core functions

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of the State in mining will be facilitation  and  regulation  of  exploration  and  mining  activities  of  investors  and  entrepreneurs,  provision  of  infrastructure  and  tax  collection.   In  mining  activities,  there  shall be arms length distance between State  agencies  (Public  Sector  Undertakings)  that  mine and those that regulate. There shall be  transparency and fair play in the reservation  of ore bodies to State agencies on such areas  where private players are not holding or have  not applied for exploration or mining, unless  security  considerations  or  specific  public  interests are involved.

xxx xxx xxx  

5.2 While  these  Government  agencies  will  continue  to  perform  the  tasks  assigned  to  them for exploration and survey, the private  sector would in future be the main source of  investment in reconnaissance and exploration  and  government  agencies  will  expend  public  funds primarily in areas where private sector  investments are not forthcoming despite the  desirability  of  programmes  due  to  reasons  such as high uncertainties.”      

12. It  would  thus  appear  that  for  the  minerals  in  question there was no reservation made in favour of any  State owned corporation or agency. That is perhaps the  reason why the Government of India had granted approval  to the State Governments recommendations on some of the  applications  filed  by  the  respondents.  The  State  Government  Policy,  however,  runs  contrary  to  the  National  Mineral  Policy,  2008  formulated  by  the  Government of India, Ministry of Mines, in so far as it

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does not permit a mining lease in favour of any entity  other than a State owned corporation or agency.  The  State  Industrial  Policy  -  2007,  relied  upon  by  the  State Government in this regard to the extent it is  relevant for our purposes, is as under:

“12.0 MINING & GEOLOGY

12.1  Intensive  efforts  will  be  made  to  explore and utilize mineral resources of  the State without adversely affecting the  ecology  and  environment.  Mineral  exploration  activities  for  iron  ores,  high grade china clay, bauxite and other  minerals  will  be  streamlined  and  strengthened.

12.2 Mining  of  mineral  sand  will  be  done  through  State/Central  Public  Sector  Undertakings  only.  However  mining  of  minerals will not be permitted in those  areas  where  the  Government  appointed  Expert  Committee  recommendation  against  mining.   Government  will  encourage  manufacture of Value Added Products.

12.3 The Government will conduct a scientific  study on mineral deposits in the State.

12.2.1 Titanium

Considering the rich mineral deposits in  the  State,  a  comprehensive  scheme  to  produce  Titanium  Metal,  Titanium  composites  by  using  State-of-the-art  technology shall be evolved with the help  of  Central  Government  agencies  and  International  organisations.   If  the  potential  of  this  natural  resource  is  used properly and scientifically, it will  immensely  pave  way  for  rapid  industrialisation  of  the  State  as  Titanium  is  a  unique  material  for  strategic applications.  The approach is

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not  to  limit  the  activities  to  manufacturing  alone  but  to  harness  its  vast potential by setting up a chain of  Titanium based industries through forward  integration.  However, utmost care shall  be taken to contain the adverse impact on  environment  by  mining,  processing  and  related  activities  by  adopting  strict  monitoring  and  control  measures.  To  develop a package for making use of the  immense  potential  of  titanium,  support  shall  be  availed  from  national  and  international organisations.”

13. It  is  argued  by  Mr.  Parasaran,  learned  senior  counsel  for  the  appellant  that  the  policy  aforementioned must be taken to be a reservation in  favour  of  the  State  owned  agencies  within  the  comprehension of Section 17A of the aforementioned Act.  Section 17A of the Mines and Minerals (Development and  Regulation) Act, 1957 reads as under:

“17A.  Reservation  of  areas  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

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through a Government company or corporation  owned  or  controlled  by  it,  and  where  it  proposes to do so, it shall, by notification  in  the  Official  Gazette,  specify  the  boundaries of such area and the mineral or  minerals in respect of which such area will  be reserved.

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

(2A)  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, reserves any  area  for  undertaking  prospecting  or  mining  operations, the State Government shall grant  prospecting licence or mining lease, as the  case may be, in respect of such area to such  Government company or corporation:

Provided that in respect of any mineral  specified in Part A and Part B of the First  Schedule,  the  State  Government  shall  grant  the prospecting licence or mining lease, as  the  case  may  be,  only  after  obtaining  the  previous approval of the Central Government.

(2B)  Where  the  Government  company  or  corporation is desirous of carrying out the  prospecting  operations  or  mining  operations  in a joint venture with other persons, the  joint  venture  partner  shall  be  selected  through  a  competitive  process,  and  such  Government company or corporation shall hold  more than seventy-four per cent of the paid  up share capital in such joint venture.

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(2C) A mining lease granted to a Government  company or corporation, or a joint venture,  referred  to  in  sub-sections  (2A)  and  (2B),  shall be granted on payment of such amount as  may be prescribed by the Central Government.

(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.”

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

(i) the reservation can only be with the approval

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of the Central Government and must confine to  

areas not already held under any prospecting  

licence or mining lease;  

(ii) the reservation must be made by a notification  

in the official gazette; and

(iii) the notification must specify the boundaries  

of such areas and the mineral or  minerals in  

respect of which such areas will be reserved.  

15. Mr.  Parasaran  was  unable  to  show  us  any  notification issued by the Government under Section 17A  (2) (supra) nor was it possible for him to exalt the  State’s industrial policy extracted above to the status  of a statutory reservation within the contemplation of  Section 17A.  The net result, therefore, is that while  the power to reserve an area not already held under any  prospecting  licence  or  mining  lease  is  squarely  and  specifically  vested  in  the  State  Government,  the  exercise of that power is not demonstrable in the case  at hand. It is common ground that there is no approval  of the Central Government nor is there a notification  duly  published  in  the  official  gazette  specifying

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boundaries of the reserved area and mineral or minerals  in respect of which such area will be or  has been  reserved.  

