STATE OF RAJASTHAN AND ORS. versus GOTAN LIME STONE KHANJI UDYOG PVT. LTD. AND ANR.
[2016] 1 S.C.R. 216, Supreme Court of India, 2016
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
A 
[2016] I S.C.R. 216 
STATE OF RAJASTHAN AND ORS. 
v. 
GOTAN LIME STONE KHANJI UDYOG PVT. LTD. AND ANR. 
(Civil Appeal No. 434 of2016) 
B 
JANUARY 20, 2016 
[ANIL R. DAVE AND ADARSH KUMAR GOEL, JJ.] 
Rajasthan Minor Mineral Concession Rules, 1986 - r.15 -
Mining rights - Transfer of - Partnership firm holding mining rights 
C 
- The firm, after converting itself from a partnership firm into a 
private limited company, sought transfer of mining rights to the 
company - Mining rights transferred by the State - Thereafter the 
company, without permission of the State, transferred its entire 
shareholding for share price to another company and itself became 
D 
E 
its subsidiary company - Propriety of transfer - Held: Mining rights 
belong to State and not to lessee and are regulated consistent with 
the doctrine of public trust - Lessee has no right to profiteer by 
trading such rights - Transfer of lease for private benefit without 
corresponding benefit to the public or the State is not permissible -
The original lessee had sought transfer by giving false declaration 
- On lifting the corporate veil, it is evident that the corporate entity 
has been used to conceal the real transaction of transfer of mining 
lease to a third party, for consideration, without statutory consent 
- Such transfer, being in violation of the rules, is void - Direction 
to the State to frame and notify its policy for exercise ?fits power of 
permitting or refusing transfer of mining lease - Till
the policy is 
F framed and an order in accordance therewith is passed by the State, 
status quo to be maintained. 
G 
Doctrine - Doctrine of lifting of corporate veil - applicability 
of- Held: The doctrine is applicable not only to unravel tax evasion, 
but also where protection of public interest is of paramount 
importance. 
Allowing the appeal, the Court 
HELD: 1. In the present case there are two transactions. 
The first transaction is of transfer of lease from the firm to the 
company. In the second transaction, the entire shareholding is 
H transferred for share price and control of mining lease is acquired 
216
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
217 
KHANJI UDYOG PVT. LTD. 
by the holding company without any apparent price for lease. A 
Viewed separately, there may be nothing wrong with either or 
both the transactions, but if real nature of transaction is seen, 
the illegality is patent. The partnership firm holding lease-hold 
rights has successfully transferred the said rights to a third party 
for consideration in the form of share price which is nothing but B 
price for sale of mining lease which is not allowed and for which 
no permission has been granted. Thus, if these facts were 
disclosed to the competent authority, permission for transfer of 
mining rights for financial consideration could not have been 
allowed. Mining rights belong to the State and not to the lessee 
and the lessee has no right to profiteer by trading such rights. 
C 
Lessee can either operate the mine or surrender or transfer, 
only with the permission of the authority as legally required. In 
the present case, the lessee has achieved indirectly what could 
not be achieved directly by concealing the real nature of the 
transaction. [Para 22] [231-G-H; 232-A-D] 
D 
2. The principle of lifting the corporate veil as an exception 
to the distinct corporate personality of a company or its members 
is well recognized not only to unravel tax evasion but also where 
protection of public interest is of paramount importance and the 
corporate entity is an attempt to evade legal obligations and
lifting 
of veil is necessary to prevent a device to avoid welfare legislation. 
E 
In the present case, the corporate entity has been used to conceal 
the real transaction of transfer of mining lease to a third party for 
consideration without statutory consent by terming it as two 
separate transactions - the first of transforming a partnership 
into a company and the second of sale of entire shareholding to 
F 
another company. The real transaction is sale of mining lease 
which is not legally permitted. Thus, the doctrine of lifting the 
veil has to be applied to give effect to law which is sought to be 
circumvented. [Paras 23 and 26] [232-E-F; 235-E-F] 
Workmen Employed in Associated Rubber Industry Ltd., 
G 
Bhavnagar vs. Associated Rubber Industry Ltd., 
Bhavnagar (1985) 4 SCC 114; State of U.P. vs. 
Renusagar Power Co. (1988) 4 SCC 59: 1988 (1) Suppl. 
SCR 627; Delhi Development Authority versus Skiper 
Construction Company (P) Ltd. (1996) 4 SCC 622: 
1996 (2) Suppl. SCR 295 - relied on. 
H
218 
A 
B 
SUPREME COURT REPORTS 
[2016] l S.C.R. 
The Commissioner of Income Tax, Madras vs. Sri 
Meenakshi Mills Ltd. (1967) 1 SCR 934; UC vs. Escort 
Ltd. 1985 (3) Suppl. SCR 909 :(1986) 1 sec 264; 
New Horizons Ltd. vs. UOJ (1995) 1 SCC 478; Victorian 
Granites (P) Ltd. vs. P. Rama Rao and Ors. (1996) 10 
SCC 665: 1996 (5) Suppl. SCR 692 
- referred to. 
Palmer's Company Law (2J'd Ed.) and Pennington 
Company Law (4'0 Ed.) - referred to. 
3. Mining rights are vested in the State and the lessee is 
strictly bound by the terms of the lease. While discerning true 
c nature of the entire transaction, court has not to merely see the 
form of the transaction which is of sale of shares but also the 
substance which is the private sale of mining rights avoiding legal 
bar against transfer of sale rights circumventing the mandatory 
consent of the competent authority. Consent of competent 
authority is not a formality and transfer without consent is void. 
D 
The minerals vest in the State and mining lease can be operated 
strictly within the statutory framework. There is nothing to rebut 
the allegation that receipt of Rs.160 crores styled as investment 
in shares is nothing but sale price of the lease. No precedent has 
been shown permitting such a private sale of a mining lease for 
E 
consideration without any corresponding benefit to the public. 
[Paras 28 and 30] [236-E; 237-F-G; 238-A-B] 
Orissa Mining Corpn. Ltd. vs. Ministry of Environment 
and Forest (2013) 6 SCC 476:
2013 (6) SCR 881; 
State of Tamil Nadu vs. Mis Hind Stone 1981 (2) SCR 
p 
742 : (1981) 2 SCC 205; Monnet !spat & Energy Ltd. 
vs. Union of India 2012 (7) SCR 644 : (2012) 11 SCC 
1; Amritlal Nathubhai Shah vs. Union Govt. of India 
1977 (1) SCR 372:(1976) 4 SCC 108; Geomin Minerals 
& Marketing Ltd. vs. State of Orissa (2013) 7 SCC 
G 
571 - relied on. 
Arnn Kumar Agrawal vs. Union of India (2013) 7 
SCC 1: 2013 (3) SCR 508; BALCO Employees' Union 
vs. Union of India (2002) 2 SCC 333: 2001 (5) Suppl. 
SCR 511; Vodafone International Holdings B. V. vs. 
Union of India (2012) 6 SCC 613: 2012 (1) SCR 573 
H 
- held inapplicable.
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
219 
KHANJI UDYOG PVT. LTD. 
Victoria Granites (P) Ltd. vs. P. Rama rao and Ors. 
