Legitimate expectation and equal treatment barred the State from withdrawing an acted-upon MoU or denying mining relaxation.

A Memorandum of Understanding remained operative where it had already been acted upon and the project proponent had altered its position and invested on that basis; the State's attempt to insist on a fresh memorandum was arbitrary and inconsistent with the legitimate expectation created by its own conduct. The State was also required to act consistently with earlier commitments and could not deny comparable relaxation under Rule 59 of the Mineral Concession Rules, 1960 when similarly placed applicants had received such benefit. On that reasoning, the earlier MoU continued in force, and the rejection of the mining-lease claim was set aside with directions to proceed under the original arrangement.

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Issues: (i) Whether the Memorandum of Understanding dated 15 May 2002 continued to subsist in favour of the appellant. (ii) Whether the State Government was obliged to recommend the appellant's case for grant of iron ore mines in terms of the Memorandum of Understanding and could seek to deny the benefit of relaxation under Rule 59 of the Mineral Concession Rules, 1960.

Issue (i): Whether the Memorandum of Understanding dated 15 May 2002 continued to subsist in favour of the appellant.

Analysis: The Memorandum of Understanding had been acted upon by the parties and the appellant had altered its position and invested in the project on that basis. The later inter se dispute within the Bhushan Group, and the attempt to require a fresh memorandum, did not dislodge the original arrangement, especially after the rival claim was withdrawn and the State accepted the settlement position. The State's insistence on a fresh memorandum, despite prior implementation of the earlier one, was held to be arbitrary and contrary to the legitimate expectation created by the State's own conduct.

Conclusion: The Memorandum of Understanding dated 15 May 2002 continued to be valid and operative in favour of the appellant.

Issue (ii): Whether the State Government was obliged to recommend the appellant's case for grant of iron ore mines in terms of the Memorandum of Understanding and could seek to deny the benefit of relaxation under Rule 59 of the Mineral Concession Rules, 1960.

Analysis: The State had already recommended or granted benefits to other similarly placed applicants by invoking relaxation under Rule 59(2) of the Mineral Concession Rules, 1960. In those circumstances, there was no cogent basis to deny the same treatment to the appellant. Since the project had progressed substantially and the earlier commitments under the Memorandum of Understanding remained operative, the State was bound to act consistently with those commitments and to recommend the appellant's case for suitable iron ore reserves.

Conclusion: The State Government was bound to act under the Memorandum of Understanding and could not deny the appellant the benefit of recommendation and relaxation under Rule 59 of the Mineral Concession Rules, 1960.

Final Conclusion: The appeal succeeded, the impugned judgment and the State's rejection of the mining-lease claim were set aside, and the State was directed to proceed in accordance with the earlier commitments under the Memorandum of Understanding.

Ratio Decidendi: Where a State has acted upon a Memorandum of Understanding and induced the project proponent to alter its position, it cannot arbitrarily require a fresh memorandum or deny comparable statutory relaxation to that proponent without a rational basis, particularly when similar benefits have been extended to others.

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