1 ndm wp.2374.10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 2374 OF 2010 M/s. S.R. Shipping Co., a Proprietary concern, through its Proprietor Mr. Mubin Karjikar, having address at 9­B/302, God Gifts Tower, Hill Road, M.R. Chowk Bandra (W), Mumbai­400 050. ... PETITIONERS VERSUS 1 The State of Maharashtra, (through the Secretary, Revenue & Forest Department, Mantralaya, Mumbai – 32). 2 The District Collector, Ratnagiri, at Ratnagiri. 3 Chiplun Dredgers Associates, Taluka Chiplun, District Ratnagiri. ... RESPONDENTS ­­­­­­­­ Mr. Manoj Patil for Petitioners. Mr. S.N. Patil, AGP for Respondent Nos. 1 and 2. Ms. Manjiri Parasnis for Respondent No.3. ­­­­­­­­ 2 CORAM : A.M. KHANWILKAR and R.M. SAVANT, JJ. RESERVED ON : 5 th May, 2010. DELIVERED ON : 19 th May, 2010. JUDGMENT: ( PER A.M. KHANWILKAR, J.) 1 By this Writ Petition under Article 226 of the Constitution of India, the Petitioners are questioning the correctness of the decision of Respondent No.1 dated 05 th March, 2010 and the consequential order passed by Respondent No.2 dated 09 th March, 2010 of granting permit for excavation of sand in favour of Respondent No.3 from Dabhol Creek / Vashishtha River more particularly four blocks bearing Block Nos. B­4, B­5, F­1 and F2 respectively. 2 The Petitioners state that they had participated in the tender process in relation to other blocks and were successful bidders. That having fulfilled the required conditions laid down in the tender documents, the contract of the other blocks has been awarded to them. Insofar as the aforesaid four blocks are concerned, it is stated that the same have been granted to the Respondent No.3 on permit basis at the price, which is far below the upset price. According to the Petitioners, permission for extraction of sand could be and ought to be granted to a person, who is the successful bidder and offers higher or best price than the upset price 3 in a public auction. That is the requirement under Rule 39­A of the Bombay Minor Mineral Extraction Rules, 1955 (hereinafter referred to “the Rules of 1955”). Besides the tenderer is obliged to obtain prior permissions pertaining to pollution control and environmental clearance from the concerned departments. 3 The Petitioners have asserted that the decision of the Respondent No.1 to award “permit” for extraction of sand for the above mentioned four blocks and not follow the regime of public auction would cause severe loss to Public Exchequer. This aspect has been noticed even in the report of Mr. J.P. Dange, then Additional Chief Secretary ( Revenue ) dated 16 th May, 2009, which was prepared for assessing the situation arising on account of grant of extraction of sand licence on “permit basis” instead of “public auction”. In this report, it is noted that for the year 2008 – 2009, in the Raigad and Ratnagiri districts alone, on account of delay in conducting public auction for grant of licence for extraction of sand at Savitri River / Bankote Creek, the authorities chose to issue permits in this region. The loss to Public Exchequer was substantial. In that, the licence royalty amount to be recovered by public auction in respect of the said area would have been Rs. 33.19 crores, instead the permits were issued for the royalty charges of only Rs.3.65 crores. This report was prepared for considering the issues raised in writ petition filed before this Court. The Petitioners have also placed reliance 4 on orders passed by this Court in public interest litigation to assert that the permission to extract sand ought to be granted only by way of conducting public auction and not on permit system basis, which causes severe loss to the Public Exchequer. 4 It is stated that the District Collector, Ratnagiri had invited tenders by issuing public notice dated 29 th January, 2010 for allotting 12 blocks in Dabhol Creek region. The auction took place on 08 th February, 2010. In the said auction, however, no bid was received in respect of the four blocks referred to above. Insofar as these four blocks are concerned, the upset price was fixed at around Rs.614/­ per brass. The advertisement issued by the District Collector notified the quantity of sand that can be extracted in terms of the proposed contract. Be that as it may, since no bid was received in respect of the said four blocks, fresh advertisement was issued of public auction. Even to this advertisement, there was no response insofar as the four blocks are concerned. Eventually, the Deputy Secretary Revenue & Forest Department vide his communication dated 05 th March, 2010 addressed to the District Collector, Ratnagiri in response to the letter sent by the District Collector dated 24 th February, 2010, took a decision that to avoid revenue loss to the Government and until the guidelines are received from the High Court, it was decided to grant permit for excavation of land by dredgers from six blocks including the above mentioned four blocks subject to 5 conditions specified in the said communication. On the basis of the said directive, issued by the Government, the District Collector gave “permit” for extraction of sand amongst other for the four blocks referred to above in favour of Respondent No.3 on certain terms and conditions referred to in the said order. Notably, the permission for sale of sand in terms of the said order was only upto 02 nd April, 2010. That period has already lapsed. In that sense, the challenge in this petition would not survive for consideration. However, since the issue is a recurring one and there is likelihood of issuance of fresh permit on similar basis, it was thought appropriate to examine the controversy brought before this Court. 