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CASE NO.: Appeal (civil)  8501 of 2002

PETITIONER: M/S INDIAN CHARGE CHROME LTD. & ANR

RESPONDENT: UNION OF INDIA & ORS

DATE OF JUDGMENT: 11/12/2006

BENCH: CJI Y.K. SABHARWAL,C.K. THAKKER & P.K. BALASUBRAMANYAN

JUDGMENT: J U D G M E N T WITH

CIVIL APPEAL NOS.8502/2002, 6787/2004, 6788/2004, TRANSFERRED CASE NOS.9/2002, 21/2005 AND TRANSFER PETITION (c) NOs.928/2005,  701/2005, 932/2005 and 446/2005

P.K. BALASUBRAMANYAN, J.   1.              M/s Indian Charge Chrome Limited (hereinafter  referred to as, "I.C.C.L.") has challenged the decision of the  Orissa High Court in O.J.C. No. 1830 of 1999 in Civil Appeal  Nos. 8501 and 8502 of 2002.  In Transferred Case (C) No. 9 of  2002, which was withdrawn to this Court from the High Court  of Delhi, the same Company had challenged by way of C.W.P.  No. 4230 of 2001 the grant of approval for what it called an  out of turn lease to M/s Nava Bharat Ferro Alloys Ltd.  (hereinafter referred to as, "Nava Bharat"), respondent No. 3 in  the Civil Appeals.  Whereas, the Writ Petitions in the Orissa  High Court challenged the recommendation of the State  Government, the Writ Petition in the Delhi High Court  challenged the grant of approval by the Central Government to  the lease in favour Nava Bharat.  

2.              M/s GMR Technologies & Industries Limited  (hereinafter referred to as, "GMR") filed O.J.C. No. 2236 of  2002 in the High Court of Orissa challenging the decision of  the State Government to grant a lease of the extent of 436.295  hectares to the Orissa Mining Corporation Limited (hereinafter  referred to as, "OMC") against a recommendation to grant a  lease to it of an extent of 43.579 hectares out of it.  The said  Writ Petition was allowed by the High Court of Orissa and the  said decision is challenged by OMC in C.A. No. 6787 of 2004  and in C.A. No. 6788 of 2004.  

3.              M/s Jindal Strips Ltd. (hereinafter referred to as,  "JINDAL") challenged in the High Court of Orissa by way of  Writ Petition No. 7575 of 2003 the decision of the State  Government to recommend the grant of the lease in favour of  OMC ignoring its own claim for a lease and the said Writ  Petition was got transferred to this Court and is numbered as  Transferred Case No. 21 of 2005.  This case also challenges  the recommendation of the State Government for grant of a  lease to OMC of the remaining extent of 436.295 hectares.

4.              The proposal of the State Government to grant a  lease to OMC was also challenged by I.C.C.L. before the Orissa

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High Court in Writ Petition (C) No. 1326 of 2005 and that is  sought to be got transferred to this Court by way of Transfer  Petition No. 928 of 2005.  Similarly, M/s Ferro Alloys  Corporation Limited (hereinafter referred to as, "FACOR") also  challenged the recommendation of the State Government for  grant of lease to OMC by filing Writ Petition (C) No. 5960 of  2005 in the High Court of Orissa and the same is sought to be  got transferred to this Court in Transfer Petition (Civil) No. 701  of 2005.  Nava Bharat, in its turn, challenged the proposal to  grant a lease to the OMC, in Writ Petition (Civil) No. 6459 of  2005 in the High Court of Orissa and the same is sought to be  got transferred to this Court by way of Transfer Petition (Civil)  No. 932 of 2005.  Balasore Alloys Limited, formerly known as  Ispat Alloys Limited (hereinafter referred to as, "ISPAT") filed  Writ Petition (Civil) No. 3767 of 2005 in the High Court of  Orissa challenging the very same proposal to grant a lease to  OMC and that Writ Petition is sought to be got transferred to  this Court in Transfer Petition (Civil) No. 446 of 2005.  

5.              Thus, the challenges in all these appeals,  transferred cases and the cases covered by the transfer  petitions, are to the proposal for grant of a lease of an extent of  84.881 hectares to Nava Bharat, the denial of a lease to GMR  and the recommendation of the State Government to grant a  lease of the entire remaining extent of 436.295 hectares (which  includes the extent of 84.881 hectares proposed to be leased  out to Nava Bharat) to OMC.   Considering that the questions  to be decided in the appeals and transferred cases by this  Court are the same as the ones raised in the writ petitions in  the High Court that are sought to be transferred to this Court,  the transfer petitions are allowed and the cases withdrawn  thereby are also disposed of by this Judgment.  Arguments  have been addressed in all the matters.   

