WP (C) 1315/2007, CM Nos. 2389/07, 2391/07, 12725/07 & 14253/08 & W.P.(C)1327/2007, C.M. Nos.2411/2007, 2413/2007 & 12866/2007 Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 29.04.2009 Pronounced on: 01.09.2010 + WP (C) Nos.1315/2007 & CM Nos. 2389/2007, 2391/2007, 12725/2007 & 14253/2008 & WP (C) Nos.1327/2007 CM Nos. 2411/2007, 2413/2007 & 12866/2007 PRISM CEMENTS LTD. ….Petitioner Through : Mr. Dushyant Dave, Sr. Advocate with Mr. Rishi Agarwal, Ms. R.Hameed, Ms. Shikha Sareen and Mr. Akshay Ringe, Advocates. Vs. UOI & OTHERS …..Respondents Through : Ms. Maneesha Dhir and Ms. Geeta Sharma, Advocates for Union of India. Mr. Naveen Sharma, Advocate for Respondent No.2. Mr. S.B. Upadhyay, Sr. Advocate, Mr. Kailash Vasudev, Sr. Advocate with Ms. Anisha Upadhyay and Mr. Pawan Upadhyay, Advocates, for Resp. No.3. CORAM: MR. JUSTICE S. RAVINDRA BHAT 1. Whether the Reporters of local papers may be allowed to see the judgment? YES 2. To be referred to Reporter or not? YES 3. Whether the judgment should be reported in the Digest? YES MR. JUSTICE S.RAVINDRA BHAT % 1. In these two writ proceedings under Article 226 of the Constitution of India, the common WP (C) 1315/2007, CM Nos. 2389/07, 2391/07, 12725/07 & 14253/08 & W.P.(C)1327/2007, C.M. Nos.2411/2007, 2413/2007 & 12866/2007 Page 2 petitioner (hereafter referred to as “PRISM”) challenges two orders of the Tribunal constituted under Section 30 of the Mines and Minerals (Development and Regulation) Act, 1957 (hereafter referred to as “the Act”) read with Section 55 of the Mineral Concession Rules, 1960 (hereafter referred to as “the Rules”). The impugned orders rejected PRISM‟s Revision Petitions, being R.P. 16(32) of 2005 and R.P. 16(31) of 2005. 2. The facts necessary for deciding the two petitions are that PRISM set-up a cement plant in Satna (M.P.) in 1997. Originally the plant had a capacity of producing 6000 Metric Tons (MT) Clinker per day, which worked-out to 2 million MT Clinker per annum. It is submitted that the capacity were subsequently enhanced to 7000 MT Clinker per day, which in turn resulted in enhancement of the annual production to 2.31 million MT clinker. PRISM contends that the areas allotted to it contained mining reserves to the extent of 44.75 million MT which were sufficient for 13 years, having regard to the original capacity and the conditions imposed for operation of the cement plant. It is submitted that on 31.12.1996 and 14.02.2000, the Central Government, acting through the Ministry of Environment and Forests granted clearances under the relevant laws for extracting minerals, primarily sandstones, subject to certain conditions. It is also stated that the Director of Mines, Central Government, by an order dated 19.08.2000 granted relaxation in regard to the Safety Zone – for the purpose of mining from 500 metres and reduced it to 300 metres. Further by another order dated 05.03.2004, again issued by the Director of Mines, additional relaxation was granted. 3. PRISM contends that the net-result of the relaxation, together with the clearances earlier obtained was such that 16.810 million MT reserves of limestone stood released for the purpose of mining; yet it is contended that it was impracticable to mine those reserves in entirety, due to various facts, such as existence of stray buildings and structures within those areas and other such obstructions. PRISM states that it took steps to increase its daily production to 7500 MT clinker per day. 4. PRISM submits that two applications were made to the Government of Madhya Pradesh (hereafter referred to as “the State Government”), for grant mining leases on 11.09.2000 and 17.02.2003. These were in respect of 196.053 hectares at Ram Nagar and 153.972 hectares at WP (C) 1315/2007, CM Nos. 2389/07, 2391/07, 12725/07 & 14253/08 & W.P.(C)1327/2007, C.M. Nos.2411/2007, 2413/2007 & 12866/2007 Page 3 Janardanpur for a total extent of 350.025 hectares (in the application dated 11.09.2000); and an extent of 346.629 hectares in the said 346.629 hectares in the same two places – Ram Nagar and Janardanpur. It is further submitted that another application also dated 17.02.2003, seeking Prospecting License at Janardanpur was made. PRISM alleges – a fact not in dispute that common contesting respondent, M/s. Jaypee Assocaites Limited (hereafter called “Jaypee Associates”) had subsequently lodged rival applications on 06.12.2001 and 09.06.2003 for grant of mining leases in areas overlapping those where mining leases had been sought for by the petitioner. Jaypee Associates‟ also filed application for Prospecting License on 09.06.2003 for a similar overlapping area. By a series of orders dated 02.06.2003, 08.09.2003 and 09.09.2003, the State granted Jaypee Associates‟ application preferring its claim over the PRISM‟s prior applications. The State