REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.      7944           OF 2010 (Arising out of S.L.P. (C) No. 22077 of 2009)

Sandur Manganese & Iron Ores Ltd.               .... Appellant(s)

Versus

State of Karnataka & Ors.              .... Respondent(s)

WITH

CIVIL APPEAL NOS.   7945-54            OF 2010     (Arising out of S.L.P.(C) Nos. 22943-22952 of 2009)

AND  

CIVIL APPEAL NOS.  7955-61              OF 2010 (Arising out of S.L.P.(C) Nos. 24124-24130 of 2009)

J U D G M E N T  

P. Sathasivam, J.

1)  Leave granted in all the special leave petitions.

2)  These appeals seek to challenge the common judgment  

and  order  of  the  Division  Bench  of  the  High  Court  of  

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Karnataka  dated  05.06.2009 arising  out  of  Writ  Appeal  

No. 5084 of 2008 and allied matters and the decision of  

the State Government dated 26/27.02.2002  as well as the  

Central Government dated 29.07.2003.

3) The  appellants  in  these  appeals  are  Sandur  

Manganese & Iron Ores Ltd. (in short “Sandur”) and M/s  

MSPL Ltd.   The  principal  respondents  are  M/s  Kalyani  

Steels Ltd. (in short “Kalyani”) and M/s Jindal Vijayanagar  

Steels Ltd. (in short “Jindal”).  Apart from these, the State  

of Karnataka and the Union of India are also arrayed as  

respondents.   

4) Factual matrix:   

a)  The case of Sandur (Petitioner in SLP (C) No. 22077 of  

2009) is as follows:

(i) Shri  Y.R.  Ghorpade,  ex-Ruler of  Sandur State,  was  

granted lease for mining of Iron & Manganese Ores under  

Order No. GEO.Ms.068 dated 26.02.1953, for a period of  

20 years commencing from 01.01.1954 to the extent of 29  

sq.  miles,  falling  within  the  boundaries  of  the  Sandur  

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State.   On  18.01.1954,  the  appellant-Company  was  

incorporated  as  a  Private  Limited  Company  under  the  

provisions  of  the  Companies  Act,  1956.   On  

21/23.06.1956, a lease was transferred in favour of the  

Company  as  per  Government  Order  No.  I.1432-38  

GE43.55-22.  On 28.11.1964, the Company was converted  

into a Public Limited Company.  In 1965, the Company,  

with  the  aim  of  value  addition  to  Ores  mined  by  the  

Company and also to industrial  area, set up a 15 MVA  

Metal and Ferro Alloys Plant at Vyasankere near Hospet at  

a substantial capital cost.  In 1980, Sandur also set up  

two more 20 MVA Furnaces in the Plant for manufacture  

of  Ferro-Silicon by entering  into an agreement with the  

State Government and the Karnataka Electricity Board to  

receive power at  a  viable  tariff.    On 19.09.1973,  upon  

applying for renewal of the abovesaid lease, the Company  

was allotted an area of 20 sq. miles only instead of 29 sq.  

miles  which  was  leased  earlier.  However,  the  Company  

was further granted renewal of lease for another 1.46 sq.  

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miles out of the area held earlier.  On the very same date,  

the State Government deleted an area of 9 sq. miles from  

the appellant-Company’s lease agreement on the ground  

that  the  said  area  is  reserved  for  exploitation  by  the  

National  Mineral  Development  Corporation  (in  short  

“NMDC”) – a Government of India Undertaking.  When the  

company  noticed  that  the  NMDC  did  not  initiate  any  

Mining  Lease  Application  on  the  said  area,  then  on  

29.09.1987, it applied for mining lease over an area of 2  

sq. miles within the said deleted area.  On 25.01.1989, the  

State Government rejected the application on the ground  

that the area applied for was already reserved by NMDC.  

However, NMDC was not granted lease and in 1992, one  

Sri H.G. Rangangoud was granted 60 Hectares out of the  

same applied area.   

(ii) Again, on 24.06.1993, again the Company applied for  

grant of lease over an area of 513.16 Hectares within the  

area deleted from its original lease but it was rejected by  

the State Government on the ground that the area applied  

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by them has overlapped with the area granted to one Sri  

Rangangoud  and  nine  others.   On  11.12.1993,  the  

Company  challenged  the  above  decision  of  the  State  

Government  by  filing  a  Revision  Petition  before  the  

Government  of  India,  Ministry  of  Coal  and  Mines,  New  

Delhi.   On  09.04.1999,  the  Government  of  India  by  

holding that the order  passed by the State Government  

was in violation of Rule 26 (1) of the Mineral Concession  

Rules,  1960 (hereinafter referred to as “MC Rules”)  and  

opposed to the principles of natural justice remanded the  

matter to the State Government for early disposal as per  

the  provisions  of  Mines  &  Minerals  (Development  and  

Regulation)  Act,  1957  (hereinafter  referred  to  as  the  

“MMDR  Act”)  and  the  Rules  framed  thereunder.   On  

26/27.02.2002, the Company got a letter from the State  

Government  that  out  of  the  area  of  513.16  Hectares  

applied  for  by  it,  only  an  extent  of  256  Hectares  (640  

acres)  was available and it  could choose either Block A  

(168 Acres or 67 Hectares) or Block B (472 Acres or 189  

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Hectares).   

(iii) On 13.05.2002, the Company filed a revision petition  

before the Government of India against the said decision  

of  the  State  Government.  On  15.03.2003,  the  State  

Government issued a Notification in exercise of its power  

under Rule 59 of the MC Rules reserving the entire area  

calling for applications from the general public for grant of  

mining leases and by notifying large extent of previously  

held areas as available for grant of mines including the  

area applied by the appellant-Company.  On 16.04.2003,  

the  appellant-Company,  by  way  of  abundant  caution,  

applied afresh for grant of mining lease over an area of  

200 Hectares in the notified area without prejudice to its  

rights  for  consideration  of  its  earlier  application  dated  

24.06.1993.   On  29.07.2003,  the  Government  of  India  

allowed  the  revision  petition  filed  by  the  appellant-

Company and directed the State Government to consider  

the application dated 24.06.1993 filed by the appellant-

Company on merits, in terms of order dated 09.04.1999 of  

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the Revisional Authority and pass a final order in the case.  

In  spite  of  this  order,  the  State  Government  has  not  

passed any order.  On 06.12.2004, a letter was issued by  

the  State  Government  seeking  approval  of  the  Central  

Government  for  grant  of  lease  to  other  applicants  i.e.  

Jindal  &  Kalyani.   Being  aggrieved  by  the  said  

recommendation, on 11.06.2007, the appellant-Company  

filed Writ Petition No. 8971 of 2007 before the High Court.  

The learned single Judge clubbed this writ petition along  

with W.P. No. 21608 of 2005 filed by another applicant –  

MSPL  Ltd.   On  07.08.2008,  the  learned  single  Judge  

quashed the Notification dated 15.03.2003 and the Mining  

Licences  granted  in  favour  of  Jindal  and  Kalyani  with  

certain observations.   

(iv)  On 22.08.2008, Jindal-Respondent No.5 herein filed  

W.A. No. 5026 of 2008 in the High Court. Being aggrieved  

by the order passed by the learned single Judge, Sandur  

preferred Writ Appeal No. 5084 of 2008 before the High  

Court.   By  the  impugned  common  order  dated  

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05.06.2009,  the  Division  Bench  of  the  High  Court  set  

aside  the  order  of  the  learned  single  Judge  dated  

07.08.2008 and upheld the validity of Notification of the  

State Government dated 15.03.2003 and the proceedings  

dated 06.12.2004 and the consequential approval of the  

Central  Government  were  held  valid.   Aggrieved  by  the  

said order, the appellant-Company has filed S.L.P.(C) No.  

