# INDIAN METALS AND FERRO ALLOYS LTD v. UNION OF INDIA AND ORS - **Citation:** [1990] Supp. 2 S.C.R. 27 - **Court:** Supreme Court of India - **Decided:** 1990-09-21 - **Case number:** Civil Miscellaneous Petition Nos. 16435-37 of 1987 - **Bench:** S. Ranganathan, M. FATHIMA BEEVl - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/indian-metals-and-ferro-alloys-ltd-v-union-of-india-and-ors-11017 - **Pages:** 70 ## Headnote Mines and Minerals (Development and Regulation) Act, 1957Sections 3(j), 5A, JO, 11, 17A & First and Second Schedules-'Minor Minera/'-Chrome ore-Grant of mining lease-Reservation in favour of Public Sector Undertakings-Whether obligatory-Consideration of applications-Directions issued to Government-Appropriate statutory amendments suggested. In these matters, the petitioners viz., four companies in the private sector, two public sector corporations owned substantially by a State Government, and a private individual sought clarifications and directions in relation to the orders passed by this Hon'ble Court on 30.4.87 and 6.10.87 on the Writ Petition. All these petitions arose out of applications for grant of right for the mining of chrome ore or chromite in the State of Orissa. Since chrome ore is one of the minerals specified in the first' and second schedules to, and not a 'minor mineral' within the meaning of Section 3(1) of the Mines and Minerals (Development and Regulation) Act, 1957, the right to grant the mining right in respect of this mineral is vested in the State Government subject to the control by Union of India, and as such they are respondents in these matters. While disposing of the matters, this Court referred the entire controversy to the Secretary to Government of India in the Ministry of Mines, viz., Mr. Rao, for a detailed consideration of the claims made by the parties. Before Mr. Rao, the two public sector undertakings also put forward their claims that the public sector units in the State were entitled to the grant of mining rights in the State to the exclusion of all private parties in as much as there was a reservation in their .favour by an appropriate notification issued by the State Government. The other parties raised objection on the ground that the claims were made at a belated stage of the proceedings. On applications made by the Public Sector Undertakings; this Court directed that their claims would also be examined by Rao. 27 A B c D E F G H 28 SUPREME. COURT REPORTS [ 1990] Supp. 2 S.C.R. .. A In his report dated l.2.J\188 Rao accepted the clahn of reservation . made by the two Public Sector Undertakings, viz., Orissa Mining Corporation (OMC) and Industrial Development Corporation of~ .ttd. (IDCOL). He also partially accepted the claims of the three private parties. viz., Indian Metals and Ferro-Alloys Limited (L\iFA); F'1TO Alloys Corporation Limited (FACOR); and Aikath and rejected the B claims of the other two private parties viz., Orissa Cements Ltd. (OCL) and Orissa Industries Ltd. (ORIND). Though be accepted the claim of the two public sector undertakings, he recommended for them leases in respect of only the balance of the lauds left, after fulfilling the claim of the others which he had accepted. c The prese!ff. peti1ions inter alia sought directions on the repo'i of . Rao. It was contended that Rao was nothing more than a Commissioner appointed by this Court to examine the various parties and hence this · Court should pass .appropriate orders on his report. Various conten- · ·tionserhaps as the Central Government has had no occasion to consider the matter earlier. However, no useful purpose would be served by remitting the matter and asking the State Government to seek the formal approval of the Central Government therefore. The decision of Rao itself can be taken as contalping the approval of the Central Government in this regard and is thus Upheld. The State Government is directed to execute, at as early a date as possible, a mining lease in favour of AIKATH in respect of the 140 acres agreed to be leased to him under the compromise dated 4.12.1984. [90G-H; 91A] 9. Although Rao has approved the grants made in favour of IMF A and FACOR by the State Government (which, he remarks, were perhaps based on the observations made by this Court), he has clearly reached his conclusions on these independently. In fact, he has set out a basis for justifying the grants of IMFA and FACOR. It is also clear that A B c D E F G H A B c 0 E F G H 32 SUPREME COUR'LREPORTS [ 1990] Supp. 2 S.C.R. there were no Court orders that could have influenced his decisions on the claims of the other parties. I 87F -G] IO.I In the context of the scheme of the Act and the importance of a lease being granted to one or more of the better qualified candidates where there are a number of them, it would not be correct to say that, as the State Government's order of 29.IO.I973 has been set aside, ORIND's application should he restored for reconsideration on the basis of the situation that prevailed as on 29.10.I973 and that, therefore, it