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CASE NO.: Appeal (civil)  8078 of 2004

PETITIONER: M/s Kabini Minerals Pvt. Ltd. and Anr.           

RESPONDENT: State of Orissa and Ors.                                         

DATE OF JUDGMENT: 18/11/2005

BENCH: ARIJIT PASAYAT & R.V. RAVEENDRAN

JUDGMENT: J U D G M E N T

ARIJIT PASAYAT, J.

       Appellants call in question legality of the judgment  rendered by a Division Bench of the Orissa High Court  dismissing their challenge to the decision of the State of  Orissa in the Department of Steel and Mines, granting lease  over an area of 6.90 acres in the villages Bada Dalma and  Jangia in Mayurbhanj District in favour of respondent No.4  and consequentially rejecting appellant’s No.1 application  dated 7th October, 2002.  

       Factual position in a nutshell is as follows:

       Appellant No.1 applied for quarry lease to the  Secretary,  Government of Orissa Steel and Mines Department,   in Form A of the Orissa Minor Mineral Concession Rules, 1990  (in short the ’Rules’) for "decorative stone" for a period  of 10 years. On 25.10.2002, the Managing Director of the  appellant No.1-Company entered into an agreement with one R.  Narayan Swami for purchase of land measuring 1.134 acres in  village Ambagan in the District of Ganjam to set up a  cutting and polishing unit for decorative stones. On  26.10.2002 the Mining Officer, Baripada Circle, Baripada  issued Form B to appellant No.1 and confirmed the receipt of  its quarry lease application dated 7.10.2002. On 2.12.2002  appellant No.1 placed orders with Metcons Engineering Pvt.  Ltd. for supply of machineries for setting up the cutting  and polishing unit for decorative stones. On 5.12.2002  respondent No.4 applied for a quarry lease in Form A for  decorative stones for a period of 10 years over an area of  6.90 acres. On 28.1.2003 respondent NO.4 wrote a letter to  the Director of Mines regarding purchase of sick unit i.e.  M/s Valley Granites (P) Ltd. from the Orissa State Financial  Corporation (in short the ’Corporation’) and requested  consideration of its quarry lease application dated  5.12.2002. On 7.2.2003 appellant No.1 vide its letter of  even date wrote to the Principal Secretary to the  Government, Department of Steel and Mines informing him  regarding the agreement to purchase land and placement of  orders for machineries of proposed unit. On 4.6.2003 the  State Government took a decision to grant the quarry lease  in question in favour of respondent No.4. Writ Petition  No.5994 of 2003 was filed by the appellants before the

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Orissa High Court questioning the decision of the Government  to grant quarry lease in favour of respondent No.4. By the  impugned judgment dated 10.2.2004 the writ petition was  dismissed. The High Court held that the case of respondent  No.4 was covered by Rule 6(6-a)(i) of the Rules and it had  priority over the appellant No.1. Said judgment as noted  above is the subject matter of challenge in this appeal.

       According to learned counsel for the appellant, the  view of the High Court is clearly erroneous. Undisputedly,  the appellant No.1 had filed the application for the quarry  lease earlier and his case was to have precedence over that  of respondent NO.4. Merely because the respondent No.4 had  purchased a sick unit which was not functional, priority  under Rule 6 (6-a)(i) was not available to it. It was  submitted that no reasons were indicated as to why and under  what circumstances respondent No.4 could have priority vis- a-vis appellant No.1.

       In response, learned counsel for the State and  respondent No.4 submitted that the crucial expression in  sub-rule (6-a)(i) of Rule 6 is "who has already set up an  industry". Undisputedly, the unit which was taken over by  respondent No.4 was engaged in the processing of the  concerned minor mineral. Therefore, rightly the Government  decided to give priority to respondent NO.4.  It was further  submitted that appellant No.1 has not even established that  it was covered by Rule 6(6-a)(ii) and, therefore, was  considered to be a person who belonged to the residual  category i.e. Rule 6 (6-a)(iv).  

       In order to resolve the controversy it would be  appropriate to take note of Rule 6 of the Rules which reads  as follows:                  "6. Disposal of the application- (1) All  applications received by the competent  authority shall be entered in the Register of  Applications for quarry leases which shall be  maintained in Form ’C’ appended to these  rules;

(2)     As soon as an application is received,  it shall be acknowledged to the applicant in  Form ’B’. If the application is refused, an  intimation which would contain the reasons  for refusal, shall be sent to the applicant;  

(3)     x               x               x               x                

(4)     No application shall be granted unless  the applicant submits the income-tax and  Sales Tax clearance certificates in original  or non-assessment certificates in original;   (5)     Subject to the provisions of sub-rules  (6) and (6-a), where two or more persons have  applied for a quarry lease in respect of same  land or area, the applicant whose application  was received earlier shall take precedence in  consideration for the grant over an applicant  whose application was received later.  

(5-a)   Notwithstanding anything contained  in sub-rule (5), if the State Government is

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of the opinion that in the interest of  mineral development, it is necessary to do  so, it may for the reasons to be recorded in  writing grant quarry lease in preference to  the applications made earlier.

(6)   Priority shall be given to the  applicants in the following order, namely:

(i)     co-operatives of artisans using the  minor mineral as raw material;

(ii) a person who has been operating an  industry based on the minor mineral  applied for or, having completed  all other formalities, would be  able to operate it if the lease is  granted;

(iii)a person who is the raiyat of the  land;

(iv)    any other category.