22077 of 2009 before this Court.  

b)  The case of  MSPL (Petitioner in SLP (C) Nos. 22943-

22952 of 2009) is as follows:

(i) MSPL Limited filed above SLPs against the common  

judgment and order dated 05.06.2009 passed by the High  

Court of Karnataka in W.A. Nos. 5024, 5026, 5032, 5052,  

5053, 5064-5066, 5077 and 5145/2008 setting aside the  

judgment of the learned single Judge dated 07.08.2008 in  

the writ petitions.

(ii) On 24.05.2001,  MSPL Ltd.  made an application to  

the Director of Mines & Geology (hereinafter referred to as  

“the Mines Director”) for grant of a mining lease over an  

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extent of 298.5 Hectares in the area known as Eddinpada  

in Kumaraswamy Range of the State of Karnataka which  

was  part  of  a  mining  lease  previously  held  by  the  

appellant-Company in S.L.P. (C) No. 22077 of 2009.  On  

30.08.2001, the State of Karnataka requested the Central  

Government to relax the conditions set out in Rule 59(1)  

in favour of MSPL Ltd. under Rule 59(2).  While the matter  

was under consideration of the Central Government, one  

Ziaullah  Sharieff (another  applicant  for  a  mining  lease)  

filed Writ Petition No. 35915 of 2001 (GM-MMS) before the  

High Court seeking declaration that he is entitled for grant  

of  a  mining  lease  in  his  favour.   On  21.12.2001,  the  

Central  Government  returned  all  proposals  for  grant  of  

mining lease pending before it to the State Government to  

await  the  report  of  the  Regional  Environmental  Impact  

Assessment  of  the  Bellary-Hospet  Region  by  National  

Environmental Engineering Research Institute (NEERI).   

(iii) On  13.05.2002,  Sandur  filed  a  revision  before  the  

Central  Government  under  Rule  54  of  the  MC  Rules  

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challenging the proposal  of  the State Government dated  

30.08.2001, in favour of the MSPL.  During pendency of  

the  said  revision,  Sandur  also  filed  W.P.  No.  22767  of  

2002 seeking a  mandamus to the Central Government to  

consider  its  revision  petition.   On  24.10.2002,  Jindal  

made an application for grant of mining lease over a part  

of  the  same  area  previously  held  and  surrendered  by  

Sandur.   On  15.03.2003,  the  State  Government  issued  

Notification  informing  the  general  public  that  the  areas  

mentioned in the annexure thereof were available for grant  

under Rule 59 of the Rules and interested persons were  

requested to file applications for grant of mining leases.  

On 16.04.2003, pursuant to the said notification, MSPL  

made an application for the same area previously held by  

Sandur.  On 29.07.2003, the Central Government rejected  

the  revision  petition  of  MSPL.   On  20.12.2003,  MSPL  

made further submissions before the Mines Director.  On  

30.04.2004, the respondent-Mines Director sent a notice  

to  the  MSPL  for  making  submissions.   Again  on  

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06.10.2004,  the  Under  Secretary  to  the  new  State  

Government,  Mines  (C  &  I  Department)  issued  another  

notice under Rule 26(1) of the Rules requiring the MSPL to  

appear before the Hon’ble Chief Minister of Karnataka to  

make a presentation for sanction of lease.  MSPL put-forth  

its  claim  and  submitted  a  detailed  presentation  to  the  

Principal Secretary to the Chief Minister.  Vide letter dated  

06.12.2004, the State Government sought the approval of  

the Central Government under Section 5(1) of the MMDR  

Act  to  grant  lease  to  Jindal  over  an  area  of  200.73  

Hectares and Kalyani over an area of 179.70 Hectares in  

respect of a part of the land mentioned in S.No.1 to the  

Notification dated 15.3.2003.  On 15.12.2004, MSPL made  

representations both to the Minister for Mines and to the  

Secretary,  Department  of  Mines  in  the  Central  

Government against the said proposal.  On 21.12.2004, a  

further  representation  was  made  to  the  Secretary,  

Department  of  Mines.   Against  the  said  approval,  two  

others preferred writ petitions before the High Court for  

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quashing of the said proposal.  MSPL filed application for  

impleadment in the said writ petitions and the same was  

rejected  by  the  learned  single  Judge  vide  order  dated  

21.07.2005.  

(iv)  On 12.09.2005, MSPL preferred writ petition being  

W.P. No. 21608 of 2005 before the High Court challenging  

the recommendation in favour of Jindal and Kalyani. On  

05.06.2006/27.06.2006, the Central Government granted  

approval to the recommendation dated 06.12.2004 of the  

State Government for grant of mining lease in favour of  

Jindal  and  Kalyani.   Vide  judgment  dated  07.08.2008,  

learned single Judge of the High Court allowed W.P. No.  

21608 of  2005 quashing the  recommendation.   Against  

the  judgment  of  the  learned  single  Judge,  Jindal  and  

Kalyani  preferred  W.A.  Nos.  5026  &  5028  of  2008  

respectively,  before a Division Bench of the High Court.  

MSPL also  filed  W.A.  No.  5057 of  2008 challenging the  

same  judgment  of  the  learned  single  Judge  save  and  

except to the extent that the recommendations of the State  

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Government  to  the  Central  Government  insofar  as  it  

recommended the grant of mining to Jindal and Kalyani  

was quashed.  A large number of other writ appeals were  

also filed, heard together and disposed of by a common  

judgment and order dated 05.06.2009.   

5) Heard  Mr.  Nariman,  learned  senior  counsel  for  

Sandur, Mr. K.K. Venugopal and Mr. Krishnan Venugopal,  

learned senior advocates for MSPL, Mr. Harish N. Salve,  

learned  senior  counsel  for  Jindal,  Mr.  Dushyant  Dave,  

learned  senior  counsel  for  Kalyani  and  Mr.  Ashok  

Haranahalli,  learned  Advocate  General  for  the  State  of  

Karnataka.   

6) Main issues:-

a) Whether  the  State  Government’s  recommendation  

dated 06.12.2004 and the proceedings of  the Chief  

Minister are contrary to the provisions of Section 11  

of the Act and Rules 59 and 60 of MC Rules and not  

valid in law.

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b) Whether  the  respondent-Jindal’s  application  dated  

24.10.2002  made  prior  to  the  Notification  dated  

15.03.2003 is capable of being entertained along with  

the  applications  made  pursuant  to  the  said  

notification.

c) Whether the order of the High Court of Karnataka in  

Ziaulla Sharieff’s case permit the consideration of the  

respondent-Jindal’s  application  dated  24.10.2002  

made prior to the notification dated 15.03.2003.

d) Whether  Rule  35  of  the  MC  Rules  justify  the  

recommendation of the State Government in favour of  

the Respondents-Jindal and Kalyani.

e) Whether  the  criterion  of  “captive  consumption”  

referred  to  in  Tata  Iron  and  Steel  Co.  Ltd.  vs.  

Union  of  India,  (1996)  9  SCC  709,  have  any  

application in this case despite not being one of the  

factors referred to in Section 11 (3) of the MMDR Act  

or Rule 35 of the MC Rules.

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f) Whether  factors  such as  the  past  commitments  by  

the State Government to applicants who have already  

set up steel plants, matter for consideration for grant  

of  lease  despite  the  MMDR Act  and the  MC Rules  

constituting a complete Code.

g) Whether  the  recommendation  in  favour  of  

respondents-Jindal  and  Kalyani  saved  by  the  

operation of the Law of Equity.

h) Whether  the  learned  single  Judge  as  well  as  the  

Division  Bench  are  justified  in  arriving  at  such  

conclusion.

i) Whether  it  is  advisable  to  remit  it  to  the  Central  

Government.

