# STATE OF KERALA & ORS v. MIS. KERALA RARE EARTH & MINERALS LIMITED & ORS

- **Citation:** [2016] 5 S.C.R. 515
- **Court:** Supreme Court of India
- **Decided:** 2016-04-08
- **Case number:** Civil Appeal No. 3608 of2016
- **Bench:** T.S. Thakur, V. Gopala Gowda, R. Banumathi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-kerala-ors-v-mis-kerala-rare-earth-minerals-limited-ors-31353
- **Pages:** 50

## Headnote

A
B
Mines and Minerals - Grant of mining lease by State
Government - For non-scheduled minerals - However, the State
C
stayed further acJion on the ground that detailed study on
environmental impact of the proposed leases was required to be
taken - Further the lessee-company was informed that the State did
not intend to grant leases for mineral sand to private parties -
Revision applications uls. 3 of Mines and Minerals Act filed by the
Company - Central Government allowing the revision directed the
D
State Government to reconsider the case :__ State Government, on
reconsideration, rejected the applications of the Company on the
ground that as per the Industrial Policy, 2007 of the State, mineral
deposits in question are to be expointed by a State agency only -
Writ petition against decision of the State Government - Allowed by
E
Single Judge of High Court - Order of Single Judge confirmed by
Division Bench of High Court - On appeal, held: Per Majority:
State Government is the owner of mineral deposits in the land which
vest with the Government - The State Government has the power to
reserve the rights to exploit such deposits in its own favour or in
favour of State owned Companies or Corporations - However, the
F
State Government can reserve such right only in terms of s. 17A of
the Mines and Minerals Act - Absence of procedure resorted to by
the State Government, as required by s. 17 A, renders the State ·
Government's claim of reservation untenable, until a valid
reservation is made in accordance with law - Per Minority: State
G
Government had legislative competence to take the policy decision
reserving the area for exploitation of minerals by a State agency -
The_ saicf policy is not dehors the provisions of Mines and .Minerals
· Act and of Mineral Concession Rules - Mines and Minerals
(Development and Regulation) Act, 1987 - s. J7A - Mineral
515
H
516
SUPREME COURT REPORTS
[2016] S S.C.R.
A
Concession Rules,1960.
B
c
D
E
F
G
H
Dismissing the appeals, the Court
Majority opinion(Per T.S. Thakur, CJI, for himself and for V.
Gopala Gowda,J.)
HELD: 1. Once the Parliament decl~res it to be expedient
in public interest to bring the regulation and development of
mines and minerals under the control of the Union in public
interest, the subject to the extent laid down by the Parliament
comes within the exclusive domain of the Parliament and that
any legislation by the State after such declaration that has the
effect of trenching upon the field, must necessarily be
unconstitutional. [Para 8) (530-B)
2. While the State Government is the owner of the mineral
deposits in the lands which vest in the Government, the
Parliament has by reason of the declaration made in Section 2 of
Mines and Minerals (Development and Regulation Act, 1957)
acquired complete dominion over the legislative field covered
by the said legislation. The Act does not denude the State of the
ownership of the minerals situate within its territories but there
is no manner of doubt that it regulates, to the extent set out in
the provisions of the Act, the development of mines and minerals
in the country. [Para 17](536-H; 537-A-B)
3.1 The State Government can reserve any area not already
held under any prospecting licence or mining lease for
undertaking prospecting or mining operations through a
Government company or corporation owned or controlled by it,
but, in terms of sub-Section(2) of Section 17A. [Para 14)[535-CD]
3.2 Three distinct requirements emerge from Section 17 A(2)
for a valid reservation viz.: the reservation can only be with the
approval of the Central Government and must confine to areas
not already held under any prospecting licence or mining lease;
the reservation must be made by a notification in the official
gazette; and the notification m~st specify the boundaries of such
areas and the mineral or minerals in respect of which such areas
will be reserved. [Para 14](535-D-F]
STATE OF KERALA v. MIS. KERALA RARE EARTH &
517
MINERALS LIMITED
3.3 If the S

## Text

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[2016] 5 S.C.R. 515
STATE OF KERALA & ORS.
v.
MIS. KERALA RARE EARTH & MINERALS
LIMITED & ORS.
(Civil Appeal No. 3608 of2016)
