Delhi High Court
Real Ispat & Power Limited vs Union Of India And Ors. on 6 July, 2011
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
W. P. (C) 4723/2010 & CM APPL 9368/2010 (for stay)
Reserved on: May 24, 2011
Decision on: July 6, 2011
REAL ISPAT & POWER LIMITED ..... Petitioner
Through: Mr. Sridhar Potaraju with
Mr. Gaichangpou Gangmei and
Ms. Tatni Basu, Advocates.
versus
UNION OF INDIA AND ORS ..... Respondents
Through: Mr. Sandeep Sethi, Senior Advocate with
Mr. Ajay Bhargava, Mr. Naveen Kumar,
Mr. A. S. Mathur and Ms. Shruti Verma, Advocates for
SKS Ispat Ltd.
Mr. Avi Singh with Mr. Shreya Dharmadhikari, Advocates
for Kalindi Ispat Pvt. Ltd.
AND
W. P. (C) 6212/2010 & CM APPL 12285/2010 (for stay)
KALINDI ISPAT PVT LTD ..... Petitioner
Through: Mr. Avi Singh with Mr. Shreya Dharmadhikari,
Advocates.
versus
UNION OF INDIA AND ORS ..... Respondents
Through: Mr. Ruchir Mishra, Advocate for R-1.
Mr. Sandeep Sethi, Senior Advocate with Mr. Ajay
Bhargava, Mr. Naveen Kumar,
W.P. (C) 4723 & 6212 of 2010 Page 1 of 16
Mr. A. S. Mathur and Ms. Shruti Verma, Advocates for
SKS Ispat Ltd.
Mr. Sridhar Potaraju with Mr. Gaichangpou Gangmei and
Ms. Tatni Basu, Advocates for Mr. Real Ispat Ltd.
Mr. Manoj Sharma with Mr. Sumit Bhardwaj, Advocates
for R-3.
CORAM: JUSTICE S. MURALIDHAR
1. Whether Reporters of local papers may be
allowed to see the judgment? No
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in Digest? Yes
JUDGMENT
06.07.2011
1. Real Ispat & Power Limited („RIPL‟) challenges, in W.P. (C) 4723 of 2010, an order dated
31st May 2010 passed by the Mines Tribunal setting aside the order dated 7th April 2007
passed by the State of Chhattisgarh („SOC‟) in the Department of Mineral Resources
(Respondent No. 2 herein) to the extent that it had recommended the grant of prospecting
licence („PL‟) for iron ore in favour of RIPL for an area of 235.03 hectares in part of the
forest compartment Nos. 112 and 179 under Core Forest Region situated in Forest Division,
Kabirdham, District Kabirdham (Kawardha), Chhattisgarh.
2. Kalindi Ispat Private Limited („KIPL‟) challenges, in W.P. (C) 6212 of 2010, the
aforementioned order dated 31st May 2010 to the extent that it maintained the
recommendation made by Respondent No. 2 SOC by its order dated 7th April 2007 for grant
of PL in favour of M/s. SKS Ispat Private Limited („SIPL‟) [„Respondent No. 3‟] for an
extent of 876.71 hectares. The prayer of KIPL is that the entire area applied for by KIPL
should have been granted to it.
3. The facts are that in the year 2001 the SOC formulated a mineral policy. It received
several applications for grant of PL for iron ore in the area of Forest Compartment Nos. 112,
179, 180, 259, 260 fn 245 (Part) in the Khara Forest Area, Chhattisgarh. Admittedly, the area
was a non-notified area. Applications were inter alia made for grant of PL by Chhattisgarh
Minerals Development Corporation („CMDC‟) on 1st May 2006 for an area of 2500 hectares,
by KIPL on 27th May 2006 for an area of 1300 hectares, by RIPL on 4th July 2006 for an area
of 300 hectares in Compartment Nos. 112, 179 and 180 and by SIPL on 26th September 2006
for an area of 1125.68 hectares in the aforementioned compartments as well as Compartment
No. 245. The applicants were given a hearing by the SOC on 7th August 2006. During the
course of hearing and thereafter, the applicants were asked by the SOC to provide the
following information in terms of Section 11 (3) of the Mines and Minerals (Development
and Regulation) Act, 1957 [„MMDR Act‟]:
"(a) Net worth of the company at the end of Financial Year 2005-2006;
(b) Experience in mining and prospecting of iron ore and other minerals;
(c) Production capacity and investment of industry based on established iron mineral;
(d) Proposed projects and investment for industry based on iron ore, and
(e) Effective steps taken for execution of proposed projects."