Government rejected the prior claim by invoking its powers under Section 11 (5) of the Act. The State was of the opinion that the proposed increase in production capacity of Jaypee Associates‟ plant from 4.2 million MT to 5.5 million MT per annum and its proposed expenditure of ` 125 crores, on expansion as well as insufficient deposits it held in mining leases that the State had granted, as opposed to PRISM, not disclosing any plans to enhance its production capacity of the existing cement plant and absence of any Project Report to such effect, were good enough reasons. The PRISM appealed to the Mines Tribunal which, after hearing the parties and also considering the State‟s view-point, issued orders on 02.05.2005, allowing the revisions. The Tribunal was of the view that even though each of the State‟s orders contained reasons, yet, the basis or terms thereof had not been disclosed. The Tribunal concluded that in order to ignore a prior claim of an applicant for a mining or Prospecting Lease like PRISM‟s, the requirement of special reasons mandated by Section 11(5) had not been complied with. Therefore, the matter was remitted for reconsideration by the State. 5. The State Government by its order dated 06.07.2005, noted that PRISM had access to mining leases to the extent of 1271.99 hectares, out of which the available mineable reserves worked-out to 6.68 million Metric Tonnes. The State Government noted that PRISM had disclosed inability to mine 16.81 million MT pointing to shortcomings in the planning of management to preserve the mineable reserves for future. The State Government also noted that PRISM had basically installed a 2 million MT per annum plant and showed no proposal for capacity augmentation and that it had invested around ` 675 crores. It was lastly noticed that WP (C) 1315/2007, CM Nos. 2389/07, 2391/07, 12725/07 & 14253/08 & W.P.(C)1327/2007, C.M. Nos.2411/2007, 2413/2007 & 12866/2007 Page 4 PRISM did not, apart from this cement plant install another facility, such as power plant etc. So far as the Jaypee Cement‟s application was concerned, the State noted that its access to leases in its favor were to the tune of 2071.263 hectares of which 6173.9 million MT were mineable reserves. Jaypee Associates, according to the State, had installed 4 million MT per annum plant after which its capacity did had been enhanced and at the time of the order, the annual production capacity was 6 million MT. The company had also invested ` 1690 crores and in addition to the cement plant, had installed 2 power plants; Jaypee Associates had indicated that it was planning to install a third power plant. 6. The State thus went on to record the consumption pattern; as against PRISM‟s production capability of 2 million MT per annum, its consumption required was 2.7 million MT per annum of mineral; the Jaypee Associates‟ production capacity was 6 million MT per annum for which consumption required was 8.5 million MT per annum. The State Government also formed an opinion that PRISM had reserves for around 25 years on the basis of its existing plant capacity whereas Jaypee Associates had reserves for about 20 years on assessment of its existing plant capacity. The State, therefore, reiterated its decision to recommend the grant of mining and Prospecting Licenses applied for by M/s. Jaypee Associates to the Central Government and sought is prior approval inter alia in the following terms: “XXXXXX XXXXXX XXXXXX MINING AND PROSPECTING LEASES 6. From the facts available, it is evident that these two prime industries of the State do not have adequate level of reserves with them in view of the estimated life of their industries but on comparative analysis this fact is strengthened that the order of the State Government, consenting to grant mining lease, which was set aside by the order of the Government of India in revision petition, was correct. 7. On inspection of records, it is evident that the area in question is closer, and adjoining, to the approved mining lease areas of M/s. Jay Prakash Associates as compared to the approved mining lease areas of M/s Prem Cement. Based on complete analysis, available facts, available records, it has been found that the requirement of the higher capacity cement plant installed in the State would naturally be higher and industrial strengthening of State, supply of optimum raw materials to the industries, security of employment to the employees of the industries, increase in the availability of employment and enhancement of revenue to the State WP (C) 1315/2007, CM Nos. 2389/07, 2391/07, 12725/07 & 14253/08 & W.P.