7)  Before considering various issues as mentioned above,  

let us refer relevant provisions of the Act and the Rules  

concerned to the issues in question.  The Preamble of the  

MMDR Act, as amended by Act 38 of 1999, makes it clear  

that it is intended for the development and regulation of  

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mines  and  minerals  under  the  control  of  Union.   The  

relevant provisions from the Act are:

“2. Declaration as to the expediency of Union control.--It  is hereby declared that it is expedient in the public interest  that the Union should take under its control the regulation  of  mines  and  the  development  of  minerals  to  the  extent  herein after provided.

3.  Definitions:-In  this  Act,  unless  the  context  otherwise  requires:--

a. "minerals" includes all minerals except mineral oils;  b. …….  c. "mining lease" means a lease granted for the purpose of  

undertaking mining operations, and includes a sub-lease  granted for such purpose;  

d. ……. e. …….  f. ……. g. "prospecting  licence"  means  a  licence  granted  for  the  

purpose of undertaking prospecting operations;  h. "prospecting  operations"  means  any  operations  

undertaken  for  the  purpose  of  exploring,  locating  or  proving mineral deposits;  

(ha)  "reconnaissance  operations"  means  any  operations  undertaken for preliminary prospecting of a mineral through  regional,  aerial,  geophysical  or  geochemical  surveys  and  geological mapping, but does not include pitting, trenching,  drilling (except drilling of boreholes on a grid specified from  time  to  time  by  the  Central  Government)  or  sub-surface  excavation;

(hb) "reconnaissance permit" means a permit granted for the  purpose of undertaking reconnaissance operations; and.

11.  Preferential  right  of  certain  persons.--(1)Where  a  reconnaissance  permit  or  prospecting  licence  has  been  granted  in  respect  of  any  land,  the  permit  holder  or  the  licencee  shall  have  a  preferential  right  for  obtaining  a  prospecting licence or mining lease, as the case may be, in  respect of that land over any other person:

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Provided that the State Government is satisfied that the permit  holder or the licensee, as the case may be,-

(a)  has  undertaken reconnaissance  operations  or  prospecting  operations, as the case may be, to establish mineral resources  in such land;

(b) has not committed any breach of the terms and conditions of  the reconnaissance permit or the prospecting licence;

(c) has not become ineligible under the provisions of this Act; and

(d) has not failed to apply for grant of prospecting licence or  mining lease, as the case may be, within three months after the  expiry of reconnaissance permit or prospecting licence, as the  case may be, or within such further period, as may be extended  by the said Government.

(2) Subject to the provisions of sub-section (1), where the State  Government has not notified in the Official Gazette the area for  grant of reconnaissance permit or prospecting licence or mining  lease,  as  the  case  may  be,  and  two  or  more  persons  have  applied for a reconnaissance permit,  prospecting licence or a  mining lease in respect of any land in such area, the applicant  whose  application  was  received  earlier,  shall  have  the  preferential right to be considered for grant of reconnaissance  permit, prospecting licence or mining lease, as the case may be,  over the applicant whose application was received later:

Provided  that  where  an  area  is  available  for  grant  of  reconnaissance permit, prospecting licence or mining lease, as  the  case  may  be,  and  the  State  Government  has  invited  applications by notification in the Official Gazette for grant of  such  permit,  licence  or  lease,  all  the  applications  received  during  the  period  sepcified  in  such  notification  and  the  applications which had been received prior to the publication of  such notification in respect of the lands within such area and  had  not  been  disposed  of,  shall  be  deemed  to  have  been  received on the same day for the purposes of assigning priority  under this sub-section:

Provided further that where any such applications are received  on  the  same  day,  the  State  Government,  after  taking  into  consideration the matter specified in sub-section (3), may grant  the reconnaissance permit, prospecting licence or mining lease,  

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as the case may be, to such one of the applications as it may  deem fit.

(3) The matters referred to in sub-section (2) are the following:-

a. any  special  knowledge  of,  or  experience  in,  reconnaissance operations,  prospecting operations or  mining operations, as the case may be, possessed by  the applicant;  

b. the financial resources of the applicant;  c. the nature and quality of the technical staff employed  

or to be employed by the applicant;  d. the investment which the applicant proposes to make  

in  the  mines  and  in  the  industry  based  on  the  minerals;  

e. such other matters as may be prescribed.  

(4)  Subject  to  the provisions of  sub-section (1),  where the  State Government notifies in the Official Gazette an area for  grant  of  reconnaissance  permit,  prospecting  licence  or  mining  lease,  as  the  case  may  be  ,  all  the  applications  received during the period as specified in such notification,  which shall not be less than thirty days, shall be considered  simultaneously as if all such applications have been received  on the same day and the State Government, after taking into  consideration the matters specified in sub-section (3), may  grant  the  reconnaissance  permit,  prospecting  licence  or  mining  lease,  as  the  case  may  be,  to  such  one  of  the  applicants as it may deem fit.

(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  application  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.”

8)  In exercise of the powers conferred by Section 13 of the  

Act,  the  Central  Government  framed  rules  called  the  

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Minerals Concession Rules, 1960.  We are concerned only  

with the following Rules:-

“35. Preferential rights of certain persons. – Where two or  more persons have applied for a reconnaissance permit or a  prospecting licence or a mining lease in respect of the same  land, the State Government shall,  for the purpose of sub- section(2)  of  Section  11,  consider,  besides  the  matters  mentioned in clauses (a) to (d) of sub-section(3) of Section  11, the end use of the mineral by the applicant.

59. Availability of area for regrant to be notified. – (1) No  area –

a) which  was  previously  held  or  which  is  being  held  under  a  reconnaissance  permit  or  a  prospecting  licence or a mining lease; or

b) which has been reserved by the Government or any  local authority for any purpose other than mining; or

c) in  respect  of  which  the  order  granting  a  permit  or  licence or lease has been revoked under sub-rule (1) of  rule 7A or sub-rule(1) of rule15 or sub-rule(1) of rule  31, as the case may be; or

d) in  respect  of  which  a  notification  has  been  issued  under the sub-section (2) or sub-section (4) of Section  17; or

e) which  has  been  reserved  by  the  State  Government  under Section 17A of the Act

shall be available for grant unless –

(i) an entry to the effect that the area is available for  grant is made in the register referred to in sub-rule  (2) of rule 7D or sub-rule (2) of rule 21 or sub-rule  (2) of rule 40 as the case may be; and

(ii) the availability of the area for grant is notified in  the Official Gazette and specifying a date (being a  date not earlier than thirty days from the date of  the publication of such notification in the Official  Gazette) from which such area shall be available for  grant:

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Provided that nothing in this rule shall apply to the  renewal of a lease in favour of the original lessee or  his  legal  heirs  notwithstanding  the  fact  that  the  lease has already expired:

Provided  further  that  where  an  area  reserved  under  rule 58 or under section 17A of the Act is proposed to  be granted to a Government Company, no notification  under clause (ii) shall be required to be issued:

Provided  also  that  where  an  area  held  under  a  reconnaissance permit or a prospecting licence, as the  case may be, is granted in terms of sub-section(1) of  section 11,  no notification under clause (ii)  shall  be  required to be issued..

(2) The Central Government may, for reasons to be recorded  in writing, relax the provisions of sub-rule (1) in any special  case.

60. Premature applications. – Application for the grant of a  reconnaissance permit,  prospecting licence or mining lease  in respect of areas whose availability for grant is required to  be notified under rule 59 shall, if -

(a) no notification has been issued, under that rule ; or

(b) where any such notification has been issued, the period  specified in the notification has not expired, shall be deemed  to be premature and shall not be entertained.”.

9)  In the light of the above statutory provisions, let us  

consider  the  issues  framed,  one  by  one,  and  test  the  

validity  or  otherwise  of  the  decision  of  the  State  

Government as well  as the order passed by the learned  

single Judge and the Division Bench of the High Court.