16. It  is  well  settled  that  if  the  law  requires  a  particular thing to be done in a particular manner,  then, in order to be valid the act must be done in the  prescribed manner alone  [See: Commissioner of Income  Tax, Mumbai   v.   Anjum M.H. Ghaswala and ors. (2002)  1 SCC 633; Captain Sube Singh and Ors. v. Lt. Governor  of Delhi and Ors. (2004) 6 SCC 440; State of U.P. v.  Singhara Singh AIR 1964 SC 358; and Mohinder Singh Gill  v.  Chief  Election  Commissioner  (1978)  1  SCC  405].  Absence  of  the  Central  Government’s  approval  to  reservation and a notification as required by Section  17A, therefore, renders the State Government’s claim of  reservation  untenable  till  such  time  a  valid  reservation is made in accordance with law. It is trite  that  the  State  Government’s  general  executive  power  cannot be invoked to make a reservation dehors Section  17A. In Sandur Manganese and Iron Ores Ltd.  v.  State  of Karnataka and Ors.  (2010) 13 SCC 1 this Court held  that the State Government is denuded of its executive

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power in the light of Section 2 of the aforementioned  Act.  To the same effect is the decision of this Court  in Bharat Coking Coal Ltd.  v.  State of Bihar (1990) 4  SCC 557, where this Court observed that the State is  denuded of its executive power in regard to matters  covered by the MMDR Act and the Rules. Reference may  also be made to the decision of this Court in State of  Tamil Nadu v. Hind Stone  (1981) 2 SCC 205 where this  Court observed:

“10.  …  The  statute  with  which  we  are  concerned,  the  Mines  and  Minerals  (Development and 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.”

17. The upshot of the above discussion then is that  while the State Government is the owner of the mineral  deposits in the lands which vest in the Government as  is the position in the case at hand, the Parliament has  by reason of the declaration made in Section 2 of the  1957  Act  acquired  complete  dominion  over  the  legislative field covered by the said legislation. The

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Act does not denude the State of the ownership of the  minerals situate within its territories but there is no  manner of doubt that it regulates to the extent set out  in the provisions of the Act the development of mines  and minerals in the country.  It follows that if the  State  Government  proposes  to  reserve  any  area  for  exploitation by the State owned corporation or company,  it must resort to making of such reservation in terms  of  Section  17A  with  the  approval  of  the  Central  Government and by a notification specifying boundaries  of the area and mineral or minerals in respect of which  such  areas  will  be  reserved.  Inasmuch  as  the  State  Government have not so far issued any notification in  terms of Section 17A, the Industrial Policy – 2007 of  the Kerala State Government does not have the effect of  making a valid reservation within the comprehension of  Section 17A.  The High Court was, therefore, justified  in holding that there is no valid reservation as at  present  no  matter  the  government  can  make  such  a  reservation if so advised in the manner prescribed by  law. In other words, the dismissal of this appeal shall  not prevent the State from invoking its right under  Section 17(A)(2) of the Act by issuing notification in

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respect of the mineral deposits in question. There is,  in that view, no reason for us to interfere with the  judgment  and  order  passed  by  the  High  Court.  These  appeals accordingly fail and are hereby dismissed, but  in the circumstances without any order as to costs.                               

................CJI.        (T.S. THAKUR)

..................J.        (V. GOPALA GOWDA)

NEW DELHI;          APRIL 08, 2016.

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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3608   OF 2016 (Arising out of S.L.P. (Civil) No.1490/2015)

STATE OF KERALA & ORS.                         ...Appellants

Versus

M/S. KERALA RARE EARTH & MINERALS LIMITED & ORS.    …Respondents

WITH

CIVIL APPEAL NOS. 3609 & 3610   OF 2016 (Arising out of S.L.P. (Civil) Nos.1840/2015 & 1914/2015)

J U D G M E N T

R. BANUMATHI, J  .   

I  have  gone  through  the  judgment  prepared  by  His  

Lordship Justice T.S. Thakur, Hon’ble the Chief Justice of India.  For  

the reasons, which I have indicated below, I am unable to agree with  

the reasonings and the final decision arrived at by His Lordship.  In  

my  view,  the  judgment  passed  by  the  Division  Bench of  the  High  

Court of Kerala is liable to be set aside and these appeals are to be  

allowed.

2. It is not necessary for me to narrate the facts, as the facts  

are referred to in the judgment of His Lordship Justice T.S. Thakur.   

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3. The points falling for consideration in these appeals are:- (i)  

Whether policy of State of Kerala reserving mining of beach sand along  

coastal  stretches  for  exploitation  of  minerals-ilmenite,  rutile,  

leucoxene,  zircon  (and  sillimanite-  non  scheduled  mineral)  by  

State/Central Public Sector Undertakings is not in consonance with  

the provisions of Mines and Minerals (Development and Regulation)  

Act,  1957  (for  short  ‘MMDR  Act  1957’);  (ii)  Whether  State  

Government’s  policy  of  reservation  for  exploitation  of  beach  sand  

minerals by its Public Sector Undertakings is untenable on the ground  

of non-compliance of the procedure stipulated under Section 17A(2) of  

the MMDR Act and (iii) Whether the High Court of Kerala is right in  

observing that after disposal of the matter by the revisional authorities  

for consideration of the matter afresh, the State Government’s refusal  

of permission is statutory and institutional insubordination.    

4. Mr. Mohan Parasaran, learned Senior Counsel appearing  

for  the  appellant-State  submitted  that  mines  and  minerals  in  the  

territory of the State are vested in the State and it is well within the  

powers of the State to frame a policy relating to mining activities in the  

State  keeping  in  mind  the  public  interest,  welfare  and  ecological  

balance of the State.  It was submitted that the policy of the State  

Government  is  framed  as  the  mining  lease  of  beach  sand  for  

exploitation of mineral involve ecological and environmental sensitive  

issues and national minerals wealth cannot be allowed to be exploited  

by indiscriminate mining by private players. It was further contended

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that the first respondent is a private party where Indian Rare Earths  

Ltd. (Government of India) and Kerala State Industrial Development  

Corporation (Government of Kerala) have minimal percentage of share  

holdings and no right accrued in favour of first respondent for grant of  

mining lease and while so, the High Court was not right in directing  

the State to consider the applications of the first respondent. It was  

further submitted that inasmuch as mining leases are governed by  

statutes  and  M.C.  Rules,  there  is  no  question  of  any  promissory  

estoppel  especially  when  mining  lease  granted  on  15.09.2004  was  

cancelled within ten days i.e. on 25.09.2004.

5. Mr.  Shyam Divan,  learned Senior  Counsel  appearing for  

the first respondent contended that earlier first respondent was found  

to satisfy all the conditions prescribed by the Government of Kerala for  

grant of mining lease as per G.O.Ms.No.102/02/ID dated 22.10.2002,  

however, first respondent’s application was rejected only on the basis  

of subsequent policy of the State. It was contended that in the light of  

constitutional  scheme  and  the  statutory  provisions  of  MMDR  Act,  

State has no legislative competence to frame a policy  dehors  MMDR  

Act and MC Rules and the policy decision of the appellant-State is in  

derogation of the provisions of MMDR Act.  It was submitted that in  

the  light  of  industrial  policy  of  the  Central  Government  permitting  

private players in the exploitation of beach sand mineral, the State  

Government  has  no  competence  to  frame  any  rule  or  policy  in  

contravention  of  the  policy  of  the  Central  Government.  It  was

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contended that if the State desired to reserve the exploitation of the  

beach sand minerals in any area, the State should have followed the  

prescribed  procedure  under  Section  17A(2)  and  the  procedure  

stipulated under the Statute cannot be thwarted under the guise of  

policy of the State. It was further submitted that in exercise of power  

under  Section  30  of  the  Act,  the  Central  Government/  Revisional  

Authority  directed  the  State  to  reconsider  the  matter,  the  State  

Government was not justified in again rejecting the applications and  

the High Court rightly directed the State to consider the applications  

of the first respondent for grant of mining lease.  