has to be straightaw•1y granted as lliere was no other application pending on that date before the State Government. In mattersc like this, subsequent applications cannot be ignored and a rule of thumb applied. [74C-E] I 10.2 Though S. 11 tries to enunciate a simple general principle of "first come, first served", in practice, priority of an application in point of time does not conclude the issue. In this case itself, for instance, during the period ORIND's application of I971 has been under consideration before varioiis authorities and ill· the writ petition filed in the High Court, several other competitors have come into the picture. The statutory provision .is not clear as to which o(ibe applications in respect ·of any piirticular area, are to be considered together. If ORIND's application of I97I were to be considered only on the basis of the persons who had made applications at that time or a short time before or after, one resl!lt would follow; if, on the other hand, all the applications pending for disposal at the time ORIND's application is to be granted or rejected are to be considered,. the result would be totally different. Since the interest of the nation require that no lease for mining rights should be granted without all applicants therefor at any point of time being considered and the best among them chosen or the area distributed among such of them as are most efficient and capable, the latter is the only reasonable ahd practical procedure. That is why this Court, in its order dated 30.4.87, laid down that all applications pending for consideration as on 30.4.87 should be considered by Rao. [71G-H; 72A-B] Ferro Alloys Corporation of India v. Union, ILR. I977 Delhi I89 and Mysore Cements Ltd. v. Union, AIR I972 Mysore I49, distinguished. I I. I Previously, rule 58 did not enable the State Government to reserve any area in the State for exploitation in the pubiic sector. The existence and validity of.such a power of reservation was upheld by this Court. Rule 58 has been amended in I980 to confer such a power on the State Government. lt .is also not in dispute that a notification of reservation was made on 3.8,77. The State Government, OMC and IDCOL are, INDIAN METALS v. U.OJ. 33 therefore, right in contending that, ex facie, the areas in question are not available for grant to any person other than the State Government or a public sector corporation unless the availability for grant is renotified in accordance with law (rule 59(l)(e) or the Central Govern· ment decides to relax the provisions of rule 59(1). [79D-F] Amritlal Nathubhai Shah and Ors. v. Union of India and Anr. [1977] l SCR372, relied on. Kotiah Naidu v. Sta.te of A.P., AIR 1959 AP 185 and Amrit/al Nathubhai Shah v. Union, AIR 1973 Guj'!rat 117, referred to. 11.2 In the present matters, except for two or three instances. where leases have been granted by the State Government on its own, the State Government has generally and consistently adhered to its stand that the chromite bearing lands are reserved for exploitation in the public sector. The rules permit the Central Government to relax the rigid requirements of reservation in individnal cases after recording special reasons. Such exceptional and isolated instances of lease are not sufficient to sustain the plea of the parties that the policy of reservation is merely being raised as a formal defence and has never been seriously implemented by the State Government. [81G-H; 82A-B] 11.3 The conclusion that the areas in question before this Court were all duly reserved for public sector exploitation does not, however, mean that private parties cannot be granted any lease at all in respect of these areas for, as pointed out earlier, it is open to the Central Government to relax the reservation for recorded reasons. Nor does this mean that the public sector undertakings should get the leases asked for by them. This is so for two reasons. In the first place, the reservation is of a general nature and does not directly confe'r any rights on the Public Sector Undertakings. This reservation is of two types. Under s. 17A(l), inserted in 1986, the Central Government may after consulting the State Government just reserve any area-not covered by a Private Lease or a Mining Lease-with a view to conserving any mineral. Apparently, the idea of such reservations is that the minerals in this area will not be exploited at all, neither by private parties nor in the public sector. The second type of reservation was provided for in role 58 and such reservation could have been made by the State Government (without any necessity for approval by the Central Government) and was intended to reserve areas for exploitation, broadly speaking, in the public sector. The notification itself might specify the Government Corporation or Company that was to exploit the areas or may be just general, on the A B c D E F G H , 34 SUPREME COURT REPORTS [ 1990) Supp. 2 S.C.R. -1 lines of the rule itself. Whether such areas are to be leased out to OMC A or IDCOL or