SAN DUR MANGANESE & IRON ORES LTD. v. STATE OF KARNATAKA & ORS.

The Judgment of the Court was delivered by

P. SATHASIVAM, J. 1. Leave granted in all the special G leave petitions.

2Copy pinpoint2. These appeals seek to challenge the common judgment and order of the Division Bench of the High Court of Karnataka dated 05.06.2009 arising out of Writ Appeal No. 5084 of 2008 H

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A and allied matters and the decision of the State Government dated 26127.02.2002 as well as the Central Government dated 29.07.2003.

3Copy pinpoint3. The appellants in these appeals are Sandur Manganese & Iron Ores Ltd. (in short "Sandur") and Mis MSPL Ltd. The 8 principal respondents are Mis Kalyani Steels Ltd. (in short "Kalyani") and Mis Jindal Vijayanagar Steels Ltd. (in short "Jindal"). Apart from tnese, the State of Karnataka and the Union of India are also arrayed as respondents.

4Copy pinpoint4. Factual matrix:

(a) The case of Sandur (Petitioner in SJ_P (C) No. 22077 of 2009) is as follows:

SANDUR MANGANESE & IRON ORES LTD. v · 263 STATE OF KARNATAKA & ORS. [P. SAtHASIVAM,. J.]

said area is reserved for ;exhloitation by t~e National Mineral A Development Corporationl«inlshort "NMDC")-a Government of India Undertaking. When the. company noti~ed thqt the NMDC did not initiate any Mining "Lease Applicatidn on the said area, then on 29.⁹.1987, it applied for mining lease over an area of 2 sq. miles witpin the said deleted area. On 25.¹.1989, ~he B State Government rejected the application on the ground that~he area applied for was alrecidy reserved by NMDC. However, NMDC was not granted lleiiise and in 1992, one Sri H.G. Rangangoud was granted 60 Hectares out of the same applied area. c (ii) Again, on 24.06.1993, again the Company applied ifor grant of lease over an area of 513.16 Hectares within the ar1ea deleted from its original lease but it was rejected by the St9te Government on the ground that the area applied by them has overlapped with the area granted to one Sri Rangangoud and D nine others. On 11.12.1993, the Company challenged the above decision of the State Government by filing a Revision Petition before the Government of India, Ministry of Coal and Mines, New Delhi. On 09.⁴.1999, the Government of India by holding that the order passed by the State Government was in violation of E Rule 26 (1) of the Mineral Concession Rules, 1960 (hereinafter referred to as "MC Rules") and opposed to the principles of natural justice remanded the matter to the State Government for early disposal as per the provisions of Mines & Minerals (Development and Regulation) Act, 1957 (hereinafter referred F to as the "MMDR Act") and the Rules framed thereunder. On 26/ . 27.02.2002, the Company got a letter from the State Government that out of the area of 513.16 Hectares applied for by it, only an extent of 256 Hectares (640 acres) was available and it could choose either Block A (168 Acres or 67 Hectares) or Block B G (472 Acres or 189 Hectares). (iii) On 13.05.2002, the Company filed a revision petition before the Government of India against the said decision of the State Government. On 15.03.2003, the State Government H

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A issued a Notification in exercise of its power under Rule 59 of the MC Rules reserving the entire area calling for applications from the general public for grant of mining leases and by notifying large extent of previously held areas as available for grant of mines including the area applied by the appellant-Company. On B 16.⁴.2003, the appellant-Company, by way of abundant caution, applied afresh for grant of mining lease over an area of 200 Hectares in the notified area without prejudice to its rights for consideration of its earlier application dated 24.06.1993. On 29.07.2003, the Government of India allowed the revision petition C filed by the appellant-Company and directed the State Government to consider the application dated 24.06.1993 filed by the appellant-Company on merits, in terms of order dated 09.⁴.1999 of the Revisional Authority and pass a final order in the case. In spite of this order, the State Government has not passed any order. On 06.12.2004, a letter was issued by the D State Government seeking approval of the Central Government for grant of lease to other applicants i.e. Jindal & Kalyani. Being aggrieved by the said recommendation, on 11.06.2007, the appellant-Company filed Writ Petition No. 8971 of 2007 before the High Court. The learned single Judge clubbed this writ petition E along with W.P. No. 21608 of 2005 filed by another applicant- MSPL Ltd. On 07.08.2008, the learned single Judge,quashed the Notification dated 15.03.2003 and the Mining Licences granted in favour of Jindal and Kalyani with certain observations.

F (iv) On 22.08.2008, Jindal-Respondent No.5 herein filed W.A. No. 5026 of 2008 in the High Court. Being aggrieved by the order passed by the learned single Judge, Sandur preferred Writ Appeal No. 5084 of 2008 before the High Court. By the impugned common order dated 05.06.2009, the Division Bench G of the High Court set aside the order of the learned single Judge dated 07.08.2008 and upheld the validity of Notification of the State Government dated 15.03.2003 and the proceedings dated 06.12.2004 and the consequential approval of the Central Government were held valid. Aggrieved by the said order, the

SANDUR MANGANESE & IRON ORES LTD. v. 265 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.] appellant-Company has filed S.L.P.(C) No. 22077 of 2009 A · before this Court.

(b) The case of MSPL (Petitioner in SLP (C) Nos. 22943- 22952 of 2009) is as follows:

(i) MSPL Limited filed above SLPs against the common B judgment and order dated 05.06.2009 passed by the High Court of Karnataka in W.A. Nos. 5024, 5026, 5032, 5052, 5053, 5064- 5066, 5077 and 5145/2008 setting aside the judgment of the learned single Judge dated 07.08.2008 in the writ petitions. c (ii) On 24.05.2001, MSPL Ltd. made an application to the Director of Mines & Geology (hereinafter referred to as "the Mines Director") for grant of a mining lease over an extent of 298.5 Hectares in the area known as Eddinpada in Kumaraswamy Range of the State of Karnataka which was part o of a mining lease previously held by the appellant-Company in S.L.P. (C) No. 22077 of 2009. On 30.08.2001, the State of Karnataka requested the Central Government to relax the conditions set out in Rule 59(1) in favour of MSPL Ltd. under Rule 59(2). While the matter was under consideration of the Central E Government, one Ziaullah Sharieff (another applicant for a mining lease) filed Writ Petition No. 35915 of 2001 (GM-MMS) before the High Court seeking declaration that he is entitled for grant of a mining lease in his favour. On 21.12.2001, the Central Government returned all proposals for grant of mining lease pending before it to the State Government to await the report of F the Regional Environmental Impact Assessment of the Bellary- Hospet Region by National Environmental Engineering Research Institute (NEERI).

