Civil Appeals No1472 77 of 1987
From the Judgment and Order dated 4121986 of the Delhi High Court in Civil Writ Petition Nos
2148 of 1986 2417 2173 2174 2175 and 2166 of 1986
1017 SC Mohanta Ravinder Bana and Mahabir Singh for the Appellant
AK Sen PP Rao Rajinder Sachhar KB Rohatgi SK Dhingra Praveen Jain Shashank Shekhar CM Nayar PN Duda and Randhir Jain for the Respondents
The Judgment of the Court was delivered by SHARMA J
The present appeals by the State of Haryana and the Haryana Minerals Limited are directed against the common judgment of the Delhi High Court disposing of 6 writ applications filed by different petitioners impleaded as respondent No 1 herein
Separate mining leases were executed on behalf of the State of Haryana with respect to Silica sand and ordinary sand in favour of the writ petitioners for a period of 10 years in accordance with the provisions of the Mines  Minerals Regulation  Development Act 1957 hereinafter referred to as the Act
The State of Haryana in purported exercise of powers under Section 4A of the Act prematurely terminated the leases by its order dated 1st October 1986 which is quoted in the judgment of the High Court stating that it was proper to do so as the Haryana Minerals Limited respondent No 4 appellant No 2 herein a public sector undertaking had informed that it had fully equipped itself to undertake the mining operation and that necessary permission in terms of the Section had been obtained from the Central Government to prematurely terminate the leases
Admittedly no prior notice to the writ petitioners or any opportunity to them to place their case was given
The lessees contended before the High Court that essential conditions for exercises of the powers under Section 4A are not satisfied in the present cases and further the impugned decision is violative of the principles of natural justice
It was also urged that so far as the lease in respect of ordinary sand which is a minor mineral under the Act is concerned Section 4A being excluded by the provisions of Section 14 is not applicable
It was also averred that forcible possession of the mining areas was taken even before communicating the impugned order
The High Court agreed with these contentions and allowed the writ petitions
The State of Haryana and the Haryana Minerals Limited respondents No 2 and 4 respectively in the writ cases were allowed special leave to appeal under Article 136
Hence these appeals
1018 4
Section 4A as it stood at the relevant time read as follows 4A1 Where the Central Government after consultation with the State Government is of opinion that it is expedient in the interest of regulation of mines and mineral development so to do it may request the State Government to make a premature termination of a mining lease in respect of any mineral other than minor mineral and on receipt of such request the State Government shall make an order making a premature termination of such mining lease and granting a fresh mining lease in favour of such Government company or corporation owned or controlled by Government as it may think fit
2 Where the State Government after consultation with the Central Government is of opinion that it is expedient in the interest of regulation of mines and mineral development so to do it may by an order make premature termination of a mining lease in respect of any minor mineral and grant a fresh lease in respect of such mineral in favour of such Government company or corporation owned or controlled by Government as it may think fit
Silica sand being a major mineral is governed by Sub section 1 of Section 4A and ordinary sand by Sub section 2
According to the appellant full and necessary consultation between the two Governments ie the Central Government and the State Government was held and it was considered expedient in the interest of regulation of mines and mineral development to take the impugned decision
Reference in this regard was made by the learned counsel to the report of the Indian Bureau of Mines referred to in the letters of the Director Department of Mines Central Government to the Chief Secretary Government of Haryana dated 20th April 1985 8th July 1985 and 10th July 1985 and the State s letters dated 14th July 1986 17th September 1986 and 29th September 1986
It has been contended that since a decision was jointly taken by the two Governments to grant mining lease of the entire area to the Haryana Minerals Limited this by itself fulfilled the necessary conditions under Section 4A and as the writ petitioners lessees had no locus standi to place their point of view with respect to this aspect it was not necessary to give them a notice
The argument is that in the circumstances there is no question of violation of principles of natural justice
It was also claimed that the State was the final authority to take a decision under Section 4A with respect to both major and minor minerals
1019 6
Mr B Datta Additional Solicitor General stated on behalf of the Union of India respondent No 2 that the respondent is ready to reconsider the matter after hearing the parties concerned
He refuted the claim of the appellant that the State is the ultimate authority to take a decision under Section 4A with respect to major minerals and he appears to be right
Sub section 1 which deals with major minerals empowers the Central Government to consider the matter and after having consultation with the State Government to take a decision in this regard and once it does so and makes a request to the State Government for prematurely terminating a lease the State Government shall be under an obligation to act
The use of shall in this context indicates the binding nature of the request
The language of Section 4A clearly indicates that the Section by itself does not prematurely terminate any mining lease
A decision in this regard has to be taken by the Central Government after considering the circumstances of each case separately