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10) As  mentioned  earlier,  by  the  impugned  common  

judgment dated 05.06.2009, the Division Bench reversed  

the judgment of the learned single Judge and held that  

the applications for grant of mining lease made prior to  

notification  under  Rule  59  of  the  MC  Rules  could  be  

considered for grant along with applications filed pursuant  

to the notification.  In the case on hand, the application  

was made by Jindal prior to the notification.  The Division  

Bench upheld the recommendations dated 06.12.2004 of  

the State Government together with the proceedings of the  

Chief  Minister  which  were  the  basis  for  the  

recommendation under Section 5(1) of the MMDR Act to  

the Central  Government for approval  of  grant of  mining  

lease in favour of Jindal and Kalyani.  It is seen from the  

records that on 24.05.2001, MSPL made an application to  

the State Government for grant of mining lease over an  

area  of  298.5  hectares  in  Eddinpada  area  in  

Kumaraswamy range of the State of Karnataka and also  

sought relaxation of the conditions specified in Rule 59(1)  

21

of the MC Rules.  This area was previously held under a  

mining  lease  by  Sandur.  Subsequently,  on  24.10.2002,  

Jindal also made an application for grant over the same  

area.  The State Government made a recommendation to  

the Central Government for grant of lease to the MSPL and  

sought relaxation of the conditions set out in Rule 59(1).  

However, it is not in dispute that the Central Government  

returned the proposal of the State Government directing it  

to await an environmental study being carried out by the  

NEERI.   

11) The  materials  placed  further  show  that  on  

15.03.2003,  the  State  Government  issued a  Notification  

under Rule 59(1) of the MC Rules notifying the availability  

of  a  large  area  for  re-grant  of  mining  lease  which  was  

referred to as the “Held Area Notification”.   Pursuant to  

the same, MSPL made a fresh application on 16.04.2003  

for grant of mining lease over the notified area.  Kalyani  

and 88 other applicants also applied pursuant to the said  

Notification.  Admittedly, Jindal did not apply pursuant to  

22

the “Held Area Notification”, even though some of its sister  

concerns applied for the grant.  On 06.12.2004, the State  

Government  made  a  recommendation  to  the  Central  

Government  under  Section  5  of  the  MMDR  Act  for  

approval of the proposed grant of mining lease to Jindal  

and  Kalyani.   MSPL  and  some  of  the  applicants  made  

representations  to  the  Central  Government  against  the  

said  recommendation  made  by  the  State  Government.  

Challenging the recommendation dated 06.12.2004 of the  

State  Government,  writ  petitions  were  filed  by  the  

aggrieved companies before the High Court.  During the  

pendency  of  the  writ  petitions,  the  Central  Government  

gave its  approval  for  grant  of  mining lease  in favour of  

Jindal  and  Kalyani  on  05.06.2006  and  27.06.2006  

respectively.  By judgment dated 07.08.2008, the learned  

single Judge allowed the writ petitions filed by MSPL and  

Sandur as well as others and quashed the grant on the  

ground among others,  that  Jindal’s  application prior  to  

the  “Held  Area  Notification”  could  not  have  been  

23

entertained in view of Section 11(4) of the MMDR Act and  

Rules 59 and 60 of the MC Rules.  The Division Bench, by  

judgment  and  order  dated  05.06.2009,  reversed  the  

judgment passed by the learned single Judge.  With this  

background, let us discuss the issues formulated above.

Issue (a)

“Whether  the  State  Government’s  recommendation  dated  06.12.2004 and the proceedings of the Chief Minister are contrary  to the provisions of Section 11 of the Act and Rules 59 and 60 of  MC Rules and not valid in law.”

12) Mr. Nariman and  Mr. K.K. Venugopal, learned senior  

counsel appearing for the Sandur and MSPL respectively,  

by taking us through the entire proceedings of the Chief  

Minister,  vehemently  contended  that  the  State  

Government  was  pre-determined  to  grant  the  lease  in  

favour of Jindal and Kalyani.  They also contended that  

there  is  no  clear  reason  as  to  why Jindal  and Kalyani  

alone were given preference and the applications of MSPL,  

Sandur and others were not considered favourably.  They  

also highlighted that all that is done is the reproduction of  

24

the details mentioned in their applications and at the end,  

certain  columns  were  left  blank  in  which  the  Chief  

Minister has filled in by hand, after which he has signed  

the  proceedings.   They  also  pointed  out  that  though  

relevant criteria is provided under Section 11(3) of the Act,  

only  one  criteria,  namely,  the  proposed  investment,  is  

taken into account while evaluating the applicants.  It is  

their grievance that the special reason mentioned in the  

recommendation  is  only  to  favour  Jindal  and  Kalyani.  

Even if  it  is  so,  according to  them,  the  decision  of  the  

State Government is violative of Section 11(4) of the Act  

which  permits  only  applications  made  pursuant  to  the  

Notification to be taken into account and not applications  

made prior to the Notification.   Both the learned senior  

counsel,  relying  on  Rule  35,  pointed  out  that  the  

recommendations made to  justify  preference taking into  

account past investments by steel  companies cannot be  

sustained.   In any event,  according to  them, in view of  

Section 2 of the Act, State Legislature is denuded of its  

25

legislative  power  to  make  any  law  with  respect  to  the  

regulation of mines and mineral development.  Finally, it  

was pointed out that there is no question of framing policy  

such as the Karnataka Mineral Policy to give out mining  

leases independently of the MMDR Act and the Rules.  On  

the other hand, Mr.  Harish N. Salve and Mr.  Dushyant  

Dave,  learned  senior  counsel  appearing  for  Jindal  and  

Kalyani,  by  drawing  our  attention  to  the  very  same  

provisions and the orders of the courts, submitted that the  

recommendations  made  by  the  State  Government  is  in  

terms  of  the  provisions  of  the  Act  and  Rules  and  the  

Division Bench was right in affirming the same.

13) It  is  useful  to  refer  notification  dated  15.03.2003  

issued by the Government of Karnataka which reads thus:  

“GOVERNMENT OF KARNATAKA

NO. CI/16/MMM/2003  Government of Karnataka Secretariat

Ms. Building Bangalore, Dated 15.03.2003

26

NOTIFICATION It  is  hereby informed for  the mining public  that  

the area noted in the annexure is available for regrant  under rule 59 of Mineral Concession Rules, 1960.  

The application for grant of mining lease shall be  received by the Director of Mines and Geology, No.49,  “Khanij  Bhavan”,  D.Devaraj  Urs  Road,  Bangalore-01,  after  30  days  from  the  date  of  publication  of  the  notification in the Official Gazette.  If the day notified for  receiving the application happens to be a Public Holiday  or General Holiday, applications will be received on the  next working day under amended Rules.  The sketch of  the area is available for inspection at the office of the  Director,  Department  of  Mines  and  Geology,  Khanija  Bhavan,  D.Devaraj  Urs  Road,  Bangalore-01  during  working hours on all working days.  

The mining public should note that the availability  of the area published here in is subject to the clearance  from the Revenue Department for mining activities and  compliance  of  the  MM  (D&R)  Act,  1957  and  the  M.C.Rules and all other relevant Acts and Rules by the  applicants.   In  case  the  area  is  found  to  consist  of  Forest Lands, the clearance from the Forest Department  under Section (2) of the Forest (Conservation) Act, 1980  for utilizing the area for non-forest activities should be  obtained by the applicants.  

Interested persons are advised to inspect the area  and satisfy themselves about the availability of mineral  deposits (as the area is previously under held.  ML/PL  block) and the present status of the land there is before  making application for mining lease.  

BY ORDER AND IN THE NAME OF THE  GOVERNOR OF KARNATAKA

(A.B. SIDDHANTI) Under Secretary to Govt. (Mines),

Commerce and Industries Department.”    