(iii) On 13.05.2002, Sandur filed a revision before the G Central Government under Rule 54 of the MC Rules challenging the proposal of the State Government dated 30.08.2001, in favour of the MSPL. During pendency of the said revision, Sandur also filed W.P. No. 22767 of2002 seeking a mandamus to the Central Government to consider its revision petition. On H

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A 24.10.2002, Jindal made an application for grant of mining lease over a part of the same area previOU$1y held and surrendered by Sandur. On 15.03.2003, the State Government issued Notification informing the general public that the areas mentioned in the annexure thereof were available for grant under B Rule 59 of the Rules and interested persons were requested to file applications for grant of mining leases. On 16.⁴.2003, pursuant to the said notification, MSPL made an application for the same area previously held by Sandur. On 29.07.2003, the Central Government rejected the revision petition of MSPL. On c 20.12.2003, MSPL made further submissions before the Mines Director. On 30.⁴.2004, the respondent-Mines Director sent a notice to the MSPL for making submissions. Again on 06.10.2004, the Under Secretary to the new State Government, Mines (C & I Department) issued another notice under Rule 26(1) of the Rules requiring/the MSPL to appear before the Hon'ble 0 Chief Minister of Karnataka to make a presentation for sanction of lease. MSPL put-forth its claim and submitted a detailed presentation to the Principal Secretary to the Chief.Minister. Vide letter dated 06.12.2004, the State Government sought the E approval of the Central Government under Section 5(1) of the MMDR Act to grant lease to Jindal over an area of 200. 73 Hectares and Kalyani over an area of 179. 70 Hectares in respect of a part of the land mentioned in S.No.¹ to the Notification dated 15.3.2003. On 15.12.2004, MSPL made representations both to the Minister for Mines and to the Secretary, Department of F Mines in the Central Government against the said proposal. On 21.12.2004, a further representation was made to the Secretary, Department of Mines. Against the said approval, two others preferred writ petitions before the High Court for quashing of the said proposal. MSPL filed application for impleadment in the said writ petitions and the same was rejected by the learned single Judge vide order dated 21.07.2005.

(iv) On 12.⁹.2005, MSPL preferred writ petition being W.P. No. 21608 of 2005 before the High Court challenging the recommendation in favour of Jindal and Kalyani. On 05.06.2006/

SANDUR MANGANESE & IRON ORES LTD. v. 267 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.) 27.06.2006, the Central Government granted approval to the recommendation dated 06.12.2004 of the State Government for grant of mining lease in favour of Jindal and Kalyani. Vide judgment dated 07.08.2008, learned single Judge of the High Court allowed W.P. No. 21608 of 2005 quashing the recommendation. Against the judgment of the learned single 8 Judge, Jindal and Kalyani preferred W.A. Nos. 5026 & 5028 of 2008 respectively, before a Division Bench of the High Court. MSPL also filed W.A. No. 5057 of 2008 challenging the same judgment of the learned single Judge save and except to the extent that the recommendations of the State Government to the C Central Government insofar as it recommended the grant of mining to Jindal and Kalyani was quashed. A large number of other writ appeals were also filed, heard together and disposed of by a common judgment and order dated 05.06.2009.

5Copy pinpoint5. Heard Mr. Nariman, learned senior counsel for Sandur, D Mr. K.K. Venugopal and Mr. Krishnan Venugopal, learned senior advocates for MSPL, Mr. Harish N. Salve, learned senior counsel for Jindal, Mr. Dushyant Dave, learned senior counsel for Kalyani and Mr. Ashok Haranahalli, learned Advocate General for the State of Karnataka. E

6Copy pinpoint6. Main issues:- (a) Whether the State Government's recommendation dated 06.12.2004 and the proceedings of the Chief Minister are contrary to the provisions of Section 11 F of the Act and Rules 59 and 60 of MC Rules and not valid in law.

(b) Whether the respondent-Jindal's application dated 24.10.2002 made prior to the Notification dated G 15.03.2003 is capable of being entertained along with the applications made pursuant to the said notification.

(c) Whether the order of the High Court of Karnataka in H

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A Ziaul/a Sharieff's case permit the consideration of the respondent-Jindal's application dated 24.10.2002 made prior to the notification dated 15.03.2003.

(d) Whether Rule 35 of the MC Rules justify the recommendation of the State Government in favour of the Respondents-Jindal and Kalyani.

(f) Whether factors such as the past commitments by D the State Government to applicants who have already set up steel plants, matter for consideration for grant of lease despite the MMDR Act and the MC Rules constituting a complete Code.

E (g) Whether the recommendation in favour of respondents-Jindal and Kalyani saved by the operation of the Law of Equity.

(h) Whether the learned single Judge as well as the F Division Bench are justified in arriving at such conclusion.

(i) Whether it is advisable to remit it to the Central Government.

7Copy pinpoint7. Before considering various issues as mentioned above, let us refer relevant provisions of the Act and the Rules concerned to the issues in question. The Preamble of the MMDR Act, as amended by Act 38 of 1999, makes it clear that it is intended for the development and regulation of mines and H minerals under the control of Union. The relevant provisions from

SANDUR MANGANESE & IRON ORES LTO. v. 269 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.]

the Act are: A

"2. Declaration as to the expediency of Union contro/.-lt is hereby declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent herein 8 after provided.

