Case: M/S.Veet Rag Homes Private Limited Vs. Union of India, Through Secretary, Ministry of Mines & Others

S.A. Bobde, J.The petitioner has approached this Court for quashing and setting aside the order dated 25.4.2008 of the Minister (Industries & Mining) recommending grant of mining lease of bauxite ore under section 11(3) of the Mines and Minerals (Development and Regulation) Act, 1957, hereinafter referred to as the Act, read with rule 34 of the Mineral Concession Rules, 1960 and the order of the Mines Tribunal rejecting their revision under section 30 of the Act thereby upholding the grant of mining lease in favour of the respondent no.3.2. The petitioner M/s.Veet Rag Homes Private Limited and the respondent no.3 M/s.Akash Universal (P) Limited alongwith 16 other applicants applied for mining lease for mining bauxite over an area of 192.36 hectares at Mauze Kumbhawade, dist. Ratnagiri, after the said area had been notified under section 11(2) of the Act on 12.12.2006 by the Director, Geology and Mining and applications were invited for grant of a mining lease over the area. All the applications were considered by the Minister (Industries and Mining) for making a recommendation for the grant of mining lease in question for bauxite over the said area. The Minister considered the applications of all the applicants and recommended the respondent no.3 M/s.Akash Universal (P) Limited for grant of mining lease by the order dated 25.4.2008. Since the application of M/s.Veet Rag Homes Private Limited (petitioner herein) was rejected, they along with another party M/s.Ashapura Minechem Ltd. applied for a revision to the Central Government under section 30 of the Act. The Central Government rejected the revision and upheld the recommendation of M/s.Akash Universal (P) Ltd. for grant of a lease. Both, the order of the Minister (Industries & Mining) and the order of the Government of India rejecting the revision have been challenged by way of this Writ Petition.3. Dr.Tulzapurkar, the learned counsel for the petitioner M/s.Veet Rag Homes Private Limited, submitted that the petitioner was fully eligible for grant of a mining lease and a preferential right for such grant as provided by section 11(3) of the Act. On the other hand, the respondent no.3 M/s.Akash Universal (P) Ltd. had no special knowledge or experience in mining operations and was, therefore, disqualified from being granted such a lease, such special knowledge or experience being an essential requirement under section 11 of the Act. It was further contended that the order recommending grant of mining lease to the respondent no.3 is arbitrary since it makes a recommendation for the grant of mining lease to M/s.Akash Universal (P) Ltd., though it had no experience and though it rejects the applications of two others for such grant even though they had no experience.4. On behalf of the respondent no.3, M/s.Akash Universal (P) Ltd., it is not disputed that they have no experience in mining and have never before been granted a mining lease. It is also not claimed that they have any special knowledge. The order recommending grant of a mining lease to it is justified on the ground that another company which is a group company has the requisite experience. Further, that the end use of bauxite proposed by M/s.Akash Universal (P) Ltd. justified such grant, because M/s.Akash Universal (P) Ltd. proposed to use the mineral in Kolhapur district itself in an alumina plant which they proposed to set up with an investment of about Rs.2,000 crores and which will generate employment for 800 to 900 people.5. Section 11 of the Act confers a preferential right on certain persons for obtaining, inter alia, mining lease. The second proviso to subsection (2) provides that the State Government may grant mining lease after taking into consideration matters specified in sub-section (3) to such of the applicants as it may deem fit. Sub-section (3) provides the matters which must be taken into account before mining lease is granted. Section 11 of the Act reads thus:-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 licensee 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 area for grant of reconnaissance permit or prospecting licence or mining lease, as the case may be, and two or more persons have applied for a reconnaissance permit, prospecting licence or a mining lease in respect of any land in such area, the applicant whose application was received earlier, shall have the preferential right to be considered for grant of reconnaissance permit, prospecting licence or mining lease, as the case may be, over the applicant whose application was received later:Provided that where an area is available for grant of reconnaissance permit, prospecting licence or mining lease, as the case may be, and the State Government has invited applications by notification in the Official Gazette for grant of such permit, licence or lease, all the applications received during the period specified in such notification and the applications which had been received prior to the publication of such notification in respect of the lands within such area and had not been disposed of, shall be deemed to have been received on the same day for the purposes of assigning priority under this subsection:Provided further that where any such applications are received on the same day, the State Government, after taking into consideration the matter 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 applications as it may deem fit.(3) The matters referred to in sub-section (2) are the following:-(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.