REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7944 OF 2010

(Arising out of S.L.P. (C) No. 22077 of 2009)

Sandur Manganese & Iron Ores Ltd. .... Appellant(s)

Versus

State of Karnataka & Ors. .... Respondent(s)

WITH

CIVIL APPEAL NOS. 7945-54 OF 2010

(Arising out of S.L.P.(C) Nos. 22943-22952 of 2009)

AND

CIVIL APPEAL NOS. 7955-61 OF 2010

(Arising out of S.L.P.(C) Nos. 24124-24130 of 2009)

J U D G M E N T

P. Sathasivam, J.

1) Leave granted in all the special leave petitions.

2) These appeals seek to challenge the common judgment

and order of the Division Bench of the High Court of

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Karnataka dated 05.06.2009 arising out of Writ Appeal

No. 5084 of 2008 and allied matters and the decision of

the State Government dated 26/27.02.2002 as well as the

Central Government dated 29.07.2003.

3)The appellants in these appeals are Sandur

Manganese & Iron Ores Ltd. (in short “Sandur”) and M/s

MSPL Ltd. The principal respondents are M/s Kalyani

Steels Ltd. (in short “Kalyani”) and M/s Jindal Vijayanagar

Steels Ltd. (in short “Jindal”). Apart from these, the State

of Karnataka and the Union of India are also arrayed as

respondents.

4)Factual matrix:

a) The case of Sandur (Petitioner in SLP (C) No. 22077 of

2009) is as follows:

(i)Shri Y.R. Ghorpade, ex-Ruler of Sandur State, was

granted lease for mining of Iron & Manganese Ores under

Order No. GEO.Ms.068 dated 26.02.1953, for a period of

20 years commencing from 01.01.1954 to the extent of 29

sq. miles, falling within the boundaries of the Sandur

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State. On 18.01.1954, the appellant-Company was

incorporated as a Private Limited Company under the

provisions of the Companies Act, 1956. On

21/23.06.1956, a lease was transferred in favour of the

Company as per Government Order No. I.1432-38

GE43.55-22. On 28.11.1964, the Company was converted

into a Public Limited Company. In 1965, the Company,

with the aim of value addition to Ores mined by the

Company and also to industrial area, set up a 15 MVA

Metal and Ferro Alloys Plant at Vyasankere near Hospet at

a substantial capital cost. In 1980, Sandur also set up

two more 20 MVA Furnaces in the Plant for manufacture

of Ferro-Silicon by entering into an agreement with the

State Government and the Karnataka Electricity Board to

receive power at a viable tariff. On 19.09.1973, upon

applying for renewal of the abovesaid lease, the Company

was allotted an area of 20 sq. miles only instead of 29 sq.

miles which was leased earlier. However, the Company

was further granted renewal of lease for another 1.46 sq.

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miles out of the area held earlier. On the very same date,

the State Government deleted an area of 9 sq. miles from

the appellant-Company’s lease agreement on the ground

that the said area is reserved for exploitation by the

National Mineral Development Corporation (in short

“NMDC”) – a Government of India Undertaking. When the

company noticed that the NMDC did not initiate any

Mining Lease Application on the said area, then on

29.09.1987, it applied for mining lease over an area of 2

sq. miles within the said deleted area. On 25.01.1989, the

State Government rejected the application on the ground

that the area applied for was already reserved by NMDC.

However, NMDC was not granted lease and in 1992, one

Sri H.G. Rangangoud was granted 60 Hectares out of the

same applied area.

(ii)Again, on 24.06.1993, again the Company applied for

grant of lease over an area of 513.16 Hectares within the

area deleted from its original lease but it was rejected by

the State Government on the ground that the area applied

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by them has overlapped with the area granted to one Sri

Rangangoud and nine others. On 11.12.1993, the

Company challenged the above decision of the State

Government by filing a Revision Petition before the

Government of India, Ministry of Coal and Mines, New

Delhi. On 09.04.1999, the Government of India by

holding that the order passed by the State Government

was in violation of Rule 26 (1) of the Mineral Concession

Rules, 1960 (hereinafter referred to as “MC Rules”) and

opposed to the principles of natural justice remanded the

matter to the State Government for early disposal as per

the provisions of Mines & Minerals (Development and

Regulation) Act, 1957 (hereinafter referred to as the

“MMDR Act”) and the Rules framed thereunder. On

26/27.02.2002, the Company got a letter from the State

Government that out of the area of 513.16 Hectares

applied for by it, only an extent of 256 Hectares (640

acres) was available and it could choose either Block A

(168 Acres or 67 Hectares) or Block B (472 Acres or 189

5

Hectares).

(iii)On 13.05.2002, the Company filed a revision petition

before the Government of India against the said decision

of the State Government. On 15.03.2003, the State

Government issued a Notification in exercise of its power

under Rule 59 of the MC Rules reserving the entire area

calling for applications from the general public for grant of

mining leases and by notifying large extent of previously

held areas as available for grant of mines including the

area applied by the appellant-Company. On 16.04.2003,

the appellant-Company, by way of abundant caution,

applied afresh for grant of mining lease over an area of

200 Hectares in the notified area without prejudice to its

rights for consideration of its earlier application dated

24.06.1993. On 29.07.2003, the Government of India

allowed the revision petition filed by the appellant-

Company and directed the State Government to consider

the application dated 24.06.1993 filed by the appellant-

Company on merits, in terms of order dated 09.04.1999 of

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the Revisional Authority and pass a final order in the case.

In spite of this order, the State Government has not

passed any order. On 06.12.2004, a letter was issued by

the State Government seeking approval of the Central

Government for grant of lease to other applicants i.e.

Jindal & Kalyani. Being aggrieved by the said

recommendation, on 11.06.2007, the appellant-Company

filed Writ Petition No. 8971 of 2007 before the High Court.

The learned single Judge clubbed this writ petition along

with W.P. No. 21608 of 2005 filed by another applicant –

MSPL Ltd. On 07.08.2008, the learned single Judge

quashed the Notification dated 15.03.2003 and the Mining

Licences granted in favour of Jindal and Kalyani with

certain observations.

(iv) On 22.08.2008, Jindal-Respondent No.5 herein filed

W.A. No. 5026 of 2008 in the High Court. Being aggrieved

by the order passed by the learned single Judge, Sandur

preferred Writ Appeal No. 5084 of 2008 before the High

Court. By the impugned common order dated

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05.06.2009, the Division Bench of the High Court set

aside the order of the learned single Judge dated

07.08.2008 and upheld the validity of Notification of the

State Government dated 15.03.2003 and the proceedings

dated 06.12.2004 and the consequential approval of the

Central Government were held valid. Aggrieved by the

said order, the appellant-Company has filed S.L.P.(C) No.

22077 of 2009 before this Court.

b) The case of MSPL (Petitioner in SLP (C) Nos. 22943-

22952 of 2009) is as follows:

(i)MSPL Limited filed above SLPs against the common

judgment and order dated 05.06.2009 passed by the High

Court of Karnataka in W.A. Nos. 5024, 5026, 5032, 5052,

5053, 5064-5066, 5077 and 5145/2008 setting aside the

judgment of the learned single Judge dated 07.08.2008 in

the writ petitions.

(ii)On 24.05.2001, MSPL Ltd. made an application to

the Director of Mines & Geology (hereinafter referred to as

“the Mines Director”) for grant of a mining lease over an

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extent of 298.5 Hectares in the area known as Eddinpada

in Kumaraswamy Range of the State of Karnataka which

was part of a mining lease previously held by the

appellant-Company in S.L.P. (C) No. 22077 of 2009. On

30.08.2001, the State of Karnataka requested the Central

Government to relax the conditions set out in Rule 59(1)

in favour of MSPL Ltd. under Rule 59(2). While the matter

was under consideration of the Central Government, one

Ziaullah Sharieff (another applicant for a mining lease)

filed Writ Petition No. 35915 of 2001 (GM-MMS) before the

High Court seeking declaration that he is entitled for grant

of a mining lease in his favour. On 21.12.2001, the

Central Government returned all proposals for grant of

mining lease pending before it to the State Government to

await the report of the Regional Environmental Impact

Assessment of the Bellary-Hospet Region by National

Environmental Engineering Research Institute (NEERI).

(iii) On 13.05.2002, Sandur filed a revision before the

Central Government under Rule 54 of the MC Rules

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challenging the proposal of the State Government dated

30.08.2001, in favour of the MSPL. During pendency of

the said revision, Sandur also filed W.P. No. 22767 of

2002 seeking a mandamus to the Central Government to

consider its revision petition. On 24.10.2002, Jindal

made an application for grant of mining lease over a part

of the same area previously held and surrendered by

Sandur. On 15.03.2003, the State Government issued

Notification informing the general public that the areas

mentioned in the annexure thereof were available for grant

under Rule 59 of the Rules and interested persons were

requested to file applications for grant of mining leases.

On 16.04.2003, pursuant to the said notification, MSPL

made an application for the same area previously held by

Sandur. On 29.07.2003, the Central Government rejected

the revision petition of MSPL. On 20.12.2003, MSPL

made further submissions before the Mines Director. On

30.04.2004, the respondent-Mines Director sent a notice

to the MSPL for making submissions. Again on

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06.10.2004, the Under Secretary to the new State

Government, Mines (C & I Department) issued another

notice under Rule 26(1) of the Rules requiring the MSPL to

appear before the Hon’ble Chief Minister of Karnataka to

make a presentation for sanction of lease. MSPL put-forth

its claim and submitted a detailed presentation to the

Principal Secretary to the Chief Minister. Vide letter dated

06.12.2004, the State Government sought the approval of

the Central Government under Section 5(1) of the MMDR

Act to grant lease to Jindal over an area of 200.73

Hectares and Kalyani over an area of 179.70 Hectares in

respect of a part of the land mentioned in S.No.1 to the

Notification dated 15.3.2003. On 15.12.2004, MSPL made

representations both to the Minister for Mines and to the

Secretary, Department of Mines in the Central

Government against the said proposal. On 21.12.2004, a

further representation was made to the Secretary,

Department of Mines. Against the said approval, two

others preferred writ petitions before the High Court for

11

quashing of the said proposal. MSPL filed application for

impleadment in the said writ petitions and the same was

rejected by the learned single Judge vide order dated

21.07.2005.