5 As per the permit given to the Respondent No.3, the Respondent No.3 became entitled to excavate upto 2,500 brass from each block on or before 02 nd April, 2010 with the help of one dredger in each block at the sanctioned amount of Rs. 200/­ per brass. The question that is posed for our consideration is, whether it is legitimate to give work of excavation of sand, which is in the nature of commercial activity by way of “permit” instead of “public auction” that too at the rate, which is far below the upset price stated in the public notice. In this case, the upset price in respect of the above said blocks was mentioned at around of Rs.614/­ per brass, whereas the permit has given in favour of Respondent No.3 by the Collector at the rate of Rs.200/­ per brass only. 6 6 This petition has been opposed by the Respondents. However, it is only the Respondent No.3 in whose favour permit has been issued by the Collector, has chosen to file reply affidavit to counter the assertions made in the petition and also further affidavit. In the said affidavits, it is stated that the Petitioners have no locus standi to maintain this petition. Further, the petition has been filed with malafide intention. The Petitioners have not participated in the tender process in relation to the four blocks in spite of two advertisements issued in that behalf. Whereas, the Petitioners have been awarded contract in relation to other blocks in pursuance of the same public notice, but the Petitioners have still not commenced their work. The Petitioners do not fulfill the requisite eligibility for starting the work on the sites already allotted to them. It is further stated that the Respondent No.3 has already acted to its prejudice by making initial deposit of Rs.20,00,000/­ and incurring expenditure to the tune of Rs.10,00,000/­ for deploying labourer, machinery, equipment and other necessary expenditure for excavation of sand at the said four sites and the said work is in progress. According to the Respondent No. 3, the authorities had no other option, but to allot the work by issuing permit and the Respondent No.3 being the only eligible applicant succeeded in getting permit for the excavation of sand work in the said four blocks. According to the Respondent No.3, if the said work is not undertaken, it may result in flooding of the nearby areas unless the Creek and River channels were cleared. Moreover, on account of no excavation activity undertaken in the 12 blocks at Chiplun and since the excavation 7 of sand activity is carried on only at Mahad, the contractor at Mahad is benefited tremendously and exploits the market condition due to his monopoly in the business of sand. According to the Respondent No.3, it was necessary to excavate the sand from the aforesaid four blocks, which has not been done for last three years. For all these reasons, it was submitted on behalf of the Respondent No.3 that the petition should be dismissed. 7 The petition was placed before us for hearing on 01 st April, 2010 and after considering the arguments of both sides, we passed the following order: “P.C. The controversy brought before this Court is in respect of the four Blocks earmarked for escavation of sand from Vashishtha River ­ Dabhol Creek, Tal. Chiplun, Dist. Ratnagiri. 2. During the course of hearing it transpired that the Authorities are extending the contract period without inviting tenders to allot the contract of escavation of sand in the concerned Blocks. On enquiries we were informed by the Learned AGP that the contract term of four Blocks in the area is likely to expire on 2 nd April, 2010 and in respect of two Dredgers, it will expire on 22 nd April, 2010. This statement is made on the instructions of Mr. A.S. Bhoge ­ District Mining Officer and Mr. R.Y. Nalawad ­ Dy. Secretary (Revenue). 8 In deference to the observations made by the Court, Learned AGP on instructions stated that no extension would be given to any existing Contractors in future in respect of the Blocks where the contract period is to expire and extension already granted to the Contractors will be recalled and the amount deposited by the Contractors towards extension fees will be returned to the concerned Contractor forthwith. Instead, the State would ensure that all future contracts will be given only after inviting the tenders by issuing public notices and not by giving temporary permits as has been done by concerned Authorities in the present case. This assurance­cum­undertaking given to this Court on behalf of State through Learned AGP is accepted. 3. Learned AGP on instructions further states that public notice to invite tenders in respect of concerned blocks whereof contract period has already expired or soon likely to expire, will be issued within one week from today and the tender process will be completed as per the dates notified in the said advertisement. That assurance is also accepted. 4. Mr. Godbole appearing for Respondent No.3 submits that the Petitioner has no locus standi. We are not impressed by this argument. In the first place, we have merely recorded the stand of the State Government. Moreover, the issue which has been addressed in this order is a larger issue which will have bearing on the public exchequer. Besides, the law mandates that contract of this nature should be given only after following tender process and not by private arrangement at the discretion of the officers of the State. 