4. In its subsequent decision dated 7th April 2007, the SOC recommended to the central
government in terms of Section 5 (1) and Section 11 (5) MMDR Act grant of PL in respect of
iron ore in favour of KIPL over an area of 196. 84 ha (in Compartments 112 Part and 179
Part), in favour of RIPL over an area of 235.03 ha (in Compartments 112 Part and 179 Part)
and in favour of SIPL over an area of 876.71 ha (in Compartments 180,259, 260 and 245
Part) for a period of two years. SOC noted in the aforesaid decision that as regards the
CMDC, the grant of PL for iron ore in its favour over an extent of 586.24 ha in District
Kanker, 1913 ha in Sehaspur-Lohara forest region took its overall allocation in excess of
2500 ha the maximum permissible under Section 6 (1) (a) MMDR Act. The SOC considered
the applications of those applicants who had established a sponge iron factory based on iron
ore but had not been sanctioned/recommended mineral concessions of iron ore or where
recommendations had been made in respect of an area where availability of mineral was very
scarce keeping in view the plant capacity. KIPL had a functioning sponge iron plant of a
capacity of 0.30 LTPA. Its net worth was Rs. 9.05 crores for the year ending 31st March 2005
and 31st March 2006 and had made an investment of Rs.28 crores. The net worth of the RIPL
for the same period was Rs.21.49 crores. RIPL had a sponge iron plant of 0.60 LTPA
capacity and had invested Rs. 70 crores. SIPL‟s net worth was Rs. 198.88 crores for the same
period. Its plant capacity was 2.70 LTPA and investment was Rs. 295.47 crores. It was
further noticed that on 6th October 2006 the SIPL signed memorandum of understanding
(„MOU‟) with SOC for investment of Rs. 1470 crores for increasing the capacity of the
existing plant. Further, although SIPL had been recommended the grant of PL for an area of
750.30 hectares in Halbibinapal in District Kanker there was no possibility of permission
being received for diversion of the land under the Forest (Conservation) Act, 1980. In terms
of Section 11 (5) of the MMDR Act keeping in view the above factors the SOC decided to
give preference to the above three entities.
5. Aggrieved by the above decision, KIPL filed a revision application No. 12(19)/2007-RC-II
before the central government under Section 30 of the MMDR Act. In the said revision
application, RIPL and SIPL were impleaded as Respondents 1 and 2 respectively. During the
pendency of the revision application before the Mines Tribunal on 25th June 2008 the central
government granted provisional approval under Section 5 of the MMDR Act in terms of the
recommendation made by the SOC on 7th April 2007. On 8th August 2008 RIPL entered into
an MOU with the SOC with proposed investment of Rs. 720 crores. On 16th December 2008
the MOEF, Government of India granted RIPL permission under Section 2 of the Forest
Conservation to drill five bores of four inches width. This order was communicated to RIPL
by a letter dated 30th April 2009. On 16th February 2009 forest clearance was granted to KIPL
subject to the condition of digging 5 bore holes only 4 inches thick for prospecting in terms
of the PL granted to it. On 18th November 2009 the KIPL and the State Government entered
into PL agreement. Meanwhile, by an order dated 8th May 2009 the High Court of
Chhattisgarh directed the Mines Tribunal to dispose of the revision application within eight
weeks.