6.              This litigation has had a chequered career.  It had  come to this Court on three prior occasions.  The facts are  detailed in those decisions in Indian Metals & Ferro Alloys  Ltd. Vs. Union of India & Ors. [(1990) Supp. 2 S.C.R. 27],  Tata Iron & Steel Company Ltd. Vs. Union of India & Anr.  [(1996) Supp. 3 S.C.R. 808] and Ferro Alloys Corporation  Ltd. & Anr. Vs. Union of India & Ors. [(1999) 2 S.C.R. 49].    Still, a few facts may be reiterated.  Chromite ore is said to be  a scarce metal ore in India.  It is mainly available in the State  of Orissa in the Sukinda Valley.  An extent of 1812.993  hectares of land was granted on mining lease to Tata Iron and  Steel Company (hereinafter referred to as, "TISCO") on  22.10.1952.  The lease was for 20 years.  In the year 1972,  TISCO obtained a renewal of the lease, but the area was  reduced to 1261.476 hectares.  This renewal was again for 20  years.  Before the expiry of the term, TISCO applied in the year  1991 for renewal of the lease for a further period of 20 years in  respect of the entire extent of 1261.476 hectares.  The State  Government recommended the renewal and the Central  Government granted its approval under Section 8(3) of the  Mines and Minerals (Regulation and Development) Act, 1957.   But, at the instance of some interested persons, the Central  Government reviewed its decision and granted approval for  renewal of the lease only in respect of 650 hectares, roughly  half of the original area.  TISCO challenged the said decision to  reduce the extent, by way of a writ petition in the High Court  of Orissa.  I.C.C.L., Indian Metals & Ferro Alloys (’IMFA’, for  short), JINDAL and ISPAT also filed writ petitions in the High  Court of Orissa challenging the approval for renewal of the  lease to TISCO in respect of an extent of 650 hectares.  All  these writ petitions raising a challenge to the decision of the

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Union Government dated 5.10.1993 were allowed by the High  Court, which directed the Union Government to consider the  matter afresh after hearing all those who had filed writ  petitions.  The decision of the Orissa High Court was  challenged by TISCO in this Court.  This Court dismissed the  appeal filed by TISCO, thus confirming the decision of the  High Court and directed the Union Government to consider  the matter afresh. But pending the proceedings in this Court,  since there was no order of stay passed by this Court, the  Union Government on 17.8.1995, granted sanction for renewal  of the mining lease in favour of TISCO in respect of 406  hectares.  The Union Government also directed that the  balance area of 855.476 hectares be distributed by way of  leases among the other claimants in terms of a Committee  report prepared as per the direction of this Court, in an earlier  proceeding.   

7.              Subsequently, regarding 855.476 hectares  remaining for grant of leases to the applicants other than  TISCO, the State Government recommended to the Union  Government that one-half of the said area could be allotted to  the other four pending applicants and the balance half of the  area of 855.476 hectares can be leased to others who also  required the mineral.  This proposal was implemented.  After  these four grants, the balance extent left is said to be 436.295  hectares.  

8.              Meanwhile, FACOR filed Writ Petition No. 12032 of  1997 in the High Court of Orissa challenging the assessment  of its need made by what came to be known as Sharma  Committee constituted as directed by this Court.  That Writ  Petition was dismissed by the Orissa High Court on 31.8.1998.   Meanwhile, the State Government set up another Committee,  the Dash Committee, for considering the distribution of the  area of 436.295 hectares, the area remaining out of 855.476  hectares, after the distribution among the four companies.   FACOR challenged the decision of the High Court of Orissa  before this Court.  While Dash Committee was considering the  claims of the various applicants, a recommendation was made  by the State Government for grant of a lease to Nava Bharat of  an extent of 84.881 hectares out of the 436.295 hectares in  respect of which claims were being considered by the Dash  Committee.  This recommendation was challenged by I.C.C.L.  in the Orissa High Court in O.J.C. 1830 of 1999.  Meanwhile,  on 22.3.1999, this Court in the FACOR’s appeal upheld the  recommendations of Sharma Committee as also the  recommendation of the State Government dated 29.6.1997  allotting 50% of 855.476 hectares to the four applicants then  claiming and leaving out 436.295 hectares for distribution by  way of lease among other needy entities.  This Court directed  that the remaining 436.295 hectares be allotted after the  report of the Dash Committee.  It may be noted here that after  Mr. Dash left the scene, the Committee came to be known  after his successor, as the Chahar Committee.  

9.              The Orissa High Court, meanwhile, dismissed the  Writ Petition, O.J.C. No. 1830 of 1999 filed by I.C.C.L.  challenging the decision recommending an out of turn lease to  Nava Bharat.  I.C.C.L., as we have noticed in the beginning,  has challenged that decision in the appeals.  Subsequently,  the Orissa Government decided that the balance extent of  436.295 hectares be granted on lease to OMC and that  decision also has been challenged in the High Court and the  High Court held the decision invalid.  That decision of the  High Court is also under challenge.  The position, therefore,