27

14) After expiry of the cut-off date, as mentioned in the  

said  notification,  hearing  was  conducted  by  the  Chief  

Minister under Rule 26A of the Rules.  The order of the  

Chief Minister shows that as per the direction of the High  

Court in a writ petition filed by Ziaulla Sharieff, the State  

has to consider their applications in accordance with law  

along with other applications.  It is the claim of the State  

that as per the said decision, it was necessary to consider  

the applications filed for  grant  of  mining lease over  the  

area  in  question  before  the  issue  of  Notification  on  

15.03.2003 along with applications received in response to  

the  said  Notification.   Para  3  of  the  order  of  the  Chief  

Minister shows that 21 applications were filed for grant of  

mining  lease  over  the  area  in  question  before  the  

notification was issued and 90 applications were received  

in response to the notification.  In all, the Chief Minister  

has considered 111 applications for grant of mining lease.  

The order further shows that notice under Rule 26(1) of  

the Rules was issued to all the applicants to appear for  

28

hearing on 12.10.2004 at 4.00 PM to make presentation  

for  sanction  of  mining  lease  in  their  favour.   On  

12.10.2004, the hearing was adjourned.  According to the  

State, applicants were heard on different dates.  Out of  

111 applicants, 85 applicants attended the hearing and 75  

applicants  gave  their  written  representations.   On  

16.10.2004,  the  hearing  was  again  adjourned,  72  

applicants  attended  and  9  applicants  submitted  their  

written representations.  Again, the hearing was held on  

25.10.2004,  76  applicants  attended  and  27  applicants  

submitted their written submissions.  On 04.11.2004, 16  

applicants  attended  the  hearing  and  7  applicants  

submitted their written submissions.  

15) The order of the Chief Minister further shows that out  

of 111 applications, 55 are companies/firms and 30 are  

individuals.  Out of 111 applicants, 11 have given more  

than  one  application  in  the  name  of  their  sister  

companies/partnership firms etc.  The proceeding further  

shows that all applications were examined under Section  

29

11(5) of the Act with a view to provide an opportunity to all  

the  applicants  who  have  filed  their  applications  on  

subsequent days i.e. after 16.04.2003.  The order further  

shows  that  out  of  30  individuals  who  have  applied  for  

mining lease, only 3 applicants hold mining lease in the  

State and the remaining 27 applicants do not hold any  

mining lease.  Some of the individuals are local people and  

have some past experience in mining.  Some of them are  

qualified engineers.  Most of the applicants have indicated  

that they would be exporting ore or would be supplying it  

to the local market.  The order proceeds that none of them  

have indicated any proposal for the value addition to the  

ore.  The Chief Minister,  after considering them, do not  

merit any consideration for grant of mining lease, rejected  

all those applications.  It is brought to our notice that no  

one from that category challenged the same in the court of  

law.   

16) After  rejecting  those  applications,  the  impugned  

proceeding  shows  that  a  total  number  of  55  

30

companies/firms have  applied for  mining  lease  and the  

details  furnished  by  them have  been  incorporated  in  a  

tabular form in para 9.  In para 10 of the order, it was  

stated that out of 55 companies/firms who have applied  

for  mining  lease,  only  12  companies/firms  were  having  

mining lease in the State.  Some of the companies have  

already established their units in the State and they have  

requested the sanction of mining lease for using the ore  

for captive consumption and for value addition to the ore.  

Some of the firms who are willing to invest huge amounts  

in mining industry have indicated that they require the  

mines for exporting ore and for supplying it to the local  

market.  Some of the companies have already established  

their units in Karnataka by investing huge amounts and  

they  are  depending  upon  local  market  for  their  raw  

material, that is, iron ore.  In para 11 of the order, it is  

stated that since the request of such of the companies is  

for  ‘captive  consumption’  and  for  ‘value  addition’,  they  

deserve consideration over others.  In para 12, the order  

31

refers  those  who established  steel  plants  in  Karnataka.  

Finally,  after  quoting  Rule  35  which  provides  for  

preferential rights for certain persons and by arriving at a  

conclusion that “it is desirable to allot the mining areas to  

applicants  who have already established their  plants  in  

the  State  by investing  huge amounts”,  and by invoking  

Rule 35 of the MC Rules, the Chief Minister recommended  

or  in  other  words  filled  up  dotted  lines  by  mentioning  

Jindal and Kalyani.

17) It is the grievance of the appellants, namely, Sandur  

and  MSPL  that  the  proceedings  of  the  Chief  Minister  

shows that the State Government was pre-determined to  

grant the lease in favour of Jindal and Kalyani.       

18) A  perusal  of  the  proceedings  of  the  Chief  Minister  

shows that no clear reasons were given to show as to why  

Jindal and Kalyani were preferred over other applicants.  

There is also no plausible reason why the applications of  

the appellants herein were not considered favourably.  A  

summary of the applications was prepared and at the end  

32

certain columns were left blank which the Chief Minister  

filled by hand and then signed the proceedings.  

19) The evaluation of all 111 applications has been done  

in three successive stages in a manner not envisaged by  

Section  11.   In  the  first  stage  of  the  process,  the  

applications by individuals were discarded.  In the second  

stage,  those  by companies  as a whole  and in the  third  

stage,  only  companies  with  existing  investment  in  steel  

plants  out  of  which  Jindal  and  Kalyani  were  chosen  

without any special or adequate reason.  In fact, no such  

procedure  of  three  stage  consideration or  differentiation  

between individuals and companies and those companies  

with  existing  investments  and  those  without  existing  

investment is envisaged in Section 11.  As rightly pointed  

out  by  learned  senior  counsel  for  the  appellants,  the  

proceedings of the Chief Minister, at no level, consider the  

various  guiding  criteria  mentioned  in  Section  11(3)  as  

mentioned below:

33

a. “any  special  knowledge  of,  or  experience  in,  reconnaissance  operations,  prospecting  operations  or  mining  operations,  as  the  case may be, possessed by the applicant;  

b. the financial resources of the applicant;  c. the  nature  and quality  of  the  technical  staff  employed  or  to  be  

employed by the applicant;  d. the investment which the applicant proposes to make in the mines  

and in the industry based on the minerals;  e.  such other matters as may be prescribed.”

20) It is true that among the criteria mentioned, only one  

criteria,  namely,  “proposed  investment”  is  taken  into  

account  in  evaluating  some  applications.   However,  as  

mentioned above, in the said proceedings, two irrelevant  

points were taken into account, namely, (i) whether or not  

the applicant holds a mining lease in the State and (ii) the  

amount  of  their  past  investment  in  steel  plant.   It  is  

equally true that the proceedings recommended in favour  

of Jindal and Kalyani was justified by the special reasons  

specifically stated at the very end in terms of Section 11(5)  

which is reproduced below:-  

“(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  application  whose  application was received earlier:

34

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.”

A plain  reading  of  the  above  provision  makes  it  amply  

clear that it would apply to favour a later applicant over  

an earlier  applicant  which is  relevant only  in the event  

that  the  main  provision  of  Section  11(2)  relating  to  

preference of prior applicants applies and not in the case  

of  notification  inviting  applications,  whether  it  is  under  

the first proviso to Section 11(2) or 11(4) under the later  

proviso,  upon  notification,  by  deeming  fiction  all  

applications are treated as having been received on the  

same date.  

21) Apart from the above infirmity, the proceedings of the  

Chief Minister also violate Section 11(4) of the Act which  

reads thus:  

“(4) Subject to the provisions of sub-section (1), where the  State Government notifies in the Official Gazette an area for  grant  of  reconnaissance  permit,  prospecting  licence  or  mining  lease,  as  the  case  may  be,  all  the  applications  received during the period as specified in such notification,  which shall not be less than thirty days, shall be considered  simultaneously as if all such applications have been received  on the same day and the State Government, after taking into  consideration the matters specified in sub-section (3), may  grant  the  reconnaissance  permit,  prospecting  licence  or  

35

mining  lease,  as  the  case  may  be,  to  such  one  of  the  applicants as it may deem fit.”

