WP(C) No. 9120/2008 Page 1 of 33 IN THE HIGH COURT OF DELHI AT NEW DELHI W.P. (C) 9120/2008 & CMs 17536/2008, 164/2009 Reserved on: 19th May 2010 Decision on : 20th July 2010 S.K. SARAWAGI & CO. PVT. LTD. & ANR ..... Petitioners Through: Mr. Rajiv Nayar, Senior Advocate with Mr. Rishi Aggarwal, Mr. Nikhil Rohatgi and Mr. Akshay Ringe, Advocates versus UOI & ORS ..... Respondents Through: Ms. Anjana Gosain with Ms. Veronica Mohan, Advocate for R-1/UOI. Mr. C.S. Vaidyanathan, Senior Advocate with Mr. Atul Jha, Advocate for R-2/State of Chhattisgarh. Mr. U.U. Lalit, Senior Advocate with Mr. Akshay Dharamdhikari, Mr. Dheeraj Malhotra and Mr. M.K. Singh, Advocates for R-3. CORAM: JUSTICE S. MURALIDHAR 1. Whether reporters of local paper may be allowed to see the judgment? No 2. To be referred to the reporter or not? Yes 3. Whether the judgment should be referred in the digest? Yes JUDGMENT 20.07.2010 Introduction 1. An order dated 16th December 2008 of the Mines Tribunal, dismissing the Petitioners‟ Revision Application No. 12(2)/2006-RC-II and 12(3)/2006-RC-II, is challenged in the present writ petition. The said revision application was filed against an order dated 5th May 2005 passed by the Government of Chhattisgarh, Respondent No. 2 herein, rejecting the two applications filed by the Petitioners for grant of prospecting licence (PL); one application for iron-ore in respect of 147 hectares area in forest Compartment Nos. 369(P) and 370(P) in forest village: Maro & WP(C) No. 9120/2008 Page 2 of 33 Durgukondal Range, Tehsil: East Bhanu Pratappur Forest Division, District: Kanker, Chhattisgarh and another application for 207 hectares in forest Compartment Nos. 371(P), 372(P), 373(P) in forest village: Bangachar, Durgukondal Range, Tehsil: East Bhanu Pratappur Forest Division, District: Kanker, Chhattisgarh. By the order dated 5th May 2005, Respondent No. 2 granted PL to Respondent No. 3 Pushp Steel and Mines Limited (PSML) and to M/s Singhal Enterprises (Respondent No. 4 herein) respectively. 2. As far as the Petitioner is concerned, it is aggrieved to the extent that the grant of PL to Respondent No. 3 overlaps an area of 354 hectares for which the Petitioner had made an application. In other words, the Petitioner has no grievance as regards the grant to Respondent No. 3 of PL in respect of the difference between the extent of 705 hectares for which the Respondent No. 3 has been granted PL and 354 hectares which overlaps the area for which the Petitioner had made an application for grant of PL. 3. In the revision application, the Petitioner had also challenged the letter dated 19th October 2005 of the Central Government granting approval to Respondent No. 3 under Section 5(1) of the Mines and Mineral (Development and Regulation) Act, 1957 [hereafter `the MMDR Act‟]. Background Facts 4. The background facts are that the Petitioners filed two separate applications with the Respondent No. 2 for grant of PLs with regard to the WP(C) No. 9120/2008 Page 3 of 33 iron-ore in Compartment Nos. 369(P) and 370(P) on the one hand and Compartment Nos. 371, 372 and 373 on the other in village Maro and Bangachar. 5. In its application, the Petitioner described itself as mine owners and exporters of minerals and ores and the extent applied for was 207 hectares. In Column No. 16 it was indicated that the Petitioner was undertaking mining for the last four decades in the State of Andhra Pradesh. The Petitioner states that it started operations of its sponge iron unit in 2004 in the State of Chhattisgarh after investing more than Rs. 25 crores from its own resources. 6. On 2nd June 2004 Respondent No. 3 PSML was incorporated at New Delhi with a paid up share capital of Rs. 1 lakh by two individuals Mr. Atul Jain and Mr. Sanjay Jain both brothers. On the same day, i.e., 2nd June 2004, Respondent No. 3 filed two applications with Respondent No. 2 for PLs in Compartment Nos. 366, 369 to 375 and for Compartment Nos. 355 to 358. It is stated that on 27th December 2004, Respondent No. 3 filed another application in respect of Compartment Nos. 366, 369 to 375 and for Compartment Nos. 355 to 358 in the same area for a mining lease (`ML‟). 