(iv) On 12.09.2005, MSPL preferred writ petition being

W.P. No. 21608 of 2005 before the High Court challenging

the recommendation in favour of Jindal and Kalyani. On

05.06.2006/27.06.2006, the Central Government granted

approval to the recommendation dated 06.12.2004 of the

State Government for grant of mining lease in favour of

Jindal and Kalyani. Vide judgment dated 07.08.2008,

learned single Judge of the High Court allowed W.P. No.

21608 of 2005 quashing the recommendation. Against

the judgment of the learned single Judge, Jindal and

Kalyani preferred W.A. Nos. 5026 & 5028 of 2008

respectively, before a Division Bench of the High Court.

MSPL also filed W.A. No. 5057 of 2008 challenging the

same judgment of the learned single Judge save and

except to the extent that the recommendations of the State

12

Government to the Central Government insofar as it

recommended the grant of mining to Jindal and Kalyani

was quashed. A large number of other writ appeals were

also filed, heard together and disposed of by a common

judgment and order dated 05.06.2009.

5)Heard Mr. Nariman, learned senior counsel for

Sandur, Mr. K.K. Venugopal and Mr. Krishnan Venugopal,

learned senior advocates for MSPL, Mr. Harish N. Salve,

learned senior counsel for Jindal, Mr. Dushyant Dave,

learned senior counsel for Kalyani and Mr. Ashok

Haranahalli, learned Advocate General for the State of

Karnataka.

6)Main issues:-

a)Whether the State Government’s recommendation

dated 06.12.2004 and the proceedings of the Chief

Minister are contrary to the provisions of Section 11

of the Act and Rules 59 and 60 of MC Rules and not

valid in law.

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b)Whether the respondent-Jindal’s application dated

24.10.2002 made prior to the Notification dated

15.03.2003 is capable of being entertained along with

the applications made pursuant to the said

notification.

c)Whether the order of the High Court of Karnataka in

Ziaulla Sharieff’s case permit the consideration of the

respondent-Jindal’s application dated 24.10.2002

made prior to the notification dated 15.03.2003.

d)Whether Rule 35 of the MC Rules justify the

recommendation of the State Government in favour of

the Respondents-Jindal and Kalyani.

e)Whether the criterion of “captive consumption”

referred to in Tata Iron and Steel Co. Ltd. vs.

Union of India, (1996) 9 SCC 709, have any

application in this case despite not being one of the

factors referred to in Section 11 (3) of the MMDR Act

or Rule 35 of the MC Rules.

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f)Whether factors such as the past commitments by

the State Government to applicants who have already

set up steel plants, matter for consideration for grant

of lease despite the MMDR Act and the MC Rules

constituting a complete Code.

g)Whether the recommendation in favour of

respondents-Jindal and Kalyani saved by the

operation of the Law of Equity.

h)Whether the learned single Judge as well as the

Division Bench are justified in arriving at such

conclusion.

i)Whether it is advisable to remit it to the Central

Government.

7) Before considering various issues as mentioned above,

let us refer relevant provisions of the Act and the Rules

concerned to the issues in question. The Preamble of the

MMDR Act, as amended by Act 38 of 1999, makes it clear

that it is intended for the development and regulation of

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mines and minerals under the control of Union. The

relevant provisions from the Act are:

“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

herein after provided.

3. Definitions:-In this Act, unless the context otherwise

requires:--

a."minerals" includes all minerals except mineral oils;

b.…….

c."mining lease" means a lease granted for the purpose of

undertaking mining operations, and includes a sub-lease

granted for such purpose;

d.…….

e.…….

f.…….

g."prospecting licence" means a licence granted for the

purpose of undertaking prospecting operations;

h."prospecting operations" means any operations

undertaken for the purpose of exploring, locating or

proving mineral deposits;

(ha) "reconnaissance operations" means any operations

undertaken for preliminary prospecting of a mineral through

regional, aerial, geophysical or geochemical surveys and

geological mapping, but does not include pitting, trenching,

drilling (except drilling of boreholes on a grid specified from

time to time by the Central Government) or sub-surface

excavation;

(hb) "reconnaissance permit" means a permit granted for the

purpose of undertaking reconnaissance operations; and.

11. Preferential right of certain persons.--(1)Where a

reconnaissance permit or prospecting licence has been

granted in respect of any land, the permit holder or the

licencee shall have a preferential right for obtaining a

prospecting licence or mining lease, as the case may be, in

respect of that land over any other person:

16

Provided that the State Government is satisfied that the permit

holder or the licensee, as the case may be,-

(a) has undertaken reconnaissance operations or prospecting

operations, as the case may be, to establish mineral resources

in such land;

(b) has not committed any breach of the terms and conditions of

the reconnaissance permit or the prospecting licence;

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

(d) has not failed to apply for grant of prospecting licence or

mining lease, as the case may be, within three months after the

expiry of reconnaissance permit or prospecting licence, as the

case may be, or within such further period, as may be extended

by the said Government.

(2) Subject to the provisions of sub-section (1), where the State

Government has not notified in the Official Gazette the area for

grant of reconnaissance permit or prospecting licence or mining

lease, as the case may be, and two or more persons have

applied for a reconnaissance permit, prospecting licence or a

mining lease in respect of any land in such area, the applicant

whose application was received earlier, shall have the

preferential right to be considered for grant of reconnaissance

permit, prospecting licence or mining lease, as the case may be,

over the applicant whose application was received later:

Provided that where an area is available for grant of

reconnaissance permit, prospecting licence or mining lease, as

the case may be, and the State Government has invited

applications by notification in the Official Gazette for grant of

such permit, licence or lease, all the applications received

during the period sepcified in such notification and the

applications which had been received prior to the publication of

such notification in respect of the lands within such area and

had not been disposed of, shall be deemed to have been

received on the same day for the purposes of assigning priority

under this sub-section:

Provided further that where any such applications are received

on the same day, the State Government, after taking into

consideration the matter specified in sub-section (3), may grant

the reconnaissance permit, prospecting licence or mining lease,

17

as the case may be, to such one of the applications as it may

deem fit.

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

a.any special knowledge of, or experience in,

reconnaissance operations, prospecting operations or

mining operations, as the case may be, possessed by

the applicant;

b.the financial resources of the applicant;

c.the nature and quality of the technical staff employed

or to be employed by the applicant;

d.the investment which the applicant proposes to make

in the mines and in the industry based on the

minerals;

e.such other matters as may be prescribed.

(4) Subject to the provisions of sub-section (1), where the

State Government notifies in the Official Gazette an area for

grant of reconnaissance permit, prospecting licence or

mining lease, as the case may be , all the applications

received during the period as specified in such notification,

which shall not be less than thirty days, shall be considered

simultaneously as if all such applications have been received

on the same day and the State Government, after taking into

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

grant the reconnaissance permit, prospecting licence or

mining lease, as the case may be, to such one of the

applicants as it may deem fit.

(5) Notwithstanding anything contained in sub-section (2),

but subject to the provisions of sub-section (1), the State

Government may, for any special reasons to be recorded,

grant a reconnaissance permit, prospecting licence or mining

lease, as the case may be, to an applicant whose application

was received later in preference to an application 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.”

8) In exercise of the powers conferred by Section 13 of the

Act, the Central Government framed rules called the

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Minerals Concession Rules, 1960. We are concerned only

with the following Rules:-

“35. Preferential rights of certain persons. – Where two or

more persons have applied for a reconnaissance permit or a

prospecting licence or a mining lease in respect of the same

land, the State Government shall, for the purpose of sub-

section(2) of Section 11, consider, besides the matters

mentioned in clauses (a) to (d) of sub-section(3) of Section

11, the end use of the mineral by the applicant.

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

area –

a)which was previously held or which is being held

under a reconnaissance permit or a prospecting

licence or a mining lease; or

b)which has been reserved by the Government or any

local authority for any purpose other than mining; or

c)in respect of which the order granting a permit or

licence or lease has been revoked under sub-rule (1) of

rule 7A or sub-rule(1) of rule15 or sub-rule(1) of rule

31, as the case may be; or

d)in respect of which a notification has been issued

under the sub-section (2) or sub-section (4) of Section

17; or

e)which has been reserved by the State Government

under Section 17A of the Act

shall be available for grant unless –

(i) an entry to the effect that the area is available for

grant is made in the register referred to in sub-rule

(2) of rule 7D or sub-rule (2) of rule 21 or sub-rule

(2) of rule 40 as the case may be; and

(ii) the availability of the area for grant is notified in

the Official Gazette and specifying a date (being a

date not earlier than thirty days from the date of

the publication of such notification in the Official

Gazette) from which such area shall be available for

grant:

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Provided that nothing in this rule shall apply to the

renewal of a lease in favour of the original lessee or

his legal heirs notwithstanding the fact that the

lease has already expired:

Provided further that where an area reserved under

rule 58 or under section 17A of the Act is proposed to

be granted to a Government Company, no notification

under clause (ii) shall be required to be issued:

Provided also that where an area held under a

reconnaissance permit or a prospecting licence, as the

case may be, is granted in terms of sub-section(1) of

section 11, no notification under clause (ii) shall be

required to be issued..

(2) The Central Government may, for reasons to be recorded

in writing, relax the provisions of sub-rule (1) in any special

case.

60. Premature applications. – Application for the grant of a

reconnaissance permit, prospecting licence or mining lease

in respect of areas whose availability for grant is required to

be notified under rule 59 shall, if -

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

(b) where any such notification has been issued, the period

specified in the notification has not expired, shall be deemed

to be premature and shall not be entertained.”.

