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Kangra Valley Slate Company Ltd. Vs. the Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 434 of 1972
Judge
Reported in10(1974)DLT109; ILR1973Delhi923
ActsMines & Minerals (Regulation and Development) Act, 1957 - Sections 11
AppellantKangra Valley Slate Company Ltd.
RespondentThe Union of India and ors.
Advocates: C.B. Aggarwal,; P.N. Mehta,; Uma Jain,;
Cases ReferredCentral Government. In L. Hirdar Narain v. Income
Excerpt:
(i) mines & minerals (regulations & development) act, (1957) - section 11 sub-sections (2) & (4) respective scope of--vires of sub-section (2)--whether offends article 14 of the constitution.;that there is no justification for the view that, even for the preferential right conferred by sub-section (1) of section 11 of the mines & minerals (regulations & development), act, 1957, equality of merit is a pre-requisite.;(rejecting the contention that the preferential rights granted by sub-section (2) of section 11 only on the ground of the applicant being the first to make the application is not founded on any intelligible differentia having any nexus with the object sought to be achieved by the act and the classification contemplated by it is not founded on any rational.....s.n. andley, c.j.(1) two principal questions arise for determination in this writ petition. one relates generally to the interpretation of section 11 of the mines and minerals (regulation and development) act, 1957 and the other to the virus of sub-section (2) of this section in the context of article 14 of the constitution of india. (2) in 1879, the petitioner-company which is a public limited company and is engaged in the business of quarrying slates and shale (major minerals) and marketing the same, was granted a perpetual lease for quarrying slate stone in villages majra and manhetti in rewari tehsil of gurgaon district by the biswaydars of these villages. it continued to carry on its operations under the said perpetual lease but when the said act came into force, the controller of.....
Judgment:

S.N. Andley, C.J.

(1) Two principal questions arise for determination in this writ petition. One relates generally to the interpretation of Section 11 of the Mines and Minerals (Regulation and Development) Act, 1957 and the other to the virus of sub-section (2) of this section in the context of Article 14 of the Constitution of India.

(2) In 1879, the petitioner-company which is a public limited company and is engaged in the business of quarrying slates and shale (major minerals) and marketing the same, was granted a perpetual lease for quarrying slate stone in villages Majra and Manhetti in Rewari tehsil of Gurgaon district by the Biswaydars of these villages. It continued to carry on its operations under the said perpetual lease but when the said Act came into force, the Controller of Mines, in exercise of powers India & ORS. conferred by rule 6 of the Mining lease (modification of terms) Amendment Rules 1960 reduced the period of lease so as to expire on March 22, 1962. Some other terms and conditions were introduced but they are not material for the purpose to this petition. The petitioner- company was given an option to have the lease renewed by making an application six months before the expiry of the existing lease. Instead of making the application for renewal on September 21, 1961, it made the application on October 9, 1961 when the then State of Punjab, within whose jurisdiction the aforesaid villages were, refused the renewal. The petitioner-company was, however, informed that the said area was being notified for re-grant and that the petitioner-company would be eligible for the grant of the mining lease on making the necsssary application.

(3) A notification was issued by the State of Punjab on February 9, 1962 inviting applications for grant of a mining lease with respect to an area of 671 Bighas and 8 bids was of land in the aforesaid two villages. Applications were to be filed after expiry of thirty days from the date of the notification. Respondent No. 3 filed his application for a mining lease in respect of this area on March 12, 1962 while the petitioner-company filed its application on March 20, 1962, eight days later, for the grant of a mining lease in respect of the said area in response to the said notification. The petitioner-company and respondent No. 3 were the only two applicants.

(4) These applications were not disposed of by the State of Punjab within the period of nine months as required by rule 24 of the Mineral Concession Rules of 1960 and such non-disposal had the effect of deeming the said applications to have been refused under rule 24(iii) of the said Rules. Both the petitioner-company and respondent No. 3 filed revisions before the Central Government under Section 30 of the said Act read with rule 54 of the said Rules. By its order dated June 25. 1965, the Central Government (respondent No. 1) directed the State Government to consider the applications filed by the petitioner-company and respondent No. 3 not later than August 31, 1965.

