Case ID: 6380

Judgment:
No. 105 of 1973. (Under Article 32 of the Constitution of India) Kapil Sibal	 A.K. Sen	 P.C. Jain	 Ranbir Chandra	 A. Minocha and Ms. Indu Goswami for the Petitioners. Kuldip Singh	 Additional Solicitor General	 M.M. Abdul Khadar	 L.N. Sinha	 V.C. Mahajan	 R.B. Dattar	 A.K. Gangu|i	 R.B. Misra	 Ms. A. Subhashini	 D.N. Mukharjee	 R.P. Gupta	 T.V.S.N. Chart	 Mrs. Binu Tamta	 Mrs. B. Sunita Rao	 Ms. Manjula Gupta and Badrinath for the Respondents. The Judgment of the Court was delivered by RANGANATHAN	 J. The petitioner company obtained mining leases from the Government of Assam to extract sillimanite in the Khasi and Jaintia Hills District. In pursuance there of	 three lease deeds were executed by the State Government in favour of the petitioner. The first was a lease deed dated 25.4.1952 for a period of 15 years in respect of an area of 129.60 hectares at Lalmati. The second	 dated 10.4.1963	 was for a period of 15 years in respect of an area of 986 777.60 hectares at Nongmawait. The third one dated 8.6.1967 was for a period of 15 years and covered an area of 363 hectares at Wamsophi. The three lease deeds were to expire on 26.5.77	 9.4.78 and 7.6.82 respectively but there was a clause for further renewal. The petitioner company had also established a refractory Plant in 1961 near Ramgarh in District Hazaribagh. It ap pears	 however	 that petitioner faced a number of difficul ties in operating the refractory plant and was explaining its difficulties to the State of Maghalaya which was formed in 1970. Between 1970 to 1972	 the Union of India	 through its public sector companies	 Hindustan Steel Ltd. and Bokaro Steel Ltd. negotiated with the petitioner for the purchase of its refractory plant and also for having the mining leases transferred to them. Though the refractory plant was not functioning properly and was on the verge of closure	 the petitioner was not willing to transfer its mining leases to the public sector companies but was willing to supply the required quantity of sillimanite to the Bakaro Steel Plant. It is also stated that some negotiations took place as a result of which the petitioner was planning to re open the factory on 6.11. However	 in the meantime on the 2nd of November	 1972	 the Central Government took over the management of the refractory plant under section 18 AA of the Industries Development & Regulation Act	 1951. Posses sion of the plant as well as its management was also taken over by the Hindustan Steel Ltd. on the same day. This take over was challenged by the petitioner company but its chal lenge was repelled by the Delhi High Court and a Special Leave Petition was filed	 which is pending in this Court. We are not concerned with this issue in the present case. On 12.9.1972	 the Mines and Minerals (Regulation and Development) Act	 1951	 was amended by Act No. 56 of 1972. By this amendment	 section 4 A was introduced in the Act	 which reads as follows: "(1) Where the Central Government	 after consultation with the State Government is of opinion that it is expedient in the interest of regulation of mines and mineral development so to do it may request the State Government to make a premature termination of a Mining Lease in respect of any mineral other than a minor mineral	 and	 on receipt of such request	 the State Government shall make an order making a premature termination of such mining lease and 987 granting a fresh mining lease in favour of such Government Company or Corporation owned or controlled by Government as it may think fit. (2) Where the State Government	 after consultation with the Central Government	 is of opinion that it is expedient in the interest of regulation of mines and mineral development so to do	 it may	 be an order	 make premature termination of a mining lease in respect of any minor mineral and grant a fresh lease in respect of such mineral in favour of such Government Company or Co operation owned or controlled by Government as it may think fit." This amendment came into effect in September 1972. At this juncture it may be mentioned that Act 37 of 1986 has further amended the 1951 Act and substituted section 4A by the following section	 which insofar as it is relevant for our present purposes reads as follows: "4A (1) Where the Central Government	 after consultation with the State Government	 is of opinion that it is expedi ent in the interest of regulation of mines and mineral development	 preservation of natural environment	 control of floods	 prevention 'of pollution	 or to avoid danger to public health or communications or to ensure safety of buildings	 monuments or other structures or for conservation of mineral resources or for maintaining safety in the mines or for such other purposes	 as the Central Government may deem fit	 it may request the State Government to make a premature termination of a prospecting licence or mining lease in respect of any mineral other than a minor mineral in any area or part thereof	 and	 on receipt of such re quest	 the State Government shall make an order making a premature