9 5. We are also not impressed by the objection taken by Mr. Godbole that the effect of this order would directly impact the Respondent No. 3 in whose favour extension order has already been issued on 30 th March, 2010. From the circumstances which have been divulged before us, prima­facie it appears that the concerned officers were more than willing to support the cause of Respondent No. 3. For, the extension order has been issued on 30th March, 2010. Notably, on the same day the order is not only communicated to the Respondent No.3 but the Respondent No. 3 also deposited the renewal charges. All steps have been taken with electric speed by both the Officers and the Contractor. In any case, the State has decided to ensure that tenders will be invited by issuing public notice and contract will be given to the highest bidder. Further, extensions or temporary permits will be ignored and recalled forthwith. That is being done in the larger interest which is not only appropriate but obligatory for the Authorities to give contract of this nature only by following public tender procedure. The Respondent No. 3 cannot claim that any right is vested in him on account of extension order which is only a temporary measure till the regular contract is entered in favour of the highest bidder. We find no substance in the objection taken on behalf of the Respondent No. 3 before us. On the other hand it is the State who has made statement before us through Counsel which merit acceptance in larger public interest. 6. Needless to mention that it will be open to the Respondent No. 3 as well as Petitioner before us to participate in the tender process, if they so desire. 7. We could have disposed of the Petition on the 10 above basis, however, to ensure that the Authorities have complied with the assurance given before this Court, we defer the hearing of this Petition to 12th April 2010. To be listed under caption “Directions”. ” 8 Pursuant to the said order, the appropriate authority issued advertisement on 02 nd April, 2010 inviting tenders in relation to the excavation of sand work at the four blocks alongwith some other blocks. This time, the upset price in respect of the said four blocks was reduced to Rs.462/­ per brass. In spite of that, no bid was received pursuant to this advertisement. That position was reported to the Court, during the hearing. In view of the issues raised, we thought it necessary to request the Additional Chief Secretary ( Revenue Department ) to remain present in Court to explain the stand of the State Government. Pursuant thereto, the Additional Chief Secretary appeared before us and explained the policy of the Government. During the discussion, pursuant to the query put by the Court, the Additional Chief Secretary in all fairness accepted that the upset price is fixed on the basis of past experience and contracts awarded in relation to the same work. That is treated as the benchmark for awarding of future contracts to the bidders in the public auction and the highest bidder, who offers the best price, is preferred. We, therefore, impressed upon the Additional Chief Secretary that even if no bids were received or the offers received from the bidders was to be below the upset price, in that situation, should the competent authority not consider of inviting the contractors qualified to undertake such work and operating 11 in and around the concerned District together on the specified day, time and place to give their offers and also allowing them to improve upon it and if the final offer was to be anywhere near the upset price or for that matter upto 25% less than the upset price, could be accepted. That price would be certainly anytime better than the price mentioned in the permit to be awarded by the competent authority unilaterally on the basis of application made by the interested contractor. 9 In other words, even if the work was required to be given by issuing permit as no bids were received in the public auction, the question is, whether there can be some mechanism to minimize the disparity of such magnitude in the upset price and the price fixed in the permit such as the present one. Inasmuch as, even under the latest (third) public notice, issued by the Collector, the reduced upset price in respect of the said four blocks was fixed at Rs.462/­, which was 25% less than the upset price fixed in the earlier advertisement. That is permissible as per the Rules. But before reducing the price further to almost over 50% of the revised upset price mentioned in the last public notice, while granting permit to a person who had not participated in the public auction or had made any offer which was below the upset price, it may be worthwhile to explore the possibility of a private sale by inviting the contractors qualified to undertake such work and operating in and around the concerned District together. If their offer was to be above the amount mentioned in the permit of Rs.200/­ per brass it would be 12 preposterous to straight away allot permit at that rate. To put it differently, before resorting to awarding of work by issuing permits, the Competent Authority should give due publicity of its intention of awarding the work on permit basis to the interested applicants. If such intention is publicized then in all likelihood there would be more than one application from the interested contractors. In that case, the interested contractors may compete inter se and offer price which may be higher than the price quoted in the permit. This option may give equal opportunity to all interested contractors and also benefit the public exchequer immensely. 10 Further, it may be necessary to reconsider the policy of providing uniform rate of royalty throughout the State at Rs.200/­ per brass. In as much as, it is common knowledge that the price tag for each work would depend upon several variables. For example, in the public notice in question, different upset price has been mentioned for different sites, even though the work involved is identical. If so, the rate of royalty even regarding permit basis should be commensurately reduced by specified percentage below the prevailing upset price of the concerned site. We cannot be oblivious to the fact that the work of extraction of sand and sale thereof to the Contractor is for commercial utility and not domestic use. In so far as the sale of sand for domestic use is concerned, the State may provide for uniform rate of royalty throughout the State. We are not expressing any final view in that regard. But, certainly, if the activity of the present kind is for commercial purpose, 13 there can be no good reason as to why the State should be so charitable to distribute its wealth at such uniform rate of royalty irrespective of the potentials of the minor minerals to generate more income to enrich the public exchequer. 