# \ [201 OJ 11 S.C.R. 240 SAN DUR MANGANESE & IRON ORES LTD v. STATE OF KARNATAKA & ORS

- **Citation:** [2010] 11 S.C.R. 240
- **Court:** Supreme Court of India
- **Decided:** 2010-09-13
- **Case number:** Civil Appeal No. 7944 of 2010
- **Bench:** P. Sathasivam, H.L. Dattu
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/201-oj-11-s-c-r-240-san-dur-manganese-iron-ores-ltd-v-state-of-karnataka-ors-26359
- **Pages:** 71

## Headnote

Mines and Minerals (Development and Regulation) Act,
1957 - s. 11(1), (2), (3), (4), (5) - Mineral Concession Rules,
C 1960 - rr. 59, 60 and 35 - Mining lease - Grant of - Renewal
of mining lease in favour of 'S' Company but not for the entire
area- Applications by 'S' for lease over certain area within the
deleted area - Rejected by State Government - Notification
ulr. 59(1) by State Government notifying large area for re-grant
o of mining lease including area applied by 'S' - Invitation of
applications from public - Fresh application by 'S', 'MSPL'
and 'K' pursuant to the Notification - However, application by
'J' made only prior to the Notification :- Recommendation by
State Government to Central Government for approval of
E proposed grant in favour of 'J' and 'K' which was subsequently
approved by Central Government - Writ petition challenging
the recommendation - Single Judge of High Court quashing
the grant in favour of 'J' and 'K' - Division Bench setting aside
the order - On appeal, held: State Government cannot justify
F grant based on criteria that are de hors the MMDR Act and
MC Rules - State Government's recommendation and the
proceedings of Chief Minister was contrary to the provisions
of s. 11 and rr. 59 and 60 and not valid in law - J's application
made prior to the Notification could not be entertained along
with the applications made pursuant to the Notification -
G Proposed investment in mines and in the industry based on
the minerals is a relevant factor -
Criteria of captive
consumption not a controlling factor to grant fresh lease -
State Government has no authority under the Act to make
H
240
SANDUR MANGANESE & IRON ORES LTD. v.
241
STATE OF KARNATAKA & ORS.
commitments to any person that it will, in future, grant a mining
A
/ease in the event that person makes investment in any
project - Recommendation in favour of 'J' and 'K' cannot be
saved by law of equity- Flaw in the recommendation of State
Government requires re-consideration, thus, matter cannot be
remitted to the Central Government - Order of Division Bench
B
as well as the decision of State Government and the Central
Government quashed -
State Government directed to
consider all applications afresh - Mines and minerals.
Power of State Government under the Act and the Rules
- Extent of - Held: State Government is denuded of all C
legislative and executive power under Entry 23 of List-I/ read
with Article 162 after passing of the MMDR Act -
State
Government is purely a delegate of Parliament and a statutory
functionary, for the purposes of s. 11 (3), hence it cannot act
in a manner that is inconsistent with the provisions of s. 11(1)
D
in" the grant of mining /eases - Constitution of India, 1950 -
Article 162, List II Entry 23.
Interpretation of statutes - Rule of construction - When
statute vests certain power in an Authority to be exercised in
E
a particular manner - Held: Authoriiy has to exercise the
power in the manner provided in the statute itself - Any
deviation therein, cannot be sustained.
Ex-Ruler of Sandur State (now appellant Company)
was granted lease for 20 years for mining of Iron and
Manganese Ores in respect of 29 sq. miles falling within
the boundaries of the Sandur State. The appellant
Company invested in mining of Ores. After the expiry of
F
20 years, the lease was not renewed for the entire area
as given in the original lease. In 1992, 'HG' was granted
G
60 hectares out of the same applied area. The appellant
Company again applied for grant of lease within the area
deleted from its original lease but the same was rejected.
The appellant Company filed a revision petition before the
H
242
SUPREME COURT REPORTS
[201 OJ 11 S.C.R.
A Government of India and the matter was remanded to the
State Government. Thereafter, 'MSPL' made an
application to the State Government for grant of mining
lease over an area which was previously held by Sandur
and also sought relaxation of the conditions specified in
B Rule 59(1) of the Mineral Conce

## Text

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A
B
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[201 OJ 11 S.C.R. 240
SAN DUR MANGANESE & IRON ORES LTD.
v.
STATE OF KARNATAKA & ORS.
(Civil Appeal No. 7944 of 2010)
SEPTEMBER 13, 2010
[P. SATHASIVAM AND H.L. DATTU, JJ.]
Mines and Minerals (Development and Regulation) Act,
1957 - s. 11(1), (2), (3), (4), (5) - Mineral Concession Rules,
C 1960 - rr. 59, 60 and 35 - Mining lease - Grant of - Renewal
of mining lease in favour of 'S' Company but not for the entire
area- Applications by 'S' for lease over certain area within the
deleted area - Rejected by State Government - Notification
ulr. 59(1) by State Government notifying large area for re-grant
o of mining lease including area applied by 'S' - Invitation of
applications from public - Fresh application by 'S', 'MSPL'
and 'K' pursuant to the Notification - However, application by
'J' made only prior to the Notification :- Recommendation by
State Government to Central Government for approval of
E proposed grant in favour of 'J' and 'K' which was subsequently
approved by Central Government - Writ petition challenging
the recommendation - Single Judge of High Court quashing
the grant in favour of 'J' and 'K' - Division Bench setting aside
the order - On appeal, held: State Government cannot justify
F grant based on criteria that are de hors the MMDR Act and
MC Rules - State Government's recommendation and the
proceedings of Chief Minister was contrary to the provisions
of s. 11 and rr. 59 and 60 and not valid in law - J's application
made prior to the Notification could not be entertained along
with the applications made pursuant to the Notification -
G Proposed investment in mines and in the industry based on
the minerals is a relevant factor -
Criteria of captive
consumption not a controlling factor to grant fresh lease -
State Government has no authority under the Act to make
H
240
SANDUR MANGANESE & IRON ORES LTD. v.