(5) The State of Punjab did not comply with the direction. Accordingly the petitioner-company filed a writ petition in the High Court of Punjab and Haryana at Chandigarh praying for directions to the State of Punjab to carry out the aforesaid directions of the Central Government. In the mean time and at the instance of the State of Haryana, within whose jurisdiction the aforesaid villages were now situate, the Central Government extended the period of consideration to July 31, 1969 and when the writ petition came up for hearing on April 9, 1969, a statement was made on behalf of the State of Haryana that the two applications would be decided within time and this resulted in the dismissal of the writ petition as infructuous.

(6) By order dated July 19, 1969, the State of Haryana (respondent No. 2) informed the petitioner-company and respondent No. 3 that their applications for grant of mining lease had been rejected as the area in question was being renotified for the grant of mining lease.

(7) The petitioner-company and respondent No. 3, being aggrieved again, filed revision petitions before the Central Government against this decision of the State of Haryana which was set aside by the Central Government on February 24, 1970. The Central Government directed the State Government to reconsider the applications of the petitioner-company and of respondent No. 3 and dispose of their cases 'according to merits'.

(8) In spite of demands by the petitioner-company, the State of Haryana did not decide the matter and the petitioner-company was obliged to file another writ petition in the High Court of Punjab and Haryana at Chandigarh on October 16, 1971 for directing the State Government to comply with the directions of the Central Government. This time, the State of Haryana acted in a different way and instead of complying with the directions of the Central Government, wrote to the petitioner-company and respondent No. 3 by their letter dated November 4, 1971 to say that in exercise of its executive powers under Article 298 of the Constitution, it had decided to exploit the area itself and, as a result, dismissed their applications for mining lease. Upon this order having been made, the writ petition was dismissed as infructuous but the order of the State of Haryana led to another set of revision petitions filed by the petitioner-company and respondent No. 3 before the Central Government. It was in these revision petitions that the impugned orders dated April 19, 1972 of the Central Government were passed.

(9) In its order, the Central Government has given the history of the case. It then held that the State of Haryana did not have the power to make a declaration under Article 298 of the Constitution once it had issued a notification throwing open an area for grant or re-grant of a mining lease and the order under revision was set aside. The Central Government then observed that the matter had been dragged India & ORS. on for ten years without any finality and it felt that a decisive order had to be passed by it so that the interest of mineral development do not suffer owing to Jack of decision on the part of the State Government'. Finally it granted the mining lease to respondent No. 3 and refused the application of the petitioner-company with these words:

'AMONGthe two rival contestants Shri Diwaii Singh Sethi has to be preferred under Section 11(2) of the Mines and Minerals (Regulation and Development) Act, provided he is otherwise qualified. It cannot be denied that Diwan Singh Sethi has the competence and is otherwise not disqualified. In view of that it will not be possible to consider your claim and the Central Government thereforee, hereby rejects your application for revision.'

(10) In its separate order in the revision petition filed by respondent No. 3. the Central Government repeated what it had said in its order in the revision petition filed by the petitioner-company and added:-

'INthe circumstances explained above the Central Government in exercise of their revisional powers under rule 55 of the Mineral Concession Rules 1960 and of all other enabling provisions in this behalf hereby set aside the order of the State Government contained in their letter No. 2 IE11-71/R.R. dated 4-11-71 and further direct the State Government to grant mining lease for slate and shale (Major minerals) over an area of 129.88 acres in villages Majra and Manhetti District Gurgaon within a period of-four months to Shri Diwan Singh Sethi whose application was the prior application in response to the Notification for regrant dated 30.1.62.'

(11) The State of Haryana were accordingly directed to grant a mining lease to respondent No. 3. On a reading of these two orders, there is no doubt that the mining lease was directed to be granted to respondent No. 3 not because the respective merits of the petitioner- company and respondent No. 3 were compared but because, being eligible, respondent No. 3 had filed his application for mining lease earlier than the petitioner-company.