7. On 7th January 2005, a Memorandum of Understanding („MoU‟) was entered into between Respondents 2 and 3 for setting up a sponge iron unit with an annual capacity of 3,15,000 tones per annum with a captive WP(C) No. 9120/2008 Page 4 of 33 power plant of 20 mega watt and had a total project cost of Rs. 308 crores. It was agreed in terms of the MoU that Respondent No. 3 will set up the above projects in the State of Chhattisgarh for which Respondent No. 2 and its agencies would “extend all necessary assistance and fullest cooperation for successful implementation of the projects.” Respondent No. 3 was to commence the implementation of the project not later than two years from the date of the MoU. On its part, Respondent No. 3 was to facilitate through the Chhattisgarh State Industrial Development Corporation („CSIDC‟) procuring optimum land free from encumbrances. Under clauses B(iv) and B(v) Respondent No. 2 was to undertake making recommendations “to the concerned Ministry of the Government of India for coal linkage/allotment of suitable captive coal mine in Chhattisgarh subject to availability”, and “for linkage/allotment of captive iron-ore mines in Chhattisgarh subject to availability.” 8. On 9th March 2005 Respondent No. 2 issued a notice under Rule 12 of the Mineral Concession Rules, 1960 („MCR‟) to four parties, namely, the Petitioner herein, M/s Jaiswal Neco Ltd., Prakash Industries Ltd., and M/s Vandana Global Ltd., for a hearing on the applications made for grant of PL in Compartment Nos. 372, 373, 374, 377, 378, 381, 390, 391, 392 and other areas in Village Maro and Bangachar. The date of the hearing was fixed as 22nd March 2005 at 3pm. It is stated that neither of the Respondents 3 and 4 were present at the public hearing. At the public hearing the Petitioner was not informed that there were other claimants for the PL for these areas. Respondent No. 2 also did not inform the Petitioner and the three others that an MoU had been entered into between WP(C) No. 9120/2008 Page 5 of 33 Respondent No. 3 and Respondent No. 2. 9. The order dated 5th May 2005 passed by the Respondent No. 2 mentioned that applications for grant of PL in respect of iron-ore in the above forest compartments, i.e., 355, 356, 357, 358, 364, 365, 366, 369, 370, 371, 372, 373, 374 and 375 of forest village Hahaladi of Michgaon- Lohatar Forest Range of Bhanu Pratappur Forest Division, District: Kanker had been received from 26 parties. The list sets out the name of the Petitioner at serial Nos. 9 and 10, that of Respondent No. 4 at serial No. 5, and Respondent No. 3 at serial Nos. 17, 18, 25 and 26. In para 3 of the order dated 5th May 2005, it is mentioned that a decision had already been taken granting permission of mineral concession to six applicants which included the Petitioner. It is stated that a decision had been taken by the State Government to give preference to those applications who had already set up their units based on iron-ore and/or those units “who are taking effective steps to set up their units.” (the original of the order dated 5th May 2005 is in Hindi and a translated version has been filed one each by the Petitioners and Respondent No.3). It was decided as a policy that units that had already set up their industries based on iron-ore and/or those had already been given a mineral concession, were not to be granted mineral concessions for the areas under consideration. The only two categories that were considered for grant of PL were those applicants, who had established industry based on iron-ore and had not been given a mineral concession earlier and those applicants who intended to set up an industry based on iron-ore and had initiated “effective steps” for setting up industries and had not been given any mineral concessions earlier. This WP(C) No. 9120/2008 Page 6 of 33 was given as the explanation for deviating from the requirement of Section 11(1) of the MMDR Act that preference had to be given to an applicant who had applied earlier. The Petitioner was considered as having fallen in the category of applicants in respect of whom a decision had already been taken to grant mineral concession. Respondent No. 4 fell in the second category and Respondent No. 3 in the third category, i.e., in the category of an applicant, who had already taken effective steps for setting up an industry based on iron-ore and had not been granted any mineral concession earlier. Accordingly, while rejecting all the other applications including that of the Petitioners, the PL was granted to Respondents 3 and 4 in the compartment numbers as indicated hereinbefore. 