3. Definitions:-ln this Act, unless the context otherwise requires:-

a. "minerals" includes all minerals except mineral oils; c b.

c. "mining lease" means a lease granted for the purpose of undertaking mining operations, and indudes a sub-lease granted for such purpose; D

g. "p!:.ospecting licence" means a licence granted for the purpose of undertaking pruspecting operations;

h. "prospecting operations" means any operations undertaken fer the purpose of exploring, locating or proving mineral deposits;

(ha) "reconnaissance operations" means any operations undertaken for preliminary prospecting of a mineral through regional, aerial, geophysical or geochemical surveys and geological mapping, but does not include pitting, trenching, drilling (except drilling of boreholes on a grid specified from time to time by the Central Government) or sub-su_rface excavation; H

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A (hb) "reconnaissance permit" means a permit granted for the purpose of undertaking reconnaissance operations; and.

11. Preferential right of certain persons.-(1)Where a reconnaissance permit or prospecting licence has been granted in respect of any land, the permit holder or the B licencee shall have a preferential right for obtaining a prospecting licence or mining lease, as the case may be, in respect of that land over any other person:

Provided that the State Government is satisfied that the c permit holder or the licensee, as the case may be,-

( a) has undertaken reconnaissance operations or prospecting operations, as the case may be, to establish mineral resources in such land; . D (b) has not committed any breach of the terms and conditions of the reconnaissance permit or the prospecting licence;

(c) has not become ineligible under the provisions of this E Act; and

(d) has not failed to apply for grant of prospecting licence or mining lease, as the case may be, within three months after the expiry of reconnaissance permit or prospecting licence, as the case may be, or within such further period, as may be extended by the said Government.

(2) Subject to the provisions of sub-section (1), where the State Government has not notified in the Official Gazette the area for grant of reconnaissance permit or prospecting licence or mining lease, as the case may be, and two or more persons have applied for a reconnaissance permit, prospecting licence or a mining lease in respect of any land in such area, the applicant whose application was received earlier, shall have the preferential right to be considered for grant of reconnaissance permit, prospecting licence or

SANDUR MANGANESE & IRON ORES LTD. v. 271 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.] mining lease, as the case may be, over the applicant whose application was received later:

Provided that where an area is available for grant of reconnaissance permit, prospecting licence or mining lease, as the case may be, and the State Government has 8 invited applications by notification in the Official Gazette for grant of such permit, licence or lease, all the applications received during the period sepcified in such notification and the applications which had been received prior to the publication of such notification in respect of the lands within such area and had not been disposed of, shall be deemed to have been received on the same day for the purposes of assigning priority under this sub-section:

Provided further that where any such applications are received on the same day, the State Government, after taking into consideration the matter specified in sub-section (3), may grant the reconnaissance permit, prospecting licence or mining lease, as the case may be, to such one of the applications as it may deem fit. E (3) The matters referred to in sub-section (2) are the following:-

a. any special knowledge of, or experience in, reconnaissance operations, prospecting operations or mining operations, as the case may be, possessed by the applicant;

b. the financial resources of the applicant;

c. the nature and quality of the technical staff employed or to be employed by the applicant;

d. the investment which the applicant proposes to make in the mines and in the industry based on the minerals; H

272 SUPREME COURT REPORTS [2010] 11 S.C.R.

A e. such other matters as may be prescribed.

(4) Subject to the provisions of sub-section (1), where the State Government notifies in the Official Gazette an area for grant of reconnaissance permit, prospecting licence or mining lease, as the case may be , all the applications B received during the period as specified in such notification, which shall not be less than thirty days, shall be considered simultaneously as if all such applications have been received on the same day and the State Government, after taking into consideration the matters specified in sub- c section (3), may grant the reconnaissance permit, prospecting licence or mining lease, as the case may be, to such one of the applicants as it may deem fit.

(5) Notwithstanding anything contained in sub-section (2), D but subject to the provisions of sub-section (1 ), the State Government may, for any special reasons to be recorded, grant a reconnaissance permit, prospecting licence or mining lease, as the case may be, to an applicant whose application was received later in preference to an application whose application was received earlier:

Provided that in respect of minerals specified in the First Schedule, prior approval of the Central Government shall be obtained before passing any order under this sub- section." F

8Copy pinpoint8. In exercise of the powers conferred by Section 13 of the Act, the Central Government framed rules called the Minerals Concession Rules, 1960. We are concerned only with the following Rules:- G "35. Preferential rights of certain persons. - Where two or more persons have applied for a reconnaissance permit or a prospecting licence or a mining lease in respect of the same land, the State Government shall, for the purpose of sub-section(2) of Section 11, consider, besides the matters H

SAN DUR MANGANESE & IRON ORES LTD. v. 273 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.] mentioned in clauses (a) to (d) of sub-section(3) of Section A 11, the end use of the mineral by the applicant.

59. Availability of area for regrant to be notified. - (1) No area -

(a) which was previously held or which is being held 8 under a reconnaissance permit or a prospecting licence or a mining lease; or

(b) which has been reserved by the Government or any local authority for any purpose other than mining; or C

(c) in respect of which the order granting a permit or licence or lease has been revoked under sub-rule (1) of rule 7A or sub-rule(1) of rule¹⁵ or sub-rule(1) of rule 31, as the case may be; or D (d) in respect of which a notification has been issued under the sub-section (2) or sub-section·(4) of Section 17; or

(e) which has been reserved by the State Government E under Section 17A bf the Act

. shall be a~~,lable for grant unless -

Q)~~ entry to th~ ett.,~)ct that t~~ area is available for grant is ~ae in the register referred to in sub-rule (2) of rule 70 or sub-rule (2) of rule 21 or sub-rule (2) of rule 40 as the case may be; and

(ii) the availability of the area for grant is notified in the Official Gazette and specifying a date (being a date not earlier than thirty days from the date of the publication of such notification in the Official Gazette) from which such area shall be available for grant:

Provided that nothing in this rule shall apply to the renewal of a lease in favour of the original lessee or his legal heirs H

274 SUPREME COURT REPORTS [2010] 11 S.C.R.

A notwithstanding the fact that the lease has already expired:

Provided further that where an area reserved under rule 58 or under section 17A of the Act is proposed to be granted to a Government Company, no notification under clause (ii) shall be required to be issued: B Provided also that where an area held under a reconnaissance permit or a prospecting licence, as the case may be, is granted in terms of sub-section(1) of section 11, no notification under clause (ii) shall be required to be C issued .. /

(2) The Central Government may, for reasons to be recorded in writing, relax the provisions of sub-rule (1) in any special case. 0 .-" 60. Premature applications. -Appl,ication for the grant of a reconnaissance permit, prospecting I licence or mining lease in respect of areas whose availability for grant is required to be notified under rule 59 shall, if -

E (a) no notification has been issued, under that rule; or

(b) where any such notification has been issued, the period specified in the notification has not expired, shall be deemed to be premature and shall not be entertained.".

