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CASE NO.:

Appeal (civil) 8501 of 2002

PETITIONER:

M/S INDIAN CHARGE CHROME LTD. & ANR

RESPONDENT:

UNION OF INDIA & ORS

DATE OF JUDGMENT: 11/12/2006

BENCH:

CJI Y.K. SABHARWAL,C.K. THAKKER & P.K. BALASUBRAMANYAN

JUDGMENT:

J U D G M E N T

WITH

CIVIL APPEAL NOS.8502/2002, 6787/2004, 6788/2004,

TRANSFERRED CASE NOS.9/2002, 21/2005 AND

TRANSFER PETITION (c) NOs.928/2005,

701/2005, 932/2005 and 446/2005

P.K. BALASUBRAMANYAN, J.

1. M/s Indian Charge Chrome Limited (hereinafter

referred to as, "I.C.C.L.") has challenged the decision of the

Orissa High Court in O.J.C. No. 1830 of 1999 in Civil Appeal

Nos. 8501 and 8502 of 2002. In Transferred Case (C) No. 9 of

2002, which was withdrawn to this Court from the High Court

of Delhi, the same Company had challenged by way of C.W.P.

No. 4230 of 2001 the grant of approval for what it called an

out of turn lease to M/s Nava Bharat Ferro Alloys Ltd.

(hereinafter referred to as, "Nava Bharat"), respondent No. 3 in

the Civil Appeals. Whereas, the Writ Petitions in the Orissa

High Court challenged the recommendation of the State

Government, the Writ Petition in the Delhi High Court

challenged the grant of approval by the Central Government to

the lease in favour Nava Bharat.

2. M/s GMR Technologies & Industries Limited

(hereinafter referred to as, "GMR") filed O.J.C. No. 2236 of

2002 in the High Court of Orissa challenging the decision of

the State Government to grant a lease of the extent of 436.295

hectares to the Orissa Mining Corporation Limited (hereinafter

referred to as, "OMC") against a recommendation to grant a

lease to it of an extent of 43.579 hectares out of it. The said

Writ Petition was allowed by the High Court of Orissa and the

said decision is challenged by OMC in C.A. No. 6787 of 2004

and in C.A. No. 6788 of 2004.

3. M/s Jindal Strips Ltd. (hereinafter referred to as,

"JINDAL") challenged in the High Court of Orissa by way of

Writ Petition No. 7575 of 2003 the decision of the State

Government to recommend the grant of the lease in favour of

OMC ignoring its own claim for a lease and the said Writ

Petition was got transferred to this Court and is numbered as

Transferred Case No. 21 of 2005. This case also challenges

the recommendation of the State Government for grant of a

lease to OMC of the remaining extent of 436.295 hectares.

4. The proposal of the State Government to grant a

lease to OMC was also challenged by I.C.C.L. before the Orissa

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High Court in Writ Petition (C) No. 1326 of 2005 and that is

sought to be got transferred to this Court by way of Transfer

Petition No. 928 of 2005. Similarly, M/s Ferro Alloys

Corporation Limited (hereinafter referred to as, "FACOR") also

challenged the recommendation of the State Government for

grant of lease to OMC by filing Writ Petition (C) No. 5960 of

2005 in the High Court of Orissa and the same is sought to be

got transferred to this Court in Transfer Petition (Civil) No. 701

of 2005. Nava Bharat, in its turn, challenged the proposal to

grant a lease to the OMC, in Writ Petition (Civil) No. 6459 of

2005 in the High Court of Orissa and the same is sought to be

got transferred to this Court by way of Transfer Petition (Civil)

No. 932 of 2005. Balasore Alloys Limited, formerly known as

Ispat Alloys Limited (hereinafter referred to as, "ISPAT") filed

Writ Petition (Civil) No. 3767 of 2005 in the High Court of

Orissa challenging the very same proposal to grant a lease to

OMC and that Writ Petition is sought to be got transferred to

this Court in Transfer Petition (Civil) No. 446 of 2005.

5. Thus, the challenges in all these appeals,

transferred cases and the cases covered by the transfer

petitions, are to the proposal for grant of a lease of an extent of

84.881 hectares to Nava Bharat, the denial of a lease to GMR

and the recommendation of the State Government to grant a

lease of the entire remaining extent of 436.295 hectares (which

includes the extent of 84.881 hectares proposed to be leased

out to Nava Bharat) to OMC. Considering that the questions

to be decided in the appeals and transferred cases by this

Court are the same as the ones raised in the writ petitions in

the High Court that are sought to be transferred to this Court,

the transfer petitions are allowed and the cases withdrawn

thereby are also disposed of by this Judgment. Arguments

have been addressed in all the matters.

6. This litigation has had a chequered career. It had

come to this Court on three prior occasions. The facts are

detailed in those decisions in Indian Metals & Ferro Alloys

Ltd. Vs. Union of India & Ors. [(1990) Supp. 2 S.C.R. 27],

Tata Iron & Steel Company Ltd. Vs. Union of India & Anr.