10. On the same date i.e. 5th May 2005, a letter was addressed by Respondent No. 2 to the Secretary, Ministry of Mines, Government of India (Respondent No. 1) for grant of its approval under Section 5(1) of the MMDR Act for grant of ML of an iron-ore in favour of Respondent No. 3 of 215 hectares out of Compartment Nos. 355, 356, 357 and 358 and PL for 705.33 hectares out of Compartment Nos. 366, 369, 370, 371, 372, 373, 374 and 375. It is submitted that at this stage the Petitioner was not given a copy of the order dated 5th May 2005. It was not even aware that Respondents 3 and 4 were among the applicants for the grant of PL. On 6th September 2005 on the basis of the revision application filed by the Petitioner, the Central Government, i.e., Respondent No. 1 directed Respondent No. 2 to provide the Petitioner information concerning the rejection of its application. On 19th October 2005 the Central Government WP(C) No. 9120/2008 Page 7 of 33 granted approval in respect of Respondent No. 3 under Section 5 (1) of the MMDR Act as regards the prospective licence. On 12th May 2006 it granted another approval under Section 5(1) for the mining lease in favour of Respondent No. 3. 11. The Petitioner states that it was only on 31st December 2005 that it received a copy of the order passed by Respondent No. 2 on 5th May 2005. On receipt of the said order on 8th February 2006, the Petitioner filed a fresh revision petition challenging the said order dated 5th May 2005. Notice was issued by the Mines Tribunal on the said petition on 8th March 2006. Although the Mines Tribunal had fixed the hearing of the previous revision petition on 31st March 2006 it was not heard even on the adjourned dates. The Petitioner filed Civil Writ Petition No. 5260 of 2006 in this Court. On 6th November 2006, an order was passed by the Court directing the Mines Tribunal to dispose of the revision petition expeditiously. However, the revision petition was not taken up for hearing immediately. It was heard finally on 9th February 2007 and orders were reserved. 12. Although according to the Petitioner the revision petition had already been finally heard, it received a notice on 5th September 2007 from the Mines Tribunal, informing it of the hearing that was to take place. No hearing took place as scheduled. Pursuant to an order passed by this Court in the WP (C) No. 2671 of 2008 filed by the Petitioner, the Mines Tribunal was directed to pronounce the judgment within a period of four weeks from 1st May 2008. It is stated that on 29th May 2008 the Petitioner WP(C) No. 9120/2008 Page 8 of 33 appeared before the Mines Tribunal and also filed its written submissions. When again the Mines Tribunal failed to pronounce the judgment, the Petitioner filed a further writ petition being W. P. (C) No. 7824 of 2008 in this Court. Impugned order of the Mines Tribunal 13. Finally, pursuant to the order passed by this Court on 5th December 2008, the Mines Tribunal passed the impugned order on 16th December 2008 dismissing the Petitioner‟s revision petitions. The Mines Tribunal held as follows: (i) No public hearing as such was envisaged under Rule 12 of the MCR. (ii) When the Central Government granted prior approval under Section 5(1) of the MMDR Act “it implied that prior approval under Section 11(5) as well as 5(1) has been granted by the Central Government.” Therefore, the matter was not required to be referred to the Central Government twice: once when seeking approval under Section 5(1) of the MMDR Act and again while seeking approval under Section 11(5) of the MMDR Act. (iii) The non-inclusion of the names of the parties whose applications had already been considered and the notice issued to the Petitioner and four others was not violative of any of the Petitioners‟ rights. The grievance, if at all, could be made by the parties whose names were not included in the list. (iv) During the hearing, Respondent No. 2 clarified that an in- principle decision had already been taken to grant PL to the Petitioner over an area of 182 hectares area elsewhere in the State and therefore the non-grant to it of PL for the area in question was WP(C) No. 9120/2008 Page 9 of 33 not illegal. 14. The Petitioner withdrew Writ Petition (C) No. 7824 of 2008 reserving liberty to challenge the order dated 16th December 2008. The present writ petition has thereafter been filed. At the hearing on 24th December 2008 this Court directed the Respondents to maintain status quo pursuant to the letters dated 19th October 2005 and 12th May 2006. By a subsequent order dated 9th January 2009, this Court clarified that the status quo order only covered the area that would have been claimed by the Petitioner in its application for PL. It was clarified that so far as the balance area, constituting the difference between the 705.33 hectares granted to Respondent No. 3 and the overlapping area with which the Petitioner, was concerned, it was open to Respondent No. 3 to act upon such PL in accordance with law. Submissions of Counsel 15. This Court has heard the submissions of Mr. Rajiv Nayar, the learned Senior counsel appearing for the Petitioners and Mr. C.S. Vaidyanathan, the learned Senior counsel appearing for Respondent No. 2 and Mr. U.U. Lalit, the learned Senior counsel appearing for Respondent No.3. 