9Copy pinpoint9. In the light of the above statutory provisions, let us consider the issues framed, one by one, and test the validity or otherwise of the decision of the State Government as well as the order passed by the learned single Judge and the Division Bench of the High Court. G

10Copy pinpoint10. As mentioned earlier, .by the impugned common judgment dated 05.06.2009, the Division Bench reversed the judgment of the learned single Judge and held that the applications for grant of mining lease made prior to notification under Rule 59 of the MC Rules could be considered for grant

SANDUR MANGANESE & IRON ORES LTD. v. 275 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.] along with applications filed pursuant to the notification. In the case on hand, the application was made by Jindal prior to the notification. The Division Bench upheld the recommendations dated 06.12.2004 of the State Government together with the proceedings of the Chief Minister which were the basis for the recommendation under Section 5(1) of the MMDR Act to the B Central Government for approval of grant of mining lease in favour of Jindal and Kalyani. It is seen from the records that on 24.05.2001, MSPL made an application to the State Government for grant of mining lease over an area of 298.5 hectares in Eddinpada area in Kumaraswamy range of the State C of Karnataka and also sought relaxation of the conditions specified in Rule 59(1) of the MC Rules. This area was previously held under a mining lease by Sandur. Subsequently, on 24.10.2002, Jindal also made an application for grant over the same area. The State Government made a recommendation to the Central Government for grant of lease to the MSPL and D sought relaxation of the conditions set out in Rule 59(1 ). However, it is not in dispute that the Central Government returned the proposal of the State Government directing it to await an environmental study being carried out by the NEERI. E

11Copy pinpoint11. The materials placed further show that on 15.03.2003, the State Government issued a Notification under Rule 59(1) of the MC Rules notifying the availability of a large area for re-grant of mining lease which was referred to as the "Held Area Notification". Pursuant to the same, MSPL made a fresh F application on 16.⁴.2003 for grant of mining lease over the notified area. Kalyani and 88 other applicants also applied pursuant to the said Notification. Admittedly, Jindal did not apply pursuant to the "Held Area Notification". even though some of its sister concerns applied for the grant. On 06.12.2004, the G State Government made a recommendation to the Central Governrr1ent under Section 5 of the MMDR Act for approval of the proposed grant of mining lease to Jindal and Kalyani. MSPL and some of the applicants made representations to the Central Government against the said recommendation made by the H

276 SUPREME COURT REPORTS [2010) 11 S.C.R.

A State Government. Challenging the recommendation dated 06.12.2004 of the State Government, writ petitions were filed by the aggrieved companies before the High Court. During the pendency of the writ petitions, the Central Government gave its approval for grant of mining lease in favour of Jindal and Kalyani B on 05.06.2006 and 27 .06.2006 respectively. By judgment dated 07.08.2008, the learned single Judge allowed the writ petitions filed by MSPL and Sandur as well as others and quashed the grant on the ground among others, that Jindal's application prior to the "Held Area Notification" could not have been entertained C in view of Section 11 (4) of the MMDR Act and Rules 59 and 60 of the MC Rules. The Division Bench, by judgment and order dated 05.06.2009, reversed the judgment passed by the learned single Judge. With this background, let us discuss the issues formulated above.

D Issue (a)

"Whether the State Government's recommendation dated

06. 12. 2004 and the proceedings of the Chief Minister are contrary to the provisions of Section 11 of the Act and E Rules 59 and 60 of MC· Rules and not valid in law."

12Copy pinpoint12. Mr. Nariman and Mr. K.K. Venugopal, learned senior counsel appearing for the Sandur and MSPL respectively, by taking us through the entire proceedings of the Chief Minister, vehemently contended that the State Government was pre- F determined to grant the lease in favour of Jindal and Kalyani. They also contended that there is no clear reason as to why Jindal and Kalyani alone were given preference and the applications of MSPL, Sandur and others were not considered favourably. They also highlighted that all that is done is the reproduction of the details mentioned in their applications and at the end, certain columns were left blank in which the Chief Minister has filled in by hand, after which he has signed the proceedings. They also pointed out that though relevant criteria is provided under Section 11 (3) of the Act, only one criteria, namely, the proposed investment, is taken into account while

SAN DUR MANGANESE & IRON ORES LTD. v. 277 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.]

evaluating the applicants. It is their grievance that the special reason mentioned in the recommendation is only to favour Jindal and Kalyani. Even if it is so, according to them, the decision of the State Government is violative of Section 11(4) of the Act which permits only applications made pursuant to the Notification to be taken into account and not applications made prior to the B Notification. Both the learned senior counsel, relying on Rule 35, pointed out that the recommendations made to justify preference taking into account past investments by steel companies cannot be sustained. In any event, according to them, in view of Section 2 of the Act, State Legislature is denuded of its legislative power c to make any law with respect to the regulation of mines and mineral development. Finally, it was pointed out that there is no question of framing policy such as the Karnataka Mineral Policy to give out mining leases independently of the MMDR Act and the Rules. On the other hand, Mr. Harish N. Salve and Mr. D Dushyant Dave, learned senior counsel appearing for Jindal and Kalyani, by drawing our attention to the very same provisions and the orders of the courts, submitted that the recommendations made by the State Government is in terms of the provisions of the Act and Rules and the Division Bench was right in affirming E the same.

