1. The petitioner was granted a prospecting licence for soap-stone, dolomitp and quartz in respect of Khasra No. 68. area 64.12 acres, in village Chita Dhana, District Narsimhapur, under a deed dated 28th February 1963 for a period of two years. The petitioner thereafter applied for a mining lease for whole of the area covered under the prospecting licence by its application dated 22nd April 1964 The State Government by Memo dated 13th October, 1964 directed the petitioner to indicate which block of 20 acres was desired by the petitioner, indicating thereby that the State Government was prepared to grant the lease for that area only. By letters dated 23rd October 1964 and 26th October 1964 the petitioner represented to the State Government that the petitioner was entitled to get a lease for whole of the area and that in view of the enormous expenditure incurred by the petitioner in prospecting the area, there was no justification for reducing the area On the insistence of the State Government that the petitioner should choose 20 acres of land and because of the threat that in case no such choice was made within 15 days the appli-cation for grant of lease was liable to be dismissed, the petitioner under protest gave its choice and the State Government by order dated 20th January 1965 accorded its ianction for grant of lease for 20 acres only. The petitioner thereupon accepted the lease for 20 acres under protest and filed an application for revision before the Central Government under Rule 54 of the Mineral Concession Rules, 1960. The Central Government, after inviting the comments of the State Government and after considering the reply of the petitioner on the comments of the State Government as required under Rule 54, rejected the revision application by order dated 27th April, 1966. The petition-er by this petition under Article 226 of the Constitution seeks a writ of certiorari for quashing the order of the State Government dated 20th January 1965 and that of the Central Government dated 27th April, 1966 and also prays for issuance of a writ of mandamus directing the State Government to grant the petitioner a lease for the whole area, applied for.
2. The contention of Shri Jakatdar, learned counsel for the petitioner, is that Under Section 11(1) of the Mines and Minerals (Regulation and Development) Act, 1957 (hereinafter called the Act) and Rule 34 of the Mineral Concession Rules, 1960 (hereinafter referred to as the Rules) the State Government had no authority or jurisdiction to reduce the area without assigning special reasons. He urged that a holder of a prospecting licence has a preferential right to secure a lease for whole of the area covered under his licence. The choice of asking for a lesser area is that of the holder of the prospecting licence and that the State Government has no authority to reduce the area on its own accord. The State Government, according to Shri Jakatdar. can for special reasons recorded in writing, reduce the area. In this case, no such valid reason was Riven by the State Government and the act of the State Government in confining the grant to 20 acres was not onlv arbitrary but was also in violation of the Act and the Rules.
3. From the return filed before us as also from the comments sent to the Central Government, it appears that the State Government had fixed a ceiling of 20 acres in the case of an individual and 40 acres for a companv for grant of leases for soap-stone mines. A similar ceiling has been fixed for other minerals also. This ceiling was fixed, according to the State Government, after taking into account past experience of the working of the prospecting licences and mining leases. The State Government came to the conclusion that where large areas were granted under prospecting licences and mining leases, such grants often resulted in the area remaining unworked This adversely affected expeditious development of mining resources of the State. In the caseof some minerals, large scale operation la required; while in other cases, small scale operations yield better results. Taking into consideration all these facts the State Government fixed a ceiling for different minerals, as indicated above, and that is the reason why the State Government insisted on granting a lease for 20 acres only. Shri Jakatdar says that this reason is quite foreign to the provisions of the Act and is no reason in law. He also referred to Rule 26 of the Rules and urged that it is obligatory on the State Government to state reasons while rejecting an application for a lease. The State Government failed to observe even this mandatory provision and on this ground alone the order of the State Government was liable to be quashed.
4. After hearing the parties, we have reached the conclusion that the petition must be dismissed. Our reasons are these.
5. It is not disputed that all the minerals vest in the State. Under entry 23 of the second list of the Seventh Schedule to the Constitution the power to regulate mines and minerals development belongs to the State Legislature. The executive authority of the State has, therefore, administrative power in that matter to decide upon a policy for the purposes of development and exploitation of the mineral wealth of the State. This power is, however, subject to entry 54 of List I of the Seventh Schedule to the Constitution That entry authorises the Parliament to make laws for regulation of mines and mineral development to the extent to which such regulation and development under control of the Union is declared by Parliament by law to be expedient in public interest. In exercise of this power the Parliament enacted the 'Mines and Minerals (Regulation and Development) Act. 1957'. Section 2 of the said Act contains the follow-ing declaration :
'It 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 the minerals to the extent hereinafter provided'.
This provision clearly indicates that the matters for which and the extent to which no provision has been made in the Act, the State Government is entitled to de-cide on those matters in the best interest of the State Section 4(2) of the Act further provides that no prospecting licence or mining lease shall be granted otherwise than in accordance with the provisions of the Act and the rules made thereunder To the extent anv provisions are made under the Act and the rules, the licences and leases must comply with the said provisions. Sections 8 to 8 of the Act prescribe the restrictions on the grant of mining leases and prospecting licences the maximum area that may be granted under them and the period for which they may be granted Section 6 provides that prospecting licences shall not begranted for an area in excess of fifty square miles; while under that section for a lease the maximum area is fixed at 10 square 4 miles. This section thus brings out the factor that the area under a prospecting licence and a lease need not be co-extensive.
Section 10 provides that the applications for licences or leases should be made in the prescribed form and should be accompanied with the prescribed fee. Clause (3) of that Section further provides that the State Government may, having regard to the provisions of that Act and the rules made thereunder grant or refuse to grant the licence or the lease. The expression 'having regard to' is important. It means that the State Government is bound to abide by the pro-visions made under the Act and the rules and to that extent it has no discretion of its own; but in other matters it has to make its own decisions and may chalk out its own policy. It may also be noted that in the authority to refuse the grant of a lease the power to confine it to a smaller area than the one asked for by the applicant is implicit Then comes Section 11, strongly relied on by the petitioner Section 11(1) reads:
'11. Preferential right of certain persons.