16. It is submitted by Mr. Nayar on behalf of the Petitioners as under: (a) The grant of PL to Respondent No. 3 was illegal inasmuch as no prior approval of the Central Government was separately accorded under the proviso to Section 11(5) of the MMDR Act; the approval for the purpose of Section 11(5) of the MMDR Act is different from the approval by the Central Government under WP(C) No. 9120/2008 Page 10 of 33 Section 5 (1) of the MMDR Act. (b) The principles of natural justice were not adhered to inasmuch as there was no disclosure to the Petitioner of the fact that there were other applicants apart than the four parties to whom the notice of hearing issued under Rule 12 of the MCR was sent. Therefore, the impugned order of Respondent No. 2 was not transparent. (c) The meeting of 9th March 2005 was obviously an eye-wash since only two months earlier, an MoU had been entered into between Respondents 2 and 3. By undertaking in the said MoU that it would make recommendation to the Central Government for grant of the PL, it was plain that the MoU was by-passing the MMDR Act. The issue was, therefore, pre-determined and the hearing under Rule 12 MCR was an eye-wash. (d) Respondent No.3 had done nothing on the ground to qualify for the grant of PL. On the contrary, the Petitioner has expanded the capacity of its plant from 60,000 MTPA to 1,07,600 MTPA. The records of Respondent No. 2 show that the incorporation certificate of the Respondent No. 3 was not filed along with the application although it was mandatory. They had also not filed the required income-tax returns. They did not even have a permanent account number (PAN) as mandated by the income-tax authorities. (e) Till such time the Central Government did not pass an order on 19th October 2005 the paid-up capital of Respondent No. 3 was only Rs. 1 lakh. Thereafter certain shareholders not concerned with the mining business purchased shares from Respondent No. 3 company at a huge premium. (f) There was no justification for Respondent No. 2 State Government to enter into an MoU with the entity that had no previous experience whatsoever. WP(C) No. 9120/2008 Page 11 of 33 (g) Undue favour has been shown to Respondent No. 3 inasmuch as it had to take effective steps under the Industrial Development Regulation Act, 1951 („IDR Act‟) and the New Industrial Policy of 1991 before venturing into setting up an industrial unit for sponge iron unit. An Industrial Entrepreneurship Memorandum („IEM‟) was compulsorily to be filed by the Respondent No. 3 before setting up a unit. However, till 5th May 2005 Respondent No. 3 did not produce any such IEM. The only step taken by Respondent No. 3 was that it purchased a land at the cost of Rs. 66,69,684/- on 9th January 2005. Even applying the common parlance meaning of „effective steps‟ Respondent No.3 had not taken any such effective steps. (h) Sections 11(5) and 5(1) of the MMDR Act operated in different fields and therefore separate approvals were required to be taken. Reliance is placed on the judgments in Hindustan Aluminium Corporation Ltd. v. State of Bihar 1991 (3) SCC 428; Indian Charge Chrome v. Union of India 2003 (2) SCC 533; Indian Charge Chrome v. Union of India 2005 (4) SCC 67 and Indian Charge Chrome v. Union of India 2006 (12) SCC 331. (i) The mere entering into an MoU was not enough to satisfy the requirement of grant of PL. Unless effective steps were taken to set up the sponge iron unit, Respondent No. 3 could not have been granted any preferential treatment. Reliance is placed on the judgments in Indian Thermal Power Ltd. v. State of M.P. (2000) 3 SCC 379 and Edward Keventers (Successors) Pvt. Ltd. v. Union of India AIR 1983 Delhi 377. (j) The grant of PL is like grant of a State largesse and this cannot be done when it is against public interest and public good. Respondent No. 3 had not mobilized any operations of mining or even running a unit, had no workers, no funds, no technical WP(C) No. 9120/2008 Page 12 of 33 experience but was still granted a PL by Respondent No. 2 overriding the Petitioner‟s prior claim under Section 11(3). This was unreasonable. Reliance is placed upon the decisions in Haji T.N. Hassan Rawther v. Kerala Financial Corporation 1988 (1) SCC 166. (k) When the impugned