AI Insights
The case revolves around the premature cancellation of a mining lease granted to I D I O Construction and Industry (India) Ltd by the State Government, which was later affirmed by the Central Government. The lease was initially granted for mining major minerals but involved the incidental mining of minor minerals (low grade quartzite). The petitioner argued that the State was required to grant permission to deal with these minor minerals as per the statutory provisions and that the cancellation of the lease was unjustified. The State contended that the petitioner was violating the lease conditions by dealing with minor minerals without permission, which should be settled by auction. The court examined the statutory provisions, the actions taken by both the State and Central Governments, and the principles of natural justice to arrive at its decision.
Appeal Details
Counselvise Citation
[2010] 140 COUNSELVISE.COM (IT) 821092 (HC-PATNA)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Others
Pronouncement Date
25-03-2010
Assessment Year
misc
Judgement Text
"IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No 16998 of 2008 I D I O Construction and Industry (India) Ltd, its registered office at Shristhi, 5, D/21, North Shri Krishnapuri, Boring Road, Patna – 800 013 through Krishna Nand Singh, CEO –cum- Director, resident Of Mohalla – Sri Krishna Nagar, Plot No – 176, Road No – 23, P S – Buddha Colony, District and in the town of Patna - Petitioner Versus 1 The Union of India through the Joint Secretary, Department of Mines, Government of India, Shastri Bhawan, New Delhi 2 The Joint Secretary & Legal Advisor, Department of Mines, Government of India, Shastri Bhawan, New Delhi 3 The State of Bihar through Secretary, Mines and Minerals Department, Government of Bihar, Patna 4 The Additional Secretary, Mines and Geology, Government of Bihar, Patna 5 The District Magistrate, Lakhisarai 6 The Mineral Development District Officer, Lakhisarai - Respondents *** For the petitioner : M/s Ashwani Kr Singh, Sr Advocate & Shankar Dayal Singh, Pankaj Kr Singh, Advocates For the Central Government : Mr Sandeep Kumar For the Mines Department : Mr VMK Sinha,Spl PP (Mines) *** 8 25.03.2010 By the present writ application, the petitioner has sought the quashing of the order of the State Government dated 28.01.2008 by which the State Government has prematurely cancelled the mining lease of the petitioner which order has not been interfered with by the Central Government which has dismissed the petitioner’s revision by order dated 16.09.2008. Petitioner’s mining lease for mining major minerals for a period of 2 30 years granted on 28.03.2001 has, thus, been prematurely cancelled. As pleadings are complete, with consent of parties, the writ petition has been taken up for final disposal at this stage itself. The facts are not in dispute. On 08.03.1994, petitioner- Company applied for mining lease for mining quartz and quartzite (silica stone) at Mouza – Bishunpur, District – Lakhisarai in respect of an area of about 48.92 acres. The District Magistrate – cum- Collector considered the application and after due enquiry recommended the same to the State. Because of certain reasons, which are not relevant, ultimately State, after undue delay, communicated its approval for grant of mining lease to the petitioner on 19.10.2000 having already got the approval from the State Cabinet in this regard. It asked the petitioner to submit a detailed mining plan from Indian Bureau of Mines (IBM) which was submitted to the State by the petitioner. IBM, in its detailed report in respect of the petitioner, clearly stated that out of the mineral, the mining for which is sought for, almost 40% would be rejects being low grade. This is noticed because of the importance of this low grade mineral in respect of this litigation. Quartz and quartzite (silica stone), if found to be of low grade, is used for building activities, road construction and such usage and it is this usage that makes this mineral a minor mineral but if it is of high grade then, not being a minor mineral in terms of the Mines and Mineral (Development and Regulation) Act 1957, it is a major 3 mineral for which the mining lease was sought for by the petitioner. The mineral remains quarts and quartzite (silica stone) but depending upon the end user, it changes its character from minor mineral to major mineral. On 30.05.2001, State granted approval for mining lease of 30 years to the petitioner (Annexure-5). This approval was subject to various terms and conditions as mentioned in the said approval letter. Clause 14 (b) thereof is of some significance wherein it is clearly contemplated that in course of mining, if low grade mineral is obtained, then unless the lessee gives a quality analysis report within 60 days in support of his claim of low grade mineral, it would be deemed that the despatches were of the high grade mineral. This clause clearly presupposes that while winning activity is carried out, there are definite chances of mining low grade mineral as well. Consequent to the approval aforesaid, on 28.08.2001, a formal lease document was executed and registered as between the petitioner and the State Government who were represented by the Collector, Lakhisarai (Annexure-6). Petitioner’s case is that when mining activity was started, as also contemplated by the IBM which was the basis for grant of lease to the petitioner, initially substantial quantity of the mineral won was low grade quartzite which was fit for only building and such usage. Petitioner got the same immediately tested and test report dated 29.04.2004 and 06.10.2004 were 4 obtained and submitted to the Collector. As the petitioner- Company was winning mineral not specified in its lease in terms of Rule 27 (1) (b) of the Mineral Concession Rules 1960, it informed the Collector with the reports aforesaid and sought permission to despatch the same. This has now reference to Rule 27 (1) (o) of the said Rules which is quoted hereunder : “27. Conditions.