(C)1327/2007, C.M. Nos.2411/2007, 2413/2007 & 12866/2007 Page 5 by optimum exploitation, in scientific manner, of mineral resources available in the State should be kept in consideration. XXXXXX XXXXXX XXXXXX” 7. Apparently, the Central Government had sought information from the Indian Bureau of Mines (IBM) and written to the office of the Chief Controller (Mines) for this purpose, seeking comments and eliciting its opinion as to whether relaxation under Section 6(1)(b) of the Act could be given. In response to this letter dated 28.10.2005, the Indian Bureau of Mines (IBM) forwarded its report through a letter dated 15.12.2005 to the Union Government. That letter enclosed the report sought for. The relevant part of the report reads as follows: “XXXXXX XXXXXX XXXXXX COMMENTS ON RELAXATION OF Sec 6(1)(b) OF THE MMDR ACT, 1957 TO THE GRANT OF FIRST RENEWAL OF MINING LEASE FOR LIMESTONE OVER AN AREA OF 772.067 HECT AND FRESH GRANT OF MINING LEASE OVER AN AREA OF 99.416 HECT IN VILL HINAUTI AND SIJATHJA AND 40.236 HECT IN VILL BADRAKHA IN DIST. SATNA M.P. IN FAVOUR OF MS/. PRISM CEMENT LTD. XXXXXX XXXXXX XXXXXX Now the Ministry vide its letter No.4/35-M IV dated 28-10-2005 sought information on the status of reserves in the lease areas already held by the applicant company, M/s Prism Cement Ltd. enclosing therewith, the submission of applicant company. On examination of the document, it is found that the applicant presently holds 3 mining leases over the area of 772.067 hect., 253.326 hect and 66.434 hect. The first lease of 772.067 hect has expired on 24-3-2005 and is presently under renewal. The later two leases were granted in the year 1996 and 2001 and valid upto 2016 and 2021. The company has applied for grant of two new mining leases over areas of 99.416 hect and 80.766 hect. Subsequent to decision of the state govt. to grant these two new leases and renewal of lease of 772.06 hectare the total lease area held by the applicant company in M.P. state will be 1272.009 hect. In the context of above situation, the company has submitted their justification for allowing them to hold more than 10 sq. km. area on the plea that out of 120.97 million tonnes of proved reserves in the already held mining leases, 59.74 million tonnes is blocked in safety zone of villages situated in the lease areas and also due to restriction imposed by MoEF not to carry out mining operations within 500m of Satna-Rewa railway line in the lease area of 66.434 hect. The matter and submissions of the applicant company has been examined and reserves position has been re-assessed based on present physical condition existing in the area. On examination, it is found that the mineral blocked in the village safety zone is 56.44 million tones as against the claim of 59.74 million tonnes by WP (C) 1315/2007, CM Nos. 2389/07, 2391/07, 12725/07 & 14253/08 & W.P.(C)1327/2007, C.M. Nos.2411/2007, 2413/2007 & 12866/2007 Page 6 the applicant. The extent of area covered under safety zone and amount of ore reserves blocked in the leases already held by the company is given in the following table: Sr. no. Lease area in Hectare Area of safety zone in hectares Ore blocked in million tones 1. 772.067 220.48 46.75 2. 253.326 18.24 4.78 3. 66.434 16.64 4.91 Total 1091.827 255.36 56.44 As desired by the Ministry, status of reserves presently available vis-à-vis blocked in the safety zone in the leases held by the company is given below: S. No. Name of leases Lease Area (Ha) Reserves as on 1-12-2005 (In Million tonnes) Blocked reserves Balance available for mining 1. Prism Cement Limestone 772.067 46.75 11.689 2. Prism Cement Limestone 253.326 4.78 26.62 3. Prism Cement Limestone 66.434 4.91 6.56 Total 1091.827 56.44 44.869 *The reserves of lease area of 99.416 hect. has been taken into account in the already held lease of 772.067 hectare as the said area is in the form of scattered islands within this lease. From the above tables, it is observed that 44.869 million tonnes of reserves is presently available for mining. In this regard, it is to mention here that the leases presently held by the company are captive to a 2 million tones per annum cement plant, which was commissioned in 1997. Subsequently, the capacity of plant has been increased to 2.3 million tones per annum thereby increasing the requirement of limestone from 3 to 3.4 million tones. At the present rate of limestone demand by the cement plant, available reserves in the already held leases will meet the requirement of the plant for another 13-14 out of its remaining life of 40 years. XXXXXX XXXXXX XXXXXX” 8. Prism, feeling itself aggrieved by the State Government‟s order, preferring Jaypee Cement‟s latter claim over its previous applications, filed revision petitions. By three separate orders dated 04.01.2007 – two in respect of mining lease applications and one in respect of Prospecting Lease application, the Tribunal noticed in detail all the contentions raised and urged WP (C) 1315/2007, CM Nos. 2389/07, 2391/07, 12725/07 & 14253/08 & W.P.