[(1996) Supp. 3 S.C.R. 808] and Ferro Alloys Corporation

Ltd. & Anr. Vs. Union of India & Ors. [(1999) 2 S.C.R. 49].

Still, a few facts may be reiterated. Chromite ore is said to be

a scarce metal ore in India. It is mainly available in the State

of Orissa in the Sukinda Valley. An extent of 1812.993

hectares of land was granted on mining lease to Tata Iron and

Steel Company (hereinafter referred to as, "TISCO") on

22.10.1952. The lease was for 20 years. In the year 1972,

TISCO obtained a renewal of the lease, but the area was

reduced to 1261.476 hectares. This renewal was again for 20

years. Before the expiry of the term, TISCO applied in the year

1991 for renewal of the lease for a further period of 20 years in

respect of the entire extent of 1261.476 hectares. The State

Government recommended the renewal and the Central

Government granted its approval under Section 8(3) of the

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

But, at the instance of some interested persons, the Central

Government reviewed its decision and granted approval for

renewal of the lease only in respect of 650 hectares, roughly

half of the original area. TISCO challenged the said decision to

reduce the extent, by way of a writ petition in the High Court

of Orissa. I.C.C.L., Indian Metals & Ferro Alloys ('IMFA', for

short), JINDAL and ISPAT also filed writ petitions in the High

Court of Orissa challenging the approval for renewal of the

lease to TISCO in respect of an extent of 650 hectares. All

these writ petitions raising a challenge to the decision of the

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Union Government dated 5.10.1993 were allowed by the High

Court, which directed the Union Government to consider the

matter afresh after hearing all those who had filed writ

petitions. The decision of the Orissa High Court was

challenged by TISCO in this Court. This Court dismissed the

appeal filed by TISCO, thus confirming the decision of the

High Court and directed the Union Government to consider

the matter afresh. But pending the proceedings in this Court,

since there was no order of stay passed by this Court, the

Union Government on 17.8.1995, granted sanction for renewal

of the mining lease in favour of TISCO in respect of 406

hectares. The Union Government also directed that the

balance area of 855.476 hectares be distributed by way of

leases among the other claimants in terms of a Committee

report prepared as per the direction of this Court, in an earlier

proceeding.

7. Subsequently, regarding 855.476 hectares

remaining for grant of leases to the applicants other than

TISCO, the State Government recommended to the Union

Government that one-half of the said area could be allotted to

the other four pending applicants and the balance half of the

area of 855.476 hectares can be leased to others who also

required the mineral. This proposal was implemented. After

these four grants, the balance extent left is said to be 436.295

hectares.

8. Meanwhile, FACOR filed Writ Petition No. 12032 of

1997 in the High Court of Orissa challenging the assessment

of its need made by what came to be known as Sharma

Committee constituted as directed by this Court. That Writ

Petition was dismissed by the Orissa High Court on 31.8.1998.

Meanwhile, the State Government set up another Committee,

the Dash Committee, for considering the distribution of the

area of 436.295 hectares, the area remaining out of 855.476

hectares, after the distribution among the four companies.

FACOR challenged the decision of the High Court of Orissa

before this Court. While Dash Committee was considering the

claims of the various applicants, a recommendation was made

by the State Government for grant of a lease to Nava Bharat of

an extent of 84.881 hectares out of the 436.295 hectares in

respect of which claims were being considered by the Dash

Committee. This recommendation was challenged by I.C.C.L.

in the Orissa High Court in O.J.C. 1830 of 1999. Meanwhile,

on 22.3.1999, this Court in the FACOR's appeal upheld the

recommendations of Sharma Committee as also the

recommendation of the State Government dated 29.6.1997

allotting 50% of 855.476 hectares to the four applicants then

claiming and leaving out 436.295 hectares for distribution by

way of lease among other needy entities. This Court directed

that the remaining 436.295 hectares be allotted after the

report of the Dash Committee. It may be noted here that after

Mr. Dash left the scene, the Committee came to be known

after his successor, as the Chahar Committee.

9. The Orissa High Court, meanwhile, dismissed the

Writ Petition, O.J.C. No. 1830 of 1999 filed by I.C.C.L.

challenging the decision recommending an out of turn lease to

Nava Bharat. I.C.C.L., as we have noticed in the beginning,

has challenged that decision in the appeals. Subsequently,

the Orissa Government decided that the balance extent of

436.295 hectares be granted on lease to OMC and that

decision also has been challenged in the High Court and the

High Court held the decision invalid. That decision of the

High Court is also under challenge. The position, therefore,

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now is that the correctness of the decision to grant a lease to