For exercise of power it is necessary that the essential condition mentioned therein is fulfilled namely that the proposed action would be in the interest of regulation of mines and mineral development
The question of the State Government granting a fresh mining lease in favour of a Government Company or a Corporation arises only after a decision to terminate the existing mining lease is arrived at and given effect to
The Section does not direct termination of all mining leases merely for the reason that a Government Company or Corporation has equipped itself for the purpose
The Section was enacted with a view to improve the efficiency in this regard and with this view directs consulation between the Central Government and the State Government to be held
The two Governments have to consider whether premature termination of a particulare mining lease shall advance the object or not and must therefore take into account all considerations relevant to the issue with reference to the lease in question
It is not correct to say that an existing mining lease can be terminated merely for the reason that a Government Company or Corporation is ready to undertake the work
Considered in this light the Section must be interpreted to imply that the person who may be affected by such a decision should be afforded an opportunity to prove that the proposed step would not advance the interest of mines and mineral development
Not to do so will be violative of the principles of natural justice
Since there is no suggestion in the Section to deny the right of the affected persons to be heard the provisions have to be interpreted as implying to preserve such a right
Reference may be made to the observations of this Court 1020 in Baldev Singh and others vs State of Himachal Pradesh and others  that where exercise of a power results in civil consequences to citizens unless the statute specifically out the application of natural justice such rules would apply
The cases Union of India and another vs Cynamide India Ltd and another AIR 1987 SC 1802 DC Saxena vs State of Haryana AIR 1987 1463 and State of Tamil Nadu vs Hind Stone etc
   relied upon by Mr Mohanta do not help the appellant
The learned counsel placed reliance on the observations in paragraphs 5 to 7 of the judgment in Union of India vs Cynamide Ltd which were made in connection with legislative activity which is not subject to the rule of audi alteram partem
The principles of natural justice have no application to legislative activities but that is not the position here
It has already been pointed out earlier that the existing mining leases were not brought to their and directly by Section 4A itself
They had to be terminated by the exercise of the executive authority of the State Government
Somewhat similar was the situation with regard to Section 4A of Haryana Board of School Education Act 1969 which was under Consideration in D C Saxena vs State of Haryana AIR 1987 SC 1463
A matter of policy was adopted and included by the legislature in the impugned section
Besides the validity of the Section was not under challenge there as was expressly stated in paragraph 6 of the judgment
So far as the case State of Tamil Nadu vs Hind Stone is concerned the learned counsel for the appellant cited it only with a view to emphasise the importance of the mineral wealth of the nation which nobody denies
We therefore held that a final decision to prematurely terminate a lease can be taken only after notice to the leassee
Coming to the facts of the present case it will be observed that the question of terminating the mining leases in question before us was introduced for the first time under the letter dated 1471986 page 80 of the State of Haryana
The earlier letter dated 2041985 and 871985 of the Department of Mines Union of India sent to the State Government discussed the general question about the desired improvement in the mining field and referred to the report of the Indian Bureau of Mines on silica sand mining in Haryana
The report had highlighted various aspects of silica sand mining in the State and made several positive suggestions
It was stated in the letter dated 20th April 1985 that if the lessees did not comply with the requirements mentioned therein their leases deserve to be terminated in accordance with the procedure established under law
 In the letter dated 8th July 1985 further emphasis was laid on ensuring scientific mining of optimum utilisation of natural resources ensuring safety in operation 1021 and ensuring payment of fair wages to the mine workers
In this letter the desirability of entrusting mining operations to the public sector was mentioned but it was also stated that the representatives of the Government of Haryana had in the earlier meetings expressed their inability to entrust the Haryana Minerals Ltd appellant No 2 before us with the mining operations in the entire State immediately
Additional terms and conditions were also suggested to be imposed in the future mining leases to be granted in favour of private parties
Later on it appears that the Haryana Minerals Ltd became ready to take over the mining operations and intimated its preparedness by letter dated 1071986 and thereupon the State of Haryana wrote on 1471986 to the Union of India that it was appropriate to prematurely terminate the 6 leases mentioned in the letter of the date
It will be significant to note that the State Government did not take a decision to terminate all the mining leases on the countrary fresh mining leases in favour of private individuals were in contemplation of the State authorities as indicated by the aforementioned letters and by Annexure P 5 page 273 to the Writ Petition of Ram Kishan in the High Court
The State s letter dated the 14th July 1986 was followed by another letter dated 591986 and in reply to it the Central Government asked for a report on several specific points mentioned in their letter which is at page 85 of the paper book