some other public sector corporation or a Government Company or are to he exploited hy the government itself is for the Government to determine de hors the statute and the rules. There is nothing in either of them which gives a right to OMC or IDCOL fu insist that the leases should be given only to them and to no one else in the B !JUblic sector. There are no competitive applications from organisations in the public sector controlled either by the State Government or the Central Government, but even if there were, it would be open to the State Government to decide how far the lands or any portion of them should be. exploited by each of such Corporations or by the Central Government or State Goverment •. Both the Corporations are admittedly ~ instrumentalities of the State Government and the decision of the State ' c Government is bindin1! on them. If the State Government decides not to grant a lease in respect of the reserved area to an instrumentality of the State Government, that instrumentality has no right to insist that a Mining Lease should be granted to it. It is open to the State Government to exercise at any time, a choice of the State or any one of the D instrumentalities specified in the rule. It is true that if, eventually, the State Government decides to grant a lease to one or other of them in respect of such land, the instrumentality whose application is rejected may he aggrieved by the choice of another for the lease. The question whether OMC or IDCOL can object to the grant to any of the private parties on the ground that a reservation has been made in favour of the E public sector, has to be answered in the negative in view of the statutory provisions. For the State Government could always denotify the reservation and make the areas available for grant to private parties. Or, short of actually deserving a notified area, persuade the Central government to relax t.he restrictions of rule 59(1) in any particular case. It is, therefore, open to the State Government to grant private leases F even in respect of arE:as covered by a notification of the State Government and this cannot be challenged by any instrumentality in the public sector. [82F-H; 83A-H; 84A-C] 12. In these matters, no grounds have been made out which could support a plea of promissory estoppel. The grant of a lease to ORIND G had to be approved by the Central Government. The Central Government never approved of it. The mere fact that the State Government, at one stage, recommended the grant cannot stand in the way of their disposing of the application of ORIND in the light of the Central Government's directives. [78E-FJ ·~ H Kanai Lal Sur v. Paramnidhi Sadhukhan, (1958] 2 SCR 366; Mis ) ~' INDIAN METALS v. U.0.1. 35 Motilal Padampat Sugar Mills Co. (P) Ltd. v. State of Uttar Pradesh and Ors., [1979] 2 SCR 641; Gujarat State Financial Corporation v. M/s Lotus Hotels Pvt. Ltd., [1983] 3 SCC 379; Surya Narain Yadav & Ors. v. Bihar State Electricity Board & ·ors., [1985] Suppl. 1 SCR 605; Union of India & Ors. v. Godfrey Philips India Ltd., [1985] Suppl. 3 SCR 123 and Mahabir Auto Stores & Ors. v. Indian Oil Corporation & Ors., [1990] JT I SC 363, referred to. [This Court directed that it would be open to 811 the parties to place their claims, or further Claims, as the case may he, in regard to the areas applied for by them on or before 30.4.1987, backed by supporting reasons, before the State Government in the form of representations within four weeks from the date of this order; that the State Government would dispose of these appljcations within the statutory period failing which the parties will have their remedy under the statute by way of revision to the Central Government; that in arriving at its decisions, it will be open to the State Government to take into account A B c the discussions and findings of the Rao Report in the light of this judgment; that the State Government should also keep In mind that no leases D to any of the parties (other than OMC and IDCOL) could be granted unless either the areas so proposed to be leased out are dereserved and thrown open to appellants from the public or unless the Central Government, after considering the recommendations of the State Government, for reasons to be recorded in writing considers a relaxation in favour of any of the parties necessary and justified.] [96B-E] CIVIL APPELLATE JURISDICTION: Civil Miscellaneous Petition Nos. 16435-37 of 1987. JN Writ Petition No. 14116 of 1984. (Under Article 32 of the Constitution of India). WITH Special Leave Petition (C) Nos. 5163/88 with 8574 of 1989 read with I.A. No. 1/89. K. Parsaran, Dr. L.M. Singhvi, G. Ramaswamy, V.C. Mahajan, Harish N. Salve, Rajan Mahapatra, Ms. Lira Goswami, S. Sukumaran, C. Mukhopadhyay, A. Subba Rao, A.D.N. Rao, P.K. Mehta, Ms. Mona Mehta, Girish Chandra, S.C. Patel, T. Srikumar, P. E F G H 36 .. SUPREME COURT REPORTS [ 1990] Supp. 2 S.C.R. A Parmeshwaran, Bishamber Lal Khanna and M.C. Bhandare for the appearing parties. B S.C. Roy, Advocate General and