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now is that the correctness of the decision to grant a lease to  Nava Bharat of 84.881 hectares and the validity of the  recommendation of the State Government to grant a lease of  the remaining area of 436.295 hectares to OMC, are both in  question before this Court.   The challenge to the grant in  favour of Nava Bharat is on the basis that Nava Bharat was  nowhere in the picture when the four companies that were  dealt with in the earlier judgments were claiming the grant of  leases and in respect of whom directions were issued by this  Court and there was no reason for ignoring the priority in their  favour and granting a lease out of turn to Nava Bharat  especially in the teeth of the report of Sharma Committee and  the partial implementation of its recommendations by lease of  50% of the areas claimed by the four companies.  The decision  to grant the mining lease to OMC was struck down by the  High Court by taking the view that in the light of the earlier  orders of this Court, it was not open to the State Government  to take such a decision.  The correctness of the same is also in  question.  Thus, we are concerned with the question whether  the decision to grant a lease to Nava Bharat on the facts and  in the circumstances of the case was justified and whether the  proposal of the State Government to grant the balance area to  OMC could be justified.  Actually, if the claim of OMC were to  be upheld in the sense that the recommendation of the State  Government for the grant of a lease to OMC in respect of the  balance extent left, is found sustainable, there would be no  need to consider specifically the challenge made by I.C.C.L.  and GMR to the grant of a lease to Nava Bharat.  But since the  recommendation of the State Government to grant the lease to  OMC has to have prior approval of the Central Government  and the approval had not yet been granted, that aspect will  also have to be decided on merits.  We, therefore, think that it  will be appropriate to consider first, the question whether it  was open to the State Government to make a recommendation  that the balance extent of 436.295 hectares be leased to OMC  in preference to the other private parties who are making  claims for the lease and thereafter consider the challenge  raised to the grant of lease to Nava Bharat.

10.             Based on the arguments raised before us, the two  important provisions of the Mines and Minerals (Regulation  and Development) Act, 1957 that fall for our consideration are  Sections 11 and 17A.  The challenge to the grant of lease to  Nava Bharat involves interpretation of Section 11 and the role  of the various sub-sections therein.  The challenge to the  recommendation of the State Government to grant the balance  extent to OMC involves interpretation of Section 17A and the  nature of power conferred thereunder.  What is the effect of  the prior proceedings in this Court will also arise.  In the  background facts of this case, Rule 59 of the Mineral  Concession Rules, 1960 has also relevance.  This is for the  reason that the area was previously held under lease by TISCO  and it would become available for grant only on compliance  with Rule 59(1) or in terms of Rule 59 (2), whereunder a power  is vested with the Central Government to relax the provisions  of sub-Rule (1).

11.             Section 10 of the Act provides for applications for  prospecting licences or mining leases being made to the State  Government by a person interested.  Section 11 deals with the  preferential right amongst such applicants for the grant of a  lease.  Sub-section (1) of Section 11 confers a preferential right  on a person, who had already been granted a reconnaissance  permit or prospecting licence.  We are not concerned with that  provision in this case.  Sub-section (2) of Section 11 provides

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that in a case where the Government has not notified a  particular area in the official gazette as being available, and  two or more persons have applied for a mining lease, the  applicant whose application was received earlier shall have a  preferential right to be considered for grant of a mining lease  over the applicant whose application was received later.   According to the proviso, in a case where the State  Government had invited applications, all applications received  during the period specified for the making of such application  and applications which had been received prior to the  publication of the notification inviting applications and which  are pending, shall be deemed to have been received on the  same day for the purpose of assigning priority under sub- section (2). In other words, all applications received until the  dead line fixed, had to be considered on the same footing.  The  further proviso indicates that where such applications are  received on the same day, the Government may take into  consideration the matters specified in sub-section (3) and may  grant the mining lease to such one of the applicants as it may  deem fit.  Sub-section (3) sets out the matters to be  considered.  They include, the special knowledge or experience  of the applicant, financial resources of the applicant, the  nature and quality of the technical staff employed or to be  employed by the applicant, the investment which the applicant  proposes to make and such other matters as may be  prescribed.  Sub-section (4) provides that subject to the  preferential right available to a reconnaissance permit holder  or a prospecting licensee, all applications received pursuant to  a notification by the State Government during the period  specified in the Notification shall be considered  simultaneously as if they all had been received on the same  day and the Government had to take into consideration the  matters specified in sub-section (3) and grant the lease to such  one of the applicants as it deemed fit.  Sub-section (5) of  Section 11 has particular relevance in respect of the grant to  Nava Bharat, since Nava Bharat entered the fray only after  this Court had directed that the balance area of 855.476  hectares be allotted to the four applicants other than TISCO  that were in the fray at that stage.  We think it appropriate to  set down here, sub-section (5) of Section 11 with the proviso  thereto:  "11 (5).        Notwithstanding anything  contained in sub-section (2), but subject to  the provisions of sub-section (1), the State  Government may, for any special reasons to  be recorded, grant a reconnaissance permit,  prospecting licence or mining lease, as the  case may be, to an applicant whose  application was received later in preference to  an applicant whose application was received  earlier.  

               Provided that in respect of  minerals specified in the First Schedule, prior  approval of the Central Government shall be  obtained before passing any order under this  sub-section."

It is the case of Nava Bharat that though it had applied later,  its application was considered and the lease to it  recommended and got approved in view of the exercise of  power by the State Government under sub-Section (5) of  Section 11 of the Act.  We shall consider this aspect at the  appropriate stage.