(1996) 10 sec 665: 1996 (5) Suppl. SCR 692; Mc. 
Dowell & Co. 
vs. Commercial Tax Officer (1985) 3 
SCC 230: 1985 (3) SCR 791; Union of India vs. Azadi 
Bachao Ando/an (2004) 10 SCC 1: 2003 (4) Suppl. 
SCR 222; /RC vs. Westminister 1936 AC 1; WT 
Ramsay vs. /RC 1982 AC 300 - referred to. 
4. 
Since, the mining rights vest in the State, the State has 
to regulate transfer of such rights in the best interest of the people. 
No lessee can trade mining rights by adopting a device of forming 
A 
B 
a private limited company and transfer of entire shareholding only 
with a view to sell the mining rights for private profit. Under C 
Section 12A( 6) added by the Mines and Minerals (Development 
and Regulation) Amendment Act, 2015, it has been provided that 
transfer of mineral concessions can be allowed only if such 
concessions are granted through auction. [Para 31] [238-E-F] 
Sulekhan Singh & Co. vs. State of U.P. 2016 AIR 228 
= 2016 (1 ) JT 50 = 2016 (1 ) SCALE 190 -
referred to. 
D 
5. The original lessee sought transfer merely by disclosing 
that the partnership firm was to be transformed into a private 
limited company with the same partners continuing as directors 
E 
and there was no direct or indirect consideration involved. It 
was specifically declared that no pecuniary advantage was being 
taken in the process which is clearly false. The
permission to 
transfer the lease in favour of a private limited company was 
granted on that basis. Thus, it was a case of suppression veri and 
F 
suggestio falsi. Once it is held that transfer of lease is not 
permissible without permission of the competent authority, the 
competent authority was entitled to have full disclosure of facts 
for taking a decision in the matter so that a private person does 
not benefit at the expense of public property. [Para 35][240-E-G] 
6. Thus, acquisition of mining lease contrary to rules is 
void. Requirement of previous consent cannot be ignored nor 
taken to be formality subject only to pay dead rent or agreeing to 
follow same terms. The lessee privately and unauthorisedly cannot 
G 
sell its rights for consideration and profiteer from rights which 
belong to State. There is no warrant for any contrary assumption. H
220 
SUPREME COURT REPORTS 
[2016] 1 S.C.R. 
A The State has to exercise its power of granting or refusing 
permission for transfer of lease in a fair and reasonable manner 
but following doctrine of public trust. The State cannot overlook 
illegal transfers. [Para 33] (240-B-C] 
Goa Foundation vs. Union of India 2014 (5) SCR 302 
B 
: (2014) 6 SCC 590 - relied on. 
7. In the facts of the present case, sale of shareholding by 
respondent No.1 to its holding Company is a private unauthorized 
sale of mining lease which being in violation of rules is void. 
Respondent No.1-company had been formed merely as a device 
c to avoid the legal requirement for transfer of mining lease and to 
facilitate private benefit to the parties to the transaction, to the 
detriment of the public. [Para 35] (241-A-B] 
8. The State must have a declared policy for exercise of its 
power of permitting or refusing transfer of mining leases and such 
D policy should be operated in a transparent manner. However, 
even in absence of a policy and irrespective of exercise of power 
in the past, transfer of lease for private benefit without 
corresponding benefit to the public or the State exchequer is not 
permitted. However, the State of Rajasthan is directed to frame 
and notify its policy in the matter. The State of Rajasthan may 
E 
pass an appropriate order in respect of the mining lease in 
question in the light of the policy so framed. Till such a decision 
is taken, status quo may be maintained.
[Paras 34 and 37] (240-
C-D; 241-E] 
Bacha F. Guzdar vs. CIT AIR 1955 SC 74: 1955 
F 
SCR 876; Heavy Engineering Mazdoor Union vs. State 
of Bihar (1969) 1 SCC 765: 1970 (1) SCR 
995; Electronics Corporation of India Limited vs. 
Secretary, Revenue Department (1999) 4 SCC 458: 
1999 (2) SCR 1078; Amit Products (India) Ltd. vs. 
G 
Chief Engineer (O&M) Circle (2005) 7 SCC 393; 
Ba/want Raj Saluja & Anr. vs. Air India Limited & 
Ors. (2014) 9 SCC 407 - referred to. 
Case Law Reference 
1955 SCR 876 
referred to 
Para 12 
H
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
221 
KHANJI UDYOG PVT. LTD. 
1970 (1) SCR 995 
referred to 
Para 12 
A 
1999 (2) SCR 1078 
referred to 
Para 12 
(2005) 1 sec 393 
referred to 
Para 12 
(2014) 9 sec 407 
referred to 
Para 12 
1988 (1) Suppl. SCR 627 
relied on. 
Para 24 
B 
(1967) 1 SCR 934 
referred to. 
Para 24 
1985 (3) Suppl. SCR 909 
referred to. 
Para 24 
(1967) 1 SCR 934 
referred to 
Para 23 
(1985) 4 sec 114 
referred to 
Para 23 
c 
1985 (3) Suppl. SCR 909 
referred to 
Para 23 
(1995) 1 sec 478 
referred to 
Para 23 
1988 (1) Suppl. SCR 627 
referred to 
Para 24 
D 
1996 (2) Suppl. SCR 295 
referred to 
Para 25 
1996 (5) Suppl. SCR 692 
referred to 
Para 27 
2013 ( 6) SCR 881 
referred to 
Para 28 
2013 (3) SCR 508 
referred to 
Para 28 
E 
2001 (5) Suppl. SCR 511 
referred to 
Para 28 
2012 (1) SCR 573 
referred to 
Para 28 
1981 (2) SCR 742 
relied on 
Para 28 
2012 (7) SCR 644 
relied on 
Para 28 
F 
1977 (1) SCR 372 
relied ou 
Para 28 
(2012) 6 sec 613 
inapplicable 
Para 28 
1985 (3) SCR 791 
referred to 
Para 30 
2003 (4) Suppl. SCR222 
referred to 
Para 30 
G 
1936 AC 1 
referred to 
Para 30 
1982 AC 300 
referred to 
Para 30 
2014 (5) SCR 302 
relied on 
Para 31 
2016 (1 ) SCALE 190 
referred to 
Para 31 
H
222 
SUPREME COURT REPORTS 
(2016] l S.C.R. 
A 
CIVIL APPELLATE JCRISDICTION : Civil Appeal No. 434 
B 
c 
D 
E 
F 
G 
H 
of2016 
From the Judgment and Order dated 14.05.2015 of the High Court 
of Judicature for Rajasthan at Jodhpur in D. B. Civil Second Appeal 
(Writs) No. 328 of2015. 
Ajay Kapur, Milind Kumar, Harsha Vinoy, Anish Roy for the 
Appellants. 
DushyantA. Dave, M. L. Singh vi, Mahesh Agarwal, An jay Kothari, 
Ankur Saigal, E. C. Agrawala, Rishabh Parikh, P. K. Bhalla, Praveen 
Kumar for the Respondents. 