(C)1327/2007, C.M. Nos.2411/2007, 2413/2007 & 12866/2007 Page 7 by the respective parties. It recorded its conclusions in the following terms in Revision Petition No. F.16/31/05-RC-II. The orders in respect of other two cases are also in identical terms: “XXXXXX XXXXXX XXXXXX 9. In the instant case the date of application of the petitioner is 17.2.2003 and the date of application of the impleaded party is 8.6.2003. Clearly, the petitioner has a preferential right under section 11(2) of the MMDR Act, 1957. However, since the State Government has invoked section 11(5) of the Act for granting ML to the respondent no.2 which is a latter applicant, it has to be seen whether the special reasons recorded by the State Government to justify grant to a latter applicant are as per law. In the impugned order the State Government has recorded that as per the information given by the mining officer the petitioner does not have any plan to increase the capacity of his plant, neither the project report has been furnished nor any relevant technical and financial information has been made available. The Mining Officer has also not reported that the petitioner has insufficient reserves of limestone to justify grant of ML to him. The State Government has recorded that since the respondent no.2 had plan (XXXX not legible) its plant capacity and also proposed to spend out of Rs. 215 crores for the purpose and had insufficient reserves for its plant etc. he has been being considered and granted ML. In our view the State Government has followed the provision of rule 26 of MCR, and has given opportunity of hearing to the petitioner also and recorded reasons in the impugned order while rejecting the.. application of the petitioner. After going through the record of the case carefully, and in the light of the above we note that the petitioner had no plan and did not take any concrete steps in increasing the plant capacity before passing the impugned order, whereas the impleaded party had definite plan to make efforts in this regard and also ready to spend a substantial amount for setting up of a plant. We do not find any parent legal infirmity in the action of the State Government in granting the mining lease in favour of the respondent no.2 under section 11(5) of MMDR, Act, 1957. In the premises, the order of the State Government is up held and revision application is rejected. XXXXXX XXXXXX XXXXXX” Prism challenges the above decisions of the Tribunal, contending that relevant factors were ignored, and irrelevant aspects were taken into consideration by it. It is argued that Prism‟s statutory right as a prior applicant had to be shown due deference by the State, which could not have ignored it, except for good reasons, deemed relevant under the statute, having regard to its objects and purposes. WP (C) 1315/2007, CM Nos. 2389/07, 2391/07, 12725/07 & 14253/08 & W.P.(C)1327/2007, C.M. Nos.2411/2007, 2413/2007 & 12866/2007 Page 8 9. Prism argues that the tribunal ignored the fact that the state and its order, had most arbitrarily, increased Jaypee Associates‟ capacity on the one hand and reduced its mineable reserves on the other hand, even while baselessly reducing the petitioner's capacity and equally erroneously increasing its assessment of the existing mineral concessions, on the other hand. This, complains Prism, betrays non-application of mind to the materials available on the record which this court should correct by intervening in exercising judicial review powers. It is argued that the tribunal baselessly endorsed the states view that Prism‟s mining reserves amounted to 64.686 million MT whereas all available indications pointed to actual mining reserves aggregating to 44.869 million MT. This fundamental error, says Prism, renders the tribunal‟s order arbitrary and therefore liable to be interfered with. It is submitted in this context that IBM's report endorsed Prism‟s stand about 56.44 MT reserves being blocked and further that 44.869 million MT of mining reserves were actually available for exploitation. If these had been properly taken into consideration, the tribunal would have concluded that the available mining reserves could have sustained Prism‟s plant only for about 13 years. 10. It is next contended that the tribunal also committed an error in overlooking that Prism had undertaken capacity enhancements in respect of its plant; so much so that its annual production capacity was enhanced from 2 million MT to 2.3 million MT or 7000 million MT with a planned further increase to 7500 million MT each year. Here, too, Prism relies on the IBM report in support of the submission. If these material aspects had been fairly considered, says Prism, the tribunal would have concluded that its (Prism‟s) mining reserves were not at the level perceived by the state (i.e, for 25 years), but realistically not more than 13 years. It is submitted further that the tribunal as well as the state ignored that the capacity augmentation of Prism‟s plant was based on a project report by Larsen and Turbo Ltd. It is contended that the inclusion of 12 million MT as an available mineral resource, for mining purposes, was unjustified, since that clearly was sub-grade limestone, which could not be used by Prism. 