Case: State Of Kerala  Vs. M/S Kerala Rare Earth & Minerals Limited

T.S. Thakur, CJI. 1. Leave granted. 2. These appeals arise out of a common judgment and order dated 13th November, 2014 passed by the High Court of Kerala at Ernakulam, whereby, Writ Appeals Nos.1610, 1611 and 1621 of 2014 filed by the appellants-State of Kerala have been dismissed affirming thereby an order passed by a Single Bench of that Court, allowing the writ petitions filed by the respondent. 3. By an order dated 15th September, 2004 the Government of Kerala sanctioned the grant of mining leases for Ilmenite, Rutile, Leucoxene, Zircon and Sillimanite (non-scheduled mineral) for a period of 20 years. The order came in exercise of the powers vested in the State Government under Section 11(5) of the Mines and Minerals (Development and Regulation) Act, 1957 and was preceded by the approval of the Government of India in terms of Section 5(1) thereof. Shortly after the issue of the sanction order, however, the State Government by another order dated 25th September, 2004 stayed further action in the matter on the ground that a detailed study on the environmental impact of the proposed leases need be undertaken before taking any further steps. This was followed by nine letters dated 12th October, 2006, 16th October, 2006 and 9th November, 2006 addressed to the respondent-company stating in no uncertain terms that the Government of Kerala did not consider it necessary to grant mining leases for mineral sand to private parties. Aggrieved by the said letters and communications, the respondents filed nine revision applications No. 14(1)/2007-RC-II to 14(3)/2007-RC-II and 14(6)/2007-RC-II to 14(11)/2007-RC-II under Section 30 of the Act aforementioned before the Government of India. These revision applications were heard and allowed by the prescribed revisional authority by a common order dated 30th November, 2009, setting aside the impugned orders and remanding the matters to the State Government to reconsider the cases in the light of the observations made in the order passed by the revisional authority. The operative portion of the order passed by the revisional authority was in the following words: "......... 9. After hearing both the sides, we find that the State Government had recommended the mining lease applications of the applicant for seeking prior approval of the Central Government in line with the policy resolution dated 22.10.2002. In 7 cases the Central Government had also accorded its prior approval under Section 5(1) of the MMDR Act, 1957 for the proposal of the State Government for grant of mining lease for mineral sand in favour of the revision applicant. The impugned orders have been passed by the State Government after obtaining the prior approval of the Central Government in 7 cases, the State Government is required to pass order under Section 10(3) of the MMDR Act. In all the 9 cases, including those in which prior approval of Central Government has been conveyed, the impugned orders passed by the State Government are against competitive edge of the mining industry. The policy decision of the State Government appears to be not in consonance with the MMDR Act, 1957 and also against the National Mineral Policy, 2008.10. The impugned orders in all the 9 revision applications mentioned above are set aside with a direction to the State Government to reconsider nil 9 cases in the light of the discussions made in para 9 above and pass appropriate orders accordingly.Sd/-Sd/-(R. Raghupathi)(Ajita Bajpal Pande)Joint Secretary and Legal AdvisorJoint Secretary (Mines)" 4. Upon remand, the Government of Kerala once again examined the matter and by an order dated 15th December, 2010 rejected all the applications filed by the respondents on the ground that although, as per Entry 54 List- I (Union List), Schedule VII of the Constitution of India, the Parliament is competent to make laws for regulation of mines and mineral development to the extent such regulation and development is declared by the Parliament by law to be expedient in public interest, yet, the power of granting mining leases for mining minerals vested only in the State Government under Section 10 of the Act aforementioned. The Government referred to and relied upon its own industrial policy of 2007 according to which mining and exploitation of minerals were permissible only through State/Central Public Sector Undertakings in order to restrict indiscriminate mining and exploitations of minerals having regard in particular to the geographical and ecological conditions as well as the density of the population in the State of Kerala. The State Government took the view that it had the power and control over the minerals lying in the land within its territory and that it was entitled to safeguard the same in larger public interest by formulating suitable policies on the subject. Relying upon the decisions of the High Court of Kerala in Shibu v. Tahsildar [1993 (2) KLT 870] and Gem Granites v. State of Kerala and Ors. [2006 (2) KLT 899 ] the Government declared that as the owner of the minerals lying in the land within its territorial limits it was entitled to determine in public interest that mining and exploitation of minerals will be permitted only through State/Central Public Sector Undertakings. The State Government insisted that such a policy was not contrary to the Act nor did it suffer from any constitutional infirmity. It also relied upon the fact that minerals in question were categorised as Atomic Minerals as per Part-B of the First Schedule to the Act aforementioned. The Government declared that environmental protection being one of its constitutional