APRIL 08, 2016
[T.S. THAKUR, CJI., V. GOPALA GOWDA AND
R. BANUMATHI JJ.)
A
B
Mines and Minerals - Grant of mining lease by State
Government - For non-scheduled minerals - However, the State
C
stayed further acJion on the ground that detailed study on
environmental impact of the proposed leases was required to be
taken - Further the lessee-company was informed that the State did
not intend to grant leases for mineral sand to private parties -
Revision applications uls. 3 of Mines and Minerals Act filed by the
Company - Central Government allowing the revision directed the
D
State Government to reconsider the case :__ State Government, on
reconsideration, rejected the applications of the Company on the
ground that as per the Industrial Policy, 2007 of the State, mineral
deposits in question are to be expointed by a State agency only -
Writ petition against decision of the State Government - Allowed by
E
Single Judge of High Court - Order of Single Judge confirmed by
Division Bench of High Court - On appeal, held: Per Majority:
State Government is the owner of mineral deposits in the land which
vest with the Government - The State Government has the power to
reserve the rights to exploit such deposits in its own favour or in
favour of State owned Companies or Corporations - However, the
F
State Government can reserve such right only in terms of s. 17A of
the Mines and Minerals Act - Absence of procedure resorted to by
the State Government, as required by s. 17 A, renders the State ·
Government's claim of reservation untenable, until a valid
reservation is made in accordance with law - Per Minority: State
G
Government had legislative competence to take the policy decision
reserving the area for exploitation of minerals by a State agency -
The_ saicf policy is not dehors the provisions of Mines and .Minerals
· Act and of Mineral Concession Rules - Mines and Minerals
(Development and Regulation) Act, 1987 - s. J7A - Mineral
515
H
516
SUPREME COURT REPORTS
[2016] S S.C.R.
A
Concession Rules,1960.
B
c
D
E
F
G
H
Dismissing the appeals, the Court
Majority opinion(Per T.S. Thakur, CJI, for himself and for V.
Gopala Gowda,J.)
HELD: 1. Once the Parliament decl~res it to be expedient
in public interest to bring the regulation and development of
mines and minerals under the control of the Union in public
interest, the subject to the extent laid down by the Parliament
comes within the exclusive domain of the Parliament and that
any legislation by the State after such declaration that has the
effect of trenching upon the field, must necessarily be
unconstitutional. [Para 8) (530-B)
2. While the State Government is the owner of the mineral
deposits in the lands which vest in the Government, the
Parliament has by reason of the declaration made in Section 2 of
Mines and Minerals (Development and Regulation Act, 1957)
acquired complete dominion over the legislative field covered
by the said legislation. The Act does not denude the State of the
ownership of the minerals situate within its territories but there
is no manner of doubt that it regulates, to the extent set out in
the provisions of the Act, the development of mines and minerals
in the country. [Para 17](536-H; 537-A-B)
3.1 The State Government can reserve any area not already
held under any prospecting licence or mining lease for
undertaking prospecting or mining operations through a
Government company or corporation owned or controlled by it,
but, in terms of sub-Section(2) of Section 17A. [Para 14)[535-CD]
3.2 Three distinct requirements emerge from Section 17 A(2)
for a valid reservation viz.: the reservation can only be with the
approval of the Central Government and must confine to areas
not already held under any prospecting licence or mining lease;
the reservation must be made by a notification in the official
gazette; and the notification m~st specify the boundaries of such
areas and the mineral or minerals in respect of which such areas
will be reserved. [Para 14](535-D-F]
STATE OF KERALA v. MIS. KERALA RARE EARTH &
517
MINERALS LIMITED
3.3 If the State Government proposes to reserve any area
for exploitation by the State owned corporation or company, it
must resort to making of such reservation in terms of Section
17A of the Act with the approval of the Central Government and
by a notification specifying boundaries of the area and mineral or
minerals in respect of which such areas will be reserved. [Para
17][537-B-C]
3.4 Thus, while the power to reserve an area not already
held under any prospecting licence or mining lease is squarely
and s.pecifically vested in the State Government, the exercise of
that power is not demonstrable in the present case. There is no
approval of the Central Government nor is there a notification
duly published in the official gazette specifying boundaries of the
reserved area and mineral or minerals in respect of which such
area will be or has been reserved. If the law requires a particular
thing to be done in a particular manner, then, in order to be valid
the act must be done in the prescribed manner alone. [Paras 15
and 16][535-G-H; 536-A-B]
3.5 Absence of the Central Government's approval to
reservation and a notification as required by Section 17 A,
therefore, renders the State Government's claim of reservation
untenable till such time a valid reservation is made in accordance
with law. The State Government's general executive power cannot
be invoked to make a reservation delwrs Section 17 A. The State
Government is denuded of its executive power in the light of
Section 2 of the Act. Therefore, the High Court was justified in
holding that there is no valid reservation. [Paras 16 and 17](536C-D; 537-D]
3.6 However, the government can make such a reservation
if so advised in the manner prescribed by law. The dismissal ()f
the present appeals shall not prevent the State from invoking its
right under Section 17(A)(2) of the Act by issuing notification in
respect of the mineral deposits in question. [Para 17](537-C, DJ
Shibu v. Tahsildar (1993 (2) KLT 870); Gem Granites
v. State of Kera/a and
Ors. 2006 (2) KLT 899;
Hingir-Rampur Coal Co. Ltd. v. Smte of Orissa AIR
1961 SC 459 : 1961 SCR 537; State of Orissa v. MA.
A
'
B
c
D
E
F
G
H
518
SUPREME COURT REPORTS
[2016] 5 S.C.R.
A
Tulloch and Co. AIR
1964 SC 1284 : 1964 SCR
46; India Cement Ltd. v. State of Tamil Nadu (1990) 1
SCC 12: 1989 (1) Suppl. SCR 692; Orissa Cement
Ltd. v. State of Orissa 1991 Supp (1) SCC 430 : 1991
(2) SCR 105; State of Orissa v. Mahanadi Coalfields
B
c
D
E
Ltd. 1995 Supp (2) SCC 686; Saurashtra Cement &
Chemical Industries Ltd. and Am: v.
