Case: Bhushan Power &amp; Steel Ltd.  Vs. State Of Orissa

dispute between the members of the Bhushan Group had been settled and the parties had mutually agreed to withdraw all the allegations and claims relating to the MOU dated 15th May, 2002. Incidentally, by filing I.A.No.13, BSSL confirmed that Bhushan Power & Steel Ltd. was the sole beneficiary under the MOU dated 15th May, 2002, and withdrew all its claims under the MOU dated 15th May, 2002. 26. Mr. L. Nageshwar Rao, learned Senior Advocate, appearing for the State of Orissa, has also very fairly stated that in view of the settlement of disputes between the members of the Bhushan Group, the issue relating to the MOU did not survive and, since, the State Government had already performed its obligation under the MOU, the only thing remaining to be done by the State is to make recommendations to the Central Government for grant of iron ore mines to the Bhushan Power & Steel Ltd. 27. Mr. Rohatgi submitted that in the changed circumstances, the question of execution of a fresh MOU loses its relevance and the letter dated 31st December, 2005, calling upon the Appellants to execute a fresh MOU, is not required to be given effect to. Consequently, it may be held that the MOU dated 15th May, 2002, continues to be valid and subsisting between the State of Orissa and Bhushan Power & Steel Ltd. 28. On the question of Rule 59 of the MC Rules, which formed the basis of the State Governments decision to reject the Appellants application for being recommended to the Central Government for grant of a mining lease, Mr. Rohatgi submitted that such recommendations had been made by the State Government in favour of other applicants as well, such as M/s. S.M.C. Power Generation Ltd., M/s. Neepaz Metalics, M/s. Sree Metaliks and M/s. Deepak Steel & Power. Therefore, there was no reason to deny the same benefits to the Appellants as well.29. Appearing for the Intervener, M/s. Jindal Steels Ltd., Mr. K.V. Vishwanathan, learned Senior Advocate, submitted that so long as any allotment made in favour of the Appellants did not impinge on the allotment made in favour of M/s. Jindal Steels Ltd., it could have no grievance against a separate allotment being made in favour of the Appellants. 30. The mutual settlement of the disputes between the members of the Bhushan Group has altered the situation considerably, since BSSL has withdrawn its claim under the MOU dated 15th May, 2002, and has declared that the said MOU was and had always been executed by the State Government in favour of Bhushan Power & Steel Ltd., which had set up its steel plant at Lapanga. As indicated hereinbefore, although, the MOU was entered into by the State Government with the Bhushan Group for setting up a steel plant at Lapanga, at a later stage, BSSL also laid claim under the MOU for setting up a separate steel plant at Mehramandali and a suggestion was also made for execution of a fresh MOU between the State Government and BSSL to this effect.31. Pursuant to the MOU with Bhushan Limited, the State Government had not only allotted land for the setting up of the steel plant at Lapanga, it had even extended all help for the commissioning of the plant, which, in fact, had already started functioning. However, it is the claim made by BSSL under the MOU executed on 15th May, 2002, that had created obstructions in the setting up of the steel plant at Lapanga. Despite having allotted land and granted sanction to Bhushan Limited to take steps for construction of the said plant, it was subsequently contended that the application filed by Bhushan Limited was premature and could not, therefore, be acted upon. Specific instances have been mentioned hereinabove of the steps taken by the various departments in extending cooperation to Bhushan Limited to set up its steel plant at Lapanga. To now turn around and take a stand that the application made by Bhushan Limited was premature, is not only unreasonable, but completely unfair to Bhushan Limited, who have already invested large sums of money in setting up the plant. The State Government had, on its own volition, entered into the MOU with Bhushan Limited on 15th May, 2002, and had even agreed to request the Central Government to allot mining areas and coal blocks for operating the steel plant. Whatever differences that may have resulted on account of the dispute within the Bhushan Group, which could have led to the rethinking on the part of the State Government, have now been laid to rest by virtue of the settlement arrived at between the Bhushan Limited (now BPSL) and BSSL. The State Government has also accepted the said position. In addition to the above, the action taken by the State Government appears to us to be highly unreasonable and arbitrary and also attracts the doctrine of legitimate expectation. There is no denying the fact that the Appellants have altered their position to their detriment in accordance with the MOU dated 15th May, 2002. Whatever may have been the arrangement subsequently arrived at between the State Government and BSSL, the original MOU dated 15th May, 2002, continued to be in existence and remained operative.32. The State Government appears to have acted arbitrarily in requiring Bhushan Limited to enter into a separate MOU, notwithstanding the existence of the MOU dated 15th May, 2002, which, as mentioned hereinabove, had been acted upon by the parties.33. In the light of the above, the High Court erred in holding that it could not interfere with the decision of the State Government calling upon the Appellants to sign a fresh MOU with the Government, during subsistence of the earlier MOU. Since the State Government has already made allotments in favour of others in relaxation of the Mineral Concession Rules, 1960, under Rule 59(2) thereof, no cogent ground had been made out on behalf of the State to deny the said privilege to the Appellants as well. 34.