(6-a)   Notwithstanding anything contained  in sub-rule (6), in respect of all types of  rocks used for decorative, industrial or  export purpose including dimension stones the  priority shall be in the following order,  namely:

(i)     a person who has already set up an  industry for processing of such  minor minerals in the State;

(ii)    a person who has a definite plan  for setting up of an industry in  the State processing of such minor  minerals if he has furnished a copy  of his project report on the  proposed processing industry and  also a letter from the financing  institution, issued by the Chief  Executive of such institution to  the effect that his project report  is being appraised by such  financing institution;

               Provided that in case of an  applicant under category (ii), the initial  lease shall be granted up to fifty hectares  and a letter of assurance can be issued for  grant of lease beyond fifty hectares before  commencement of production on confirmation  received from the financing institution or  the Deputy Director of Mines or the Mining  Officer.         (iii)   a person who is a raiyat of  the land;

       (iv)    any other category;

               Provided that in the case of an  applicant under category (iii) or (iv) the  lease may be granted by the competent

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authority on being satisfied that the  applicant shall be able to invest or arrange  sufficient funds to carry on his quarrying  activity in a proper, skilful and workmen- like manner.  

(7)     No quarry lease/permit/auction for road  metals including ballas and ordinary boulders  shall be granted within the area for which a  lease has been granted for quarrying rocks  used for decorative, industrial and export  purposes including dimension stones."

       On a reading of the language of Rule 6 it is clear that  three types of precedence/priority are embodied in the  provision. First is a normal case where the application  which has been received earlier is given precedence over the  latter application. An exception is carved out in sub-rule  (5-a) to the effect that if the State Government is of the  opinion that in the interest of mineral department it is  necessary to do so it may for reasons to be recorded in  writing grant quarry lease in preference to the applications  made earlier. Sub-rule (6) deals with another category of  priority. In the present case Sub-rule (6) does not have  much relevance. Sub-rule (6-a) carves out a category of  applicants who have applied for minor minerals of the  enumerated categories  i.e. all types of rocks used for  decorative, industrial or export purpose including dimension  stones. The present case relates to priority as provided in  the said Sub-rule. It provides for priority to a person who  has already set up an industry for processing of such minor  minerals. From the documents placed on record more  particularly the letter of the Corporation dated 23.5.2003  it is clear that M/s Valley Granites (P) Ltd. was operating  a running unit. The letter in clear terms states that  possession of the unit was handed over to respondent No.4  and the unit is being run by the said Company.  

       Learned counsel for appellant No.1 submitted that in  fact the unit taken over by respondent No.4 was not  functional and it had applied for permanent registration  certificate which was under process as is evident from the  letter of the District Industrial Centre, Mayurbhanj.

       The question really is whether the unit had been set up  and not whether it was running. Undisputedly, prior to its  take over by respondent No.4 the industry had been set up  and used for processing of decorative stones. Though, it was  contended by learned counsel for appellants that by the time  the applications were made the respondent No.4 had not taken  over the unit yet that really is of consequence.  

       Appellant No.1 had also not set up an industry. It had  merely entered into an agreement for purchasing the land and  placed orders for the machineries. The expression ’set up’  has a definite connotation of its own.   

The expression "setting up" means, as is defined in  the Oxford English Dictionary, ’to place on foot’ or ’to  establish’, and is contradistinction to ’commence’. The  distinction is this that when a business is established and  is ready to commence business, and then it can be said of  that business that it is set up. But before it is ready to  commence business it is not set up. (See Commissioner of

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Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills Ltd.  (1967 (1) SCR 761).

        In the said case, it was further held that the word  "set up" is equivalent to the word established but  operations for establishment cannot be equated with the  establishment of the unit itself of its setting up.  

       The question of priority is to be adjudged only at the  time of consideration of the applications. Undisputedly,  respondent No.4 had taken over the unit on the date the  applications were considered. Therefore, the stand of the  appellants that at the time the applications were made by  respondent No.4 it had not set up an industry is really  without substance.  As was observed by this Court in Indian  Metals & Ferro Alloys Ltd. v. Union of India and Ors. (AIR  1991 SC 818), since the applicant had already set up an  industry for processing minor minerals on the date of  consideration of the application its claim for priority was  to be judged on the basis of the factual position  on the  date of consideration of the applications.  

       It was submitted by learned counsel for the appellants  that no reasons were indicated by the authorities as to why  the respondent No.4 was to have priority over the  appellants. Reference in this context is made to sub-rule  (5-a) of Rule 6.

        It is to be noted that in a case covered by sub-rule  (5-a) the State Government has to objectively assess as to  whether in the interest of mineral development preference is  given to a person though he made the application later. In  such a case the Government’s opinion that in the interest of  mineral development it is necessary to do so obviously has  an objective angle involved and, therefore, there is  necessity to record reasons. So far as Sub-rule (6-a) is  concerned, there is no requirement indicated to record  reasons.  The fact that priority is given to a person who  has already set up an industry is itself the reason for  giving priority. Therefore, the enumeration of the order of    priority is itself the reason inbuilt in the process of  consideration of the applications. That itself is the  foundation and forms the rational for the priority given.   It is not the case of the appellant that the order of  priority is irrational.  That being so, stand of learned  counsel for the appellants that reasons were not recorded  and, therefore, the action is vitiated is really of no  consequence.

        Looked at from any angle, the appellants have not made  out any case for interference with the judgment of the High  Court. The appeal fails and is dismissed. Costs made easy.