The above sub-section permits only the applications made  

pursuant to the notification to be taken into account and  

not  applications  made  prior  to  the  notification.   The  

notification referred to in the first proviso to Section 11(2)  

is intended only to invite applications in respect of “virgin  

areas”.  In the case of previously held areas covered by  

present notification dated 15.03.2003, applications made  

prior  to  the  notification  cannot  be  entertained  because  

they are premature.  

22) We have already adverted to Section 2 of the MMDR  

Act, which is a parliamentary declaration, makes it clear  

that  the  State  Legislature  is  denuded  of  its  legislative  

power to make any law with respect to the regulation of  

mines and mineral development to the extent provided in  

the MMDR Act.  (Vide  State of Orissa vs. M.A. Tulloch  

& Co. (1964) 4 SCR 461).  In Baijnath Kedio vs. State of  

Bihar  and  Others,  (1969)  3  SCC  838,  a  Constitution  

36

Bench of this Court reiterated the above view.  Argument  

of  the  appellant  in  that  case  was  that,  apart  from the  

provisions of the 2nd proviso to Section 10 added to the  

Land Reforms Act, 1950 in 1964, by Act IV of 1965 and  

second  sub-rule  added  to  Rule  20  of  the  Bihar  Minor  

Mineral  Concession  Rules,  1964,  there  is  no  power  to  

modify  the  terms.   It  was further  contended that  these  

provisions of law are said to be outside the competence of  

the  State  Legislature  and the  Bihar Government.   With  

regard to the State Legislature, it was contended that the  

scheme of the relevant entries in the Union and the State  

List is that to the extent to which regulation of mines and  

mineral development is declared by Parliament by law to  

be  expedient  in  the  public  interest,  the  subject  of  

legislation is withdrawn from the jurisdiction of the State  

Legislature  and,  therefore,  Act  67  of  1957  (MMDR Act)  

leaves no legislative field to the Bihar Legislature to enact  

Act 4 of 1955 amending the Land Reforms Act.  Answering  

those questions, the Constitution bench has held thus:

37

“13.    ….  …..  Entry  54 of  the  Union List  speaks both of  Regulation of mines and minerals development and Entry 23  is subject to Entry 54. It is open to Parliament to declare  that  it  is  expedient  in the public  interest  that  the control  should rest in Central Government. To what extent such a  declaration can go is for Parliament to determine and this  must  be  commensurate  with  public  interest.  Once  this  declaration is made and the extent laid down, the subject of  legislation  to  the  extent  laid  down  becomes  an  exclusive  subject for legislation by Parliament. Any legislation by the  State  after  such declaration  and trenching  upon the  field  disclosed  in  the  declaration  must  necessarily  be  unconstitutional  because  that  field  is  abstracted  from the  legislative  competence  of  the  State  Legislature.  This  proposition is also self-evident that no attempt was rightly  made to contradict it.  There are also two decisions of this  Court reported in the Hingir Rampur Coal Co. Ltd. v. State of  Orissa, and State of Orissa v. M.A. Tulloch and Co. in which  the matter is discussed. The only dispute, therefore, can be  to  what  extent  the  declaration  by  Parliament  leaves  any  scope for legislation by the State Legislature. If the impugned  legislation  falls  within  the  ambit  of  such  scope  it  will  be  valid; if outside it, then it must be declared invalid.

14. The declaration is contained in Section 2 of Act 67 of  1957  and  speaks  of  the  taking  under  the  control  of  the  Central  Government  the  regulation  of  mines  and  development of minerals to the extent  provided in the Act  itself.  We have thus not to look outside Act 67 of 1957 to  determine what  is  left  within the competence of  the State  Legislature but have to work it out from the terms of that  Act. In this connection we may notice what was decided in  the two cases of  this  Court.  In the  Hingir  Rampur  case a  question had arisen whether the Act of 1948 so completely  covered  the  field  of  conservation  and  development  of  minerals as to leave no room for State legislation. It was held  that  the  declaration  was  effective  even  if  the  rules  contemplated  under  the  Act  of  1948 had not  been  made.  However, considering further whether a declaration made by  a Dominion Law could be regarded as a declaration made by  Parliament for the purpose of Entry 54, it was held that it  could not and there was thus a lacuna which the Adaptation  of Laws Order, 1950 could not remove. Therefore, it was held  that there was room for legislation by the State Legislature.

38

15. In the M.A. Tulloch case the firm was working a mining  lease granted under the Act of 1948. The State Legislature of  Orissa  then passed the  Orissa  Mining  Areas  Development  Fund  Act,  1952  and  levied  a  fee  for  the  development  of  mining areas within the State. After the provisions came into  force a demand was made for payment of fees due from July  1957 to March 1958 and the demand was challenged. The  High Court held that after the coming into force of Act 67 of  1957 the Orissa Act must be held to be non existent. It was  held  on  appeal  that  since  Act  67  of  1957  contained  the  requisite declaration by Parliament under Entry 54 and that  Act covered the same field as the Act of 1948 in regard to  mines  and  mineral  development,  the  ruling  in  Hingir   Rampur’s case applied and as Sections 18(1) and (2) of the  Act 67 of 1957 were very wide they ruled out legislation by  the State Legislature. Where a superior legislature evinced  an intention to cover the whole field, the enactments of the  other legislature whether passed before or after must be held  to be overborne. It was laid down that inconsistency could be  proved not by a detailed comparison of the provisions of the  conflicting Acts but by the mere existence of two pieces of  legislation.  As Section 18(1)  covered the entire  field,  there  was no scope for the argument that till  rules were framed  under that Section, room was available.”

The Constitution Bench after considering Hingir Rampur  

Coal Co. Ltd. vs. State of Orissa, 1961 (2) SCR 537 and  

M.A.  Tulloch (supra)  held  that  in  view  of  the  two  

undermentioned  rulings  of  this  Court  and  by  enacting  

Section 15 of Act 67 of 1957, the Union of India has taken  

all  the  power  to  itself  and  authorized  the  State  

Government to make rules for the regulation of leases.  By  

the  declaration  and  the  enactment  of  Section  15,  the  

whole of the field relating to minor minerals came within  

39

the jurisdiction of Parliament and no scope was left for the  

enactment of the second proviso to Section 10 in the Land  

Reforms Act.  The enactment of the proviso was, therefore,  

without jurisdiction.   

23) In  State of West Bengal  vs. Kesoram Industries  

Ltd. and Others,  (2004) 10 SCC 201, after referring to  

earlier  judgments  including  M.A.  Tulloch (supra)  and  

Baijnath Kedio (supra), the Constitution Bench held as  

under:

“95.  ….  ….  All  that  the  Court  has  said  is  that  the  1957  enactment covers the field of legislation as to the regulation  of mines and the development of minerals. As Section 2 itself  provides and indicates, the assumption of control in public  interest by the Central Government is on: (i) the regulation of  mines, (ii) the development of minerals, and (iii) to the extent  hereinafter  provided.  The  scope  and  extent  of  declaration  cannot and could not have been enlarged by the Court nor  has it been done. The effect is that no State Legislature shall  have  power  to  enact  any  legislation  touching:  (i)  the  regulation of mines, (ii) the development of minerals, and (iii)  to the extent provided by Act 67 of 1957…. …. ”  

24) In  the  same way,  the  State  is  also  denuded of  its  

executive  power  in  regard  to  matters  covered  by  the  

MMDR Act  and the  Rules.   [vide  Bharat Coking Coal  

Ltd. vs. State of Bihar & Ors., (1990) 4 SCC 557].   

40

25)  In view of the specific parliamentary declaration as  

discussed  and  explained  by  this  Court  in  various  

decisions,  there  is  no question of  the  State  having any  

power to frame a policy  de hors the MMDR Act and the  

Rules.