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]30. The mutual settlement of the disputes between the members of the Bhushan Group has altered the situation considerably, since BSSL has withdrawn its claim under the MOU dated 15th May, 2002, and has declared that the said MOU was and had always been executed by the State Government in favour of Bhushan Power & Steel Ltd., which had set up its steel plant at Lapanga. As indicated hereinbefore, although, the MOU was entered into by the State Government with the Bhushan Group for setting up a steel plant at Lapanga, at a later stage, BSSL also laid claim under the MOU for setting up a separate steel plant at Mehramandali and a suggestion was also made for execution of a fresh MOU between the State Government and BSSL to this effect.31. Pursuant to the MOU with Bhushan Limited, the State Government had not only allotted land for the setting up of the steel plant at Lapanga, it had even extended all help for the commissioning of the plant, which, in fact, had already started functioning. However, it is the claim made by BSSL under the MOU executed on 15th May, 2002, that had created obstructions in the setting up of the steel plant at Lapanga. Despite having allotted land and granted sanction to Bhushan Limited to take steps for construction of the said plant, it was subsequently contended that the application filed by Bhushan Limited was premature and could not, therefore, be acted upon. Specific instances have been mentioned hereinabove of the steps taken by the various departments in extending cooperation to Bhushan Limited to set up its steel plant at Lapanga. To now turn around and take a stand that the application made by Bhushan Limited was premature, is not only unreasonable, but completely unfair to Bhushan Limited, who have already invested large sums of money in setting up the plant. The State Government had, on its own volition, entered into the MOU with Bhushan Limited on 15th May, 2002, and had even agreed to request the Central Government to allot mining areas and coal blocks for operating the steel plant. Whatever differences that may have resulted on account of the dispute within the Bhushan Group, which could have led to the rethinking on the part of the State Government, have now been laid to rest by virtue of the settlement arrived at between the Bhushan Limited (now BPSL) and BSSL. The State Government has also accepted the said position. In addition to the above, the action taken by the State Government appears to us to be highly unreasonable and arbitrary and also attracts the doctrine of legitimate expectation. There is no denying the fact that the Appellants have altered their position to their detriment in accordance with the MOU dated 15th May, 2002. Whatever may have been the arrangement subsequently arrived at between the State Government and BSSL, the original MOU dated 15th May, 2002, continued to be in existence and remained operative.32. The State Government appears to have acted arbitrarily in requiring Bhushan Limited to enter into a separate MOU, notwithstanding the existence of the MOU dated 15th May, 2002, which, as mentioned hereinabove, had been acted upon by the parties.33. In the light of the above, the High Court erred in holding that it could not interfere with the decision of the State Government calling upon the Appellants to sign a fresh MOU with the Government, during subsistence of the earlier MOU. Since the State Government has already made allotments in favour of others in relaxation of the Mineral Concession Rules, 1960, under Rule 59(2) thereof, no cogent ground had been made out on behalf of the State to deny the said privilege to the Appellants as well.The mutual settlement of the disputes between the members of the Bhushan Group has altered the situation considerably, since BSSL has withdrawn its claim under the MOU dated 15th May, 2002, and has declared that the said MOU was and had always been executed by the State Government in favour of Bhushan Power & Steel Ltd., which had set up its steel plant at Lapanga. As indicated hereinbefore, although, the MOU was entered into by the State Government with the Bhushan Group for setting up a steel plant at Lapanga, at a later stage, BSSL also laid claim under the MOU for setting up a separate steel plant at Mehramandali and a suggestion was also made for execution of a fresh MOU between the State Government and BSSL to this effect.31. Pursuant to the MOU with Bhushan Limited, the State Government had not only allotted land for the setting up of the steel plant at Lapanga, it had even extended all help for the commissioning of the plant, which, in fact, had already started functioning. However, it is the claim made by BSSL under the MOU executed on 15th May, 2002, that had created obstructions in the setting up of the steel plant at Lapanga. Despite having allotted land and granted sanction to Bhushan Limited to take steps for construction of the said plant, it was subsequently contended that the application filed by Bhushan Limited was premature and could not, therefore, be acted upon. Specific instances have been mentioned hereinabove of the steps taken by the various departments in extending cooperation to Bhushan Limited to set up its steel plant at Lapanga. To now turn around and take a stand that the application made by Bhushan Limited was premature, is not only unreasonable, but completely unfair to Bhushan Limited, who have already invested large sums of money in setting up the plant. The State Government had, on its own volition, entered into the MOU with Bhushan Limited on 15th May, 2002, and had even agreed to request the Central Government to allot mining areas and coal blocks for operating the steel plant. Whatever differences that may have resulted on account of the dispute within the Bhushan Group, which could have led to the rethinking on the part of the State Government, have now been laid to rest by virtue of the settlement arrived at between the Bhushan Limited (now BPSL) and BSSL. The State Government has also accepted the said position. In addition to the above, the action taken by the State Government appears to us to be highly unreasonable and arbitrary and also attracts the doctrine of legitimate expectation. There is no denying the fact that the Appellants have altered their position to their detriment in accordance with the MOU dated 15th May, 2002. Whatever may have been the arrangement subsequently arrived at between the State Government and BSSL, the original MOU dated 15th May, 2002, continued to be in existence and remained operative.32. The State Government appears to have acted arbitrarily in requiring Bhushan Limited to enter into a separate MOU, notwithstanding the existence of the MOU dated 15th May, 2002, which, as mentioned hereinabove, had been acted upon by the parties.33. In the light of the above, the High Court erred in holding that it could not interfere with the decision of the State Government calling upon the Appellants to sign a fresh MOU with the Government, during subsistence of the earlier MOU. Since the State Government has already made allotments in favour of others in relaxation of the Mineral Concession Rules, 1960, under Rule 59(2) thereof, no cogent ground had been made out on behalf of the State to deny the said privilege to the Appellants as well.