Rajesh Sadanand Patil, Abhijeet ... vs The Additional Collector, The ...
2003 Latest Caselaw 199 Bom

JUDGMENT

C.K. Thakker, C.J.

1. Rule, Smt. J.S. Pawar, Additional Government Pleader, Mr. R.M. Patne, Mr. C.R. Sonawane, and Mr. P.M. Patil, Assistant Government Pleaders, appear and waive service of notice of Rule on behalf of Respondents. In the facts and circumstances, all the petitions were taken for final hearing.

2. In all these petitions, common questions of fact and law have been involved. It is, therefore, appropriate to decide all of them by a common judgment.

3. In the present group of petitions, orders passed by the respondents cancelling all contracts and leases for extraction of sand have been challenged, inter alia, on the grounds that the orders are arbitrary, unreasonable and violative of fundamental rights of the petitioners.

4. To appreciate the controversy raised in the petitions, few relevant facts in the first petition being Writ Petition No. 7446 of 2002 may be stated.

5. According to the petitioner, an auction was held for extraction of sand at the spot of Mouje-Tanshi. The petitioner was the highest bidder. His bid was, therefore, accepted. Before the petitioner was put in possession of the said spot, villagers raised certain objections which necessitated the petitioner to request the respondents for alternative spot. The request was granted and an alternate spot was allotted to the petitioner at Mouje-Malthal, Tal. Daund, Dist. Pune. On 3rd August, 2001, the petitioner received a letter from respondent No. 2, Tahsildar, Daund, directing the petitioner to stop extraction work at Mouje-Malthan. As the petitioner was in lawful and legal possession of the spot and was entitled to extract sand and yet was restrained from extracting sand, he instituted Writ Petition No. 3804 of 2001 in this Court.

6. On behalf of respondents, an affidavit was filed stating therein that the State Government had put a ban for lifting of sand and hence a consequential letter was issued by respondent No. 2. On November 8, 2001, this Court disposed of the petition by directing respondents to grant necessary extension to the petitioner so that he could proceed with the extraction of sand in accordance with the contract entered into between the parties. Accordingly, the petitioner was put in possession of the said spot at Mouje-Malthan on December 15, 2001. It was also the case of the petitioner that he could not immediately extract sand, since one Ganesh Devkate started illegal extraction of sand from the spot which was allotted to the petitioner. It appears that proceedings were initiated against Devkate, he was found extracting sand illegally and was ordered to pay fine of more than Rs. 25,00,000/-. The petitioner in the circumstances had again approached this Court by filing Writ Petition No. 2786 of 2002, seeking necessary direction to respondents to grant extension to the petitioner for extracting sand.

7. In an affidavit on behalf of the respondents, it was admitted that Mr. Devkate had illegally extracted sand and the petitioner could not get the benefit of the contract which was awarded. On May 2, 2002, this Court disposed of the writ petition directing the respondents to put the petitioner in possession of the spot at Mouje-Malthan to extract sand for the remaining period of eight months. Even thereafter the petitioner was not put in possession of the spot, contempt proceedings were initiated and thereafter the order of this Court was complied with.

8. The petitioner has stated that on 21st December, 2002, he received an order dated 17th December, 2002, passed by respondent No. 2. By the said order, he was asked to stop extraction work from 24th December, 2002. No reason and/or ground whatsoever was stated in the said order as to why the petitioner was asked to stop work. No notice was issued and no opportunity of hearing was afforded. According to the petitioner, the action was taken on the basis of a circular issued by the State Government on November 20, 2002. When the petitioner approached the Additional Collector, Pune, respondent No. 1 herein, and complained that he was put in possession of the spot pursuant to an order passed by this Court and hence he could not be stopped from extracting sand, he was shown a copy of the circular dated November 21, 2002. By the said circular, the Government had decided to discontinue extraction of sand from river beds. According to the petitioner, the action taken by the respondents was illegal, unlawful and in violation of the order passed by this Court in earlier petitions and, hence liable to be quashed and set aside. He, therefore, approached this Court by filing the present petition.