Nava Bharat of 84.881 hectares and the validity of the

recommendation of the State Government to grant a lease of

the remaining area of 436.295 hectares to OMC, are both in

question before this Court. The challenge to the grant in

favour of Nava Bharat is on the basis that Nava Bharat was

nowhere in the picture when the four companies that were

dealt with in the earlier judgments were claiming the grant of

leases and in respect of whom directions were issued by this

Court and there was no reason for ignoring the priority in their

favour and granting a lease out of turn to Nava Bharat

especially in the teeth of the report of Sharma Committee and

the partial implementation of its recommendations by lease of

50% of the areas claimed by the four companies. The decision

to grant the mining lease to OMC was struck down by the

High Court by taking the view that in the light of the earlier

orders of this Court, it was not open to the State Government

to take such a decision. The correctness of the same is also in

question. Thus, we are concerned with the question whether

the decision to grant a lease to Nava Bharat on the facts and

in the circumstances of the case was justified and whether the

proposal of the State Government to grant the balance area to

OMC could be justified. Actually, if the claim of OMC were to

be upheld in the sense that the recommendation of the State

Government for the grant of a lease to OMC in respect of the

balance extent left, is found sustainable, there would be no

need to consider specifically the challenge made by I.C.C.L.

and GMR to the grant of a lease to Nava Bharat. But since the

recommendation of the State Government to grant the lease to

OMC has to have prior approval of the Central Government

and the approval had not yet been granted, that aspect will

also have to be decided on merits. We, therefore, think that it

will be appropriate to consider first, the question whether it

was open to the State Government to make a recommendation

that the balance extent of 436.295 hectares be leased to OMC

in preference to the other private parties who are making

claims for the lease and thereafter consider the challenge

raised to the grant of lease to Nava Bharat.

10. Based on the arguments raised before us, the two

important provisions of the Mines and Minerals (Regulation

and Development) Act, 1957 that fall for our consideration are

Sections 11 and 17A. The challenge to the grant of lease to

Nava Bharat involves interpretation of Section 11 and the role

of the various sub-sections therein. The challenge to the

recommendation of the State Government to grant the balance

extent to OMC involves interpretation of Section 17A and the

nature of power conferred thereunder. What is the effect of

the prior proceedings in this Court will also arise. In the

background facts of this case, Rule 59 of the Mineral

Concession Rules, 1960 has also relevance. This is for the

reason that the area was previously held under lease by TISCO

and it would become available for grant only on compliance

with Rule 59(1) or in terms of Rule 59 (2), whereunder a power

is vested with the Central Government to relax the provisions

of sub-Rule (1).

11. Section 10 of the Act provides for applications for

prospecting licences or mining leases being made to the State

Government by a person interested. Section 11 deals with the

preferential right amongst such applicants for the grant of a

lease. Sub-section (1) of Section 11 confers a preferential right

on a person, who had already been granted a reconnaissance

permit or prospecting licence. We are not concerned with that

provision in this case. Sub-section (2) of Section 11 provides

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that in a case where the Government has not notified a

particular area in the official gazette as being available, and

two or more persons have applied for a mining lease, the

applicant whose application was received earlier shall have a

preferential right to be considered for grant of a mining lease

over the applicant whose application was received later.

According to the proviso, in a case where the State

Government had invited applications, all applications received

during the period specified for the making of such application

and applications which had been received prior to the

publication of the notification inviting applications and which

are pending, shall be deemed to have been received on the

same day for the purpose of assigning priority under sub-

section (2). In other words, all applications received until the

dead line fixed, had to be considered on the same footing. The

further proviso indicates that where such applications are

received on the same day, the Government may take into

consideration the matters specified in sub-section (3) and may

grant the mining lease to such one of the applicants as it may

deem fit. Sub-section (3) sets out the matters to be

considered. They include, the special knowledge or experience

of the applicant, financial resources of the applicant, the

nature and quality of the technical staff employed or to be

employed by the applicant, the investment which the applicant

proposes to make and such other matters as may be

prescribed. Sub-section (4) provides that subject to the

preferential right available to a reconnaissance permit holder

or a prospecting licensee, all applications received pursuant to

a notification by the State Government during the period

specified in the Notification shall be considered

simultaneously as if they all had been received on the same

day and the Government had to take into consideration the

matters specified in sub-section (3) and grant the lease to such

one of the applicants as it deemed fit. Sub-section (5) of

Section 11 has particular relevance in respect of the grant to

Nava Bharat, since Nava Bharat entered the fray only after

this Court had directed that the balance area of 855.476

hectares be allotted to the four applicants other than TISCO

that were in the fray at that stage. We think it appropriate to

set down here, sub-section (5) of Section 11 with the proviso

thereto:

"11 (5). Notwithstanding anything

contained in sub-section (2), but subject to

the provisions of sub-section (1), the State

Government may, for any special reasons to

be recorded, grant a reconnaissance permit,

prospecting licence or mining lease, as the

case may be, to an applicant whose

application was received later in preference to

an applicant whose application was received

earlier.

Provided that in respect of

minerals specified in the First Schedule, prior

approval of the Central Government shall be

obtained before passing any order under this

sub-section."

It is the case of Nava Bharat that though it had applied later,

its application was considered and the lease to it

recommended and got approved in view of the exercise of

power by the State Government under sub-Section (5) of

Section 11 of the Act. We shall consider this aspect at the

appropriate stage.