mandates, any decision that may affect environment or sections of people living in the coastal areas or which may affect environmental conditions in those areas cannot be said to be in public interest.5. Aggrieved by the order passed by the State Government, the respondent- company filed Writ Petitions No.34345 of 2010, 34346 of 2010 and 5420 of 2011 before the High Court of Kerala inter alia praying for a writ of mandamus directing the State to implement the revisional order issued by the Government of India and grant in favour of the respondents mining leases in respect of all the areas which were the subject matter of the said order. The respondents also prayed for a declaration to the effect that the order passed by the Central Government in exercise of its powers under Section 30 of the Act aforementioned was binding upon the State Government and that any policy decision by the State Government contrary to the said decision will not affect the rights of the respondents to obtain mining leases for the areas applied for. The respondent also prayed for a mandamus directing the State Government to forward to the Government of India for approval all the mining lease applications made by the respondent-Company which had not so far been forwarded for such approval.6. By an order dated 21st February, 2013 passed by a Single Judge of High Court of Kerala, the Writ Petitions mentioned above were allowed in part by the High Court inasmuch as the order passed by the State Government was quashed and the matter remitted back to the Government to pass orders in the light of the observations made by the High Court. The High Court quashed the order by which further action in the matter was stayed by the Government with a direction to the Government to consider the applications pending with it in accordance with law. The High Court took the view that the State Government had not reserved, in terms of Section 17 A(2) of the 1957 Act, the areas covered by the applications filed by the respondents and that so long as no such reservation was made, the direction issued by the Central Government to the State Government to reconsider the applications could not be negated. The High Court also held that the State Government had overlooked the provisions of the National Mineral Policy, 2008, which permitted facilitation of private entrepreneurs and that since the Government of Kerala had already exercised its discretion in terms of the prevalent Mining Policy and recommended to the Government of India the grant of approval for mining leases, the rejection of the applications on the basis of a changed policy after the Government of India had accorded sanction for the proposed mining leases was unjustified. The High Court also took note of the fact that Government of Kerala had granted mining lease in respect of the area covered by four other applications and that there could not be different policies in respect of different areas covered by different applications made by the same Company.7. Aggrieved by the order passed by the Single Judge, the State Government preferred Writ Appeals No.1610, 1611 and 1621 of 2014 which were heard and dismissed by a Division Bench of that Court in terms of the order impugned in the present appeals. The High Court, while doing so, held that the State Government was not justified in declining mining leases on the ground that it had been simply directed to reconsider the matter. The refusal of the Government, according to the High Court, amounted to institutional insubordination. The appeals were accordingly dismissed with the observation that the State Governments role in issuing the sanction was minimal, as the subject matter of the law fell within the domain of Central Government. The present appeals by special leave question the correctness of the above order, as already noted above.8. The law relating to mines and minerals development and regulation as also the interpretation of the provisions of the 1957 Act has been the subject matter of a long line of decisions of this Court. It is, in our view, unnecessary to refer to all such decisions as have dealt with different facets of the controversy relating to the powers of the Central Government and those of the State Governments in relation to regulation and development of mines and minerals including the power to levy taxes, fee and cesses and royalties. Decisions of this Court in Hingir-Rampur Coal Co. Ltd. v. State of Orissa [AIR 1961 SC 459 ]; State of Orissa v. M.A. Tulloch and Co. [AIR 1964 SC 1284 ]; India Cement Ltd. v. State of Tamil Nadu [(1990) 1 SCC 12] ; Orissa Cement Ltd. v. State of Orissa [1991 Supp (1) SCC 430]; State of Orissa v. Mahanadi Coalfields Ltd. [1995 Supp (2) SCC 686] ; Saurashtra Cement & Chemical Industries Ltd. and Anr. v. Union of India and Ors. [(2001) 1 SCC 91] ; and State of Madhya Pradesh v. Mahalaxmi Fabric Mills Ltd. [1995 Supp(1) SCC 642] have elaborately dealt with the legislative power of the States to levy taxes, fees and cesses on the minerals regulated by the Act. Dealing with various hues and colours of such levies this Court held that once the Parliament declares it to be expedient in public interest to bring the regulation and development of mines and minerals under the control of the Union in public interest, the subject to the extent laid down by the Parliament comes within the exclusive domain of the Parliament and that any legislation by the State after such declaration that has the effect of trenching upon the field, must necessarily be unconstitutional. 