2015 (3) TMI 1344 - HC - Indian Laws

Court quashes order, directs return of possession to petitioner, citing arbitrary state actions.

Gotan Lime Stone Khanij Udyog Pvt. Ltd. Versus The State of Rajasthan and Ors.

The Court allowed the writ petition, quashing the order dated 16.12.2014 and all consequential actions. It directed the respondents to return possession ... Transfer of lease in petitioner's favor - mining lease - grant of prior permission for transfer - subsequent action of transfer of shares by the shareholders of Gotan Lime Stone Khanij Udhyog Pvt. Ltd. on 23.7.2012 to Ultra-Tech Cement Limited resulting in the petitioner-Company becoming a wholly owned subsidiary - principles of natural justice. Held that:- A bare reading of the provisions of Rule 15 reveals that a previous consent of the competent authority is necessary before a mining lease or any right title or interest therein is assigned, sublet, mortgaged or in any other manner transferred. The requirement of prior consent has also been provided even in a case where a lessee enters into or makes any arrangement, contract or understanding, whereby the lessee is or may be directly or indirectly financed to a substantial extent by or under which lessee's operations and undertaking is or may be substantially controlled by any person or body of person other than lessee. Whereafter, the stipulations regarding transfer, fees, 18 premium etc. have been indicated and exception provided regarding mortgage to State institution, Bank or State Corporation. The sub-rule (4) of Rule 15 provides for execution of a transfer lease deed in Form No. 15 within a period of three months of consent or within such period as may be allowed by the competent authority - Rule 72 of the Rules, which has been invoked by the respondents and relied on during the course of submissions provide that any lease, quarry licence, short term permit or any other permit granted otherwise then in accordance with the provisions of the Rules shall be deemed to be null and void. From perusal of the show cause notice, the response made by the petitioner, the provisions of Rule 15 & 72 and the order dated 16.12.2014 passed by the respondents, it is apparent that the Secretary while passing the order dated 16.12.2014 has not at all dealt with any of the contentions raised by the petitioner in its reply to the show cause notice and after reproducing the contents of the show cause notice and the contentions raised by the petitioner has jumped on to the conclusion that the reply filed by the Company is an afterthought and was not satisfactory. Not a word has been indicated as to why and how the authority reached to the said conclusion. The recommendation by the Assistant Mining Engineer was made on 2.4.2012 and by then the resolution and the affidavits had already been filed. So far as the making of inspection on 30.3.2012 is concerned, a look at the inspection report (pg. 72) reveals that the same merely indicates the status of the lease deed and leased area and nothing else, so as to vitiate the report if the same was made without affidavit having been filed in support of the application - the plea raised by the respondents seeking to support the order dated 16.12.2014 qua the pre 25.4.2012 events cannot be sustained. Whether the action of shareholders of the Company in transferring its shares to Ultra Tech Cement Limited and consequently, the Company becoming wholly owned subsidiary of Ultra Tech Cement Limited amounts to violation of Rule 15(1)(b) of the Rules is the issue which requires consideration - Held that:- For alleging violation of provisions of Rule 15(1)(b) of the Rules, the transaction must be such whereby the lessee i.e. the Company will or may be directly or indirectly financed to a substantial extent or the lessee's operations or undertakings will or may be substantially controlled by any person or body of persons other than lessee. The pre-requisite for coming to a conclusion regarding violation of the provisions of Rule 15 would be an arrival to a conclusion that either the lessee company is directly or indirectly financed, or lessee's operations or undertakings are substantially controlled by any person or body of persons other than lessee - Nowhere in the show cause notice, the order dated 16.12.2014 or in reply to the writ petition, there is any allegation whatsoever by the State indicating either financing or any substantial control on the lessee's operations or undertakings by Ultra Tech Cement Limited. Apparently, only based on the assumed implication of the Company becoming wholly owned subsidiary of Ultra Tech Cement Limited that the present action appears to have been taken by the respondents. Merely on account of the Company becoming a subsidiary of Ultra Tech Cement Limited on account of certain action of the shareholders of the Company, it cannot be said that the Company is being directly or indirectly financed to a substantial extent or the Company's operations or undertakings are substantially controlled by Ultra Tech Cement Limited, regarding which there are absolutely no allegations or material whatsoever. Therefore, on account of the petitioner-Company becoming subsidiary of Ultra Tech Cement Limited, it cannot be said that ipso facto the provisions of Rule 15(1)(b) of the Rules have been violated by the lessee i.e. petitioner-Company. Thus, it is apparent that the allegations made in the show cause notice, the reason indicated in the order dated 16.12.2014 and the various plea raised by the respondents in the present writ petition seeking to substantiate the order dated 16.12.2014 have absolutely no substance. Neither the events prior to 25.4.2012 nor the events subsequent to 25.4.2012 can be said to be sufficient for taking action under provisions of Rule 72 of the Rules so as to either cancel the order dated 25.4.2012 and/or cancel the mining lease standing in favour of the petitioner-Company. Petition allowed. Issues Involved:1. Validity of the transfer of Mining Lease No. 45/93 to Gotan Lime Stone Khanij Udyog Pvt. Ltd.2. Alleged procedural irregularities in the application process for the transfer.3. Impact of change in shareholding and directorship on the validity of the lease transfer.4. Application of Rule 15 and Rule 72 of the Rajasthan Minor Mineral Concession Rules, 1986.5. Allegations of malice in law and extraneous considerations in the cancellation of the lease.Issue-wise Detailed Analysis:1. Validity of the Transfer of Mining Lease No. 45/93:The petitioner, Gotan Lime Stone Khanij Udyog Pvt. Ltd., challenged the cancellation of the mining lease transfer by the Joint Secretary, Mines, Government of Rajasthan. The transfer was initially permitted on 25.4.2012 but later declared void on 16.12.2014.2. Procedural Irregularities in the Application Process:The State alleged procedural irregularities, such as the purchase of non-judicial stamps before the incorporation of the company, the application for transfer being filed before the resolution by the Board of Directors, and the execution of the transfer document on insufficient stamp paper. The Court found these to be 'inconsequential irregularities' that did not affect the validity of the application or the grant of permission.3. Impact of Change in Shareholding and Directorship:The transfer of shareholding to Ultra-Tech Cement Limited and the change in directorship were scrutinized under Rule 15(1)(b). The Court held that these changes did not amount to a violation of Rule 15(1)(b) as there was no substantial financing or control by Ultra-Tech Cement Limited over the lessee's operations. The Court emphasized that a company and its shareholders are distinct legal entities, and the mere change in shareholding does not affect the company's legal status or its lease.4. Application of Rule 15 and Rule 72:The Court examined Rule 15, which requires prior consent for transferring a mining lease, and Rule 72, which deems any lease granted otherwise than in accordance with the rules as null and void. The Court found that the transfer was conducted with the necessary prior permission and that the procedural irregularities cited by the State did not justify invoking Rule 72 to cancel the lease.5. Allegations of Malice in Law and Extraneous Considerations:The petitioner argued that the cancellation was motivated by business rivalry and extraneous considerations, particularly the revived interest of JK Cement. The Court found that the State's action lacked a fair decision-making process and was influenced by extraneous factors, constituting malice in law. The Court cited the necessity of giving reasons for administrative decisions and found the State's order lacking in this regard.Conclusion:The Court allowed the writ petition, quashing the order dated 16.12.2014 and all consequential actions, and directed the respondents to hand over the possession of the leased area back to the petitioner. The Court emphasized the importance of a reasoned decision-making process and found the State's action arbitrary and influenced by extraneous considerations.