9) In the light of the above statutory provisions, let us

consider the issues framed, one by one, and test the

validity or otherwise of the decision of the State

Government as well as the order passed by the learned

single Judge and the Division Bench of the High Court.

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10)As mentioned earlier, by the impugned common

judgment dated 05.06.2009, the Division Bench reversed

the judgment of the learned single Judge and held that

the applications for grant of mining lease made prior to

notification under Rule 59 of the MC Rules could be

considered for grant along with applications filed pursuant

to the notification. In the case on hand, the application

was made by Jindal prior to the notification. The Division

Bench upheld the recommendations dated 06.12.2004 of

the State Government together with the proceedings of the

Chief Minister which were the basis for the

recommendation under Section 5(1) of the MMDR Act to

the Central Government for approval of grant of mining

lease in favour of Jindal and Kalyani. It is seen from the

records that on 24.05.2001, MSPL made an application to

the State Government for grant of mining lease over an

area of 298.5 hectares in Eddinpada area in

Kumaraswamy range of the State of Karnataka and also

sought relaxation of the conditions specified in Rule 59(1)

21

of the MC Rules. This area was previously held under a

mining lease by Sandur. Subsequently, on 24.10.2002,

Jindal also made an application for grant over the same

area. The State Government made a recommendation to

the Central Government for grant of lease to the MSPL and

sought relaxation of the conditions set out in Rule 59(1).

However, it is not in dispute that the Central Government

returned the proposal of the State Government directing it

to await an environmental study being carried out by the

NEERI.

11)The materials placed further show that on

15.03.2003, the State Government issued a Notification

under Rule 59(1) of the MC Rules notifying the availability

of a large area for re-grant of mining lease which was

referred to as the “Held Area Notification”. Pursuant to

the same, MSPL made a fresh application on 16.04.2003

for grant of mining lease over the notified area. Kalyani

and 88 other applicants also applied pursuant to the said

Notification. Admittedly, Jindal did not apply pursuant to

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the “Held Area Notification”, even though some of its sister

concerns applied for the grant. On 06.12.2004, the State

Government made a recommendation to the Central

Government under Section 5 of the MMDR Act for

approval of the proposed grant of mining lease to Jindal

and Kalyani. MSPL and some of the applicants made

representations to the Central Government against the

said recommendation made by the State Government.

Challenging the recommendation dated 06.12.2004 of the

State Government, writ petitions were filed by the

aggrieved companies before the High Court. During the

pendency of the writ petitions, the Central Government

gave its approval for grant of mining lease in favour of

Jindal and Kalyani on 05.06.2006 and 27.06.2006

respectively. By judgment dated 07.08.2008, the learned

single Judge allowed the writ petitions filed by MSPL and

Sandur as well as others and quashed the grant on the

ground among others, that Jindal’s application prior to

the “Held Area Notification” could not have been

23

entertained in view of Section 11(4) of the MMDR Act and

Rules 59 and 60 of the MC Rules. The Division Bench, by

judgment and order dated 05.06.2009, reversed the

judgment passed by the learned single Judge. With this

background, let us discuss the issues formulated above.

Issue (a)

“Whether the State Government’s recommendation dated

06.12.2004 and the proceedings of the Chief Minister are contrary

to the provisions of Section 11 of the Act and Rules 59 and 60 of

MC Rules and not valid in law.”

12)Mr. Nariman and Mr. K.K. Venugopal, learned senior

counsel appearing for the Sandur and MSPL respectively,

by taking us through the entire proceedings of the Chief

Minister, vehemently contended that the State

Government was pre-determined to grant the lease in

favour of Jindal and Kalyani. They also contended that

there is no clear reason as to why Jindal and Kalyani

alone were given preference and the applications of MSPL,

Sandur and others were not considered favourably. They

also highlighted that all that is done is the reproduction of

24

the details mentioned in their applications and at the end,

certain columns were left blank in which the Chief

Minister has filled in by hand, after which he has signed

the proceedings. They also pointed out that though

relevant criteria is provided under Section 11(3) of the Act,

only one criteria, namely, the proposed investment, is

taken into account while evaluating the applicants. It is

their grievance that the special reason mentioned in the

recommendation is only to favour Jindal and Kalyani.

Even if it is so, according to them, the decision of the

State Government is violative of Section 11(4) of the Act

which permits only applications made pursuant to the

Notification to be taken into account and not applications

made prior to the Notification. Both the learned senior

counsel, relying on Rule 35, pointed out that the

recommendations made to justify preference taking into

account past investments by steel companies cannot be

sustained. In any event, according to them, in view of

Section 2 of the Act, State Legislature is denuded of its

25

legislative power to make any law with respect to the

regulation of mines and mineral development. Finally, it

was pointed out that there is no question of framing policy

such as the Karnataka Mineral Policy to give out mining

leases independently of the MMDR Act and the Rules. On

the other hand, Mr. Harish N. Salve and Mr. Dushyant

Dave, learned senior counsel appearing for Jindal and

Kalyani, by drawing our attention to the very same

provisions and the orders of the courts, submitted that the

recommendations made by the State Government is in

terms of the provisions of the Act and Rules and the

Division Bench was right in affirming the same.

13)It is useful to refer notification dated 15.03.2003

issued by the Government of Karnataka which reads thus:

“GOVERNMENT OF KARNATAKA

NO. CI/16/MMM/2003

Government of Karnataka Secretariat

Ms. Building

Bangalore, Dated 15.03.2003

26

NOTIFICATION

It is hereby informed for the mining public that

the area noted in the annexure is available for regrant

under rule 59 of Mineral Concession Rules, 1960.

The application for grant of mining lease shall be

received by the Director of Mines and Geology, No.49,

“Khanij Bhavan”, D.Devaraj Urs Road, Bangalore-01,

after 30 days from the date of publication of the

notification in the Official Gazette. If the day notified for

receiving the application happens to be a Public Holiday

or General Holiday, applications will be received on the

next working day under amended Rules. The sketch of

the area is available for inspection at the office of the

Director, Department of Mines and Geology, Khanija

Bhavan, D.Devaraj Urs Road, Bangalore-01 during

working hours on all working days.

The mining public should note that the availability

of the area published here in is subject to the clearance

from the Revenue Department for mining activities and

compliance of the MM (D&R) Act, 1957 and the

M.C.Rules and all other relevant Acts and Rules by the

applicants. In case the area is found to consist of

Forest Lands, the clearance from the Forest Department

under Section (2) of the Forest (Conservation) Act, 1980

for utilizing the area for non-forest activities should be

obtained by the applicants.

Interested persons are advised to inspect the area

and satisfy themselves about the availability of mineral

deposits (as the area is previously under held. ML/PL

block) and the present status of the land there is before

making application for mining lease.

BY ORDER AND IN THE NAME OF THE

GOVERNOR OF KARNATAKA

(A.B. SIDDHANTI)

Under Secretary to Govt. (Mines),

Commerce and Industries Department.”

27

14)After expiry of the cut-off date, as mentioned in the

said notification, hearing was conducted by the Chief

Minister under Rule 26A of the Rules. The order of the

Chief Minister shows that as per the direction of the High

Court in a writ petition filed by Ziaulla Sharieff, the State

has to consider their applications in accordance with law

along with other applications. It is the claim of the State

that as per the said decision, it was necessary to consider

the applications filed for grant of mining lease over the

area in question before the issue of Notification on

15.03.2003 along with applications received in response to

the said Notification. Para 3 of the order of the Chief

Minister shows that 21 applications were filed for grant of

mining lease over the area in question before the

notification was issued and 90 applications were received

in response to the notification. In all, the Chief Minister

has considered 111 applications for grant of mining lease.

The order further shows that notice under Rule 26(1) of

the Rules was issued to all the applicants to appear for

28

hearing on 12.10.2004 at 4.00 PM to make presentation

for sanction of mining lease in their favour. On

12.10.2004, the hearing was adjourned. According to the

State, applicants were heard on different dates. Out of

111 applicants, 85 applicants attended the hearing and 75

applicants gave their written representations. On

16.10.2004, the hearing was again adjourned, 72

applicants attended and 9 applicants submitted their

written representations. Again, the hearing was held on

25.10.2004, 76 applicants attended and 27 applicants

submitted their written submissions. On 04.11.2004, 16

applicants attended the hearing and 7 applicants

submitted their written submissions.

15)The order of the Chief Minister further shows that out

of 111 applications, 55 are companies/firms and 30 are

individuals. Out of 111 applicants, 11 have given more

than one application in the name of their sister

companies/partnership firms etc. The proceeding further

shows that all applications were examined under Section

29

11(5) of the Act with a view to provide an opportunity to all

the applicants who have filed their applications on

subsequent days i.e. after 16.04.2003. The order further

shows that out of 30 individuals who have applied for

mining lease, only 3 applicants hold mining lease in the

State and the remaining 27 applicants do not hold any

mining lease. Some of the individuals are local people and

have some past experience in mining. Some of them are

qualified engineers. Most of the applicants have indicated

that they would be exporting ore or would be supplying it

to the local market. The order proceeds that none of them

have indicated any proposal for the value addition to the

ore. The Chief Minister, after considering them, do not

merit any consideration for grant of mining lease, rejected

all those applications. It is brought to our notice that no

one from that category challenged the same in the court of

law.

16)After rejecting those applications, the impugned

proceeding shows that a total number of 55

30

companies/firms have applied for mining lease and the

details furnished by them have been incorporated in a

tabular form in para 9. In para 10 of the order, it was

stated that out of 55 companies/firms who have applied

for mining lease, only 12 companies/firms were having

mining lease in the State. Some of the companies have

already established their units in the State and they have

requested the sanction of mining lease for using the ore

for captive consumption and for value addition to the ore.

Some of the firms who are willing to invest huge amounts

in mining industry have indicated that they require the

mines for exporting ore and for supplying it to the local

market. Some of the companies have already established

their units in Karnataka by investing huge amounts and

they are depending upon local market for their raw

material, that is, iron ore. In para 11 of the order, it is

stated that since the request of such of the companies is

for ‘captive consumption’ and for ‘value addition’, they

deserve consideration over others. In para 12, the order

31

refers those who established steel plants in Karnataka.