9. In all other matters also, similar orders have been passed by the respondents and the contracts have been cancelled. All the petitioners hence, complain that the action taken by the state authorities cannot be sustained in the eye of law. Appropriate writ, direction and order is, therefore, sought that the respondents be restrained from implementing those orders by allowing the petitioners to permit them to extract sand.

10. Notices were issued pursuant to which the respondents appeared. We have heard the learned counsel for the parties.

11. The learned counsel for the petitioners raised several contentions. Even in individual cases, submissions were made as to how the action taken by the respondents was illegal, unlawful and improper. In view of the fact, however, that we are upholding the contention of the petitioners that no such action could have been taken by the State authorities of en masse cancellation of all subsisting contracts, it would not be necessary to deal with individual cases.

12. It was submitted by the petitioners that in accordance with the settled policy of the State Government, tenders were invited for extraction of sand at various places and river beds and highest bidders were awarded contracts. They were put in possession and permitted to extract sand. Such contracts, could not have been terminated en masse and the action must be held to be illegal and unlawful.

13. Once an action is taken by the State authorities pursuant to tender notices, it was obligatory on the respondents to allow the petitioners to extract sand. Without there being anything against the petitioners, they cannot be restrained from extracting sand.

14. Even if it is open to the respondents to take a policy decision, such a decision can be implemented and made applicable in future in respect of new leases which would be granted after such decision. No retrospective effect can be given by interfering with the rights accrued in favour of the petitioner and such an action must be held to be arbitrary and unreasonable.

15. No show cause notice was issued to the petitioners nor an explanation sought nor opportunity of hearing was afforded and leases were cancelled. The impugned action is thus violative of principles of natural justice and fair play.

16. In pursuance of an agreement entered into between the parties, the petitioners have acted to their detriment, inasmuch as relying on the terms and conditions of the contracts, they had invested huge amount. If at this stage the contracts would be terminated illegally, serious prejudice would be caused to them. No such action can be taken by the State as it would be inconsistent with the doctrine of promissory estoppel. It would also be contrary to the principle of legitimate expectations as the petitioners always anticipated and proceeded on the footing that they would be allowed to extract sand at lest for the period for which the contracts were awarded.

17. Apart from the fact that no such en masse cancellation could have been ordered, the circular does not provide for cancellation of existing and subsisting leases. It merely reflects the Government policy and a new policy sought to be framed and to be implemented. The action was taken with a view to revise rates of royalty. It did not authorise the officers of the State Government to ignore legal and legitimate claims of the petitioners before issuance of such circular.

18. The letter dated November 20, 2002 was ex facie bad in law as it stated that the Government had decided to discontinue extraction of sand from river beds. No such decision was taken by the State Government. The letter dated November 20, 2002 was thus illegal and cannot be enforced.

19. An affidavit in reply is filed by the District Mining Officer, Collectorate, Pune, taking various contentions. A preliminary objection was raised in the counter that an alternate remedy is available to the petitioner of filing suits, and writ petitions are not maintainable. Reliance was placed on several judgments, including a judgment of this Court in Writ Petition No. 6900 of 2002 decided by us on January 6, 2003. Five Star Sand Dredging Co. v. State of Maharashtra and Ors..

20. In paragraph 3, the action taken by the Government was sought to be supported on merits. The said paragraph is relevant and may be quoted in extenso.