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12. Section 17A deals with reservation of area for

purposes of conservation. Sub-Section (1) provides that 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 notify in the official gazette such area by

specifying the boundaries thereof and the mineral or minerals

in respect of which such area will be reserved. Sub-section

(1A) of Section 17A enables the Central Government to reserve

any such area for undertaking mining operations through a

Government Company or corporation owned or controlled by

it. Sub-section (2) of Section 17A enables the State

Government, with the approval of the Central Government, to

reserve any area not granted on lease for undertaking

prospecting or mining operations through a Government

company or corporation owned or controlled by it and its right

to notify the same. Since, OMC relies heavily on this

provision, we think it appropriate to set down sub-section (2)

of Section 17A hereunder.

"17A(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."

Sub-section (3) of Section 17A is not relevant for our present

purposes.

13. It is the case of Nava Bharat that the grant to it was

justified in terms of Section 11(5) of the Act and the State

Government was entitled to extend a preference to Nava

Bharat and the decisions of this Court rendered earlier cannot

and did not stand in the way of such exercise of power by the

State Government. The case of those who oppose the grant to

Nava Bharat is that the conditions of sub-Section (5) of

Section 11 have not been fulfilled in the case on hand and

even otherwise, at the present stage, it was not open to the

State Government to act under sub-Section (5) in the light of

the directions contained in Indian Metals & Ferro Alloys Ltd.

Vs. Union of India & Ors. (supra), Tata Iron & Steel

Company Ltd. Vs. Union of India & Anr. (supra) and Ferro

Alloys Corporation Ltd. & Anr. Vs. Union of India & Ors.

(supra) decisions rendered by this Court. Similarly, the case

of OMC is that the power under Section 17A was independent

of any other power, or the power under Section 11 and it was

always open to the State Government, no doubt, with the

approval of the Central Government, to reserve any area that

may be available for exploitation by a corporation owned or

controlled by the Government. OMC was such a corporation

and the State Government having made that recommendation

to the Central Government, it was for the Central Government

to take a decision on the question of approval as contemplated

by sub-Section (2) of Section 17A of the Act and on the grant

of such approval it was perfectly open to the State Government

to grant a lease in respect of the balance 436.295 hectares to

OMC and there was nothing in the prior decisions of this

Court which stood in the way or which could control the

exercise of power, the independent power, by the State

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Government under Section 17A of the Act. The case of those

who oppose the stand of OMC is that in the light of the prior

decisions of this Court and the binding directions issued

therein, and the stand it had adopted earlier, the State

Government could not invoke its power or exercise its right

under Section 17A(2) of the Act at this stage and the Orissa

High Court was right in taking up that position while striking

down the recommendation of the State Government.

14. As a result of the prior directions of this Court, what

has transpired is that out of the 1261.476 hectares earlier

leased to TISCO, a renewal has been granted to it in respect of

406 hectares. Out of the balance extent of 855.476 hectares,

leases of varying extents have been granted to

I.C.C.L./I.M.F.A., JINDAL, ISPAT and FACOR and what is left

is said to be 436.295 hectares. This Court directed in the last

of the decisions that this area had to be distributed in terms of

the recommendations of the Dash Committee, that became

Chahar Committee. It is therefore the case of the applicants

other than OMC that the distribution of this area could only

be in terms of the recommendations of the Chahar Committee.

The Chahar Committee not having recommended the grant of

any extent to OMC, in fact it had rejected the claim of OMC

altogether, it was not open to the State Government to purport

to recommend the grant of a lease of that extent to OMC. It is

the further submission that while making the recommendation

to the Central Government, the State Government had not

disclosed all the relevant facts and the material fact that OMC

was inefficient, was not in a position to exploit the areas

already held by it and that a number of mines under it were

remaining idle had not been brought to the notice of the

Central Government. The Orissa High Court did not go into

the latter question or the scope of the power under Section

17A of the Act, but proceeded on the footing that in the light of

the prior directions of this Court, it was not open to the State

Government to exercise its right or power under Section 17A of

the Act.

15. As we see it, the power under Section 17A is an

independent power. It is not related to the power available

under Section 11 of the Act. It is open to the Central

Government to reserve an area in terms of Section 17A(1) if it

is thought expedient and it is in the interests of the nation or

that it is necessary to conserve a particular metal or ore or the

area producing it. It is also open to the Central Government to

decide that such area should be exploited by a company or

corporation owned or controlled by it. Of course, that

situation has not arisen in this case. Under sub-section (2) of

Section 17A, with the approval of the Central Government, the

State Government may reserve any area not already held

under any prospecting licence or mining lease for undertaking

the exploitation through a Government company or

corporation owned or controlled by it and on fulfilling the

conditions referred to in sub-section (2) and in an appropriate

case, also the conditions of sub-section (3). Again, the

exercise of power by the State Government under sub-section

(2) of Section 17A has no reference to the entertaining of

applications under Section 11 or the preferences available

thereunder. The area in question was under a mining lease to

TISCO and after the mining lease expired, the area of 436.295

hectares had not been leased out to any other person.