Finally, after quoting Rule 35 which provides for

preferential rights for certain persons and by arriving at a

conclusion that “it is desirable to allot the mining areas to

applicants who have already established their plants in

the State by investing huge amounts”, and by invoking

Rule 35 of the MC Rules, the Chief Minister recommended

or in other words filled up dotted lines by mentioning

Jindal and Kalyani.

17)It is the grievance of the appellants, namely, Sandur

and MSPL that the proceedings of the Chief Minister

shows that the State Government was pre-determined to

grant the lease in favour of Jindal and Kalyani.

18)A perusal of the proceedings of the Chief Minister

shows that no clear reasons were given to show as to why

Jindal and Kalyani were preferred over other applicants.

There is also no plausible reason why the applications of

the appellants herein were not considered favourably. A

summary of the applications was prepared and at the end

32

certain columns were left blank which the Chief Minister

filled by hand and then signed the proceedings.

19)The evaluation of all 111 applications has been done

in three successive stages in a manner not envisaged by

Section 11. In the first stage of the process, the

applications by individuals were discarded. In the second

stage, those by companies as a whole and in the third

stage, only companies with existing investment in steel

plants out of which Jindal and Kalyani were chosen

without any special or adequate reason. In fact, no such

procedure of three stage consideration or differentiation

between individuals and companies and those companies

with existing investments and those without existing

investment is envisaged in Section 11. As rightly pointed

out by learned senior counsel for the appellants, the

proceedings of the Chief Minister, at no level, consider the

various guiding criteria mentioned in Section 11(3) as

mentioned below:

33

a.“any special knowledge of, or experience in, reconnaissance

operations, prospecting operations or mining operations, as the

case may be, possessed by the applicant;

b.the financial resources of the applicant;

c.the nature and quality of the technical staff employed or to be

employed by the applicant;

d.the investment which the applicant proposes to make in the mines

and in the industry based on the minerals;

e. such other matters as may be prescribed.”

20)It is true that among the criteria mentioned, only one

criteria, namely, “proposed investment” is taken into

account in evaluating some applications. However, as

mentioned above, in the said proceedings, two irrelevant

points were taken into account, namely, (i) whether or not

the applicant holds a mining lease in the State and (ii) the

amount of their past investment in steel plant. It is

equally true that the proceedings recommended in favour

of Jindal and Kalyani was justified by the special reasons

specifically stated at the very end in terms of Section 11(5)

which is reproduced below:-

“(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 application whose

application was received earlier:

34

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.”

A plain reading of the above provision makes it amply

clear that it would apply to favour a later applicant over

an earlier applicant which is relevant only in the event

that the main provision of Section 11(2) relating to

preference of prior applicants applies and not in the case

of notification inviting applications, whether it is under

the first proviso to Section 11(2) or 11(4) under the later

proviso, upon notification, by deeming fiction all

applications are treated as having been received on the

same date.

21)Apart from the above infirmity, the proceedings of the

Chief Minister also violate Section 11(4) of the Act which

reads thus:

“(4) Subject to the provisions of sub-section (1), where the

State Government notifies in the Official Gazette an area for

grant of reconnaissance permit, prospecting licence or

mining lease, as the case may be, all the applications

received during the period as specified in such notification,

which shall not be less than thirty days, shall be considered

simultaneously as if all such applications have been received

on the same day and the State Government, after taking into

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

grant the reconnaissance permit, prospecting licence or

35

mining lease, as the case may be, to such one of the

applicants as it may deem fit.”

The above sub-section permits only the applications made

pursuant to the notification to be taken into account and

not applications made prior to the notification. The

notification referred to in the first proviso to Section 11(2)

is intended only to invite applications in respect of “virgin

areas”. In the case of previously held areas covered by

present notification dated 15.03.2003, applications made

prior to the notification cannot be entertained because

they are premature.

22)We have already adverted to Section 2 of the MMDR

Act, which is a parliamentary declaration, makes it clear

that the State Legislature is denuded of its legislative

power to make any law with respect to the regulation of

mines and mineral development to the extent provided in

the MMDR Act. (Vide State of Orissa vs. M.A. Tulloch

& Co. (1964) 4 SCR 461). In Baijnath Kedio vs. State of

Bihar and Others, (1969) 3 SCC 838, a Constitution

36

Bench of this Court reiterated the above view. Argument

of the appellant in that case was that, apart from the

provisions of the 2

nd

proviso to Section 10 added to the

Land Reforms Act, 1950 in 1964, by Act IV of 1965 and

second sub-rule added to Rule 20 of the Bihar Minor

Mineral Concession Rules, 1964, there is no power to

modify the terms. It was further contended that these

provisions of law are said to be outside the competence of

the State Legislature and the Bihar Government. With

regard to the State Legislature, it was contended that the

scheme of the relevant entries in the Union and the State

List is that to the extent to which regulation of mines and

mineral development is declared by Parliament by law to

be expedient in the public interest, the subject of

legislation is withdrawn from the jurisdiction of the State

Legislature and, therefore, Act 67 of 1957 (MMDR Act)

leaves no legislative field to the Bihar Legislature to enact

Act 4 of 1955 amending the Land Reforms Act. Answering

those questions, the Constitution bench has held thus:

37

“13. …. ….. Entry 54 of the Union List speaks both of

Regulation of mines and minerals development and Entry 23

is subject to Entry 54. It is open to Parliament to declare

that it is expedient in the public interest that the control

should rest in Central Government. To what extent such a

declaration can go is for Parliament to determine and this

must be commensurate with public interest. Once this

declaration is made and the extent laid down, the subject of

legislation to the extent laid down becomes an exclusive

subject for legislation by Parliament. Any legislation by the

State after such declaration and trenching upon the field

disclosed in the declaration must necessarily be

unconstitutional because that field is abstracted from the

legislative competence of the State Legislature. This

proposition is also self-evident that no attempt was rightly

made to contradict it. There are also two decisions of this

Court reported in the Hingir Rampur Coal Co. Ltd. v. State of

Orissa, and State of Orissa v. M.A. Tulloch and Co. in which

the matter is discussed. The only dispute, therefore, can be

to what extent the declaration by Parliament leaves any

scope for legislation by the State Legislature. If the impugned

legislation falls within the ambit of such scope it will be

valid; if outside it, then it must be declared invalid.

14. The declaration is contained in Section 2 of Act 67 of

1957 and speaks of the taking under the control of the

Central Government the regulation of mines and

development of minerals to the extent provided in the Act

itself. We have thus not to look outside Act 67 of 1957 to

determine what is left within the competence of the State

Legislature but have to work it out from the terms of that

Act. In this connection we may notice what was decided in

the two cases of this Court. In the Hingir Rampur case a

question had arisen whether the Act of 1948 so completely

covered the field of conservation and development of

minerals as to leave no room for State legislation. It was held

that the declaration was effective even if the rules

contemplated under the Act of 1948 had not been made.

However, considering further whether a declaration made by

a Dominion Law could be regarded as a declaration made by

Parliament for the purpose of Entry 54, it was held that it

could not and there was thus a lacuna which the Adaptation

of Laws Order, 1950 could not remove. Therefore, it was held

that there was room for legislation by the State Legislature.

38

15. In the M.A. Tulloch case the firm was working a mining

lease granted under the Act of 1948. The State Legislature of

Orissa then passed the Orissa Mining Areas Development

Fund Act, 1952 and levied a fee for the development of

mining areas within the State. After the provisions came into

force a demand was made for payment of fees due from July

1957 to March 1958 and the demand was challenged. The

High Court held that after the coming into force of Act 67 of

1957 the Orissa Act must be held to be non existent. It was

held on appeal that since Act 67 of 1957 contained the

requisite declaration by Parliament under Entry 54 and that

Act covered the same field as the Act of 1948 in regard to

mines and mineral development, the ruling in Hingir

Rampur’s case applied and as Sections 18(1) and (2) of the

Act 67 of 1957 were very wide they ruled out legislation by

the State Legislature. Where a superior legislature evinced

an intention to cover the whole field, the enactments of the

other legislature whether passed before or after must be held

to be overborne. It was laid down that inconsistency could be

proved not by a detailed comparison of the provisions of the

conflicting Acts but by the mere existence of two pieces of

legislation. As Section 18(1) covered the entire field, there

was no scope for the argument that till rules were framed

under that Section, room was available.”

The Constitution Bench after considering Hingir Rampur

Coal Co. Ltd. vs. State of Orissa, 1961 (2) SCR 537 and

M.A. Tulloch (supra) held that in view of the two

undermentioned rulings of this Court and by enacting

Section 15 of Act 67 of 1957, the Union of India has taken

all the power to itself and authorized the State

Government to make rules for the regulation of leases. By

the declaration and the enactment of Section 15, the

whole of the field relating to minor minerals came within

39

the jurisdiction of Parliament and no scope was left for the

enactment of the second proviso to Section 10 in the Land

Reforms Act. The enactment of the proviso was, therefore,

without jurisdiction.

23)In State of West Bengal vs. Kesoram Industries

Ltd. and Others, (2004) 10 SCC 201, after referring to

earlier judgments including M.A. Tulloch (supra) and

Baijnath Kedio (supra), the Constitution Bench held as

under:

“95. …. …. All that the Court has said is that the 1957

enactment covers the field of legislation as to the regulation

of mines and the development of minerals. As Section 2 itself

provides and indicates, the assumption of control in public

interest by the Central Government is on: (i) the regulation of

mines, (ii) the development of minerals, and (iii) to the extent

hereinafter provided. The scope and extent of declaration

cannot and could not have been enlarged by the Court nor

has it been done. The effect is that no State Legislature shall

have power to enact any legislation touching: (i) the

regulation of mines, (ii) the development of minerals, and (iii)

to the extent provided by Act 67 of 1957…. …. ”

24)In the same way, the State is also denuded of its

executive power in regard to matters covered by the

MMDR Act and the Rules. [vide Bharat Coking Coal

Ltd. vs. State of Bihar & Ors., (1990) 4 SCC 557].