6. I  have  carefully  considered  the  rival  submissions  and  

perused the impugned judgment and material on record.  

7. In the federal structure of India, State Governments are the  

owners of the mines and minerals located within the territory of the  

State concerned. In  Amritlal  Nathubhai  Shah &  Ors.  v.  Union  

Government of India & Anr., (1976) 4 SCC 108, while dealing with the  

scope  of  the  MMDR  Act  1957,  this  Court  held  that  the  State  

Government is the owner of minerals within its territory and minerals  

vest in it and there is nothing in the MMDR Act or the MC Rules to  

detract from this basic fact.    

8. Although, mineral wealth vests with the State Government,  

yet  the  subject  of  regulation of  mines  and mineral  development  is  

covered under Seventh Schedule of the Constitution of India.  In order  

to appreciate this, it is necessary to refer to few entries in the Seventh

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Schedule of the Constitution.  Entry 54 of List I of Seventh Schedule  

reads as under:-

List  I-Union  List  Entry  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.

Entry 23 of List II reads as under:-

List  II-State  List  Entry  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.   

By a reading of Entry 23 of List II, it is clear that Entry 23 is subject  

to the provisions of List I with respect to regulation and development  

of  mines and mineral  development under the control  of  the Union.  

Section 2 of the Act makes a declaration 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  

provided in the said Act.  It will therefore be seen, to the extent control  

of regulation of mines and mineral development is taken over by the  

Union under the law made by Parliament declaring that it is expedient  

in the public interest to do so,  the scope and ambit of Entry 23 of List  

II is cut down to that extent.  This would appear to be clear on a plain  

construction of Entry 54 of List I and Entry 23 of List II.  

9. Considering the scope of Article 246 of the Constitution of  

India and the wording of the above entries in Seventh Schedule to the  

Constitution and the scope, purpose and the effect of the State and  

the Central Legislations, in State of Orissa And Anr. vs. M.A. Tulloch &  

Co., AIR 1964 SC 1284, this Court held as under:-

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“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 Schedule VII 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:

‘246. Subject-matter of laws made by Parliament and  by  the  legislatures  of  States.—(1)  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:

‘246. (3) 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 Schedule VII, Entry 23 of the State List vests in the  State Legislature power to enact laws on the subject of ‘regulation  of  mines and minerals  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  minerals  development’  is  plenary.  The  relevant  provision in List I is, as already noticed, Entry 54 of the Union List.  It  may  be  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:

‘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.’

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

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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.” (emphasis supplied)

10. The policy of the State and impugned order of the State  

dated 15.12.2010 which state that the exploitation of the beach sand  

mineral would be done by the Public Sector Undertakings has to be  

examined in the light of the provision of the MMDR Act 1957 and MC  

Rules  1960.   MMDR  Act  1957  was  enacted  to  provide  for  the  

regulation  of  mines  and  oil  fields  and  for  the  development  of  the  

minerals. The declaration contained in Section 2 of MMDR Act speaks  

of taking under the control of the Union the regulation of mines and  

the development of minerals to the extent provided in the MMDR Act.  

In Section 3, the words “Minerals”, “Mineral Oils”, “Minor Minerals”  

have been separately defined. The MMDR Act, 1957 mainly deals with  

general  restrictions  on  prospecting  and  mining  operations  and  the  

rules and procedures for regulating grants of prospecting licences and  

mining leases. State Governments are competent to give licences for  

prospecting  and  for  granting  mining  leases.   The  Act  specifically

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provides that in the case of minerals included in the First Schedule to  

the Act, the State Governments shall not grant or renew, prospecting  

licences or mining leases without the prior permission of the Union  

Government.  Sections 4 to 12 of the Act deal with the conditions and  

procedures  and  other  allied  matters  regarding  the  prospecting  or  

mining operations under licence or lease.  Sections 13 and 13A deal  

with the rule making power of the Central Government. It is however,  

significant that Section 14 provides that Sections 4 to 13 of the Act  

shall not apply to minor minerals.  Further, Section 15 provides that  

the  State  Governments  may  by  notification  in  the  Official  Gazette  

make rule  for regulating the grant of  quarry-lease,  mining-lease or  

other mineral concessions in respect of minor minerals and for the  

purposes connected therewith. Section 17 confers special powers on  

Central Government to undertake prospecting or mining operation of  

certain  lands.  Section  17A  inserted  by  Act  37  of  1986  (w.e.f.  

10.02.1987)  deals  with  reservation  of  area  for  purposes  of  

conservation of any mineral.  Section 17A (2) deals with the power of  

the State Government with the approval of the Central Government to  

reserve any area not already held under the prospecting licence or  

mining lease by Government Companies.  Section 30 deals with power  

of revision by the Central Government.

11. Comprehensive  view  of  the  statutory  framework  with  

regard  to  regulation  of  mines  and  minerals  development,  role  and  

power of  the State  Government vis-à-vis   the power of  the Central

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Government has been elaborately dealt with by this Court in Monnet  

Ispat And Energy Limited v. Union of India And Ors.,    (2012) 11 SCC  

1. Observing that the State Government has the paramount right over  

the  mineral,  State’s  ownership  of  mines  and  minerals  within  its  

territory remains untouched by MMDR Act 1957 except to the extent  

provided in the Act, in para (138),  it was held as under:-

“138. ……. the  declaration made by Parliament in Section 2 and  the  provisions  that  follow  Section  2  in  the  1957  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 the 1957 Act that  has not been done.  There is nothing in the 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 the provisions of the 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 the  powers of the State Legislatures under List II Entry 18. As noted  above, the declaration made by Parliament in Section 2 of the 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.”  (Underlining added)

12. State Government’s ownership in mines and minerals in its   

territory and power of the State to grant or refuse application for mining  

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on  the  ground that  the land in  question is  not  available  in  view of   

reservation  of  area  by  the  State  for  exploitation  of  the  minerals   

resources in the public sector whether permissible under MMDR Act:- In  

grant of mining lease of a property of the State, the State Government  

has the 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. No one has a vested right for grant of mining  lease  

vide  M.P. Ram Mohan Raja v.  State of T.N. & Ors.,  (2007) 9 SCC 78  

and State of  Tamil Nadu v. Hind Stone & Ors., (1981) 2 SCC 205.  The  

State has a discretion to grant or refuse to grant any mining lease.  No  

person can claim any right in any land belonging to the Government  

or in any mines except the rights created under MMDR Act and the  

Mineral  Concession  Rules.   But  State  Government  being  a  public  

authority, its acts are necessarily regulated by rules and regulations.

