Delhi High Court
Larsen & Toubro Ltd. vs Union Of India And Ors. on 27 April, 2011
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
W.P. (C) 5317/2003 and CM 9344/2003
Reserved on: March 16, 2011
Decision on: April 27, 2011
LARSEN & TOUBRO LTD. ..... Petitioner
Through: Mr. S. Ganesh, Senior Advocate
with Mr. Ashish Wad, Mr. B. B. Sharma
and Ms. Dipti B., Advocates.
Versus
UNION OF INDIA AND ORS. ..... Respondents
Through: Mr. B. V. Niren, CGSC for
R-1/UOI.
Mr. Suresh Tripathy, Standing Counsel for
State of Orissa/R-2.
Mr. Sandeep Sethi, Senior Advocate with
Mr. Prashant, Advocate for the Intervener.
CORAM: JUSTICE S. MURALIDHAR
1. Whether Reporters of local papers may be
allowed to see the order? No
2. To be referred to the Reporter or not? Yes
3. Whether the order should be reported in Digest? Yes
JUDGMENT
27.04.2011
1. The Petitioner Larsen & Toubro Limited („L&T‟) seeks the setting
aside of an order dated 10th July 2003 of the Mines Tribunal
dismissing its revision application challenging an order dated 27 th
September 2001 passed by the Government of Orissa („GoO‟)
(Respondent Nos. 2 to 4 herein) rejecting, inter alia, (i) its
application dated 5th November 1995 for a Mining Lease („ML‟) for
iron ore over an area of 611.58 hectares in Village Badamgarh
Pahad, Sundergarh District (ii) its revision application dated 11th
September 1997 for Prospecting Licence („PL‟) over an area of
540.475 hectares in Village Khajuridihi Reserve Forest, Sundergarh
District and (iii) a further revised application dated 11th September
1997 for a PL over an area of 475.955 hectares in Village Rakma &
Marsuan, Keonjhar District.
Factual matrix
2. It is stated that sometime in 1995, the GoO made a promise to
L&T that it would be allowed to use iron ore deposits for captive
consumption for the proposed port-based steel plant to be set up by
the L&T at Gopalpur, Orissa. Pursuant to the said promise, a
Memorandum of Understanding („MoU‟) was entered into between
L&T and the GoO on 20th December 1995. The said MoU recorded
that L&T required a quantity of approximately 5 million tonnes
(MT) of iron ore to meet its annual requirement of the steel plant at
Gopalpur during the first phase of production of 10 MT in the event
of L&T achieving the ultimate capacity of 6 to 7 MT per annum
(MTPA). In Clause II (d) of the MoU, it was stated as under:
"Badamgarh Pahad group of iron ore mines,
estimated to contain 275 million tonnes
deposits can be considered by the State
Government for recommending grant of
PL/ML to L&T for the proposed Steel Plant
Project."
3. Further the MoU recorded that the GoO inter alia agreed to hand
over to L&T land to the extent of 5000 acres between the National
Highway No. 5 and the Howrah-Madras Railway main line, free
from all encumbrances through the Orissa Industrial Infrastructural
Development Corporation („IDCO‟) for the steel plant and associated
facilities. The allotment of another 1000 acres would be considered
for the purposes of a township and a colony. The GoO was to ensure
that the Gopalpur port would be ready by the time the steel plant
commenced commercial production since an all-weather port was of
vital importance to the steel plant. Further, the MoU recognized that
the Banspani-Daitari Railway link "is the essential link for
transportation of iron ore to the plant site and it is therefore
necessary that this link is established before the Steel Plant goes into
operation." L&T and the GoO would "together/or separately pursue
with the Government of India, Ministry of Railways for expeditious
completion and commissioning of the Banspani-Daitari Railway link
before 1999."
4. On 15th November 1995, the L&T made three applications for
grant of ML:
(i) for iron ore over an area of 304.704 hectares in village
Kansara and Batgaon in Sundergarh district;
(ii) for iron ore over an area of 569.96 hectares in village
Khajuridihi in Sundergarh district; and
(iii) for iron ore over an area of 611.58 hectares in village
Badamgarh Pahad, Sundergarh District.