26) In  State of Assam & Ors. vs. Om Prakash Mehta  

& Ors.,  (1973)  1 SCC 584, this Court  in paragraph 12  

held that the MMDR Act, 1957 and the MC Rules, 1960  

contain complete code in respect of the grant and renewal  

of prospecting licences as well as mining leases in lands  

belonging  to  Government  as  well  as  lands  belonging  to  

private persons.   

27)  Again this Court in Quarry Owners’ Association vs.  

State of Bihar & Ors., (2000) 8 SCC 655, held that both  

the  Central  and  the  State  Government  act  as  mere  

delegates of Parliament while exercising powers under the  

MMDR Act and the MC Rules.   

28) It is not open to the State Government to justify grant  

based on criteria that are  de hors to the MMDR Act and  

41

the  MC Rules.   The exercise  has to  be  done strictly  in  

accordance with the statutory provisions and if  there is  

any deviation,  the same cannot be sustained.  It  is the  

normal  rule  of  construction  that  when  a  statute  vests  

certain  power  in  an  authority  to  be  exercised  in  a  

particular manner then the said authority has to exercise  

it only in the manner provided in the statute itself.  This  

principle has been reiterated in C.I.T. Mumbai vs. Anjum  

M.H.  Ghaswala  &  Ors.,  (2002)  1  SCC  633  at  644,  

Captain Sube Singh & Ors. vs. Lt. Governor of Delhi &  

Ors., (2004) 6 SCC 440 and State of U.P.  vs. Singhara  

Singh & Ors., (1964) 4 SCR 485.   

29) Mr.  Harish  N.  Salve  and  Mr.  Dushyant  Dave,  by  

drawing  our  attention  to  the  decision  of  this  Court  in  

TISCO vs. U.O.I. & Anr.,  (1996) 9 SCC 709, submitted  

that inasmuch as this Court had upheld the grants based  

on “captive consumption”, there is no flaw or error in the  

recommendation  of  the  State  Government  dated  

06.12.2004.  A perusal of the above decision clearly shows  

42

that it concerned with Section 8(3) of the MMDR Act which  

requires consideration of the extremely general criterion of  

the  interests  of  mineral  development  before  granting  

second renewal of a mining lease.  Unlike in Section 11(3),  

no  further  criteria  was  specified  and  it  was  in  this  

background, this Court upheld on the facts of that case  

that  relevant  material  taken  into  account  by  the  

Committee  set  up  by  the  Central  Government  rightly  

included “captive  consumption”.   In  view of  the  factual  

situation, the said decision can have no bearing on initial  

grants of mining lease where the only permissible criteria  

are the matters set out in Section 11(3) of the MMDR Act.   

Issue (b)

“Whether  the  respondent-Jindal’s  application  dated  24.10.2002  made prior to the Notification dated 15.03.2003 is capable of being  entertained along with the applications made pursuant to the said  notification.”

30) The next vital issue that arises in this case is whether  

Jindal’s  application  dated  24.10.2002  made  prior  to  the  

Notification  dated  15.03.2003  inviting  applications  for  

previously held  area could be considered in view of  Section  

43

11(4) of the MMDR Act read with Rules 59 and 60 of the MC  

Rules.  Before considering the above aspect, it is relevant to  

note  the  stand  taken  by  Jindal  that  in  2001,  one  Ziaulla  

Sharieff filed a writ petition being Writ Petition No 35915 of  

2001 seeking a declaration that he was entitled to a mining  

lease in respect of 388 acres of land in Sandur Taluk, Bellary  

District.   It  was  pointed  out  that  in  the  said  writ  petition,  

MSPL  was  arrayed  as  respondent  No.3  and  Sandur  was  

arrayed as Respondent No.7.  Three sister concerns of Jindal  

were also arrayed as respondents.  During the pendency of the  

said writ petition, the State Government issued a notification  

dated 15.03.2003 inviting applications from the general public  

for  mineral  concessions  over  large  areas  of  the  State  of  

Karnataka.  It was further pointed out that the area concerned  

in  the  said  writ  petition  as  also  the  area  concerned  in  the  

present  appeals  were  included  in  the  said  notification.   By  

judgment  and  order  dated  29.03.2004,  the  High  Court  

disposed of Writ Petition No. 35915 of 2001 with the following  

direction “in view of the subsequent notification issued by the  

State Government dated 15.03.2003, inviting that the area is  

44

available for grant, the State Government is now expected not  

only to consider the applications pending before it but also the  

applications  that  may  be  filed  pursuant  to  the  above  said  

notification notwithstanding the earlier recommendation made  

by the second respondent.”  Learned senior counsel appearing  

for Jindal submitted that the State Government had acted on  

the  basis  of  the  Ziaulla  Sharieff’s  case  and  empowered  the  

Director of Mines and Geology to hear applications that were  

filed prior to the issuance of the notification dated 15.03.2003  

and  were  pending  on  the  date  of  the  said  notification.  

Whether such direction saves the State Government’s decision  

in considering the Jindal’s application which was made well  

prior to the notification dated 15.03.2003.  

31) In order to determine whether it is Section 11(4) or the  

first proviso to Section 11(2), it is relevant to understand the  

intention  of  the  legislature  in  enacting  Section  11  of  the  

MMDR Act and Rules 59 and 60 of MC Rules as being part of  

single statutory scheme governing the grant of reconnaissance  

permits,  prospecting  licences  and  mining  leases.   The  

amendments  to  MMDR Act  in  1999 which inserted and re-

45

drafted  Section  11  had  their  origin  in  the  Report  of  the  

Committee  to  Review  the  Existing  Laws  and  Procedure  for  

Regulation  and  Development  of  Minerals  set  up  by  the  

Ministry of Mines, Government of India, submitted in January,  

1998.   We  are  concerned  about  para  2.1.21  of  the  Report  

which reads as under:

“…  The  concept  of  first-come,  first-serve  has  become  necessary in view of the fact that the Act does not provide for  inviting  applications  through  advertisement  for  grant  of  PL/ML  in  respect  of  virgin  areas.   No  doubt,  there  is  provision in Rule 59 of  MCR for advertisement of an area  earlier held under PL/ML with provision for relaxation.”  In  this  background,  the  Committee  recommended  the  introduction of the proviso to Section 11(2) permitting calling  for  applications  by  way  of  a  notification.   There  is  a  distinction  between  virgin  areas  and  areas  covered  under  Rule 59 and Section 11(2) ought to be interpreted to cover  virgin areas alone.”   

If we consider Section 11 with the aid of the said Report, it  

makes it clear that Section 11(1) provides preferential right to  

the holder of reconnaissance permits or a prospecting licencee  

who has identified mineral  resources in the area allotted to  

him for grant of a mining lease, subject to certain conditions  

specified  in  the  proviso  appended  thereto.   The  over-riding  

character  of  the priority  given to the successful  prospecting  

46

licencee or reconnaissance permit-holder is clear from the fact  

that  each  of  the  subsequent  sub-sections  in  Section  11  is  

made subject to Section 11(1).  

32) It is also clear that the main provision in Section 11(2)  

gives  preference  to  a  prior  applicant  for  grant  of  

reconnaissance  permit,  prospecting  licence  or  mining  lease  

over  later  applicants  where  the  State  Government  has  not  

issued any notification.  The analysis of the Report makes it  

clear that the main provision in Section 11(2) applies to “virgin  

areas”.  It further makes it clear that to the extent that an area  

that is previously held or reserved would require a notification  

for it to become available.  The first proviso to Section 11(2)  

carves  out  an  exception  to  the  preferential  right  based  on  

priority of applications in point of time referred to in the main  

provision.  It makes it clear that where the State Government  

subsequently  issues  a  notification  inviting  applications  for  

grant,  the  prior  and  subsequent  applications  to  the  

notification would be considered as if they were filed on the  

same day and no priority in order of time would be given.  The  

second proviso requires the State Government to examine the  

47

matters  set  out  in  Section  11(3)  while  considering  the  

applications for grant.  