241
STATE OF KARNATAKA & ORS.
commitments to any person that it will, in future, grant a mining
A
/ease in the event that person makes investment in any
project - Recommendation in favour of 'J' and 'K' cannot be
saved by law of equity- Flaw in the recommendation of State
Government requires re-consideration, thus, matter cannot be
remitted to the Central Government - Order of Division Bench
B
as well as the decision of State Government and the Central
Government quashed -
State Government directed to
consider all applications afresh - Mines and minerals.
Power of State Government under the Act and the Rules
- Extent of - Held: State Government is denuded of all C
legislative and executive power under Entry 23 of List-I/ read
with Article 162 after passing of the MMDR Act -
State
Government is purely a delegate of Parliament and a statutory
functionary, for the purposes of s. 11 (3), hence it cannot act
in a manner that is inconsistent with the provisions of s. 11(1)
D
in" the grant of mining /eases - Constitution of India, 1950 -
Article 162, List II Entry 23.
Interpretation of statutes - Rule of construction - When
statute vests certain power in an Authority to be exercised in
E
a particular manner - Held: Authoriiy has to exercise the
power in the manner provided in the statute itself - Any
deviation therein, cannot be sustained.
Ex-Ruler of Sandur State (now appellant Company)
was granted lease for 20 years for mining of Iron and
Manganese Ores in respect of 29 sq. miles falling within
the boundaries of the Sandur State. The appellant
Company invested in mining of Ores. After the expiry of
F
20 years, the lease was not renewed for the entire area
as given in the original lease. In 1992, 'HG' was granted
G
60 hectares out of the same applied area. The appellant
Company again applied for grant of lease within the area
deleted from its original lease but the same was rejected.
The appellant Company filed a revision petition before the
H
242
SUPREME COURT REPORTS
[201 OJ 11 S.C.R.
A Government of India and the matter was remanded to the
State Government. Thereafter, 'MSPL' made an
application to the State Government for grant of mining
lease over an area which was previously held by Sandur
and also sought relaxation of the conditions specified in
B Rule 59(1) of the Mineral Concession Rules, 1960.
Subsequently, 'J' Company also made an application for
grant over the same area. The State Government made a.
recommendation to the Central Government for grant of
lease to the 'MSPL'. While the matter was under
c consideration, one 'ZS' filed a writ petition seeking
declaration that he was entitled for grant of a mining
lease in his favour. However, the Central Government
returned the proposal of the State Government directing
it to await an environmental study.
D
On 26/27 .02.2002, the State Government by a letter
conveyed to the appellant Company that out of the area
of 513.16 hectares applied for by the appellant Company,
only an extent of 256 hectares (640 acres) was available
to it. The appellant Company again filed a revision
E petition. On 15.03.2003, the State Government issued a
Notification under Rule 59(1) of the Rules, notifying the
availability of a large area for re-grant of mining lease
which was referred to as 'Held Area Notification' including
the area applied by the appellant Company. The appellant
F Company applied for the grant of mining lease over an
area of 200 hectares in the notified area afresh. On
29.07.2003, the Government of India directed the State
Government to consider the appellant's application.
However, the State Government did not pass any order.
G Pursuant to the Notification, 'MSPL' made a fresh
~pplication for grant of mining lease over the notified
area. 'K' and 88 other applicants also applied. However,
'J' did not apply. On 06.12.2004, the State Government
made a recommendation to the Central Government
H
SAN DUR MANGANESE & IRON ORES LTD. v.
243
STATE OF KARNATAKA & ORS.
under Section 5 of the Mines and Minerals (Development
A
and Regulation) Act, 1957 for approval of the proposed
grant of mining lease to 'J' and 'K'. 'MSPL' and some of
the applicants made representations to the Central
Government against the said recommendation made by
the State Government. The appellant Company as also
B
'MSPL' filed separate writ petitions challenging the
recommendation dated 06.12.2004 of the State
Government. During pendency, the Central Government
gave its approval for grant of mining lease in favour of
'J' and 'K'. The Single Judge of the High Court by order c
dated 07 .08.2008 quashed the Notification dated
15.03.2003 and the mining licences granted in favour of
'J' and 'K'. The Division Bench of the High Court by order
dated 05.06.2009 upheld the validity of Notification of the
State Government dated 15.03.2003 and the proceedings
0
dated 06.12.2004 and consequently approval of the
Central Government were held valid. Therefore, the
instant Special Leave Petitions were filed.