In place of sending the required information the State Government in its letter dated 1791986 took the erroneous stand that the information sought for was not relevant
Instead of pointing out that the information demanded was very pertinent in the context of the proposed termination of the mining lease the Central Government by its letter dated 26th November 1986 agreed to the proposal but took care to advice that while taking any action for premature termination of the leases the authority should ensure that the provisions of Section 4A of the Act are complied with
As has been mentioned earlier the Union of India does not deny the right of hearing to the affected lessees and is ready even now to give an opportunity to them
Admittedly the writ petitioners who are respondents before us were never given any such opportunity and according to their assertion if such an opportunity had been afforded they would have shown that the standard of their mining operation was very high and favourably measured against the expected standard suggested in the report of the Indian Bureau of Mines and mentioned in the letter of the Mines Department of the Central Government and that it was definitely superior to that of Haryana Minerals Limited
On a consideration of the facts and circumstances of the 1022 present case we are of the opinion that there was no effective consultation between the Union of India and the State Government and the Central Government did not form any opinion as required under Section 4A of the Act
We are further of the view that the lessees the respondents before us were entitled to be heard before a decision to prematurely terminate their leases was taken but they were not given any opportunity to place their case
Mr Sen the learned counsel for the respondents very fairly stated that he could not support the plea that leases in respect of minor minerals are saved from the application of Section 4A altogether by reason of Section 14
This Court in State of Tamil Nadu vs Hind Stone  at pages 746H and 747A pointed out that perhaps since Section 4A1 is inapplicable to minor minerals because of the provisions of Section 14 Section 4A2 has been specially enacted making somewhat similar provision
It must therefore be held that leases in respect of minor minerals also can be prematurely terminated in appropriate cases
However in view of our earlier finding the respondents must succeed
We accordingly dismiss these appeals with costs
SL Appeals dismissed


Summary:
The petitioners were dealers carrying on business in the City of Madras in the sale and purchase of yarn
The dealers in the State of Andhra used to place orders for the purchase of yarn with the petitioners in Madras where the contracts were concluded and the goods were delivered ex godown at Madras and thereafter despatched to the purchasers who would take delivery of them within their State
The present dispute related to sales in which property in the goods sold passed outside the State of 1423 Andhra but the goods themselves were actually delivered as a result of the sale for consumption within that State
After the coming into force of the Constitution of India the President in the exercise of the powers conferred by article 3722 made Adaptation Orders with reference to the Sales Tax Laws of all the States and as regards the Madras General Sales Tax Act 1939 he issued an Amendment inserting a new section section 22 in that Act which was a verbatim reproduction of the Explanation to article 286 ia of the Constitution
Oil July 13 1954 the Board of Revenue Commercial Taxes in the State of Andhra acting on the decision in The State of Bombay and another vs The United Motors India Ltd and others   called upon dealers in the State of Madras to submit returns of their turnover of sales in which goods were delivered in the State of Andhra for consumption
Thereupon they filed the present petitions under article 32 Of the Constitution challenging the demand on the grounds inter alia that the sales proposed to be taxed were inter State sales and that they were immune from taxation under article 2862 Of the Constitution
While the petitions were pending the Supreme Court pronounced on September 6 1955 its judgment in The Be gal Immunity Company Limited vs The State of Bihar and others 1055 2 SCR 603 according to which the petitioners were not liable to be taxed
But before final orders were passed on the petitions Parliament passed Sales Tax Laws Validation Act 1956 section 2 whereof provided that no law of a State imposing or authorising the imposition of tax on inter State sales during the period between April 1 1951 and September 6 1955 shall be deeme to be invalid or ever to have been invalid merely by reason of the fact that the sales took place in the course of the inter State trade
That section further provided that taxes levied or collected on such sales during the aforesaid period shall be deemed to have been validly levied or collected
It was the con tention of the State of Andhra that by reason of the aforesaid provision it had the right to impose tax on inter State sales during the aforesaid period
On the other hand the petitioners contended inter alia that I section 22 Of the Madras General Sales Tax Laws Validation Act 1956 which gave validity to laws which imposed a tax did not authorise the imposition 2 the Sales Tax Laws Validation Act was ultra vires article 2862 3 section 22 of the Madras Act was not a law of a State within article 2862 and section 2 of the impugned Act 4 the impugned Act only validated levies already made and did not authorise the initiation of fresh proceedings for imposing tax 5 section 22 having been unconstitutional when it was enacted and therefore void no proceedings could be taken thereunder on the basis of the Validation Act as the effect of unconstitutionality of the law was to efface it out of the statute book and 6 the proposed levy was bad as infringing the Rule which provided that the sale of yarn could be taxed only at one point