A.'K. Panda for the State of Orissa. The Judgment of the Court was delivered by RANGANATIIAN,J. THE "DRAMATIS PERSONAE" All these matters are in the nature of off shoots of a basic controversy raised in W.P. No. 14116/84 which was "disposed of" by the C orders of this Court dated 30..4.87 and 6.10.87. The parties are now seeking certain clarifications and directions in relation to the orders passed by this Court in the above writ petition. There have been several subsequent developments having an impact on the issue originally brought to this Court in the Writ Petition (W.P.) and, at present, 0 the matter has become very complicated and involves the interests of a large number of parties. To give a cogent narration of the necessary facts, it is best to start with an enumeration of the various parties with whom we are concerned in the matters which are being disposed of by this judgment. E F G H The writ petition as well as the connected matters arise out of applications for grant of rights for the mining of chrome ore or Chromite in the State of Orissa. Chrome ore is one of the minerals specified in the First and Second Schedules to, and not a "minor mineral" within the meaning of s. 3(f) of, the Mines and Minerals (Development and Regulation) Act, 1957. The right to grant mining rights in respect of this mineral is vested in the State Government, subject, as we shall see later, on control by the Union oflndia. The State of Orissa (S.G.) and the Union of India (C.G .) are, therefore, the primary respondents in this litigation. On the other side are ranged a number of applicants for the mining rights we have referred to above. These are: (1) Indian Metals and Ferro-Alloys Limited (IMFA); (2) Ferro Alloys Corporation Limited (FACOR); (3) Orissa Cements Limited (OCL); (4) Orissa Industries Limited (ORIND); ·- INDIAN METALS v. U.0.1. IRANGANATHAN, J.] 37 (5) Orissa Mining Corporation (OMC); (6) Industrial Development Corporation of Orissa Ltd. (IDCOL); and (7) Shri Mantosh Aikath; Of the above, the first four are companies in the private sector, the next two are public sector corporations owned substantially by the State of Orissa and the last, a private individual. THE PRESENT CONTROVERSY The principal question for decision before us is as to whether all or any of the various parties referred to above are entitled to obtain leases for the mining of chrome ore (hereinafter referred to as MLs) and, if so, to what extent. In particular, we are concerned with an area consisting of five blocks referred to in para 8 of the W.P. to which reference will be made later. The controversy primarily turns round applications made in respect of these blocks by IMFA, FACOR, AIKAT and OCL. ORIND also lays claim to mining rights in respect of a portion of these blocks. It has filed a special leave petition which is separately numbered as S.L.P. No. 8574 of 1989 and is directed against an order dated 7.4.89 passed by the Orissa Government rejecting an application made by the company on 5th July, 1971. FACOR has also preferred S.L.P. No. 5163 of 1988 from an order of the High Court of Orissa dated 11. 11.1987 dismissing a writ petition filed against an order of rejection by the S.G. of an application made by it on 18.7.1977 for grant of a ML which was confirmed by the C.G. A B c D E F As already mentioned, this Court 'disposed' of W.P. No. 14116/ 1984 by its order of 30.4.87. We shall have to consider this and several other orders passed by this Court in the course cf the hearing more closely but a brief reference may be made here to the resultant effect thereof. When this Court found that there were a large number of applications for MLs over varying extents of land in the areas in question, this Court decided that the respective merits of the applications G could not be gone into by this Court but that they should be considered by a responsible officer of the C. G. Accordingly, by the orders above referred to, this Court referred the entire controversy to the Secretary to the Government of India in the Ministry of Mines (Shri B.K. Rao, "Rao", for short) for a detailed consideration of the claims of the various parties. When the matter went to Rao, OMC and IDCOL also A B 38 SUPREME COURT REPORTS [ 1990] Supp. 2 S.C.R. put forward claims that the public sector units in the State of Orissa were entitled to the grant of mining rights in the State to the exclusion of all private parties inasmuch as there was a reservation in their favour by an appropriate notification issued by the State Government. The other parties objected to the intervention of the OMC and IDCOL at, what they alleged was, a belated stage of the proceedings. However, on applications made by OMC and IDCOL, this Court directed that the claims of these two public sector undertakings would also be examined by Rao. Eventually Rao, after considering the claims of all parties, reduced his conclusions in the form of a report dated !st February, 1988. In his report, Rao accepted the claim of reservation made on behalf of the OMC