According to us, nothing stands in the way of the State

Government seeking the approval of the Central Government

for the exploitation of that area in respect of a precious metal

ore by a Government company or a corporation owned or

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controlled by it like OMC. Therefore, it cannot be said that the

recommendation made by the State Government is per se

invalid or that it is one without authority. On the scheme of

the Act, the decision or recommendation under Section 17A

can be taken or made until the area in question is actually

leased out to any applicant in terms of Section 11 of the Act.

Here, the area had not actually been leased at this relevant

time though a decision has been taken to lease out 84.881

hectares out of it and the power of the State Government

saved by Section 17A (2) of the Act is in no way fettered or

curtailed.

16. In that perspective, the two relevant aspects to be

considered are whether the prior decisions of this Court have

in any way fettered the exercise of that power by the State

Government and whether the decision of the State

Government in that behalf is vitiated for any other reason. On

the first aspect, it is true that this Court accepted the report of

the Sharma Committee and directed that the recommendation

therein be considered for implementation. At that stage, the

State Government allotted 50% of the area available, to the

four entities based on their applications, in partial fulfilment of

the recommendations of Sharma Committee. When the matter

came up again before this Court, this Court ultimately

directed that the balance 50% of the left out area, namely,

436.295 hectares be dealt with on the basis of the report of the

Dash Committee. When this Court made that direction, this

Court was not dealing with any exercise of power by the State

Government under Section 17A(2) of the Act or was not

dealing with the question, in the context of exercise of any

such power. Therefore, the direction to deal with 436.295

hectares on the basis of the recommendations of Dash

Committee, succeeded by Chahar Committee, does not by

itself preclude the exercise of power by the State under Section

17A(2) of the Act to make a recommendation that the

exploitation be left to a corporation owned or controlled by it.

We are therefore not in a position to accept the argument that

the prior decisions precluded the State Government from

invoking its right under Section 17A(2) of the Act. Of course,

the prior approval of the Central Government, that is

necessary, is to be sought and obtained and in that context,

the State Government has moved the Central Government for

approval.

17. What is argued on behalf of GMR is that though the

submission that the power under Section 17A(2) of the Act

could be exercised at any time could be considered sound and

logical, the question in the present case has to be viewed in

the background of events leading to the said decision and the

context in which that decision was taken so as to determine

whether the alleged change of so-called policy is mala fide or

arising out of colourable exercise of power with the sole

purpose of defeating the prior judgments of the court and

especially the direction of the Orissa High Court in favour of

GMR. It is true that on the prior occasions when the dispute

before the High Court and before this Court centered round

the entitlement of various applicants for grant of fresh leases

after the TISCO lease was not renewed in full, the stand of the

State Government was that it would abide by the

recommendations of Dash Committee transformed into

Chahar Committee. But it is difficult to postulate that the

adoption of such a stand in the context of the disputes then

arising, could estop the State from taking a decision under

Section 17A(2) of the Act to recommend to the Central

Government that the compact area left, which was the only

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balance area left, be granted on lease to the Government

controlled Corporation, OMC so as to ensure a fair and just

distribution of the Ore, which was a scarce commodity in the

country. There is no dispute that there were various entities

that needed the ore in question and that some of them had

made requests for grant of leases of varied extents of lands. If

at that stage the Government, after considering what was

contained in the Chahar Committee report itself and the

noting of the concerned Minister, decided to reconsider the

question and take a decision to recommend the grant of the

area without it being fragmented on lease to OMC, it is difficult

to accept the contention that the same must be taken to be

mala fide. The power under Section 17A(2) is a statutory

power and normally there could be no estoppel against the

exercise of statutory power. That apart, though the claims

were being considered as directed by this Court, the various

claimants had not changed their positions or had made any

investments towards mining and in that context, the

contention that the decision that was taken was one in

colourable exercise of power, cannot be accepted. The

considerations relating to environment, relating to

fragmentation and relating to even distribution of the ore to be

extracted for supplies to industries in the country as a whole

are all relevant considerations and it cannot be said that the

decision of the Cabinet dated 27.8.2001 is vitiated by mala

fides or is borne of colourable exercise of power or that it is

irrational.

18. It is argued on behalf of the I.C.C.L. that the

purpose put forward by the State Government for exercise of

power under Section 17A (2) of the Act is not within the

province of that provision since extraction and equitable

distribution of the mineral is not one of the aspects relevant

for exercise of power under Section 17A of the Act. Learned

counsel pointed out that the heading of the Section is

"Reservation of area for purposes of conservation" and

exploitation and distribution is not conservation. Moreover, it

was submitted that the said power under sub-section (1) of

Section 17A of the Act rested with the Central Government

and not with the State Government. There may be substance

in the submission of learned counsel, but what we are

concerned with is the power of the State Government, of

course, with the approval of the Central Government, to

reserve an area for undertaking mining operations through a

Government company or corporation owned or controlled by it.