13.  In Dharambir Singh v. Union of India & Ors., (1996) 6 SCC  

702,  a three-Judge Bench of this Court while considering   Sections  

10(3)  and  11(2)  of  the 1957 Act  observed as under:-              

“4. … 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  requirements of the law…”  

This was reiterated in Monnet Ispat and Energy Ltd. vs. Union of India   

and Others (2012) 11 SCC 1.

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14. Whether the State Government has the competence to   

frame  policy  under  MMDR  Act  and  reserve  the  area  for   

exploitation  of  minerals  in  the  Public  Sector  Undertakings:-  

Contention  of  the  respondent  is  that  policy  decision  of  the  State  

Government has no role to play in a matter over which the decision of  

the  Central  Government  must  prevail  in  the  statutory  and  

constitutional  scheme.   Placing reliance upon the judgment of  this  

Court in the case of  Sandur Manganese & Iron Ores Ltd. v. State of   

Karnataka & Ors., (2010) 13 SCC 1, Mr. Shyam Divan, learned Senior  

Counsel appearing for the first respondent submitted that there is no  

question of the State having any power to frame a policy  dehors the  

MMDR Act and the MC Rules and when the Union List has occupied  

the entire field, executive power of the State cannot extend to matters  

over which the State Legislature has no power to legislate.     

15. Section 17A deals with the reservation of area by Central  

Government  or  by  the  State  Government  for  the  purpose  of  

“conservation  of  minerals”.   By  amendment  Act  37  of  1986  (w.e.f.  

10.02.1987), Section 17A was inserted in the Act.  Section 17A reads  

as under:-  

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

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

16. The  authority  of  the  State  to  make  reservation  of  a  

particular  mining  area  within  its  territory  for  its  own  use  is  the  

offspring  of  the  State’s  authority  of  ownership  over  the  mines and  

minerals. Section 17A(2) reserves the power of the State Government  

with the approval of the Central Government to reserve any area not  

already  held  under  prospecting  licence  or  mining  lease.   Section  

17A(2) uses the words “with the approval of the Central Government”  

and does not use the expression “prior approval”.  In paragraph (160)  

of Monnet Ispat & Energy Ltd. vs. Union of India & Ors., (2012) 11 SCC  

1, it was held that Section 17A(2) does not use the expression “prior  

approval” and I will advert to this aspect a little later.

17. Re. Contention: State has no legislative competence to  

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frame Industrial Policy reserving area for exploitation of beach  

sand minerals by Public Sector Undertakings in derogation of   

the  National  Policy  which  encourages  private  participation:-  

India  has  large  reserves  of  beach  sand  minerals  in  the  coastal  

stretches  around  the  country.  There  are  substantial  deposits  of  

minerals including ilmenite on Kerala Coast especially in Kollam and  

Alappuzha Districts. The impugned order in G.O.(Rt.)No.1709/10/ID  

dated 15.12.2010 states that “….It has been estimated that out of the   

total ilmenite reserves in the world, 35% is in India and out of this 30%   

is  on  the  coastal  stretches  of  Kollam  and  Alappuzha  Districts…”.  

Realising the potential of this rich mineral deposits in the State, State  

of  Kerala in its  Industrial  Policy-2007,  vide G.O.(P)  No.78/2007/ID  

dated 18.06.2007, took a policy decision that the mining of mineral  

sand  will  be  done  through  the  State/Central  Public  Sector  

Undertakings only.   Relevant portion of  the Industrial  Policy of  the  

State reads as under:-

“12.2. Mining of mineral sand will be done through State/Central  Public Sector Undertakings only. However mining of minerals will  not be permitted in those areas where the Government appointed  Expert Committee recommended against mining. Government will  encourage manufacture of Value Added Products.   12.2.1 Titanium.   Considering  the  rich  mineral  deposits  in  the  State,  a  comprehensive  scheme  to  produce  Titanium  Metal,  Titanium  composites by using state-of-the-art  technology shall  be evolved  with the help of Central Government agencies and International  organizations.  If  the  potential  of  this  natural  resource  is  used  properly  and scientifically,  it  will  immensely pave way for  rapid  industrialization of the State as Titanium is a unique material for  strategic applications.  The approach is not to limit the activities to  manufacturing alone but to harness its vast potential by setting up  a chain of Titanium based industries through forward integration.

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However, utmost care shall be taken to contain the adverse impact  on  environment  by  mining,  processing  and related  activities  by  adopting  strict  monitoring  and  control  measures.  To  develop  a  package  for  making  use  of  the  immense  potential  of  titanium,  support  shall  be  availed  from  national  and  international  organizations.”

18. Mineral  ilmenite,  rutile,  leucoxene,  zircon  and  monazite  

except  sillimanite  and  garnet  have  been  classified  as  “prescribed  

substances” under the Atomic Energy Act 1962.  Under the Central  

Government  Industrial  Policy  1991,  mining  and  production  of  

minerals  classified as  “prescribed substances”  was reserved for the  

public sector. As per 1991 Policy, Indian Rare Earths Limited (IREL), a  

Government of India Undertaking (Department of Atomic Energy) and  

Kerala Minerals and Metals Limited (KMML) a Government of Kerala  

Undertaking were engaged in mining, production and processing in  

Orissa, Tamil Nadu and Kerala.  In 1998, as per the national policy of  

the  Department  of  Atomic  Energy  on  exploitation  of  beach  sand  

minerals,  Central  Government  (Department  of  Atomic  Energy)  has  

taken  a  policy  decision  to  encourage  exploitation  of  beach  sand  

mineral through private sector/judicious mix up of public and private  

sector  participation  (including  foreign  investment).  The  relevant  

portion  of  the  Policy  on  Exploitation  of  Beach  Sand  Minerals,  

Department  of  Atomic  Energy  No.8/1(I)/97-PSU/1422  dated  

06.10.1998, reads as under:-

“Under the Industrial Policy Resolution of 1991, the mining and  production  of  minerals  classified  as  “prescribed  substances”  is  reserved for the public sector.  However, the Policy Resolution also  allows selective entry of the private sector.  At present, the Indian  Rare Earths Limited (IREL), a Government    of India (Department