-(1) Every mining lease shall be subject to the following conditions:- … … … … (o) in respect of any mineral which in relation to its use for certain purposes is classified as a major mineral and in relation to its use for other purposes as a minor mineral, the lessee who holds a lease for extraction of such mineral under these rules whether or not it is specified as a major mineral in the lease deed, shall not use or sell the mineral or deal with it in whatsoever manner or knowingly allow any one to use or sell the mineral or deal with it in whatsoever manner as a minor mineral: Provided that if on an application made to it in this behalf by the lessee, the State Government is satisfied that having regard to the inferior quality of such mineral, it cannot be used for any of the purposes by reason of which use it can be called a major mineral or that there is no market for such mineral as a major mineral, the State Government may by order permit the lessee to dispose of the mineral in such quantity and in such manner as may be specified therein as a minor mineral;” From the reading of the Rule aforesaid being Rule 27 (1) (o), it would be seen that this Rule statutorily recognizes the eventuality where while winning a major mineral, a lessee obtains minor minerals then he has to move the State Government who may by order permit the lessee to dispose of the mineral as minor 5 mineral. Thus seen, the petitioner had rightly approached the authorities for grant of permission to deal with minor mineral which was known could be there even before as per report of IBM at the very beginning and was so contemplated under the approval granted by the State and the lease as executed between the parties and as also statutorily provided, as noted above. Petitioner has annexed copies of office notings of the State Government in this regard pursuant to recommendation of the Collector where the matter, having been considered right up to the level of Secretary, Department of Mines and Geology, Government of Bihar who approved the grant of permission to the petitioner to despatch minor minerals, but those notings would show that the decision having been taken by the Secretary of the Department, as the State was put under President’s Rule, the matter did not proceed further and became dormant. No formal communication of the permission was made. However, it is not in dispute that petitioner then obtained mineral despatch challans from the local authorities and started despatching the said low grade mineral clearly showing it to be so. While petitioner was waiting for a clarification in this regard, it had stopped further mining. Then the Assistant Mining Officer noticed petitioner by its letter dated 14.10.2006 as to why it had stopped mining and why because of that, punitive action be not taken against it. It is pursuant to that petitioner started despatches on the challans as aforesaid. On 09.02.2007 even the District Magistrate –cum- 6 Collector, Lakhisarai certified that petitioner was carrying on mining activities. At this stage, two events occurred. One, allegedly some local politicians started interfering and demanded allegedly rangdari and started creating trouble for the petitioner which led to criminal cases being filed on behalf of petitioner against local politicians. This was followed by a notice dated 14.06.2007 (Annexure-12) by the Mining Development Officer, Jamui wherein it was stated that petitioner had obtained mining lease for major mineral but in contravention thereof, an enquiry committee had found that petitioner was despatching minor mineral, as such, petitioner was asked to stop such despatches and the transport challans issued in that regard were cancelled. The petitioner, being aggrieved by the said order stopping despatches and the mining activity, filed a writ application before this Court being CWJC No 7374 of 2007 asserting his right to despatch minor mineral which were obtained in course of winning major mineral. This writ application was heard at length and by judgment and order dated 05.10.2007 (Annexure-17), the writ application was dismissed. This Court clearly held that even though in course of winning major mineral, if the petitioner won minor mineral, it could not deal with it without permission of the State Government as envisaged under Rule 27 (1) of the Rules. This Court rejected the argument of the Government that as the Government policy with regard to minor mineral was to settle it by auction, permission could not be granted to the petitioner who, in 7 view of the State’s stand, ought to obtain the said permission in course of public auction. This Court directed that in terms of Rule 27 (1) (o), the State Government has to decide the matter but till such a decision is taken, the petitioner