Bombay High Court
Ganesh Phadnavis Bhavan vs Union Of India on 19 December, 2011
Bench: S.A. Bobde, V.K. Tahilramani
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
APPELLATE SIDE
WRIT PETITION NO.468 OF 2011
M/s.Veet Rag Homes Private Limited )
a Private Company having its office at 267 )
Ganesh Phadnavis Bhavan, Near Trikoni Park, )
Dharampeth Nagpur 440 010. ) : Petitioner
V/s.
1. Union of India , ig )
Through Secretary, )
Ministry of Mines, )
Shastri Bhavan, Rajendra Prasad Marg, )
New Delhi. )
2. State of Maharashtra, )
Through the Secretary, )
Department of Industries, Mines, )
Government of Maharashtra, Mantralaya, )
Mumbai--400 032. )
3. M/s.Akash Universal (P) Ltd., )
Akash Marble House, Santacruz, )
Airport Side, Western Express Highway, )
Vile Parle (East), Mumbai. ) : Respondents
....
Dr.Virendra Tulzapurkar with Mr.Nikhil Sakhare and Ms Chandana
Salgaonkar for the petitioner.
Mr. Jaydeep Deo for respondent no.1.
Mr.Vijay Patil, Govt. Pleader with Mr.Prashant Dharandhale, Asstt. Govt.
Pleader for respondent no.2.
Ms P.K.Dhakephalkar, Senior Advocate, i/b. Mr.Anil Mishra for
respondent no.3.
...
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CORAM : S.A. BOBDE AND
SMT.V.K.TAHILRAMANI, JJ.
Date of Reserving ) : 24.11.2011.
the Judgement. )
Date of Pronouncing ) : 19.12.2011.
the Judgement. )
JUDGEMENT (Per S.A.Bobde,J.)
The petitioner has approached this Court for quashing and setting
aside the order dated 25.4.2008 of the Minister (Industries & Mining)
recommending grant of mining lease of bauxite ore under section 11(3) of
the Mines and Minerals (Development and Regulation) Act, 1957,
hereinafter referred to as the "Act", read with rule 34 of the Mineral
Concession Rules, 1960 and the order of the Mines Tribunal rejecting
their revision under section 30 of the Act thereby upholding the grant of
mining lease in favour of the respondent no.3.
2. The petitioner M/s.Veet Rag Homes Private Limited and the
respondent no.3 M/s.Akash Universal (P) Limited alongwith 16 other
applicants applied for mining lease for mining bauxite over an area of
192.36 hectares at Mauze Kumbhawade, dist. Ratnagiri, after the said
area had been notified under section 11(2) of the Act on 12.12.2006 by
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the Director, Geology and Mining and applications were invited for
grant of a mining lease over the area. All the applications were
considered by the Minister (Industries and Mining) for making a
recommendation for the grant of mining lease in question for bauxite over
the said area. The Minister considered the applications of all the
applicants and recommended the respondent no.3 M/s.Akash Universal
(P) Limited for grant of mining lease by the order dated 25.4.2008. Since
the application of M/s.Veet Rag Homes Private Limited (petitioner
herein) was rejected, they along with another party M/s.Ashapura
Minechem Ltd. applied for a revision to the Central Government under
section 30 of the Act. The Central Government rejected the revision and
upheld the recommendation of M/s.Akash Universal (P) Ltd. for grant of
a lease. Both, the order of the Minister (Industries & Mining) and the
order of the Government of India rejecting the revision have been
challenged by way of this Writ Petition.
3. Dr.Tulzapurkar, the learned counsel for the petitioner M/s.Veet Rag
Homes Private Limited, submitted that the petitioner was fully eligible for
grant of a mining lease and a preferential right for such grant as provided
by section 11(3) of the Act. On the other hand, the respondent no.3
M/s.Akash Universal (P) Ltd. had no special knowledge or experience in
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mining operations and was, therefore, disqualified from being granted
such a lease, such special knowledge or experience being an essential
requirement under section 11 of the Act. It was further contended that the
order recommending grant of mining lease to the respondent no.3 is
arbitrary since it makes a recommendation for the grant of mining lease to
M/s.Akash Universal (P) Ltd., though it had no experience and though it
rejects the applications of two others for such grant even though they had
no experience.