The Judgment of the Court was delivered by 
ADARSH KUMAR GOEL, J I. Leave granted. The State of 
Rajasthan is aggrieved by the quashing of its order dated I 61h December, 
2014 whereby it declared its earlier order dated 25'" April, 2012 as void 
and cancelled the mining lease No.45 of 1993. By the said earlier order 
the aforesaid lease was permitted to be transferred in favour of 
Respondent No. I. 
2. Question for consideration is whether looking at the substance 
of the transaction in question, an illegal transfer of mining lease was 
involved? Whether transformation of partnership into company and 
transfer of lease rights to such company, though apparently valid and 
permitted, has to be seen with the next transaction of transfer of the 
entire shareholding to a third company for a price thereby avoiding 
declaration of real transaction of sale of mining lease which was not 
permissible. Further question is whether on this basis the State is justified 
in
cancelling the lease which the High Court has quashed. 
3. 
FACTS : M/s. Gotan Limestone Khanji Udhyog (GLKU), a 
partnership firm, held a mining lease for mining limestone at village 
Dhaappa, Tehsil Merta, District Nagaur in area of IO sq. km at fixed 
rent of Rs.1,42,85,224/- per annum for which third renewal for 30years 
was granted w.e.f. 8'" April, 1994. The said lessee applied for transfer 
of the lease in favour of respondent No. I herein, Mis. Gotan Limestone 
Khanji Udhyog Pvt. Ltd. (GLKUPL) on 28'" March, 2012. The application 
dated 28'h March, 2012 states that the lessee was a partnership firm and 
wished to transfer the lease to a private limited company which was 
mere change of form of its own business by converting itself from a
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
KHANJI UDYOG PVT. LTD. [ADARSH KUMAR GOEL, J.) 
partnership firm into a private limited company. The partners of the firm 
and Directors of the company were the same and on transfer, no illegal 
benefit, price or premium was taken from the transferee. The lease 
was 40 years old and there was no impediment in the transfer. The 
transferee will comply with the niles and regulations. The transfer was 
allowed on 25th April, 2012 on that basis. After seeking the said 
permission, the newly formed private limited company instead of operating 
the mining lease itself sold its entire shareholding to another company 
allegedly for Rs.160 crores which is alleged to be the sale price of mining 
lease. 
4. On this development, a show cause notice dated 21" April, 
2014 was issued to Respondent No.I proposing to cancel the transfer 
order on the ground that contrary to the statement in the application for 
transfer that the partners of the partnership firm will be Directors of the 
private limited company, the Directors of the private limited company 
who were partners of the firm were replaced by new Directors on 6'h 
August, 2012 and the private limited company was listed as subsidiary 
of Ultra Tech Cement Limited Company (UTCL) with the Bombay Stock 
Exchange. This development showed that the transfer was secured by 
a conspiracy and in circumvention of the rules. 
5. Respondent No. I contested the show cause notice. In its reply,
it stated that the State Government itself had defended the transfer in its 
affidavit in reply to the Writ Petition No.404 of2013 filed by Mis. J.K. 
Cement Limited (JKCL). There was no bar to the change of Directors 
and shareholding of a company under the rules. Thus, transfer of 
shareholding and change of Directors did not amount to transferof mining 
lease nor it affected validity of permission for transfer from GLKU to 
GLKUPL. 
6. This stand was held to be unsatisfactory by the competent 
authority. Accordingly, the order dated 25'" April, 2012 was rescinded 
223 
A 
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F 
and declared void vide order dated 16'" December, 2014. It was also 
observed that the department had filed its revised reply before the High 
Court and according to the said reply, the transfer was in violation of G 
Rule 15 of the Rajasthan Minor Mineral Concession Rules, 1986 (the 
Rules). 
7. It appears that an FIR dated 7'h August, 2014 was also 
registered with the Jaipur Main Police Centre on a complaint of on.: Dr. 
Kiri! Somaiya on the allegation that GLKU had sold the mining lease tc, 
H
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SUPREME COURT REPORTS 
[2016] 1 S.C.R. 
UTCL which was not permissible and thereby unlawful gain was acquired 
in connivance with the mining department and Joss was caused to the 
State. The erstwhile partners of the firm which was original lessee, had 
in effect transferred the lease in favour of S/Shri K.C. Birla, R. Mehnot 
and M.B. Agarwal who took over as Directors of the Private Limited 
Company at the instance of UTCL. 
8. The respondent No. l filed S.B. Civil Writ Petition No.9669 of 
2014 seeking quashing of show cause notice dated 21" April, 2014, the 
order dated 16'h December, 2014 and other consequential orders. It 
was submitted that the order dated 25"' April, 2012 permitting transfer 
oflease from the partnership firm to the private limited company was in 
order. After the said transfer, the entire shareholding of the company 
was transferred by the promoter directors in favour of UTCL in July, 
2012, except some shares which were transferred in joint names of 
UTCL with some private persons who were employees of the said 
company. Thus, the writ petitioner-Respondent No. l became wholly 
owned suhsidiary of UTCL. The Directors were replaced by the 
nominees of the holding company. JKCL had made an application seeking 
permission of part transfer of the mining lease and its application was 
rejected on 5"' September, 2012 against which Writ Petition No.404 of 
2013 was filed. The State Government in its reply defended its order 
dated 25"'
April, 2012. After the assembly election in December, 2013, 
show cause notice dated 21" April, 2014 was issued and a supplementary 
reply was filed by the State in October, 2014 taking a different stand. It 
was submitted that the order dated 16"' December, 2014 had not dealt 
with the objection regarding applicability of Rule 72 (treating the lease 
void) and the judgments relied upon by the writ petitioner in its reply. 
F 
Change in the pattern of shareholding and directorship of the company 
was of no consequence for purposes of the Rules. The mining rights 
are vested in the writ petitioner company as a consequence of order 
dated 25"' April, 2012 and change in pattern in shareholding or directorship 
did not affect the said rights. Shareholders and directors are not the 
owners of the assets of the company. Company was a distinct entity 
G 
and mining lease was owned by the Company. 
H 
9. The writ petition was defended by the State with the plea that 
change of all the directors and shareholding amounted to transfer of the 
lease in violation of Rule 15 which was void under Rule 72. Thus, the 
order dated 16" December, 2014 was valid.
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
225 
KHANJI UDYOG PVT. LTD. [ADARSH KUMAR GOEL, J.] 
10. JKCL, who had applied for transfer of part of mining lease 
A 
and was aggrieved by rejection of its application moved an application 
before the High Court for being added as a party to oppose the writ 
petition and was impleaded as a respondent in the writ petition, vide 
order of the High Court dated 28'h January, 2015. The impleaded party 
supported the order of cancellation inter alia on the ground that one of B 
the conditions in the order dated 25" April, 2012 was that the document 
of transfer was to be executed within three months which was not done. 
Further, the transfer of entire shareholding by the newly formed company 
was indirect way to transfer the lease for consideration by GLKU to 
UTCL which was not legally permissible. 
11. The main issue framed by leame<l Single Judge for consideration 
was as follows: 
c 
"Whether the action of shareholders of the Company in 
transferring its shares to Ultra Tech Cement Limited and 
consequently, the Company becoming wholly owned 
subsidiary of Ultra Tech Cement Limited amounts to violation 
D 
of Rule 15(1) ( b) of the Rules is the issue which requires 
consideration." 