cannot despatch the minor mineral. This Court also noticed that the royalty and other dues payable to the State for the minor mineral was much higher than that of the major mineral. This Court also noticed that essentially what was being mined was quartz and quartzite but what was being won being low grade made it a minor mineral to begin with. Thus, the necessity of Government permission. This Court also noticed that in the past, there were recommendations already made for grant of permission which had been accepted by the Government but for reasons as indicated above, formal communication was never made to the petitioner. Immediately after the writ petition was dismissed as aforesaid, on 12.10.2007, petitioner wrote to the Government for grant of requisite permission pointing out the aforesaid facts but on the same day that is 12.10.2007 (Annexure-19), the State Government again reiterated that minor mineral lease is to be settled by auction and, as such, petitioner should stop mining activity. As it had been found in past, petitioner was despatching minor mineral why action should not be taken against it. Petitioner responded stating that it was ready to pay royalty and other charges in respect of despatches made and, explaining the situation, sought permission once again. Rather than considering 8 the matter afresh, as was directed by this Court in the writ proceedings as noted above, by the impugned order dated 28.01.2008, the State Government, holding that the petitioner had violated the conditions of lease in purported exercise of powers under Rule 27 (5), cancelled the lease prematurely. Petitioner preferred revision application before the Central Government (Mines Tribunal) which held that the State Government had rightly held petitioner responsible for violating Rule 27 (1) (o) and, as such, dismissed petitioner’s revision, thus, affirming the action of the State in cancelling the lease prematurely. The Central Government also held that the petitioner was given adequate opportunity of being heard in this matter. Thus, the petitioner is before this Court assailing the orders of the State Government and the Central Government, as aforesaid. A reference to the order of the State Government dated 28.01.2008 by which the long term mining lease of the petitioner was cancelled would show that the Government considered that the writ petition filed by the petitioner against order to stop despatches which was dismissed by this Court apparently vindicated the stand of the State. It held that petitioner had been violating Rule 27 (1) (o) by using challans meant for major minerals but despatching minor minerals. It further held that permission to mine and despatch minor mineral could not be granted as per the amended Rules amending right with regard to minor mineral which could only be settled by auction. While 9 cancelling the lease, a reference was made to notice having been issued under Rule 27 (5). This order of the State Government, as stated above, was affirmed by the Central Government in revision by its order dated 16.09.2008 holding that petitioner had been given adequate notice and had violated Rule 27 (1) (o) of the Rules and, therefore, cancellation of lease was justified. It is the correctness of these stands that is in question. On behalf of petitioner, Shri Ashwani Kumar Singh, learned Senior Counsel submitted firstly that when even before the lease was granted as per the expert report of IBM, it was clearly indicated that there would be a chance of getting inferior quality of mineral (minor mineral) to the extent of about 40% of the production then when such an eventuality took place, in terms of Rule 27 (1) (o), Government was bound to grant permission to the petitioner to deal with minor minerals so produced. The use of expression “may by order permit the lessee” as used in proviso to Rule 27 (1) (o), as quoted above, casts a duty to exercise the power which is invested in aid of enforcement of a right meaning thereby that it became imperative on the Government to grant such a permission. Consequently, failure to grant permission was bad as a corollary to this, it is submitted, that the provision of the Rules for settlement of minor minerals by public auction would not apply because no lease was being sought for mining minor minerals which were being obtained in course of exploiting lease for major mineral which aspect of the matter had already been 10 considered between the parties in the earlier writ petition being CWJC No 7374 of 2007 disposed of by this Court on 05.10.2007. The second submission was that in fact there was no notice as contemplated under Rule 27 (5) much less to remedy any breach failing which cancellation could be resorted to and in absence of such a notice, there could be no cancellation. Lastly, it was urged that the breaches complained, if any, the petitioner was ready to remedy and under those circumstances, the lease could not be cancelled without grant of such opportunity in view of the provisions of Rule 27 (5) of the Rules. State, on the other hand, urged that as petitioner was mining minor mineral and despatching the same without permission which permission could not be granted as minor mineral was to be settled by auction, petitioner was avoiding to pay royalty etc on minor mineral and, thus, the lease was rightly cancelled. It is further submitted that the show cause notice issued immediately after disposal of the earlier writ petition on 12.10.2007 was actually a notice under Rule 27 (5) which rightly led to cancellation of the lease. It is these rival contentions which are being resolved in the present litigation. Having considered the matter, after hearing the parties in detail, in my view, the writ petition must succeed. For proper consideration, it is relevant to notice Rule 27 (1) (o) in extenso which is quoted above and Rule 27 (5) of the Mineral Concession 11 Rules, 1960 which is quoted hereunder: “27. Conditions.