13Copy pinpoint13. It is useful to refer notification dated 15.03.2003 issued by the Government of Karnataka which reads thus:

"GOVERNMENT OF KARNATAKA F NO. Cl/16/MMM/2003 Government of Karnataka Secretariat Ms. Building Bangalore, Dated 15.03.2003 G NOTIFICATION

It is hereby informed for the mining public that the area noted in the annexure is available for regrant under rule 59 of Mineral Concession Rules, 1960. H

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A The application for grant of mining lease shall be received by the Director of Mines and Geology, No.49, "Khanij Bhavan", D.Devaraj Urs Road, Bangalore-01, after 30 days from the date of publication of the notification in the Official Gazette. If the day notified for receiving the B application happens to be a Public Holiday or General Holiday, applications will be received on the next working day under amended Rules. The sketch of the area is available for inspection at the office of the Director, Department of Mines and Geology, Khanija Bhavan, c D.Devaraj Urs Road, Bangalore-01 during working hours on all working days.

The mining public should note that the availability of the area published here in is subject to the clearance from the Revenue Department for mining activities and compliance of the MM (D&R) Act, 1957 and the M.C.Rules and all other relevant Acts and Rules by the applicants. In case the area is found to consist of Forest Lands, the clearance from the Forest Department under Section (2) of the Forest (Conservation) Act, 1980 for utilizing the area for non-forest activities should be obtained by the applicants.

Interested persons are advised to inspect the area and satisfy themselves about the availability of mineral deposits (as the area is previously under held. MUPL block) F and the present status of the land there is before making application for mining lease. BYORDERANDINTHENAMEOFTHE GOVERNOR OF KARNATAKA (A.B. SIDDHANTI) G Under Secretary to Govt. (Mines), Commerce and Industries Department."

14Copy pinpoint14. After expiry of the cut-off date, as mentioned in the said notification, hearing was conducted by the Chief Minister under Rule 26A of the Rules. The order of the Chief Minister shows that as per the direction of the High Court in a writ petition filed by

SANDUR MANGANESE & IRON ORES LTD. v. 279 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.] Ziaulla Sharieff, the State has to consider their applications in accordance with law along with other applications. It is the claim of the State that as per the said decision, it was necessary to consider the applications filed for grant of mining lease over the area in question before the issue of Notification on 15.03.2003 along with applications received in response to the said B Notification. Para 3 of the order of the Chief Minister shows that 21 applications were filed for grant of mining lease over the area in question before the notification was issued and 90 applications were received in response to the notification. In all, the Chief Minister has considered 111 applications for grant of c mining lease. The order further shows that notice under Rule 26(1) of the Rules was issued to all the applicants to appear for hearing on 12.10.2004 at 4.00 PM to make presentation for sanction of mining lease in their favour. On 12.10.2004, the hearing was adjourned. According to the State, applicants were 0 heard on different dates. Out of 111 applicants, 85 applicants attended the hearing and 75 applicants gave their written representations. On 16.10.2004, the hearing was again adjourned, 72 applicants attended and 9 applicants submitted their written representations. Again, the hearing was held on E 25.10.2004, 76 applicants attended and 27 a'pplicants submitted their written submissions. On 04.¹¹.2004, 16 applicants attended the hearing and 7 applicants submitted their written submissions.

15Copy pinpoint15. The order of the Chief Minister further shows that out of F 111 applications, 55 are companies/firms and 30 are individuals. Out of 111 applicants, 11 have given more than one application in the name of their sister companies/partnership firms etc. The proceeding further shows that all applications were examined under Section 11 (5) of the Act with a view to provide G an opportunity to all the applicants who have filed their applications on subsequent days i.e. after 16.⁴.2003. The order further shows that out of 30 individuals who have applied for mining lease, only 3 applicants hold mining lease in the State and the remaining 27 applicants do not hold any mining lease. H

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A Some of the individuals are local people and have some past experience in mining. Some of them are qualified engineers. Most of the applicants have indicated that they would be exporting ore or would be supplying it to the local market. The order proceeds that none of them have indicated any proposal B for the value addition to the ore. The Chief Minister, after considering them, do not merit any consideration for grant of mining lease, rejected all those applications. It is brought to our notice that no one from that category challenged the same in the court of law. c 16. After rejecting those applications, the impugned proceeding shows that a total number of 55 companies/firms have applied for mining lease and the details furnished by them have been incorporated in a tabular form in para 9. In para 10 of the order, it was stated that out of 55 companies/firms who have applied for mining lease, only 12 companies/firms were having mining lease in the State. Some of the companies have already established their units in the State and they have requested the sanction of mining lease for using the ore for captive consumption and for value addition to the ore. Some of the firms who are willing to invest huge amounts in mining industry have indicated that they require the mines for exporting ore and for supplying it to the local market. Some of the companies have already established their units in Karnataka by investing huge amounts . and they are depending upon local market for their raw material, that is, iron ore .. In para 11 of the order, it is stated that since the request of such of the companies is for 'captive consumption' and for 'value addition', they deserve consideration over others. In para 12, the order refers those who established steel ' plants in Karnataka. Finally, after quoting Rule 35 which provides for preferential rights for certain persons and by arriving at a conclusion that "it is desirable to allot the mining areas to applicants who have already established their plants in the State by investing huge amounts", and by invoking Rule 35 of the MC Rules, the Chief Minister recommended or in other words filled up dotted lines by mentioning Jindal and Kalyani.

SANDUR MANGANESE & IRON ORES LTD. v. 281 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.]

17Copy pinpoint17. It is the grievance of the appellants, namely, Sandurand A MSPL that the proceedings of the Chief Minister shows that the State,Government was pre-determined to grant the lease in favour of Jindal and Kalyani.

18Copy pinpoint18. A perusal of the proceedings of the Chief Minister shows 8 that no clear reasons were given to show as to why Jindal and Kalyani were preferred over other applicants. There is also no plausible reason why the applications of the appellants herein were not considered favourably. A summary of the applications was prepared and at the end certain columns were left blank which the Chief Minister filled by hand and then signed the proceedings.