12. After referring to the decisions of this Court in Bacha F. 
Guzdar vs. CIT', Heavy Engineering Mazdoor Union vs. State of 
Bihar2, Electronics Corporation of India Limited vs. Secretary. 
E 
Revenue Department', Amit Products (India) Ltd. vs.
Chief Engineer 
(O&M) Circle4 and Ba/want Raj Saluja & Anr. vs. Air India Limited 
& Ors. 5 learned Single Judge concluded as follows: 
"Jn view of the law laid down by the Hon 'ble Supreme Court 
in the case of Government Companies, inter-se relationship 
F 
between holding and subsidiary Companies and fundamental 
principles regarding distinction between a shareholder and 
the Company, it is apparent that merely on account of the 
Company becoming a subsidiary of Ultra Tech Cement Limited 
on account of certain action of the shareholders of the 
G 
Company, it cannot be said that the Company is being directly 
1AIR1955 SC 74 
2 (1969) 1 sec 765 
3 (1999) 4 sec 458 
4 (2005) 1 sec 393 
5 (2014) 9 sec 407 
H
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SUPREME COURT REPORTS 
[2016] 1 S.C.R. 
or indirectly financed to a substantial extent or the Company's 
operations or undertakings are substantially controlled by 
Ultra Tech Cement Limited, regarding which there are 
absolutely no a/legations or material whatsoever. Therefore, 
on account of the petitioner-Company becoming subsidiary 
of Ultra Tech Cement Limited, in view of the law laid down by 
the Hon'ble Supreme Court as noticed hereinbefore, it cannot 
be said that ipso facto the provisions of Rule 15(1) ( b) of the 
Rules have been violated by the lessee i.e. petitioner-
Company." 
13. Aggrieved by the judgment of the learned Single Judge, the 
appellant and the impleaded party JKCL filed appeals before the Division 
Bench of the High Court which have been dismissed by impugned order 
dated 14'" May, 2015. The Division Bench while affirming the view 
taken by the learned Single Judge, inter alia, observed: 
"41. The entire corporate business is run through contracts, 
which may give statutory or non-statutory rights to the 
Company. A Company may apply and become the owner of 
the license, permit, concessions and lease under the statutory 
schemes of various statutes, under which the Company carries 
out its business. In all such cases, the license, concessions, 
pennit and lease are the property of the Company and not of 
its shareholders. The shareholders may keep on changing and 
the control and management in the Company may also
undergo 
changes on such transfer of shares, but the assets and 
properties of the Company including license, permit, 
concessions and lease continue to belong to the Company 
and that any acquisition or transfer of such assets will not 
relate back to the share-holding of the Company or the 
management of the Company, which may change on the 
change in the shareholding of the Company. 
xxxx 
43. We do not find any substance in the reliance placed on 
the judgment of Supreme Court in Victorian Granites (P) Ltd. 
Vis P.Rama Rao and ors. (( 1996) JO SCC 665), in which it 
was held that the socio-economic justice is the arch of the 
Constitution and the public resources under Article 39( b) must 
be distributed to achieve that objective since liberty and 
meaningful right of life are hedged with availability of
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
KHANJI UDYOG PVT. LTD. [ADARSH KUMAR GOEL, J.] 
opportunities and resources to augment economic 
empowerment. The principles sought to be developed in 
Victorian Granites (P) Ltd. (supra) have not been accepted 
by the Supreme Court in Natural Resources Allocation, In Re, 
Special Reference No.I of 2012 ((2012) JO SCC 1), in which 
while distinguishing the judgment in 2G Spectrum Case, it 
was held in paragraph 129 that there is no constitutional 
mandate in favour of action under Article 14. The Government 
has repeatedly deviated from the course of action and the 
Supreme Court has repeatedly upheld such actions. The 
judiciary tests such deviations on the limited scope of 
arbitrariness and fairness under Article 14 and its role is 
limited to that extent. Essentially, whenever the object of policy 
is anything but revenue maximization, the executive is seen to 
adopt methods other than auction. 
xxxxxx 
227 
A 
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c 
46. It is of common knowledge that the corporate entities 
D 
frequently undergoes changes in share-holding patterns. The 
Company Law permits it, and that the entire corporate world 
moves on such permissible transactions. The shares of the 
Company are bought and sold every day on the Stock 
Exchanges, which may result into change in the control of 
the management of the Company. The changes, however, do 
E 
not affect the contracts under which the Company has to 
transact its business, including the
acquisition of assets, 
licenses, permits, concessions and leases. In case the argument 
of learned Additional Advocate General is accepted, the 
change in the share-holding pattern would amount to 
F 
cancellation of all such contracts, leading to a complete chaos 
in the corporate world. The entire object of providing limited 
liability of shareholders under the Companies Act will be 
affected by such interpretation of law and in such case, the 
holding Companies, Public Limited Companies and the wholly 
owned subsidiaries will have to apply for consent and G 
permission in case of change in the share-holding patterns 
of the Company, affecting their business. We, therefore, reject 
the submission of learned Additional Advocate General and 
learned counsel appearing for Mis J.K. Cement Limited that 
any consequence of the change in the share-holding pattern 
H
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SUPREME COURT REPORTS 
[2016] 1 S.C.R. 
of the Private Limited Company by which it became a wholly 
owned subsidiary of Ultra Tech Cement would have required 
a permission for transfer or that if such proposal was in the 
making, the change in the personalty of the partnership firm 
to a Private Limited Company would require previous consent 
in writing of the competent authority. 
47. We entirely agree with the reasons assigned by learned 
Single Judge that no material has been placed on record to 
suggest that the transfer of the mining lease from the 
partnership firm to a Private Limited Company was made with 
a design to ultimately transfer the shares to Ultra Tech Cement 
Limited. There is no evidence to suggest any such design or 
attempt at the time when the application was made for transfer 
of mining lease by the partnership to the Private Limited 
Company. 
48. We also do not find any case of cheating or fraud in the 
transfer of mining lease by either the partners of the 
partnership firm or the Directors of the Private Limited 
Company, for which the officers of the Mining Department 
and competent authority could be liable or any criminal action 
can be taken against them. The competent authority had fully 
understood and had acted in accordance with the law, on the 
facts placed before it, in granting consent in writing before 
transfer of mining lease from the partnership firm to the Private 
Limited Company. The State Government
in its reply in the 
Writ Petition No.40412013 had taken a correct stand in 
defence of the transfer of mining lease. It appears that with 
the change of Government, the loyalties changed from one 
business group to another, and the State Government not only 
initiated action by issuing show cause notice for declaring 
the permission for transfer to be null and void, but also 
proposed to take action against its officers for granting 
permission. The entire action to cancel the lease was actuated 
with malice in law. An additional affidavit was filed in the 
writ petition filed by Mis J.K.Cement Limited changing the 
stand of the Government in triggering action apparently to 
the benefit of Mis J.K.Cement Limited, instrumental in blocking 
the expansion of capacity of production of cement by Ultra 
Tech Cement Limited.
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
229 
KHANTI UDYOG PVT. LTD. [ADARSH KUMAR GOEL, J.] 