-(1) Every mining lease shall be subject to the following conditions:- … … … (5) If the lessee makes any default in the payment of royalty as required under section 9 or payment of dead rent as required under section 9A or commits a breach of any of the conditions specified in sub-rules (1), (2) and (3), Government shall give notice to the lessee requiring him to pay the royalty or dead rent or remedy the breach, as the case may be, within sixty days from the date of the receipt of the notice and if the royalty or dead rent is not paid or the breach is not remedied within the said period, the State Government may, without prejudice to any other proceedings that may be taken against him, determine the lease and forfeit the whole or part of the security deposit.]” The first thing to see is whether there is absolute and total discretion on the State Government with regard to grant of permission to permit the lessee to dispose of minor mineral which are obtained while mining for a major mineral. Facts of the present case establish that right from the beginning, all parties were fully aware that though the lease was being granted for a major mineral, in course of mining the same, substantial quantity of minor mineral would be obtained. At the cost of repetition, it may be pointed out that though the mineral mined remained quartz and quartzite, if it was of low grade, its user being restricted to uses in building construction and road construction activities, it became minor mineral and if it was of a higher grade, it became major mineral. Accordingly, the IBM also reported. Based on 12 which report, the lease was granted and the lease also contemplated such an eventuality. This eventuality is also statutorily recognized if one appreciates the provision of Rule 27 (1) (o) of the Rules where this contingency is specifically dealt with. Thus, it is no unforeseen new situation that developed. Keeping that in mind, one has to read and interpret the provisions of Rule 27 (1) (o). It is under this contingency that the statute clearly provides in the proviso to Rule 27 (1) (o) that if the State Government is satisfied that having regard to the inferior quality of such mineral, it cannot be used for any purpose by reason of which use it could be called a major mineral or does not mark as a major mineral, the State Government may by order permit the lessee to dispose of the mineral in such quantity and in such manner as may be specified therein as a minor mineral. State’s submission is that this is purely discretionary. State may or may not grant permission. The lease of minor mineral has to be settled by auction. As such, state was not obliged to grant permission. In my view, contention of the petitioner that mere use of expression “may” does not leave it to the absolute discretion of the State to grant permission or not is correct. Here a duty is cast and, as such, Court should hold that grant of permission is imperative if the conditions so justify leaving little or no discretion in the matter. This is correct. In this connection, I may refer to the decision of the Apex Court in the case of L Hirday Narain –Versus- Income Tax Officer, Bareilly since report in AIR 1971 Supreme Court 13 33. That was a case under Income Tax Act 1922 wherein Section 35 conferred a power on the Income Tax Officer to rectify a mistake apparent on the records. The officer took the stand that the statute provides that he may rectify a mistake apparent on the records and was not compelled to do so. The Apex Court held, referring to the English decision in the case of Julius –Versus- Bishop of Oxford (1880) 5 AC 214 that where a person is empowered to do certain act based on some conditions for the benefit of a person then the power is coupled with a duty. If a statute invest 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 a party interested can have 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 Court will readily infer a duty to exercise power which is invested in aid of enforcement of a right – public or private – of a citizen. Thus seen, the State was under obligation to grant permission. I may notice here that when petitioner applied for permission to deal and despatch minor minerals, it was duly considered and recommended by the Collector of the district to the State Government. The State Government considered the matter in details and the Secretary of the Department of Mines and Geology, Government of Bihar also clearly opined that permission had to be accorded but the State having gone under President’s 14 Rule, the matter went into hibernation instead of formal order of permission being issued. It was never rejected. Petitioner started despatching minor minerals using challans issued to him as a lessee for major mineral but it is not in dispute that in these challans, he clearly mentioned that the despatches