19Copy pinpoint19. The evaluation of all 111 applications has been done in three successive stages in a manner not envisaged by Section

11. In the first stage of the process, the applications by individuals were discarded. In the second stage, those by companies as a whole and in the third stage, only companies with existing investment in steel plants out of which Jindal and Kalyani were chosen without any special or adequate reason. In fact, no such procedure of three stage consideration or differentiation between individuals and companies and those companies with existing investments and those without existing investment is envisaged in Section 11. As rightly pointed out by learned senior counsel for the appellants, the proceedings of the Chief Minister, at no level, consider the various guiding criteria mentioned in F Section 11 (3) as mentioned below:

a. "any special knowledge of, or experience in, reconnaissance operations, prospecting operations or mining operations, as the case may be, possessed by the applicant; G

b. the financial resources of the applicant;

c. the nature and quality of the technical staff employed or to be employed by the applicant; H

282 SUPREME COURT REPORTS [201 OJ 11 S.C.R.

A d. the investment which the applicant proposes to make in the mines and in the industry based on the minerals;

e. such other matters as may be prescribed."

20Copy pinpoint20. It is true that among the criteria mentioned, only one criteria, namely, "proposed investment" is taken into account in evaluating some applications. However, as mentioned above, in the said proceedings, two irrelevant points were taken into account, namely, (i) whether or not the applicant holds a mining C lease in the State and (ii) the amount of their past investment in steel plant. It is equally true that the proceedings recommended in favour of Jindal and Kalyani was justified by the special reasons specifically stated at the very end in terms of Section 11 (5) which is reproduced below:- D "(5) Notwithstanding anything contained in sub-section (2), but subject to the provisions of sub-section (1 ), the State Government may, for any special reasons to be recorded, grant a reconnaissance permit, prospecting licence or E m.ining lease, as the case may be, to an applicant whose application was received later in preference to an application whose application was received earlier:

Provided that in respect of minerals specified in the First Schedule, prior approval of the Central Government shall be obtained before passing any order under this sub- section."

A plain reading of the above provision makes it amply clear that it would apply to favour a later applicant over an earlier applicant which is relevant only in the event that the main provision of Section 11 (2) relating to preference of prior applicants applies and not in the case of notification inviting applications, whether it is under the first proviso to Section 11 (2) or 11 (4) under the later/proviso, upon notification, by deeming fiction all applications are treated as having been received on

SANDUR MANGANESE & IRON ORES LTD. V; 283 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.] the same date. A

21Copy pinpoint21. Apart from the above infirmity, the proceedings of the Chief Minister also violate Section 11 (4) of the Act which reads thus:

"(4) Subject to the provisions of sub-section (1 ), where the B State Government notifies in the Official Gazette an area for grant of reconnaissance permit, prospecting licence or mining lease, as the case may be, all the applications received during the period as specified in such notification, which shall not be less than thirty days, shall be considered simultaneously as if all such applications have been received on the same day and the State Government, after taking into consideration the matters specified in sub- s~ction (3), may grant the reconnaissance permit, prospecting licence or mining lease, as the case may be, to such one of the applicants as it may deem fit."

The above sub-section permits only the applications made pursuant to the notification to be taken into acco¹:1nt and not applications made prior to the notification. The notification referred to in the first proviso to Section 11 (2) is intended only to invite applications in respect of "virgin areas". In the case of previously held areas covere'.' by present notification dated 15.03.2003, applications made prior to the notification cannot be entertained because they are premature. F

22Copy pinpoint22. We have already adverted to Section 2 of the MMDR Act, which is a parliamentary declaration, makes it clear that the State Legislature is denuded of its legislative power to make any law with respect to the regulation of mines and mineral • development to the extent provided in the MMDR Act. (Vide G State of Orissa vs. M.A. Tulloch & Co. (1964) 4 SCR 461). In Baijnath Kedia vs. State of Bihar and Others, (1969) 3 SCC 838, a Constitution Bench of this Court reiterated the above view. Argument of the appellant in that case was that, apart from the provisions of the 2nd proviso to Section 10 added to the Land H

284 SUPREME COURT REPORTS [2010] 11 S.C.R.

A Reforms Act, 1950 in 1964, by Act IV of 1965 and second sub- rule added to Rule 20 of the Bihar Minor Mineral Concession Rules, 1964, there is no power to modify the terms. It was further contended that these provisions of law are said to be outside the competence of the State Legislature and the Bihar B Government. With regard to the State Legislature, it was contended that the scheme of the relevant entries in the Union and the State List is that to the extent to which regulation of mines and mineral development is declared by Parliament by law to be expedient in the public interest, the subject of legislation is c withdrawn from the jurisdiction of the State Legislature and, therefore, Act 67of1957 (MMDR Act) leaves no legislative field· to the Bihar Legislature to enact Act 4 of 1955 amending the Land Reforms Act. Answering those questions, the Constitution bench has held thus: D "13 .......... Entry 54 of the Union List speaks both of Regulation of mines and minerals development and Entry 23 is subject to Entry 54. It is open to Parliament to declare that it is expedient in the public interest that the control should rest in Central Government. To what extent such a E declaration can go is for Parliament to determine and this must be commensurate with public interest. Once this declaration is made and the extent laid down, the subject of legislation to the extent laid down becomes an exclusive subject for legislation by Parliament. Any legislation by the F State after such declaration and trenching upon the field disclosed in the declaration must necessarily be unconstitutional because that field is abstracted from the legislative competence of the State Legislature. This proposition is also self-evident that no attempt was rightly G made to contradict it. There are also two decisions of this Court reported in the Hingir Rampur Coal Co. Ltd. v. State of Orissa, and State of Orissa v. M.A. Tulloch and Co. in which the matter is discussed. The only dispute, therefore, can be to what extent the declaration by Parliament leaves any scope for legislation by the State Legislature. If the H

SANDUR MANGANESE & IRON ORES LTD. v. 285 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.]

impugned legislation falls within the ambit of such scope it A will be valid; if outside it, then it must be declared invalid.