(12) The above facts disclose a sorry state of affairs. Although the initial notification was issued by the then State of Punjab in 1962, the petitioner-company and respondent No. 3 have been agitating the matter for the last 10 years without any concrete results. They have been driven, as it were, from pillar to post. The State Government as also the Central Government have changed their attitudes and taken action which appear to us to be inconsistent with each other. The State Government particularly has woken up to take action only so as to make the writ petitions filed by the petitioner-company in the High Court of Punjab and Haryana infructuous. They did not bother about the directions of the Central Government which were issued to them to deal with the matter in a particular way. The result probably is that mineral development in the area in question has suffered because of the varying attitudes and actions of the two Governments.

(13) As stated earlier, it is the aforesaid order of the Central Government dated April 19, 1972 which has been challenged by the petitioner- company by this writ petition. The respondents to the writ petition are the Union of India (respondent No. 1), the State of Haryana (respondent No. 2) and Dewan Singh Sethi (respondent No. 3). Although various contentions have been urged by the petitioner-company in its petition, only three points have been argued by its learned counsel, Mr. C. B. Aggarwala.

(14) The first point is as to whether section 11(2) of the said Act is vocative of Article 14 of the Constitution. It is contended that the preferential right granted by this sub-section only on the ground of the applicant being the first to make the application is not founded on any intelligible differentia having any nexus with the object sought to be achieved by the Act and the classification contemplated by it is not founded on any rational basis to distinguish persons and groups.

(15) Now, the said Act provides for the regulation of mines and the development of minerals under the control of the Union. Section 2 declares 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 provided in the Act. Section 4 prohibits any person from undertaking any prospecting or mining operations in any area except under and in accordance with a prospecting license or mining lease granted under the Act. Section 5 provides for the grant of a prospecting license or mining lease by a State Government to a person who satisfies the conditions mentioned in this section or as may be prescribed by the Rules. Sections 7 and 8 prescribe the periods for which a prospecting license or mining lease can be granted. Section 10 gives the procedure for obtaining a prospecting license or a mining lease in respect of land in which the minerals vest in the Government as in the present case. Then section 11 provides:- India & ORS.

'11.(1)Where a prospecting license 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 license and is otherwise a fit person for being granted the mining lease. (2) Subject to the provisions of sub-section (1), where two or more persons have applied for a prospecting license or a mining lease in respect of the same land, the applicant whose application was received earlier shall have a preferential right for the grant of the license or lease, as the case may be, over an applicant whose application was received later: Provided that where any such applications are received on the same day, the State Government, after taking into consideration the matters specified in sub-section (3), may grant the prospecting license or mining lease, as the case may be, to such one of the applicants as it may deem fit. (3) The matters referred t3 in sub-section (2) are the following :- (a) any special knowledge of, or experience in 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) such other matters as may be prescribed. (4) 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 and with the previous approval of the Centra) Government, grant a prospecting license or a mining lease to an applicant whose application was received later in preference to an applicant whose application was received earlier.'

his section grants a preferential right to certain persons to obtain a respecting license or a mining lease. Sub-section (1) gives a preferenial right to obtain a mining lease to a prospecting licensee who was carrying on prospecting operations, meaning operations undertaken for the purpose of exploring, locating or proving mineral deposits in the very land (S. 3(h)). The grant of this preferential right has rightly not been challenged as being vocative of Article 14. A prospecting licensee for a specified area has to spend monies for exploring, locating and proving mineral deposits therein. In case the prospecting operations are not successful he loses his investment but if he succeeds in his efforts, he, by way of a reward, has been given a preferential right to obtain a mining lease for that area.

(16) Then sub-section (2) of section 11 confers another preferential right on the person, amongst two or more applicants for a prospecting license or mining lease in respect of the same land, whose application is received earliest. This preferential right is challenged as being vocative of Article 14 of the Constitution on. the grounds stated earlier. Then, the proviso to sub-section (2) deals with the case of persons who have applied for a prospecting-license or a mining lease on the same day and for determining the person to whom such a license or lease is to be granted, the matters referred to in sub-section (3) of this section are to be taken into consideration. These matters show that the person who has special qualifications is to be preferred over other persons who have applied on the same date. In other words, amongst the persons who apply on the same day, the person who is best on merits is to be granted the license or the lease.