"3. At the outset, I say and submit that be way of uniform policy decision taken by the State Government vide Government Resolution dated 21.11.2002, has called of all the permissions granted for excavation of sand. I further say and submit that the State Government by way of uniform policy made applicable to all the sand ghats throughout the State of Maharashtra, has decided to cancel all the contracts awarded for excavation of sand for the year 2002-2003. I say that the State Government in this regard received various representations from public representatives as well as local bodies throughout the State of Maharashtra bringing to the notice of the State Government, the negative effects, due to excessive excavation of sand on the ground water level as well as ecology and environment. It was further noticed by the State Government that in the present system there was a serious lacuna in awarding contracts for excavation of sand on annual contract basis as there was no control for the quantity of sand excavated by the Contractors. It was also further noticed to the State Government that in order to earn huge profit contractors excavate sand from the river beds rigorously without considering the negative effect that, it may have on the ground water level and ecology and environment. It was also noticed that the revenue which was earned by the State Government was meagre in comparison of huge profit earned by the contractors, therefore, taking into consideration all these factors, the State Government has decided to stop the practice of awarding annual contracts for excavation of sand for the year 2002-2003. I say that the State Government is now actively considering for formulating a new policy for excavation of sand keeping in mind of all the factors such as indiscriminate excavation of sand, adverse effect on ground water level, revenue earned by the State Government as well as ecology and environment. Is say that the decision taken by the State Government is in larger public interest."

21. It was also stated that the petitioners would be entitled to refund proportionate amount of bid. Since the rights and liabilities of the parties are governed by contracts and disputed questions of fact are involved, the petitioners may be asked to approach an appropriate court for getting their rights adjudicated. The State Government has taken a policy decision, keeping in mind larger public interest and to maintain balance of ecology and environment along with other facts, and no relief can be granted in favour of the petitioners.

22. So far as the preliminary objection is concerned, in our opinion, it is not well founded. No disputed questions of fact are involved in the petitions. It is an admitted fact that the agreements had been entered into between the parties, contracts were awarded and lease deeds were executed. It is also undisputed that the period of contract has not come to an end. Hence, the contention that disputed questions of fact have been involved which cannot be decided under Article 226 of the Constitution does not impress us and is hereby rejected.

23. Similarly, the contention that the petitioners have prayed for enforcement of rights and liabilities under the contract and hence petitions are not tenable is equally misconceived. It is true that normally for enforcement of contractual rights and liabilities, parties have to approach a Civil Court wherein evidence would be led and appropriate orders passed. The learned Additional Government Pleader, in this connection, placed reliance on M/s. Five Star Sand Dredging Co.

24. We may, however, state that the facts of that case were totally different. There, a contract was terminated by making a specific order to that effect which was individual in nature. Moreover, it was brought on record that auction for a period of one year was held on March 20, 2002. The bid of the petitioner was highest of Rs. 1,46,00,000/-. Immediately thereafter a public auction of "equivalent area" was held in the nearby vicinity on March 23, 2002 i.e. within 3-4 days and the highest offer which was received was of Rs. 5 crores. Even in that case (i.e. M/s. Five Star Sand Dredging Co.), after termination of contract, fresh auction was held for the remaining period which was less than four months (5th December, 2002 to 31st March, 2003) and the highest bid was for Rs. 2,45,01,000/-. There was thus substantial loss to the revenue and public exchequer had suffered considerably. In the light of those facts and circumstances, this Court held that it would not be appropriate to exercise extraordinary jurisdiction under Article 226 of the Constitution. It was, however, observed that it would be open to the party aggrieved to take appropriate proceedings in accordance with law in appropriate forum.

25. In the instant case, en masse action has been taken by the respondents against several leaseholders. The ratio raid down in M/s. Five Star Sand Dredging Co., in our opinion, therefore, would not apply. It is too late to contend now that in contractual matters, this Court has no jurisdiction to exercise powers under Article 226 of the Constitution of India. On the contrary, in several cases, the powers have been exercised by High Courts as well as by the Supreme Court. Reliance in this connection was rightly placed by the learned counsel for the petitioners on Shrilekha Vidyarthi v. State of U.P., ;

Dwarkadas Marfatia & Sons v. Board of Trustees of the Port of Bombay, and Mahabir Auto Stores v. India Oil Corporation, .

26. In Shrilekha Vidyarthi, by a circular, the State Government terminated appointment of all Government Counsel. When the validity of the Circular was questioned in a writ petition, it was contended by the respondents that at the most there was a breach of contract which could not be questioned in a writ jurisdiction.