Union of India
and Ors. (2001) 1 SCC 91; State of Madhya Pradesh
v. Mahalaxmi Fabric Mills Ltd. 1995 Supp (1) S C C
642: 1995 (1) SCR 756; Co111111issioner of Income Tax,
Mumbai v. Anjum MH. Ghaswala and ors. (2002) 1
SCC 633 : 2001 (4) Suppl. SCR 303; Captain Sube
Singh and Ors. v. Lt. Governor of Delhi and Ors. (2004)
6 SCC 440 : 2004 (1) Suppl. SCR 929; State of U.P.
v. Singhara Singh AIR 1964 SC 358; Mohinder
Singh Gill v. Chief Election Commissioner (1978) 1 SCC
405 : 1978 (2) SCR 272; Sandur Manganese and Iron
Ores Ltd. v. State of Karnataka and Ors. (2010) 13
SCC 1 : 2010 (11) SCR 240; Bharat
Coking Coal
Ltd. v. State of Bihar (1990) 4 SCC 557 : 1990 (3) SCR
744; State of Tamil Nadii v. Hind Stone (1981) 2 SCC
205 : 1981 (2) SCR 742 - relied on.
Monnet !spat and Energy Limited v. Union of India and
Ors. 2012 (11) SCC 1 : 2012 (7) SCR 644 - referred
to.
Minority Opinion (Per R. Banumathi, J.):
F
1. In the federal structure of India, State Governments are
the owners of the mines and minerals located within the territory
.of the State concerned. There is nothing in the Mines and
Minerals (Development and Regulation) Act (MMDR Act) or the
Mineral Concession Rules (MC Rules) to detract from this basic
fact. Although, mineral wealth vests with the State Government,
G
yet the subject of regulation of mines and mineral development
is covered under Seventh Schedule of the Constitution of India.To
the extent control of regulation of mines and mineral development
is taken over by the Union under the law made by Parliament
declaring that it is expedient in the public interest to do so, the
H
scope and ambit of Entry 23 of List II is cut down to that extent.
STATE OF KERALA v. M/S. KERALA RARE EARTH &
519
MINERALS LIMITED
(Paras 7 and 8)(539-D-F; 540-B-C]
A
Amritlal Nathubhai Shah & Ors. v. Union Government
of India & Am: (1976) 4SC,C 108: 1977 (1) SCR 372relied on.
State. of Orissa And Anr. v. M.A. Tulloch & Co. AIR
B
1964 SC 1284 : 1964 SCR 461 - referred to .
•
2. In grant of mining lease of a property of the State, the
State Government has the 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 c
for mining operations in any place within the State. No one has a
vested right for grant of mining lease except the rights created
under MMDR Act and the Mineral Concession Rules. But State
Government being a public authority, its acts are necessarily
regulated by rules and regulations. [Para 12)(544-E-G; 545-A]
MP. Ram Mohan Raja v. State of T.N & Ors. (2007) 9
D
SCC 78 : 2007 (5) SCR 576; State of Tamil Nadu v.
Hind Stone & Ors., (1981) 2 SCC 205 : 1981 (2) SCR
742; Dharambir Singh v. Union of India & Ors. (1996)
6 SCC 702 : 1996 (6) Suppl. SCR 566; Monnet !spat
and Energy Ltd. v. Union of India and Ors. (2012) 11
E
SCC 1 : 2012 (7) SCR 644; Sandur Manganese &
Iron Ores Ltd. v. State ofKarnataka & Ors., (2010) 13
SCC 1 : 2010 (11) SCR 240 -
relied on.
3. Section 17 A deals with the reservation of area by Central
Government or by the State. Government for the purpose of f•
"conservation of minerals". The authority of the State to make ·
reservation of a particular mining area within its territory for its
own use is the offspring of the State's authority of ownership over
the mines and minerals. Section 17 A(2) reserves the power of
the State Government with the approval of the Central
Government to reserve any area not already held under
G
prospecting licence or mining lease. Section 17 A(2). uses the
words "with the approval of the Central Government" and does ·
not use the expression "prior approval". [Paras 15 and 16)(545" ·
G; 546-A-B]
H
520
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
[2016] 5 S.C.R.
Monnet !spat & Energy Ltd. v. Union of India & Ors.
(2012) 11 SCC 1 : 2012 (7) SCR 644 - relied on.
4.1 Under Section 17 A(2) the power is conferred upon the
State Government with the approval of the Central Government
to reserve any area for undertakillg prospecting or mining
operations through a Government company or a Corporation
owned or controlled by it. The State Government has the
executive power to exploit its own minerals. Such power is thus
conferred upon the State by the MMDR Act _itself. Section 17 A
(2) clearly recognizes the power of the State Government to
reserve the land for mining or exploitation of the mineral in public.
sector. While so; a policy decision of the State reserving the area
for mining of mineral sand through State/Central Public Sector
Undertakings cannot be said to be in derogation of MMDR Act.