termination of such prospecting licence or mining lease with respect to the area or any part thereof. (2) Where the State Government	 after consultation with the Central Government	 is of opinion that it is expedient in the interest of regulation of mines and mineral development	 preservation of natural environment	 control of floods	 prevention of pollution or to avoid danger to public health or communications or to ensure safety 'of buildings	 988 monuments or other structures or for such other purposes	 as the State Government may deem fit	 it may	 by an order	 in respect of any minor mineral	 make premature termination of a prospecting licence or mining lease with respect to the area or any part thereof covered by such licence or lease: Provided that the State Government may	 after the premature termination of a prospecting licence or mining lease under sub section (1) or sub section (2)	 as the case may be	 grant a prospecting licenee or mining lease in favour of such Government company or corporation owned or controlled by Government as it may think fit. '(3) No order making a premature termination of a prospect ing licence or mining lease shall be made except after giving the holder of the licence or lease a reasonable opportunity of being heard. In pursuance of the 1972 amendment	 the State Government passed an order terminating the mining leases granted to the petitioner and granted fresh leases over the same areas in favour of M/s. Hindustan Steel Ltd.	 a Government company	 fully owned by the Central Government. The order	 made in the name of the Governor	 reads as follows: Dated	 Shillong 7th Dec.	 1972. No. MG. 133/72: Whereas the Central Govt.	 having consulted the Govt. of Meghalaya	 is of opinion that it is expedient in the interest of mineral regulation and development that the mining leases of sillimanite mentioned below held by M/s. Assam Sillimanite Ltd. (having its Registered Office at 13 A.T. Road	 Gauhati) in Meghalaya are terminated forth with; And	 whereas	 in terms of Sec. 4A of the Mines and Minerals (Regulation & Development) Act	 1957	 as amended by the Mines and Minerals (Regulation & Development) Amended Act	 1972	 the Central Govt. has requested the Govt. of Meghalaya to make a premature . termination of the said mining leases held by M/s. Assam Sillimanite Ltd.; 989 Now	 therefore	 the Govt. of Meghalaya in exercise of the powers conferred by Sec. 4A(1) of the Mines and Minerals (Regulation & Development) Act	 1957	 as amended by the Mines & Minerals (Regulation & Development) Amendment Act	 1972 hereby terminates prematurely the mining leases of sillimanite mentioned below held by M/s. Assam Sillimanite Ltd. with immediate effect and grants fresh mining leases over the same areas in favour of M/s. Hindustan Steel Ltd.	 a Government Company	 fully owned by the Central Government. Lease Locality Area in Period of Date of No. hecteres Lease expiry 5. Lalmati 129.60 15 years 24.4.1977 6. Nongmawait 777.60 do 9.4.1978 7. Wamsophi 363.00 do 7.6.1982" The petitioner filed a writ petition in the Gauhati High Court against the order dated 7.12. 1972 but it was not able to obtain any ex 'parte interim orders. The petition was withdrawn from the Gauhati High Court and the present peti tion under Article 32 has been filed in this Court. On 5.3. 1973	 this Court issued rule nisi and also directed the maintenance of the status quo pending notice. It	 however	 appears that Hindustan Steel Ltd. had taken possession of the properties in question and the interim stay was also vacated on 20th of January	 1987. The present position	 therefore	 is that the mining leases have been granted to the Hindustan Steel Ltd. and they have also been operating the mines for the past several years. Though several objections have been raised to the action of the State Government in the writ petition	 including a challenge to the validity of section 4A	 the arguments before us were restricted by Shri P.C. Jain to only two aspects. He submitted that	 admittedly	 no notice had been issued by the State Government before terminating the leases prematurely. This	 according to him	 amounts to denial of natural justice and vitiates the order dated 7.12. The second contention is that the order does not fulfil the requirements specified in section 4 A justifying the prema ture termination of leases in pursuance thereof. 990 This writ petition came up for hearing on earlier occa sions but it was adjourned from time to time as the same issue was pending decision in this Court in the case of State of Haryana vs Ram Kishan & Ors.	 