6. By the impugned order dated 31st May 2010 the Mines Tribunal held that the mere
comparison of „net worth‟ of the applicants could not furnish the „special reasons‟ or justify
the grant of PL in favour of a later applicant in terms of Section 11 (5) of the MMDR Act
read with Rule 35 MCR Rules. Further, the SOC had considered the production capacity,
status of other pending applications of the parties and the signing of MOUs which were not
factors envisaged in either Section 11 of the MMDR Act or Rule 35 MCR. The Mines
Tribunal noted that the MMDR Act provided for two distinct concession regimes: one for
„non-notified‟ areas where an applicant earlier in point of time would have preference; the
second was for „notified‟ areas where the relative merits of the different applicants would
determine the manner of equitable distribution of resources. The Mines Tribunal also referred
to guidelines issued by the Ministry of Mines („MOM‟) on 24th June 2009 and 9th February
2010. The Mines Tribunal noted that the MOU between the SOC and SIPL was signed on 6th
October 2006. SIPL had established its plant and invested Rs. 700 crores as on 7th April
2007. These constituted special reasons in favour of SIPL for the purposes of Section 11 (5)
MMDR Act. On the other hand, the MOU with RIPL was entered into after 7th April 2007. In
the absence of any special reason, the criteria spelt out in Section 11 (3) of the MMDR Act
could not be used to justify the grant of PL in favour of RIPL. Consequently, the Mines
Tribunal modified the order dated 7th April 2007 of the SOC only to the extent of
recommendation in favour of RIPL. The recommendation for grant of PL in favour of KIPL
and SIPL was left undisturbed. A direction was issued by the Mines Tribunal to the SOC to
re-examine the issue to the extent of the recommendation made for grant of PL to RIPL with
reference to the MOM guidelines dated 9th February 2010. Further the Mines Tribunal
directed that while considering the set aside part of impugned order and any balance free area
available, the SOC should consider the case of RIPL "keeping in view their claim to installed
capacity as 0.60 LTPA instead of 0.30 LTPA before passing a fresh order."
7. Mr. Sridhar Potaraju, learned counsel appearing for RIPL first submitted that the
interpretation placed on Section 11 (2) and Section 11 (3) read with Section 11 (5) of the
MMDR Act by the Mines Tribunal was erroneous. Although KIPL which had applied for PL
on 27th May 2006 was an earlier applicant within the meaning of Section 11 (2) MMDR Act,
KIPL had only the right to be considered for grant of PL. In other words, being an earlier
applicant did not give KIPL an indefeasible right to be granted the PL. It still had to satisfy
the basic norms for grant of PL which although not spelt out expressly could be inferred from
Section 11 (3) of the MMDR Act read with Rule 35 of the MCR. It is submitted that there
was a discretion in the SOC not to recommend the grant of PL for the entire area as applied
for by KIPL. According to Mr. Potaraju, the special reasons in Section 11 (5) MMDR Act to
justify a grant in favour of a later applicant was required to be shown only where the
application of an earlier applicant was rejected in its entirety and not where it was accepted in
part. In the instant case it was evident from para 12 of the decision dated 7th April 2007 of the
SOC that it was only after KIPL‟s application was first considered and recommended in part
that the subsequent applicants were considered in the order of their relative seniority. The
decision dated 7th April 2007 of the SOC was also consistent with the mineral policy of the
SOC announced in 2001 which stipulated that preference would be given in sanction of
ML/PL to those who are seriously interested in establishing mineral based industry in the
State. Finally it was submitted that the decision dated 7th April 2007 was also consistent with
the MOM guidelines dated 24th June 2009 and 9th February 2010 which envisage that the
special reasons to be adduced by the state government to justify the recommendation of the
PL in favour of a later applicant in terms of Section 11 (5) of the MMDR Act should be in
public interest for economic development. The criteria of investments already made, the net
worth of the applicant and the capacity of the functioning sponge iron plants were „special
reasons‟ for the purposes of Section 11 (5) MMDR Act. It is submitted that in any event the
MOM guidelines were prospective and could not be invoked to invalidate the impugned
decision dated 7th April 2007 of the SOC. On equities it is submitted that RIPL had already
completed its prospecting work in four out of the five permitted holes permitted to be drilled
and it had incurred an expenditure of Rs. 9.2 lakhs. Therefore, this area was no longer
available for prospecting and no purpose would be served by remitting the matter back to the
SOC. Lastly it is submitted that the decision dated 7th April 2007 of the SOC ought not to
have been interfered with by the Mines Tribunal in exercise of its revisional jurisdiction
merely because two reasonable views were possible.