14. The declaration is contained in Section 2 of Act 67 of 1957 and speaks of the taking under the control of the Central Government the regulation of mines and 8 development of minerals to the extent provided in the Act itself. We have thus not to look outside Act 67 of 1957 to determine what is left within the competence of the State Legislature but have to work it outfrom the terms of that Act. In this connection we may notice what was decided in the C two cases of this Court. In the Hingir Rampur case a question had arisen whether the Act of 1948 so completely covered the field of conservation and development of minerals as to leave no room for State legislation. It was held that the declaration was effective even if the rules contemplated under the Act of 1948 had not been made. D However, considering further whether a declaration made by a Dominion Law could be regarded as a declaration made by Parliament for the purpose of Entry 54, it was held that it could not and there was thus a lacuna which the Adaptation of Laws Order, 1950 could not remove. E Therefore, it was held that there was room for legislation by the State Legislature.

15. In the M.A. Tulloch case the firm was working a mining lease granted under the Act of 1948. The State Legislature F of Orissa then passed the Orissa Mining Areas Development Fund Act, 1952 and levied a fee for the development of mining areas within the State. After the provisions came into force a demand was made for payment of fees due from July 1957 to March 1958 and the G demand was challenged. The High Court held that after the coming into force of Act 67 of 1957 the Orissa Act must be held to be non existent. It was held on appeal that since Act 67 of 1957 contained the requisite declaration by Parliament under Entry 54 and that Act covered the same H ,

286 SUPREME COURT REPORTS [2010] 11 S.C.R.

A field as the Act of 1948 in regard to mines and mineral development, the ruling in Hingir Rampur's case applied and as Sections 18(1) and (2) of the Act 67 of 1957 were very wide they ruled out legislation by the State Legislature. Where a superior legislature evinced an intention to cover B the whole field, the enactments of the other legislature whether passed before or after must be held to be overborne. It was laid down that inconsistency could be proved not by a detailed comparison of the provisions of the conflicting Acts but by the mere existence of two pieces of legislation. As Section 18(1) covered the entire field, there c was no scope for the argument that till rules were framed under that Section, room was available."

The Constitution Bench after considering Hingir Rampur Coal Co. Ltd. vs. State ofOrissa, 1961 (2) SCR 537 and M.A. D Tulloch (supra) held that in view of the two undermentioned rulings of this Court and by enacting Section 15 of Act67of1957, the Union of India has taken all the power to itself and authorized the State Government to make ~ules for the regulation of leases. By the declaration and the enactment of Section 15, the whole E of the field relating to minor minerals came within the jurisdiction of Parliament and no scope was left for the enactment of the second proviso to Section 10 in the Land Reforms Act. The enactment of the proviso was, therefore, without jurisdiction.

23Copy pinpoint23. In State of West Bengal vs. Kesoram Industries Ltd. and Others, (2004) 1o sec 201, after referring to earlier judgments including M.A. Tulloch (supra) and Baijnath Kedio (supra), the Constitution Bench held as under:

"95 ......... All that the Court has said is that the 1957 G enactment covers the field of legislation as to the regulation of mines and the development of minerals. As Section 2 itself provides and indicates, the assumption of control in public interest by the Central Government is on: (1) the regulation of mines, (it) the development of minerals, and H (iii) to the extent hereinafter provided. The scope and extent

SAN DUR MANGANESE & IRON ORES LTD. v. 287 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.] . of declaration cannot and could not have been enlarged by A the Court nor has it been done. The effect is that no State Legislature shall have power to enact any legislation touching: (1) the regulation of mines, (ii) the development of minerals, and (iii) to the extent provided by Act 67of1957 .... " B

24Copy pinpoint24. In the same way, the State is also denuded of its executive power in regard to matters covered by the MMDR Act and the Rules. [vide Bharat Coking Coal Ltd. vs. State of Bihar & Ors., (1990) 4 sec 557]. c

25Copy pinpoint25. In view of the specific parliamentary declaration as discussed and explained by this Court in various decisions, there is no question of the State having any power to frame a policy de hors the MMDR Act and the Rules. D

26Copy pinpoint26. In State of Assam & Ors. vs. Om Prakash Mehta & Ors., (1973) 1 SCC 584, this Court in paragraph 12 held that the MMDR Act, 1957 and the MC Ru.les, 1960 contain complete code in respect of the grant and renewal of prospecting licences as well as mining leases in lands belonging to Government as E well as lands belonging to private persons.

27Copy pinpoint27. Again this Court in Quarry Owners' Association vs. State of Bihar & Ors., (2000) 8 SCC 655, held that both the Central and the State Government act as mere delegates of Parliament while exercising powers under the MMDR Act and the MC Rules. F

28Copy pinpoint28. It is not open to the State Government to justify grant based on criteria that are de hors to the MMDR Act and the MC Rules. The exercise has to be done strictly in accordance with the statutp_ry provisions and if there is any deviation, the same G cannot be sustained. It is the normal rule of construction that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself. This principle has been reiterated in C./. T Mumbai vs. Anjum M.H. Ghaswa/a & H

288 SUPREME COURT REPORTS [201 OJ 11 S.C.R.

A Ors., (2002) 1 SCC 633 at 644, Captain Sube Singh & Ors. vs. Lt. Governor of Delhi & Ors., (2004) 6 SCC 440 and State of UP. vs. Singhara Singh & Ors., (1964) 4 SCR 485.

29Copy pinpoint29. Mr. Harish N. Salve and Mr. Dushyant Dave, by drawing our attention to the decision of this Court in TISCO vs. U 0.¹. & 8 Anr., (1996) 9 SCC 709, submitted that inasmuch as this Court had upheld the grants based on "captive consumption", there is no flaw or error in the recommendation of the State Government dated 06.12.2004. A perusal of the above decision clearly shows that it concerned with Section 8(3) of the MMDR Act which requires consideration of the extremely general criterion of the interests of mineral development before granting second renewal of a mining lease. Unlike in Section 11.(3), no further criteria was specified and it was in this background, this Court upheld on the facts of that case that relevant material taken into account by the Committee set up by the Central Government rightly included "captive consumption". In view of the factual situation, the said decision can have no bearing on initial grants of mining lease where the only permissible criteria are the matters set out in Section 11 (3) of the MMDR Act. E Issue (b)

"Whether the respondent-Jindal's application dated 24.10.2002 made prior to the Notification dated 15.03.2003 is capable of being entertained along with the applications made pursuant to the said notification."