The questions which arose for consideration in these
appeals were as follows:
(i) Whether the State Government's recommendation
dated 06.12.2004 and the proceedings of the Chief
Minister are contrary to the provisions of Section 11
of the Act and Rules 59 and 60 of MC Rules and not
valid in law.
E
F
(ii) Whether the application made by respondent-'J'
prior to the Notification dated 15.03.2003 is capable
of being entertained along with the applications made
pursuant to the said notification.
G
(iii) Whether the order of the High Court of Karnataka
in the case of 'ZS' permit the consideration of the
application made by the respondent-'J' prior to the
Notification dated 15.03.2003.
H
244
SUPREME COURT REPORTS
[2010] 11 S.C.R.
A
(iv) Whether Rule 35 of the MC Rules justify the
recommendation of the State Government in favour
of 'J' and 'K'.
B
c
D
E
F
(v) Whether the criterion of 'captive consumption'
referred to in Tata Iron and Steel Co. Ltd. vs. Union
of India (1996) 9 SCC 709 was applicable to the
instant case despite not being one of the factors
referred to in Section 11 (3) of the MMDR Act or Rule
35 of the MC Rules.
(vi) Whether factors such as the past commitments
by the State Government to applicants who have
already set up steel plants, are relevant for grant of
lease despite the MMDR Act and the MC Rules
constituting a complete Code.
(vii) Whether the iecommendation in favour of 'J' and
'K' is saved by t~e operation of the Law of Equity.
(viii) Whether the Single Judge as well as the Division
Bench of the High Court are justified in arriving at the
said conclusion.
(ix) Whether it is advisable to remit the matter to the
Central Government.
Partly allowing the appeals, the Court
HELD: 1.1. A perusal of the proceedings of the Chief
Minister shows that no clear reasons were given to show
as to why 'J' and 'K' were preferred over other applicants.
There was no plausible reason why the applications of
G the appellants were not considered favourably. A
summary of the applications was prepared and at the
end certain columns were left blank which the Chief
Minister filled by hand and then signed the proceedings.
(Para 18) (281-B-C]
H
SANDUR MANGANESE & IRON ORES LTD. v.
245
STATE OF KARNATAKA & ORS.
1.2. The evaluation of all 111 applications was done
A
in three successive stages in a manner not envisaged by
Section 11 of the Mines and Minerals (Development and
Regulation) Act, 1957. No such procedure of three stage
consideration or differentiation between individuals and
Companies and those Companies with existing
B
investments and those without existing investment is
envisaged in Section 11. The proceedings of the Chief
Minister, at no level, considered the various guiding
criteria mentioned in Section 11 (3). Only one criteria,
namely, 'proposed investment' was taken into account in c
evaluating some applications. However, two irrelevant
points were taken into account, namely, (i) whether or not
the applicant holds a mining lease in the State, and (ii) the
amount of their past investment in steel plant. The
proceedings recommended in favour of 'J' and 'K' was
0
justified by the special reasons specifically stated at the
very end in terms of Section 11(5). [Paras 19 and 20] [281D-F; 282-B-D]
1.3. A plain reading of Section 11 (5) makes it amply
clear that it would apply to favour a later applicant over
E
an earlier applicant which is relevant only in the event that
the main provision of Section 11 (2) relating to preference
of prior applicants applies and not in the case of
Notification inviting applications, whether it is under the
first proviso to Section 11 (2) or 11 (4) under the later
F
proviso, upon Notification, by deeming fiction all
applications are treated as having been received on the
same date. [Para 20] [282-G-H; 283-A]
1.4. The proceedings of the Chief Minister also violate
G
Section 11 (4). Sub-section (4) permits only the
applications made pursuant to the Notification to be
taken into account and not applications made prior to the
Notification. The Notification referred to in the first
proviso to Section 11 (2) is intended only to invite
H
applications in respect of 'virgin areas'. In the case of
246
SUPREME COURT REPORTS
[201 O] 11 S.C.R.
A previously held areas covered by Notification dated
15.03.2003, applications made prior to the Notification
could not be entertained because they were pre-mature.
[Para 21] [283-A-F]
B
1.5. In view of the specific parliamentary declaration,
there is no question of the State having any power to
frame a policy de hors the MMDR Act and the Rules.
[Paras 22, 24 and 25] [283-F-G; 287-B-D]
State of Orissa vs. M.A. Tulloch and Co. (1964) 4 SCR
C 461; Baijnath Kedio vs. State of Bihar and Ors. (1969) 3 SCC
838; Hingir Rampur Coal Co. Ltd. vs. State of Orissa 1961
(2) SCR 537; State of West Bengal vs. Kesoram Industries
Ltd. and Ors. (2004) 10 SCC 201; Bharat Coking Coal Ltd.
vs. State of Bihar and Ors. (1990) 4 SCC 557; State of Assam
D and Ors. vs. Om Prakash Mehta and Ors. (1973) 1 SCC 584;
Quarry Own~rs' Association vs. State of Bihar and Ors. (2000)
8 sec 655/ relied on.
1.6. It is not open to the State· Government to justify
E grant based on criteria that are de hors to the 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
F particular manner then the said authority has to exercise
it only in the manner provided in the statute itself. [Para
28] [287-G-H]
C.I. T. Mumbai vs. Anjum M.H. Ghaswala and Ors. (2002)
G 1 SCC 633; Captain Sube Singh and Ors. vs. Lt. Governor
of Delhi and Ors. (2004) 6 sec 440; State of U. P. vs.