It was also contended that under the Constitution it was only the Parliament that has the competence to impose tax on inter State sales and that the Sales Tax Laws Validation Act 1424 was bad in that it gave validity to the laws of the State to impose the tax  Held Sarkar J dissenting that section 22 of the Madras General Sales Tax Act 1939 did in fact impose a tax on the class of sales covered by the Explanation to article 2861a but that it was conditional on the ban enacted on article 2862 being lifted by law of Parliament as provided therein and that it was therefore validated by section 2 of the Sales Tax Laws Validation Act 1956
The construction put upon the Explanation to article 2861a of the Constitution in The Bengal Immunity Company case that it merely prohibited the outside States from imposing a tax on the class of sales falling within the Explanation and did not confer on the delivery State any power to impose a tax on such sales has no application to a taxing statute of a State the object of which was primarily to confer power on the State to levy and collect tax
Section 22 and section 2h of the Madras General Sales Tax Act must be read together as  defining the sales which are taxable under the Act
Mettur Industries Ltd vs State of Madras AIR 1957 Mad
362 The Mysore Spinning and Manufacturing Co Ltd vs Deputy Commercial Tax Officer Madras AIR 1957 Mad 368 and Dial Das vs P section Talwalkay AIR 1957 Bom
71 approved
Mathew vs Travancore Cochin Board of Revenue AIR 1957 T C 300 Cochin Coal Co Ltd vs The State of Travancore Cochin 1956 7 Sales Tax Cases 731 and The Government of Andhra vs Nooney Govin arajulu 1957 8 Sales Tax Cases 297 disapproved
Queen vs Burah 1878 5 IA 178 and In Ye The  etc
  relied on  Held Per section R Das C J Venkatarama Aiyar section K Das and Vivian Bose JJ that i the Sales Tax Laws Validation Act 1956 is in substance one lifting the ban on taxation of interState sales and is within the authority conferred on Parliament tinder article 2 62 and further that under that provision it was competent to Parliament to enact a law with retrospective operation
Punjab Province vs Daulat Singh 1946 LR 73 IA 59 distinguished
The United Province vs Atiqa Bcgum  2 the Adaptation Order made by the President under article 3722 is valid and is not open to attack on the ground that it goes beyond the limits contemplated by that Article
3the expression  law of a State  in article 2862 and section 2 of the Sales Tax Laws Validation Act means whatever operates as law in the State and that section 22 of the Madras General Sales Tax Act is a law within those enactments
1425 4 section 2 of the Sales Tax Laws Validation Act validates not only the levies already collected but also authorises the imposition of tax on sales falling within the Explanation which had taken place during the period specified in section 2
The Act is not a temporary Act though its operation is limited to sales taking place within a specified period
Dial Das vs P section Talwalkay AIR 1937 Bom
71 in so far as it held that it was not competent to the State to start fresh proceedings for assessment disapproved
5 though section 22 of the Madras General Sales Tax Act was unconstitutional when enacted the effect of the unconstitu tionality was not to efface it out of the statute book
Unconstitutionality might arise either because the law is in respect of a matter not within the competence of the legislature or because the matter itself being within the competence its provisions offend some constitutional restrictions
Which a law which is not within the competence of the legislature is a nullity a law on a topic within its competence but repugnant to any constitutional prohibition is only unenforceable
In the latter class of legislation when once the constitutional prohibition is removed the law becomes enforceable without re enactment
Where an enactment is unconstitutional in part but valid as to the rest assuming that the two portions are severable it cannot be held to have been wiped out of the statute book as admittedly it must remain there for the purpose of enforcement of the valid portion
Moreover in the view that the impugned law is conditional legislation it cannot be held to have become non est
Behram Khurshed Pesikaka vs The State of Bombay 1955 I SCR 6I3 and A V Fernandez vs State of Kerala   distinguished
Bhikaji Narayan Dhakras and others vs The State of Madhya Pradesh and a other   relied on
6 under Entry 42 in List 1 Sch
VII of the Constitution legislation with respect to inter State trade and commerce is exclusively within the competence of Parliament
Under Entry 54 List 11 taxes on sale of goods is within the exclusive competence of the State Legislature and reading the two Entries together Entry 42 must be construed as excluding the power to tax sale of goods
The scheme of the Entries in the Lists is that taxation is regarded as a distinct matter and is separately set out
Entry 42 List 1 must therefore be construed as not including the power to impose tax on inter State sales
7 the proposed imposition does not infringe the rule that the sales of yarns should be subject to taxation at a single point because the proposed levy is by the State of Andhra and the rule in question prohibits only multiple taxation in the same State
Per Sarkar J
The Sales Tax Act does not authorise the taxation of a sale under which goods are delivered in the State of 1426 Andhra but the property in them passes outside that State
The Explanation in section 22 of the Act only contemplates a State other than Andhra as the State inside which a sale shall be deemed to have taken place
The words  for the purposes of clause ai  have the same meaning in the Explanation in article 2861 as in the Explanation in section 22 of the Act and the present case is not distinguishable from the decision in The Bengal Immunity Company Limited vs The State of Bihar and others