(17) Finally, sub-section (4) of this section gives power to the State Government to grant a prospecting license or a mining lease to an applicant whose application was received later in preference to the applicant whose application was received earlier if there are special reasons which have to be recorded and if the grant is made with the previous approval of the Central Government.

(18) The scheme of the section, thereforee, is that a person who held a prospecting license in respect of the same land has an indefeasible preferential right for the grant of a mining lease (sub-section (1)); the person applying first amongst persons who apply on different dates is given a preferential right to the grant of a prospecting license or mining lease subject to sub-section (1) (sub-section (2)) but if all applicants apply on the same day then the person who is the best of the applicants is given the preferential right for such grant. However, the preferential right given by sub-section (2) can be defeated if there are special reasons and the previous approval of the Central Government (subsection (4)). India & ORS. Prima fade, the preferential right given by sub-section (2) by reason merely of being the first applicant amongst persons who apply on different dates is not based on a consideration of merit. It is contended that such preference is not based on any intelligible differentia having any relation to the object sought to be achieved-which is the regulation of mines and the development of minerals. This contention was accepted by a learned Single Judge of the Andhra Pradesh High Court in writ petition No. 5363 of 1968 decided on November 27, 1970. He said:-

'Ifail to understand how this classification between a person who gives his application one day and a person who gives his application next day, can be justified merely on the ground of priority. The scheme and object of the Act is for the development of mineral industry and exploitation of the wealth of the count ry and the preferential right given to a person, in my opinion, is absolutely unrelated, in other words, it has no nexus at all to the object sought to be achieved by the Act... ...Therefore the preferential right given to a person who makes an application on an earlier date is not founded on any intelligible differentia having any nexus or relation to the object sought to be achieved by the Act and, thereforee, sub-section (2) of section 11 of the Act must be struck down as ultra virus of Article 14 of the Constitution.'

(19) The matter was re-examined in an unreported Division Bench decision of the same High Court dated April 1, 1971 in a batch of writ appeals and writ petition being writ appeals Nos. 600 to 602 of 1969 writ appeal No. 11 of 1970 and writ petition No. 3057 of 1967. The aforesaid decision of the learned Single Judge of that court was not accepted. The view expressed by the Division Bench is that the question of preference under sub-sections (1) and (g) arises only when all the applicants are on an equal footing. They observed:-

'INall cases, where the applicants are placed on equal footing, then sub-sections (1) and (2) direct as to who should be preferred. But sub-section (4) in cases coming under sub-section (2) directs that in special cases any other applicant can be granted lease or license. It thereforee means that in spite of the fact that all the petitioners having been founded to be equal in the light of the provisions of the Act and the. Rules and preference has to be given to the applicant who has filed his application earlier, but in the opinion of the State Government some other person for special reasons should be granted the lease or license then the State Government has to record special reasons and also has to obtain previous permission of the Central Government for departing from the legislative direction given in sub-section (2).'

Again,--

'WEare, thereforee, satisfied that section 11(1) and (2) do not direct that the preference has to be given without considering the other applications and evaluating them under the provisions of the Act and the Rules. They confer preferential rights on certain applicants only when they Along with the others are found as a result of evaluation to be all equal in all other respects. They are not granted lease or license automatically even without considering their applications, leave aside the other applications. And if for special reasons to be recorded, the State Government find that in spite of preferential rights of a person under sub-section (2), some other applicant should be granted lease or license, it can do so but with the prior approval of the Central Government.'

(20) According to the learned Judges even the preferential right given to a prospecting licensee to get a mining lease under sub-section (1) of section 11 is subject to his being of equal merit with the other applicants and this view goes even beyond the argument in the case before us. So far as the view of the Division Bench of the Andhra Pradesh High Court with respect to sub-section (2) of section 11 is concerned, the argument on behalf of the petitioner-company is that if this is the proper construction of this sub-section, then it will not be ultra vires. We do not understand the validity of this concession. The bald question is whether preference on the basis of priority in time in making the application has a nexus with the object of the Act. If there is no such nexus, equality of merit will not create such nexus. Conversely, if there is such nexus, comparative merit or equality of merit will be irrelevant. We thereforee, regret our inability to accept the view either of the learned Single Judge or of the Division Bench of the Andhra Pradesh High Court.