4. On behalf of the respondent no.3, M/s.Akash Universal (P) Ltd.,
it is not disputed that they have no experience in mining and have never
before been granted a mining lease. It is also not claimed that they have
any special knowledge. The order recommending grant of a mining lease
to it is justified on the ground that another company which is a group
company has the requisite experience. Further, that the end use of bauxite
proposed by M/s.Akash Universal (P) Ltd. justified such grant, because
M/s.Akash Universal (P) Ltd. proposed to use the mineral in Kolhapur
district itself in an alumina plant which they proposed to set up with an
investment of about Rs.2,000 crores and which will generate employment
for 800 to 900 people.
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5. Section 11 of the Act confers a preferential right on certain
persons for obtaining, inter alia, mining lease. The second proviso to sub-
section (2) provides that the State Government may grant mining lease
after taking into consideration matters specified in sub-section (3) to such
of the applicants as it may deem fit. Sub-section (3) provides the matters
which must be taken into account before mining lease is granted. Section
11 of the Act reads thus:-
11. Preferential right of certain persons .--(1)
Where a reconnaissance permit or prospecting
licence has been granted in respect of any land, the
permit holder or the licensee shall have a
preferential right for obtaining a prospecting
licence or mining lease, as the case may be, in
respect of that land over any other person:
Provided that the State Government is satisfied
that the permit holder or the licensee, as the case
may be,-
(a) has undertaken reconnaissance operations or
prospecting operations, as the case may be, to
establish mineral resources in such land;
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(b) has not committed any breach of the terms and
conditions of the reconnaissance permit or the
prospecting licence;
(c) has not become ineligible under the provisions
of this Act; and
(d) has not failed to apply for grant of prospecting
licence or mining lease, as the case may be, within
three months after the expiry of reconnaissance
permit or prospecting licence, as the case may be,
or within such further period, as may be extended
by the said Government.
(2) Subject to the provisions of sub-section (1),
where the State Government has not notified in the
Official Gazette the area for grant of
reconnaissance permit or prospecting licence or
mining lease, as the case may be, and two or more
persons have applied for a reconnaissance permit,
prospecting licence or a mining lease in respect of
any land in such area, the applicant whose
application was received earlier, shall have the
preferential right to be considered for grant of
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reconnaissance permit, prospecting licence or
mining lease, as the case may be, over the
applicant whose application was received later:
Provided that where an area is available for grant
of reconnaissance permit,
prospecting licence or mining lease, as the case
may be, and the State Government has invited
applications by notification in the Official Gazette
for grant of such permit, licence or lease, all the
applications received during the period specified in
such notification and the applications which had
been received prior to the publication of such
notification in respect of the lands within such area
and had not been disposed of, shall be deemed to
have been received on the same day for the
purposes of assigning priority under this sub-
section:
Provided further that where any such applications
are received on the same day, the State
Government, after taking into consideration the
matter specified in sub-section (3), may grant the
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reconnaissance permit, prospecting licence or
mining lease, as the case may be, to such one of the
applications as it may deem fit.
(3) The matters referred to in sub-section (2) are
the following:-
(a) any special knowledge of, or experience in,
reconnaissance operations, prospecting operations
or mining operations, as the case may be,
possessed by the applicant;
(b) the financial resources of the applicant;
(c) the nature and quality of the technical staff
employed or to be employed by the applicant;
(d) the investment which the applicant proposes to
make in the mines and in the industry based on the
minerals;
(e) such other matters as may be prescribed.
(4) Subject to the provisions of sub-section (1),
where the State Government notifies in the Official
Gazette an area for grant of reconnaissance permit,
prospecting licence or mining lease, as the case
may be , all the applications received during the
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period as specified in such notification, which shall
not be less than thirty days, shall be considered
simultaneously as if all such applications have
been received on the same day and the State
Government, after taking into consideration the
matters specified in sub-section (3), may grant the
reconnaissance permit, prospecting licence or
mining lease, as the case may be, to such one of the
applicants as it may deem fit.
(5) Notwithstanding anything contained in sub-
section (2), but subject to the provisions of sub-
section (1), the State Government may, for any
special reasons to be recorded, grant a
reconnaissance permit, prospecting licence or
mining lease, as the case may be, to an applicant
whose application was received later in preference
to an application whose application was received
earlier:
Provided that in respect of minerals specified in
the First Schedule, prior approval of the Central
Government shall be obtained before passing any
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order under this sub-section."
In addition, rule 35 of the Mineral Concession Rules, 1960 provides that
in addition to the matters mentioned in clauses (a) to (d) of sub-section (3)
of section 11, the State Government shall also consider the end use of
mineral by the applicant.
6.