5. In response to the last mentioned ML application, the GoO by a
letter dated 28th July 1997 informed L&T that it had decided to
recommend 754.50 hectares for mining of iron ore in village
Badamgarh Pahad in Sundergarh and Keonjhar districts for the grant
of PL in favour of the Petitioner. By the same letter, the GoO
directed L&T to file two separate revised applications for PL over an
area of 180 hectares in Keonjhar district and 574.50 hectares in
respect of Sundergarh district. Pursuant thereto, L&T filed two
revised PL applications on 11th September 1997 for mining over an
area of 475.955 hectares in Keonjhar district and 540.475 hectares in
Sundergarh district. It is stated that of the total area applied for by
L&T under the two revised PL applications, an area of 17.50
hectares overlapped with an area recommended for ML to another
company. The Government of India („GoI‟) in its letter dated 20th
January 1987 recommended the exclusion of this overlapping area.
Thus the total area applied for by L&T under the two revised PL
applications was 998.93 hectares.
6. According to the L&T, a joint meeting was held on 23rd May
1997 between the GoO and the GoI to promote the establishment of
steel plants in Orissa by TISCO Ltd., MESCO Ltd., L&T and
Neelachal Ispat Nigam Ltd. According to L&T, it was decided that
the ML applications to these parties for iron ore should be
favourably considered. It is stated that such a decision giving
preference and priority to the said parties was permissible under
Section 11(5) of the Mines and Minerals (Development and
Regulation) Act, 1957 [„MMDR Act‟]. L&T claims that the prior
approval of the GoI as required under Section 11(5) of the MMDR
Act, with iron ore being a major mineral, was obtained and the joint
decision taken on 23rd May 1997 by the GoO and the GoI was
implemented not only in the case of L&T but other parties as well.
7. L&T also claims that by a letter dated 13th December 1996, the
GoO asked L&T to carry out reconnaissance/ prospective operations
in the mining area in question, i.e., Badamgarh Pahad. L&T claims
to have carried out the prospective operations at a total cost of about
Rs. 3 crores. It is stated that under Section 11(1) of the MMDR Act
a person to whom the PL has been granted gets a preferential right
for the purpose of grant of an ML.
8. According to L&T between 1995 and 2001 no steps were taken
by the GoO to provide the essential infrastructural facilities which
were vital for the establishment of the port-based steel plant at
Gopalpur. This included development of the port at Gopalpur into
an all-weather port for handling large vessels, construction of the
Badamgarh Pahad Railway line, construction of broad roads and
service roads and the construction of a dam and pipeline for
uninterrupted water supply of 35 million gallons per day. When
despite repeated attempts by L&T to get the GoO to honour its
obligations under the MoU were unsuccessful, L&T informed the
GoO at a meeting with the Chief Minister on 23rd May 1998 that it
was left with no option "but to consider an alternative location to set
up its steel plant". It is stated that it was in this context that L&T on
26th May 1998 requested IDCO to suspend all further activities for
acquisition of land and to freeze further expenditure with immediate
effect. L&T had already deposited over Rs. 6 crores with IDCO to
meet the cost of acquisition of land.
9. By a letter dated 3rd January 2000, the GoO, Department of Steel
and Mines enquired from L&T whether it was withdrawing the
proposed project at Gopalpur and whether it had any intention to set
up the proposed steel plant. According to L&T, within three days
thereafter, without waiting for a reply from the L&T, the GoO by a
letter dated 6th January 2000 informed GoI that L&T had withdrawn
from the proposal to set up an integrated steel plant at Gopalpur.
Unaware of the above communication between the GoO and the GoI,
L&T sent a reply to the GoO on 17th January 2000 stating that
because there was no sign of the Gopalpur port being set up in time,
L&T was evaluating alternative locations for setting up a plant which
was port linked. L&T informed the GoO that after evaluating
various locations it had decided Dhamra was a good alternative,
which port was being constructed by L&T itself.
10. It is stated that on 17th January 2000, the Department of Steel
and Mines, GoO (Respondent No. 3), wrote to L&T asking whether
it still intended to implement the project since no progress had been
made by the L&T in that regard. In reply, L&T wrote to Respondent
No. 3 on 9th February 2000 stating that it was the GoO that had failed
to set up the Gopalpur port and L&T was, therefore, considering
shifting the location of the proposed steel plant to the Dhamra port.
A request was made to the GoO to allot an area of about 1500 acres
at Dhamra for the proposed steel plant. L&T asked for adjustment of
the amount already deposited towards cost of the proposed land to be
allotted at Dhamra port.