9. We are not, in the present case, dealing with a challenge to the levy of any tax, fee, cess or royalty nor is the vires of any legislation enacted by the State under challenge before us. We are, instead, examining whether the State Government was justified in declining the applications for grant of leases in favour of the respondent-company on the ground that the mineral wealth found in the coastal regions of the State was vested in the State Government and that it was in exercise of its right of ownership over the said deposits entitled to reserve in its own favour or in favour of State owned companies or corporations the right to exploit such deposits. The State Government as noticed in the earlier part of the judgment has, while declining applications for grant of lease, relied upon its own policy according to which the mineral deposits in question are reserved for exploitation by a State agency only. Two precise questions, therefore, fall for consideration in the light of the stance taken by the State Government viz: (i) Whether the ownership in the mineral reserves is vested in the State Government; and(ii) If it is, whether the Government has the right to decline leases on the ground that the minerals or the areas where the same are found have been reserved for exploitation by government companies or corporations. 10. In Monnet Ispat and Energy Limited v. Union of India and Ors. 2012 (11) SCC 1 , Lodha, J., as His Lordship then was, speaking for the Court, held that no one can claim any right in any land belonging to the Government or in any mines in any land belonging to the Government except under the 1957 Act and 1960 Rules nor can any person claim any fundamental right to a lease or prospecting license qua any land belonging to the Government. The mines and minerals, observed the Court, within the territory of a State would vest in the State Government especially when the land where such minerals deposits are found is owned by the Government as is also the position in the case at hand. In fairness to counsel for the respondents it must be mentioned that there was no real dispute as to the ownership of the minerals found in the Government owned land. What was strenuously argued by learned counsel for the respondents was that the State Government could not, on the basis of its own mineral policy, decline consideration to the applications filed by the respondents, when such policy was in conflict with the mineral policy of the Government of India. 11. The Mineral Policy 2008 of the Government of India, inter alia, provides as under: "4. ROLE OF THE STATE IN MINERAL DEVELOPMENTThe role to be played by the Central and State Government in regard to mineral development has been extensively dealt in the Mines and Minerals (Development and Regulation) Act, 1957 and Rules made under the Act by the Central Government and the State Governments in their respective domains. The provisions of the Act and the Rules will be reviewed and harmonised with the basic features of the new National Mineral Policy. In future the core functions of the State in mining will be facilitation and regulation of exploration and mining activities of investors and entrepreneurs, provision of infrastructure and tax collection. In mining activities, there shall be arms length distance between State agencies (Public Sector Undertakings) that mine and those that regulate. There shall be transparency and fair play in the reservation of ore bodies to State agencies on such areas where private players are not holding or have not applied for exploration or mining, unless security considerations or specific public interests are involved.xxx xxx xxx5.2 While these Government agencies will continue to perform the tasks assigned to them for exploration and survey, the private sector would in future be the main source of investment in reconnaissance and exploration and government agencies will expend public funds primarily in areas where private sector investments are not forthcoming despite the desirability of programmes due to reasons such as high uncertainties." 12. It would thus appear that for the minerals in question there was no reservation made in favour of any State owned corporation or agency. That is perhaps the reason why the Government of India had granted approval to the State Governments recommendations on some of the applications filed by the respondents. The State Government Policy, however, runs contrary to the National Mineral Policy, 2008 formulated by the Government of India, Ministry of Mines, in so far as it does not permit a mining lease in favour of any entity other than a State owned corporation or agency. The State Industrial Policy - 2007, relied upon by the State Government in this regard to the extent it is relevant for our purposes, is as under: "12.0 MINING & GEOLOGY12.1 Intensive efforts will be made to explore and utilize mineral resources of the State without adversely affecting the ecology and environment. Mineral exploration activities for iron ores, high grade china clay, bauxite and other minerals will be streamlined and strengthened.12.2 Mining of mineral sand will be done through State/Central Public Sector Undertakings only. However mining of minerals will not be permitted in those areas where the Government appointed Expert Committee recommendation against mining. Government will encourage manufacture of Value Added Products.12.3 The Government will conduct a scientific study on mineral deposits in the State.12.2.1 TitaniumConsidering the rich mineral deposits in the State, a comprehensive scheme to produce Titanium Metal, Titanium composites by using State-of-the-art technology shall be evolved with the help of Central Government agencies and International organisations. If the potential of this natural resource is used properly and scientifically, it will immensely pave way for rapid industrialisation of the State as Titanium is a unique material for strategic applications. The approach is not to limit the activities to manufacturing alone but to harness its vast potential by setting up a chain of Titanium based industries through forward integration. However, utmost care shall be taken to contain the adverse impact on environment by mining, processing and related activities by adopting strict monitoring and control measures. To develop a package for making use of the immense potential of titanium, support shall be availed from national and international organisations." 