Case: Sandur Manganese &amp; Iron Ores Ltd Vs. State of Karnataka &amp; Others

at the end of Rule 60 to the effect that once the 30 days period specified in the Notification contemplated by Rule 59(1) sub-clause (ii) is over, premature applications would revive. After taking such pains to make it clear that the application would not be entertained until the end of 30 days period, surely the Legislature itself would not have inserted such proviso in Rule 60 if that were its intention. If such premature applications are allowed to be entertained, it would result in the State Government giving out mining leases to favoured persons without notice to the general public.54) The Division Bench has also accepted Jindals contention that if Rule 60 is interpreted to render applications made prior to Rule 59(1) Notification non est, in that event, it would make Rule 59(2) unworkable because persons will normally apply mining lease areas along with an application for relaxation under Rule 59(2). In view of our earlier reasons, this conclusion is clearly misplaced. It is only the request under Rule 59(2) for relaxation in respect of an area that is considered and not the application for grant. It is only after the relaxation under Rule 59(2) by the Central Government of the requirement of the Notification under Rule 59(1) that the applications could be considered for grant of mining lease.55) Though the learned single Judge in his order dated 07.08.2008 quashed the communication/recommendation of the State Government dated 06.12.2004 proposing to grant mining lease to Jindal and Kalyani, however, the learned single Judge traveled much beyond the reliefs sought for in the writ petition and quashed the entire Notification No. CI.16:MMM.2003 dated 15.03.2003. In our view, while approving earlier part of his order and quashing the communication/recommendation of the State Government dated 06.12.2004, the other observations/directions are not warranted in the light of the provisions of the Act and the Rules. The said observations/directions are deleted.Issue (i): Whether it is advisable to remit it to the Central Government: 56) Learned senior counsel appearing for Jindal and Kalyani requested that inasmuch as the Central Government has already given its approval under Section 5 of the MMDR Act in their favour during the pendency of the writ petition, if this Court feels that fresh decision is to be arrived, the same may be remitted to the Central Government. In the earlier part of our judgment, we have pointed out that the Central Government considers only the materials forwarded by the State Government along with its recommendation. As rightly pointed out, if the recommendation of the State Government cannot be upheld in law, all consequential orders including the subsequent approval by the Central Government are also liable to be quashed. It is useful to refer Barnard vs. National Dock Labour Board (1953) 1 All E.R. 1113 at 1120 para 1, McFoy vs. United Africa Co. (1961) All E.R. 1169, Pavani Sridhara Rao vs. Govt. of A.P & Ors. (1996) 8 SCC 298 (para 5) and State of Kerala vs. Puthenkavu N.S.S. Karayogam & Anr., (2001) 10 SCC 191 (para 9). If the very same recommendation of the State Government is sent back to the Central Government on the administrative side in its role as an approving authority under Section 5(1) without setting aside the impugned judgment, it is more likely that the Central Government would simply follow its previous order. In that event, the Central Government would be influenced by the judgment passed by the Division Bench upholding the grant made in favour of Jindal and Kalyani. Such an exercise would be in the nature of post-decisional hearing which would be impermissible. [Vide H.L. Trehan & Ors. vs. Union of India & Ors., (1989) 1 SCC 764 (paras 12 & 13) K.I. Shephard & Ors. vs. Union of India & Ors., (1987) 4 SCC 431 (para 16) and Shekhar Ghosh vs. Union of India & Anr., (2007) 1 SCC 331 ]. It is also brought to our notice that as on date the Central Government hears revision petitions through an Executive Officer and without participation of a Judicial Member. It is also pointed out that the exact procedure of the revisional Tribunal has kept changing over the last few months. It is clear that it would not be an independent and efficacious alternative forum in terms of the guidelines laid down by the Constitution Bench in Union of India vs. R. Gandhi, President, Madras Bar Association, JT 2010 (5) SC 553 . As observed by three Judge Bench of this Court in Indian Charge Chrome Ltd. (supra), when there was no valid recommendation by the State Government for the grant of lease, there cannot be any valid approval of the Central Government relying on the defective recommendation. We have already concluded that the recommendation of the State Government dated 06.12.2004 is not valid with reference to the provisions of MMDR Act and the Rules, hence the invalid recommendation cannot be looked into by the Central Government. Further, proviso to Section 5(1) itself provides only for the Central Government either to grant or reject