11. On 9th March 2000, Respondent No. 3 wrote to L&T asking it
"to submit the withdrawal proposal" for the land proposed to be
acquired in 17 villages of Ganjam district for which proceedings had
already been initiated under the Land Acquisition Act, 1894. L&T
was asked to submit the withdrawal proposal so that necessary steps
could be taken to drop the land acquisition proceedings and to refund
to L&T the amount deposited by it. L&T replied on 24th March 2000
stating that since it was compelled to look for an alternative site for
the steel plant "this should not be considered as a case of
withdrawal". L&T once again requested that an amount already
deposited by it should be transferred to the account of Dhamra port
project so that it could be adjusted against the cost of acquisition of
the land at Dhamra port.
12. On 4th April 2000, Respondent No. 3 issued a notice to L&T
under Section 12 (1) of the Mineral Concession Rules, 1960
(„MCR‟) asking it to appear for a personal hearing before the Special
Secretary, Department of Steel & Mines on 17th April 2000 in
connection with its application for grant of an ML for iron ore over
an area of 611.58 hectares in village Badamgarh Pahad and its two
revised PL applications dated 11th September 1997 for an area of
540.475 hectares in Village Khajuridihi and 475.955 hectares in
Village Rakma & Marsuan, Keonjhar District. The notice stated that
L&T was having second thoughts on setting up a steel plant at
Gopalpur and, therefore, the revised PL applications were liable to
be rejected.
13. It is stated that at the personal hearing on 17 th April 2000, L&T
submitted a project profile of the proposed steel plant at Dhamra port
and handed over a feasibility study conducted by MECON Ltd.
L&T explained that its joint venture partners were SMS-DEMAG of
Germany and Indian Seamless Metal Tubes Limited. This was
followed by a letter dated 16th June 2000 from Respondent No. 3
asking L&T to produce the project proposal and other documentary
proof to substantiate its proposal to set up an integrated steel plant at
Dhamra. In the said letter, it was stated that at the hearing on 17 th
April 2000 L&T had mentioned that "abandoned Gopalpur project
for want of facilities like port, railways and other infrastructure, but
have decided in particular to put up an integrated steel plant at
Dhamra". In response thereto on 18th July 2000, L&T explained that
the proposed steel plant at Dhamra port has been conceptualised as a
joint venture which was designed to produce specialized products of
international quality. A project was expected to be completed by
September 2004 by which the Dhamra port was also expected to be
fully operational. The proposed alternative site was also based on
the raw material to be supplied from the iron ore mines at
Badamgarh Pahad.
14. On 27th September 2001, the GoO rejected the revised PL
application dated 11th September 1997. The said order noted that the
L&T could not show any progress in setting up the proposed steel
plant at Gopalpur. There was no MoU signed for the alternative site
for the steel plant.
15. Aggrieved by the aforementioned order dated 27 th September
2001, the Petitioner filed revision petition under Section 30 of the
MMDR Act read with Rules 54 and 55 of MCR. An order dated 4th
February 2002 was passed by the Mines Tribunal to the effect that
the area covered under the revised PL applications shall not be
settled by the GoO with any third party till further orders in the
revision application.
16. In its final impugned order dated 10th July 2003, the Mines
Tribunal noted the contention of the GoO that although initially it
had made a recommendation for grant of ML on account of the
willingness of the L&T to set up an integrated steel plant, the
applications were rejected after giving L&T a hearing and coming to
the conclusion that it was not prepared to immediately set up a steel
plant in Gopalpur. Although 196 applications had been filed for the
very same area, there were no special reasons in terms of Section
11(5) of MMDR Act, to overlook the seniority of the applicants and
grant ML to L&T. While dismissing L&T‟s revision application, the
Mines Tribunal issued a direction that in the cases of all the 196
applications, the GoO should simultaneously consider all the
applications filed for the notified area in terms of Section 11 MMDR
Act after granting an opportunity to all the applicants including
L&T.
Submissions of counsel
17. Appearing for L&T, Mr. S. Ganesh, learned Senior counsel first
submitted that pursuant to the MoU, L&T had taken effective steps
to perform its obligations which included incurring an expenditure of
Rs. 3 crores in undertaking prospective activities as directed by the
GoO and depositing over Rs. 6 crores with IDCO for acquisition of
land to meet the expenses of acquisition of land at Gopalpur. He
submitted that the letter dated 26th May 1998 written by the L&T to
IDCO requesting it to temporarily suspend further activities in
connection with the acquisition of land was necessitated on account
of the failure of the GoO to perform its part of the obligation. He
submitted that the proposed steel plant was a port-based one and
without any progress in the setting up of the Gopalpur port, there
was little purpose in the Petitioner going ahead with the steel plant.