8. Mr. Avi Singh, learned counsel appearing for the KIPL submitted that there were no
special reasons given by the SOC in its decision dated 7th April 2007 for recommending the
grant of PL in favour of SIPL. According to him, the reasons that weighed with the Mines
Tribunal for setting aside the recommendation in favour of RIPL equally applied to SIPL. It
is submitted that the observations in the impugned decision dated 7th April 2007 of the SOC
that forest clearance may not be able to be obtained in regard to the PL granted in favour of
SIPL over an area of 752.32 hectares in Halbibinapal of District Kanker was based on
surmises and conjectures. In any event, that would not constitute the special reasons for the
purpose of Section 11 (5) of the MMDR Act. The criteria of Section 11 (3) of the MMDR
Act applied only to notified areas and could not be extended to non-notified areas. As long as
KIPL was the first in order of seniority after CMDC, its indefeasible right for the grant of PL
for the entire area applied for could not be taken away. Mr. Singh pointed out that KIPL had
initially applied for a PL over an area of 7000 ha which was later reduced to 1300 ha.
Referring to the proviso to Section 6 (c) of the MMDR Act, it is submitted that no PL can be
granted in favour of SIPL in respect of an area which was "not compact or contiguous".
Referring to para 8.17 of the MOM government guidelines Mr. Singh submitted that the
central government would not grant prior approval to proposals for accommodating "multiple
applicants at the cost of the „first-in-time principle‟ or the „capacity and capability‟ principle
as the case may be." The „special reasons‟ for the purposes of Section 11 (5) MMDR Act
had to be something more than the matters referred to in Section 11 (3) of the MMDR Act.
He pointed out that there was no basis for restricting the PL to an area far less than what was
applied for and this rendered the decision arbitrary. Mr. Singh placed reliance on the
observations of the Supreme Court in Sandur Manganese and Iron Ores Limited v. State of
Karnataka (2011) 13 SCC 1.
9. Appearing for the SIPL, Mr. Sandeep Sethi, learned Senior counsel first submitted that
prior applicant did not have any indefeasible right for the grant of PL for the entire area
applied for. It is submitted that the SOC was within its rights, consistent with its obligation
under Article 39 (b) (c) of the Constitution of India, to exercise its discretion under Section
11 (2) of the MMDR Act and not grant PL to the prior applicant in respect of the entire area
applied for. In particular, he placed reliance upon the observations of the Supreme Court in
Indian Metals and Ferro Alloys Ltd. v. Union of India 1992 Supp 1 SCC 91 and
Dharambir Singh v. Union of India (1996) 6 SCC 702 and of this Court in Prism Cements
Limited v. Union of India 2010 (9) AD (Delhi) 88. Those who did not have established steel
plants were adversely affected by the policy of the SOC as revealed in its decision dated 7th
April 2007 and yet none of them had challenged the said decision. The parties before the
Mines Tribunal knew of the policy priorities of the SOC and information was also sought
from each of them on that basis. On merits it is submitted that the decision to recommend
grant of PL in favour of the SIPL was just and equitable although it was not for the entire
area applied for. Although the basis for restricting the grant of PL to areas less than what
was applied for was not spelt out in the impugned decision dated 7th April 2007, a broad
correlation could be drawn between the area available for allocation for PL and the respective
plant capacities of the applicants eligible for such grant. Mr. Sethi also referred to para 2 of
the impugned decision order dated 7th April 2007 of the SOC which noted that the
Directorate of Geology and Mining, SOC had carried out a geological survey confirming the
formation containing iron ore in the area but that the detailed prospecting work for
computation of stock of iron ore was yet to be conducted. This meant that KIPL could seek
the grant of ML in respect of an area notwithstanding that it had not been granted PL in that
area.
10. The first issue concerns the interpretation of Section 11 (2) of the MMDR Act which
reads as under:
"11(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 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 reconnaissance permit,
prospecting licence of mining lease; as the case may be, to such one of the
applicants as it may deem fit."
11. There are two distinct parts to Section 11 (2) MMDR Act. The substantive part applies to
non-notified areas. It states that where two or more persons have applied for a reconnaissance
permit („RP‟), PL or ML in respect of a non-notified area, the earlier applicant will have a
preferential right over the later applicant. Where the area is notified and the state government
invites applications for RP, PL or ML all the applications received during the period
specified in such notification as well as the applications received prior to the publication of
such notification shall be deemed to have been received on the same date. The second
proviso to Section 11 (2) states that "where any such applications are received on the same
day" meaning application that has been made under Section 11 (2) in respect of non-notified
area and applications received on the same day in respect of notified area (in terms of first
proviso), then the State Government shall grant a PL or ML, "to such one of the applicants"
as it may deem fit. This it will do "after taking into consideration the matter specified in sub-
section (3)." Thus the factors listed out in Section 11 (3) of the MMDR Act would have to
be taken into account by the State Government in respect of a non-notified area only where
all the applications for grant of PL in respect of such non-notified area "are received on the
same day". This has to be read along with Rule 35 of the MCR, which reads as under:
"35. Preferential rights of certain persons - Where two or more persons
have applied for a reconnaissance permit or a prospecting licence or a
mining lease in respect of the same land, the State Government shall, for
the purpose of sub-section (2) of Section 11, consider besides the matters
mentioned in clauses (a) to (d) of sub-section (3) of Section 11, the end
use of the mineral by the applicant."