This is exactly what is sought to be done by the State

Government in this case, of carrying on the mining operations

in the balance area through a corporation owned or controlled

by the State Government. We are therefore of the view that

the recommendation of the State Government for the approval

of the Central Government for leasing out the extent to OMC is

well within the power of the State Government under Section

17A(2) of the Act. The heading of the Section cannot control

the natural effect of sub-section (2) of Section 17A of the Act or

the power conferred by it. That provision deals specifically with

the power of the State Government to carry on mining

operations through a corporation owned or controlled by it.

The said argument cannot also be accepted to invalidate the

decision of the State Government to seek the approval of the

Central Government for grant of lease to OMC of the balance

area left, in a bloc.

19. We also do not find any substance in the contention

that the decision to grant a lease of the remaining extent to

OMC is irrational in the context of the performance of OMC

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and the other attendant circumstances of the case and in the

context of the National Mining Policy. The argument that on

principle the necessity of industries established in Orissa for

captive mining had also been approved and the said aspect

could not be lost sight of while taking such a decision cannot

be the controlling factor. What we find is that the area

available for chromite ore mining has already been divided

among TISCO, the four companies and AIKITH and what is left

is the extent of 436.295 hectares. It is clear that a number of

companies have applied for leases of varying extents from that

remaining extent and if the State Government took a decision

that further fragmentation of the area would not be in the

interests of scientific mining and to ensure even distribution

among the consumers in the country, it is necessary to leave

the mining to a corporation controlled by the Government, it is

difficult to say that the decision is irrational. In a sense, it is a

policy decision and though in a given case this Court could

interfere with a policy decision of the Government, we cannot

say that the present case is one where the decision is so

irrational, unreasonable or patently illegal as to justify

interference by this Court. All industries outside the State of

Orissa also require the precious ore and it is the duty of the

Government to ensure a just distribution at a fair price. In the

circumstances, it is difficult to say that the decision taken to

retain the area in a compact bloc for mining by a Government

controlled Corporation is irrational. We therefore reject this

contention.

20. The contention on behalf of the Companies, that the

Central Government must be taken to have rejected the

approval sought by the State Government under Section

17A(2) of the Act, cannot be accepted. It is seen that the

Central Government took the stand that as the matter was

pending in this Court, it would not be appropriate for it to take

a decision. The application or request of the State

Government is seen to have been returned. Of course, the

Central Government is also entitled to seek further

clarifications or additional facts so as to make up its mind on

the question of approval. As matters stand at this stage, the

Central Government has refused to take a decision one way or

the other on the request of the State Government. It is

therefore not possible to proceed on the basis that the Central

Government has already rejected the request of the State

Government for reserving the area for exploitation by OMC.

21. Then the question is whether there is anything in

the process of decision making by the State Government that

makes the decision itself vitiated. What is contended is that

the Chahar Committee had recommended that the distribution

be made among the various applicants and that OMC was not

eligible for getting a lease of any extent. It was when that

recommendation was put up that the concerned Minister

made a noting indicating a sudden turn around,

recommending consideration of the question whether the

lands or the area available with the State, should also be

divided among the private operators and whether it would not

be in the interests of a just and equitable distribution of the

ore and the protection of the environment, to have the area in

a bloc for being exploited by OMC. It is true that the earlier

stand of the Government was that leases could be granted to

private players including industries established in the State

for captive mining. But, when the recommendation of the

Chahar Committee was put up before him for his final view, it

was open to the Minister concerned to go through the report

and record his views thereon. In fact, Chahar Committee

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report itself had indicated some of these aspects, though it

had overridden them and made recommendations for grant of

leases to the various applicants in the light of the directions of

this Court and the High Court. If a Minister, on going through

the report, feels that the aspects highlighted in the report

themselves would justify the retaining of the resources with

the State so as to ensure a just distribution of the mineral

among the needy and for protection of the environment, in the

absence of any other material, it could not be said that the

recommendation of the Minister was not bona fide or that it

was tainted in any manner by mala fides. It is interesting to

note that Mr. Chahar himself as Secretary of the Ministry

concerned thereafter highlighted the aspects pointed out by

the Minister and recommended in his capacity as Secretary of

the concerned Ministry that it would be appropriate to retain

the area for being exploited by the Government controlled

corporation. The file shows that this noting of the Minister in

the light of the recommendation of the Secretary to the

Ministry was considered by the Cabinet and the Cabinet

approved the noting of the Minister or the course

recommended therein to exploit the mineral through OMC and

not to divide the balance area left with the Government among

various private entrepreneurs. The decision was reiterated by

the Cabinet and a request was made by the State Government

to the Central Government for approval of this proposal.

There is nothing to show that the noting of the Minister was

tainted in any manner or that the subsequent cabinet decision

was vitiated for any reason that could be gone into by the

Court. In a sense, counsel for OMC and the State of Orissa are

right in submitting that it was really a policy decision and the

role of this Court in respect of such a policy decision and its

scrutiny was limited and within the scope of that limited

scrutiny, there was no justification in interfering with the

decision of the Government. Of course, as we have indicated

earlier, it is for the Central Government to give its approval or

not to give its approval to the proposal of the State

Government. The Central Government is yet to take a

decision. Since, we have not reached that stage, we are also

not called upon to pronounce on it at this stage.