The policy of the State that the mining of minerals sand will be
done only through State/Central Public Sector Undertakings is
well in consonance with the provisions of MMDR Act. [Para
20)(550-C-E]
Monnet !spat & Energy Ltd. v. Union of India & Ors.
(2012) 11 SCC 1 : 2012 (7) SCR 644 - relied on.
4.2 State Government being owner of the minerals lying
within its territory by virtue of the powers conferred under
Sections 10 and 17 A(2) MMDR Act and having regard to the
Industrial Policy, Government of India, Department of Atomic
Energy dated 6.10.1998 granting liberty to the State to select the
companies/entrepreneurs of its choice for setting up projects/
plants for exploitation of beach sand minerals, the policy of the
State Government, reserving the area for mining of the mineral
sand done through State/Central Public Sector Undertakings
cannot be said to be in derogation of MMDR Act and MC Rules.
It cannot be contended that the State has no legislative
competence and the Executive has no power to frame a policy
rese..Ving the area for exploitation of beach sand mineral by State/
Central Public Sector Undertakings. [Para 23)(552-F-G]
4.3 As per Article 48A of the Constitution, the State shall
endeavour to protect and improve the environment and this is a
constitutional mandate. Kerala being a State with long coastal
STATE OF KERALA v. M/S. KERALA RARE EARTH &
MINERALS LIMITED
areas and backwaters and State being densely populated, State
Government's decision to reserve mining lease of beach sand
minerals to State/Central Public Sector Undertakings is stated
to be in larger public interest. The policy adopted by the State of
Kerala is well in consonance with the National Mineral Policy as
both are designed to encourage the scientific methods of mining,
beneficiation and economic utilization. The National Policy
specifies that there shall be transparency and fair play in the
reservation for one over another in the public interest. Apparently
the State of Kerala has reserved the area for public sector
undertakings in order to prevent environmental degradation and
to ensure the maintainability of public health. [Para 25][553-CG]
Pa/lava Granite Industries (India) (P) Ltd. v. Union of
India & Ors., (2007) 15 SCC 30 : 2006 (8) Suppl. SCR
633 - relied on.
Indian Charge Chrome Ltd. & Am: v. Union of India &
Ors. (2006) 12 SCC 331 : 2006 (10) Suppl. SCR 640 -
referred to.
-~
4.4 The policy of the State is also in consonance with Section
18 of the MMDR Act which provides that it shall be the duty of
the Central Government to take all steps for conservation and
systematic development of minerals in India. The State
Government's policy is in adherence to sustainable development
which is a constitutional mandate and the State has tried to balance
521
A
B
c
D
E
the developmental needs and the need for protection of
environment and ecology. Therefore, it cannot be said that the -p
State Government's policy is violative of provisions of the MMDR
Act and National Policy. The High Court failed to consider that
the State of Kerala keeping in view its policy decision and the
importance of environment protection rejected the application
moved by the first respondent. [Para 25][553-G-H;554-A-B]
4.5 The State Government has passed a reasoned order as
to why it has chosen to reserve the area for exploitation of mineral
sand in public sector_ undertakings and there is no arbitrariness
or unreasonableness in the policy of the State. [Para 26][554-DE]
G
H
522
A
B
c
D
E
F
G
H
SUPREME .COURT REPORTS
[2016] 5 S.C.R.
State of Tamil Nadu v. Hind Stone & Ors. (1981) 2 SCC
205 : 1981 (2) SCR 742; Monnet !spat & Energy Ltd.
v. Union of India & Ors. (2012) 11 SCC 1 : 2012 (7)
SCR 644 - relied on.
5.1 Under Section 17A(2) of the MMDR Act, the statutory
dispensation is the approval of the Central Government and
reservation of area by the State Government by notification in
the Official Gazette specifying the boundaries of such area and
the mineral or minerals in respect of which such areas will be
reserved. No doubt, when the statute stipulates a procedure, it
should be done strictly as per the procedure stipulated thereon.
State Government with the approval of the Central Government
has the power to reserve any area for undertaking mining
operation through public sector undertakings. Recommendation
of the State Government for approval of the Central Government
for such reservation and issuance of notification is only procedural.
The policy of the State that mining of beach and mineral would be
done through public sector undertakings cannot be said to be
dehors the MMDR Act or unreasonable ,justifying interference
by the Court. [Para 30)(557-G-H; 558-A-B)
5.2 The plea regarding thwarting the procedure stipulated
under Section 17 A(2) of the MMDR Act under the guise of
industrial policy has not been specifically raised before the High
Court in the writ petition. Only during the course of arguments
in this Court for the first time, such a plea was raised. Therefore
steps, if any, taken by the State of Kerala in furtherance of Section
17 A (2) of MMDR Act is not available on record. [Para 31)(558C]
5.3 The approval of the Central Government required by
Section 17A (2) is mandatory, but nowhere it is stated that the
approval must be sought prior to the reservation. Prior approval
of the Central Government before reserving any area by the State
Government for the public sector undertaking is not required.