and the IDCOL. Nevertheless it appears C that, bearing in mind certain interim orders passed by this Court in the various applications made to it during the pendency of the writ petitions, Rao came to the conclusion that only three of the parties other than the two public sector undertakings should be granted leases to the extent .mentioned by him. Broadly speaking, Rao accepted partially the claims of !MFA, FACOR and AIKATH. He rejected the claims D made by ORIND and OCL. He accepted the claim of the public sector undertakings but he recommended for them leases in respect of only the balance of the lands left, after fulfilling the claims of the others which he had accepted. Applications have now been filed before us which, inter a/ia, seek E directions on Rao's report. There has been a good deal of contest before us as to the precise legal character. of the report submitted by Rao. One suggestion is that Rao was nothiμg more than a comm is· sioner appointed by the Court to examine the claims of the various parties and to submit a detailed report thereon. It is submitted that this report having been received we should pass such orders thereon as we F may consider appropriate. A second approach suggested is that the Rao report should be taken to be the decision of the Central Government, which it is now for the State Government to implement, leaving it open to any aggrieved party to take such appropriate proceedings as may be ·available to them in law for successfully challenging the findings reached by Rao. A third line of argument which has been addresG sed before us, particularly by the State of Orissa, the OMC and the IDCOL, is that Dr. Rao's report suffers from a fundamental defect in that he has completely ignored the reservation made by the State Government in favour of the public sector. According to them, Rao was not right in suggesting the grant of leases to any of the other parties and should have simply left it to the State to exploit the mines H in public sector, including inter alia, the OMC and IDCOL. A fourth ) INDIAN METALS v. U.0.1. {RANGANATHAN, J.l 39 stance taken up by the State Government may also be mentioned here. The learned Advocate General for the State made a statement before us that, without prejudice to a contention that the Rao report suffered from the fundamental defect referred to above, the State Government was prepared to abide by the findings of Rao provided this Court decides to accept the same in toto without any modifications. He clarified that this is not because they think the Rao report is correct. On the other hand they have got several objections to the validity and correctness of Dr. Rao's report. ,However, having regard to the interim orders passed by this Court and having regard to the fact that what Rao has done is virtually to implement various orders passed by this Court during the pendency of the writ petition, the State Government, without prejudice to its contentions in relation to the Rao report, is prepared to abide by it. However, the learned AdvocateGeneral said, the State Government wish to make it clear that if, for some reason, this Court does not accept the Rao Report in toto, then the State Government would like to put forward their contentions against the report of Dr. Rao. In that event the State Government should be given the liberty to attack Dr. Rao's report and urge all contentions that are open to it in respect of the grant of mining leases relating to chrome ore in the State of Orissa. The above stance understandably, is not acceptable to OCL and ORIND or, indeed, even to OMC and IDCOL who have got nothing at the hands of Rao. !MFA and FACOR are substantially satisfied with the report given by Dr. Rao (except for certain minor contentions which they are prepared to give up for the present, with liberty to make representations to the State Government) but they also wish to make it clear that, in case the Rao report is not to be accepted by this Court, they would also like to put forward all their contentions so that their case may not go by default. In that event, in particular, they would like to attack the reservation plea urged by the S.G., OMC and IDCOL both as belated as well as on merits. AIKA TH's submission is that he is a small operator who discovered the mines and that Rao's recommendation A B c D E F for the grant of a ML in his favour in respect of a small extent of land should not be disturbed by us. We have only broadly set out here the attitudes of the various parties to the Rao report and shall discuss their contentions later in detail. In the light of these various contentions, we G have to determine the legal character of the Rao report and decide whether the findings of Rao are to be given effect to in toto or are to be modified and, if so, in what respects. -~ Before dealing with these questions and even setting out the de.tails of the claims of the various parties and the material they placed H A B c D E F 40 SUPREME COURT REPORTS [ 1990] Supp. 2 S.C.R. before Rao to substantiate their claims, it will be useful to survey the relevant statutory provisions relating to the grant of mineral concessions of the nature we are concerned with here. This we shall at once proceed to do. THE RELEVANT STATUTORY PROVISIONS (a) Constitution: Article 297 of the Constitution of India unequivocally declares that 'all lands, minerals and other things of value underiying the ocean ..... shall vest in the Union and be held for the purposes of the Union'. Article 298 defines the extent of the executive power of the Union and of each State thus: "298. Power to carry on trade, etc.