Referring to the reply dated 17th January 2000 where the Petitioner
gave an alternative proposal for shifting the proposed steel plant to
the Dhamra port, he submitted that the GoI never really responded to
this alternative proposal and erroneously concluded that the
Petitioner had altogether given up the project for which the MoU
was entered into. Mr. Ganesh further submitted that the earlier order
dated 21st October 1997 was issued pursuant to a joint decision taken
by the GoO and the GoI at a joint meeting held on 23rd May 1997.
This decision was relatable to Section 11 (5) of the MMDR Act.
The said decision was acted upon and understood to be pursuant to
the approval granted by the Central Government under Section 11(5)
of the MMDR Act. He emphasized that the order dated 21st October
1997 imposed two conditions under Rule 27(3) MCR. One of them
was that if the lessee, i.e., L&T failed to set up the steel plant at
Gopalpur within a reasonable time "due to any default of its own"
the lease could be terminated by the GoO by taking recourse to Rule
27(5) MCR. It is submitted that there was no default committed by
the L&T and therefore, there was no question of termination of the
lease. The default, if any, was entirely that of the GoO. He
submitted that the order dated 27th September 2001 was bad in law,
arbitrary and unjust since it was pre-determined and passed without
application of mind to the relevant facts and circumstances. Since
the decision taken at the meeting on 23rd May 1997 was a joint one
of both the GoO and the GoI, it was not open to the GoO to
unilaterally reverse the earlier order dated 21st October 1997 by its
subsequent order dated 27th September 2001. Iron ore was a major
mineral which was subject to and required the prior approval of the
GoI. The GoO‟s unilateral reversal of a decision which had the
approval of the GoI would be contrary to Section 11(5) of the
MMDR Act.
18. It was submitted by Mr. Ganesh that since L&T had undertaken
reconnaissance/prospecting operations pursuant to a letter of the
GoO dated 13th December 1996 and had spent Rs. 3 crores in the
process, L&T had a preferential right over all other applicants for a
PL or ML under Section 11(1) MMDR Act. The other sub-sections
of Section 11 were made expressly subject to sub-section (1) MMDR
Act. This, it was submitted, distinguished the present case from the
decision in Sandur Manganese & Iron Ores Ltd. v. State of
Karnataka 2010 (9) SCALE 492 as in the latter case most of the
applicants could not claim statutory priority or preference under sub-
section (1) or (5) of Section 11 MMDR Act. It is further submitted
that provisions of sub-section (5) prevail over sub-sections (2) and
(3) and consequently at a decision made under sub-section (5) of
Section 11 need not comply with all the requirements of sub-sections
(2) read with sub-section (3) of Section 11 MMDR Act. In the
present case the selection of L&T by the GoO as well as the GoI was
in conformity with the criteria laid down in Section 11(3). Further in
Sandur Manganese the State Government had first given its
commitment to two parties and had thereafter issued a notification
under Rule 59 throwing open the area to all applicants. However, in
the present case, the selection of four parties including L&T by the
GoO and the GoI was long after the issuance of the Rule 59 MCR
notification.
19. Mr. Ganesh submitted that the amendment to Section 11 of
MMDR Act, which introduced Section 11(4) and renumbered the
previous Section 11(4) as Section 11(5), was with effect from 18th
December 1999 whereas the letter from the GoO recommending the
grant of ML and PL in favour to L&T was dated 21st October 1997.
L&T‟s vested right to be considered in terms of the unamended
Section 11 MMDR Act could not be taken away by the subsequent
amendment. L&T‟s application could not be asked to be considered
along with 196 other applicants. Reliance is placed on the decisions
in Municipal Corporation for the City of Poona v. Bijlee Products
(India) Ltd. (1978) 4 SCC 214; Shyam Sunder v. Ram Kumar
(2001) 8 SCC 24; Zile Singh v. State of Haryana (2004) 8 SCC 1
and Union of India v. Martin Lottery Agencies Ltd. (2009) 12 SCC
209. It was submitted that the doctrine of promissory and equitable
estoppel are attracted in the present case. L&T had acted on the
basis of the MoU and altered its position significantly. The GoO
was, therefore, bound to honour the promise made by it in the MoU
and make available the iron ore mines promised to L&T for its steel
plant.