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12.             Section 17A deals with reservation of area for  purposes of conservation.  Sub-Section (1) provides that the  Central Government, with a view to conserving any mineral  and after consultation with the State Government, may reserve  any area not already held under any prospecting licence or  mining lease and notify in the official gazette such area by  specifying the boundaries thereof and the mineral or minerals  in respect of which such area will be reserved.   Sub-section  (1A) of Section 17A enables the Central Government to reserve  any such area for undertaking mining operations through a  Government Company or corporation owned or controlled by  it.  Sub-section (2) of Section 17A enables the State  Government, with the approval of the Central Government, to  reserve any area not granted on lease for undertaking  prospecting or mining operations through a Government  company or corporation owned or controlled by it and its right  to notify the same.  Since, OMC relies heavily on this  provision, we think it appropriate to set down sub-section (2)  of Section 17A hereunder. "17A(2).        The State Government may, with  the approval of the Central Government,  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 and  where it proposes to do so, it shall, by  notification in the Official Gazette, specify the  boundaries of such area and the mineral or  minerals in respect of which such areas will  be reserved."

Sub-section (3) of Section 17A is not relevant for our present  purposes.  

13.             It is the case of Nava Bharat that the grant to it was  justified in terms of Section 11(5) of the Act and the State  Government was entitled to extend a preference to Nava  Bharat and the decisions of this Court rendered earlier cannot  and did not stand in the way of such exercise of power by the  State Government. The case of those who oppose the grant to  Nava Bharat is that the conditions of sub-Section (5) of  Section 11 have not been fulfilled in the case on hand and  even otherwise, at the present stage, it was not open to the  State Government to act under sub-Section (5) in the light of  the directions contained in Indian Metals & Ferro Alloys Ltd.  Vs. Union of India & Ors. (supra), Tata Iron & Steel  Company Ltd. Vs. Union of India & Anr. (supra) and Ferro  Alloys Corporation Ltd. & Anr. Vs. Union of India & Ors.   (supra) decisions rendered by this Court.  Similarly, the case  of OMC is that the power under Section 17A was independent  of any other power, or the power under Section 11 and it was  always open to the State Government, no doubt, with the  approval of the Central Government, to reserve any area that  may be available for exploitation by a corporation owned or  controlled by the Government.  OMC was such a corporation  and the State Government having made that recommendation  to the Central Government, it was for the Central Government  to take a decision on the question of approval as contemplated  by sub-Section (2) of Section 17A of the Act and on the grant  of such approval it was perfectly open to the State Government  to grant a lease in respect of the balance 436.295 hectares to  OMC and there was nothing in the prior decisions of this  Court which stood in the way or which could control the  exercise of power, the independent power, by the State

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Government under Section 17A of the Act.  The case of those  who oppose the stand of OMC is that in the light of the prior  decisions of this Court and the binding directions issued  therein, and the stand it had adopted earlier, the State  Government could not invoke its power or exercise its right  under Section 17A(2) of the Act at this stage and the Orissa  High Court was right in taking up that position while striking  down the recommendation of the State Government.  

14.             As a result of the prior directions of this Court, what  has transpired is that out of the 1261.476 hectares earlier  leased to TISCO, a renewal has been granted to it in respect of  406 hectares.  Out of the balance extent of 855.476 hectares,  leases of varying extents have been granted to  I.C.C.L./I.M.F.A., JINDAL, ISPAT and FACOR and what is left  is said to be 436.295 hectares.  This Court directed in the last  of the decisions that this area had to be distributed in terms of  the recommendations of the Dash Committee, that became  Chahar Committee.  It is therefore the case of the applicants  other than OMC that the distribution of this area could only  be in terms of the recommendations of the Chahar Committee.   The Chahar Committee not having recommended the grant of  any extent to OMC, in fact it had rejected the claim of OMC  altogether, it was not open to the State Government to purport  to recommend the grant of a lease of that extent to OMC.  It is  the further submission that while making the recommendation  to the Central Government, the State Government had not  disclosed all the relevant facts and the material fact that OMC  was inefficient, was not in a position to exploit the areas  already held by it and that a number of mines under it were  remaining idle had not been brought to the notice of the  Central Government.  The Orissa High Court did not go into  the latter question or the scope of the power under Section  17A of the Act, but proceeded on the footing that in the light of  the prior directions of this Court, it was not open to the State  Government to exercise its right or power under Section 17A of  the Act.  

15.             As we see it, the power under Section 17A is an  independent power.  It is not related to the power available  under Section 11 of the Act.  It is open to the Central  Government to reserve an area in terms of Section 17A(1) if it  is thought expedient and it is in the interests of the nation or  that it is necessary to conserve a particular metal or ore or the  area producing it.  It is also open to the Central Government to  decide that such area should be exploited by a company or  corporation owned or controlled by it.  Of course, that  situation has not arisen in this case.  Under sub-section (2) of  Section 17A, with the approval of the Central Government, the  State Government may reserve any area not already held  under any prospecting licence or mining lease for undertaking  the exploitation through a Government company or  corporation owned or controlled by it and on fulfilling the  conditions referred to in sub-section (2) and in an appropriate  case, also the conditions of sub-section (3).  Again, the  exercise of power by the State Government under sub-section  (2) of Section 17A has no reference to the entertaining of  applications under Section 11 or the preferences available  thereunder.  The area in question was under a mining lease to  TISCO and after the mining lease expired, the area of 436.295  hectares had not been leased out to any other person.   According to us, nothing stands in the way of the State  Government seeking the approval of the Central Government  for the exploitation of that area in respect of a precious metal  ore by a Government company or a corporation owned or