13. It is argued by Mr. Parasaran, learned senior counsel for the appellant that the policy aforementioned must be taken to be a reservation in favour of the State owned agencies within the comprehension of Section 17A of the aforementioned Act. Section 17A of the Mines and Minerals (Development and Regulation) Act, 1957 reads as under: "17A. Reservation of areas for purposes of conservation. –(1) The Central Government, with a view to conserving any mineral and after consultation with the State Government, may reserve any area not already held under any prospecting licence or mining lease and, where it proposes to do so, it shall, by notification in the Official Gazette, specify the boundaries of such area and the mineral or minerals in respect of which such area will be reserved.(1A) The Central Government may in consultation with the State Government, reserve any area not already held under any prospecting licence or mining lease, for undertaking prospecting or mining operations through a Government company or corporation owned or controlled by it, and where it proposes to do so, it shall, by notification in the Official Gazette, specify the boundaries of such area and the mineral or minerals in respect of which such area will be reserved.(2) The State Government may, with the approval of the Central Government, reserve any area not already held under any prospecting licence or mining lease, for undertaking prospecting or mining operations through a Government company or corporation owned or controlled by it and where it proposes to do so, it shall, by notification in the Official Gazette, specify the boundaries of such area and the mineral or minerals in respect of which such areas will be reserved.(2A) Where in exercise of the powers conferred by sub-section (1A) or sub- section (2), the Central Government or the State Government, as the case may be, reserves any area for undertaking prospecting or mining operations, the State Government shall grant prospecting licence or mining lease, as the case may be, in respect of such area to such Government company or corporation:Provided that in respect of any mineral specified in Part A and Part B of the First Schedule, the State Government shall grant the prospecting licence or mining lease, as the case may be, only after obtaining the previous approval of the Central Government.(2B) Where the Government company or corporation is desirous of carrying out the prospecting operations or mining operations in a joint venture with other persons, the joint venture partner shall be selected through a competitive process, and such Government company or corporation shall hold more than seventy-four per cent of the paid up share capital in such joint venture.(2C) A mining lease granted to a Government company or corporation, or a joint venture, referred to in sub-sections (2A) and (2B), shall be granted on payment of such amount as may be prescribed by the Central Government.(3) Where in exercise of the powers conferred by sub-section (1A) or sub- section (2) the Central Government or the State Government, as the case may be, undertakes prospecting or mining operations in any area in which the minerals vest in a private person, it shall be liable, to pay prospecting fee, royalty, surface rent or dead rent, as the case may be, from time to time at the same rate at which it would have been payable under this Act if such prospecting or mining operations had been undertaken by a private person under prospecting licence or mining lease." 14. There is no gainsaying that the State Government can reserve any area not already held under any prospecting licence or mining lease for undertaking prospecting or mining operations through a Government company or corporation owned or controlled by it, but, in terms of sub-Section(2) of Section 17A (supra) where the Government proposes to do so, it shall by notification in the official gazette specify the boundaries of such area and the mineral or minerals in respect of which such areas will be reserved. Three distinct requirements emerge from Section 17A(2) for a valid reservation viz.: (i) the reservation can only be with the approval of the Central Government and must confine to areas not already held under any prospecting licence or mining lease;(ii) the reservation must be made by a notification in the official gazette; and(iii) the notification must specify the boundaries of such areas and the mineral or minerals in respect of which such areas will be reserved. 15. Mr. Parasaran was unable to show us any notification issued by the Government under Section 17A (2) (supra) nor was it possible for him to exalt the States industrial policy extracted above to the status of a statutory reservation within the contemplation of Section 17A. The net result, therefore, is that while the power to reserve an area not already held under any prospecting licence or mining lease is squarely and specifically vested in the State Government, the exercise of that power is not demonstrable in the case at hand. It is common ground that there is no approval of the Central Government nor is there a notification duly published in the official gazette specifying boundaries of the reserved area and mineral or minerals in respect of which such area will be or has been reserved. 