its approval to the State Governments recommendation in the case of mining lease for a mineral such as iron ore in the First Schedule. In our view, such consideration on the administrative side does not involve consideration of all the applicants based on their mining lease applications and after giving an opportunity of hearing. Inasmuch as the Central Government does not have all relevant materials before it, it may not be in a position to substitute itself for the State Government and, if not, it would be proper, in fact, it would be inconsistent with the provisions of the MMDR Act and the Rules to frame the issue on the administrative side of the Central Government. Even otherwise, inasmuch as we have heard the matter at length and we satisfy that there is a flaw in the recommendation of the State Government which requires reconsideration, we reject the request for remitting the matter to the Central Government for its decision. Conclusion:

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]) A perusal of the proceedings of the Chief Minister shows that no clear reasons were given to show as to why Jindal and Kalyani were preferred over other applicants. There is also no plausible reason why the applications of the appellants herein were not considered favourably. A summary of the applications was prepared and at the end certain columns were left blank which the Chief Minister filled by hand and then signed theIt is true that among the criteria mentioned, only one criteria, namely, "proposed investment" is taken into account in evaluating some applications. However, as mentioned above, in the said proceedings, two irrelevant points were taken into account, namely, (i) whether or not the applicant holds a mining lease in the State and (ii) the amount of their past investment in steel plant. It is equally true that the proceedings recommended in favour of Jindal and Kalyani was justified by the special reasons specifically stated at the very end in terms of Sectionplain reading of the above provision makes it amply clear that it would apply to favour a later applicant over an earlier applicant which is relevant only in the event that the main provision of Section 11(2) relating to preference of prior applicants applies and not in the case of notification inviting applications, whether it is under the first proviso to Section 11(2) or 11(4) under the later proviso, upon notification, by deeming fiction all applications are treated as having been received on the sameIn view of the specific parliamentary declaration as discussed and explained by this Court in various decisions, there is no question of the State having any power to frame a policy de hors the MMDR Act and theRules.28) It is not open to the State Government to justify grant based on criteria that are de hors to 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 statuteperusal of the above decision clearly shows that it concerned with Section 8(3) of the MMDR Act which requires consideration of the extremely general criterion of the interests of mineral development before granting second renewal of a mining lease. Unlike in Section 11(3), no further criteria was specified and it was in this background, this Court upheld on the facts of that case that relevant material taken into account by the Committee set up by the Central Government rightly included "captive consumption". In view of the factual situation, the said decision can have no bearing on initial grants of mining lease where the only permissible criteria are the matters set out in Section 11(3) of the MMDR Act.Issuewe consider Section 11 with the aid of the said Report, it makes it clear that Section 11(1) provides preferential right to the holder of reconnaissance permits or a prospecting licencee who has identified mineral resources in the area allotted to him for grant of a mining lease, subject to certain conditions specified in the proviso appended thereto. The over-riding character of the priority given to the successful prospecting licencee or reconnaissance permit-holder is clear from the fact that each of the subsequent sub-sections in Section 11 is made subject to Section 11(1).32) It is also clear that the main provision in Section 11(2) gives preference to a prior applicant for grant of reconnaissance permit, prospecting licence or mining lease over later applicants where the State Government has not issued any notification. The analysis of the Report makes it clear that the main provision in Section 11(2) applies to "virgin areas". It further makes it clear that to the extent that an area that is previously held or reserved would require a notification for it to become available. The first proviso to Section 11(2) carves out an exception to the preferential right based on priority of applications in point of time referred to in the main provision. It makes it clear that where the State Government subsequently issues a notification inviting applications for grant, the prior and subsequent applications to the notification would be considered as if they were filed on the same day and no