(21) The preferential right given to a prospecting licensee under subsection (t) of section 11 is in the nature of a reward for his having India & ORS. invested in exploring, locating or proving mineral deposits. In a matter like the grant of prospecting licenses or mining leases, it is impossible to arrive at a mathemitical orthe oratical finding or conclusion of equality of the various applicants. Experience special knowledge, financial resources, the nature and: quality of the technical staff employed or to be employed and other matters in the case of various applicants will generally be different and even unequal.

(22) One of the objects of the Act being the development of the mineral wealth of the country, all that the Act requires is that the applicant should be eligible for such grant according to the conditions imposed by the Act and the Rules. The equality contemplated is in the eligibility and not in the merit of each applicant. It is, thereforee, not necessary that each applicant must, in the first instance, be of the same merit as others before he can claim the preferential rights given by the various sub-sections.

(23) We do not see why a person who has invested in carrying out prospecting operations and is eligible or, in other words, fit to develop the minss should prove himself to be of the same comparative merit amongst all the applicants to be entitled to the preferential right under sub-section (1) of section 11. Determination of equality of merit will Isad to impractical results and entail delay thereby defeating the object of development of mines. What the Government is concerned with is onlythe question whether the applicant qualifies and is eligible according to the provisions of the Act and the Rules for the grant and it is only when several qualified and eligible persons, though not equally qualified, apply that the question of granting a preferential right arises. The section provides a rough and ready method for the early disposal of applications for licenses or leases so that mineral development may be undertaken as expeditiously as possible. We thereforee, d.o not find any justification for the view that even forthe preferential right conferred by sub-section (1), equality of merit is a pre-requisite.

(24) Then we come to sub-section (2). The nexus theory with reference to Article 14 is a well accepted theory. The question, thereforee, is whether priority of time in making the application can constitutionally be said to have any relation to the object sought to be achieved which is the interest of mineral development. In this context it is to be remembered that a prospecting license or a mining lease is a grant by the Government for the purpose of mineral development in its lands. The Act and the Rules have prescribed conditions of eligibility. If a person fulfills these conditions, he can be said to be capable or fit to undertake mineral development. In the very nature of things equality of merit is difficult if not impossible of determination in the case of various applicants because licenses and leases are granted in respect of lands which are spread throughout the length and breadth of this country. A sole applicant has only to show his eligibility according to the Act and the Rules for the grant of a prospecting license or mining lease. In a case where there are several applicants who are all eligible in the aforesaid sense for such grant, the interests of mineral development require a speedy disposal of the applications so that development can take place without loss of time. For determining as expeditiously as possible, the person to whom a grant is to be made preferential right have been given. The principle first come first served is not unknown. We do not see why the Government or the legislature cannot say that it will make a grant in favor of a person who comes to it first if he is othrwise eligible. Coming first in the field may show greater keenness for the work to be undertaken and in that way be taken to be a qualification for the object to be achieved, i.e., mineral development. From that point of view a preferential right based on priority of time in making the application cannot be said to suffer from the absence of intelligible differentia having no nexus with the object of the Act.

(25) Even with regard to sub-section (2), determination of equality of merit is difficult if not impossible for the reasons stated. Even so, a difficulty may arise where by reason of the fact that all the applications are received on the same day, the preferential right under subsection (2) cannot be determined. This situation is contemplated by the proviso to sub-section (2) and in this situation, the matters specified in sub-section (3) relating to special knowledge, financial resources and nature and quality of the technical staff fall for determination. These are all matters which relate to comparative merit and not equality of merit. If the view of the Division Bench of the Andhra Pradesh High Court is accepted, sub-section (3) would be rendered redundent and otiose. We .therefore, conclude that priority in time has a nexus with the object of the Act, namely, interest of mineral development and the provisions of this section are not vocative of Article 14 of the Constitution.