Singhara Singh and Ors. (1964) 4 SCR 485, relied on.
TISCO vs. u. 0.1. and Anr. (1996) 9 sec 709,
H distinguished.
SANDUR MANGANESE & IRON ORES LTD. v.
247
STATE OF KARNATAKA & ORS.
2.1. Section 11 (1) provides preferential right to the
A
holder of reconnaissance permits or a prospecting
licencee who has identified mineral resources in the area
allotted to him for grant of a mining lease, subject to
certain conditions specified in the proviso appended
thereto. The over-riding character of the priority given to
B
the successful prospecting licencee or reconnaissance
permit-holder is clear from the fact that each of the
subsequent sub-sections in Section 11 is made subject
to Section 11 (1 ). Section 11 (2) gives preference to a prior
applicant for grant of reconnaissance permit, prospecting
licence or mining lease over later applicants where the
State Government has not issued any Notification. The
analysis of the Report of the Committee to Review the
Existing Laws and Procedure for Regulation and
Development of Minerals makes it clear that the main
provision in Section 11 (2) applies to 'virgin areas'; and
that an area that is previously held or reserved would
require a Notification for it to become available. The first
proviso to Section 11 (2) carves out an exception to the
preferential right based on priority of applications in point
c
D
E
of time refe1:.red to in the main provision. It makes it clear
that where the State Government subsequently issues a
notification inviting applications for grant, the prior and
subsequent applications to the Notification would be
considered as if they were filed on the same day and no
priority in order of time would be given. The second . F
proviso requires the State Government to examine the
matters set out in Section 11 (3) while considering the
applications for grant. Under the ordinary principles of
statutory interpretation, the first proviso to Section 11 (2)
embraces the field that is covered by the main provision.
G
Thus; the Notification calling for applications referred to
in the first proviso to Section 11 (2) applies only to virgin
areas. [Paras 31, 32 and 33] [290-D-H; 291-A-D; 292-C-E]
Indian Metals and Ferro Alloys Ltd. vs. Union of India and
H
248
SUPREME COURT REPORTS
[201 OJ 11 S.C.R.
A Ors. 1992 Supp. 1 SCC 91; Abdul Jabar vs. State of J&K.
AIR 1957 SC 281; Ram Narain Sons vs. Asst. CST 1955 (2)
SCR 483, relied on.
2.2. Section 11 (3) specifies the matter relevant for
8
purposes of second proviso to Section 11 (2). Section
11 (3)(d) provides that "the investment which the applicant
proposes to make in the mines and in the industry based
on minerals" and it speaks about investment proposed
to be made and not past investments. Thus, it confines
the concept of "captive consumption of minerals to
C proposed investment and not past investments". Even
the residuary clauses in Section 11 (3)(e) are limited to
'matters as may be prescribed', which would necessarily
mean matters prescribed by Rules. [Para 35] [293-C-F]
D
BSNL Ltd. and Anr. vs. BPL Mobile Cellular Ltd. and Ors.
(2008) 13 sec 597, referred to.
2.3. Sub-section (4) of Section 11 contemplates a
situation where a Notification is issued inviting
E applications for an area for grant. In contrast to the first
proviso to Section 11 (2), it provides that all applications
received pursuant to a Notification shall be considered
simultaneously without assigning any priority in point of
time, and after taking into account the matters specified
in Section 11 (3). Section 11 (4), in effect, covers exactly
F the same field as the first and second proviso to Section
11 (2) read along with Section 11 (3) with one difference,
i.e., unlike the first proviso to Section 11 (2), it provides for
consideration of only those applications that are made
pursuant to the Notification and not those made prior to
G the Notification. Notification under Section 11 (4) is
consistent with Rule 59(1) read with Rule 60 insofar as
applications received prior to the notification would not
be entertained. The first proviso to Section 11 (2) was
being added to cover virgin areas, then provided for the
H
SAN DUR MANGANESE & IRON ORES LTD. v.
249
STATE OF KARNATAKA & ORS.
addition of Section 11 (4), in order to ensure that the
A
Notification referred to in Rule 59(1) together with Rule
60 would not render ultra vires the MMDR Act. It cannot
be said that the first proviso of Section 11 (2) would cover
Notifications under Rule 59(1) because this would render
Section 11 (4) otiose and redundant. [Para 36) [293-F-H;
B
294-A-D)
J.K. Cotton Spinning & Weaving Mills Co. Ltd. vs. State
of UP. AIR 1961 SC 1170; O.P. Sing/a and Anr. vs. Union
of India and Ors. (1984) 4 sec 450, referred to.
c
2.4. Section 11 (5) carves out an exception to the
preference in favour of prior applicants in the main
provision of Section 11 (2). It permits the State
Government, with the prior approval of the Central
Government, to disregard the priority in point of time in
D
the main provision of Section 11 (2) and to make a grant
in favour of a latter applicant as compared to an earlier
applicant for special reasons to be recorded in writing. It
also gives an. indication that it can have no application
to cases in which a Notification is issued because, in
E
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. Thus, the proceedings of the Chief Minister
and the recommendation dated 06.12.2004 are contrary
F
to the Scheme of the MMDR Act as they were based on
Section 11 (5) which had no application at all to
applications made pursuant to the Notification dated
15.03.2003. [Para 37) [294-F-H; 295~A]
2.5. Section 11 (4) would apply to a Notification issued
G
under Rule 59(1). Rule 59(1) provides that the categories
of areas listed in it including, inter alia, areas that were
previously held or being under a mining lease or which
was reserved for exploitation by the State Government or
under Section 17 A of the Act, shall not be available for
H
250
SUPREME COURT REPORTS
[2010] 11 S.C.R.