Therefore, what logically follows from Section 17A (2) is that the
State Government may seek approval of the Central Government
even after the framing .of the policy. [Para 33)[558-G-H]
5.4 Industrial Policy of the State can be said to be a prelude
STATE OF KERALA v. MIS. KERALA RARE EARTH &
MINERALS LIMITED
before the State makes the proposal reserving the area for
exploitation of the mineral by the public sector undertakings. It
is not correct to say that under the guise of policy decision, the
State has bye-passed the procedure stipulated under Section
17A(2).
[Para 33](559-F-G)
6. Merely because the Central Government has directed
the State Government to reconsider the matter, it was not
obligated upon the State to grant mining lease in favour of the
first respondent. After remittance of the matter, State has the
power to consider the applications afresh on its own merits and
the constitutional mandate. Though MMDR Act confers the
revisional power on the Central Government for grant of mining
lease for mining minerals other than a minor mineral, that does
not mean that the State Government is denuded of its power or
control over the minerals lying in the land within its territory.
The High Court fell in error in faulting the State Government
and the State cannot be faulted for the alleged "institutional
insubordination". (Paras 35 and 36](560-F-G; 561-A-B)
Sandur Manganese And Iron Ores Ltd. v. State of
Karnataka & Ors. (2010) 13 SCC 1 : 2010 (11) SCR
240 - relied on.
Dharam Chand Jain v. State of Bihar (1976) 4 SCC
427 : 1976 (0) Suppl. SCR 53 - referred to.
7. It is well settled that no one has legal or vested right for
the grant of mining lease. Mere disappointment of expectation
cannot be a ground for interfering with the policy of the State
reserving the areas for exploitation of beach sand mineral by State/
Central Public Sector Undertakings. No doubt by G.O (MS)
No.105/04/ID dated 15.09.2004, State has sanctioned mining
leases to the first respondent. But within ten days by order dated
25.09.2004, the mining lease granted to first respondent was
stopped on the ground that the detailed study on the environment
impact will be undertaken before taking further action in the
matter. The rule of promissory estoppel can be invoked only if on
the basis of representation made by the Government, the party
has substantially altered the position. Within short time of ten
days, first respondent could not have altered its position so as to
523
A
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c
D
E
F
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H
524
SUPREME COURT REPORTS
[2016] 5 S.C.R.
A
invoke the doctrine of promissory estoppe/. [Paras 40 and 41)(562D-E; 563-B~D)
B
c
D
E
F
G
H
Monnet !spat & Energy Ltd. v. Union of India & Ors.
(2012) 11 SCC 1: 2012 (7) SCR 644 - relied on.
Case Law Reference
In the Judgment of T.S. Thakur, CJI:
(1993 (2) KLT S70)
relied on
2006 (2) KLT S99
1961 SCR 537
relied on
relied on
1964 SCR 461
relied on
19S9 (1) Suppl. SCR 692
relied on
1991 (2) SCR 105
relied on
1995 Supp (2) sec 6S6
(2001) 1 sec 91
relied on
relied on
Para4
Para4
Paras
ParaS
ParaS
Paras
Paras
Paras
1995 (1) SCR 756
relied on
Para S
2012 (7) SCR 644
referred to
Para 10
2001 (4) Suppl. SCR 303
relied on
Para 16
2004 (1 ) Suppl. SCR 9.29
relied on
AIR 1964 SC 35S
197S (2) SCR 272
2010 (11) SCR 240
1990 (3) SCR 744
19Sl (2) SCR 742
relied on
relied on
relied on
relied on
relied on
In the Judgment of R. Banumathi, J.:
relied on
Para 16
Para 16
Para 16
Para 16
Para 16
Para 16
Para7
1977 (1) SCR 372
1964 SCR 461
2012 (7) SCR 644
referred to
Para 9
2007 (5) SCR 576
19Sl
(2) SCR 742
referred to
Para 11
relied on
relied on
relied on
Paras 13 & 16
Para 12
Para 12
STATE OF KERALA v. MIS. KERALA RARE EARTH &
525
MINERALS LIMITED
1996 (6) Suppl. SCR 566
relied on
Para 12
2010 (11) SCR 240
relied on
Para 14
2006 (8) Suppl. SCR 633
relied on
Para 24
2006 (10) Suppl. SCR 640
referred to
Para24
1981 (2) SCR 742
relied on
Para26
1976 (0) Suppl. SCR 53
referred to
Para34
2010 (11) SCR 240
relied on
Para 37
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3608
of2016
WITH
C. A. Nos. 3609 and 3610 of2016.
From the Judgment and Order dated 13.11.2014 of the High Court
ofKerala at Ernakulam in Writ Appeal No. 1610of2014 in Writ Petition
A
B
c
(Civil) No. 34345 of2010.
·
D
• Mohan Parasaran, Sr. Adv., Jogy Scaria, Advs. for the Appellants.
Shyam Divan, Sr. Adv., Ritin Rai, Gopinath Menon, Siddhartha
Jha, V. K. Monga, Jayant Malik, Advs. for the Respondents.
The following Judgments and Order were delivered.
T.S. THAKUR, CJI; I. Leave granted.