The question which falls for consideration is whether section 11
sub-sections (2) and (3) permit the grant of a mining lease to an applicant
who has no special knowledge or experience in mining operation at all
and whether therefore the recommendation to grant the mining lease to
M/s.Akash Universal (P) Ltd., who had no experience, is sustainable.
7. On a plain reading of sub-sections (2) and (3) of section 11 above,
it is clear that the State Government is empowered to grant a mining lease
only after taking into consideration the matters specified in sub-section
(3) which includes special knowledge or experience in mining operations,
etc. It is thus not open for the State Government to refuse to consider
whether the applicant has special knowledge or experience in mining
operations. According to the respondent no.3, however, though the State
Government cannot refuse to consider if an applicant has special
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knowledge or any mining experience, it is not necessary for an applicant
to actually have any such knowledge or experience if on a consideration
of all the other factors or attributes required in the section, the State
Government considers the applicant fit to be granted such lease. In other
words, according to the respondent no.3, sub-sections (2) and (3) of
section 11 of the Act only requires the State Government to advert to and
take into account whether the applicant possesses the attributes referred to
in sub-section (3), but the State Government can grant a mining lease to
an applicant who does not possess such attributes in its sole discretion as
it may deem fit. It is not possible to accept this contention that sub-
sections (2) and (3) only require the State government to inquire into and
take into account whether an applicant possesses the attributes required
by those provisions, but that nevertheless the State Government may grant
a mining lease even to an applicant who does not possess an attribute if
he possesses other attributes referred to in the sub-section. Accepting this
contention would render the provisions meaningless. For example, if the
contention were to be accepted, the State Government would be entitled
to grant an applicant who possesses no financial resources, vide sub-
section 3(b), or who has technical staff which is wholly unqualified for
the work, vide sub-section 3(c) and so on. In the circumstances, we are of
view that the State Government which is a delegatee of Parliament can
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grant a mining lease only to an Applicant who has the attributes specified
by sub-section (3) of section 11.
8. In the circumstances, we are of view that the impugned order of
the Minister for Mining recommending the grant of a mining lease to the
respondent no.3 though the said respondent is not shown to have any
special knowledge or experience in mining operations is illegal and
violative of section 11 of the Act. The order is also arbitrary in that it
rejects the applications of two other applicants, viz., M/s.R.W.Sawant &
Co., Thane, and M/s.Entegra Infrastructures Ltd., Mumbai, on the ground
that they are new entrants in the field of mining and do not have any
experience. There is no reason why a different yardstick ought to have
been applied to the case of the respondent no.3 apparently on the ground
that the respondent no.3 is an emerging entrepreneur. It is settled law
vide Sandur Manganese & Iron Ores Ltd. v. State of Karnataka [(2010)
13 SCC 1] that the State Government cannot justify a grant based on
criteria that are de hors the Act and the Mineral Concession Rules, 1960.
The Supreme Court has observed as follows:-
"43. It is not open to the State Government to
justify grant based on criteria that are dehors the
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MMDR Act and the MC Rules. The exercise has
to be done strictly in accordance with the statutory
provisions and if there is any deviation, the same
cannot be sustained. It is the normal rule of
construction that when a statute vests certain power
in an authority to be exercised in a particular
manner then the said authority has to exercise it
only in the manner provided in the statute itself.
This principle has been reiterated in CIT v. Anjum
M.H. Ghaswala, SCC at p. 644; Captain Sube
Singh v. Lt. Governor of Delhi and State of U.P.
v. Singhara Singh."
The observation in the order that it may be worthwhile to consider the
respondent no.3's case because it is an emerging entrepreneur is
extraneous to the provisions of the Act, which require the State
Government only to take into account the factors or attributes referred to
in section 11, sub-sections (2) and (3). It is not possible to accept the
justification that because the respondents are said to have taken steps to
establish the project, they are entitled to the mining lease. Rule 35 of the
Mineral Concession Rules prescribe that the end use of the mineral is a
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factor that may be taken into account. While doing so, it was not
permissible for the State Government to take into account the mere
intention of the respondent no.3 to set up an alumina plant in Kolhapur
district in which they are said to have supposedly invested Rs.2,000 crores
and which will generate employment for 800 to 900 people. The end use
contemplated by rule 35 is the end use of mineral by the applicant. That
is, the use to which the applicant intends to put the mineral i.e. for
example iron ore will be used for steel and so on. This may of course
include sale to another. The location of the use such as whether it will be
used in a particular district is not a relevant factor.