A grant unless (i) an entry is made in the register and (ii)
its availability for grant is notified in the Official Gazette
specifying a date not earlier than 30 days from the date
of Notification. Sub-rule (2) of Rule 59 empowers the
Central Government to relax the conditions set out in
B Rule 59(1). As per r. 60, an application for grant of
connaissance permit, prospecting licence or mining
lease in respect of an area whose availability is required
to be notified under Rule 59 shall, if no notification is
issued; or where Notification is issued, the 30-days
c black-out period specified in the Notification pursuant to
Rule 59(1 )(i)(ii) has not expired, be deemed to be premature and shall not be entertained. Section 11 (4) is
consistent with Rules 59 and 60 when it provides for
consideration only of applications made pursuant to a
0
Notification. The consideration of applications made prior
to the Notification, as required by the first proviso to
Section 11 (2), is clearly inconsistent with Rules 59 and
60. In such circumstances, a harmonious reading of
Section 11 with Rules 59 and 60, therefore, mandates an
E interpretation under which Notifications would be issued
under Section 11 (4) in the case of categories of areas
covered by Rule 59(1) of the Rules. [Para 38) [295-B-G]
2.6. The Division Bench erred in concluding that
applications made prior to the Notification under Rule
F 59(1) which are pre-mature and cannot be entertained
under Rule 60 would revive upon issuance of the
Notification. The conclusion is against basic principles of
statutory interpretation. The effect of Rule 60 is couched
in negative language that is mandatory in nature. The
G · purpose of Rule 59(1 ), which is to ensure that mining
lease areas are not given by State Governments to favour
persons of their choice without notice to the general
public would be defeated. The Single Judge correctly
interpreted Section 11 read with Rules 59 and 60. [Paras
H 39 and 41) [295-H; 296-A-B; 297-B-C]
SANDUR MANGANESE & IRON ORES LTD. v.
251
STATE OF KARNATAKA & ORS.
Amritlal Nathubhai Shah and Ors. vs. Union Government
A
of India and Anr. (1976) 4 SCC 108; State of Tamil Nadu vs.
M.S. Hindstone and Ors. (1981) 2 SCC 205; State of UP. vs.
Babu Ram Upadhya (1961) 2 SCR 679; Gujarat Pradesh
Panchayat Parishad amd Ors. vs. State of Gujarat and Ors.
(2007) 7 SCC 718, referred to.
B
2.7. The Division Bench concluded that if Rule 60 is
interpreted to render applications made prior to Rule 59(1)
Notification non est, it would make Rule 59(2) unworkable
because persons normally apply for mining lease areas
along with an application for relaxation under Rule 59(2).
C
The conclusion is clearly misplaced. It is only the request
under Rule 59(2) of any person for relaxation in respect
of an area that is considered and not the application for
· grant. Only after the relaxation under Rule 59(2) by the
Central Government of the requirement of Notification
D
under Rule 59(1) that applications could be considered
for grant of mining lease. Section 11 (2) alongwith Rules
59 and 60 should be interpreted that Section 11 (2) is to
cover virgin areas alone. Thus, the application made py
'J' prior to the Notification cannot be entertained along
E
with the applications made pursuant to the Notification
dated 15.03.2003 because it is Section 11 (4) which covers
the Notification along with Rule 59(1) and not the first
proviso to Section 11(2) of the Act. [Para 41] [297-E-H;
298-A-C]
F
3. A perusal of the order of the High Court in the writ
• petition filed by 'ZS' shows that the State Government
was directed to consider only the application of 'MSPL'
and the applications filed by the impleading applicants
G
and others pursuant to the Notification dated 15.03.2003
in accordance with law and in terms of the provisions of
the MMDR Act and MC Rules. The High Court did not
issue any direction to consider all applications made prior
to the Notification. There was no mandamus from the
H
252
SUPREME COURT REPORTS
[201 OJ 11 S.C.R.
A High Court to consider prior applications. The word
'others' qualify the phrase 'pursuant to' and not the class
of applicants who had applied even prior to the 'Held Area
Notification' dated 15.03.2003. The High Court merely
directed the State Government to consider the
B applications in accordance with the provisions of the
MMDR Act and MC Rules. The said order was passed
without going into the specific provisions in the Act or
Rules. The order does not deal with the interpretation of
Section 11 or Rules 59 and 60. Hence, the orders of the
c High Court in the case of 'ZS' do not permit the
consideration of application by 'J' which was made prior
to the Notification dated 15.03.2003. [Para 42] [298-E-H;
299-A-B]
4.1. Rule 35 permits the State Government to
D differentiate between the 'end use' of the minerals for the
purpose of sub-section (2) of Section 11 in addition to the
matters in Section 11 (3). Rule 35 does not differentiate
between 'proposed' and 'existing' end use. In the instant
case, all the parties, namely, 'MSPL', the appellant
E Company, 'J' and 'K' expressed their intention to use iron
ore from the mines for producing steel and, therefore, the
same 'end use' requirement is satisfied. Therefore, it
could have enabled the State Government to take into
account the claim of 'J' and 'K', whose past investments
F would not have qualified on the 'proposed' investment
criterion under Section 11 (3)(d), in addition to 'MSPL' and
the appellant Company. This could have been a basis to
exclude those with proposed investments in steel plants
from consideration. [Para 43] [300-A-C]
G
H
4.2. Rule 35 specifies one additional factor apart from
the factors set out in Section 11 (3). The plain language
of Rule 35 requires its application only in cases covered
by Section 11 (2) and not by Section 11 (4). Therefore, to
the extent that it is Section 11(4) that covers Notification
SAN DUR MANGANESE & IRON ORES LTD. v.