priority in order of time would be given. The second proviso requires the State Government to examine the matters set out in Section 11(3) while considering the applications forwe are of the view that the notification calling for applications referred to in the first proviso to Section 11(2) applies only to virginWe have already held that Section 11(3) specifies the matter relevant for purposes of second proviso to Section 11(2). We also referred to the Committees Report. In accordance with the recommendation in the said Report, Section 11(3)(d) was added as part of the substitution of Section 11 in the year 1999. Sub-section (d) provides that "the investment which the applicant proposes to make in the mines and in the industry based on minerals" and it speaks about investment proposed to be made and not past investments. Thus it confines the concept of "captive consumption of minerals to proposed investment and not past investments". Even the residuary clauses in Section 11(3)(e) are limited to "matters as may be prescribed", which would necessarily mean matters prescribed bywe accept the said position, it would result in anomalous consequences of rendering Rule 60 ultra vires the first proviso to Section 11(2). In fact, this has been highlighted by the Central Government in their affidavit filed before the High Court.37) In addition to what we have stated, it is relevant to note that Section 11(5) again carves out an exception to the preference in favour of prior applicants in the main provision of Section 11(2). It permits the State Government, with the prior approval of the Central Government, to disregard the priority in point of time in the main provision of Section 11(2) and to make a grant in favour of a latter applicant as compared to an earlier applicant for special reasons to be recorded in writing. It also gives an indication that it can have no application to cases in which a notification is issued because, in such a case, both the first proviso to Section 11(2) and Section 11(4) make it clear that all applications will be considered together as having been received on the same date. In view of our interpretation, the proceedings of the Chief Minister and the recommendation dated 06.12.2004 are contrary to the Scheme of the MMDR Act as they were based on Section 11(5) which had no application at all to applications made pursuant to the notification datedsuch circumstances, a harmonious reading of Section 11 with Rules 59 and 60, therefore, mandates an interpretation under which Notifications would be issued under Section 11(4) in the case of categories of areas covered by Rule 59(1). In those circumstances, we are unable to accept the argument of learned senior counsel for Jindal and Kalyani with reference to those provisions.39) The Division Bench has clearly erred in concluding that applications made prior to the notification under Rule 59(1) which are premature and cannot be entertained under Rule 60 would revive upon issuance of the Notification. This conclusion goes against basic principles of statutory interpretation. We have already pointed out the effect of Rule 60 which is couched in negative language that is mandatory in nature. Further, if that was the intention of the Legislature, there was no reason for the Legislature to take pains to state in Rule 60(b) that an application made during the black-out period of 30 days specified in the Notification also would be premature and could not be entertained. Accordingly, the interpretation placed by the Division Bench on Rule 60 would result in reading in a proviso at the end of Rule 60 to the effect that once the 30-days black-out period specified in the Notification contemplated by Rule 59(1)(ii) is over, premature applications would revive. After taking such pains to make it clear that the applications would not be entertained until the end of the 30-days period, surely the Legislature itself would have inserted such a proviso at the end of Rule 60 if that were itsthe light of the above discussion about Section 11(2) alongwith Rules 59 and 60, it should be interpreted that Section 11(2) is to cover virgin areas alone. In view of the same, the Jindals application made prior to the Notification cannot be entertained along with the applications made pursuant to the Notification dated 15.03.2003 because it is Section 11(4) which covers the said Notification along with Rule 59(1) and not the first proviso to Section 11(2) as contended by the respondents.IssueWe have already discussed this issue. In addition to the same, perusal of the order of the High Court in Writ Petition No. 35915 of 2001 shows that the State Government was directed to consider only the application of the MSPL and the applications filed by the impleading applicants and others pursuant to the Notification dated 15.03.2003 in accordance with law and in terms of the provisions of the MMDR Act and MC Rules. In other words, the High Court did not issue any direction to consider all applications made prior to the notification. To put it clear, there was no mandamus from the High Court to consider prior