11. Prism argues that the state authorities and the tribunal fell into error, in accepting Jaypee Associates‟ exaggerated projections of its capacity, on the one hand, and its under estimating the mineral reserves available with it, on the other. It is submitted, in this respect, that the finding about JAYPEEAssociates‟s capacity being 8.5 million MT annually ignores the Cement Manufacturing Association‟s document, which clearly demonstrates that such annual capacity WP (C) 1315/2007, CM Nos. 2389/07, 2391/07, 12725/07 & 14253/08 & W.P.(C)1327/2007, C.M. Nos.2411/2007, 2413/2007 & 12866/2007 Page 9 was only 7.425 million MT. Prism also argues that Jaypee‟s reserves were understated, and erroneously accepted as such by the Tribunal, and was contrary to the records. 12. It is submitted that the grant of rights to Jaypee Associates, overriding the statutory rights of Prism, are not only contrary to the record, but an abuse of power, and thus indefensible in law. Prism relies on the decision of the Supreme Court, on this aspect, reported as S.R. Venkataraman v. UOI & Anr. (1979) 2 SCC 491 where it was held that: “……….It is not therefore the case of the appellant that there was actual malicious intention on the part of the Government in making the alleged wrongful order of her premature retirement so as to amount to malice in fact. Malice in law is, however, quite different. Viscount Haldane described it as follows in Shearer v. Shields (1914) AC 808, 813 A person who inflicts an injury upon another person in contravention of the law is not allowed to say that he did so with an innocent mind; he is taken to know the law, and he must act within the law. He may, therefore, be guilty of malice in law, although, so far the state of his mind is concerned, he acts ignorantly, and in that sense innocently. Thus malice in its legal sense means malice such as may be assumed from the doing of a wrongful act intentionally but without just cause or excuse, or for want of reasonable or probable cause. 6. It is however not necessary to examine the question of malice in law in this case, for it is trite law that if a discretionary power has been exercised for an unauthorized purpose, it is generally immaterial whether its repository was acting in good faith or in bad faith. As was stated by Lord Goddard. C.J. in Pilling v. Abergele Urban District Council (1950) 1 KB 636; (1950) 1 All ER 76 where a duty to determine a question is conferred on an authority which state their reasons for the decision, and the reasons which they state show that they have taken into account matters which they ought not to have taken into account, or that they have failed to take matters into account which they ought to have taken into account, the court to which an appeal lies can and ought to adjudicate on the matter. XXXXXX XXXXXX XXXXXX” 13. Prism relies on the decision of the Andhra Pradesh High Court, in Dr. T. Nandgopal v. State of A.P. & Ors. AIR 1988 A.P. 199 for the argument that the State and the Union are bound to see – while considering whether or not to overlook the claim of a prior applicant for a mining WP (C) 1315/2007, CM Nos. 2389/07, 2391/07, 12725/07 & 14253/08 & W.P.(C)1327/2007, C.M. Nos.2411/2007, 2413/2007 & 12866/2007 Page 10 or prospecting lease, under the Act – only relevant materials, and act rationally, and not arbitrarily. It was held by the High Court, in that judgment, as follows: “XXXXXX XXXXXX XXXXXX 19. It is true that the minerals vest in the State Government; but, it goes without saying that the State Government cannot act arbitrarily. Now, take the facts of this case. More than one person applied for mining lease in respect of the lands concerned herein. The State Government wants to grant a lease. It has been changing its mind from time to time. Now it wants to grant the entire 500 Acres to the 2nd respondent. That is not possible because the Central Government has not accorded, its prior approval for overlooking the petitioner’s priority claim for the entire extent. The Central Government has agreed to overlook the petitioner’s priority claim only in respect of 350 Acres. While doing so, it has directed that the remaining 150 Acres should be granted to the petitioner. The State Government has, in pursuance of the said proceedings of the Central Government, already, granted 350 Acres to the 2nd respondent. But, so far as 150 Acres is concerned, since it is