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of Atomic Energy)  undertaking  and Kerala  Minerals & Metals Ltd.  (KMML),  a  Government  of   Kerala  undertaking  are  engaged  in  mining, production and processing  of in Orissa, Tamil Nadu  and  Kerala.  Demand  for  these  minerals  and/or  their  value-added  products in the domestic as well as international markets and the  potential  available  in  the  country,  setting  up  of  new plants  for  exploitation  of  the  deposits  in  fresh  locations  would  be  in  the  interest  of  the  country.   Production  of  various  value-added  products of these minerals    is, however, highly capital intensive  and it may not be possible for only the PSUs (both Central and  State owned) operating in this field to set up the new plants on  their own.  It is, therefore necessary to allow the private sector set  up such plants within the framework of some broad guidelines.

In view of the background explained above, Government of India  has recently approved a policy to encourage further exploitation of  these mineral deposit through a judicious mix of public and private  sector  participation  (including  foreign  investment).   The  other  objective  of the policy are maximization of value addition to the  raw  minerals  within  the  country,  upgradation  of  the  existing  process technologies to international standards, attracting funds  and  new  technology  necessary  for  this  purpose  through  participation   of  the  private  sector  (domestic   and  foreign),  appropriate dispersal of  the new production facilities with an eye  on regional balance  and regulating the rate of exploitation of the  reserves by the facilities such that the  exploitable reserves last for  about hundred years without,  of  course adversely affecting  the  investors’  techno-economic  considerations  regarding  plant  size,  etc.”

19. Since  the  source  of  the  executive  power  of  the  State  

Government is Article 298 of the Constitution of India, it is clear from  

the proviso to Article 298 that the exercise of  this executive power  

would be subject to legislation by Parliament. The declaration made in  

Section 2 of the MMDR Act has resulted in bringing the entire field of  

regulation of mines and development of minerals under the control of  

the Union to the extent provided in the Act.   Therefore, to determine  

the power of the State that is left  within Entry 23 of List II,  we have  

to work it within the terms of the MMDR Act and MC Rules.  We must  

therefore consider whether there is anything in the MMDR Act or MC

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Rules which takes away the executive power of the State Government  

or  in  any  manner  controls  or  regulates  it.   If  there  is  any  such  

provision in the Act or in MC Rules, then the same would prevail and  

the executive power of the State Government would have to give way  

to it.  Under Section 17A (2) of the MMDR Act, when State has the  

competence to reserve any area for exploitation of minerals by public  

sector  undertakings,  the  policy  of  the  State  of  Kerala  reserving  

exploitation  of  beach  sand  minerals  by  public  sector  undertakings  

cannot be said to be in derogation of the provisions of MMDR Act.

20. Under Section 17A(2) the power is conferred upon the State  

Government with the approval of the Central Government to reserve  

any area for undertaking prospecting or mining operations through a  

government company or a corporation owned or controlled by it.  The  

State Government has the executive power to exploit its own minerals.  

Such power is thus conferred upon the State by the MMDR Act itself.  

Section 17A (2) clearly recognizes the power of the State Government  

to reserve the land for mining or exploitation of the mineral in public  

sector.  While  so,  it  is  difficult  to  comprehend  as  to  how  a  policy  

decision of  the State reserving the area for mining of mineral sand  

through State/Central Public Sector Undertakings can be said to be in  

derogation of MMDR Act.  The policy of the State that the mining of  

minerals sand will be done only through State/Central Public Sector  

Undertakings is well in consonance with the provisions of MMDR Act.  

It can hardly be disputed that the State Government has the executive

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power to reserve any area for exploitation of minerals to public sector  

undertakings.    

21. Observing  that  the  power  of  the  State  Government  to  

reserve  the  area  for  exploitation  of  the  mineral  in  public  sector  

undertakings, authority of the State Government to make reservation  

of a particular mining   of the area is the off-spring of the ownership  

and after referring to various decisions in paragraph (144) in Monnet  

Ispat And Energy Limited (supra), it was held as under:-     

“144 …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 the 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-Rampur Coal Co. AIR 1961 SC 459, M.A. Tulloch &  Co.  AIR  1964  SC  1284,  Baijnath  Kadio  (1969)  3  SCC  838  and  Amritlal Nathubhai Shah (1976) 4 SCC 108. The Bench in Amritlal  Nathubhai Shah was alive to the legal position highlighted by this  Court in Hingir-Rampur Coal Co.,  M.A. Tulloch & Co. and Baijnath  Kadio 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  List  I  Entry  54  in  Schedule VII, 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 the State Legislature’s power under List II Entry 23  was,  thus,  taken  away  and  regulation  of  mines  and  minerals  development had therefore to be in accordance with the 1957 Act  and  the  1960  Rules.  The  legal  position  exposited  in  Amritlal   Nathubhai  Shah 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 Parliament in Section 2 of the  1957  Act,  but  that  cannot  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

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Government to order reservation flows from the fact that it is the  owner  of  the  mines  and the  minerals  within  its  territory.  Such  authority is also traceable to Rule 59 of the 1960 Rules.”

The above ratio laid down in  Monnet Ispat answers the contentions  

raised by the respondent.

22. As per Section 10 of  the MMDR Act,  the power to grant  

mining lease is vested with the State Government.  In recognition of  

the position that the State Government is the owner of the mines and  

minerals,  the  said  Industrial  Policy  of  the  Government  of  India,  

Department  of  Atomic  Energy  dated  06.10.1998  on  exploitation  of  

beach  sand  mineral,  reserves  option  of  the  State  of  selecting  the  

companies/entrepreneurs for setting up of projects/plants.  We may  

usefully refer to relevant portion of the National Policy which reads as  

under:-

“4(g). The provisions of the Atomic Energy Act and the Rules   and  Orders  hereunder  will  continue  to  apply  to  the  exploitation  of  beach sands minerals, including their import/export, to the extent  such minerals are notified as prescribed substances and require  licensing under the said provisions.  The mining leases under the  Mines and Minerals (Regulation & Development) Act will continue  to be granted by the State Government (s) concerned. (j). Subject   to the broad guidelines set  forth in the foregoing  paragraphs,  the  selection   of  companies/  entrepreneurs    for  setting up projects/plants for exploitation of beach sand minerals  in the private/joint sector would be left to the State Government  concerned.   However,  where a central  PSU (at  present  only  the  Indian Rare Earths Limited in this field)  is  one of  the proposed  partners in the joint  venture, the matter would also be referred to  the  Department  of  Atomic  Energy  for  prior  consultation   and  concurrence.”   