40

25) In view of the specific parliamentary declaration as

discussed and explained by this Court in various

decisions, there is no question of the State having any

power to frame a policy de hors the MMDR Act and the

Rules.

26)In State of Assam & Ors. vs. Om Prakash Mehta

& Ors., (1973) 1 SCC 584, this Court in paragraph 12

held that the MMDR Act, 1957 and the MC Rules, 1960

contain complete code in respect of the grant and renewal

of prospecting licences as well as mining leases in lands

belonging to Government as well as lands belonging to

private persons.

27) Again this Court in Quarry Owners’ Association vs.

State of Bihar & Ors., (2000) 8 SCC 655, held that both

the Central and the State Government act as mere

delegates of Parliament while exercising powers under the

MMDR Act and the MC Rules.

28)It is not open to the State Government to justify grant

based on criteria that are de hors to the MMDR Act and

41

the MC Rules. The exercise has to be done strictly in

accordance with the statutory provisions and if there is

any deviation, the same cannot be sustained. It is the

normal rule of construction that when a statute vests

certain power in an authority to be exercised in a

particular manner then the said authority has to exercise

it only in the manner provided in the statute itself. This

principle has been reiterated in C.I.T. Mumbai vs. Anjum

M.H. Ghaswala & Ors., (2002) 1 SCC 633 at 644,

Captain Sube Singh & Ors. vs. Lt. Governor of Delhi &

Ors., (2004) 6 SCC 440 and State of U.P. vs. Singhara

Singh & Ors., (1964) 4 SCR 485.

29)Mr. Harish N. Salve and Mr. Dushyant Dave, by

drawing our attention to the decision of this Court in

TISCO vs. U.O.I. & Anr., (1996) 9 SCC 709, submitted

that inasmuch as this Court had upheld the grants based

on “captive consumption”, there is no flaw or error in the

recommendation of the State Government dated

06.12.2004. A perusal of the above decision clearly shows

42

that it concerned with Section 8(3) of the MMDR Act which

requires consideration of the extremely general criterion of

the interests of mineral development before granting

second renewal of a mining lease. Unlike in Section 11(3),

no further criteria was specified and it was in this

background, this Court upheld on the facts of that case

that relevant material taken into account by the

Committee set up by the Central Government rightly

included “captive consumption”. In view of the factual

situation, the said decision can have no bearing on initial

grants of mining lease where the only permissible criteria

are the matters set out in Section 11(3) of the MMDR Act.

Issue (b)

“Whether the respondent-Jindal’s application dated 24.10.2002

made prior to the Notification dated 15.03.2003 is capable of being

entertained along with the applications made pursuant to the said

notification.”

30)The next vital issue that arises in this case is whether

Jindal’s application dated 24.10.2002 made prior to the

Notification dated 15.03.2003 inviting applications for

previously held area could be considered in view of Section

43

11(4) of the MMDR Act read with Rules 59 and 60 of the MC

Rules. Before considering the above aspect, it is relevant to

note the stand taken by Jindal that in 2001, one Ziaulla

Sharieff filed a writ petition being Writ Petition No 35915 of

2001 seeking a declaration that he was entitled to a mining

lease in respect of 388 acres of land in Sandur Taluk, Bellary

District. It was pointed out that in the said writ petition,

MSPL was arrayed as respondent No.3 and Sandur was

arrayed as Respondent No.7. Three sister concerns of Jindal

were also arrayed as respondents. During the pendency of the

said writ petition, the State Government issued a notification

dated 15.03.2003 inviting applications from the general public

for mineral concessions over large areas of the State of

Karnataka. It was further pointed out that the area concerned

in the said writ petition as also the area concerned in the

present appeals were included in the said notification. By

judgment and order dated 29.03.2004, the High Court

disposed of Writ Petition No. 35915 of 2001 with the following

direction “in view of the subsequent notification issued by the

State Government dated 15.03.2003, inviting that the area is

44

available for grant, the State Government is now expected not

only to consider the applications pending before it but also the

applications that may be filed pursuant to the above said

notification notwithstanding the earlier recommendation made

by the second respondent.” Learned senior counsel appearing

for Jindal submitted that the State Government had acted on

the basis of the Ziaulla Sharieff’s case and empowered the

Director of Mines and Geology to hear applications that were

filed prior to the issuance of the notification dated 15.03.2003

and were pending on the date of the said notification.

Whether such direction saves the State Government’s decision

in considering the Jindal’s application which was made well

prior to the notification dated 15.03.2003.

31)In order to determine whether it is Section 11(4) or the

first proviso to Section 11(2), it is relevant to understand the

intention of the legislature in enacting Section 11 of the

MMDR Act and Rules 59 and 60 of MC Rules as being part of

single statutory scheme governing the grant of reconnaissance

permits, prospecting licences and mining leases. The

amendments to MMDR Act in 1999 which inserted and re-

45

drafted Section 11 had their origin in the Report of the

Committee to Review the Existing Laws and Procedure for

Regulation and Development of Minerals set up by the

Ministry of Mines, Government of India, submitted in January,

1998. We are concerned about para 2.1.21 of the Report

which reads as under:

“… The concept of first-come, first-serve has become

necessary in view of the fact that the Act does not provide for

inviting applications through advertisement for grant of

PL/ML in respect of virgin areas. No doubt, there is

provision in Rule 59 of MCR for advertisement of an area

earlier held under PL/ML with provision for relaxation.” In

this background, the Committee recommended the

introduction of the proviso to Section 11(2) permitting calling

for applications by way of a notification. There is a

distinction between virgin areas and areas covered under

Rule 59 and Section 11(2) ought to be interpreted to cover

virgin areas alone.”

If we consider Section 11 with the aid of the said Report, it

makes it clear that Section 11(1) provides preferential right to

the holder of reconnaissance permits or a prospecting licencee

who has identified mineral resources in the area allotted to

him for grant of a mining lease, subject to certain conditions

specified in the proviso appended thereto. The over-riding

character of the priority given to the successful prospecting

46

licencee or reconnaissance permit-holder is clear from the fact

that each of the subsequent sub-sections in Section 11 is

made subject to Section 11(1).

32)It is also clear that the main provision in Section 11(2)

gives preference to a prior applicant for grant of

reconnaissance permit, prospecting licence or mining lease

over later applicants where the State Government has not

issued any notification. The analysis of the Report makes it

clear that the main provision in Section 11(2) applies to “virgin

areas”. It further makes it clear that to the extent that an area

that is previously held or reserved would require a notification

for it to become available. The first proviso to Section 11(2)

carves out an exception to the preferential right based on

priority of applications in point of time referred to in the main

provision. It makes it clear that where the State Government

subsequently issues a notification inviting applications for

grant, the prior and subsequent applications to the

notification would be considered as if they were filed on the

same day and no priority in order of time would be given. The

second proviso requires the State Government to examine the

47

matters set out in Section 11(3) while considering the

applications for grant.

33)The Committee’s Report, particularly, para 2.1.21 which

we extracted in the earlier paras, makes it clear that this

provision was inserted because the Act does not provide for

advertisement of virgin areas and the State Government was

perfectly within the rights to issue an advertisement inviting

applications even for virgin areas. In this regard, it is useful to

mention that this Court had suggested an almost identical

change in the un-amended Section 11 in Indian Metals and

Ferro Alloys Ltd. vs. Union of India & Ors., 1992 Supp. 1

SCC 91 at page 127 para 35.

“35. Now, to turn to the contentions urged before us: Dr

Singhvi, who appeared for ORIND, vehemently contended

that the rejection of the application of ORIND for a mining

lease was contrary to the statutory mandate in Section 11(2);

that, subject only to the provision contained in Section 11(1)

which had no application here, the earliest applicant was

entitled to have a preferential right for the grant of a lease;

and that a consideration of the comparative merits of other

applicants can arise only in a case where applications have

been received on the same day. It is no doubt true that

Section 11(2) of the Act read in isolation gives such an

impression which, in reality, is a misleading one. We think

that the sooner such an impression is corrected by a

statutory amendment the better it would be for all

concerned. On a reading of Section 11 as a whole, one will

realise that the provisions of sub-section (4) completely

override those of sub-section (2). This sub-section preserves

48

to the S.G. a right to grant a lease to an applicant out of turn

subject to two conditions: (a) recording of special reasons

and (b) previous approval of the C.G. It is manifest,

therefore, that the S.G. is not bound to dispose of

applications only on a “first come, first served” basis. It will

be easily appreciated that this should indeed be so for the

interests of national mineral development clearly require in

the case of major minerals, that the mining lease should be

given to that applicant who can exploit it most efficiently. A

grant of ML, in order of time, will not achieve this result.”

Even under ordinary principles of statutory interpretation, the

first proviso to Section 11(2) embraces the field that is covered

by the main provision. [Vide Abdul Jabar vs. State of J&K.,

AIR 1957 SC 281 (para 8) and Ram Narain Sons vs. Asst.

CST, 1955 (2) SCR 483 at 493].

Accordingly, we are of the view that the notification calling for

applications referred to in the first proviso to Section 11(2)

applies only to virgin areas.

34)It is the claim of Jindal and Kalyani that the proviso

to Section 11(2) of the Act sets out a plenary rule for

consideration of applications for mining leases where the

State Government has invited applications for mineral

concessions by notification in the official gazette and the

applications pending on the date of notification must be

considered simultaneously with applications filed in

49

response to the notification and within the notification

period. It is also their claim that since there is no

provision in the rules empowering the State Government

to issue notification inviting applications for mineral

concessions apart from Rule 59(1), it is asserted by Jindal

and Kalyani that a notification inviting applications for

mineral concessions in the proviso to Section 11(2) must

necessarily relate only to a notification under Rule 59(1)

inviting applications for mineral concessions in previously

held or reserved lands. Therefore, according to them, the

proviso’s stipulation that applications for mineral

concessions pending on the date of the said notification

inviting applications must be considered, must necessarily

apply to applications pending in receipt of previously held

lands. It is also contended that the proviso to Section

11(2) and Rule 59(1) use identical phraseology when

referring to areas (available for grant). It was pointed out

that since this language is not present in Section 11(4),

this suggests strongly that Rule 59(1), the proviso to

50

Section 11(2), Section 11(3) and Rule 35 form a composite

code dealing with the consideration of applications for

mineral concessions over lands thrown open for grant by

way of notification under Rule 59(1) and that Section 11(4)

does not apply to such applications.

