Independent reservation power and recorded special reasons govern mineral lease allocation; procedural non-compliance invalidated the later proposal.

Section 17A(2) confers an independent power on the State Government, with Central approval, to reserve an unleased mineral-bearing area for exploitation through a Government company or corporation; that power is separate from the preference regime under Section 11, so the recommendation for reservation in favour of the State corporation was upheld. By contrast, an out-of-turn mining lease under Section 11(5) requires special reasons to be recorded, and no such reasons justified overriding earlier applicants, so the grant in favour of Nava Bharat was invalid. The proposal was also vitiated by non-compliance with Rule 59 and the Rules of Business under Article 166, as the earlier recommendation lost efficacy after withdrawal and valid State recommendation and Central approval were absent.

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Issues: (i) whether the State Government could invoke Section 17A(2) to recommend reservation of the remaining mineral-bearing area for exploitation by a Government corporation; (ii) whether the out-of-turn recommendation of lease in favour of Nava Bharat could be sustained under Section 11(5); and (iii) whether the proposal relating to Nava Bharat was vitiated by non-compliance with Rule 59 and the Rules of Business under Article 166.

Issue (i): whether the State Government could invoke Section 17A(2) to recommend reservation of the remaining mineral-bearing area for exploitation by a Government corporation.

Analysis: The power under Section 17A is independent of the preference regime under Section 11. The State Government may, with the approval of the Central Government, reserve any unleased area for mining through a Government company or corporation owned or controlled by it. The prior directions in the earlier proceedings did not deal with the exercise of this statutory power and did not foreclose its use. The recommendation was also not shown to be mala fide, colourable, or irrational.

Conclusion: The State Government was competent to seek approval under Section 17A(2), and the recommendation in favour of OMC was not invalid on that ground.

Issue (ii): whether the out-of-turn recommendation of lease in favour of Nava Bharat could be sustained under Section 11(5).

Analysis: Section 11(5) permits preference to a later applicant only for special reasons recorded. On the materials, no special reasons were recorded to justify overriding the claims of earlier applicants. The State Government also did not follow the committee-based process earlier directed for distribution of the remaining area. The grant was therefore inconsistent with the statutory preference scheme.

Conclusion: The out-of-turn grant in favour of Nava Bharat could not be sustained and was liable to be set aside.

Issue (iii): whether the proposal relating to Nava Bharat was vitiated by non-compliance with Rule 59 and the Rules of Business under Article 166.

Analysis: The Central Government had pointed out infirmities and the breach of Rule 59. The subsequent departmental communication was not in accordance with the Rules of Business, and the earlier recommendation lost efficacy after the Cabinet decided to withdraw it. The proposal therefore lacked a valid State recommendation and valid Central approval.

Conclusion: The proposal in favour of Nava Bharat was vitiated by procedural non-compliance and could not stand.

Final Conclusion: The decisions of the High Court were set aside. The challenge to the State Government's recommendation under Section 17A(2) failed, but the grant proposed in favour of Nava Bharat was invalidated, leaving the matter to be reconsidered by the Central Government on a fresh and complete request from the State Government.

Ratio Decidendi: Section 17A(2) confers an independent power to reserve an unleased mineral area for exploitation through a Government-controlled corporation, but a later mining lease can be preferred under Section 11(5) only for special reasons duly recorded and in conformity with the applicable procedural requirements.

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