20. Mr. Suresh Tripathy, learned counsel for the GoO submitted that
the MoU was only for setting up of an integrated steel plant at
Gopalpur. Nowhere in the MoU was it stated that if the project did
not materialize, an alternative project could be considered. Even the
applications made by L&T for ML adverted to the fact that the
mineral, i.e., iron ore, was to be utilized "as a source for iron ore or
iron ore and steel production through an integrated steel plant in
Orissa". Referring to the letter dated 26th May 1998, Mr. Tripathy
submitted that there could be no manner of doubt that L&T had
decided "to temporarily suspend the project activities till a more
opportune moment". It further requested that all further activities
relating to land acquisition should be suspended and further
expenditure frozen "with immediate effect". Therefore, this was not
a mere suspension but abandonment of the project. This is what
prompted the letter dated 3rd January 2000 of the GoO asking L&T
to indicate clearly its intention to implement the "steel project at
Gopalpur". It is submitted that there was no vested right in L&T to
ask for the alternative project proposal to be accepted by the GoO. It
is submitted that the order dated 21st October 1997 was not a formal
order by the GoO and was not a decision within Section 11(5)
MMDR Act.
21. Mr. BV Niren, learned counsel appearing for the GoI submitted
that it accepted the decision of the Mines Tribunal directing the GoO
to consider all the 196 applicants in terms of the MMDR Act.
22. Mr. Sandeep Sethi, learned Senior counsel appeared on behalf of
the Intervener, Geomin Minerals and Marketing (P) Ltd.
(„GMMPL‟), in CM APPL No. 13109 of 2008. GMMPL had filed
two PL applications for an area of 147 hectares and 173 hectares in
Badamgarh Pahad, an ML application for 75.4 hectares in village
Rakma & Marsuan, Keonjhar District and a PL application for 75.4
hectares again in village Rakma & Marsuan, Keonjhar. It is
submitted that Section 11 MMDR Act requires consideration of all
the competing applications on merits after granting a personal
hearing. This could not be bypassed only because an MoU had been
entered into between L&T and GoO. He placed reliance on the
judgment of the Supreme Court in Sandur Manganese. It is
submitted that on account of the interim order dated 25th August
2003 passed by this Court subsequently confirmed on 8th July 2004
that applications overlapping the area for which L&T had applied
were not being processed by the GoO and this was causing grave
prejudice to all the other applicants including the GMMPL. As a
consequence of the stay order passed by this Court, an estimated 275
MT of iron ore had been rendered unavailable to the mining industry.
Mr. Sethi referred to Section 11(4) MMDR Act as it stood prior to
the amendment and submitted that it did not envisage an order
passed by the State government. The only order in terms of that
provision was that of the central government granting approval.
Consequently the communication dated 21st October 1997 was really
not an order of the GoO under Section 11(4) MMDR Act.
23. The intervention application of GMMPL has been opposed by
L&T by pointing out that it is seeking the grant of an ML for export
of iron ore and not for captive use. Mr. Ganesh posed the question
as to why the GoO should take the trouble of passing an order dated
27th September 2001 reversing the decision dated 21st October 1997
if in fact it was not an order under Section 11(4) of the un-amended
MMDR Act. He submitted that both in terms of Section 11(4) of the
un-amended MMDR Act as well as Section 11(5) of the amended
MMDR Act, a decision had to be taken by the GoO and that was
expressed in the form of the order dated 21st October 1997.
Issues that arise for consideration
24. On the submissions made by learned counsel for the parties, the
following issues arise for consideration in the present case:
(i) Is the communication dated 21st October 1997 from the GoO
to L&T an order under Section 11(4) of the MMDR Act (prior
to its amendment)? Does it create a vested right in L&T for
the grant of an ML?
(ii) Does L&T have an indefeasible right of priority for grant of
PL/ML in terms of Section 11(1) of MMDR Act?
(iii) In the context of the MoU dated 20th December 1995, are the
doctrines of promissory and equitable estoppel attracted in the
facts and circumstances of the present case?
(iv) Is the impugned order dated 27th September 2001 of the GoO
bad in law on account of the non-application of mind and is it
violative of Section 11(5) MMDR Act?
Issue (i): Did the communication dated 21st October 1997 create a
vested right in L&T for the grant of ML?
25. The mineral in question in the present case is iron ore which is a
major mineral in terms of the First Schedule to the MMDR Act.
Consequently, in terms of the proviso to Section 5(1) MMDR Act,
the previous approval of the central government has to be obtained
before a State government can grant either a PL or ML to any person
in respect of iron ore. Further, in terms of Section 5(2), no ML can
be granted by a State government unless it is satisfied that there is
evidence to show that the area for which the lease has been applied
for has been prospected earlier or the existence of mineral content
has been established otherwise by means of prospecting in such area.