49. Though we find that learned Single Judge has not gone 
A 
into and recorded any finding on malice in law, the facts 
placed before us and the arguments advanced clearly indicate 
that the entire action was coloured with malice in law. The 
object and purpose of declaring the permission for transfer 
to be null and void and cancellation of mining lease was for 
B 
the purpose of restricting the expansion of business activities 
of Ultra Tech Cement Limited owned by Bir/a Group of 
Companies in the State of Rajasthan. " 
14. When the matter came up for hearing before this Court on 
18th September, 2015 following order was passed: 
"In the meantime, the State shallfile an affidavit giving details c 
of the circumstances in which normally an application for 
transfer of mining lease is granted/ rejected. If there is any 
policy in this regard, the same will be placed on record and if 
there is no such policy, the State shall mention as to how many 
applications for transfer of mining lease were granted/rejected D 
in last two years and shall also give the reasons for which 
they were granted or rejected." 
15. Accordingly, an affidavit has been filed by the State of 
Rajasthan stating that there was no specific policy regarding the granting/ 
rejecting of a transfer of a lease. However, a lease could not be 
transferred without the consent of the competent authority. In the
case 
of one Shri Abdul Kareem, on death of a lessee, the legal heirs formed a 
partnership and sought mutation in favour of the partnership firm. It 
was later learnt that the partners retired and new partners were inducted 
and on that basis the transfer was declared void. 
E 
F 
16. JKCL, respondent No.2, who had also filed independent writ 
petition before the High Court, has referred to documents which are 
part of record to submit that in the present case, sale of shares by 
GLKUPL to UTCL is nothing but sale of the mining lease for 
consideration of Rs.160 crores. This consideration is reflected in annual 
G 
report 2012-2013 of the UTCL in the form of investment in shares of 
GLKUPL. It has also referred to averments in pleadings/written 
submissions before the High Court that GLKUPL was incorporated on 
26th March, 2012. On 28th March, 2012 application for transfer of lease 
was made by GLKU. Permission was granted on 25th April, 2012. 
Transfer deed was executed on 8"' August, 2013 but on 23"' July, 2012 
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itself entire shareholding was transferred to UTCL for Rs.160 crores. 
Thus, on 8'h August, 2013, transferee was UTCL without the consent of 
the State. This was contrary to rules and standard conditions of transfer. 
In para 3(iii) of the transfer deed there is a declaration that the transferor 
has not directly or indirectly been financed. We will refer to these aspects 
in due course. 
17. We have heard learned counsel for the parties at length. 
18. As already stated the question for consideration is whether in 
the given fact situation the transfer of entire shareholding and change of 
all the directors of a newly formed company to which lease rights were 
transferred by a declaration that it was mere change of form of partnership 
business without any transfer for consideration being involved can be 
taken as unauthorized transfer of lease which could be declared void. 
I 9. Learned counsel for the appellants submitted that the view of 
the High Court that sale of entire shareholding in favour of UTCL by the 
newly formed company which had no other assets or business except 
the mining lease and appointment of nominees of UTCL as Directors of 
GLKUPL did not amount to change of control of GLKUPL to UTCL or 
that it was not transfer of mining lease for consideration was clearly 
erroneous. In view of the fact that transfer of shareholding took place 
just after the formation of GLKUPL by partnership
firm holding the 
lease on a declaration that no third party was involved nor any direct or 
indirect consideration was involved, it was clear that formation of 
GLKUPL itself was a device for transfer of mining lease from GLKU 
to UTCL for monetary consideration without disclosing the real 
transaction to the competent authority. The Court was required to see 
the substance and not mere form. The judgments relied upon only stated 
the general principle of identity of the company being distinct from 
shareholders and directors which was subject to the doctrine of piercing 
the veil to discover the real nature of transaction when it was different 
from what was apparent. In the present case, it was not a case of mere 
transfer of shareholding or change of Directors or even a routine merger 
but use of device to unauthorisedly acquire mining lease by misleading 
the competent authority by concealing the real transaction. Real 
transaction is of impermissible sale of the lease which was the only 
asset of the company. If true facts that lease was to be sold were 
disclosed, power to permit transfer of lease may not have been exercised. 
Lease could not be transferred to make profit. Thus, the doctrine of
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
231 
KHANJI UDYOG PVT. LTD. [ADARSH KUMAR GOEL, J.] 
lifting the corporate veil should be invoked. The public power of permitting 
transfer of lease could not be used to benefit a private operator, who 
sells its rights in natural resources given to it by the State, in violation of 
law. Reliance has been placed on Victorian Granites (P) Ltd. vs. P. 
Rama Rao and Ors. 6• The High Court did not appreciate the judgment 
even after noticing it. The controlling power of the lease has completely 
been transferred for consideration without this fact being brought to the 
knowledge of the competent authority having jurisdiction to permit and 
regulate the power to transfer the lease. Law governing relationship 
between a company and its shareholders inter se has to be applied having 
regard to reality of a transaction and to effectuate the regulatory 
provisions dealing with subject. The constitutional principles and the 
regulatory regime in relation to the mining leases of minerals which vest 
in the State cannot be defeated by the abstract doctrine of corporate 
personality being separate from the entire body of shareholders without 
having regard to the real nature of transaction and the well known 
exceptions to this abstract doctrine. 
20. Learned counsel for the respondent-writ petitioner supported 
the view taken by the High Court. He submitted that there was no 
transfer of lease involved in transfer of entire shareholding
and change 
of directors and in such a situation no permission for transfer was required 
A 
B 
c 
D 
to be taken. Transaction of sale of shareholding was independent of 
transfer of lease to the newly formed private limited company without 
E 
any monetary consideration as was correctly declared. 
In any case, 
transfer of lease was permissible and only consideration was payment 
of dead rent/royalty and compliance of procedural formalities. There 
was nothing inherently illegal in transfer of a lease. He cited instances 
of takeover and merger of companies with running business including 
p 
the cases of Vedanta and BALCO to which we will refer later. 
21. We have given thoughtful consideration to the issue arising for 
consideration. 
22. In the present case there are two transactions. Viewed 
separately, there may be nothing wrong with either or both but if real 
nature of transaction is seen, the illegality is patent. In first transaction 
of transfer of lease from the firm to the company, with the permission of 
the competent authority, only disclosure made while seeking permission 
for transfer is of transforming partnership business into a private limited 
6 (1996) 10 sec 665 
G 
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company with same partners as directors without there being any financial 
consideration for the transfer and without there being any third party. 
There is perhaps nothing wrong in such transfer by itself. In the second 
transaction, the entire shareholding is transferred for share price and 
control of mining lease is acquired by the holding company without any 
apparent price for lease. Technically lease rights are not sold, only shares 
are sold. No permission for transfer oflease hold rights may be required. 
Let us now see the combined effect and real substance of the two 
transactions. The partnership firm holding lease hold rights has 
successfully transferred the said rights to a third party for consideration 
in the form of share price which is nothing but price for sale of mining 
lease which is not allowed and for which no permission has been granted. 