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controlled by it like OMC.  Therefore, it cannot be said that the  recommendation made by the State Government is per se  invalid or that it is one without authority.  On the scheme of  the Act, the decision or recommendation under Section 17A  can be taken or made until the area in question is actually  leased out to any applicant in terms of Section 11 of the Act.   Here, the area had not actually been leased at this relevant  time though a decision has been taken to lease out 84.881  hectares out of it and the power of the State Government  saved by Section 17A (2) of the Act is in no way fettered or  curtailed.

16.             In that perspective, the two relevant aspects to be  considered are whether the prior decisions of this Court have  in any way fettered the exercise of that power by the State  Government and whether the decision of the State  Government in that behalf is vitiated for any other reason.  On  the first aspect, it is true that this Court accepted the report of  the Sharma Committee and directed that the recommendation  therein be considered for implementation.  At that stage, the  State Government allotted 50% of the area available, to the  four entities based on their applications, in partial fulfilment of  the recommendations of Sharma Committee. When the matter  came up again before this Court, this Court ultimately  directed that the balance 50% of the left out area, namely,  436.295 hectares be dealt with on the basis of the report of the  Dash Committee.  When this Court made that direction, this  Court was not dealing with any exercise of power by the State  Government under Section 17A(2) of the Act or was not  dealing with the question, in the context of exercise of any  such power.  Therefore, the direction to deal with 436.295  hectares on the basis of the recommendations of Dash  Committee, succeeded by Chahar Committee, does not by  itself preclude the exercise of power by the State under Section  17A(2) of the Act to make a recommendation that the  exploitation be left to a corporation owned or controlled by it.   We are therefore not in a position to accept the argument that  the prior decisions precluded the State Government from  invoking its right under Section 17A(2) of the Act.   Of course,  the prior approval of the Central Government, that is  necessary, is to be sought and obtained and in that context,  the State Government has moved the Central Government for  approval.  

17.             What is argued on behalf of GMR is that though the  submission that the power under Section 17A(2) of the Act  could be exercised at any time could be considered sound and  logical, the question in the present case has to be viewed in  the background of events leading to the said decision and the  context in which that decision was taken so as to determine  whether the alleged change of so-called policy is mala fide or  arising out of colourable exercise of power with the sole  purpose of defeating the prior judgments of the court and  especially the direction of the Orissa High Court in favour of  GMR.  It is true that on the prior occasions when the dispute  before the High Court and before this Court centered round  the entitlement of various applicants for grant of fresh leases  after the TISCO lease was not renewed in full, the stand of the  State Government was that it would abide by the  recommendations of Dash Committee transformed into  Chahar Committee.  But it is difficult to postulate that the  adoption of such a stand in the context of the disputes then  arising, could estop the State from taking a decision under  Section 17A(2) of the Act to recommend to the Central  Government that the compact area left, which was the only

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balance area left, be granted on lease to the Government  controlled Corporation, OMC so as to ensure a fair and just  distribution of the Ore, which was a scarce commodity in the  country.  There is no dispute that there were various entities  that needed the ore in question and that some of them had  made requests for grant of leases of varied extents of lands.  If  at that stage the Government, after considering what was  contained in the Chahar Committee report itself and the  noting of the concerned Minister, decided to reconsider the  question and take a decision to recommend the grant of the  area without it being fragmented on lease to OMC, it is difficult  to accept the contention that the same must be taken to be  mala fide.  The power under Section 17A(2) is a statutory  power and normally there could be no estoppel against the  exercise of statutory power.  That apart, though the claims  were being considered as directed by this Court, the various  claimants had not changed their positions or had made any  investments towards mining and in that context, the  contention that the decision that was taken was one in  colourable exercise of power, cannot be accepted.  The  considerations relating to environment, relating to  fragmentation and relating to even distribution of the ore to be  extracted for supplies to industries in the country as a whole  are all relevant considerations and it cannot be said that the  decision of the Cabinet dated 27.8.2001 is vitiated by mala  fides or is borne of colourable exercise of power or that it is  irrational.  

18.             It is argued on behalf of the I.C.C.L. that the  purpose put forward by the State Government for exercise of  power under Section 17A (2) of the Act is not within the  province of that provision since extraction and equitable  distribution of the mineral is not one of the aspects relevant  for exercise of power under Section 17A of the Act.  Learned  counsel pointed out that the heading of the Section is  "Reservation of area for purposes of conservation" and  exploitation and distribution is not conservation.  Moreover, it  was submitted that the said power under sub-section (1) of  Section 17A of the Act rested with the Central Government  and not with the State Government.  There may be substance  in the submission of learned counsel, but what we are  concerned with is the power of the State Government, of  course, with the approval of the Central Government, to  reserve an area for undertaking mining operations through a  Government company or corporation owned or controlled by it.   This is exactly what is sought to be done by the State  Government in this case, of carrying on the mining operations  in the balance area through a corporation owned or controlled  by the State Government.  We are therefore of the view that  the recommendation of the State Government for the approval  of the Central Government for leasing out the extent to OMC is  well within the power of the State Government under Section  17A(2) of the Act.  The heading of the Section cannot control  the natural effect of sub-section (2) of Section 17A of the Act or  the power conferred by it. That provision deals specifically with  the power of the State Government to carry on mining  operations through a corporation owned or controlled by it.   The said argument cannot also be accepted to invalidate the  decision of the State Government to seek the approval of the  Central Government for grant of lease to OMC of the balance  area left, in a bloc.   