Civil Appeals Nos. 1472 77 of 1987. Our task in the present writ petition has been considerably simplified because the above civil appeals have been disposed of by this Court by its judgment dated 6th May	 1988	 which is reported in ; Shri P.C. Jain	 learned counsel for the petitioner company submits that the first point raised by him has been squarely decided in his favour in the above case and that	 therefore	 he is entitled to succeed in the present writ petition. Learned counsel also referred to a decision of the Delhi High Court reported in Dharam Veer vs Union of India	 AIR 1989 Delhi 227	 which has followed the decision in Ram Kishan 's case. In that case	 a similar order of premature termination was set aside by the High Court and the lessees were directed to be put back in possession of the leased premises which had been taken away from them in pursuance of their unlawful order. Learned counsel submits that	 in the present case	 having regard to the comparatively long peri ods of leases and the lapse of time	 be would not pray for the petitioner being put back in possession of the leased premises but he contends that the least that could be done is to award compensation to the petitioner company for	 (what has now to be held to be)	 the wrongful premature termination of the leases. He submits that the petitioner is willing to have this aspect of the matter referred to arbi tration by any arbitrator appointed by this Court. On the other hand	 Shri R.B. Datar	 learned counsel for the Union of India submits that	 in the State of Haryana vs Ram Kishan and Others	 ; 	 the Central Government had expressed its willingness to reconsider the matter after hearing the parties concerned and that	 there fore	 the decision of this Court in that case is distin guishable. He sought to contend	 on the strength of observa tions made by this Court in The Barium Chemicals Ltd. and Anr. vs Company Law Board and Others	 [1966] Suppl. S.C.R. 311 as well as the decision in R.S. Dass vs Union of India and Others	 that rules of natural justice can be statutorily excluded either expressly or by necessary implication. In the present case	 he submits that it became expedient in the interest of regulation of mines and mineral development	 to have the mining operations in respect of raw materials necessary for the production of iron and steel entrusted to public sector companies and a policy decision to this effect had been taken by the Govern ment. In this context	 he submits	 the grant of an opportu nity to the lessee would be totally meaningless and futile. He 991 says that the object and purpose of the statute clearly excludes the provision of an opportunity to the lessees before termination of the leases. If at all	 he submits	 it will be open to a lessee	 whose lease is prematurely termi nated under section 4 A	 to challenge the order of premature termination	 after it was passed	 on the ground that it did not satisfy the conditions set out in section 4 A but that the section should not be construed as envisaging a hearing of the lessees before an order of premature termination is made. Referring to the amendment of section 4 A in 1986	 which specifically provides for an opportunity of hearing under sub section (3)	 Shri Datar says that this provision became necessary because the grounds for premature termina tion set out in the new sub section (1) of section 4 A were made wider and made more comprehensive. Under the new sub section	 premature termination of leases was permissible in various other circumstances	 such as: preservation of natu ral environment	 control of floods	 prevention of pollution	 avoidance of danger to public health or communications	 ensuring of safety of buildings	 monuments and other struc tures	 conservation of mineral resources	 maintenance of safety in mines and such other purposes as the Central Government may deem fit. These were purposes in respect of which an opportunity of hearing to the lessee would be really needed and helpful but that	 in the context of earli er sub section	 which was much narrower	 no such opportunity of hearing was at all contemplated. We do not propose to reconsider this matter as	 in our opinion	 the contention raised by Shri P.C. Jain is directly and squarely concluded by the decision in Ram Kishan 's case (supra). It is no doubt true that in that case the Central Government appears to have been willing to reheat the par ties but the court did not proceed on the basis of any concession. The court discussed the provisions of section 4 A at great length and held that there was no suggestion in the section to deny the right of the affected persons to be heard and that the section must be interpreted to imply that the person who may be affected by such a decision should be afforded an opportunity to prove that the proposed step would not advance the interest of mines and mineral develop ment. Not to do so	 it was held	 would be violative of the principles of natural justice. The court concluded that the lessee respondents were entitled to be heard before a deci sion to prematurely terminate their leases was taken and that	 since it was not done	 the High Court was right in quashing the order passed under section 4 A. In our opinion	 the decision in Ram Kishan 's case fully covers the present case and should be followed by us. In fact	 we think that the 992 subsequent amendment in 1986 lends support to the plea of the petitioners. Though it is true that the scope of section 4 A (1) has been widened	 the insertion of sub section (3) clearly