Thus, if these facts were disclosed to the competent authority, permission 
for transfer of mining rights for financial consideration could not be 
allowed. Mining rights belong to the State and not to the lessee and the 
lessee has no right to profiteer by trading such rights. In fact the lessee 
has also not claimed such a right. Lessee can either operate the mine or 
surrender or transfer only with the permission of the authority as legally 
required. In the present case, the lessee has achieved indirectly what 
could not be achieved directly by
concealing the real nature of the 
transaction. Is it legally permissible, is the question. 
23. The principle of lifting the corporate veil as an exception to the 
distinct corporate personality of a company or its members is well 
recognized not only to unravel tax evasion' but also where protection of 
public interest is of paramount importance and the corporate entity is an 
attempt to evade legal obligations and lifting of veil is necessary to prevent 
a device to avoid welfare legislation'. It is neither necessary nor desirable 
to enumerate the classes of cases where lifting the veil is permissible, 
since that must necessarily depend on the relevant statutory or other 
provisions, the object sought to be achieved, the impugned conduct, the 
involvement of the element of the public interest, the effect on parties 
who may be affected etc.' 
G 
7(1967) 1 SCR 934 -The Commissioner of Income Tax. Madras vs. Sri Meenakshi 
Mills Ltd. 
H 
8 (1985) 4 SCC 114 - Workmen Employed in Associated Rubber Industry Ltd., 
Bhavnagar vs. Associated Rubber Industry Ltd., Bhavnagar 
9 
(1986) I SCC 264 (LIC vs. Escorts Ltd.) which refers to Palmer's Company Law 
(23rd Ed.) and Pennington Company Law (4th Ed.) followed in New Horizons Ltd. vs. 
um (1995) 1 sec 478
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
233 
KHANJI UDYOG PVT. LTD. [ADARSH KUMAR GOEL, J.] 
24. In State of U.P. vs. Renusagar Power Co. 10 this Court A 
observed: 
"66. It is high time to reiterate that in. the expanding horizon 
of modern jurisprudence, lifting of corporate veil is 
permissible. Its frontiers are unlimited. It must, however, 
depend primarily on the realities of the situation. The aim of B 
the legislation is to do justice to all the parties. The horiwn 
of the doctrine of lifting of corporate veil is expanding ........ . 
67. In the aforesaid view of the matter we are of the opinion 
that the corporate veil should be lifted and Hindalco and 
Renusagar be treated as one concern and Renusagar 's power C 
plant must be treated as the own source of generation of 
Hindalco and should be liable to duty on that basis. In the 
premises the consumption of such energy by Hindalco will 
fall under Section 3( I)( c) of the Act. The learned Additional 
Advocate-General for the State relied on several decisions, 
some of which have been noted. 
D 
68. The veil on corporate personality even though not lifted 
sometimes, is becoming more and more transparent in modem 
company jurisprudence. The ghost of Salomon case (1897 
AC 22) still visits frequently the hounds of Company Law but 
the veil has been pierced in many cases. Some of these have 
been noted by Justice P.B. Mukharji in the New Jurisprudence 
(Tagore Law Lectures, P. 183 ). " 
25. In Delhi
Development Authority versus Skiper Construction 
Company (P) Ltd.11, it was observed : 
"24. Lifting the corporate veil : 
In Aron Salomon v. Salomon & Company Limited (1897) AC 
22, the House of Lords had observed, "the company is at law 
a different person altogether from the subscriber. .. ; and though 
E 
F 
it may be that after incorporation the business is precisely G 
the same as it was before and the same persons are managers 
and the same hands received the profits, the company is not 
in law the agent of the subscribers or trustee for them. Nor 
are the subscribers as members liable, in any shape or form, 
10 (1988) 4 sec 59 
11 ( 1996) 4 sec 622 
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SUPREME COURT REPORTS 
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except to the extent and in the manner provided by that Act". 
Since then, however, the Courts have come to recognise 
several exceptions to the said rule. While it is not necessary 
to refer to all of them, the one relevant to us is "when the 
corporate personality is being blatantly used as a cloak for 
fraud or improper conduct". (Gower : Modern Company Law 
- 4th Edn. (1979) at P. 137). Pennington (Company Law - 5th 
Edn . .1985 at P. 53) also states that "where the protection of 
public interests is of paramount importance or where the 
company has been formed to evade obligations imposed by 
the law", the court will disregard the corporate veil. A 
Professor of Law, S. Ottolenghi in his article "From Peeping 
Behind the Corporate Veil, to Ignoring it Completely" says 
"the concept of 'piercing the veil' in the United States is 
much more developed than in the UK. The motto, which 
was laid down by Sanborn, J. and cited since then as the 
law, is that 'when the notion of legal entity is used to defeat 
public convenience, justify wrong, protect fraud, or defend 
crime, the law will regard the corporation as an association 
of persons. The same can be seen in various European 
jurisdictions". 
[(1990) 53 MLR 338]. Indeed, as far back 1912, another 
American Professor L. Maurice Wormser examined the 
American decisions on the subject in a brilliantly written article 
"Piercing the veil of corporate
entity" (published in ( 1912) 
12 CLR 496) and summarised their central holding in the 
following words : 
"The various classes of cases where the concept of 
corporate entity should be ignored and and veil drawn 
aside have now been briefly reviewed. What general rule, 
if any, can be laid down ? The nearest approximation to 
generalization which the present state of the authorities 
would warrant is this: When the conception of corporate 
entity is employed to defraud creditors, to evade an existing 
obligation. to circumvent a statute, to achieve or perpetuate 
monopoly, or to protect knavery or crime, the courts will 
draw aside the web of entity, will regard the corporate 
company as an association of live, up-and-doing, men and
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
235 
KHANJI UDYOG PVT. LTD. [ADARSH KUMAR GOEL, J.] 
women shareholders, and will do justice between real 
A 
persons. 
25. In Palmer's Company Law, this topic is discussed in Part-
Il of Vol-I. Several situations where the court will disregard 
the corporate veil are set out. It would be sufficient for our 
purposes to quote the eighth exception. It runs : 
B 
"The courts have further shown themselves willing to 
'lifting the veil' where the device of incorporation is used 
for some illegal or improper purpose .... Where a vendor of 
land sought to avoid the action for specific performance 
by transferring the land in breach of contract to a company c 
he had formed for the purpose, the court treated the 
company as a mere 'sham' and made an order for specific 
peiformance against both the vendor and the company". 
Similar views have been expressed by all the commentators 
on the Company Law which we do not think it necessary to 
D 
refer." 
(underlining is ours) 
26. It is thus clear that the doctrine oflifting the veil can be invoked 
if the public interest so requires or if there is allegation of violation of E 
law by using the device of a corporate entity. In the present case, the 
corporate entity has been used to conceal the real transaction of transfer 
of mining lease to a third party for consideration without statutory consent 
by terming it as two separate transactions - the first of transfonning a 
partnership
into a company and the second of sale of entire shareholding 
to another company. The real transaction is sale of mining lease which 
F 
is not legally pennitted. Thus, the doctrine of lifting the veil has to be 
applied to give effect to law which is sought to be circumvented. 