(4) Subject to the provisions of sub-section (1), where the State Government notifies in the Official Gazette an area for grant of reconnaissance permit, prospecting licence or mining lease, as the case may be , all the applications received during the period as specified in such notification, which shall not be less than thirty days, shall be considered simultaneously as if all such applications have 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 subsection (2), but subject to the provisions of subsection (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.In addition, rule 35 of the Mineral Concession Rules, 1960 provides that in addition to the matters mentioned in clauses (a) to (d) of sub-section (3) of section 11, the State Government shall also consider the end use of mineral by the applicant.6. The question which falls for consideration is whether section 11 sub-sections (2) and (3) permit the grant of a mining lease to an applicant who has no special knowledge or experience in mining operation at all and whether therefore the recommendation to grant the mining lease to M/s.Akash Universal (P) Ltd., who had no experience, is sustainable.7. On a plain reading of sub-sections (2) and (3) of section 11 above, it is clear that the State Government is empowered to grant a mining lease only after taking into consideration the matters specified in sub-section (3) which includes special knowledge or experience in mining operations, etc. It is thus not open for the State Government to refuse to consider whether the applicant has special knowledge or experience in mining operations. According to the respondent no.3, however, though the State Government cannot refuse to consider if an applicant has special knowledge or any mining experience, it is not necessary for an applicant to actually have any such knowledge or experience if on a consideration of all the other factors or attributes required in the section, the State Government considers the applicant fit to be granted such lease. In other words, according to the respondent no.3, sub-sections (2) and (3) of section 11 of the Act only requires the State Government to advert to and take into account whether the applicant possesses the attributes referred to in sub-section (3), but the State Government can grant a mining lease to an applicant who does not possess such attributes in its sole discretion as it may deem fit. It is not possible to accept this contention that subsections (2) and (3) only require the State government to inquire into and take into account whether an applicant possesses the attributes required by those provisions, but that nevertheless the State Government may grant a mining lease even to an applicant who does not possess an attribute if he possesses other attributes referred to in the sub-section. Accepting this contention would render the provisions meaningless. For example, if the contention were to be accepted, the State Government would be entitled to grant an applicant who possesses no financial resources, vide subsection 3(b), or who has technical staff which is wholly unqualified for the work, vide sub-section 3(c) and so on. In the circumstances, we are of view that the State Government which is a delegatee of Parliament can grant a mining lease only to an Applicant who has the attributes specified by sub-section (3) of section 11.8. In the circumstances, we are of view that the impugned order of the Minister for Mining recommending the grant of a mining lease to the respondent no.3 though the said respondent is not shown to have any special knowledge or experience in mining operations is illegal and violative of section 11 of the Act. The order is also arbitrary in that it rejects the applications of two other applicants, viz., M/s.R.W.Sawant & Co., Thane, and M/s.Entegra Infrastructures Ltd., Mumbai, on the ground that they are new entrants in the field of mining and do not have any experience. There is no reason why a different yardstick ought to have been applied to the case of the respondent no.3 apparently on the ground that the respondent no.3 is an emerging entrepreneur. It is settled law vide Sandur Manganese & Iron Ores Ltd. v. State of Karnataka [(2010) 13 SCC 1] that the State Government cannot justify a grant based on criteria that are de hors the Act and the Mineral Concession Rules, 1960.The Supreme Court has observed as follows:-43. It is not open to the State Government to justify grant based on criteria that are dehors the MMDR Act and the MC Rules. The exercise has to be done strictly in accordance with the statutory provisions and if there is any deviation, the same cannot be sustained. It is the normal rule of construction that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself. This principle has been reiterated in CIT v. AnjumM.H. Ghaswala, SCC at p. 644; Captain Sube Singh v. Lt. Governor of Delhi and State of U.P. v. SingharaSingh.The observation in the order that it may be worthwhile to consider the respondent no.3s case because it is an emerging entrepreneur is extraneous to the provisions of the Act, which require the State Government only to take into account the factors or attributes referred to in section 11, sub-sections (2) and (3). It is not possible to accept the justification that because the respondents are said to have taken steps to establish the project, they are entitled to the mining lease. Rule 35 of the Mineral Concession Rules prescribe that the end use of the mineral is a factor that may be taken into account. While doing so, it was not permissible for the State Government to take into account the mere intention of the respondent no.3 to set up an alumina plant in Kolhapur district in which they are said to have supposedly invested Rs.2,000 crores and which will generate employment for 800 to 900 people. The end use contemplated by rule 35 is the end use of mineral by the applicant. That is, the use to which the applicant intends to put the mineral i.e. for example iron ore will be used for steel and so on. This may of course include sale to another. The location of the use such as whether it will be used in a particular district is not a relevant factor.9. Lastly, in paragraph 7 of the order, the Minister for Mining has classified the applicants into groups `A and `B. Group `A comprises the applicants who are financially sound but do not have experience of mining. Seven applicants have been included in this group. Group `B includes names of the applicants who have experience in mining. Nine names have been included in this group. The name of the respondent no.3 has been included in this group of applicants who have experience in mining. It seems that the respondent no.3 has been held as having experience in mining, even though it does not have any mining experience, only on the basis that one group company i.e. M/s.Akash Mining Pvt. Ltd. holds a mining lease of granite and iron ore in Orissa. The State Government, in our view, could not have clubbed the experience of a company other than the respondent no.3 as experience of the respondent no.3. It is not permissible to do so.10. In New Horizons Ltd. v. Union of India [(1995) 1 SCC 478] the Supreme Court has observed that the experience of a company which has merged into a re-organized company may be taken into consideration