TaxTMI 
TaxTMI 
2010 (9) TMI 1058
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....ollows: (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 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 w....
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.... 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 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 Hig....
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....he 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 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 MSP....
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....gopal 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. 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....
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....ce 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: 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 ....
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....ve 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 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....
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....ect 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. 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 f....
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....ndal's application prior to the "Held Area Notification" could not have been 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 the details mentioned in their applications and at the ....
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....ay 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), Comm....
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....ing 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 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 f....
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....ction 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: 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 re....
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...., 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 Bench of this Court reiterated the above view. Argument of the appellant in that case was that, apart from the provisions of the 2nd 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 ....
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....ave 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. 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 1....
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....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]. 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 the MC Rules. The exercise has to be done strictly in accordance with the statu....
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.... 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 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 su....
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....ubject 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 matters set out in Section 11(3) while considering the applications for grant. 33) The Committee's Report, particularly, para 2.1.21....
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.... 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 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 concession....
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....se 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 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 thei....
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....n 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 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 ....
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....e, 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 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 ap....
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....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. 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 ....
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....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) 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....
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....ecutive 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 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 are....
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.... considerations cannot be taken into account to assess Jindal and Kalyani, when the recommendation in their favour is in violation of statute. 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 recommendation for grant of mining le....
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....e 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 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' p....
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....part of our judgment, we have pointed out that the Central Government considers only the materials forwarded by the State Government along 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 exercise would be in the nature of pos....