35)We have already held that Section 11(3) specifies the

matter relevant for purposes of second proviso to Section

11(2). We also referred to the Committee’s Report. In

accordance with the recommendation in the said Report,

Section 11(3)(d) was added as part of the substitution of

Section 11 in the year 1999. Sub-section (d) provides that

“the investment which the applicant proposes to make in

the mines and in the industry based on minerals” and it

speaks about investment proposed to be made and not

past investments. Thus it confines the concept of “captive

consumption of minerals to proposed investment and not

past investments”. Even the residuary clauses in Section

11(3)(e) are limited to “matters as may be prescribed”,

which would necessarily mean matters prescribed by

51

rules. This is fortified by decision of this Court in BSNL

Ltd. & Anr. vs. BPL Mobile Cellular Ltd. & Ors., (2008)

13 SCC 597, para 45.

36)We have already quoted sub-section (4) of Section 11

which contemplates a situation where a notification is

issued inviting applications for an area for grant. In

contrast to the first proviso to Section 11(2), it provides

that all applications received pursuant to a notification

shall be considered simultaneously without assigning any

priority in point of time, and after taking into account the

matters specified in Section 11(3). Section 11(4), in effect,

covers exactly the same field as the first and second

proviso to Section 11(2) read along with Section 11(3) with

one difference, i.e., unlike the first proviso to Section

11(2), it provides for consideration of only those

applications that are made pursuant to the notification

and not those made prior to the notification. Notification

under Section 11(4) is consistent with Rule 59(1) read with

Rule 60 insofar as applications received prior to the

52

notification would not be entertained. The first proviso to

Section 11(2) was being added to cover virgin areas, then

provided for the addition of Section 11(4), in order to

ensure that the notification referred to in Rule 59(1)

together with Rule 60 would not render ultra vires the

MMDR Act. In view of the same, the contention on behalf

of Jindal and Kalyani that the first proviso of Section 11(2)

would cover notifications under Rule 59(1) is unacceptable

because this would render Section 11(4) otiose and

redundant. In J.K. Cotton Spinning & Weaving Mills

co. Ltd. vs. State of U.P., AIR 1961 SC 1170 and O.P.

Singla & Anr. vs. Union of India & Ors. (1984) 4 SCC

450, this Court held that a provision in a statute must not

be so interpreted as to reduce another provision to a

“useless lumber” or a “dead letter”. If we accept the said

position, it would result in anomalous consequences of

rendering Rule 60 ultra vires the first proviso to Section

11(2). In fact, this has been highlighted by the Central

Government in their affidavit filed before the High Court.

53

37)In addition to what we have stated, it is relevant to

note that Section 11(5) again carves out an exception to

the preference in favour of prior applicants in the main

provision of Section 11(2). It permits the State

Government, with the prior approval of the Central

Government, to disregard the priority in point of time in

the main provision of Section 11(2) and to make a grant in

favour of a latter applicant as compared to an earlier

applicant for special reasons to be recorded in writing. It

also gives an indication that it can have no application to

cases in which a notification is issued because, in such a

case, both the first proviso to Section 11(2) and Section

11(4) make it clear that all applications will be considered

together as having been received on the same date. In

view of our interpretation, the proceedings of the Chief

Minister and the recommendation dated 06.12.2004 are

contrary to the Scheme of the MMDR Act as they were

based on Section 11(5) which had no application at all to

54

applications made pursuant to the notification dated

15.03.2003.

38)We have already extracted Rules 59 and 60 and

analysis of those rules confirms the interpretation of

Section 11 above and the conclusion that it is Section

11(4) which would apply to a Notification issued under

Rule 59(1). Rule 59(1) provides that the categories of

areas listed in it including, inter alia, areas that were

previously held or being under a mining lease or which

has been reserved for exploitation by the State

Government or under Section 17A of the Act, shall not be

available for grant unless (i) an entry is made in the

register and (ii) its availability for grant is notified in the

Official Gazette specifying a date not earlier than 30 days

from the date of notification. Sub-rule (2) of Rule 59

empowers the Central Government to relax the conditions

set out in Rule 59(1) in respect of an area whose

availability is required to be notified under Rule 59 if no

application is issued or where notification is issued, the

55

30-days black-out period specified in the notification

pursuant to Rule 59(1)(i)(ii) has not expired, shall be

deemed to be premature and shall not be entertained. As

discussed earlier, Section 11(4) is consistent with Rules

59 and 60 when it provides for consideration only of

applications made pursuant to a Notification. On the

other hand, the consideration of applications made prior

to the Notification, as required by the first proviso to

Section 11(2), is clearly inconsistent with Rules 59 & 60.

In such circumstances, a harmonious reading of Section

11 with Rules 59 and 60, therefore, mandates an

interpretation under which Notifications would be issued

under Section 11(4) in the case of categories of areas

covered by Rule 59(1). In those circumstances, we are

unable to accept the argument of learned senior counsel

for Jindal and Kalyani with reference to those provisions.

39)The Division Bench has clearly erred in concluding

that applications made prior to the notification under Rule

59(1) which are premature and cannot be entertained

56

under Rule 60 would revive upon issuance of the

Notification. This conclusion goes against basic principles

of statutory interpretation. We have already pointed out

the effect of Rule 60 which is couched in negative

language that is mandatory in nature. Further, if that

was the intention of the Legislature, there was no reason

for the Legislature to take pains to state in Rule 60(b) that

an application made during the black-out period of 30

days specified in the Notification also would be premature

and could not be entertained. Accordingly, the

interpretation placed by the Division Bench on Rule 60

would result in reading in a proviso at the end of Rule 60

to the effect that once the 30-days black-out period

specified in the Notification contemplated by Rule 59(1)(ii)

is over, premature applications would revive. After taking

such pains to make it clear that the applications would

not be entertained until the end of the 30-days period,

surely the Legislature itself would have inserted such a

proviso at the end of Rule 60 if that were its intention.

57

40)In Amritlal Nathubhai Shah & Ors. vs. Union

Government of India & Anr., (1976) 4 SCC 108 (para 7),

this Court observed as follows:

“….. Rule 60 provides that an application for the grant

of a prospecting licence or a mining lease in respect of

an area for which no such notification has been issued,

inter alia, under Rule 59, for making the area available

for grant of a licence or a lease, would be premature,

and “shall not be entertained and the fee, if any, paid in

respect of any such application shall be refunded.” It

would therefore follow that as the areas which are the

subject-matter of the present appeals had been reserved

by the State Government for the purpose stated in its

notification, and as those lands did not become

available for the grant of a prospecting licence or a

mining lease, the State Government was well within its

rights in rejecting the applications of the appellants

under Rule 60 as premature. The Central Government

was thus justified in rejecting the revision applications

which were filed against the orders of rejection passed

by the State Government.”

41)Even thereafter, this Court has consistently taken the

position that applications made prior to a Notification

cannot be entertained. In our view, the purpose of Rule

59(1), which is to ensure that mining lease areas are not

given by State Governments to favour persons of their

choice without notice to the general public would be

defeated. In fact, the learned single Judge correctly

58

interpreted Section 11 read with Rules 59 and 60. The

said conclusion also finds support in the decision of this

Court in State of Tamil Nadu vs. M.S. Hindstone &

Ors., (1981) 2 SCC 205 at page 218, where it has been

held in the context of the rules framed under the MMDR

Act itself that a statutory rule, while subordinate to the

parent statute, is otherwise to be treated as part of the

statute and is effective. The same position has been

reiterated in State of U.P. vs. Babu Ram Upadhya,

(1961) 2 SCR 679 at 701 and Gujarat Pradesh

Panchayat Parishad & Ors. vs. State of Gujarat &

Ors., (2007) 7 SCC 718. The Division Bench did not

advert to these aspects as analyzed by the learned single

Judge. On the other hand, the Division Bench accepted

Jindal’s contention that if Rule 60 is interpreted to render

applications made prior to Rule 59(1) Notification non est,

it would make Rule 59(2) unworkable because persons

normally apply for mining lease areas along with an

application for relaxation under Rule 59(2). This

59

conclusion is clearly misplaced. It is only the request

under Rule 59(2) of any person for relaxation in respect of

an area that is considered and not the application for

grant. Only after the relaxation under Rule 59(2) by the

Central Government of the requirement of Notification

under Rule 59(1) that applications could be considered for

grant of mining lease. The decision relied on by the

learned senior counsel for Jindal in TISCO (supra), (paras

42, 44 and 47), that applications made by certain parties

were considered after a relaxation under Rule 59(2) cannot

be taken as laying down any law. It is also seen that

consideration of the applications made by various parties

in the TISCO’s case was pursuant to the directions issued

by this Court and not independently by the State

Government under Section 11 of the Act. As a matter of

fact, the issue whether premature applications revived for

consideration after the relaxation under Rule 59(2) was

neither expressly raised nor decided in the TISCO’s case.

In the light of the above discussion about Section 11(2)

60

alongwith Rules 59 and 60, it should be interpreted that

Section 11(2) is to cover virgin areas alone. In view of the

same, the Jindal’s application made prior to the

Notification cannot be entertained along with the

applications made pursuant to the Notification dated

15.03.2003 because it is Section 11(4) which covers the

said Notification along with Rule 59(1) and not the first

proviso to Section 11(2) as contended by the respondents.