22. It is urged that it was a volte-face by the Minister

concerned and what changed in three days between the stand

till then adopted and the note made has not been explained.

What is put forward is that the Chahar Committee report itself

justified such a change in perspective and if the taking of such

a decision of this nature is not precluded by the prior

proceedings, the recommendation of the Minister was a

rational one and the Cabinet was justified in approving it. We

have already held that the orders earlier made by this Court

did not preclude such a decision being taken. There is

nothing to show that the noting was not made bona fide or

that any extraneous consideration influenced it. When the

occasion arose, the Minister made the noting. It put forward a

relevant point of view. There is no merit in the contention that

it was a hurried turn around on the part of the Minister.

23. We are therefore satisfied that the decision of the

State Government to seek the approval of the Central

Government for grant of a lease to OMC, a corporation

controlled by it, could not be held to be invalid.

24. In this context, it was contended that the State

Government had not disclosed the full facts to the Central

Government. Learned Senior Counsel for I.C.C.L. was at pains

to point out that OMC was inefficient; that it had failed to

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exploit the area earlier granted to it on lease; that many of its

mines remain unexploited and that it would be imprudent to

entrust this area also to OMC for mining of chromite ore.

Learned counsel also contended that OMC did not have even

qualified persons at his helm and elsewhere and in that

situation, the recommendation of the State Government must

be found to be imprudent and ineffective. Learned counsel for

the OMC and the State of Orissa sought to controvert these

submissions with reference to certain materials to show that

there was no merit in these charges against OMC. We do not

think that we are called upon to go into this question here. It

is for the Central Government to consider whether all these

aspects are relevant. It has to consider all the relevant facts

while applying its mind to the question of grant of permission

sought for by the State Government in terms of Section 17A(2)

of the Act. It would, therefore, be premature for us to

pronounce on the merits or demerits of the arguments sought

to be raised regarding the efficiency and the competency of

OMC to exploit minerals. But certainly these arguments ---

whether they are relevant or not in the context of Section

17A(2) of the Act, the Central Government will have to decide -

-- should alert the State Government to ensure that

competent, honest and qualified persons are put in charge of

OMC and the requisite expertise obtained for the purpose of

making its working more efficient. This is independent of the

question of approval involved in this case.

25. We find some merit in the contention of learned

counsel for the State and OMC that the fact that the ore is

required by many industries in the country other than the

applicants for leases for captive mining and if the whole area is

divided and given for private exploitation, there may be

difficulty in ensuring equitable distribution of the ore was a

relevant consideration for the State Government in making the

recommendation under Section 17A (2) of the Act. We cannot

certainly say that this aspect is not a relevant circumstance.

Anyway, as we have indicated, it is not for us to pronounce on

it at this stage and that would also be one of the aspects to be

considered by the Central Government when it considers the

request of the State Government for approval under Section

17A(2) of the Act.

26. In our view, the High Court was not right in holding

that what had transpired thus far, or the directions of this

Court earlier made, precluded the State Government from

exercising the power and seeking approval in terms of Section

17A(2) of the Act. As we have held, the State Government

could exercise that power until a grant is actually made since

it is an overriding power. The taking up of a particular stand

earlier, cannot also preclude the exercise of that power.

Whether it has laid itself open to claims for damages by its

prior actions is a different question and that cannot control

the exercise of the power under Section 17A of the Act.

27. Now, we come to the lease proposed to be granted to

Nava Bharat. In view of our upholding the decision of the

State Government subject to approval by the Central

Government, the lease proposed has to be found to be still

born; or that the decision no more survives. But it is

necessary to consider the contentions put forward, since the

question would become relevant if for any reason, the Central

Government chooses not to approve the request or decision of

the State Government to lease the balance extent of 436.295

hectares to OMC.

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28. As regards the allotment to Nava Bharat, we see

considerable force in the submission on behalf of the I.C.C.L.

that the decision to grant lease to Nava Bharat in preference to

the other applicants who were before the Government was

incorrect and calls for interference. On the materials, it is not

established that the State Government exercised its power

under sub-section (5) of Section 11 of the Act. Nava Bharat

was a subsequent entrant into the fray and had claimed the

grant even while the claims of various applicants were being

considered by Dash Committee. Even without sending the

request of Nava Bharat to Dash Committee for consideration

and recommendation, the State Government proceeded to

recommend the grant of a lease to Nava Bharat from out of the

extent available with it. This was a case to which the rule of

preference under Section 11 of the Act as modified by the

earlier orders of this Court applied and there was a preference

available to those who had applied for leases earlier. Of

course, the position had been explained in the first decision in

Indian Metals & Ferro Alloys Ltd. Vs. Union of India & Ors.

(supra). What is the reason that led to overriding the claims of

others is not disclosed. On the materials, it cannot be said

that the conditions of sub-Section (5) of Section 11 are fulfilled

in this case. No special reasons are recorded justifying such

an out of turn grant.