23. State Government being owner of the minerals lying  within  

its territory by virtue of the powers conferred under  Sections 10 and  

17A(2)  and  having  regard  to  the  aforesaid  clauses  in  the  National

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Policy  granting  liberty  to  the  State  to  select  the  

companies/entrepreneurs of its choice for setting up projects/ plants  

for  exploitation  of  beach  sand  minerals,  the  policy  of  the  State  

Government, reserving the area for mining of the mineral sand done  

through State/Central Public Sector Undertakings cannot be said to  

be in derogation of MMDR Act and MC Rules. It cannot be contended  

that the State has no legislative competence and the Executive has no  

power to frame a policy reserving the area for exploitation of beach  

sand mineral by State/Central Public Sector Undertakings.  

24. In  Pallava  Granite  Industries  (India)  (P)  Ltd. vs.  Union  of  

India & Ors., (2007) 15 SCC 30,  it was held  that the reservation of  

right in favour of a public sector enterprise was permissible inter alia  

on the ground of welfare requirements of the State.  In Indian Charge  

Chrome Ltd. & Anr. vs.  Union of India & Ors., (2006) 12 SCC 331, it  

was held  that  with  the  approval  of  the  Central  Government  under  

Section 17A(2) the State Government has the power to reserve any  

area not already held under any prospecting licence or mining lease  

for undertaking the exploitation through a government company or  

corporation owned or controlled by it.

25. As per the Industrial Policy 2007 of the State of Kerala, the  

mining and exploitation of beach sand minerals will be permitted only  

through  State/Central  Public  Sector  Undertakings.   The  reason  

behind the said policy decision is to restrict the indiscriminate mining  

and exploitation of minerals by scientific mining taking into account

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the geographical and ecological conditions as well as density of the  

population.  The applications of the respondents are for mining lease  

of  Titanium-bearing  minerals  ilmenite,  rutile,  leucoxene,  zircon  

minerals and as per Part B of the First Schedule to the MMDR Act,  

these minerals are categorized as Atomic Minerals. As per Article 48A  

of the Constitution, the State shall endeavour to protect and improve  

the environment and this is a constitutional mandate.  Kerala being a  

State with long coastal areas and backwaters and State being densely  

populated,  State  Government’s  decision  to  reserve  mining  lease  of  

beach sand minerals to State/Central Public Sector Undertakings is  

stated to be in larger public interest.  Major portion of the land in  

which mining operation sought to be carried out by first respondent is  

Kayal Puramboke and Sea Puramboke Land. The policy adopted by  

the State of Kerala is well in consonance with the National Mineral  

policy as  both are  designed to  encourage  the scientific  methods of  

mining,  beneficiation  and  economic  utilization.  The  National  policy  

specifies  that  there  shall  be  transparency  and  fair  play  in  the  

reservation for one over another in the public interest. Apparently the  

State of Kerala has reserved the area for public sector undertakings in  

order  to  prevent  environmental  degradation  and  to  ensure  the  

maintainability  of  public  health.  The  State  Government  cannot  be  

expected to take any decision which may have adverse health impact  

on the people of the State residing in those areas.  The policy of the  

State is also in consonance with Section 18 of the MMDR Act which

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provides that it shall be the duty of the Central Government to take all  

steps  for  conservation  and  systematic  development  of  minerals  in  

India.  The State Government’s policy is in adherence to sustainable  

development  which  is  a  constitutional  mandate  and  the  State  has  

tried to balance the developmental needs and the need for protection  

of environment and ecology.  Respondent’s contention that the State  

Government’s policy is violative of provisions of the MMDR Act and  

National Policy is wholly misplaced.  The High Court failed to consider  

that the State of Kerala keeping in view its policy decision and the  

importance of environment protection rejected the application moved  

by the first respondent.

26. While allowing the revision filed under Section 30 of  the  

Act, the revisional authority observed that “…The policy decision of the  

State Government appears to be not in consonance with the MMDR Act   

1957  and  also  against  the  National  Mineral  Policy  2008.”    The  

observation that the policy decision of the State Government is not in  

consonance with the MMDR Act 1957 is not correct.  Be it noted that  

the policy of the State of Kerala itself is not under challenge. The State  

Government has passed a reasoned order as to why it has chosen to  

reserve  the  area  for  exploitation  of  mineral  sand  in  public  sector  

undertakings and I do not find any arbitrariness or unreasonableness  

in the policy of the State.   

27. In State of Tamil Nadu vs. Hind Stone & Ors.,          (1981) 2  

SCC 205,  it was observed as under:-

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“10. ….The statute with which we are concerned, the Mines and  Minerals  (Development  and  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.”

28. The decision in Hind Stone case (supra) was referred to and  

quoted with the approval in  Monnet Ispat case in paragraphs (292)  

and (293) which read as under:-

“292. Although in Hind Stone, (1981) 2 SCC 205 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 the MMDR Act which are relevant  for our purpose. Thus in para 6, it was observed as follows: (SCC  p. 213)

“6. …The public interest which induced Parliament to make  the  declaration  contained  in  Section  2  of  the  Mines  and  Minerals  (Development  and  Regulation)  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.”

Again in para 9, this Court observed: (Hind Stone case, SCC pp.  216-17)

“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

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of the Act, it is thought exploitation by the public sector is  best 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 the least, in para 13 this Court observed as follows:  (Hind Stone case, SCC p. 220)

“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.”

293. 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 the 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 the Bihar Land Reforms Act,  1950 which Act is protected by placing it in Schedule IX added by  the First Amendment to the Constitution. While speaking for the  Constitution  Bench  in  Waman  Rao  (1981)  2  SCC  362  Chandrachud,  C.J.  had  the  following  to  state  on  the  correlationship  between  Articles  39(b)  and  (c)  and  the  First  Amendment: (SCC p. 387, para 26)

“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  First and the Fourth Amendments were passed.”

Under the MMDR Act, when State Government has the right to reserve  

any area for exploitation in the public sector, the policy of the State  

cannot be said to be in derogation of the MMDR Act or MC Rules or

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the National Policy.  