Issue (c)

Whether the order of the High Court of Karnataka in Ziaulla

Sharieff’s (supra) permit the consideration of the Jindal’s

application dated 24.10.2002 which was made prior to the

notification dated 15.03.2003.

42) We have already discussed this issue. In addition to

the same, perusal of the order of the High Court in Writ

Petition No. 35915 of 2001 shows that the State

Government was directed to consider only the application

of the MSPL and the applications filed by the impleading

applicants and others pursuant to the Notification dated

15.03.2003 in accordance with law and in terms of the

provisions of the MMDR Act and MC Rules. In other

61

words, the High Court did not issue any direction to

consider all applications made prior to the notification. To

put it clear, there was no mandamus from the High Court

to consider prior applications. The word “others” qualify

the phrase “pursuant to” and not the class of applicants

who had applied even prior to the “Held Area Notification”

dated 15.03.2003. As a matter of fact, the High Court had

merely directed the State Government to consider the

applications in accordance with the provisions of the

MMDR Act and MC Rules. Even otherwise, the said order

was passed without going into the specific provisions in

the Act or Rules. Further, the order does not deal with the

interpretation of Section 11 or Rules 59 and 60. Hence,

the order of the High Court of Karnataka in Ziaulla

Sharieff’s case does not permit the consideration of

Jindal’s application dated 24.10.2002 which was made

prior to the notification dated 15.03.2003.

62

Issue (d):

Whether Rule 35 of the MC Rules justify the recommendation of the

State Government and the proceedings of the Chief Minister in

favour of the Respondents – Jindal & Kalyani?

“Rule 35. Preferential rights of certain persons – Where

two or more persons have applied for a reconnaissance

permit or a prospecting licence or a mining lease in respect

of the same land, the State Government shall, for the

purpose of sub-section (2) of section 11, consider besides the

matters mentioned in clauses (a) to (d) of sub-section (3) of

section 11, the end use of the mineral by the applicant. “

We have already adverted to the proceedings of the Chief

Minister which heavily relied on Rule 35 to justify the

recommendation in favour of the respondents – Jindal and

Kalyani on the premise that it is intended to give preference to

those who have made existing investments in industries based

on iron ore and both of them qualify on this consideration.

From a plain reading of Rule 35, it is clear that the rule

permits the State Government to differentiate between the

“end use” of the minerals for the purpose of sub-section (2) of

Section 11 in addition to the matters in Section 11(3). In the

case on hand, all the parties, namely, MSPL, Sandur, Jindal

and Kalyani expressed their intention to use iron ore from the

mines for producing steel and, therefore, the same “end use”

requirement is satisfied.

63

43) Rule 35, at best, permits the State Government to

differentiate between different “end uses”, for example, the use

of iron ore to produce sponge iron instead of steel, or the use

of gold in jewellery as compared to medicines. Further, Rule

35 does not differentiate between “proposed” and “existing”

end use. Therefore, it could have enabled the State

Government to take into account the claim of the respondents

– Jindal and Kalyani, whose past investments would not have

qualified on the “proposed” investment criterion under

Section 11(3)(d), in addition to MSPL and Sandur. This could

have been a basis to exclude those with proposed investments

in steel plants from consideration.

44) It is also relevant to point out that Rule 35 specifies one

additional factor apart from the factors set out in Section

11(3). The plain language of Rule 35 requires its application

only in cases covered by Section 11(2) and not by Section

11(4). Therefore, to the extent that it is Section 11(4) that

covers Notification under Rule 59(1) and not Section 11(2), in

this way also, the State Government committed an error in

relying on Rule 35 to exclude the appellants, i.e., MSPL and

64

Sandur. To justify the recommendation in favour of the

respondents-Jindal and Kalyani, in the proceedings of the

Chief Minister, State heavily relied on Rule 35 on the premise

that it is intended to give preference to those who have made

existing investments in industries based on iron ore and that

the respondents – Jindal and Kalyani, qualify on this

consideration. However, as discussed above, Rule 35 only

permits the State Government to take additional factor of the

“end use” of the minerals and not the existing investments

made by the applicants. Moreover, relying on the existing

investments made, the respondents also does not satisfy the

requirements under Section 11(3)(d) which talks solely about

proposed investments to be made and not the existing ones.

Issue (e):

Whether the criterion of captive consumption referred to in the

TISCO’s case has no application to the present case because it is not

one of the factors referred to in Section 11(3) or even in Rule 35.

45) The criterion of captive consumption referred to in

TISCO’s case (supra) does not have any application in this

case, which we will refer in the later part of this paragraph.

Section 11(4) and even the second proviso to Section 11(2)

65

provide that the State Government may grant, inter alia, a

mining lease after taking into consideration the matters

specified in Section 11(3). Section 11(3)(d) specifies “the

investment which the applicant proposes to make in the mines

and in the industry based on the minerals” as one of such

matters and on a plain interpretation, it is clear that only the

proposed investment is a relevant factor. If the Legislature

had intended that it should include past investments also, the

use of the word “proposed” is superfluous, which could never

be the case. Learned senior counsel appearing for the

respondents have not pointed out any other provision in the

MMDR Act or the MC Rules permitting grant of mining lease

based on past commitments or for captive purposes in existing

industries.

46) As observed in the earlier paragraphs, the strong reliance

placed by the respondent-Jindal on the decision of this Court

in TISCO’s case (supra) (Paras 9,15,20,25,27,34,54,56 & 57)

is misplaced. This case concerned solely on the interpretation

of Section 8(3) of the MMDR Act in the context of a second

renewal of a mining lease in favour of TISCO, and not a fresh

66

grant. It is, in this context the phrase “interest on mineral

development” in Section 8(3) was interpreted to include captive

requirements. On the other hand, the case of fresh grant is

covered by Section 11 of the MMDR Act. Paragraph 54 of the

TISCO’s case (supra) makes it clear that the case concerned is

chromite whose known reserves were not abundant, whereas

iron ore is in abundance. Even otherwise, this judgment is of

no assistance even on Rule 59(1) of the MC Rules since it was

a case of relaxation by the Central Government under Rule

59(2), as is clear from paragraph 15 of the judgment.

47) It is useful to mention that subsequent to the decision in

TISCO (supra), this Court in Indian Charge Chrome Ltd. &

Anr. vs. Union of India & Ors., (2006) 12 SCC 331 (Paras 20

& 26) held that considerations of captive mining cannot be the

controlling factor for grant of lease.

Issue (f):

Whether factors such as past commitments made by the State

Government to applicants who have already set up steel plants is

not a relevant matter for consideration for grant of lease.

48)As discussed earlier, the State Government is

denuded of all legislative and executive power under Entry

67

23 of List-II read with Article 162 after passing of the

MMDR Act which are as under:-

“Entry 23, List II: 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.”

“Article 162. Extent of executive power of State.-

Subject to the provisions of this Constitution, the

executive power of a State shall extend to the matters

with respect to which the Legislature of the State has

power to make laws.

Provided that in any matter with respect to which

the Legislature of a State and Parliament have power to

make laws, the executive power of the State shall be

subject to, and limited by, the executive power expressly

conferred by this Constitution or by any law made by

Parliament upon the Union or authorities thereof.”

It is clear that the State Government is purely a delegate

of Parliament and a statutory functionary, for the

purposes of Section 11(3) of the Act, hence it cannot act in

a manner that is inconsistent with the provisions of

Section 11(1) of the MMDR Act in the grant of mining

leases. Furthermore, Section 2 of the Act clearly states

that the regulation of mines and mineral development

comes within the purview of the Union Government and

not the State Government. As a matter of fact, the

68

respondents have not been able to point out any other

provision in the MMDR Act or MC Rules permitting grant

of mining lease based on past commitments. As rightly

pointed out, the State Government has no authority under

the MMDR Act to make commitments to any person that it

will, in future, grant a mining lease in the event that the

person makes investment in any project. Assuming that

the State Government had made any such commitment, it

could not be possible for it to take an inconsistent position

and proceed to notify a particular area. Further, having

notified the area, the State Government certainly could

not thereafter to honour an alleged commitment by

ousting other applicants even if they are more deserving

on the merit criteria as provided in Section 11(3).

49) In the case of State of Assam & Ors. vs. Om

Prakash Mehta & Ors., AIR 1973 SC 678, this Court

observed that the MMDR Act and MC Rules contain the

complete code in respect of the grant and renewal of

prospecting licences as well as mining leases in lands

69

belonging to Government. In Quarry Owners

Association (supra), this Court again reaffirmed the

notion that both the Central as well as the State

Government act as a mere delegates of Parliament while

exercising the powers under the Act and Rules. [Vide M.A.

Tulloch (supra), Baijnath Kedio (supra), Kesoram’s case

(supra), and Bharat Cooking Coal Ltd. (supra)]. From

this, it becomes amply clear that the State Government

has divested of legislative and executive powers with

respect to mines and minerals development. In addition

to the same, Anjum M.H. Gaswala (supra), Captain

Sube Singh (supra), Singhara Singh’s case (supra), this

Court repeatedly held that the field of granting mining

leases is covered by express statute and rules and the

grants must be made in accordance with the provisions of

the Act and Rules and no other consideration. From a

perusal of the above settled legal position, it becomes clear

that the State Government cannot grant mining leases

keeping in mind any considerations apart from the ones

70

mentioned in the MMDR Act and MC Rules. In those

circumstances, no extraneous considerations such as past

commitments made by the State Government to Jindal

and Kalyani who have already set up steel plants can be

entertained by the State Government while granting

mining leases and must abide by the Act and Rules.

Issue (g):

Whether the recommendation in favour of Jindal and Kalyani saved

by operation of law of equity?

50)The Law of Equity cannot save the recommendation

in favour of Jindal and Kalyani because it is a well settled

principle that equity stands excluded when a matter is

governed by statute. This principle was clearly stated by

this Court in the cases of Kedar Lal vs. Hari Lal Sea,

(1952) SCR 179 at 186 and Raja Ram vs. Aba Maruti

Mali (1962) Supp. 1 SCR 739 at 745. It is clear that

where the field is covered expressly by Section 11 of the

MMDR Act, equitable considerations cannot be taken into

account to assess Jindal and Kalyani, when the

recommendation in their favour is in violation of statute.