30Copy pinpoint30. The next vital issue that arises in this case is whether Jindal's application dated 24.10.2002 made prior to the Notification dated 15.03.2003 inviting applications for previously held area could be considered in view of Section 11 (4) of the MMDR Act read with Rules 59 and 60 of the MC Rules. Before considering the above aspect, it is relevant to note the stand taken by Jindal that in 2001, one Ziaulla Sharieff filed a writ petition being Writ Petition No 35915 of 2001 seeking a H declaration that he was entitled to a mining lease in respect of

SAN DUR MANGANESE & IRON ORES LTD. v. 289 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.) 388 acres of land in Sandur Taluk, Bellary District. It was pointed out that in the said writ petition, MSPL was arrayed as respondent No.3 and Sandur was arrayed as Respondent No.7. Three sister concerns of Jindal were also arrayed as respondents. During the pendency of the said writ petition, the State Government issued a notification dated 15.03.2003 inviting applications from the general public for mineral concessions over large areas of the State of Karnataka. It was further pointed out that the area concerned in the said writ petition as also the area concerned in the present appeals were included in the said notification. By judgment and order dated 29.03.2004, the High c Court disposed of Writ Petition No. 35915 of 2001 with the following direction "in view of the subsequent notification issued by the State Government dated 15.03.2003, inviting that the area is available for grant, the State Government is now expected not only to consider the applications pending before it but also the D applications that may be filed pursuant to the above said notification notwithstanding the earlier recommendation made by the second respondent." Learned senior counsel appearing for Jindal submitted that the State Government had acted on the basis of the Ziau/la Sharieff's case and empowered the Director E of Mines and Geology to hear applications that were filed prior to the issuance of the notification dated 15.03.2003 and were pending on the date of the said notification. Whether such direction saves the State Government's decision in considering the Jindal's application which was made well prior to the notification dated 15.03.2003. F

31 . In order to determine whether it is Section 11 (4) or the first proviso to Section 11 (2), it is relevant to understand the intention of the legislature in enacting Section 11 of the MMDR Act and Rules 59 and 60 of MC Rules as being part of single G statutory scheme governing the grant of reconnaissance permits, prospecting licences and mining leases. The amendments to MMDR Act in 1999 which inserted and re-drafted Section 11 had their origin in the Report of the Committee to Review the Existing Laws and Procedure for Regulation and Development of H

290 SUPREME COURT REPORTS [2010] 11 S.C.R.

A Minerals set up by the Ministry of Mines, Government of India, submitted in January, 1998. We are concerned about para 2.¹.21 of the Report which reads as under:

" ... The concept of first-come, first-serve has become B necessary in vieyv of the fact that the Act does not provide for inviting applications through advertisement for grant of PUML in respect of virgin areas. No doubt, there is provision in Rule 59 of MCR for advertisement of an area earlier held under PLIML with provision for relaxation." In this background, the Committee recommended the introduction c of the proviso to Section 11 (2) permitting calling for applications by way of a notification. There is a distinction between virgin areas and areas covered under Rule 59 and Section 11 (2) ought to be interpreted to cover virgin areas alone." · D If we consider Section 11 with the aid of the said Report, it makes it clear that Section 11 (1) provides preferential right to the holder of reconnaissance permits or a prospecting licencee who has identified mineral resources in the area allotted to him for grant E of a mining lease, subject to certain conditions specified in the proviso appended thereto. The over-riding character of the priority given to the successful prospecting licencee or reconnaissance permit-holder is clear from the fact that each of the subsequent sub-sections in Section 11 is made subject to F Section 11 (1 ).

32Copy pinpoint32. It is also clear that the main provision in Section 11 (2) gives preference to a prior applicant for grant of reconnaissance permit, prospecting licence or mining lease over later applicants where the State Government has not issued any notification. The G analysis of the Report makes it clear that the main provision in Section 11 (2) applies to "virgin areas". It further makes it clear that to the extent that an area that is previously held or reserved would require a notification for it to become available. The first proviso to Section 11 (2) carves out an exception to the H preferential right based on priority of applications in point of time

SANDUR MANGANESE & IRON ORES LTD. v. 291 STATE OF KARNATAKA & ORS. [P. SATHASIVAM, J.] referred to in the main provision. It makes it clear that where the A State Government subsequently issues a notification inviting applications for grant, the prior and subsequent applications to the notification would be considered as if they were filed on the same day and no priority in order of time would be given. The second proviso requires the State Government to examine the matters set out in Section 11 (3) while considering the applications for grant.

33Copy pinpoint33. The Committee's Report, particularly, para 2.¹.2Jwhich we extracted in the earlier paras, makes it clear that this provision was inserted because the Act does not provide for advertisement of virgin areas and the State Government was perfectly within the rights to issue an advertisement inviting applications even for virgin areas. In this regard, it is useful to mention that this Court had suggested an almost identical change in the un-amended Section 11 in Indian Metals and D Ferro Alloys Ltd. vs. Union of India & Ors., 1992 Supp. 1 SCC 91 at page 127 para 35.

"35. Now, to turn to the contentions urged before us: Dr Singhvi, who appeared for ORIND, vehemently contended that the rejection of the application of ORIND for a mining lease was contrary to the statutory mandate in Section 11 (2); that, subject only to the provision contained in Section 11 (1) which had no application here, the earliest applicant was entitled to have a preferential right for the grant of a lease; and that a consideration of the comparative merits of other applicants can arise only in a case where applications have been received on the same day. It is no doubt true that Section 11 (2) of the Act read in isolation gives such an impression which, in reality, is a misleading one. We think that the sooner such an impression is corrected by a statutory amendment the better it would be for all concerned. On a reading of Section 11 as a whole, one will realise that the provisions of sub-section (4) completely override those of sub-section (2). This sub-section preserves to the S.G. H

292 SUPREME COURT REPORTS [201 O] 11 S.C.R.