253
STATE OF KARNATAKA & ORS.
under Rule 59(1) and not Section 11 (2). The State
A
Government committed an error in relying on Rule 35 to
exclude 'MSPL' and the appellant Company on the
premise that it is intended to give preference to those
who have made existing investments in industries based
on iron ore and that the respondents-'J' and 'K', qualify
B
on the said consideration. However, Rule 35 only permits
the State Government to take additional factor of the 'end
use' of the minerals and not the existing investments
made by the applicants. The respondents also do not
satisfy the requirements under Section 11 (3)(d) which c
talks solely about proposed investments to be made and
not the existing ones. [Para 44] [300-D-G]
5. Section 11 (4) and second proviso to Section 11 (2)
provide that the State Government may grant, inter alia,
a mining lease after taking into consideration the matters
D
specified in Section 11 (3). Section 11 (3)(d) specifies "the
investment which the applicant proposes to make in the
mines and in the industry based on the minerals" as one
of such matters and on a plain interpretation, it is clear
that only the proposed investment is a relevant factor. If E ·
the Legislature had intended that it should include past
investments also, the use of the word 'proposed' is
superfluous, which could never be the case. The
respondents did not point out any other provision in the
MMDR Act or the MC Rules permitting grant of mining
F
lease based on past commitments or for captive
purposes in existing industries. [Para 45] [301-B-D]
Tata Iron and Steel Co. Ltd. vs. Union of India (1996) 9
sec 709, distinguished.
Indian Charge Chrome Ltd. and Anr. vs. Union of India
and Ors. (2006) 12 sec 331, referred to.
G
6.1. The State Government is denuded of all
legislative and executive power under Entry 23 of List-II
H
254
SUPREME COURT REPORTS
[2010] 11,.S.C.R.
A read with Article 162 after passing of the MMDR Act. 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 Section 11(1) of the
· B MMDR Act in the grant of mining leases. 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. The
respondents have not been able to point out any other
c provision in the MMDR Act or MC Rules permitting grant
of mining lease based on past commitments. 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
D 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 hotify a particular area. Further, having
notified the area, the State Government certainly could
E 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). (Para 48] (302D-H; 303-A-D]
6.2. The State Government cannot grant mining
F leases keeping in mind any considerations apart from
the ones mentioned in the MMDR Act and MC Rules. Thus,
no extraneous considerations such as past commitments
made by the State Government to 'J' and 'K' who have
already set up steel plants can be entertained by the State
G Government while granting mining leases and the State
Government must abide by the Act and Rules. [Para 49]
H
State of Assam and Ors. vs. Om Prakash Mehta and Ors.
AIR 1973 SC 678; Quarry Owners' Association vs. State of
Bihar and Ors. (2000) 8 SCC 655; State of Orissa vs. M.A.
SANDUR MANGANESE & IRON ORES LTD. v.
255
STATE OF KARNATAKA & ORS.
Tulloch and Co. (1964) 4 SCR 461; Baijnath Kedio vs. State
A
of Bihar and Ors. (1969) 3 SCC 838; State of West Bengal
vs. Kesoram Industries Ltd. and Ors. (2004) 10 SCC 201;
Bharat Coking Coal Ltd. vs. State of Bihar and Ors. (1990) 4
SCC 557; C.I. T. Mumbai vs. Anjum M.H. Ghaswala and Ors.
(2002) 1 SCC 633; Captain Sube Singh and Ors. vs. Lt.
B
Governor of Delhi and Ors. _(2004) 6 SCC 440; State of U.P.
vs. Singhara Singh and Ors. (1964) 4 SCR 485, relied on.
7.
The
Law of Equity cannot save
the
recommendation in favour of 'J' and 'K' because equity
C
stands excluded when a matter is governed by statute.
Where the field is covered expressly by Section 11 of the
MMDR Act, equitable considerations cannot be taken into
account to assess 'J' and 'K', when the recommendation
in their favour is in violation of statute. 'K' did not have a
commitment from the State Government regarding its iron
D
ore needs. In the proceedings of the State Government,
there is only a statement that it may apply for a lease. 'J'
emphasized that it has already set up its steel plant based
on the commitments made by the State Government to
grant a mining lease and it is in need of iron ore for these
E
steel plants. Commitments made by the State Government
cannot be a relevant factor for grant of lease in the teeth
of the consideration set out in Section 11 (3). If that was
to be the sole criterion, the State Government ought not
to have notified the area as 'Held Area Notification' dated
F
15.03.2003. Since the entire field of granting mining lease
is covered by MMDR Act and MC Rules, the State
Government cannot use any consideration apart from the
ones mentioned in the Act and Rules. [Paras 50 and 51)
[304-D-H; 306-B]
G
Kedar Lal vs. Hari Lal Sea (1952) SCR 179; Raja Ram
vs. Aba MarutiMali (1962) Supp. 1 SCR 739, referred to.