Even before the State government can grant an ML, the mining plan
has to be duly approved by the central government or the State
government in respect of such category of mines as may be specified
by the central government, for the development of mineral deposits
in the area concerned. Therefore, with reference to Section 5 when
the mineral in question is iron ore, prior approval of the central
government for the grant of ML or PL to any party becomes
mandatory. The proviso to Section 11(5) requires prior approval of
the central government before an order is made by the State
government granting either a PL or ML to an applicant whose
application is received later in time but is given preference over an
earlier applicant.
26. The communication dated 21st October 1997 from the GoO to
the GoI mentions that by a notification dated 23rd August 1991, the
GoO had reserved "and thrown open iron ore/Gopalpur ore bearing
concession to the extent of 282.46 sq. mines in 5 blocks located in
Keonjhar and Sundergarh district". Applications were invited from
interested private parties with effect from 29th October 1991 in terms
of Rule 59 MCR for grant of PL and ML. 196 applications were
received pursuant to the said notification issued under Rule 59 MCR
by the GoO for the area in question. In terms of Section 11(2) read
with Section 11(4) of the MMDR Act as amended, the applications
would have to be considered simultaneously as if all the applications
were received on the same day and subject to the factors specified in
Section 11(3).
27. The decision of the GoO to promote establishment of steel plants
in Orissa by TISCO Ltd., MESCO Ltd., L&T and Neelachal Ispat
Nigam Ltd. to ensure optimum utilization of mineral reserves was
taken subsequently. The communication dated 21st October 1997
referred to "the interface held under the chairmanship of the
Secretary, Ministry of Steel, GoI in Bubhaneshwar on 23rd May 1997
to review the progress of steel plant in Orissa". It adverted to the
fact that "it was decided that the State Government should
recommend the lease applications for iron ore in favour of the
proposed steel plant". The letter enclosed a copy of the minutes of
the said joint meeting. The letter noted that the two revised PL
applications filed by L&T overlapped partially/fully with 5 ML and
23 PL applications filed earlier by the private parties on 29 th October
1991. However, as an MoU had been signed with L&T for
establishment of a steel plant at Gopalpur, "in the larger interest of
mineral development in that stage, it has been decided to consider for
grant of PL over an area of 998.93 hectares for iron ore in favour of
Larsen &Toubro Ltd. in terms of Section 11(3) and 11(4) of the
MMDR Act, 1957 read with Rule 71 MCR".
28. It is apparent that the decision to recommend the ML and PLs in
favour of L&T in terms of Section 11(4) of the unamended MMDR
Act [which corresponds to Section 11(5) of the MMDR Act (as
amended)] was on account of the MoU entered into between the
GoO and L&T. There was no other special reason why L&T was
preferred over all the other applicants for grant of ML and PL.
29. At this stage the change brought about by the amended Section
11 may be noticed. Section 11(4) of the amended MMDR Act details
the manner in which applications received pursuant to the
notification by the State Government of an area under Rule 59 MCR
should be dealt with. These applications, received during the period
specified in a notification, "shall be considered simultaneously as if
all such applications have been received on the same date". Under
the unamended Section 11(4), there was no such provision. The first
proviso to Section 11(2) is another consequential amendment. What
is clear from these amendments is that once an area is thrown open
by the State government and applications are invited from all private
interested parties, then the preferential right under Section 11(1) of
MMDR Act (which has been substantially retained in the amended
MMDR Act) can no longer be invoked by a party which may have
had such preferential right prior to the throwing open of the area by
the State government.
30. In the present case, even before the MoU was entered into with
L&T on 20th December 1995, the area had been thrown open by the
GoO. Notwithstanding this, the GoO decided to enter into MoUs
with four parties to encourage the setting up of steel plants by them
in the State of Orissa. If at all, the grievance ought to have been that
of the applicants other than the aforementioned four entities. The
other parties could well claim that since the area was already thrown
open, their right to have their applications considered in terms of the
unamended Section 11 of MMDR Act could not be taken away. In
the context of the unamended Section 11 there was no vested right in
L&T to have its applications decided irrespective of the other
applications filed by other private parties pursuant to the area being
thrown open by the GoO. It is not, therefore, possible to accept the
contention that the recommendation made by the GoO on 21st
October 1997 created an indefeasible vested right in L&T to have its
applications for PL and ML granted notwithstanding the amendment
made to Section 11 in 1999.