(1) Where a prospecting licence has been granted in respect of any land, the licensee shall have a preferential right for obtaining a mining lease in respect of that land over any other person:
Provided that the State Government is satisfied that the licensee has not committed any breach of the terms and conditions of the prospecting licence and is otherwise a fit person for being granted the mining lease'
This section clearly brings out two factors, namely, fi) that when there is a competition between the holder of a prospecting licence and a third party, the holder of the prospecting licence shall be preferred; and (ii) that for this preference being accorded to the holder of the prospecting licence, he must further satisfy the State Government that he has not committed any breach of the conditions of the nrospecting licence and that he is otherwise fit for the grant. Thus this section only deals with the respective claims of the holder of a prospecting licence and a third party It nowhere lays down that the Government is bound to grant a mining lease with respect to whole of the area under the prospecting licence. The purpose of Section 11. In our view, is that if the Government has no objection to grant a mining lease over whole of the area, then the holder of the prospecting licence must be preferred to a third party. This preference is prescribed with a view to preserve the fruit of labour to the party that puts In labour in prospecting the area and not to allow it to be reaped bv a third partv This section does not take away the right of the State Government to fix a ceiling in thematter of various minerals. Section 13 confers the rule-making authority on the Central Government for the purposes of the Act. Other provisions of the Act are not materialfor the purposes of this petition.
6. The Central Government has framed rules styled as 'Mineral Concessions Rules ,1960'. Chapter IV of the Rules contains provisions with respect to grant of leases of Government lands. These rules cover various matters, such as. the authority before which the applications should be made, the procedure to be followed in the disposal of the applications, the forms to be used, the particulars to be mentioned, the fee to be paid etc. Rules 26 and 34, specially referred to by Shri Jakatdar. are extracted below:
'26 Reasons for refusal to be recorded. Where the State Government, passes any order refusing to grant or renew a mining lease, it shall communicate in writing the reasons for such order to the person against whom such order is passed.
34. Manner of exercise of preferential rights for mining lease A mining lease to any person who has a preferential right thereto under Sub-section (1) of Section 11, may, at his option, be granted to him either for the whole of the area for which he holds the prospecting licence or such part or parts thereof as he may select but the State Government may for any special reasons to be recorded in writing reduce the area or exclude a portion therefrom' Rule 26 is of general application with respect to all the applications for mining leases. Under this rule, if the application is rejected, the State Government is required to state the reasons therefor. It may again be emphasised that in the power of rejection; the power to restrict the grant to a lesser area than the one applied for is implicit. The requirement of recording the reasons is for the benefit of the applicant, so that he may know the reasons of the refusal and may seek relief from the Union Government by way of filing a revision petition as provided under Rule 54. Rule 34 in terms refers to Section 11(1) of the Act. The purpose of this rule is to enable the person mentioned in Section 11(1), that is to say. the holder of a prospecting licence to apply for whole of the area for which the pros-pecting licence was granted or to restrict the application for any part of the area. The language of this rule does not support the contention that the holder of the prospecting licence is, as of right, entitled to secure the lease foi the whole of the area or the area chosen bv him
If this interpretation is accepted, Rule 26, which enables the State Government to reject an application for a lease, will be rendered ineffective, at least with respect to persons holding prospecting licences It is a matter of common knowledge that ordinarily no one applies for a mining lease un-less he has satisfied himself, by prospecting the area, that there is a possibility of profitably working any mine. Thus, in most of the cases, Rule 26 will be rendered ineffective. The latter portion of Rule 34, which enables the State Government, for special reasons to be recorded, to reduce the area or exclude any particular area, is an enabling provision which authorises the State Government to accommodate a third party.
7. If Section 11(1) of the Act and Rules 26 and 34 of the Rules are read together and if it is kept in view that the provisions of the Mines and Minerals (Regulation and Development) Act are only to enable the Central Government to have control over the matter of mineral development and that the State Government is not altogether deprived of its rights over the minerals, there is no escape from the conclusion that the holder of a prospecting licence is not entitled, as of right, to get a lease over whole of the area or any part of the area chosen by him and that the State Government has authority to reject the application or to confine the grant to anv smaller area that the Government decides upon for the better development of the mineral wealth of the State. We are, therefore, of the view that the State Government acted within its juris-diction in confining the grant to 20 acres.
8. It is no doubt true that the State Government did not record reasons while rejecting the application of the petitioner for grant of whole of the area, applied for, or, in any case, the reasons were not conveyed to the petitioner. But when the petitioner preferred a revision petition before the Central Government, the reasons were disclosed by the State Government and the petitioner was afforded an opportunity of making his representations against those reasons. In our view, the provisions of Rule 26 are directory and not mandatory. In anv case, no prejudice has occurred inasmuch as the petitioner had sufficient opportunity to make the representations. There is, therefore, no reason to quash the order of the State Government
9. The Central Government before dismissing the revision application gave adequate opportunity contemDlated by Rule 54 of the Rules and no grievance can be made that the principles of natural justice were denied to the Petitioner.
10. For the aforesaid reasons, we havecome to the conclusion that the petition iswithout substance and is hereby dismissedwith costs Hearing fee is fixed at Rs. 200to be equally shared between the two respondents. The outstanding amount of thesecurity deposit, if any, after reduction ofcosts, shall be refunded to the petitioner.