reflects a statutory intention that an opportunity of hearing must be given before the order of termination is passed	 presumably as such an order widely affects the rights of the lessees. We are not able to agree with Shri Datar that under section 4 A	 as it stood before 1986	 no useful purpose would have been served by the giving of such an opportunity. Several situations and circumstances can be conceived of where	 given an opportunity of hearing	 the lessee may be able to either dissuade the Government from terminating the leases prematurely or in persuading the government to do it subject to certain safeguards for its benefit. For example	 the lessee may be able to show that the public sector corporation to whom it is proposed to entrust the working of the mines is not yet adequately equipped to exploit the mines and that	 atleast for some more time the status quo should continue; or	 again	 if there is only a short period before the leases are to expire in the normal course	 the lessee may be able to persuade the Government that no great advantage would be derived by premature termination of the lease. These are only illustra tive. Several such other situations can be thought of. It is very difficult	 therefore	 to accept the contention that because an order under section 4 A is to be passed in order to give effect to a policy of the Government	 it is not necessary or useful to provide the lessees	 whose leases are about to be terminated	 an opportunity of hearing. We	 therefore	 hold	 respectfully following the decision in Ram Kishan 's case (supra)	 that the order passed under section 4 A dated 7.12.1972 is null and void as it violated the principles of natural justice and was passed without giving an opportunity to the lessees of being heard. The next question is regarding the relief to be granted to the petitioner. Shri Datar submits that in the writ petition the only prayer made by the petitioners is for the quashing of the order dated 7.12. 1972 and that no further claim has been made in the writ petition. He submits that if the petitioners are aggrieved because of the premature termination of the leases	 it is open to them to file a suit or take other appropriate remedies for obtaining compensa tion in respect of the unlawful termination. We do not think that this a fair course to be adopted in this case. The writ petition was filed by the petitioner company as early as in February 1973 and has been pending in this Court for about 17 years. It is true that the petitioner could have filed a suit for the same purpose with a prayer for additional relief by way of compensation or damages. But we do not think that it should now be 993 asked to go back to file a suit for compensation or damages which may be barred by limitation. After the lapse of such a long time	 in our opinion	 the proper course is to adopt some method for deciding the quantum of relief that could be granted to the petitioner by way of compensation and dam ages	 which can at once be simple and expeditious and which will avoid further unnecessary litigation. We think that the request of the learned counsel that the matter may be re ferred to arbitration is a fair one and indeed this course is also not seriously resisted by the respondents. The short question that remains to be decided is whether the petition ers have suffered any damages as a result of the premature termination of the three leases in their favour either in the shape of loss of profits for the unexpired periods of the leases or in any other material respect. We	 however	 direct that	 having regard to the circumstances of the case	 the compensation/damages should be restricted to a period of five years from the date of termination of the leases or upto the date of expiry of the original lease deeds referred to above whichever is less and not for the entire unexpired period of all the leases. We refer this issue to arbitra tion. Shri Justice section Natarajan	 retired Judge of this Court	 is appointed as Arbitrator to decide the above issue. The Union of India has promised to place the services of a mining engineer/expert at the disposal of the arbitrator to assist him on the technical aspects of the matter. The name of the nominee should be communicated to the arbitrator within four weeks from today. It will be open to the arbi trator to avail himself of the services of such nominee. Parties may settle the terms of arbitration with the arbi trator. The company and Union of India should	 however	 deposit Rs. 10	000 each with the arbitrator as soon as the terms are settled to enable him to start the proceedings without delay. The Arbitrator may enter upon the reference within four weeks of the date of communication of this order to him. He may make his award within a period of four months thereafter. He will not be obliged to give reasons for his conclusions. A copy of this order may be sent to the learned Arbitrator by the Registry. The writ petitions disposed of in the above terms. In the circumstances	 we make no order as to costs. R.S.S. Petition disposed of.