11 In deference to our observation in Court the Additional Chief Secretary readily agreed that the Government will re­examine the entire issue afresh; especially because the difference between the sale of sand by “public auction” and that by grant of “permit” is manifold, which has been highlighted even in the report of the then Additional Chief Secretary referred to above. As per the said report, the loss to public exchequer is quite substantial i.e. almost to the extent of 10 times. The rate of royalty received by the Government due to permit basis is thus causing huge loss to the Public Exchequer. The Additional Chief Secretary also agreed with the suggestion of the Court that issuance of permit should be eschewed and must be the last resort only in exceptional circumstances, which may warrant clearance of the channels to avoid flooding in the locality. Further, even in that situation, efforts ought to be made by the competent authority to privately invite contractors, who are competent to undertake the extraction work and have experience in that behalf on a specified date together so that they would compete to offer best price to the administration for undertaking the proposed work. That would minimize the loss to the Public Exchequer. In view of the positive approach of the Additional Chief Secretary, we would not like to delve 14 upon these aspects in detail and leave it to the Government to evolve a proper policy to ensure that there is no loss or minimum and unavoidable loss to the Public Exchequer. 12 It was also suggested to the Additional Chief Secretary that while considering the scheme, it may be kept in mind that if the permit, if at all is to be granted, should, as far as possible, match the upset price mentioned in the public notice. In the event, the same is below the upset price and the difference is only upto 25% below the upset price, the Collector himself can be authorized to grant permit on that basis. That would avoid issuance of fresh advertisements, which if issued, as per the rules, the upset price may have to be reduced upto 25% of the upset price mentioned in the earlier advertisement. However, if the permit is to be granted at the rate, which is more than 25% difference, the Collector may have to recommend that proposal to the State Government and the Secretary alone should take the final decision as to whether permit should be granted at the rate specified in the proposal. Indeed, to avoid any uncertainty, the best course would be to specify the percentage below the prevailing upset price of the concerned site, which can be uniformly applied throughout the State. Further, neither the Collector nor the Secretary would be competent to grant permit below such specified percentage. If such checks and balances are provided and the decision is to be taken at the highest level, the possibility of substantial loss being caused to the Public Exchequer would be minimized. 15 13 During the course of hearing, our attention was invited to Government decision dated 05 th September, 2003 and notification dated 11 th February, 2010 to justify the rate mentioned in the permit issued in favour of the Respondent No.3. We shall deal with the above documents at the appropriate stage. 14 There can be no doubt that depending on the usage of the sand, the same can be treated as minor or major mineral as the case may be. As per Rule 70 of the Mineral Concession Rules, 1960, it is plainly provided that sand cannot be treated as a minor mineral when used for certain purpose. The said rule reads thus: “[70. Sand not to be treated as a minor mineral when used for certain purposes­. ­ Sand shall not be treated as minor minerals when used for any of the following purposes, namely: (i) Purposes of refractory and manufacture of ceramic. (ii) Metallurgical purposes. (iii) Optical purposes. (iv) Purposes of stowing in coal. (v) For manufacture of silioute cement. (vi) For manufacture of sodium solicate. (vii) For manufacture of pottery and glass.] ” 15 Thus, while granting permission, the Competent Authority 16 may have to keep in mind as to whether the sand will have to be treated as minor mineral or otherwise. If it is not to be treated as a minor mineral, then the regime regarding permission for extraction of the said sand will be under the central enactment and rules framed thereunder. Whereas, if it is to be treated as minor mineral then alone, the regime provided under the Rules Regulating the Working of Minor Minerals Rules, 1954 (hereinafter referred to “Rules of 1954”) or the Mumbai Minor Mineral Extraction Rules of 1955, would apply. Even if the said Rules of 1954 or the Rules of 1955 were to apply, it is evident that no person shall quarry any minor mineral from any land whether private or Government, whether situated within a reserved forest or outside or within a (Patta) or free hold land, without obtaining the quarry lease granted under the Rules of 1954. Indeed, the said requirement does not affect the rights of agriculturist under Section 27 of the Land Revenue Act when minor minerals are not quarried for sale, but for the construction or repair of well or other agricultural works or for the construction or improvement of dwelling houses of agriculturist. On the other hand, if it is for other purposes, including the commercial use, obtaining permission to quarry is mandatory. From the Rules of 1954, it may appear that permits may