-The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose: Provided that- (a) the said executive power of the Union shall, in so far as such trade or business or such purpose is not one with respect to which Parliament may make laws, be subject in each State to legislation by the State; and (b) the said executive power of each State shall, in so far as such trade or business or such purpose is not one with respect to which the State Legislature may make laws, be subject to legislation by Parliament." The Union and the States have both been vested with powers to legislate in respect of mining rights under the Seventh Schedule to the Constitution. The respective rights of the Union and the States in this regard are contained in the following entries in the said Schedule: G List I, Entry 54 H Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in public interest. .,,-- INDIAN METALS v. U.0.1. [RANGANATHAN, J.] . 41 List II, Entry 23 Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union. (b) Act: In exercise of the above powers, the Union legislature has enacted the Mines and Minerals (Development & Regulation) Act, 1957 (hereinafter referred to as 'the Act'). The Act has been substantially amended and several drastic changes introduced in 1986 with a view, inter alia, to prevent unscientific mining, remove bottle-necks and promote speedy development of mineral based industries. We are concerned only with the provisions relating to the grant of mining leases and we may proceed to consider the same. S. 2 of the Act contains the declaration referred to in Entry 54 referred to above. It reads: A B c "2. Declaration as to expediency of Union control-it is D hereby declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent hereinafter provided." · With this declaration, the Act proceeds to circumscribe the extent to E which the regulation of mining rights in the States should be subject to the control of the Union. We may now proceed to refer to the relevant provisions of the Act in relation to mi.nerals like "chrome ore", which may be described, for convenience, as "major minerals". S. 4 of the Act provides as follows:- :'No person shall undertake any prospecting or mmmg operation in any area except under and in accordance with the terms and conditions of a prospecting licence or as the case may be, a mining lease granted under this Act and the F rules made thereunder. G (2) No prospecting licence or mining lease shall be granted otherwise than in accordance with the provisions of this Act and the rules made thereunder." Sections 10 and 11 outline the procedure for obtaining a prospecting H A B c D E F G H 42 SUPREME COURT REPORTS [ 1990] Supp. 2 S.C.R. licence (PL) or a mining lease (ML). They read thus: "10. Application for prospecting licences or mining leases: (I) An application for a prospecting licence or a mining lease in respect of any land in which the minerals vest in the Government shall be made to the State Government concerned in the prescribed form and shall be accompanied by the prescribed fee. (2) Where an application is received under sub-section there shall be sent to applicant an acknowledgement of its receipt within the prescribed time and in the prescribed form. (3) On receipt of an application under this section, the State Government may, havhJg regard to the provisions of this Act and any rules made thereunder, grant or refuse to grant the licence or lease." 11. Preferential right of certain person: (I) Where a prospecting licence has been granted in respect of any land, the licensee shall have a preferential right for obtaining the mining lease in respect of the said land over any other person: xxx xxx xxx (2) Subject to the provisions of sub-section (I), where two or more persons have applied for a prospecting licence or a mining lease in respect of the same land, the applicant whpse application was received earlier shall have a preferential right for the grant of the lieence or lease as the case may be over an applicant whose application was received later: Provided that where any such applications are received on the same day, the State Government, after taking into consideration the matters specified in subsection (3), may grant the prospecting licence or mining lease. as the case may be, to such one of the applicants as it may deem fit. (3) The matters referred to in sub-section (2) are the following: - .. -' ,.....-"\ INDIAN METALS v. U.0.1.