2. These appeals arise out of a common judgment and order dated
131h November, 2014 passed by the High Court ofKerala at Erriakulam,
whereby, Writ Appeals Nos.1610, 1611 and 1621 of 2014 filed by the
appellants-State of Kerala have been dismissed affirming thereby an
order passed by a Single Bench of that Court, allowing the writ petitions
filed by the respondent.
3. By an order dated l5'h September, 2004 the Government of
Kerala sanctioned the grant of mining leases for Ilmenite, Rutile,
Leucoxene, Zircon and Sil/imanite (non-scheduled mineral) for a
period of20 years. The order came in exercise of the powers vested in
the State Government under Section 11(5) of the Mines and Minerals
(Development and Regulation) Act, 1957 and was preceded by the
approval of the Government of India in terms of Section 5(1) thereof.
E
F
G
H
526
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H
SUPREME COURT REPORTS
[2016] 5 S.C.R.
Shortly after the issue of the sanction order, however, the State
Government by another order dated 25'h September, 2004 stayed further
action in the matter on the ground that a detailed study on the
environmental impact of the proposed leases need be undertaken before
taking any further steps. This was followed by nine letters dated J2•h
October, 2006, l 61h October, 2006 and 9'hNovember, 2006 addressed to
the respondent-company stating in no uncertain terms that the
Government of Kerala did not consider it necessary to grant mining
leases for mineral sand to private parties. Aggrieved by the said letters
and communications, the respondents filed nine revision applications No.
14(1)/2007-RC-Jl to 14(3)/2007-RC-Iland 14(6)/2007-RC-Il to 14(11)/
2007-RC-II under Section 30 of the Act aforementioned before the
Government oflndia. These revision applications were heard and allowed
by the prescribed revisional authority by a common order dated 30th
November, 2009, setting aside the impugned orders and remanding the
matters to the State Government to reconsider the cases in the light of
the observations made in the order passed by the revisional authority.
The operative portion of the order passed by the revisional authority
was in the following words:
" ......... 9. After hearing both the sides. we find that
the State Government had recommended the mining lease
applications of the applicant for seeking prior approval
of the Central Government in line with the policy
resolution dated 22.J0.2002. Jn 7 cases the Central
Government had also accorded its prior approval under
Section 5(1) of the MMDR Act, J957 for the proposal
of the State Government for grant of mining lease for
mineral sand in favour of the revision applicant. . The
impugned orders have been passed by the State
Government after obtaining the prior approval of the
Central Government in 7 cases, the State Government
is required to pass order under Section J0(3) of the
MMDR Act. Jn all the 9 cases, including those in which
prior approval of Central Government has been.
conveyed, the impugned orders passed by the State
Government are against competitive edge of the mining
industry. The policy decision. of the State Government
appears to be not in consonance with the MMDR Act,
STATE OF KERALA v. MIS. KERALA RARE EARTH &
527
MINERALS LIMITED [T. S. THAKUR, CJI]
1957 and also against the National Mineral Policy,
A
2008.
10. The impugned orders in all the 9 revision
applications mentioned above are set aside with a
direction to the State Government to reconsider nil 9
cases in the light of the discussions made in para 9
B
above and pass appropriate orders accordingly.
Sd/-
(R. Raghupathi)
Joint Secretary and
Legal Advisor
Sdl-
(Ajita Bajpal Pande)
Joint Secretary
(Min es)"
4. Upon remand, the Government ofKerala once again' xamined
the matter and by an order dated J 5'h December, 20 I 0 rejected all the
applications filed by the respondents on the ground that although, as per
Entry 54 List-I (Union List), Schedule VII of the Constitution oflndia,
the Parliament is competent to make laws for regulation of mines and
mineral development to the extent such regulation and development is
declared by the Parliament by law to be expedient in public interest, yet,
the power of granting mining leases for mining minerals vested only in
the State Government under Section I 0 of the Act aforementioned. The
Government referred to and relied upon its own industrial policy of2007
according to which mining and exploitation of minerals were permissible
only through State/Central Public Sector Undertakings in order to restrict
indiscriminate mining and exploitations of minerals having regard in
particular to the geographical and ecological conditions as well as the
density of the population in the State ofKerala. The State Government
took the view.that it had the power and control over the minerals lying in
the land within its territory and that it was entitled to safeguard the same
in larger public interest bx formulating suitable policies on the subject.
Relying upon the decisions of the High Court of Kerala in Shibu le
Tahsildar [1993 (2) KLT 870] and Gem Granites ii. State of Kera/a
and Ors. [2006 (2) KLT 899] the Government declared that as the
owner of the minerals lying in the land within its territorial limits it was
entitled to determine in public interest that mining and exploitation of
minerals will be permitted only through State/Central Public Sector
Undertakings. The State Government insisted that such a policy was not
contrary to the Act nor did it suffer from any constitutional infirmity. It
also relied upon the fact that minerals in question were categorised as
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(2016] 5 S.C.R.
Atomic Minerals as per Part-8 of the First Schedule to the Act
aforementioned. The Government declared that environmental protection
being one of its constitutional mandates, any decision that may affect
environment or sections of people living in the coastal areas or which
may affect environmental conditions in those areas cannot be said to be
in public interest.