16. It is well settled that if the law requires a particular thing to be done in a particular manner, then, in order to be valid the act must be done in the prescribed manner alone [See: Commissioner of Income Tax, Mumbai v. Anjum M.H. Ghaswala and ors. (2002) 1 SCC 633 ; Captain Sube Singh and Ors. v. Lt. Governor of Delhi and Ors. (2004) 6 SCC 440 ; State of U.P. v. Singhara Singh AIR 1964 SC 358 ; and Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 405 ]. Absence of the Central Governments approval to reservation and a notification as required by Section 17A, therefore, renders the State Governments claim of reservation untenable till such time a valid reservation is made in accordance with law. It is trite that the State Governments general executive power cannot be invoked to make a reservation dehors Section 17A. In Sandur Manganese and Iron Ores Ltd. v. State of Karnataka and Ors. (2010) 13 SCC 1 this Court held that the State Government is denuded of its executive power in the light of Section 2 of the aforementioned Act. To the same effect is the decision of this Court in Bharat Coking Coal Ltd. v. State of Bihar (1990) 4 SCC 557 , where this Court observed that the State is denuded of its executive power in regard to matters covered by the MMDR Act and the Rules. Reference may also be made to the decision of this Court in State of Tamil Nadu v. Hind Stone (1981) 2 SCC 205 where this Court observed: "10. ... The statute with which we are concerned, the Mines and Minerals (Development and Regulation) Act, is aimed ... at the conservation and the prudent and discriminating exploitation of minerals. Surely, in the case of a scarce mineral, to permit exploitation by the State or its agency and to prohibit exploitation by private agencies is the most effective method of conservation and prudent exploitation. If you want to conserve for the future, you must prohibit in the present." 17. The upshot of the above discussion then is that while the State Government is the owner of the mineral deposits in the lands which vest in the Government as is the position in the case at hand, the Parliament has by reason of the declaration made in Section 2 of the 1957 Act acquired complete dominion over the legislative field covered by the said legislation. The Act does not denude the State of the ownership of the minerals situate within its territories but there is no manner of doubt that it regulates to the extent set out in the provisions of the Act the development of mines and minerals in the country. It follows that if the State Government proposes to reserve any area for exploitation by the State owned corporation or company, it must resort to making of such reservation in terms of Section 17A with the approval of the Central Government and by a notification specifying boundaries of the area and mineral or minerals in respect of which such areas will be reserved. Inasmuch as the State Government have not so far issued any notification in terms of Section 17A, the Industrial Policy - 2007 of the Kerala State Government does not have the effect of making a valid reservation within the comprehension of Section 17A. The High Court was, therefore, justified in holding that there is no valid reservation as at present no matter the government can make such a reservation if so advised in the manner prescribed by law. In other words, the dismissal of this appeal shall not prevent the State from invoking its right under Section 17(A)(2) of the Act by issuing notification in respect of the mineral deposits in question. There is, in that view, no reason for us to interfere with the judgment and order passed by the High Court.

Decision:
0[ds]while the State Government is the owner of the mineral deposits in the lands which vest in the Government as is the position in the case at hand, the Parliament has by reason of the declaration made in Section 2 of the 1957 Act acquired complete dominion over the legislative field covered by the said legislation. The Act does not denude the State of the ownership of the minerals situate within its territories but there is no manner of doubt that it regulates to the extent set out in the provisions of the Act the development of mines and minerals in the country. It follows that if the State Government proposes to reserve any area for exploitation by the State owned corporation or company, it must resort to making of such reservation in terms of Section 17A with the approval of the Central Government and by a notification specifying boundaries of the area and mineral or minerals in respect of which such areas will be reserved. Inasmuch as the State Government have not so far issued any notification in terms of Section 17A, the Industrial Policy - 2007 of the Kerala State Government does not have the effect of making a valid reservation within the comprehension of Section 17A. The High Court was, therefore, justified in holding that there is no valid reservation as at present no matter the government can make such a reservation if so advised in the manner prescribed by law. In other words, the dismissal of this appeal shall not prevent the State from invoking its right under Section 17(A)(2) of the Act by issuing notification in respect of the mineral deposits in question. There is, in that view, no reason for us to interfere with the judgment and order passed by the High Court.