Summary:
The petitioner company had obtained three mining leases from the Government of Assam to extract sillimanite in the Khasi and Jaintia Hills District	 for a period of 15 years. Negotiations between the Union of India and the peti tioner for having the mining leases transferred to the public sector companies	 Hindustan Steel Ltd. and Bokaro Steel Ltd.	 having failed	 the Government of Meghalaya	 on the request of the Central Government	 passed an order dated 7th December	 1972 prematurely terminating the mining leases in terms of section 4 A(1) of the Mines and Minerals (Regu lation & Development) Act	 1957 as amended by the Mines & Minerals (Regulation and Development) Amendment Act	 1972. Thereupon	 the petitioner company filed the present petition under Article 32 of the Constitution. On behalf of the petitioner it was inter alia contended that since no notice had been issued by the State Government before terminating the leases prematurely	 it amounted to denial of natural justice thus vitiating the order of termi nation. State of Haryana vs Ram Kishan & Ors.	 [1988] 3 S.C.C. 416	 relied upon. It was further submitted that having regard to the comparatively long periods of leases and the lapse of time	 the petitioner would not pray for being put back in posses sion of the leased premises but would be content with an award for compensation for wrongful premature termination	 to be determined by any arbitrator appointed by the Court. On behalf of the respondents it was submitted that the decision of 984 this Court in Ram Kishan 's case was distinguishable; that the rules of natural justice could be statutorily excluded either expressly or by necessary implication; that grant of an opportunity to the lessee would be totally meaningless and futile; that the object and purpose of the statute clearly excluded the provision of an opportunity to the lessee before termination of the leases; that amendment of section 4 A of 1986 specifically providing for an opportuni ty of hearing became necessary because the grounds for premature termination set out in the new subsection (1) of section 4 A were made wider and more comprehensive; that in the writ petition the only prayer made was for quashing the order of premature termination; and that it was open to the petitioner to file a suit or take other appropriate remedies for obtaining compensation in respect of the unlawful termi nation. The Barium Chemicals Ltd. and Anr. vs Company Law Board and Others	 [1966] Supp. S.C.R. 311 and R.S. Dass vs Union of India and Others	 [1985] Supp. S.C.C. 617	 referred to	 Disposing of the writ petition	 this Court	 HELD: (1) The order dated 7.12.1972 passed under section 4A of the Act whereby the leases were terminated prematurely was null and void as it violated the principles of natural justice and was passed without giving an opportunity to the lessee of being heard. State of Haryana vs Ram Kishan & Ors.	 ; 	 followed. Dharam Veer vs Union of India	 AIR (1989) Delhi 227	 re ferred to. (2) Though it is true that the scope of section 4 A (1) has been widened	 the insertion of sub section 4 A(3) clear ly reflects a statutory intention that an opportunity of hearing must be given before the order of termination is passed	 presumably as such an order widely effects the rights of the lessees. [992A] (3) It is difficult to accept the contention that be cause an order under section 4 A is to be passed in order to give effect to a policy of the Government	 it is not neces sary or useful to provide the lessees	 whose leases are about to be terminated	 an opportunity of hearing. [992D] (4) It is true that the petitioner could have filed a suit or taken 985 other appropriate remedies for obtaining compensation in respect of the unlawful termination. But	 in the facts and circumstances of this case	 it is not fair to ask the peti tioner to go hack and file a suit for compensation or dam ages which may be barred by limitation. The writ petition was filed by the petitioner company in 1973 and has been pending in this Court for about 17 years. After a lapse of such a long time the proper course is to adopt some method for deciding the quantum of compensation and damages	 which can at once be simple and expeditious and which will avoid further unnecessary litigation. [992G H; 993A] (5) The request made on behalf of the petitioner that the matter may be referred to arbitration is a fair one and indeed this course is also not seriously resisted by the respondents. The issue of compensation/ damages is accord ingly referred to Arbitration. [993B] (6) Having regard to the circumstances of the case	 the compensation/damages should be restricted to a period of five years from the date of termination of the leases or upto the date of expiry of the original lease deeds whichev er is less and not for the entire unexpired period of all the leases. [993C]