27. Negating the contention, the Apex Court stated:

"Applicability of Article 14 to all executive actions of the State being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, can it be said that the State can thereafter cast off its personality and exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters can claim to be governed therein only by private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more? We have no hesitation in saying that the personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirements of Article 14 and contractual obligations are alien concepts, which cannot co-exist."

28. Referring to Dwarkadas Marfatia and Mahabir Auto Stores, the Court concluded:

"Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract Article 14 and permit judicial review, we have no hesitation in saying that the ultimate impact of all actions of the State or a public body being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters. We, therefore, find it difficult and unrealistic to exclude the State actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Article 14." (emphasis supplied)

29. In our opinion, the ratio laid down in Shrilekha Vidyarthi squarely applies to the case on hand and the petitioners cannot be sent home at the threshold. We, therefore, reject the contention of the State.

30. On merits, in our opinion, the action of the State Government cannot be held justified. The learned Additional Government Pleader, referred to certain decisions taken by the respondents. On October 28, 2002, the Revenue and Forest Department addressed a letter to all the Collectors that the Government had decided to stay further auctions of extraction of sand from river beds and in order to implement the decision, appropriate actions should be taken forthwith by the Collectors. They were asked to stay further auctions for extraction of sand from river beds in their respective Districts until further orders by the Government. It is thus clear that the decision which was taken by the Government and communicated to Collectors was not to hold further auctions for extraction of sand from river beds or to execute leases till further orders by the Government. Nothing has been said with regard to auctions which had already been held, bids accepted and contracts entered into between the parties.

31. Then comes Government circular dated November 2, 2002. This circular refers to Government letter of Revenue and Forest Department dated October 28, 2002 referred to hereinabove. In the circular it was stated that stay had been granted against auction of extraction of sand from river beds. It was also stated that the Government was contemplating new policy for extracting sand. Until such revised policy would be declared, Government had decided to issue permits for extraction of sand from river beds at revised rate of royalty. Such permission would be issued to actual user of sand. The circular provided action to be taken against the person who would make use of such sand extracted against the permit for commercial use or for business purpose.

32. The above circular thus clarified that till appropriate decision would be taken regarding new policy, permits could be issued at revised rates of royalty and that too for actual use of sand. It prohibited selling of sand for business or commercial purposes. It, however, did not state anything in respect of leases already granted pursuant to tender notices, holding of bids and acceptance of contract.

33. It is surprising that the Revenue and Forest Department issued a letter to all Collectors on a previous day, i.e. on November 20, 2002 informing all the Collectors that the Government had taken a decision to discontinue extraction of sand from river beds. All the Collectors were, therefore, directed to take action to issue notices to all auctioneers in river beds during the period 2002-2003 for cancellation of leases.

34. In our opinion, the learned counsel for the petitioners are right in contending that apart from the fact that the letter preceded the circular issued by the Government, the Government had never decided to cancel leases which had already been granted in favour of leaseholders. Nowhere it was stated in the Government circular that existing leaseholders would not be permitted to continue extraction of sand by curtailing the lease period. Nowhere it was mentioned that action should be taken to cancel such leases. The impugned orders of the Collectors, therefore, went beyond what was decided by the Government and on that ground also, the orders deserve to be quashed and set aside.

35. The matter, however, did not end there. It appears that a note was submitted by the Department of Mines and Minerals on the subject of "Minor Minerals" under Item No. 3: "Revision of Rates of Royalties on Minor Minerals" to be discussed by the cabinet. Certain decisions were taken by the Cabinet. The first decision related to revised rates of royalty on minor minerals. Secondly, it stated that such revised rates would be brought into force with effect from the date of their publication in Government Gazette. It was then stated that extraction of sand from river beds and auction thereof would be suspended. It was observed that "hereafter" till new policy would be formulated, extraction of sand shall be allowed on permit basis at the revised rates of royalty. However, such permit would be issued only to those persons using the sand.