applications. The word "others" qualify the phrase "pursuant to" and not the class of applicants who had applied even prior to the "Held Area Notification" dated 15.03.2003. As a matter of fact, the High Court had merely directed the State Government to consider the applications in accordance with the provisions of the MMDR Act and MC Rules. Even otherwise, the said order was passed without going into the specific provisions in the Act or Rules. Further, the order does not deal with the interpretation of Section 11 or Rules 59 and 60. Hence, the order of the High Court of Karnataka in Ziaulla Sharieffs case does not permit the consideration of Jindals application dated 24.10.2002 which was made prior to the notification dated 15.03.2003.Issuea plain reading of Rule 35, it is clear that the rule permits the State Government to differentiate between the "end use" of the minerals for the purpose of sub-section (2) of Section 11 in addition to the matters in Section 11(3). In the case on hand, all the parties, namely, MSPL, Sandur, Jindal and Kalyani expressed their intention to use iron ore from the mines for producing steel and, therefore, the same "end use" requirement is satisfied.43) Rule 35, at best, permits the State Government to differentiate between different "end uses", for example, the use of iron ore to produce sponge iron instead of steel, or the use of gold in jewellery as compared to medicines. Further, Rule 35 does not differentiate between "proposed" and "existing" end use. Therefore, it could have enabled the State Government to take into account the claim of the respondents - Jindal and Kalyani, whose past investments would not have qualified on the "proposed" investment criterion under Section 11(3)(d), in addition to MSPL and Sandur. This could have been a basis to exclude those with proposed investments in steel plants from consideration.44) It is also relevant to point out that Rule 35 specifies one additional factor apart from the factors set out in Section 11(3). The plain language of Rule 35 requires its application only in cases covered by Section 11(2) and not by Section 11(4). Therefore, to the extent that it is Section 11(4) that covers Notification under Rule 59(1) and not Section 11(2), in this way also, the State Government committed an error in relying on Rule 35 to exclude the appellants, i.e., MSPL and Sandur. To justify the recommendation in favour of the respondents-Jindal and Kalyani, in the proceedings of the Chief Minister, State heavily relied on Rule 35 on the premise that it is intended to give preference to those who have made existing investments in industries based on iron ore and that the respondents - Jindal and Kalyani, qualify on this consideration. However, as discussed above, Rule 35 only permits the State Government to take additional factor of the "end use" of the minerals and not the existing investments made by the applicants. Moreover, relying on the existing investments made, the respondents also does not satisfy the requirements under Section 11(3)(d) which talks solely about proposed investments to be made and not the existing ones.Issuethe Legislature had intended that it should include past investments also, the use of the word "proposed" is superfluous, which could never be the case. Learned senior counsel appearing for the respondents have not pointed out any other provision in the MMDR Act or the MC Rules permitting grant of mining lease based on past commitments or for captive purposes in existing industries.46) As observed in the earlier paragraphs, the strong reliance placed by the respondent-Jindal on the decision of this Court in TISCOs case (supra) (Paras 9,15,20,25,27,34,54,56 & 57) is misplaced. This case concerned solely on the interpretation of Section 8(3) of the MMDR Act in the context of a second renewal of a mining lease in favour of TISCO, and not a fresh grant. It is, in this context the phrase "interest on mineral development" in Section 8(3) was interpreted to include captive requirements. On the other hand, the case of fresh grant is covered by Section 11 of the MMDR Act. Paragraph 54 of the TISCOs case (supra) makes it clear that the case concerned is chromite whose known reserves were not abundant, whereas iron ore is in abundance. Even otherwise, this judgment is of no assistance even on Rule 59(1) of the MC Rules since it was a case of relaxation by the Central Government under Rule 59(2), as is clear from paragraph 15 of the judgment.47) It is useful to mention that subsequent to the decision in TISCO (supra), this Court in Indian Charge Chrome Ltd. & Anr. vs. Union of India & Ors., (2006) 12 SCC 331 (Paras 20 & 26) held that considerations of captive mining cannot be the controlling factor for grant of lease.Issueis clear that the State Government is purely a delegate of Parliament and a statutory functionary, for the purposes of Section 11(3) of the Act, hence it cannot act in a manner that is inconsistent with the provisions of Section 11(1) of the MMDR Act in the grant of mining leases. Furthermore, Section 2 of the Act clearly states that the