19.             We also do not find any substance in the contention  that the decision to grant a lease of the remaining extent to  OMC is irrational in the context of the performance of OMC

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and the other attendant circumstances of the case and in the  context of the National Mining Policy.  The argument that on  principle the necessity of industries established in Orissa for  captive mining had also been approved and the said aspect  could not be lost sight of while taking such a decision cannot  be the controlling factor.  What we find is that the area  available for chromite ore mining has already been divided  among TISCO, the four companies and AIKITH and what is left  is the extent of 436.295 hectares.  It is clear that a number of  companies have applied for leases of varying extents from that  remaining extent and if the State Government took a decision  that further fragmentation of the area would not be in the  interests of scientific mining and to ensure even distribution  among the consumers in the country, it is necessary to leave  the mining to a corporation controlled by the Government, it is  difficult to say that the decision is irrational.  In a sense, it is a  policy decision and though in a given case this Court could  interfere with a policy decision of the Government, we cannot  say that the present case is one where the decision is so  irrational, unreasonable or patently illegal as to justify  interference by this Court.  All industries outside the State of  Orissa also require the precious ore and it is the duty of the  Government to ensure a just distribution at a fair price.  In the  circumstances, it is difficult to say that the decision taken to  retain the area in a compact bloc for mining by a Government  controlled Corporation is irrational.  We therefore reject this  contention.

20.             The contention on behalf of the Companies, that the  Central Government must be taken to have rejected the  approval sought by the State Government under Section  17A(2) of the Act, cannot be accepted.  It is seen that the  Central Government took the stand that as the matter was  pending in this Court, it would not be appropriate for it to take  a decision.  The application or request of the State  Government is seen to have been returned.  Of course, the  Central Government is also entitled to seek further  clarifications or additional facts so as to make up its mind on  the question of approval.  As matters stand at this stage, the  Central Government has refused to take a decision one way or  the other on the request of the State Government.  It is  therefore not possible to proceed on the basis that the Central  Government has already rejected the request of the State  Government for reserving the area for exploitation by OMC.   

21.             Then the question is whether there is anything in  the process of decision making by the State Government that  makes the decision itself vitiated.  What is contended is that  the Chahar Committee had recommended that the distribution  be made among the various applicants and that OMC was not  eligible for getting a lease of any extent.  It was when that  recommendation was put up that the concerned Minister  made a noting indicating a sudden turn around,  recommending consideration of the question whether the  lands or the area available with the State, should also be  divided among the private operators and whether it would not  be in the interests of a just and equitable distribution of the  ore and the protection of the environment, to have the area in  a bloc for being exploited by OMC.  It is true that the earlier  stand of the Government was that leases could be granted to  private players including industries established in the State  for captive mining.  But, when the recommendation of the  Chahar Committee was put up before him for his final view, it  was open to the Minister concerned to go through the report  and record his views thereon.  In fact, Chahar Committee

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report itself had indicated some of these aspects, though it  had overridden them and made recommendations for grant of  leases to the various applicants in the light of the directions of  this Court and the High Court.  If a Minister, on going through  the report, feels that the aspects highlighted in the report  themselves would justify the retaining of the resources with  the State so as to ensure a just distribution of the mineral  among the needy and for protection of the environment, in the  absence of any other material, it could not be said that the  recommendation of the Minister was not bona fide or that it  was tainted in any manner by mala fides.  It is interesting to  note that Mr. Chahar himself as Secretary of the Ministry  concerned thereafter highlighted the aspects pointed out by  the Minister and recommended in his capacity as Secretary of  the concerned Ministry that it would be appropriate to retain  the area for being exploited by the Government controlled  corporation.  The file shows that this noting of the Minister in  the light of the recommendation of the Secretary to the  Ministry was considered by the Cabinet and the Cabinet  approved the noting of the Minister or the course  recommended therein to exploit the mineral through OMC and  not to divide the balance area left with the Government among  various private entrepreneurs.  The decision was reiterated by  the Cabinet and a request was made by the State Government  to the Central Government for approval of this proposal.   There is nothing to show that the noting of the Minister was  tainted in any manner or that the subsequent cabinet decision  was vitiated for any reason that could be gone into by the  Court. In a sense, counsel for OMC and the State of Orissa are  right in submitting that it was really a policy decision and the  role of this Court in respect of such a policy decision and its  scrutiny was limited and within the scope of that limited  scrutiny, there was no justification in interfering with the  decision of the Government.  Of course, as we have indicated  earlier, it is for the Central Government to give its approval or  not to give its approval to the proposal of the State  Government.  The Central Government is yet to take a  decision. Since, we have not reached that stage, we are also  not called upon to pronounce on it at this stage.   