29. Re.  Contention.  Procedure  stipulated  under  Section  

17A (2) cannot be thwarted under the guise of State’s Industrial   

Policy:- Learned Senior Counsel for the respondents submitted that  

under Section 17A(2) the State Government with the approval of the  

Central  Government  can  reserve  any  area  for  exploitation  of  the  

mineral  through a public sector undertaking and when the statute  

stipulates  the  procedure  to  be  followed,  then  an  area  could  be  

reserved for exploitation of the mineral by public sector undertakings  

only as per the procedure stipulated in Section 17A(2) and the said  

statutory  procedure  cannot  be  thwarted  under  the  guise  of  an  

industrial policy.  It was submitted that if the State Government really  

intended to reserve any area for exploitation of beach sand mineral in  

public  sector,  the  State  Government  should  have  taken  steps  for  

obtaining approval of the Central Government and having not done so,  

the State cannot under the pretext of policy decision reject the first  

respondent’s application on the ground that the area is reserved for  

exploitation of minerals in the public sector.   

30. Under  Section  17A(2)  of  the  MMDR  Act,  the  statutory  

dispensation  is  the  approval  of  the  Central  Government  and  

reservation of  area by the  State  Government  by notification in  the  

Official  Gazette  specifying  the  boundaries  of  such  area  and  the  

mineral or minerals in respect of which such areas will be reserved.  

No doubt, when the statute stipulates a procedure, it should be done

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strictly  as  per  the procedure stipulated  thereon.  State  Government  

with the approval of the Central Government has the power to reserve  

any  area  for  undertaking  mining  operation  through  public  sector  

undertakings.  Recommendation of the State Government for approval  

of  the  Central  Government  for  such  reservation  and  issuance  of  

notification is only procedural. As discussed earlier, the policy of the  

State that mining of beach and mineral would be done through public  

sector undertakings cannot be said to be  dehors the MMDR Act or  

unreasonable justifying interference by the Court.  

31. Further,  be  it  noted,  the  plea  regarding  thwarting  the  

procedure stipulated under Section 17A(2) of the MMDR Act under the  

guise of industrial policy has not been specifically raised before the  

High Court in the writ petition.  Only during the course of arguments  

in this Court for the first time, such a plea was raised.  Therefore  

steps, if any, taken by the State of Kerala in furtherance of Section  

17A (2) of MMDR Act is not available on record.   

32. That apart, grant of a mining lease to the first respondent  

was  stopped  by  G.O.(MS)112/2004/ID  dated  25.09.2004  and  the  

matter  was  pending  consideration  before  the  revisional  authority-

Central Government from 2007 and the revision came to be dismissed  

on 30.11.2009 directing the State to reconsider the matter afresh.  In  

the meanwhile, industrial policy of the State stating that mining of  

minerals  sand  will  be  done  through  State/Central  Public  Sector  

Undertakings came into force w.e.f. 18.06.2007. After reconsideration,

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the impugned order was passed

by the State Government on 15.12.2010.  Evidently, the State could  

not have made the proposal to the Central Government for reserving  

the area for exploitation of the mineral by Public Sector Undertakings.  

Since  2007,  the  matter  was  sub-judice before  one authority  or  the  

other.  Since the matter was  sub-judice, State could not have taken  

further steps in sending any proposal to the Central Government for  

obtaining the approval.   

33. The  approval  of  the  Central  Government  required  by  

Section  17A  (2)  is  mandatory,  but  nowhere  it  is  stated  that  the  

approval must be sought prior to the reservation.  Prior approval of  

the  Central  Government  before  reserving  any  area  by  the  State  

Government  for  the  public  sector  undertaking  is  not  required.  

Therefore, what logically follows from Section 17A (2) is that the State  

Government may seek approval of the Central Government even after  

the framing of the policy.   Observing  that Section 17A(2) does not  

use the expression “prior approval” in paragraph (160) of Monnet Ispat  

case,  it was held as under:-  

“160. The types of reservation under Section 17-A and their scope  have been considered by this  Court  in  Indian Metals  and Ferro   Alloys Ltd. 1992 suppl. (1) SCC 91,  in paras 45 and 46 (pp. 136- 39)  of  the Report.  I  am in respectful  agreement with that  view.  However, it was argued that Section 17-A(2) requires prior approval  of the Central Government before reservation of any area by the  State Government for the public sector undertaking. The argument  is  founded  on  an  incorrect  reading  of  Section  17-A(2).  This  provision does not use the expression, “prior approval” which has  been used in Section 11. On the other hand, Section 17-A(2) uses  the words, “with the approval of the Central Government”. These  words in Section 17-A(2) cannot be equated with prior approval of

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

Industrial Policy of the State can be said to be a prelude before the  

State makes the proposal  reserving the area for exploitation of  the  

mineral by the public sector undertakings.  Respondent is not right in  

contending that under the guise of policy decision, the State has bye-

passed the procedure stipulated under Section 17A(2).   

34. Under Section 30 of MMDR Act after remittance of the   

matter, the right of the State to reconsider the matter:- While  

allowing the revision petitions filed under Section 30 of  the MMDR  

Act,  the  Central  Government  directed  the  State  Government  to  

reconsider the matter. The High Court faulted the State Government  

that  when  the  revisional  authority  directed  reconsideration  of  the  

matter  based  on  the  “facts  in  issue”,   the  binding  nature  of  the  

decisions of the superior authorities in the hierarchy was not kept in  

view and that  “it is sheer statutory and institutional insubordination”  

on the part of the State.  Placing reliance upon the judgment of this  

Court in  Dharam Chand Jain vs.  State of Bihar, (1976) 4 SCC 427,  

learned  counsel  for  the  appellant  submitted  that  the  State

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Government being “a subordinate authority” in the matter of granting  

mining lease was obligated under the law to carry out the orders of the  

Central  Government.   Relying  upon  the  above  decision,  it  was  

submitted that if the State Government could decline to carry out the  

order of the Central Government, it  would be subversive of judicial  

discipline.   

35. The decision in  Dharam Chand Jain (supra) was rendered  

in the year 1976, that is prior to insertion of Sections 17A (1A) and (2)  

(inserted  and  modified  respectively  by  Act  25  of  1994  with  

retrospective effect 25.01.1994).  In the year 1976, barring Rule 59 of  

MC Rules, there was no provision in the MMDR Act to reserve the area  

for mining operation through the public sector undertakings. Under  

Section 10(3), the State Government has the power to take a decision  

keeping in view the overall interest of the State and also the scientific  

mining of the mineral.  The minerals to be exploited in this case are  

ilmenite, rutile, leucoxene and zircon, which have been classified as  

“prescribed substance” under the Atomic Energy Act 1962.   In the  

order  passed  by  the  State  Government,  State  has  emphasized  the  

need for environmental protection which is the statutory obligation of  

the State and the interest of larger section of people who are residing  

in  the  coastal  areas  of  Kollam  and  Alappuzha  Districts.   Merely  

because the Central Government has directed the State Government  

to reconsider the matter, it was not obligated upon the State to grant  

mining lease in favour of the first respondent.  After remittance of the

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matter, State has the power to consider the applications afresh on its  

own merits and the constitutional mandate.  