regulation of mines and mineral development comes within the purview of the Union Government and not the State Government. As a matter of fact, the respondents have not been able to point out any other provision in the MMDR Act or MC Rules permitting grant of mining lease based on past commitments. As rightly pointed out, the State Government has no authority under the MMDR Act to make commitments to any person that it will, in future, grant a mining lease in the event that the person makes investment in any project. Assuming that the State Government had made any such commitment, it could not be possible for it to take an inconsistent position and proceed to notify a particular area. Further, having notified the area, the State Government certainly could not thereafter to honour an alleged commitment by ousting other applicants even if they are more deserving on the merit criteria as provided in Section 11(3).49) In the case of State of Assam & Ors. vs. Om Prakash Mehta & Ors., AIR 1973 SC 678 , this Court observed that the MMDR Act and MC Rules contain the complete code in respect of the grant and renewal of prospecting licences as well as mining leases in lands belonging to Government. In Quarry Owners Association (supra), this Court again reaffirmed the notion that both the Central as well as the State Government act as a mere delegates of Parliament while exercising the powers under the Act and Rules. [Vide M.A. Tulloch (supra), Baijnath Kedio (supra), Kesorams case (supra), and Bharat Cooking Coal Ltd. (supra)]. From this, it becomes amply clear that the State Government has divested of legislative and executive powers with respect to mines and minerals development. In addition to the same, Anjum M.H. Gaswala (supra), Captain Sube Singh (supra), Singhara Singhs case (supra), this Court repeatedly held that the field of granting mining leases is covered by express statute and rules and the grants must be made in accordance with the provisions of the Act and Rules and no other consideration. From a perusal of the above settled legal position, it becomes clear that the State Government cannot grant mining leases keeping in mind any considerations apart from the ones mentioned in the MMDR Act and MC Rules. In those circumstances, no extraneous considerations such as past commitments made by the State Government to Jindal and Kalyani who have already set up steel plants can be entertained by the State Government while granting mining leases and must abide by the Act and Rules.IssueThe Law of Equity cannot save the recommendation in favour of Jindal and Kalyani because it is a well settled principle that equity stands excluded when a matter is governed by statute. This principle was clearly stated by this Court in the cases of Kedar Lal vs. Hari Lal Sea, (1952) SCR 179  at 186 and Raja Ram vs. Aba Maruti Mali (1962) Supp. 1 SCR 739 at 745. It is clear that where the field is covered expressly by Section 11 of the MMDR Act, equitable considerations cannot be taken into account to assess Jindal and Kalyani, when the recommendation in their favour is in violation of statute. It was pointed out that Kalyani does not have a commitment from the State Government regarding its iron ore needs. In the proceedings of the State Government, there is only a statement that it may apply for a lease. No doubt, Jindal has emphasized that it has already set up its steel plant based on the commitments made by the State Government to grant a mining lease and it is in need of iron ore for these steel plants. As observed earlier, commitments made by the State Government cannot be a relevant factor for grant of lease in the teeth of the consideration set out in Section 11(3). If that was to be the sole criterion, the State Government ought not to have notified the area vide `Held Area Notification datedreference to the allegation that MSPL has a mining lease over an area of 722.94 hectares, it was pointed out that in actual it has a lease over an area of 347.22 hectares only. On 05.06.2009, MSPL filed an affidavit before the Division Bench stating that it holds only a single mining lease granted over five decades ago and the major proportion of which has been afforestated. It is also their grievance that the iron ore reserves in this lease have almost been exhausted over a period of 58 years, since 1952. The remaining iron ore cannot support a steel plant of the size that is being set up by MSPL. Since the entire field of granting mining lease is covered by MMDR Act and MC Rules, the State Government cannot use any consideration apart from the ones mentioned in the Act and Rules.IssueIn view of our conclusion, the Division Bench has erred in concluding that the Jindals application made prior to the Notification can be entertained along with the applications made pursuant to the said Notification because it is not Section 11(4) which covers the said Notification under Rule 59(1) but the first proviso to Section 11(2). As a matter of fact, the Division Bench did not even mention Section 11(4) in its reasoning apart from stray references even though the conclusion