order dated 5th May 2005 was passed by Respondent No. 2 on the presumption of grant of alternate land to the extent of 182 hectares for the purposes of PL was already sanctioned, it was not known to the Petitioner at that point in time. While the claim by Respondent No. 3 is that the said decision was taken on 31st March 2005 itself. According to the Petitioner, the said decision was taken only on 17th May 2005 after passing of the impugned order of 5th May 2005. This fact is in any event not specifically mentioned in the impugned order. It is submitted that the Respondent No. 3 did not have any technical capability or financial capacity to justify the grant of the PL in its favour by Respondent No. 2. 17. On behalf of Respondent No. 3, Mr. Lalit submitted as under: (i) Respondent No. 2 has by its policy divided the applicants for grant of PL into three categories. The policy was non-arbitrary and uniform in its application. It is stated that the said policy has also not been challenged by the Petitioner. It is submitted that having got the benefit of grant of 182 hectares of land for PL purposes, the Petitioner cannot question the grant of PL under the very same policy in favour of Respondent No. 3. (ii) Under Section 11(2) of the MMDR Act, the Petitioner as a prior applicant has only a preferential right to be considered and no absolute right to be granted PL. Reference is made to the judgment in Dharambir v. Union of India (1996) 6 SCC 702 and Indian Metals & Ferro Alloys v. Union of India 1992 Supp (1) SCC 91. WP(C) No. 9120/2008 Page 13 of 33 (iii) There is no violation of Rule 12 of the MCR or the principles of natural justice. Rule 12 does not envisage a public hearing at all. It is submitted that the Respondent No. 2 did not act arbitrarily as it gave cogent reasons why it was rejecting the applicants‟ applications and why it was granting PL to 2 out of the 26 applicants. (iv) The approval granted by the Central Government was both for the purposes of Section 5(1) as well as Section 11(5) of the MMDR Act. These constituted the special reasons why the rule of seniority in terms of Section 11(1) was not adhered to. (v) Respondent No. 3 has in the affidavit filed by it listed out so- called “effective steps” taken by it for the purposes of the policy decision of the State Government: “a) Obtained an IEM from the Ministry of Commerce and Industry, Government of India (No. 2187/SIA/IMO/2004 dated 17.06.2004). The IEM was amended on 14.01.2006 as the proposed location of the project was changed from District Bilaspur to District Durg after acquiring land from CSIDC. Since the issue of IEM has been raised by the Petitioner for the first time in their Written Submissions, a copy of the IEM along with the amended IEM is annexed hereto and marked as Annexure R3-A. b) Entered into an MoU committing to establishing an integrated steel plant for the production of special steels for manufacture of automotive components with a captive power plant with an investment of about Rs. 380 crores on 07.01.2005. (The capability and bona fide of the applicant is considered by State before entering into the MoU) d) Prepared and submitted a project report clearly providing product mix and details, end use of raw material, value addition and quantum of raw material to be used. e) Procured developed industrial on 19.01.2005 and a sum in excess of Rs. 60 lacs along with the bank guarantee of about Rs. 48 lacs was deployed for the same (as opposed to a less expensive but more time consuming option of acquiring rural land and processing change of land use). WP(C) No. 9120/2008 Page 14 of 33 f) Applied for and procured allocation of water (another important consumable in making steel) for the proposed plant. g) Applied for grant of mining lease for a coal block to the state government on 03.03.2005 and 28.03.2005. h) A coal block was eventually secured in the year 2007.” (vi) The approval granted by the Central Government is both under Section 5(1) as well as Section 11(5) of the MMDR Act and that since the proviso to Section 11(5) and Section 5(1) operate in the same field, i.e., First Schedule minerals, hence a composite approval is not contrary to the Act as long as all the factors relevant for the exercise of granting approval under Section 5(1) and 11(5) have been accounted for. (vii) The order rejecting an application need not contain detailed reasons. Reference is made to the decision in M.J. Sivani v. State of Karnataka AIR 1995 SC 1770. A plea of equity is also raised showing that in the last three years Respondent No. 3 has spent