even though the tender has not been submitted in its name and has been submitted in the name of the re-organised company which does not have experience in its name. Then, while considering the converse, the Supreme Court observed as follows:-Conversely there may be a split in a company and persons looking after a particular field of the business of the company form a new company after leaving it. The new company, though having persons with experience in the field, has no experience in its name while the original company having experience in its name lacks persons with experience. The requirement regarding experience does not mean that the offer of the original company must be considered because it has experience in its name though it does not have experienced persons with it and ignore the offer of the new company because it does not have experience in its name though it has persons having experience in the field.Further, the Supreme Court has observed as follows:-The terms and conditions of such a document have to be construed from the standpoint of a prudent businessman. When a businessman enters into a contract whereunder some work is to be performed he seeks to assure himself about the credentials of the person who is to be entrusted with the performance of the work. Such credentials are to be examined from a commercial point of view which means that if the contract is to be entered with a company he will look into the background of the company and the persons who are in control of the same and their capacity to execute the work. He would go not by the name of the company but by the persons behind the company. While keeping in view the past experience he would also take note of the present state of affairs and the equipment and resources at the disposal of the company. The same has to be the approach of the authorities while considering a tender received in response to the advertisement issued on 22-4-1993. This would require that first the terms of the offer must be examined and if they are found satisfactory the next step would be to consider the credentials of the tenderer and his ability to perform the work to be entrusted. For judging the credentials past experience will have to be considered along with the present state of equipment and resources available with the tenderer. Past experience may not be of much help if the machinery and equipment is outdated. Conversely lack of experience may be made good by improved technology and better equipment.We find from the impugned order that nowhere it has been examined how experience of the group company can be treated as the experience of the respondent no.3. Prima facie, it would not be permissible to club the experience of two separate companies together and hold that though any applicant company has no experience itself, it may be condoned as a company which has experience because some other group company has experience.

Decision:
1[ds]7. On a plain reading ofsubsections (2) and (3)of section 11 above, it is clear that the State Government is empowered to grant a mining lease only after taking into consideration the matters specified in(3) which includes special knowledge or experience in mining operations, etc. It is thus not open for the State Government to refuse to consider whether the applicant has special knowledge or experience in mining operations. According to the respondent no.3, however, though the State Government cannot refuse to consider if an applicant has special knowledge or any mining experience, it is not necessary for an applicant to actually have any such knowledge or experience if on a consideration of all the other factors or attributes required in the section, the State Government considers the applicant fit to be granted such lease. In other words, according to the respondent no.3,subsections (2) and (3)of section 11 of the Act only requires the State Government to advert to and take into account whether the applicant possesses the attributes referred to in(3), but the State Government can grant a mining lease to an applicant who does not possess such attributes in its sole discretion as it may deem fit. It is not possible to accept this contention thatsubsections (2) and (3)only require the State government to inquire into and take into account whether an applicant possesses the attributes required by those provisions, but that nevertheless the State Government may grant a mining lease even to an applicant who does not possess an attribute if he possesses other attributes referred to in theAccepting this contention would render the provisions meaningless. For example, if the contention were to be accepted, the State Government would be entitled to grant an applicant who possesses no financial resources, vide subsection 3(b), or who has technical staff which is wholly unqualified for the work, vide3(c) and so on. In the circumstances, we are of view that the State Government which is a delegatee of Parliament can grant a mining lease only to an Applicant who has the attributes specified by(3) of section 11.8. In the circumstances, we are of view that the impugned order of the Minister for Mining recommending the grant of a mining lease to the respondent no.3 though the said respondent is not shown to have any special knowledge or experience in mining operations is illegal and violative of section 11 of the Act. The order is also arbitrary in that it rejects the applications of two other applicants, viz., M/s.R.W.SawantCo., Thane, and M/s.Entegra Infrastructures Ltd., Mumbai, on the ground that they are new entrants in the field of mining and do not have any experience. There is no reason why a different yardstick ought to have been applied to the case of the respondent no.3 apparently on the ground that the respondent no.3 is an emerging entrepreneur. It is settled law vide Sandur ManganeseIron Ores Ltd. v. State of Karnataka [(2010) 13 SCC 1]  that the State Government cannot justify a grant based on criteria that are de hors the Act and the Mineral Concession Rules,seems that the respondent no.3 has been held as having experience in mining, even though it does not have any mining experience, only on the basis that one group company i.e. M/s.Akash Mining Pvt. Ltd. holds a mining lease of granite and iron ore in Orissa. The State Government, in our view, could not have clubbed the experience of a company other than the respondent no.3 as experience of the respondent no.3. It is not permissible to do so.