12. Rule 35 refers to a situation where the State Government has to account for the factors in
Section 11 (3). It requires the State Government to take into account another factor in
addition to the factors enumerated in clauses (a) to (d) of sub-section (30 of Section 11
MMDR Act. This is the "end use of the mineral by the applicant." However, this again
would apply where two or more applicants have in respect of a non-notified area applied on
the same day.
13. The resultant position on a collective reading of Section 11 (2), its second proviso and
Section 11 (3) of the MMDR Act along with Rule 35 MCR in respect of non-notified areas
is that the priority accorded to an applicant who applies first-in-time remains undisturbed.
The only exception is envisaged by sub-section (5) of Section 11 of the MMDR Act. A
departure from the first-in-time principle is possible where the State Government records in
writing special reasons under Section 11 (5) of the MMDR Act. As regards the case on hand,
the area was a non-notified area and after the elimination of the CMDC, KIPL was the first-
in-time applicant. Subject to satisfying the basic eligibility conditions, KIPL‟s right to be
considered for grant of PL as a first-in-time applicant could be overlooked only if the SOC
was able to record special reasons for not according to KIPL that priority.
14. Unlike a notified area where the departure from the first-in-time principle as envisaged
in the first proviso to Section 11 (2) read with the second proviso is made conditional upon
the State Government having to account for the factors spelt out in clauses (a) to (d) of
Section 11 (3), in respect of a non-notified area, there is no such requirement. The discretion
vested in the State Government under Section 11 (5) MMDR Act to depart from the first-in-
time principle appears prima facie to be a wide one, not controlled by any other provision of
the MMDR Act. However, from a legal and constitutional perspective the discretion is not
unfettered. The requirement that reasons must be recorded in writing to justify the departure
indicates that the State Government has been made accountable for the exercise of such
discretion. The reasons have to be germane to the exercise of the power. They have to be in
conformity with the object and purpose of vesting such wide discretionary power in the State
Government. The decision of the State Government, in exercise of such discretion, would
obviously be justiciable and judicially reviewable on the Article 14 standards of
reasonableness and fairness. Thus while the „special‟ reasons‟ have to be precisely that:
"special", what should constitute "special" will depend on the facts and circumstances and
will have to be tested on a case to case basis for their reasonableness and fairness. In a given
case, where the area is a notified one, these „special‟ reasons could be a greater degree of the
factors outlined in clauses (a) to (d) of Section 11 (3) read with Rule 35 MCR. But in
another case, they by themselves may not be sufficient. "Special" reasons in such cases
would have to be something other than the factors outlined in Section 11 (3) read with Rule
35 MCR. For a non-notified area, while the factors in Section 11 (3) MMDR Act read with
Rule 35 MCR need not determine the „special‟ reasons, some guidance could be had from
the said provisions. Precisely for the reason that these „special‟ reasons cannot be
straitjacketed, it is not possible to accept the contention that they need not be shown to exist
as long some part of the area applied for by the earlier applicant, which in this case is KIPL,
has been granted to it. Every exercise of discretionary power has to be held accountable in
law and this case is no exception to that broad overarching principle.
15. Given the scheme of Section 11 MMDR Act it is difficult to accept the extreme
proposition advanced on behalf of KIPL that, subject to it being otherwise eligible for grant
of PL, its right as a first-in-time applicant to be granted a PL to the entire extent applied for
in a non-notified area is absolute and cannot be taken away except for special reasons to be
accorded under Section 11 (5) MMDR Act. A more reasonable interpretation would be that
in a non-notified area while there is certainly a right in an earlier applicant to be considered
for the grant of PL, it need not be for the entire area applied for as long as the reasons
adduced under Section 11 (5) MMDR Act are „special‟ and satisfy the test of reasonableness
and non-arbitrariness. Conversely, the provision does not prohibit a State Government, for
valid reasons, deciding to recommend grant of PL in respect of an area in favour of more
than one applicant. On this yardstick, the impugned decision dated 11th April 2007 of the
SOC cannot on that score be held to be unreasonable, arbitrary or contrary to law.
