Case: M/S Kabaini Minerals Pvt. Ltd.  Vs. State Of Orissa

2. Factual position in a nutshell is as follows:Appellant No.1 applied for quarry lease to the Secretary, Government of Orissa Steel and Mines Department, in Form A of the Orissa Minor Mineral Concession Rules, 1990 (in short the Rules) for "decorative stone" for a period of 10 years. On 25.10.2002, the Managing Director of the appellant No.1-Company entered into an agreement with one R. Narayan Swami for purchase of land measuring 1.134 acres in village Ambagan in the District of Ganjam to set up a cutting and polishing unit for decorative stones. On 26.10.2002 the Mining Officer, Baripada Circle, Baripada issued Form B to appellant No.1 and confirmed the receipt of its quarry lease application dated 7.10.2002. On 2.12.2002 appellant No.1 placed orders with Metcons Engineering Pvt. Ltd. for supply of machineries for setting up the cutting and polishing unit for decorative stones. On 5.12.2002 respondent No.4 applied for a quarry lease in Form A for decorative stones for a period of 10 years over an area of 6.90 acres. On 28.1.2003 respondent NO.4 wrote a letter to the Director of Mines regarding purchase of sick unit i.e. M/s Valley Granites (P) Ltd. from the Orissa State Financial Corporation (in short the Corporation) and requested consideration of its quarry lease application dated 5.12.2002. On 7.2.2003 appellant No.1 vide its letter of even date wrote to the Principal Secretary to the Government, Department of Steel and Mines informing him regarding the agreement to purchase land and placement of orders for machineries of proposed unit. On 4.6.2003 the State Government took a decision to grant the quarry lease in question in favour of respondent No.4. Writ Petition No.5994 of 2003 was filed by the appellants before the Orissa High Court questioning the decision of the Government to grant quarry lease in favour of respondent No.4. By the impugned judgment dated 10.2.2004 the writ petition was dismissed. The High Court held that the case of respondent No.4 was covered by Rule 6(6-a)(i) of the Rules and it had priority over the appellant No.1. Said judgment as noted above is the subject matter of challenge in this appeal.

Court's reasoning:
The present case relates to priority as provided in the said Sub-rule. It provides for priority to a person who has already set up an industry for processing of such minor minerals. From the documents placed on record more particularly the letter of the Corporation dated 23.5.2003 it is clear that M/s Valley Granites (P) Ltd. was operating a running unit. The letter in clear terms states that possession of the unit was handed over to respondent No.4 and the unit is being run by the said Company.Appellant No.1 had also not set up an industry. It had merely entered into an agreement for purchasing the land and placed orders for the machineries. The expression set up has a definite connotation of its own.In the said case, it was further held that the word "set up" is equivalent to the word established but operations for establishment cannot be equated with the establishment of the unit itself of its setting up.12. The question of priority is to be adjudged only at the time of consideration of the applications. Undisputedly, respondent No.4 had taken over the unit on the date the applications were considered. Therefore, the stand of the appellants that at the time the applications were made by respondent No.4 it had not set up an industry is really without substance. As was observed by this Court in Indian Metals & Ferro Alloys Ltd. v. Union of India and Ors. (AIR 1991 SC 818 ), since the applicant had already set up an industry for processing minor minerals on the date of consideration of the application its claim for priority was to be judged on the basis of the factual position on the date of consideration of the applications.It is to be noted that in a case covered by sub-rule (5-a) the State Government has to objectively assess as to whether in the interest of mineral development preference is given to a person though he made the application later. In such a case the Governments opinion that in the interest of mineral development it is necessary to do so obviously has an objective angle involved and, therefore, there is necessity to record reasons. So far as Sub-rule (6-a) is concerned, there is no requirement indicated to record reasons. The fact that priority is given to a person who has already set up an industry is itself the reason for giving priority. Therefore, the enumeration of the order of priority is itself the reason inbuilt in the process of consideration of the applications. That itself is the foundation and forms the rational for the priority given. It is not the case of the appellant that the order of priority is irrational. That being so, stand of learned counsel for the appellants that reasons were not recorded and, therefore, the action is vitiated is really of no. On a reading of the language of Rule 6 it is clear that three types of precedence/priority are embodied in the provision. First is a normal case where the application which has been received earlier is given precedence over the latter application. An exception is carved out in sub-rule (5-a) to the effect that if the State Government is of the opinion that in the interest of mineral department it is necessary to do so it may for reasons to be recorded in writing grant quarry lease in preference to the applications made earlier. Sub-rule (6) deals with another category of priority. In the present case Sub-rule (6) does not have much relevance. Sub-rule (6-a) carves out a category of applicants who have applied for minor minerals of the enumerated categories i.e. all types of rocks used for decorative, industrial or export purpose including dimension stones.The present case relates to priority as provided in the said Sub-rule. It provides for priority to a person who has already set up an industry for processing of such minor minerals. From the documents placed on record more particularly the letter of the Corporation dated 23.5.2003 it is clear that M/s Valley Granites (P) Ltd. was operating a running unit. The letter in clear terms states that possession of the unit was handed over to respondent No.4 and the unit is being run by the said Company.