were of minor mineral (low grade quartz/quartzite). Coming to the question of the Rules providing for settlement of minor mineral lease by auction, the petitioner is again correct that that issue stood concluded inter party in the earlier writ application filed by the petitioner. This Court had clearly rejected the argument of the Advocate General in this regard. It may be pointed out that petitioner already had lease for mining major mineral. It was not seeking any lease or permission to mine minor minerals. Minor minerals were being won in course of mining major mineral as was contemplated and anticipated right from beginning. Therefore, there was no question of participating in any public auction for obtaining lease for minor mineral. It was only seeking right to despatch and deal with minor mineral won while mining for major mineral as was specifically contemplated and provided for in Rule 27 (1) (o). This is substantially the ground on which the lease was cancelled and is found to be wrong. Now we come to the next argument that there was no notice as contemplated under Rule 27 (5) of the Rules. Petitioner is once again correct. A reference to Rule 27 (5), as quoted above, 15 would show that it gives a right to the State Government to determine the lease if, upon notice to the lessee to remedy the breach, no effective steps are taken by the lessee in that regard. Thus, the action of determining the lease has to be preceded by a notice to make good or remedy the breach. Keeping this in mind, if one refers to the show cause notice dated 12.10.2007, it would be seen that it is not a notice as contemplated under Rule 27 (5) of the Rules. Nowhere in the notice has the petitioner been asked to remedy any breach failing which action to cancel the lease is contemplated. Thus, in my view, the cancellation of the lease is without notice which is a condition precedent and contemplated within Rule 27 (5) and that being so, the petitioner is right that even otherwise, the cancellation is in violation of Rules 27 (5) of the Rules and in violation of principles of natural justice. Here, I may notice that while passing the impugned order of cancellation of the lease, the State Government mentions that the show cause notice was a notice in terms of Rule 27 (5) which is probably because it subsequently realised that the notice was mandatory but had not been issued but as action was contemplated to be taken, the default was being covered up as petitioner had already filed his show cause. Both the State Government and the Central Government, thus, fell in error in holding that adequate opportunity was granted before action was taken for cancellation of the lease. Here, I may refer to the 16 decision of the Supreme Court in S L Kapoor –Versus- Jagmohan & Others, AIR 1981 Supreme Court 136 wherein in paragraph-16 of the reports, it has been clearly held that the requirement of natural justice are met only if opportunity to represent is given in view of proposed action. The demands of natural justice are not met even if the very person proceeded against has furnished the information on which the action is based, if it is furnished in a casual way or for some other purpose. The person proceeded against must know that he is being required to meet the allegation which might lead to a certain action being taken against him. That is not the case here and, thus, there is complete violation of principles of natural justice as well and violation of the provisions of Rule 27 (5) and, thus, the order of cancellation of lease, as done by the State Government and as affirmed by the Central Government, cannot be sustained and are set aside accordingly. Here, I may also refer to the two decisions both of which were dealing with premature cancellation of mining lease being in the case of State of Haryana –Versus- Ram Kishan & Others since reported in AIR 1988 Supreme Court 1301 which decision has been followed in the case of Assam Sillimanite Ltd & Another –Versus- Union of India & Others since reported in AIR 1990 Supreme Court 1417 wherein it has been clearly held that before mining lease is prematurely cancelled, observance of principles of natural justice is mandatory. However, before parting, I must notice that petitioner’s 17 lease is essentially for mining major mineral. It cannot, under the garb of this lease, mine, despatch and deal with only minor minerals. Winning minor mineral is only incidental and as contemplated in the report of the IBM itself, it would be about 40% of the total produce. Thus seen, petitioner should be able to win about 60% major mineral. If consistently petitioner is only winning minor mineral, then it would be a case where the State Government, on facts being established, take appropriate action in accordance with law. Thus, in view of the aforesaid, the writ application is allowed. The impugned orders of the State Government, as affirmed by the Central Government prematurely cancelling the mining lease, are set aside. M.E.H./ (Navaniti Prasad Singh) "
Other Referred Cases
L Hirday Narain vs Income Tax Officer, Bareilly, Julius vs Bishop of Oxford, State of Haryana vs Ram Kishan & Others, Assam Sillimanite Ltd & Another vs Union of India & Others, S L Kapoor vs Jagmohan & Others
Laws Referred To
Mines and Mineral (Development and Regulation) Act 1957, Mineral Concession Rules 1960
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