16. Although extensive reliance was placed by learned counsel for KIPL on the MOM
guidelines, there is merit in the contention of RIPL and SIPL that those guidelines were not
in vogue when the impugned decision of the SOC dated 11th April 2007 was taken and it
would not be proper to determine the validity of the said decision with reference to those
guidelines. Even otherwise, the MOM guidelines are supplemental to the statutory
provisions and are not to be read in substitution thereof. Para 8.17 of the guidelines dated
24th June 2009 of the MOM acknowledges that the statutory scheme applicable to notified
and non-notified areas is not the same. Para 8.13 which concerns non-notified areas states
that "first-in-time principle must be the norm" and that "the central government would
normally not favour an exception to this principle". It emphasizes that "conditions under
Section 11 (3) are not the same as the „special reasons‟ mentioned in Section 11 (5)" of the
MMDR Act and that „special reasons‟ have to be stronger than the matters referred to in
Section 11 (3) of the MMDR Act. These guidelines further states that "special reasons have
to be exceptional by their very nature and not routine or obvious." Para 8.14 of the MOM
guidelines acknowledges that "special reasons would be those which form part of the State
Mineral Policy or other duty notified policy document, so that the „special reasons‟ are
objectively founded and are not perceived as being formulated to suit requirements on a case
by case basis. Since these would be State-specific, those guidelines cannot exhaustively
define „special reasons‟. However, the special reasons should be in the public interest and
the economic development and must be capable of withstanding legal scrutiny." Although
Para 8.17 of the MOM guidelines states that dividing an area amongst more than one
applicant "would be against the provisions of Section 11 (2)" it appears to permit it if "there
is a clear reasoned finding that the capacity or capability of the earlier applicant is not
commensurate with the area applied for." That the MOM guidelines are meant to be
prospective is made clear from the sentence which reads: "The Central Government will
henceforth not give prior approval to proposals for accommodating multiple applicants at
the cost of the „first-in-time‟ principle or the „capacity and capability‟ principle as the case
may be."
17. The above guidelines were further elaborated in the MOM guidelines of 9th February
2010 in which it was recommended that the following „special reasons‟ may be adopted and
applied by the state government while recommending mineral concession proposals under
Section 11 (5) of the MMDR Act:
"(1) Exhaustion of captive capacity
(2) Special technology
(3) Ownership of the land of the recommended area
(4) Considering an adjoining area for mining in the interest of scientific and
systematic mining and reduction in barrier loss provided they are used
consistently in all cases.
(5) MOU cases, where a plant/industry has already been set up on the basis of an
MOU but mineral concession not yet granted as per the MOU, provided that all
such MOUs will be treated as a single class (without distinction of size, quantum
of investment etc.) and the first-in-time within the class will be accorded the first
right."
18. As already observed the above guidelines of the MOM are prospective and cannot be
made applicable to the decision dated 7th April 2007 of the SOC. Secondly, they are at
best recommendatory and supplemental to the statutory provisions. Thirdly, the mineral
policy of the SOC was already announced in 2001 and was available in the public
domain. It clearly spelt out that "preference would be given in sanction of ML, PL to
those who are seriously interested in establishing mineral based industry in the State."
There was no illegality in the SOC applying such criterion as spelt out in its mineral
policy of 2001. Fourthly, the decision to apportion the area appears to have some
correlation to the respective plant capacities and the availability of iron ore. Fifthly, the
factors cited in the impugned decision dated 7th April 2007 cannot be said to be irrelevant
even in the context of those factors outlined in the MOM guidelines extracted
hereinbefore. The additional factor as far as the SIPL was concerned was that it had
entered into an MOU with the SOC for investment of Rs. 12.82 crores on 6th October
2006 for increasing its plant capacity. Further, the earlier recommendation in its favour
for grant of PL in the Halbibinapal part area was not likely to materialize since it was
unlikely that clearance under the FCA would be granted. When the case was heard before
the Mines Tribunal it was disclosed that SIPL had in fact surrendered the area which fact
was acknowledged by the SOC.