71

It was pointed out that Kalyani does not have a

commitment from the State Government regarding its iron

ore needs. In the proceedings of the State Government,

there is only a statement that it may apply for a lease. No

doubt, Jindal has emphasized that it has already set up

its steel plant based on the commitments made by the

State Government to grant a mining lease and it is in need

of iron ore for these steel plants. As observed earlier,

commitments made by the State Government cannot be a

relevant factor for grant of lease in the teeth of the

consideration set out in Section 11(3). If that was to be

the sole criterion, the State Government ought not to have

notified the area vide ‘Held Area Notification’ dated

15.03.2003.

51)It was also pointed out that Jindal has been mining a

lease area of 85.50 hectares of Mysore Minerals Limited, a

Public Sector Undertaking through a joint venture in

terms of the commitment made by the State Government.

In addition, the State Government has made a

72

recommendation for grant of mining lease in favour of

Jindal and its sister concerns in the following areas:

(i)188.128 hectares in favour of M/s JSW Steel Limited in

Donimalai Range, Sandur Taluk, Bellary District.

(ii)181.70 hectares in favour of M/s. Vijaynagara Minerals Pvt.

Ltd. In Donimalai Range, Sandur Taluk, Bellary District.

(iii)184.14 hectares in favour of M/s. South West Mining Ltd. In

Donimalai Range, Sandur Taluk, Bellary District.

(iv) 200.73 hectares in favour of M/s JVSL in Kumaraswamy range

of Sandur Taluk, Bellary District, which si the subject matter of

the present SLP.

As a matter of fact, MSPL had filed an affidavit in this

regard before the Division Bench. It is not clear whether

Jindal has specifically denied the specific grants. By

drawing our attention to certain factual details, it was

contended that Jindal has so much iron ore and it

actually exported iron ore for which reliance was made to

its annual reports during the years 2002-03 to 2005-06.

On the other hand, it is the claim of the MSPL that in

accordance with Section 11(3)(d) it had proposed to set up

a steel plant for which it required iron ore. It was also

brought to our notice that it had received permission from

73

the State Government in this regard. With reference to

the allegation that MSPL has a mining lease over an area

of 722.94 hectares, it was pointed out that in actual it has

a lease over an area of 347.22 hectares only. On

05.06.2009, MSPL filed an affidavit before the Division

Bench stating that it holds only a single mining lease

granted over five decades ago and the major proportion of

which has been afforestated. It is also their grievance that

the iron ore reserves in this lease have almost been

exhausted over a period of 58 years, since 1952. The

remaining iron ore cannot support a steel plant of the size

that is being set up by MSPL. Since the entire field of

granting mining lease is covered by MMDR Act and MC

Rules, the State Government cannot use any

consideration apart from the ones mentioned in the Act

and Rules.

74

Issue (h):

About the impugned judgments of the single Judge and Division

Bench:

52)In view of our conclusion, the Division Bench has

erred in concluding that the Jindal’s application made

prior to the Notification can be entertained along with the

applications made pursuant to the said Notification

because it is not Section 11(4) which covers the said

Notification under Rule 59(1) but the first proviso to

Section 11(2). As a matter of fact, the Division Bench did

not even mention Section 11(4) in its reasoning apart from

stray references even though the conclusion of the learned

single Judge hinged on how Section 11(4) would be

rendered otiose and redundant if the first proviso to

Section 11(2) was taken as governing the consideration of

applications under a Notification pursuant to Rule 59(1).

53)The Division Bench has also faulted in arriving at the

conclusion that the applications made prior to Notification

under Rule 59(1) which are premature and cannot be

75

entertained under Rule 60 would revive upon issuance of

the Notification which is clearly not the case. As pointed

out earlier, had that been the intention of the Legislature,

there was no reason for the Legislature to take pains

under Rule 60(b) that an application made during the

period of 30 days specified in the Notification also would

be premature and could not be entertained. If the

decision of the Division Bench is taken to its logical

conclusion, then it would result in reading in a proviso at

the end of Rule 60 to the effect that once the 30 days’

period specified in the Notification contemplated by Rule

59(1) sub-clause (ii) is over, premature applications would

revive. After taking such pains to make it clear that the

application would not be entertained until the end of 30

days’ period, surely the Legislature itself would not have

inserted such proviso in Rule 60 if that were its intention.

If such premature applications are allowed to be

entertained, it would result in the State Government

giving out mining leases to favoured persons without

76

notice to the general public.

54)The Division Bench has also accepted Jindal’s

contention that if Rule 60 is interpreted to render

applications made prior to Rule 59(1) Notification non est,

in that event, it would make Rule 59(2) unworkable

because persons will normally apply mining lease areas

along with an application for relaxation under Rule 59(2).

In view of our earlier reasons, this conclusion is clearly

misplaced. It is only the request under Rule 59(2) for

relaxation in respect of an area that is considered and not

the application for grant. It is only after the relaxation

under Rule 59(2) by the Central Government of the

requirement of the Notification under Rule 59(1) that the

applications could be considered for grant of mining lease.

55)Though the learned single Judge in his order dated

07.08.2008 quashed the communication/recommendation

of the State Government dated 06.12.2004 proposing to

grant mining lease to Jindal and Kalyani, however, the

learned single Judge traveled much beyond the reliefs

77

sought for in the writ petition and quashed the entire

Notification No. CI.16:MMM.2003 dated 15.03.2003. In

our view, while approving earlier part of his order and

quashing the communication/recommendation of the

State Government dated 06.12.2004, the other

observations/directions are not warranted in the light of

the provisions of the Act and the Rules. The said

observations/directions are deleted.

Issue (i):

Whether it is advisable to remit it to the Central Government:

56)Learned senior counsel appearing for Jindal and

Kalyani requested that inasmuch as the Central

Government has already given its approval under Section

5 of the MMDR Act in their favour during the pendency of

the writ petition, if this Court feels that fresh decision is to

be arrived, the same may be remitted to the Central

Government. In the earlier part of our judgment, we have

pointed out that the Central Government considers only

the materials forwarded by the State Government along

78

with its recommendation. As rightly pointed out, if the

recommendation of the State Government cannot be

upheld in law, all consequential orders including the

subsequent approval by the Central Government are also

liable to be quashed. It is useful to refer Barnard vs.

National Dock Labour Board (1953) 1 All E.R. 1113 at

1120 para 1, McFoy vs. United Africa Co. (1961) All E.R.

1169, Pavani Sridhara Rao vs. Govt. of A.P & Ors.

(1996) 8 SCC 298 (para 5) and State of Kerala vs.

Puthenkavu N.S.S. Karayogam & Anr., (2001) 10 SCC

191 (para 9). If the very same recommendation of the

State Government is sent back to the Central Government

on the administrative side in its role as an approving

authority under Section 5(1) without setting aside the

impugned judgment, it is more likely that the Central

Government would simply follow its previous order. In

that event, the Central Government would be influenced

by the judgment passed by the Division Bench upholding

the grant made in favour of Jindal and Kalyani. Such an

79

exercise would be in the nature of post-decisional hearing

which would be impermissible. [Vide H.L. Trehan & Ors.

vs. Union of India & Ors., (1989) 1 SCC 764 (paras 12 &

13) K.I. Shephard & Ors. vs. Union of India & Ors.,

(1987) 4 SCC 431 (para 16) and Shekhar Ghosh vs.

Union of India & Anr., (2007) 1 SCC 331]. 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 vs. R. Gandhi,

President, Madras Bar Association, JT 2010 (5) SC 553.

As observed by three Judge Bench of this Court in Indian

Charge Chrome Ltd. (supra), when there was no valid

recommendation by the State Government for the grant of

lease, there cannot be any valid approval of the Central

80

Government relying on the defective recommendation. We

have already concluded that the recommendation of the

State Government dated 06.12.2004 is not valid with

reference to the provisions of MMDR Act and the Rules,

hence the invalid recommendation cannot be looked into

by the Central Government. Further, proviso to Section

5(1) itself provides only for the Central Government either

to grant or reject its approval to the State Government’s

recommendation in the case of mining lease for a mineral

such as iron ore in the First Schedule. In our view, such

consideration on the administrative side does not involve

consideration of all the applicants based on their mining

lease applications and after giving an opportunity of

hearing. Inasmuch as the Central Government does not

have all relevant materials before it, it may not be in a

position to substitute itself for the State Government and,

if not, it would be proper, in fact, it would be inconsistent

with the provisions of the MMDR Act and the Rules to

frame the issue on the administrative side of the Central

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Government. Even otherwise, inasmuch as we have heard

the matter at length and we satisfy that there is a flaw in

the recommendation of the State Government which

requires reconsideration, we reject the request for

remitting the matter to the Central Government for its

decision.

Conclusion:

57)In the light of the above discussion, the impugned

order of the Division Bench of the High Court dated

05.06.2009 in Writ Appeal No. 5084 of 2008 and allied

matters as well as the decision of the State Government

dated 26/27.02.2002 and the subsequent decision of the

Central Government dated 29.07.2003 are quashed. We

direct the State Government to consider all applications

afresh in light of our interpretation of Section 11 of the Act

and Rules 35, 59 and 60 of MC Rules and make a

recommendation to the Central Government within a

period of four months from the date of receipt of the copy

of this judgment. It is made clear that we have not

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expressed anything on the eligibility or merits of any of the

parties before us and our conclusion as to the decision of

the State Government is based on the interpretation of the

statutory provisions mentioned above for which we

adverted to certain factual details of the parties. The State

Government is free to consider the applications and take a

decision one way or other in accordance with law, as

discussed above, within the time scheduled.

58)All the appeals are allowed to the extent mentioned

above. No costs.

...…………………………………J.

(P. SATHASIVAM)

...…………………………………J.

(H.L. DATTU)

NEW DELHI;

SEPTEMBER 13, 2010.

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