9. Lastly, in paragraph 7 of the order, the Minister for Mining has
classified the applicants into groups `A' and `B'. Group `A' comprises the
applicants who are financially sound but do not have experience of
mining. Seven applicants have been included in this group. Group `B'
includes names of the applicants who have experience in mining. Nine
names have been included in this group. The name of the respondent no.3
has been included in this group of applicants who have experience in
mining. It seems that the respondent no.3 has been held as having
experience in mining, even though it does not have any mining
experience, only on the basis that one group company i.e. M/s.Akash
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Mining Pvt. Ltd. holds a mining lease of granite and iron ore in Orissa.
The State Government, in our view, could not have clubbed the
experience of a company other than the respondent no.3 as experience of
the respondent no.3. It is not permissible to do so.
10. In New Horizons Ltd. v. Union of India [(1995) 1 SCC 478] the
Supreme Court has observed that the experience of a company which has
merged into a re-organized company may be taken into consideration
even though the tender has not been submitted in its name and has been
submitted in the name of the re-organised company which does not have
experience in its name. Then, while considering the converse, the
Supreme Court observed as follows:-
"Conversely there may be a split in a
company and persons looking after a
particular field of the business of the
company form a new company after leaving
it. The new company, though having
persons with experience in the field, has no
experience in its name while the original
company having experience in its name
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lacks persons with experience. The
requirement regarding experience does not
mean that the offer of the original company
must be considered because it has
experience in its name though it does not
have experienced persons with it and ignore
the offer of the new company because it
does not have experience in its name though
it has persons having experience in the
field."
Further, the Supreme Court has observed as follows:-
"The terms and conditions of such a document
have to be construed from the standpoint of a
prudent businessman. When a businessman enters
into a contract whereunder some work is to be
performed he seeks to assure himself about the
credentials of the person who is to be entrusted
with the performance of the work. Such
credentials are to be examined from a commercial
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point of view which means that if the contract is to
be entered with a company he will look into the
background of the company and the persons who
are in control of the same and their capacity to
execute the work. He would go not by the name
of the company but by the persons behind the
company. While keeping in view the past
experience he would also take note of the present
state of affairs and the equipment and resources at
the disposal of the company. The same has to be
the approach of the authorities while considering a
tender received in response to the advertisement
issued on 22-4-1993. This would require that first
the terms of the offer must be examined and if
they are found satisfactory the next step would be
to consider the credentials of the tenderer and his
ability to perform the work to be entrusted. For
judging the credentials past experience will have
to be considered along with the present state of
equipment and resources available with the
tenderer. Past experience may not be of much
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help if the machinery and equipment is outdated.
Conversely lack of experience may be made good
by improved technology and better equipment."
We find from the impugned order that nowhere it has been examined how
experience of the group company can be treated as the experience of the
respondent no.3. Prima facie, it would not be permissible to club the
experience of two separate companies together and hold that though any
applicant company has no experience itself, it may be condoned as a
company which has experience because some other group company has
experience.
11. In the result, we are of the view that the impugned order
recommending the grant of lease is not sustainable.
12. Though it appears that the revision was heard by the Central
Government, the revision preferred by the petitioner and another
applicant was considered by the Central Government. The order in
revision which does not properly discuss the issues, upholds the order of
the State Government on the ground that the conclusions are supported by
reasons without going into the correctness or otherwise of the reasons. In
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doing so, the Central Government has erroneously upheld the aforesaid
reasons given by the State Government which are vitiated for the reasons
stated hereinabove. In particular, the Central Government seems to have
accepted the grant of mining lease to the respondent no.3 on the ground
that they have experience in that a group company M/s.Akash Mining
Pvt. Ltd. holds a mining lease of granite/tin and iron in Orissa. The order
of the Central Government thus suffers from errors of law apparent on the
face of the record and is liable to be set aside.
13. In the result, the impugned orders are set aside. The matter is
remanded back to the State Government for a fresh consideration of the
applications for mining lease over 95.57 hectares at village Kubhawade.
The State Government shall consider the matter afresh and pass
appropriate orders, in accordance with law. It seems that there is some
dispute about the experience in mining operations of the petitioner vide
paragraph 10 of the State Government's order in revision. It was
submitted on behalf of the State Government that though the petitioner
has been granted mineral concession earlier, they have not been able to
commence mining operations. It would be open for the State
Government to consider whether in the circumstances of the case, the
petitioner has experience in mining operations.
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14. Rule is made absolute in the above terms. No order as to costs.
15. At this stage, the learned counsel for the respondent no.3 prays for
stay of the operation of this judgement. Prayer for stay is rejected.
(S.A. BOBDE, J.)
(SMT.V.K.TAHILRAMANI, J.)