31. The right of L&T to have a preferential consideration of its
application, as is plain from the order dated 21st October 1997, is
traceable to the MoU. There were no other special reasons
mentioned in its favour. Even in the unamended Section 11(4) of
MMDR Act, the State Government had to record special reasons but
could grant a PL or ML to an applicant whose application was
received later in preference to an applicant whose application was
received earlier only with "the previous approval of the Central
Government". Section 11(4) necessarily envisages only one order
being passed for grant of PL or ML as the case may be. In other
words, there no order can be issued under Section 11(4) of the
unamended MMDR Act unless both the stages are complete, i.e., the
recommendation by the GoO followed by its approval by the GoI. In
that sense, the letter dated 21st October 1997 cannot be held to be "an
order" of the GoO under Section 11(4) of the unamended MMDR
Act (relatable to the Section 11(5) of the MMDR Act after the
amendment).
32. The portion of the proviso to the amended Section 11(5) of the
MMDR Act was already part of the substantive Section 11(4) of the
unamended MMDR Act in so far as it related to the previous
approval of the central government. It reiterates the requirement of
the prior approval of the central government in respect of minerals
specified in the First Schedule to the MMDR Act. As far as L&T is
concerned, the position remained unchanged since iron ore is a major
mineral.
33. It is therefore not possible to accept the contention of the learned
Senior counsel appearing for L&T that the recommendatory letter
dated 21st October 1997 from the GoO to the GoI was an order of the
State government and that the said letter created an indefeasible right
in the L&T for its applications to be considered notwithstanding that
the MoU was not acted upon by the parties. The amendments made
in 1999 to Section 11 MMDR Act did not take away any such vested
right of L&T.
34. Consequently this Court does not find the decisions in Municipal
Corporation for the City of Poona v. Bijlee Products (India) Ltd.
and Shyam Sunder v. Ram Kumar to be applicable or relevant in the
facts of the present case. In any event, those decisions did not arise
in the context of the MMDR Act. Likewise the decisions in Zile
Singh v. State of Haryana and Union of India v. Martin Lottery
Agencies Ltd. do not have any applicability to the facts of the
present case.
Issue (ii): Did the prospecting operations by L&T entitle it to a
preferential right under Section 11 (1)?
35. The contention of L&T that the prospecting operations
undertaken by it pursuant to a letter dated 13 th December 1996 of the
GoO entitled it to a preferential right in terms of Section 11(1) of
MMDR Act is required to be dealt with next. The admitted position
is that no formal orders granting PL in favour of L&T were issued by
the GoO pursuant to the letter dated 21st October 1997. In other
words, there was no corresponding approval granted by the central
government to the proposal made by the GoO on 21st October 1997.
As already noticed, unless the central government granted such
approval, there could not have been any valid order in favour of
L&T granting a PL or ML for the area for which the applications had
been made. Any prospecting by L&T pursuant to the letter dated 13 th
December 1996 of the GoO was de hors the grant of statutory PL in
terms of Section 11 of the MMDR Act. In the considered view of
this Court, such prospecting cannot be said to have vested any
preferential right in L&T in terms of Section 11(1) of MMDR Act.
The grant of a PL in favour of a party in relation to a major mineral
is usually made conditional upon the obtaining of permissions to
undertake prospecting under the forest laws. In fact, the order dated
21st October 1997 itself records "for the above forest land of 540.475
hectares situated in Khajuridihi R.F. of Sundergarh district prior
clearance of MOEF, Govt. of India under Section 2 of Forest
(Conservation) Act, 1980 is a mandatory pre-condition for sanction
of P.L." In the absence of a formal order granting the PL followed
by an agreement and the obtaining of forest clearances, the
prospecting work undertaken by L&T cannot be relied upon by it to
claim a preferential right under Section 11 (1) of the MMDR Act.
The second ground urged by L&T that notwithstanding the throwing
open of an area by the GoO, L&T would still have a preferential
right under Section 11(1) of the MMDR Act, cannot, in the facts and
circumstances of the present case, be accepted.
Issue (iii): Promissory Estoppel
36. The next issue is whether the doctrines of promissory and
equitable estoppel are attracted in the facts and circumstances of the
present case. The MoU dated 20th December 1995 spells out the
respective obligations of the GoO on the one hand and the L&T on
the other. The assurance by L&T that it had performed its part of the
obligations is disputed by the GoO. While it is not possible in the
proceedings under Article 226 to render any finding on which of the
parties is responsible for the MoU not being worked out, the fact
remains that for about five years after it was entered into the parties
have not moved forward in the matter. There is nothing to show that
the GoO took steps to establish Gopalpur port. On the other hand,
the L&T admittedly did not commence operations to set up its steel
plant at Gopalpur. The MoU unfortunately does not spell out any
time limits by which the parties have to take the respective steps. It is
difficult, therefore, even from the perspective of the contractual
obligations to infer that time was the essence of the MoU. In the
absence of such time limits and particularly in the absence of any
spelling out of the sequence in which the steps were to be taken by
the respective parties, it is not possible to come to any definite
conclusion that either of the parties was responsible for the
breakdown of the MoU.