36. Thus, from the above minutes of Cabinet also, it is clear that stay was granted against extraction of sand from river beds and auction was suspended till formulation of new policy. Extraction of sand would be allowed on permit basis and that too for personal use. There was no whisper about cancellation of subsisting and existing leases.

37. No doubt, in para 3 of the counter affidavit, which has been extracted in the earlier part of the judgment, the stand taken by the Government is that by Government Resolution dated November 21, 2002, all permissions granted for extraction of sand had been called off. As already observed hereinabove, no such decision was taken by the State Government in the circular dated November 21, 2002. It is further stated in the affidavit in reply that the State of Maharashtra had decided to cancel all the contracts awarded for extraction of sand for the year 2002-2003. With respect, no such decision was taken by the Government. It was also stated that the Government had received various representations from public representatives and local bodies throughout the State of Maharashtra bringing to the notice of the State Government negative effects due to excessive extraction of sand on the ground water level as well as ecology and environment.

38. We have perused and referred to the circular dated November 21, 2002 as also the minutes of the Cabinet. No mention whatsoever has been made in the minutes regarding representations/complaints of excessive extraction of sand, effect on ground water level, ecology or environment. Thus, it is in the affidavit in reply that this case has been put forward by the State Government which was neither reflected in the Minutes of the Cabinet nor in the circular. In the affidavit, it was asserted that it was noticed by the State Government that in the present system there was serous lacuna in awarding contracts for extraction of sand on annual contract basis as there was no control over the quantity of sand extracted by the contractors. In our opinion, an appropriate action can be taken by the respondents, if there is excess extraction of sand by individuals. On that ground, however, no en masse cancellation can be ordered. The affidavit further points out that it had been noticed by the State Government that in order to earn huge profit, contractors extract sand from river beds rigorously without considering the negative effect on the ground water level and ecology and environment. It was noticed that revenue earned by the State Government was meager in comparison to huge profit earned by the contractors. We may state that if there are such cases, the respondents can take appropriate action against erring individuals. Such actions may consist of cancellation of leases, imposition of fines and taking other appropriate civil/criminal actions permissible in law. It, however, cannot be made a ground for en masse cancellation of leases entered into between the parties after complying with requirements of law. As stated in the affidavit in reply, if the State Government is now actively considering formulation of new policy for extraction of sand keeping in mind relevant factors, such as, indiscriminate extraction of sand, adverse effect on ground water level, revenue earned by the State Government as compared to the income earned by the lessee, effect on ecology and environment, etc. it is open to the State Government to do so in larger public interest. The Court would not substitute its opinion for the opinion of the authority in such matters. The action of en masse cancellation of leases taken in the present group of matters, however, cannot be sustained and the same deserves to be quashed and set aside. In Onkarlal Bajaj v. Union of India, (2002) 9 Scale 501, the Supreme Court held that en masse cancellation of petrol dealerships, regardless of the merits of each individual case, was impermissible.

39. For the foregoing reasons, in our considered opinion, all the petitions deserve to be allowed by quashing and setting aside the actions taken by the State Government as also by the officers of the State Government cancelling subsisting and existing leases. The Respondents are directed to permit and allow the petitioners to extract sand as per the agreements arrived at and lease deeds executed for the remaining period. If, by interim orders or otherwise, the petitioners had continued to extract sand, the respondents will allow such extraction only for the remaining period of lease. If leases were terminated and no interim relief was granted, the respondents would ensure extraction of sand for the period for which such leases were executed by extending time. If there is any difficulty or practical problem at a particular place, it is open to the respondents to offer alternate spot to the petitioners(s). It is further clarified that our order will not come in the way of the respondents in taking individual actions and in passing appropriate orders in case of breach of terms and conditions of leases. If any such action is taken, it is open to the aggrieved party to approach appropriate authority/court including this Court. As and when such case will come up, it will be decided on its own merits.

40. In the result, all the petitions are allowed. An action of the respondents cancelling existing leases has been set aside. Rule is made absolute in all petitions. In the facts and circumstances, however, there shall be no order as to costs.

Certified copy expedited.