27. In Victorian Granites (supra), it was observed:-
"4. It is true that a facade of compliance of law has been 
done by P. Rama Rao and Magam Inc. for having the transfer 
G 
of the leasehold interests had by P. Rama Rao made in favour 
of the latter. The best of the legal brains will be available to 
escape the clutches of law and transactions would be so 
shown to be in compliance of semblance of law. In that pursuit, 
payment of royalty and permits remained in the name of P. 
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SUPREME COURT REPORTS 
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Rama Rao. The court has to pierce through the process, lift 
the veil and reach the genesis and effect. Article 39(b) of the 
Constitution envisages that the State shall, in particular. direct 
its policies towards securing that the ownership and control 
of the material resources of the community are so distributed 
as best to subserve the common good. Socio-economic justice 
is the arch of the Constitution. The public resources are 
distributed to achieve that objective since liberty and 
meaningful right of life are hedged with availability of 
opportunities and resources to augment economic 
empowerment. The question is whether the transfer is to 
subserve the above common good and constitutional 
objective? It is true that when the individuals have been 
granted lease of mining of the property belonging to the 
Government, the object of such transfer was to augment the 
economic empowerment of the transferee by himself or by a 
cooperative society or partnership composing persons to 
work out the mines to achieve economic empowerment. 
Whether such a transfer could be made a subterfuge to 
circumvent the constitutional philosophy and thereby the 
constitutional objective be sabotaged in that behalf? Answer 
would be obviously in the negative ............ " 
28. lt is also well settled that mining rights are vested in the State 
and the lessee is strictly bound by the terms of the lease12• Cases of
Arun Kumar Agrawal vs. Union of lndia13 (the Vedanta case), 
BALCO Employees' Union vs. Union of India" (the BALCO case) 
and Vodafone International Holdings B. V. versus Union of lndia15 
cited by learned counsel for the respondent have no application to the 
present case once real transaction is found to be different from the 
apparent transactions. In fact, the principle oflaw laid down in Vodqfone 
case (supra) that the court can look to the real transaction goes against 
the respondent . 
12 (2013) 6 SCC 476 (Orissa Mining Corpn. Ltd. vs. Ministry of Environment and 
forest) -Para 58; (1981) 2 SCC 205 (State of Tamil Nadu vs. Mis Hind Stone) -
Para 37; (2012) 11 SCC 1 (Monnet lspat & Energy Ltd. vs. Union oflndia)-Para 
41; (1976) 4 SCC 108 (Amritlal Nathubhai Shah vs. Union Govt. oflndia); (2013) 
7 sec 571 (Geomin Minerals & Marketing Ltd. VS. State of Orissa) 
13 (2013) 1 sec 1 
14 (2002) 2 sec 333 
15 (2012) 6 sec 613
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
237 
KHANJI UDYOG PVT. LTD. [ADARSH KUMAR GOEL, J.] 
29. In Vedanta case (supra)1• approval granted by tbe Government 
A 
oflndia for acquisition of majority stake in Cairn Energy Ltd. (CIL) was 
challenged and a direction was sought for tbe ONGC to exercise right 
of pre-emption over shares of CIL. Furtber challenge was to transfer 
of ONGC shareholding in CIL to Vedanta, a private company, as being 
contrary to public interest. This Court held tbat various commercial and 
B 
technical aspects have been duly considered by tbe Government of India 
and this Court could not sit in judgment over tbe commercial and business 
decisions so taken. Reference was also made to earlier decision in 
BALCO case (supra) laying down tbat Courts may not ordinarily interfere 
witb economic decisions and wisdom of economic policies of tbe State 
in exercise of its power of judicial review. These judgments are in tbe 
context of situations where highest public autborities had applied tbeir 
mind to all tbe facts in which case tbe Court was not inclined to interfere. 
Such is not tbe position in tbe present case. No public autbority, in tbe 
present case, was even conscious that mining lease was being transferred 
to UTCL and at what price or for what benefit to tbe public. 
30. In Vodafone case (supra)" tbe dispute arose out of claim by 
tbe income tax department to tax capital gain arising out of sale of share 
capital of a company called CGP
by HEL to Vodafone. Question was 
whetber income accrued in India. Negativing tbe claim of tbe Revenue, 
c 
D 
it was held tbat transaction took place outside territorial jurisdiction of 
India and was not taxable. This Court observed tbat "it is tbe task of tbe 
E 
court to ascertain the legal nature of tbe transaction and while doing so 
it has to look at tbe entire transaction as a whole and not to adopt a 
dissecting approach."18 In so concluding, the court reconciled the 
apparent conflicting approach in earlier decisions in Mc. Dowell & Co. 
vs. Commercial Tax Officer'' and Union of India vs. Azadi Bachao 
F 
Andolan20 witb reference to English decisions in IRC vs. Westminister21 
and W. T. Ramsay vs. !RC" dealing witb tbe question whetber tbe Court 
must accept a transaction on face value or not. Thus, while discerning 
true nature of tbe entire transaction, court has uot to merely see the 
form of tbe transaction which is of sale of shares but also tbe substance 
16 (2013) 7 sec 1 -Para 1 
17(2012)6SCC613-Para179 
18 Para 64 
19 (1985) 3 sec 230 
20 (2004) 10 sec 1 
211936AC 1 
22 1982AC300 
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[201611 S.C.R. 
which is the private sale of mining rights avoiding legal bar against transfer 
of sale rights circumventing the mandatory consent of the competent 
authority. Consent of competent authority is not a formality and transfer 
without consent is void. The minerals vest in the State and mining lease 
can be operated strictly within the statutory framework. There is nothing 
to rebut the allegation that receipt of Rs.160 crores styled as investment 
in shares is nothing but sale price of the lease. No precedent has been 
shown permitting such a private sale of a mining lease for consideration 
without any corresponding benefit to the public. 
31. In the recent past, there have been serious allegations of 
illegalities and deficiencies in the regulatory regime of mining leases. As 
noted by this Court in Goa Foundation (supra), the Government of 
India appointed a former Judge of this Court, Justice M.B. Shah to go 
into various aspects of illegal mining, including grant and transfer of 
leases. It is a matter of public knowledge that in the wake of reports 
submitted by Justice Shah, the policy framework and statutory provisions 
have undergone changes at various levels. Changes suggested include 
the mode and manner of grant and renewal of lease rights. A facet of 
this aspect has been gone into by us in our order dated 04" January, 
2016 in Civil Appeal Nos. 4845-4846 of 2015 titled Sulekhan Singh & 
Co. vs. State
of U.P. Since, the mining rights vest in the State, the State 
has to regulate transfer of such rights in the best interest of the people. 
No lessee can trade mining rights by adopting a device of forming a 
private limited company and transfer of entire shareholding only with a 
view to sell the mining rights for private profit as has happened in the 
present case. 
We may note that under Section 12A(6) added by the 
Mines and Minerals (Development and Regulation) Amendment Act, 
2015, it has been provided that transfer of mineral concessions can be 
allowed only if such concessions are granted through auction. 