29. If it was a case of consideration of the claims under

Section 11 of the Act, we feel that the State Government was

bound by the directions of this Court issued ultimately in

Ferro Alloys Corporation Ltd. & Anr. Vs. Union of India &

Ors. (supra). The State Government had to proceed on the

basis of the directions contained therein and make allotments

as recommended by the Dash Committee or the successor

Chahar Committee. Of course, the State Government might

have been in a position to forward the application of Nava

Bharat also to the said Committe for consideration and

recommendation and might have thereafter acted on the basis

of recommendations of the Chahar Committee. But that was

not done and the decision to lease to Nava Bharat was straight

away taken. We see some force in the submission on behalf of

I.C.C.L and GMR that no proper reasons are given for

overriding the preferences of others especially in the light of

the directions of this Court while deciding to grant a lease in

favour of Nava Bharat. Notwithstanding the valiant effort in

that behalf made by learned Senior Counsel for Nava Bharat to

salvage the grant made to it, we are of the view that on the

facts and in the circumstances of the case, the decision to

grant a lease to Nava Bharat out of turn was not justified, legal

or proper.

30. When the State Government made the

recommendation for grant of a lease to Nava Bharat, the

infirmities in that recommendation were pointed out by the

Central Government, in its letter dated 27.6.2001. The

violation of Rule 59 was also pointed out. Instead of placing

the letter before the Chief Minister or the Cabinet and

obtaining directions thereon, the Steel and Mines Department

on its own chose to send a letter dated 30.6.2001 purporting

to conform to the requirements. When the matter reached the

Chief Minister and the Cabinet, the decision taken was to

withdraw the earlier request for grant of approval of lease to

Nava Bharat. On the materials, it is clear that the letter dated

30.6.2001 sent by the Secretary of the Steel and Mines

Department was not one consistent with the Rules of Business

framed under Article 166 of the Constitution of India. The

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letter also lost its efficacy in view of the decision taken by the

Cabinet to withdraw the recommendation itself. The position

that emerges is that there was no valid recommendation by

the State Government for the grant of a lease to Nava Bharat

and there was hence no valid approval of the Central

Government. Non-compliance with Rule 59 of the Rules also

vitiated the proposal to lease to Nava Bharat

31. In view of our conclusion that the State Government

was entitled to seek the approval of the Central Government in

respect of the balance extent of 436.295 hectares, in which

was included the proposed Nava Bharat grant, for exploitation

by OMC and since, we are satisfied that the grant to Nava

Bharat cannot be sustained, the proposed grant or grant to it

has to be set aside. We do so. If it is a question of

reconsideration of the applications of various entities for grant

of leases in respect of 436.295 hectares, it would be a case

where the claim of Nava Bharat would also have to be

considered along with the claim of others in the light of the

directions earlier issued by this Court. This contingency may

arise only if the Central Government does not grant approval

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

the Act. To that extent, we allow the appeals of I.C.C.L.

32. Taking note of the circumstances, it is for the State

Government to make a fresh request to the Central

Government in terms of Section 17A(2) of the Act setting out

all the relevant details for consideration of the Central

Government. Thereupon the Central Government will have to

take a decision in terms of Section 17A(2) of the Act and in the

context of Section 17A of the Act and all relevant attendant

circumstances. We make it clear that the prior directions of

this Court or that of the High Court cannot and do not stand

in the way of the Central Government in applying its mind to

the request made by the State Government under Section

17A(2) of the Act and in taking an independent decision

thereon. All that is necessary at the moment is to hold that

the recommendation of the State Government cannot be

rejected by the Central Government on the ground that it has

no freedom or right to take a decision on the request, in view

of the prior orders of this Court or on the ground that

adequate details are not forthcoming. In the latter

contingency, it is for the Central Government to seek such

further details from the State Government as it deems fit and

thereafter to come to a decision.

33. The decisions of the High Court of Orissa are thus

set aside. The appeals are allowed in the manner indicated

above. The State Government is directed to make a proper

request in terms of Section 17A(2) of the Act and the Central

Government is directed to take a decision thereon bearing in

mind all the aspects as indicated hereinbefore. What is to

happen thereafter will depend upon the decision the Central

Government takes and the consequences that flow therefrom.

Those are aspects that will have to be tackled at the

appropriate time, if the need or occasion for it arises.

34. Since, this matter has been pending for years and

what is involved is exploitation of a precious mineral, we direct

the State Government and the Central Government to comply

with the directions we have made expeditiously. The State

Government should send its request within a period of four

months from today with all relevant details and the Central

Government should take its decision on the recommendation

within a period of four months from the date of receipt of the

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recommendation, if necessary, after calling for any further

detail that it may consider relevant.

35. Thus, the appeals of the State of Orissa and OMC

are allowed, that of I.C.C.L. and GMR are allowed to the extent

of setting aside the grant of lease to Nava Bharat and the

Transferred Cases are disposed of in the light of the above

decision. The parties are directed to bear their costs in this

Court.