5. Aggrieved by the order passed by the State Government, the
respondent-company filed Writ Petitions No.34345 of2010, 34346 of
20 I 0 and 5420of2011 before the High Court ofKerala inter alia praying
for a writ of mandamus directing the State to implement the revisional
order issued by the Government of India and grant in favour of the
respondents mining leases in respect of all the areas which were the
subject matter of the said order. The respondents also prayed for a
declaration to the effect that the order passed by the Central Government
in exercise of its powers under Section 30 of the Act aforementioned
was binding upon the State Government and that any policy decision by
the St!lte Government contrary to the said decision will not affect the
rights of the respondents to obtain mining leases for the areas applied
for. The respondent also prayed for a mandamus directing the State
Government to forward to the Government of India for approval all the
mining lease applications made by the respondent-Company which had
not so far been forwarded for such approyal.
6. By an order dated 21" February, 2013 passed by a Single Judge
ofHigh Court ofKerala, the Writ Petitions mentioned above were al lowed
in part by the High Court inasmuch as the order passed by the State
Government was quashed and the matter remitted back to the
Government to pass orders in the light of the observations made by the
High Court. The High Court quashed the order by which further action
in the matter was stayed by the Government with a direction to the
Government to consider the applications pending with it in accordance
with law. The High Court took the view that the State Government had
not reserved, in terms of Section 17 A(2) of the I 957 Act, the areas
covered by the applications filed by the respondents and that so long as
no such reservation was made, the direction issued by the Central
Government to the State Government to reconsider the applications could
not be negated. The High Court also held that the State Government had
overlooked the provisions of the National Mineral Policy, 2008, which
permitted facilitation .of private entrepreneurs and that since the
STATE OF KERALA v. M/S. KERALA RARE EARTH &
MINERALS LIMITED [T. S. THAKUR, CJI]
Government of Kerala had already exercised its discretion in terms of
the prevalent Mining Policy and recommended to the Government of
India the grant of approval for mining leases, the rejection of the
applications on the basis of a changed policy after the Government of
India had accorded sanction for the proposed mining leases was
unjustified. The High Court also took note of the fact that Government
of Kerala had granted mining lease in respect of the area covered by
four other applications and that there could not be different policies in
respect of different areas covered by different applications made by the
same Company.
7. Aggrieved by the order passed by the Single Judge, the State
Government preferred Writ Appeals No.1610, 1611 and 1621 of 2014
which were heard and dismissed by a Division Bench of that Court in
terms of the order impugned in the present appeals. The High Court,
while doing so, held that the State Government was not justified in
declining mining leases on the ground that it had been simply directed to
reconsider the matter. The refusal of the Government, according to the
High Court, amounted to institutional insubordination. The appeals were
accordingly dismissed with the observation that the State Government's
role in issuing the sanction was minimal, as the subject matter of the law
fell within the domain of Central Government. The present appeals by
special leave question the correctness of the above order, as already
noted above.
8. The law relating to mines and minerals development and
regulation as also the interpretation of the provisions of the 1957 Act has
been the subject matter of a long line of decisions of this Court. It is, in
our view, unnecessary to refer to all such decisions as have dealt wi-th
different facets of the controversy relating to the powers of the Central
Government and those of the State Governments in relation to regulation
and development of mines and minerals including the power to levy taxes,
fee and cesses and royalties. Decisions of this Court in Hingir-Rampur
Coal Co. Ltd. " State of Orissa [AIR 1961 SC 459];· State of Orissa
"MA. Tulloch and Co. [AIR 1964 SC 1284]; India Cement Ltd."
State of Tamil Nadu [(1990) I SCC 12]; Orissa Cement Ltd. " State
of Orissa [ 1991 Supp (I) SCC 430]; State of Orissa v. Mahanadi
Coalfields Ltd. [ 1995 Supp (2) SCC 686]; Saurashtra Cement &
Chemical Industries Ltd. and Am: v. Union of India and Ors. [(200 I)
I SCC 91 ]; and State of Madhya Pradesh v. Mahafaxmi Fabric Miffs
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Ltd. [1995 Supp(!) SCC 642] have elaborately dealt with the legislative
power of the States to levy taxes, fees and cesses on the minerals
regulated by the Act. Dealing with various hues and colours of such
levies this Court held that once the Parliament declares it to be expedient
in public interest to bring the regulation and development of mines and
minerals under the control of the Union in public interest, the subject to
the extent laid down by the Parliament comes within the exclusive domain
of the Parliament and that any legislation by the State after such
declaration that has the effect of trenching upon the field, must necessarily
be unconstitutional.
9. We are not, in the present case, dealing with a challenge to the
levy of any tax, fee, cess or royalty nor is the vires of any legislation
enacted by the State under challenge before us. We are, instead,
examining whether the State Government was justified in declining the
applications for grant ofleases in favour of the respondent-company on
the ground that the mineral wealth found in the coastal regions of the
State was vested in the State Government and that it was in exercise of
its right of ownership over the said deposits entitled to reserve in its own
favour or in favour of State owned companies or corporations the right
to exploit such deposits. The State Government as noticed in the earlier
part of the judgment has, while declining applications for grant oflease,
relied upon its own policy acc9rding to which the mineral deposits in
question are reserved for exploitation by a State agency only. Two precise
questions, therefore, fall for consideration in the light of the stance taken
by the State Government viz:
{i) Whether the ownership in the mineral reserves is vested
in the State Government; and
(ii) If it is, whether the Government has the right to decline
leases on the ground that the minerals or the areas where
the same are found have been reserved for exploitation
by government companies or corporations.