(26) The preferential right given by sub-section (2) is a weak right because not withstanding these provisions priority in time in making the India & ORS. application will be defeated if there are special reasons and the previous approval of the Central Government as required by sub-section (4). It is for the applicant who is more fit to advance the special reasons and if such special reasons are found to exist, the preferential right to another applicant by reason of priority in time in making the application will be defeated.

(27) Section 11 to our mind contains a practical solution to the problem as to whom to grant a prospecting license or mining lease and so long as the applicants are fit-even though not equally fit-the grant of preferential rights cannot be held to be vocative of Article 14 of the Constitution.

(28) The second point urged on behalf of the petitioner-company is that although it never held a prospecting license as such in respect of the land in question, it had carried on mining operations on this land for almost a hundred years under its lease and this necessarily entailed the undertaking of prospecting operations for the purpose of exploring locating or proving mineral deposits and, thereforee, the petitioner- company should be treated as the holder of a prospecting license giving to it a preferential right for obtaining a mining lease in respect of the said land as provided by sub-section (1) of section 11 of the said Act. Another point urged on behalf of the petitioner-company is that having carried on mining operations for almost a century upon the land in question, as stated earlier, and having done a lot not only for the said land but also for the neighbouring area and for other reasons, there were special reasons within the meaning of sub-section (4) of section 11 of the said Act to entitle it to a grant of a mining lease in preference to respondent No. 3 even though the latter, having made the application for mining lease earlier by eight days, was entitled to a preferential right under sub-section (2) of section 11 of the said Act. The facts pertaining to both these points were admittedly given by the petitioner-company in their revision petitions to the Central Government and it had invited the Central Government to determine these questions on their merits but the Central Government refused to do so as it merely applied the provisions of sub-section (2) of section 11 of the said Act. With regard to the second point stated, the case of the respondents is that in saying that respondent No. 3 'has the competence and is otherwise not disqualified' and in rejecting the revision application of the petitioner-company, the Central Government determined the claim of the petitioner-company under sub-sections (1) and (4) of section 11 of the said Act on merits. We do not agree with this contention of the respondents as it appears to us that the Central Government merely applied the provisions of sub-section (2) of section 11 of the said Act without considering the case of the petitioner-company under sub-sections (1) and (4) of this section. The petitioner-company invited us to decide these two questions in this writ petition but we are of the opinion that inasmuch as we are not sitting as a Court of appeal against the decision of the Central Government, we should not determine these two questions.

(29) Even though sub-section -(4) uses the word 'may', the power of the State Government is a statutory power. If such power is not exercised by the State Government, it can be and has to be exercised by the Central Government while hearing the revision. The petitioner- company invited the State Government as also the Central Government to determine its rights under sub-section (1) and sub-section (4) of section 11. No findings have been given on these questions either by the State Government or by the Central Government. In L. Hirdar Narain v. Income-tax Officer, Bareilly : [1970]78ITR26(SC) it was observed:-

'IFa statute invests a public officer with authority to do an act in a specified set of circumstances, it is imperative upon him to exercise his authority in a manner appropriate to the case when aparty interested and having a right to apply moves in that behalf and circumstances for exercise of authority are shown to exist. Even if the words used in the statute are prima facie enabling, the Courts will readily infer a duty to exercise power which is invested in aid of enforcement of a right-public or private-of a citizen.'

(30) The Central Government had, thereforee, a duty to determine the rights of the petitioner-company claimed under sub-sections (1) and (4) of section 11 of the said Act. It failed to do so. The impugned order, thereforee, has to be set aside and the rights of the petitioner-company under sub-sections (1) and (4) of section 11 of the said Act have to be determined by the Central Government.

(31) We, thereforee, order the issue of a writ of Certiorari to quash the impugned order dated April 19, 1972 of the Central Government and further order the issue of a Mandamus to the Central Government India & ORS. to hear the matter again and determine whether the petitioner-company is justified in claiming rights under sub-sections (1) and (4) of section 11 of the said Act. The petitioner-company shall have its costs. Counsel's fee Rs. 300.00.


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