19. In Sandur Manganese and Iron Ores Limited v. State of Karnataka the Supreme
Court was considering the case of grant of ML in a notified area. Several applications had
been received prior to the notification by the state government which had in terms of the
first proviso to Section 11 (2) of the MMDR Act be considered along with applications
received pursuant to the notification as if they had all been received on the same date.
The observations in para 20 and para 37 of the judgment make it clear that Section 11 (5)
would have no application to notified areas because "in such a case both the first proviso
to Section 11 (2) and Section 11 (4) make it clear that all applications will be considered
together as having been received on the same date." The judgment further noticed that
Rule 35 only requires fulfillment of one additional factor apart from the factors as set out
in Section 11 (3) of the MMDR Act i.e. of the „end use‟ of the minerals and "not the
existing investments made by the applicants." It was in the context of the above facts that
it was held that the State of Karnataka had 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." Further it was held that having notified the
area, the State Government certainly could not thereafter honour an alleged commitment
by ousting other applicants even if they were more deserving on the merit criteria as
provided in Section 11(3). It is clear that all the above observations were made in the
context of notified areas. It would therefore not be appropriate to extend the ratio of the
judgment in Sandur Manganese and Iron Ores Limited ipso facto to a decision
concerning grant of PL in a non-notified area.
20. In Dharambir Singh v. Union of India the Petitioner had applied for ML and PL
claiming that he had discovered limestone minerals in Bhemdemti Dostpur,
Mohindergarh District, Haryana. Subsequently, the Government of Haryana notified that
area under Rule 59 MCR. The Petitioner contended that as an earlier applicant he was
entitled to the grant of ML. The Supreme Court explained that while granting a PL or ML
the State Government has a discretion "to grant or refuse to grant any prospective licence
or licence to any applicant. No applicant has a right, much less vested right, to the grant
of mining lease for mining operations in any place with the State." The above
observations were relied upon by this Court in Prism Cements Limited v. Union of
India. It was observed that "normally the rule of seniority has to be applied; however, the
rule is not invariable; if the State Government considers that a later applicant has the
ability and capability to sub-serve the goals of the Act, better than a previous applicant, it
can override the rule of preference. However, while doing so, it has to record "special
reasons" which are germane to the situation at hand. The question was "whether the
reasons, of considerations which weighed with the State are relevant, and are genuine,
and also can be considered sufficient." It was pointed out that in exercise of the power of
the Constitution of India the scope of judicial review was limited. "The higher
investment, existence of power plant and employment generated, cannot be considered
irrelevant, as long as it subserves the larger purpose of the Act."
21. Viewed in light of the law explained in the decision in Dharambir Singh v. Union of
India this Court is unable to find any perversity in the decision dated 7th April 2007 of
the SOC, as affirmed by the Mines Tribunal insofar as the grant of PL in favour of SIPL
to an extent of 876.71 hectares is concerned. However, as regards the recommendation
made in favour of RIPL the impugned decision dated 7th April 2007 of the SOC fails to
indicate the special reasons for such recommendation. It only refers to the fact that RIPL
has a functional plant with a capacity of 0.670 LTPA. This by itself cannot possibly
constitute the „special‟ reason for the purposes of Section 11 (5) MMDR Act. The MOU
with the RIPL was entered into subsequently on 8th August 2008 and therefore was not a
factor that could sustain the decision of the SOC dated 7th April 2007. The Mines
Tribunal therefore correctly distinguished the grant of PL in favour of SIPL from that in
favour of RIPL. The purported investment made by RIPL to work out the PL granted to it
does not create any special equities to sustain the grant in its favour. In any event, a
direction has been issued in the impugned order by the Mines Tribunal to re-examine the
question of grant of PL to the extent that it has been set aside with reference to the MOM
guidelines. The claim of RIPL will also be re-examined in the process. In the
circumstances, this Court is not inclined to interfere with the impugned order dated 31st
May 2010 of the Mines Tribunal to the extent it sets aside the recommendation of the
SOC in favour of RIPL.
22. For the aforementioned reasons, this Court declines to interfere with the impugned
order dated 31st May 2010 of the Mines Tribunal. Both writ petitions and pending
applications are hereby dismissed but in the facts and circumstances, with no orders as to
costs. The interim orders stand vacated.
S. MURALIDHAR, J
JULY 6, 2011
rk