of the learned single Judge hinged on how Section 11(4) would be rendered otiose and redundant if the first proviso to Section 11(2) was taken as governing the consideration of applications under a Notification pursuant to Rule 59(1).53) The Division Bench has also faulted in arriving at the conclusion that the applications made prior to Notification under Rule 59(1) which are premature and cannot be entertained under Rule 60 would revive upon issuance of the Notification which is clearly not the case. As pointed out earlier, had that been the intention of the Legislature, there was no reason for the Legislature to take pains under Rule 60(b) that an application made during the period of 30 days specified in the Notification also would be premature and could not be entertained. If the decision of the Division Bench is taken to its logical conclusion, then it would result in reading in a proviso at the end of Rule 60 to the effect that once the 30 days period specified in the Notification contemplated by Rule 59(1) sub-clause (ii) is over, premature applications would revive. After taking such pains to make it clear that the application would not be entertained until the end of 30 days period, surely the Legislature itself would not have inserted such proviso in Rule 60 if that were its intention. If such premature applications are allowed to be entertained, it would result in the State Government giving out mining leases to favoured persons without notice to the general public.54) The Division Bench has also accepted Jindals contention that if Rule 60 is interpreted to render applications made prior to Rule 59(1) Notification non est, in that event, it would make Rule 59(2) unworkable because persons will normally apply mining lease areas along with an application for relaxation under Rule 59(2). In view of our earlier reasons, this conclusion is clearly misplaced. It is only the request under Rule 59(2) for relaxation in respect of an area that is considered and not the application for grant. It is only after the relaxation under Rule 59(2) by the Central Government of the requirement of the Notification under Rule 59(1) that the applications could be considered for grant of mining lease.55) Though the learned single Judge in his order dated 07.08.2008 quashed the communication/recommendation of the State Government dated 06.12.2004 proposing to grant mining lease to Jindal and Kalyani, however, the learned single Judge traveled much beyond the reliefs sought for in the writ petition and quashed the entire Notification No. CI.16:MMM.2003 dated 15.03.2003. In our view, while approving earlier part of his order and quashing the communication/recommendation of the State Government dated 06.12.2004, the other observations/directions are not warranted in the light of the provisions of the Act and the Rules. The said observations/directions are deleted.Issuethe earlier part of our judgment, we have pointed out that the Central Government considers only the materials forwarded by the State Government along with its recommendation. As rightly pointed out, if the recommendation of the State Government cannot be upheld in law, all consequential orders including the subsequent approval by the Central Government are also liable to bethe very same recommendation of the State Government is sent back to the Central Government on the administrative side in its role as an approving authority under Section 5(1) without setting aside the impugned judgment, it is more likely that the Central Government would simply follow its previous order. In that event, the Central Government would be influenced by the judgment passed by the Division Bench upholding the grant made in favour of Jindal and Kalyani. Such an exercise would be in the nature of post-decisional hearing which would behave already concluded that the recommendation of the State Government dated 06.12.2004 is not valid with reference to the provisions of MMDR Act and the Rules, hence the invalid recommendation cannot be looked into by the Central Government. Further, proviso to Section 5(1) itself provides only for the Central Government either to grant or reject its approval to the State Governments recommendation in the case of mining lease for a mineral such as iron ore in the First Schedule. In our view, such consideration on the administrative side does not involve consideration of all the applicants based on their mining lease applications and after giving an opportunity of hearing. Inasmuch as the Central Government does not have all relevant materials before it, it may not be in a position to substitute itself for the State Government and, if not, it would be proper, in fact, it would be inconsistent with the provisions of the MMDR Act and the Rules to frame the issue on the administrative side of the Central Government. Even otherwise, inasmuch as we have heard the matter at length and we satisfy that there is a flaw in the recommendation of the State Government which requires reconsideration, we reject the request for remitting the matter to the Central Government for its decision.