Case: State Of Kerala  Vs. M/S Kerala Rare Earth &amp; Minerals Limited

3. By an order dated 15th September, 2004 the Government of Kerala sanctioned the grant of mining leases for Ilmenite, Rutile, Leucoxene, Zircon and Sillimanite (non-scheduled mineral) for a period of 20 years. The order came in exercise of the powers vested in the State Government under Section 11(5) of the Mines and Minerals (Development and Regulation) Act, 1957 and was preceded by the approval of the Government of India in terms of Section 5(1) thereof. Shortly after the issue of the sanction order, however, the State Government by another order dated 25th September, 2004 stayed further action in the matter on the ground that a detailed study on the environmental impact of the proposed leases need be undertaken before taking any further steps. This was followed by nine letters dated 12th October, 2006, 16th October, 2006 and 9th November, 2006 addressed to the respondent-company stating in no uncertain terms that the Government of Kerala did not consider it necessary to grant mining leases for mineral sand to private parties. Aggrieved by the said letters and communications, the respondents filed nine revision applications No. 14(1)/2007-RC-II to 14(3)/2007-RC-II and 14(6)/2007-RC-II to 14(11)/2007-RC-II under Section 30 of the Act aforementioned before the Government of India. These revision applications were heard and allowed by the prescribed revisional authority by a common order dated 30th November, 2009, setting aside the impugned orders and remanding the matters to the State Government to reconsider the cases in the light of the observations made in the order passed by the revisional authority. The operative portion of the order passed by the revisional authority was in the following9. After hearing both the sides, we find that the State Government had recommended the mining lease applications of the applicant for seeking prior approval of the Central Government in line with the policy resolution dated 22.10.2002. In 7 cases the Central Government had also accorded its prior approval under Section 5(1) of the MMDR Act, 1957 for the proposal of the State Government for grant of mining lease for mineral sand in favour of the revision applicant. The impugned orders have been passed by the State Government after obtaining the prior approval of the Central Government in 7 cases, the State Government is required to pass order under Section 10(3) of the MMDR Act. In all the 9 cases, including those in which prior approval of Central Government has been conveyed, the impugned orders passed by the State Government are against competitive edge of the mining industry. The policy decision of the State Government appears to be not in consonance with the MMDR Act, 1957 and also against the National Mineral Policy, 2008.10. The impugned orders in all the 9 revision applications mentioned above are set aside with a direction to the State Government to reconsider nil 9 cases in the light of the discussions made in para 9 above and pass appropriate orders accordingly.Sd/-Sd/-(R. Raghupathi)(Ajita Bajpal Pande)Joint Secretary and Legal AdvisorJoint SecretaryUpon remand, the Government of Kerala once again examined the matter and by an order dated 15th December, 2010 rejected all the applications filed by the respondents on the ground that although, as per Entry 54 List- I (Union List), Schedule VII of the Constitution of India, the Parliament is competent to make laws for regulation of mines and mineral development to the extent such regulation and development is declared by the Parliament by law to be expedient in public interest, yet, the power of granting mining leases for mining minerals vested only in the State Government under Section 10 of the Act aforementioned. The Government referred to and relied upon its own industrial policy of 2007 according to which mining and exploitation of minerals were permissible only through State/Central Public Sector Undertakings in order to restrict indiscriminate mining and exploitations of minerals having regard in particular to the geographical and ecological conditions as well as the density of the population in the State of Kerala. The State Government took the view that it had the power and control over the minerals lying in the land within its territory and that it was entitled to safeguard the same in larger public interest by formulating suitable policies on the subject. Relying upon the decisions of the High Court of Kerala in Shibu v. Tahsildar [1993 (2) KLT 870] and Gem Granites v. State of Kerala and Ors. [2006 (2) KLT 899 ] the Government declared that as the owner of the minerals lying in the land within its territorial limits it was entitled to determine in public interest that mining and exploitation of minerals will be permitted only through State/Central Public Sector Undertakings. The State Government insisted that such a policy was not contrary to the Act nor did it suffer from any constitutional infirmity. It also relied upon the fact that minerals in question were categorised as Atomic Minerals as per Part-B of the First Schedule to the Act aforementioned. The Government declared that environmental protection being one of its constitutional mandates, any decision that may affect environment or sections of people living in the coastal areas or which may affect environmental conditions in those areas