32. In these circumstances, the plea of the writ petitioner that the 
lessee has a vested right to transfer the lease subject merely to 
compliance of formalities cannot be accepted as correct. The submission 
is contrary to scheme of law. As already observed mining rights vest in 
State and are regulated consistent with the doctrine of public trust. The 
rules prohibit transfer of mining lease for consideration without the 
previous consent of competent authority in writing23 • The original lessee 
23 "R. I 5. Transfer of Mining Lease.- (1) The lessee shall not without the previous consent 
in writing of the competent authority-
H 
(a) assign, sublet, mortgage or in any other manner transfer the mining lease or any right, 
title or interest therein, or
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
239 
KHANJI UDYOG PVT. LTD. [ADARSH KUMAR GOEL, J.] 
gave declaration while seeking transfer, that no consideration was 
A 
received which though apparently correct was actually false as the 
subsequent transaction of sale of shares was integral part of the first 
transaction of transfer of lease to private company which soon thereafter 
(b) enter into or make any arrangement, contract or understanding whereby the lessee 
will or may be directly or indirectly financed to a substantial extent by, or under which the 
lessee's operations or undertakings will or may be substantially controlled by any persori or 
body of person other than lessee. 
Provided that the lessee of masonary stone may, with the prior permission of concerned 
ME/AME and subject to such conditions as he may specify therein, allow any Government 
contractor to install and operate stone gitti crusher till the completion of construction 
work. 
B 
Provided further that such permission shall be given by ME/AME after obtaining 
C 
registered consent of the lessee and also on the condition that the crusher owner shall use 
masonary stone produced from the concerned lease area only. 
Provided also that wherever required, permission of Revenue and other Departments 
may also be taken before issuing such permission. (I A) Every application for transfer of 
Mining Lease shall be accompanied by a fee of [Rs.5000/- for Marble, Sand Stone & 
granite and Rs. 2000/- for
other minerals] and shall be submitted to the Mining Engineer 
I Assistant Mining Engineer. (lAA) The Government may subject to the condition specified 
D 
in rule 11(2) transfer whole area of the lease to a person on payment to the Government 
transfer premium [equal to existing dead rent;] 
Provided that the lease has remained in force for at least two years from the date of 
grant. 
Provided further that such transfer shall not be made if there are any dues outstanding 
against the transferor or transferee. 
Provided further also that where the mortgagee is a State Institution or a bank or a State 
corporation, it shall not be necessary for the lessee to obtain the previous consent of the 
competent authority or previous sanction of the State Government. However, the lessee 
shall inform the competent authority about any mortgage in favour of any State institution, 
Bank or State Corporation within a period of 3 months from the date of mortgage or 
assignment. 
E 
(2) An application for transfer of mining lease 17 shall be disposed of by competent 
F 
authority: [xxx] 
Provided that transfer of mining lease, granted to the category of persons mentioned in 
sub-rule (3) of rule 7 shall be made only to a person belonging to any of the categories 
mentioned in the clause of the said sub-rule. 
(3) Transfer of mining lease shall not be considered as a matter of right and the Government 
may refuse for such transfer for the reasons to be recorded and communicated in writing to
the lessee. 
(4) Where on an application for transfer of mining lease under this rule the competent 
authority has given consent for such lease, a transfer lease deed in Form No.15 or a form 
as near thereto as possible, shall be executed within three months of the date of the 
consent, or within such period as the competent authority may allow in this behalf." 
G 
"R.72. Mining operations to be under lease or licence.- No mining lease, quarry licen~~. 
shortterm-permit or any other permit shall be granted otherwise than in accordance with 
H 
the provisions of these rules and if granted shall be deemed to be null and void.''
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[2016] 1 S.C.R. 
A 
became subsidiary of another company. The said real transaction cannot 
be ignored to find out the substance. 
B 
c 
D 
E 
F 
33. Thus, acquisition of mining lease contrary to rules is void. 
Requirement of previous consent cannot be ignored nor taken to be 
formality subject only to pay dead rent or agreeing to follow same terms. 
The lessee privately and unauthorisedly cannot sell its rights for 
consideration and profiteer from rights which belong to State. There is 
no warrant for any contrary assumption. The State has to exercise its 
power of granting or refusing permission for transfer of lease in a fair 
and reasonable manner but following doctrine of public trust. This Court 
has held that the State cannot overlook illegal transfers24• 
34. The State must have a declared policy for exercise of its power 
of permitting or refusing transfer of mining leases and such policy should 
be operated in a transparent manner. 
However, even in absence of a 
policy and irrespective of exercise of power in the past, transfer of lease 
for private benefit without corresponding benefit to the public or the 
State exchequer is not permitted. After all, minerals vest in the State 
and the State has to exercise its power to deal with them as per doctrine 
of public trust. Thus, in the present case, the State was certainly entitled 
to exercise its jurisdiction to cancel lease transferred in violation of rules. 
35. As already seen, in
the present case, the original lessee sought 
transfer merely by disclosing that the partnership firm was to be 
transformed into a private limited company with the same partners 
continuing as directors and there was no direct or indirect consideration 
involved. It was specifically declared that no pecuniary advantage was 
being taken in the process which is clearly false. The permission to 
transfer the lease in favour of a private limited company was granted on 
that basis. Thus, it was a case of suppression veri and suggestio 
falsi. Once it is held that transfer of lease is not permissible without 
permission of the competent authority, the competent authority was 
entitled to have full disclosure of facts for taking a decision in the matter 
so that a private person does not benefit at the expense of public property. 
G 
The original lessee did not disclose that the real purpose was not merely 
to change its partnership business into a private limited company as 
claimed but to privately transfer the lease by sale to a third party. This 
aspect has also escaped the attention of the High Court. Accordingly, 
our answer to the question framed is that in the facts of the present 
H 
"(2014) 6 SCC 590 (Goa Foundation vs. Union of India) - Para 60
STATE OF RAJASTHAN AND ORS. v. GOTAN LIME STONE 
241 
KHANfl UDYOG PVT. LTD. [ADARSH KUMAR GOEL, J.] 
case, sale of shareholding by GLKUPL to UTCL is a private unauthorized 
A 
sale of mining lease which being in violation of rules is void. GLKUPL 
has been formed merely as a device to avoid the legal requirement for 
transfer of mining lease and to facilitate private benefit to the parties to 
the transaction, to the detriment of the public. 
36. Learned single Judge and the Division Bench have gone by 
B 
only one aspect of law, i.e. the general principle that sale of shares by 
itself is not sale of assets but this principle is subject to the doctrine of 
piercing of corporate veil wherever necessary to give effect to the policy 
of law. In the present case, this principle clearly applies as transfer of 
shares to cover up the real transaction which is sale of mining lease for 
consideration without the previous consent of competent authority, as 
C 
statutorily required. The statutory requirement is sought to be overcome 
with the plea that it was a transaction merely of transfer of shareholding 
when on the face of it the transaction is clearly that of sale of the mining 
lease. In view of the above, the view taken by the High Court cannot be 
sustained. 
D 
37: Accordingly, this appeal is allowed and the judgment of the 
High Court is set aside. We, however, direct the State of Rajasthan to 
frame and notify its policy in the matter within one month from the receipt
of a copy of this order. The State of Rajasthan may within one month 
thereafter pass an appropriate order in respect of the mining lease in 
E 
question in the light of the policy so framed. Till such a decision is taken, 
status quo may be maintained. 
Kalpana K Tripathy 
Appeal allowed. 
F