8.1. The Division Bench erred in concluding that the
application made by 'J' prior to the Notification could be
H
256
SUPREME COURT REPORTS
(2010) 11 S.C.R.
A entertained along with the applications made pursuant to
the Notification because it is not Section 11 (4) which
covers the said Notification under Rule 59(1) but the first
proviso to Section 11 (2). The Division Bench did not even
mention Section 11 (4) in its reasoning apart from stray
B references even though the conclusion of the Single
Judge hinged on how Section 11 (4) would be rendered
otiose and redundant if the first proviso to Section 11 (2)
was taken as governing the consideration of applications
under a Notification pursuant to Rule 59(1 ). It also erred
c in concluding that the applications made prior to
Notification under R4le 59(1) which are pre-mature and
cannot be entertained under Rule 60 would revive upon
issuance of the Notification. Had that been the intention
of the Legislature, there was no reason for the
0 Legislature to take pains under Rule 60(b) that an
application made during the period of 30 days specified
in the Notification also would be pre-mature and could not
be entertained. If the decision of the Division Bench is
taken to its, logical conclusion, then it would result in
reading a proviso at the end of Rule 60 to the effect that
E once the 30 days' period specified in the Notification
contemplated by Rule 59(1) sub-clause (ii) is over, prematur~ applications would revive. After taking such pains
to make it clear that the application would not be.
entertained until the end of 30 days' period, surely the
F Legislature itself would have inserted such proviso in
Rule 60 if that were its intention. If such pre-mature
applications are allowed to be entertained, it would result
in the State Government giving out mining leases to
favoured persons without notice to the general public.
G [Paras 52 and 53) [306-D-H; 307-A-B]
8.2. The conclusion arrived at by the Division Bench
that if Rule 60 is interpreted to render applications made
prior to Rule 59(1) Notification non est, in that event, it
H would make Rule 59(2) unworkable because persons will
SANDUR MANGANESE & IRON ORES LTD. v.
257
STATE OF KARNATAKA & ORS.
normally apply mining lease areas along with an
A
application for relaxation under Rule 59(2), is clearly
misplaced. It is only the request under Rule 59(2) for
relaxation in respect of an area that is considered and not
the application for grant. It is only after the relaxation
under Rule 59(2) by the Central Government of the
requirement of the Notification under Rule 59(1) that the
applications could be considered for grant of mining
lease. Though the Single Judge in his order dated
07.08.2008 quashed the communication/recommendation
B
of the State Government dated 06.12.2004 proposing to c
grant mining lease to 'J' and 'K', however, the Single
Judge traveled much beyond the reliefs sought for in the
writ petition and quashed the entire Notification No.
Cl.16:MMM.2003 dated 15.03.2003. While approving earlier
part of the order and quashing the communication/ 0
recommendation of the State Government dated
06.12.2004, the other observations/directions are not
warranted in the light of the provisions of the Act and the
Rules. The said observations/directions are deleted.
[Paras 54 and 55) [307 -C-HJ
E
9.1. The Central Government considers only the
materials forwarded by the State Government along with
its recommendation. If the recomm~~dation of the. State
Government cannot be upheld in layv. all consequential
orders including the subsequent apJ)roval by the Central
F
Government are also liable to be quashed. If the very
same recommendation of the State Government is sent
back to the Central Government on the administrative
side in its role as an approving authority under Section
5(1) without setting aside the impugned judgment, it is
G
more likely that the Central Government would simply
follow its previous order. In that event, the Central
Government would be influenced by the judgment
passed by the Division Bench upholdi~g the grant made
in favour of 'J' and 'K'. Such an exercise would be in the
H
258
SUPREME COURT REPORTS
[2010] 11 S.C.R.
A nature of post-decisional hearing which would be
impermissible. As on date the Central Government hears
revision petitions through an Executive Officer and
without participation of a Judicial Member. The exact
procedure of the revisional tribunal has kept changing
B over the last few months. It would not be an independent
and efficacious alternative forum. When there was no
valid recommendation by the State Government for the
grant of lease, there cannot be any valid approval of the
Central
· Government
relying
on.
defective
c recommendation. [Para 56] [308-B-H; 309-A-C]
H.L. Trehan and Ors. vs. Union of India and Ors. (1989)
1 SCC 764; K.I. Shephard and Ors. vs. Union of India and
Ors. (1987) 4 SCC 431; Shekhar Ghosh vs. Union of India
and Anr. (2007) 1 SCC 331; Union of India vs. R. Gandhi,
D President, Madras Bar Association JT 2010 (5) SC 553,
relied on.
Pavani Sridhara Rao vs. Govt. of A.P and Ors. (1996) 8
SCC 298; State of Kera/a vs. Puthenkavu N.S.S. Karayogam
E and Anr. (2001) 10 SCC 191; Indian Charge Crome Ltd. and
Anr. v. Union of India and Ors. (2006) 12 SCC 331, referred
to.