G
· 10. In Monnet !spat and Energy Limited 1< Union of India and
H
Ors. 2012 ( 11) SCC I, Lodha, J., as His Lordship then was, speaking for
the Court, held that no one can claim any right in any land belonging to
the Government or in any mines in any land belonging to the Government
except under the 1957 Act and 1960 Rules nor can any person claim any
fundamental right to a lease or prospecting license qua any land belonging
STATE OF KERALA v. M/S. KERALA RARE EARTH &
MINERALS LIMITED [T. S. THAKUR, CJ!]
to the Government. The mines and minerals, observed the Court, within
the territory of a .State would vest in the State Government especially
when the land where such minerals deposits are found is owned by the
Government as is also the position in the case at hand. In fairness to
counsel for the respondents it must be mentioned that there was no real
dispute as to the ownership of the minerals found in the Government
owned land. What was strenuously argued by learned counsel for the
respondents was that the State Government could not, on the basis of its
own mineral policy, decline consideration to the applications filed by the
respondents, when such policy was in conflict with the mineral policy of
the Government oflndia.
11. The Mineral Policy 2008 of the Government of India, inter
alia, provides as under:
"4.
ROLE
OF
THE
STATE
IN MINERAL
DEVELOPMENT
The role to be played by the Central and State
Government in regard to mineral development has been
extensively dealt in the Mines and Minerals
(Development and Regulation) Act, 1957 and Rules made
under the Act by the Central Government and the State
Governments in their respective domains. The provisions
of the Act and the Rules will be reviewed and harmonised
with the basic features of the new National Mineral
Policy. In future the core functions of the State in mining
will be facilitation and regulation of exploration and
mining activities of investors and entrepreneurs,
provision of infrastructure and tax collection. In mining
activities, there shall be arms length distance between
State agencies (Public Sector Undertakings) that mine
and those that regulate. There shall be transparency
and fair play in the reservation of ore bodies to State
agencies on such areas where private players are not
holding or have not applied for exploration or mining,
unless security considerations or specific public
interests are involved.
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5.2 While these Government agencies will continue to
perform the tasks assigned to them for exploration and
survey, the private sector would in future be the main
source of investment in reconnaissance and exploration
and government agencies will .expend public funds
primarily in areas where private sector investments are
not forthcoming despite the desirability of programmes
due to reasons such as high uncertainties. "
12. It would thus appear that for the minerals in question there
was no reservation made in favour of any State owned corporation or
agency. that is perhaps the reason why the Government of India had
granted approval to the State Governments recommendations on some
of the applications filed by the respondents. The State Government Policy,
however, runs contrary to the National Mineral Policy, 2008 formulated
by the Government oflndia, Ministry of Mines, in so far as it does not
pennit a mining lease in favour of any entity other than a State owned
corporation or agency. The State Industrial Policy- 2007, relied upon by
the State Government in this regard to the'extent it is relevant for our
purposes, is as under:
"I2.0 MINING & GEOLOGY
I2.1 lntensive efforts will be made to explore and utilize
mineral resources of the State without adversely
affecting the ecology and environment. Mineral
exploration activities for iron ores, high grade china
clay, bauxite and other minerals will be streamlined
. and strengthened.
j
12.2 Mining of mineral sand will be done through State/
Central Public Sector Undertakings only. However
mining of minerals will not be permitted in those areas
where the Government appointed Expert Committee
recommendation against mining. Government will
encourage manufacture of Value Added. Products.
12.3 The Government will conduct a scientific study on
mineral deposits in the State.
12.2.I Titanium
Considering the rich mineral deposits in the State, a
comprehensive scheme to produce Titanium Metal,
STATE OF KERALA v. M/S. KERALA RARE EARTH &
MrNERALS LIMITED [T. S. THAKUR, CJI]
Titanium composites by using State-of-the-art
technology shall be evolved with the help of Central
Government
agencies
and
International
organisations. If the potential of this natural
resource is used properly and scientifically, it will
immensely pave way for rapid industrialisation of
the State as Titanium is a unique material for strategic
applications. The approach is not to limit the
activities to manufacturing alone but to harness its
vast potential by setting up a chain of Titanium based
industries through forward integration. However,
utmost care shall be taken to contain the adverse
impact on environment by mining, processing and
related activities by adopting strict monitoring and
control measures. To develop a package for making
use of the immense potential of titanium,· support shall
be availed from national and international
organisations. "
13. It is argued by Mr. Parasaran, learned senior counsel for the
appellantthat the policy aforementioned must be taken to be a reservation
in favour of the State owned agencies within the comprehension of
Section 17 A of the aforementioned Act. Section I 7A of the Mines and
Minerals (Development and Regulation) Act, 1957 reads as under:
"I 7 A.