37. What is evident, however, is that by letter dated 17 th January
2000, L&T had decided to not to go ahead with setting up a steel
plant at Gopalpur. It had proposed an alternative site at Dhamra.
Learned counsel for the GoO is right in his contention that the MoU
did not contain any provision requiring the GoO to accept any
alternative project proposal of L&T. Therefore, it cannot be said that
the GoO was obliged in law to accept the alternative proposal
suggested by the L&T. The effect of an MoU entered into by a State
government with an applicant on the consideration of its application
for grant of PL and ML was one of the issues that arose for
consideration in Sandur Manganese & Iron Ores Ltd. v. State of
Karnataka. Issue (f) formulated by the Supreme Court in the said
case reads as under:
"Whether factors such as past commitments
made by the State Government to applicants
who have already set up steel plants is not a
relevant matter for consideration for grant of
lease."
38. On the above issue, the Supreme Court‟s observations were as
under:
"It is clear that the State Government is
purely a delegate of Parliament and a
statutory functionary, for the purposes of
Section 11(3) of the Act, hence it cannot act
in a manner that is inconsistent with the
provisions of Section11(1) of the MMDR
Act in the grant of mining lease.
Furthermore, Section 2 of the Act clearly
states that the regulation of mines and
mineral development comes within the
purview of the Union Government and not
the State Government. As a matter of fact,
the respondents have not been able to point
out any other provision in the MMDR Act or
MC Rules permitting grant of mining lease
based on past commitments. As rightly
pointed out, the State Government has no
authority under the MMDR Act to make
commitments to any person that it will, in
future, grant a mining lease in the event that
the person makes investment in any project.
Assuming that the State Government had
made any such commitment, it could not be
possible for it to take an inconsistent position
and proceed to notify a particular area.
Further, having notified the area, the State
Government certainly could not thereafter
honour an alleged commitment by ousting
other applicants even if they are more
deserving on the merit criteria as provided in
Section 11(3)."
39. Consequently in the present case the MoU dated 20th December
1995 cannot be relied upon by L&T to argue for any preferential
right over the other applicants for grant of an ML or PLs. In light of
the law explained in Sandur Manganese & Iron Ores Ltd. v. State
of Karnataka, it is not open to L&T to contend that the GoO was
bound to fulfil the promise made by it in the MoU to make available
iron mining rights to L&T for its steel plant. The above narration of
facts shows that the MoU dated 20th December 1995 was not acted
upon by both the L&T and the GoO. Enforcing any right of L&T to
be granted a PL or ML on the basis of the said MoU at this stage
does not arise.
Issue (iv): Validity of the order dated 27th September 2001
40. The order dated 27th September 2001 of the GoO rejects the
applications for ML and PL made by L&T on the short ground that
L&T could not show any progress in the proposed steel plant at
Gopalpur. It records the submission of L&T that it requires the ML
and PLs for another steel plant proposed to set up at Dhamra but that
till that date no MoU had been signed nor any application had been
filed for acquiring land for the said project at Dhamra. For the
reasons already discussed, this Court is not persuaded to hold that
the said order dated 27th September 2001 either suffers from non-
application of mind or contradicts Section 11(5) of the MMDR Act.
The said order dated 27th September 2001 cannot be said to be
reversing the order dated 21st September 1997. As already held, the
recommendation made on 21st October 1997 by the GoO was not "an
order" under Section 11(5) of the MMDR Act. The proceedings
dated 27th September 2001 cannot, therefore, be characterized as a
review of the earlier decision dated 21st October 1997 which in its
very terms was incomplete. It was only the first stage of the two
stages that had to be crossed before an order could be passed under
Section 11(5) of the MMDR Act. The impugned order dated 27th
September 2001 simply records the fact that the main reason for
which a preferential recommendation was made in favour of L&T no
longer existed. That reason cannot be said to be arbitrary or
irrational in light of the facts and circumstances discussed
hereinbefore.
41. Having examined the impugned order of the Mines Tribunal in
light of the facts and circumstances of the case, this Court does not
find any grounds having made out for interference.
42. The writ petition is dismissed and the pending application is
disposed of in the above terms. The interim order stands vacated.
S. MURALIDHAR, J
APRIL 27, 2011
ha