Barnard vs. National Dock Labour Board (1953) 1 All E.R.
F 1113; McFoy vs. United Africa C~. (1961) All E.R. 1169,
referred to.
·
I
9.2. The recommendation o~ the State Government
dated 06.12.2004 is not valid with reference to the
provisions of MMDR ~ct and the ~ules, hence the invalid
G recommendation cannot be lookied into by the Central
Government. The proviso to Secqon 5(1) itself provides
only for the Central Government ~ither to grant or reject
its approval to the State Governrtjent's recommendation
in the case of mining lease for a m~neral such• as iron ore
H
\
I,
SANDUR MANGANESE & IRON ORES LTD. v.
259
STATE OF KARNATAKA & ORS.
in the Fi.rst Schedule. Such consideration on the
A
administrative side does not involve consideration of all
the applicants based on their mining lease applications
and after giving an opportunity of hearing. Inasmuch as
the Central Government does not have all relevant
materials before it, it may not be in a position to substitute
B
itself for the State Government and it would not be proper,
in fact, it would be inconsistent with the provisions of the
MMDR Act and the Rules, to frame the issue on the
administrative side of the Central Government. Even
otherwise, inasmuch as there is a flaw in the c
recommendation of the State Government which requires
re-consideration, the request for remitting the matter to
the Central Government for its decision is rejected. [Para
56) [309-C-G]
10. The impugned order of the Division Bench of the
D
High Court in Writ Appeal No. 5084 of 2008 and allied
matters as well as the decision of the State Government
dated 26/27 .02.2002 and the subsequent decision of the
Central Government dated 29.07.2003 are quashed. The
'
State Government is directed to consider all applications
E
afresh in light of the interpretation of Section 11 of the Act
and Rules 35, 59 and 60 of MC Rules and make a
recommendation to the Central Government within the
stipulated period. [Para 57) [309-H; 310-A-C]
Case Law Reference:
(1964) 4 SCR 461
Relied on.'
Para 22, 49
(1969) 3 sec 838
Relied on.
Para 22, 49
1961 (2) SCR 537
Relied on.
Para 22
(2004) 10 sec 201
Relied on.
Para 23, 49
(1990) 4 sec 557
Relied on.
Para 24, 49
(1973) 1 sec 584
Relied on.
Para 26
F
G
H
260
SUPREME COURT REPORTS
[2010] 11 S.C.R.
A
(2000) 8 sec 655
Relied on.
Para 27, 49
(2002) 1 sec 633
Relied on.
Para 28, 49
(2004) 6 sec 440
Relied on.
Para 28, 49
B
(1964) 4 SCR 485
Relied on.
Para 28, 49
(1996) 9 sec 109
Distinguished.
Para 29, 46
1992 Supp. 1 sec 91
Relied on.
·Para 33
AIR 1957 SC 281
Relied on.
Para 33
c
1955 (2) SCR 483
Relied on.
Para 33
(2008) 13 sec 597
Referred to.
Para 35
AIR 1961 SC 1170
Referred to.
Para 36
D
'
(1984) 4 sec 450
Referred to.
Para 36
(1976) 4 sec 108
Referred to.
Para 40
(1981) 2 sec 205
Referred to.
Para 41
E
(1961) 2 SCR 679
Referred to.
Para 41
(2001) 1 sec 118
Referred to.
Para 41
(2006) 12 sec 331
Referred to.
Para 47
AIR 1973 SC . 678
Referred to.
Para 49
(1952) SCR 179
Referred to.
Para 50
(1962) Supp. 1 SCR 739 Referred to.
Para 50
(1953) 1 All E.R. 1113
Referred to.
Para 56
(1961) All E.R. 1169
Referred to.
Para 56
(1996) 8 sec 298
Referred to.
Para 56
(2001) 10 sec 191
Referred to.
Para 56
(1989) 1 sec 764
Relied on.
Para 56
SANDUR MANGANESE & IRON ORES LTD. v.
STATE OF KARNATAKA & ORS.
(1987) 4 sec 431
Relied on.
Para 56
(2007) 1 sec 331
Relied on.
JT 2010 (5) SC 553
Relied on.
Para 56
Para 56
261
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
7944 of 2010.
From the Judgment & Order dated 05.06.2009 of the High
Court of Karnataka at Bangalore in W.A. No. 5084 of 2008.
With
C.A.Nos. 7945-54, 7955-61 of 2010
K.K. Venugopal, Krishnan Venugopal, Uday Tiwary, Abir
Phukan, Sidharth Singh, A. Raghunath, Shyam Mohan, Nishant,
A. V., P.V. Dinesh, P. Rajesh, P.V. Vinod, T.P. Sindhu,
Athouba K., Sunil Dogra, A. Venayagam Balan, Harshad V.
Hameed, Kuriakose Varghese, K. Rajeev, 8. Agrawal, Rajeev
Mehta for the Appellant.
Dushant Dave, D.L.N. Rao, Bhardwaj S. Iyengar, Sadri
Vishal, Prashant Kumar, M. Gireesh Kumar, S.K. Kulkarni, A.S.
Kulkarni, AP & J Chambers, Manu Nair, P.C. Sen, R. Sharma
Mark Disouza, Suresh A. Shroff & Co., Anitha Shenoy, Rashmi
Nand Kumar, S.