22.             It is urged that it was a volte-face by the Minister  concerned and what changed in three days between the stand  till then adopted and the note made has not been explained.   What is put forward is that the Chahar Committee report itself  justified such a change in perspective and if the taking of such  a decision of this nature is not precluded by the prior  proceedings, the recommendation of the Minister was a  rational one and the Cabinet was justified in approving it.  We  have already held that the orders earlier made by this Court  did not preclude such a decision being taken.  There is  nothing to show that the noting was not made bona fide or  that any extraneous consideration influenced it.  When the  occasion arose, the Minister made the noting.  It put forward a  relevant point of view.  There is no merit in the contention that  it was a hurried turn around on the part of the Minister.  

23.             We are therefore satisfied that the decision of the  State Government to seek the approval of the Central  Government for grant of a lease to OMC, a corporation  controlled by it, could not be held to be invalid.  

24.             In this context, it was contended that the State  Government had not disclosed the full facts to the Central  Government.  Learned Senior Counsel for I.C.C.L. was at pains  to point out that OMC was inefficient; that it had failed to

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exploit the area earlier granted to it on lease; that many of its  mines remain unexploited and that it would be imprudent to  entrust this area also to OMC for mining of chromite ore.   Learned counsel also contended that OMC did not have even  qualified persons at his helm and elsewhere and in that  situation, the recommendation of the State Government must  be found to be imprudent and ineffective.  Learned counsel for  the OMC and the State of Orissa sought to controvert these  submissions with reference to certain materials to show that  there was no merit in these charges against OMC.   We do not  think that we are called upon to go into this question here.  It  is for the Central Government to consider whether all these  aspects are relevant.  It has to consider all the relevant facts  while applying its mind to the question of grant of permission  sought for by the State Government in terms of Section 17A(2)  of the Act.  It would, therefore, be premature for us to  pronounce on the merits or demerits of the arguments sought  to be raised regarding the efficiency and the competency of  OMC to exploit minerals.  But certainly these arguments ---  whether they are relevant or not in the context of Section  17A(2) of the Act, the Central Government will have to decide - -- should alert the State Government to ensure that  competent, honest and qualified persons are put in charge of  OMC and the requisite expertise obtained for the purpose of  making its working more efficient.   This is independent of the  question of approval involved in this case.

25.             We find some merit in the contention of learned  counsel for the State and OMC that the fact that the ore is  required by many industries in the country other than the  applicants for leases for captive mining and if the whole area is  divided and given for private exploitation, there may be  difficulty in ensuring equitable distribution of the ore was a  relevant consideration for the State Government in making the  recommendation under Section 17A (2) of the Act.  We cannot  certainly say that this aspect is not a relevant circumstance.   Anyway, as we have indicated, it is not for us to pronounce on  it at this stage and that would also be one of the aspects to be  considered by the Central Government when it considers the  request of the State Government for approval under Section  17A(2) of the Act.  

26.             In our view, the High Court was not right in holding  that what had transpired thus far, or the directions of this  Court earlier made, precluded the State Government from  exercising the power and seeking approval in terms of Section  17A(2) of the Act.  As we have held, the State Government  could exercise that power until a grant is actually made since  it is an overriding power.  The taking up of a particular stand  earlier, cannot also preclude the exercise of that power.   Whether it has laid itself open to claims for damages by its  prior actions is a different question and that cannot control  the exercise of the power under Section 17A of the Act.  

27.             Now, we come to the lease proposed to be granted to  Nava Bharat.  In view of our upholding the decision of the  State Government subject to approval by the Central  Government, the lease proposed has to be found to be still  born; or that the decision no more survives.  But it is  necessary to consider the contentions put forward, since the  question would become relevant if for any reason, the Central  Government chooses not to approve the request or decision of  the State Government to lease the balance extent of 436.295  hectares to OMC.

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28.             As regards the allotment to Nava Bharat, we see  considerable force in the submission on behalf of the I.C.C.L.  that the decision to grant lease to Nava Bharat in preference to  the other applicants who were before the Government was  incorrect and calls for interference.  On the materials, it is not  established that the State Government exercised its power  under sub-section (5) of Section 11 of the Act.  Nava Bharat  was a subsequent entrant into the fray and had claimed the  grant even while the claims of various applicants were being  considered by Dash Committee.  Even without sending the  request of Nava Bharat to Dash Committee for consideration  and recommendation, the State Government proceeded to  recommend the grant of a lease to Nava Bharat from out of the  extent available with it.  This was a case to which the rule of  preference under Section 11 of the Act as modified by the  earlier orders of this Court applied and there was a preference  available to those who had applied for leases earlier.  Of  course, the position had been explained in the first decision in  Indian Metals & Ferro Alloys Ltd. Vs. Union of India & Ors.  (supra).  What is the reason that led to overriding the claims of  others is not disclosed.  On the materials, it cannot be said  that the conditions of sub-Section (5) of Section 11 are fulfilled  in this case.  No special reasons are recorded justifying such  an out of turn grant.