cannot be said to be in public interest.5. Aggrieved by the order passed by the State Government, the respondent- company filed Writ Petitions No.34345 of 2010, 34346 of 2010 and 5420 of 2011 before the High Court of Kerala inter alia praying for a writ of mandamus directing the State to implement the revisional order issued by the Government of India and grant in favour of the respondents mining leases in respect of all the areas which were the subject matter of the said order. The respondents also prayed for a declaration to the effect that the order passed by the Central Government in exercise of its powers under Section 30 of the Act aforementioned was binding upon the State Government and that any policy decision by the State Government contrary to the said decision will not affect the rights of the respondents to obtain mining leases for the areas applied for. The respondent also prayed for a mandamus directing the State Government to forward to the Government of India for approval all the mining lease applications made by the respondent-Company which had not so far been forwarded for such approval.6. By an order dated 21st February, 2013 passed by a Single Judge of High Court of Kerala, the Writ Petitions mentioned above were allowed in part by the High Court inasmuch as the order passed by the State Government was quashed and the matter remitted back to the Government to pass orders in the light of the observations made by the High Court. The High Court quashed the order by which further action in the matter was stayed by the Government with a direction to the Government to consider the applications pending with it in accordance with law. The High Court took the view that the State Government had not reserved, in terms of Section 17 A(2) of the 1957 Act, the areas covered by the applications filed by the respondents and that so long as no such reservation was made, the direction issued by the Central Government to the State Government to reconsider the applications could not be negated. The High Court also held that the State Government had overlooked the provisions of the National Mineral Policy, 2008, which permitted facilitation of private entrepreneurs and that since the Government of Kerala had already exercised its discretion in terms of the prevalent Mining Policy and recommended to the Government of India the grant of approval for mining leases, the rejection of the applications on the basis of a changed policy after the Government of India had accorded sanction for the proposed mining leases was unjustified. The High Court also took note of the fact that Government of Kerala had granted mining lease in respect of the area covered by four other applications and that there could not be different policies in respect of different areas covered by different applications made by the same Company.7. Aggrieved by the order passed by the Single Judge, the State Government preferred Writ Appeals No.1610, 1611 and 1621 of 2014 which were heard and dismissed by a Division Bench of that Court in terms of the order impugned in the present appeals. The High Court, while doing so, held that the State Government was not justified in declining mining leases on the ground that it had been simply directed to reconsider the matter. The refusal of the Government, according to the High Court, amounted to institutional insubordination. The appeals were accordingly dismissed with the observation that the State Governments role in issuing the sanction was minimal, as the subject matter of the law fell within the domain of Central Government. The present appeals by special leave question the correctness of the above order, as already noted above.

Court's reasoning:
while the State Government is the owner of the mineral deposits in the lands which vest in the Government as is the position in the case at hand, the Parliament has by reason of the declaration made in Section 2 of the 1957 Act acquired complete dominion over the legislative field covered by the said legislation. The Act does not denude the State of the ownership of the minerals situate within its territories but there is no manner of doubt that it regulates to the extent set out in the provisions of the Act the development of mines and minerals in the country. It follows that if the State Government proposes to reserve any area for exploitation by the State owned corporation or company, it must resort to making of such reservation in terms of Section 17A with the approval of the Central Government and by a notification specifying boundaries of the area and mineral or minerals in respect of which such areas will be reserved. Inasmuch as the State Government have not so far issued any notification in terms of Section 17A, the Industrial Policy - 2007 of the Kerala State Government does not have the effect of making a valid reservation within the comprehension of Section 17A. The High Court was, therefore, justified in holding that there is no valid reservation as at present no matter the government can make such a reservation if so advised in the manner prescribed by law. In other words, the dismissal of this appeal shall not prevent the State from invoking its right under Section 17(A)(2) of the Act by issuing notification in respect of the mineral deposits in question. There is, in that view, no reason for us to interfere with the judgment and order passed by the High Court.