36. By perusal of the order dated 30.11.2009 passed by the  

Revisional Authority, it is seen that the order was passed by the Joint  

Secretary (Mines) and Joint Secretary and Legal Advisor.  The order  

only directed the State Government to reconsider the matter. When  

the State Government was required to reconsider the matter,  State  

Government was free to consider the applications and take a decision.  

Though  MMDR  Act  confers  the  revisional  power  on  the  Central  

Government for grant of mining lease for mining minerals other than a  

minor  mineral,  that  does  not  mean  that  the  State  Government  is  

denuded of its power or control over the minerals lying in the land  

within its territory. The State Government is the custodian of the land,  

mines  and  minerals.  Under  Section  10(3)  State  has  the  power  to  

reconsider the applications in the light of its constitutional mandate of  

environmental protection. The     High Court fell in error in faulting  

the State Government and in my view, the State cannot be faulted for  

the alleged “institutional  insubordination”,  as observed by the High  

Court.

37. At this juncture, we may usefully refer to the observation of  

this  Court  that  many  a  times  Central  Government  hears  revision  

petitions through an executive officer and without participation of the  

judicial member. In Sandur Manganese And Iron Ores Ltd. vs. State of  

Karnataka & Ors., (2010) 13 SCC 1  para (95), it was held as under:-

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“95. It is also brought to our notice that as on date the Central  Government  hears  revision  petitions  through  an  executive  officer and without participation of a judicial member. It is also  pointed out that the exact procedure of the Revisional Tribunal  has kept changing over the last few months. It is clear that it  would not be an independent and efficacious alternative forum  in terms of the guidelines laid down by the Constitution Bench  in  Union  of  India v.  Madras  Bar  Assn.(2010)  11  SCC  1  As  observed  by  the  three-Judge  Bench  of  this  Court  in  Indian  Charge Chrome Ltd.(2006) 12 SCC 331, when there was no valid  recommendation by the State Government for the grant of lease,  there cannot be any valid approval of the Central Government  relying on the defective recommendation.”

38. In  the  present  case,  Joint  Secretary  (Mines)  and  Joint  

Secretary  and Legal  Advisor  have  passed the  order  in  the  revision  

petition.  By allowing revision petition, Central Government directed  

the State to reconsider the matter.  As noticed earlier, National Policy  

on Exploitation of Beach Sand Minerals issued by the Department of  

Atomic  Energy  reserves  liberty  to  the  State  for  selection  of  

Companies/Entrepreneurs  for  setting  up  of  projects/plants  for  

exploitation of beach sand minerals. Grant or refusal of mining lease  

and  mining  of  minerals  involves  considerable  high  stakes  both  in  

terms of commercial value and the fact that such a decision will have  

impact on the concept of mineral development, it is for the State to  

exercise its discretion either to grant or refuse mining lease.   

39. Plea  of promissory  estoppel and  legitimate  

expectation:- First respondent raised the plea of promissory estoppel  

and legitimate expectation.  It  was submitted that State has granted  

approval  for  mining  by  its  order  dated  15.09.2004  and  the  same  

cannot be supplanted by purportedly changing the policy.  Learned

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Senior Counsel for the first respondent submitted that on the basis of  

representations  on  the  part  of  the  State  Government,  the  first  

respondent  had expended an amount  in  excess of  rupees  eighteen  

crores  inter-alia  for  the  project  including  substantial  amounts  for  

acquisition of mineral bearing lands for mining beach sand minerals  

and by doing so, first respondent has altered its position irretrievably  

to its prejudice.  

40. It is well settled that no one has legal or vested right for the  

grant of mining lease. Mere disappointment of expectation cannot be a  

ground for interfering with the policy of the State reserving the areas  

for exploitation of beach sand mineral by State/Central Public Sector  

Undertakings. After referring to various judgments on the doctrine of  

promissory estoppel, in Monnet Ispat case, this Court has summarized  

the principles in paragraph (182) as under:-

“182.1. 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. 182.2. 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

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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. 182.3. 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. 182.4. 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. 182.5. 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. 182.6. 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. 182.7. 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.”

41. No doubt  by  G.O (MS)  No.105/04/ID dated  15.09.2004,  

State  has  sanctioned  mining  leases  to  the  first  respondent.   But  

within ten days by order dated 25.09.2004, the mining lease granted  

to first respondent was stopped on the ground that the detailed study  

on the environment impact will be undertaken before taking further  

action in the matter.  The rule of promissory estoppel can be invoked  

only if on the basis of representation made by the Government, the  

party has substantially altered the position.  Within short time of ten

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days, in my view, first respondent could not have altered its position  

so as to invoke the doctrine of promissory estoppel.

42. State of Kerala has the legislative competence to take the  

policy decision reserving the area for exploitation of minerals by the  

public sector undertakings and the said policy cannot be said to be  

dehors the MMDR Act 1957 and MC Rules.  The High Court fell in  

error in not appreciating the policy of  the State in the light of  the  

constitutional mandate and the decision taken by the State for the  

welfare of the State and exploitation of the mineral by scientific mining  

by public sector undertakings.

43. In the result, the impugned common judgment of the High  

Court is set aside and these appeals are allowed.  No order as to costs.

..……………………J.               (R. BANUMATHI)   

        New Delhi; April 8, 2016

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REPORTABLE    IN THE SUPREME COURT OF INDIA   CIVIL APPELLATE JURISDICTION

Civil Appeal NO.3608 of 2016 (Arising out of SLP(C) No(s). 1490 of 2015)

STATE OF KERALA & ORS.                             Appellant(s)                                 VERSUS M/S KERALA RARE EARTH & MINERALS LIMITED & ORS.    Respondent(s)

WITH Civil Appeal NO.3609 of 2016

(Arising out of SLP(C)No.1840 of 2015) AND

Civil Appeal NO.3610 of 2016 (Arising out of SLP(C)No.1914 of 2015)

O R D E R

In view of the majority of opinion, these appeals fail and  

are hereby dismissed.

.....................CJI. (T.S. THAKUR)

......................J. (V.GOPALA GOWDA)

......................J. (R.BANUMATHI)

NEW DELHI DATED 8th APRIL, 2016.