29.             If it was a case of consideration of the claims under  Section 11 of the Act, we feel that the State Government was  bound by the directions of this Court issued ultimately in  Ferro Alloys Corporation Ltd. & Anr. Vs. Union of India &  Ors. (supra).  The State Government had to proceed on the  basis of the directions contained therein and make allotments  as recommended by the Dash Committee or the successor  Chahar Committee.  Of course, the State Government might  have been in a position to forward the application of Nava  Bharat also to the said Committe for consideration and  recommendation and might have thereafter acted on the basis  of recommendations of the Chahar Committee.  But that was  not done and the decision to lease to Nava Bharat was straight  away taken.  We see some force in the submission on behalf of  I.C.C.L and GMR that no proper reasons are given for  overriding the preferences of others especially in the light of  the directions of this Court while deciding to grant a lease in  favour of Nava Bharat.  Notwithstanding the valiant effort in  that behalf made by learned Senior Counsel for Nava Bharat to  salvage the grant made to it, we are of the view that on the  facts and in the circumstances of the case, the decision to  grant a lease to Nava Bharat out of turn was not justified, legal  or proper.   

30.             When the State Government made the  recommendation for grant of a lease to Nava Bharat, the  infirmities in that recommendation were pointed out by the  Central Government, in its letter dated 27.6.2001.  The  violation of Rule 59 was also pointed out.  Instead of placing  the letter before the Chief Minister or the Cabinet and  obtaining directions thereon, the Steel and Mines Department  on its own chose to send a letter dated 30.6.2001 purporting  to conform to the requirements.  When the matter reached the  Chief Minister and the Cabinet, the decision taken was to  withdraw the earlier request for grant of approval of lease to  Nava Bharat.  On the materials, it is clear that the letter dated  30.6.2001 sent by the Secretary of the Steel and Mines  Department was not one consistent with the Rules of Business  framed under Article 166 of the Constitution of India.  The

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letter also lost its efficacy in view of the decision taken by the  Cabinet to withdraw the recommendation itself.  The position  that emerges is that there was no valid  recommendation by  the State Government for the grant of a lease to Nava Bharat  and there was hence no valid approval of the Central  Government.  Non-compliance with Rule 59 of the Rules also  vitiated the proposal to lease to Nava Bharat  

31.             In view of our conclusion that the State Government  was entitled to seek the approval of the Central Government in  respect of the balance extent of 436.295 hectares, in which  was included the proposed Nava Bharat grant, for exploitation  by OMC and since, we are satisfied that the grant to Nava  Bharat cannot be sustained, the proposed grant or grant to it  has to be set aside.  We do so.  If it is a question of  reconsideration of the applications of various entities for grant  of leases in respect of 436.295 hectares, it would be a case  where the claim of Nava Bharat would also have to be  considered along with the claim of others in the light of the  directions earlier issued by this Court.  This contingency may  arise only if the Central Government does not grant approval  to the request of the State Government under Section 17A(2) of  the Act.  To that extent, we allow the appeals of I.C.C.L.  

32.             Taking note of the circumstances, it is for the State  Government to make a fresh request to the Central  Government in terms of Section 17A(2) of the Act setting out  all the relevant details for consideration of the Central  Government.  Thereupon the Central Government will have to  take a decision in terms of Section 17A(2) of the Act and in the  context of Section 17A of the Act and all relevant attendant  circumstances.  We make it clear that the prior directions of  this Court or that of the High Court cannot and do not stand  in the way of the Central Government in applying its mind to  the request made by the State Government under Section  17A(2) of the Act and in taking an independent decision  thereon.  All that is necessary at the moment is to hold that  the recommendation of the State Government cannot be  rejected by the Central Government on the ground that it has  no freedom or right to take a decision on the request, in view  of the prior orders of this Court or on the ground that  adequate details are not forthcoming.   In the latter  contingency, it is for the Central Government to seek such  further details from the State Government as it deems fit and  thereafter to come to a decision.   

33.             The decisions of the High Court of Orissa are thus  set aside.  The appeals are allowed in the manner indicated  above.  The State Government is directed to make a proper  request in terms of Section 17A(2) of the Act and the Central  Government is directed to take a decision thereon bearing in  mind all the aspects as indicated hereinbefore.  What is to  happen thereafter will depend upon the decision the Central  Government takes and the consequences that flow therefrom.   Those are aspects that will have to be tackled at the  appropriate time, if the need or occasion for it arises.   

34.             Since, this matter has been pending for years and  what is involved is exploitation of a precious mineral, we direct  the State Government and the Central Government to comply  with the directions we have made expeditiously.  The State  Government should send its request within a period of four  months from today with all relevant details and the Central  Government should take its decision on the recommendation  within a period of four months from the date of receipt of the

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recommendation, if necessary, after calling for any further  detail that it may consider relevant.

35.             Thus, the appeals of the State of Orissa and OMC  are allowed, that of I.C.C.L. and GMR are allowed to the extent  of setting aside the grant of lease to Nava Bharat and the  Transferred Cases are disposed of in the light of the above  decision.  The parties are directed to bear their costs in this  Court.