33) The Committee’s Report, particularly, para 2.1.21 which  

we  extracted  in  the  earlier  paras,  makes  it  clear  that  this  

provision was inserted because the Act does not provide for  

advertisement of virgin areas and the State Government was  

perfectly within the rights to issue an advertisement inviting  

applications even for virgin areas.  In this regard, it is useful to  

mention  that  this  Court  had suggested  an  almost  identical  

change in the un-amended Section 11 in Indian Metals and  

Ferro Alloys Ltd. vs. Union of India & Ors., 1992 Supp. 1  

SCC 91 at page 127 para 35.  

“35. Now,  to  turn to the contentions urged before  us:  Dr  Singhvi,  who  appeared  for  ORIND,  vehemently  contended  that the rejection of the application of ORIND for a mining  lease was contrary to the statutory mandate in Section 11(2);  that, subject only to the provision contained in Section 11(1)  which had no application here,  the  earliest  applicant  was  entitled to have a preferential right for the grant of a lease;  and that a consideration of the comparative merits of other  applicants can arise only in a case where applications have  been  received  on  the  same  day.  It  is  no  doubt  true  that  Section  11(2)  of  the  Act  read  in  isolation  gives  such  an  impression which, in reality, is a misleading one. We think  that  the  sooner  such  an  impression  is  corrected  by  a  statutory  amendment  the  better  it  would  be  for  all  concerned. On a reading of Section 11 as a whole, one will  realise  that  the  provisions  of  sub-section  (4)  completely  override those of sub-section (2). This sub-section preserves  

48

to the S.G. a right to grant a lease to an applicant out of turn  subject  to  two conditions:  (a)  recording of  special  reasons  and  (b)  previous  approval  of  the  C.G.  It  is  manifest,  therefore,  that  the  S.G.  is  not  bound  to  dispose  of  applications only on a “first come, first served” basis. It will  be easily appreciated that this should indeed be so for the  interests of national mineral development clearly require in  the case of major minerals, that the mining lease should be  given to that applicant who can exploit it most efficiently. A  grant of ML, in order of time, will not achieve this result.”

Even under ordinary principles of statutory interpretation, the  

first proviso to Section 11(2) embraces the field that is covered  

by the main provision.  [Vide Abdul Jabar vs. State of J&K.,  

AIR 1957 SC 281 (para 8) and  Ram Narain Sons vs.  Asst.  

CST, 1955 (2) SCR 483 at 493].   

Accordingly, we are of the view that the notification calling for  

applications  referred to  in  the  first  proviso  to  Section 11(2)  

applies only to virgin areas.   

34) It is the claim of Jindal and Kalyani that the proviso  

to  Section  11(2)  of  the  Act  sets  out  a  plenary  rule  for  

consideration of applications for mining leases where the  

State  Government  has  invited  applications  for  mineral  

concessions by notification in the official gazette and the  

applications pending on the date of notification must be  

considered  simultaneously  with  applications  filed  in  

49

response  to  the  notification  and  within  the  notification  

period.   It  is  also  their  claim  that  since  there  is  no  

provision in the rules empowering the State Government  

to  issue  notification  inviting  applications  for  mineral  

concessions apart from Rule 59(1), it is asserted by Jindal  

and  Kalyani  that  a  notification  inviting  applications  for  

mineral concessions in the proviso to Section 11(2) must  

necessarily relate only to a notification under Rule 59(1)  

inviting applications for mineral concessions in previously  

held or reserved lands.  Therefore, according to them, the  

proviso’s  stipulation  that  applications  for  mineral  

concessions pending on the date of the said notification  

inviting applications must be considered, must necessarily  

apply to applications pending in receipt of previously held  

lands.   It  is  also contended that  the proviso to  Section  

11(2)  and  Rule  59(1)  use  identical  phraseology  when  

referring to areas (available for grant).  It was pointed out  

that since this language is not present in Section 11(4),  

this  suggests  strongly  that  Rule  59(1),  the  proviso  to  

50

Section 11(2), Section 11(3) and Rule 35 form a composite  

code  dealing  with  the  consideration  of  applications  for  

mineral concessions over lands thrown open for grant by  

way of notification under Rule 59(1) and that Section 11(4)  

does not apply to such applications.  

35) We have already held that Section 11(3) specifies the  

matter relevant for purposes of second proviso to Section  

11(2).   We also  referred to  the  Committee’s  Report.   In  

accordance with the recommendation in the said Report,  

Section 11(3)(d) was added as part of the substitution of  

Section 11 in the year 1999.  Sub-section (d) provides that  

“the investment which the applicant proposes to make in  

the mines and in the industry based on minerals” and it  

speaks about  investment  proposed to  be  made and not  

past investments.  Thus it confines the concept of “captive  

consumption of minerals to proposed investment and not  

past investments”.  Even the residuary clauses in Section  

11(3)(e)  are  limited  to  “matters  as  may  be  prescribed”,  

which  would  necessarily  mean  matters  prescribed  by  

51

rules.  This is fortified by decision of this Court in BSNL  

Ltd. & Anr. vs. BPL Mobile Cellular Ltd. & Ors., (2008)  

13 SCC 597, para 45.  

36) We have already quoted sub-section (4) of Section 11  

which  contemplates  a  situation  where  a  notification  is  

issued  inviting  applications  for  an  area  for  grant.   In  

contrast to the first proviso to Section 11(2),  it  provides  

that  all  applications  received  pursuant  to  a  notification  

shall be considered simultaneously without assigning any  

priority in point of time, and after taking into account the  

matters specified in Section 11(3).  Section 11(4), in effect,  

covers  exactly  the  same  field  as  the  first  and  second  

proviso to Section 11(2) read along with Section 11(3) with  

one  difference,  i.e.,  unlike  the  first  proviso  to  Section  

11(2),  it  provides  for  consideration  of  only  those  

applications  that  are  made pursuant  to  the  notification  

and not those made prior to the notification.  Notification  

under Section 11(4) is consistent with Rule 59(1) read with  

Rule  60  insofar  as  applications  received  prior  to  the  

52

notification would not be entertained.  The first proviso to  

Section 11(2) was being added to cover virgin areas, then  

provided  for  the  addition  of  Section  11(4),  in  order  to  

ensure  that  the  notification  referred  to  in  Rule  59(1)  

together  with  Rule  60  would  not  render  ultra  vires the  

MMDR Act.  In view of the same, the contention on behalf  

of Jindal and Kalyani that the first proviso of Section 11(2)  

would cover notifications under Rule 59(1) is unacceptable  

because  this  would  render  Section  11(4)  otiose  and  

redundant.   In J.K. Cotton Spinning & Weaving Mills  

co. Ltd.  vs. State of U.P., AIR 1961 SC 1170 and  O.P.  

Singla & Anr. vs. Union of India & Ors. (1984) 4 SCC  

450, this Court held that a provision in a statute must not  

be  so  interpreted  as  to  reduce  another  provision  to  a  

“useless lumber” or a “dead letter”.  If we accept the said  

position,  it  would  result  in  anomalous  consequences  of  

rendering Rule 60  ultra vires the first proviso to Section  

11(2).   In fact, this has been highlighted by the Central  

Government in their affidavit filed before the High Court.

53

37) In addition to what we have stated, it is relevant to  

note that Section 11(5) again carves out an exception to  

the preference in favour of prior applicants in the main  

provision  of  Section  11(2).   It  permits  the  State  

Government,  with  the  prior  approval  of  the  Central  

Government, to disregard the priority in point of time in  

the main provision of Section 11(2) and to make a grant in  

favour  of  a  latter  applicant  as  compared  to  an  earlier  

applicant for special reasons to be recorded in writing.  It  

also gives an indication that it can have no application to  

cases in which a notification is issued because, in such a  

case, both the first proviso to Section 11(2) and Section  

11(4) make it clear that all applications will be considered  

together as having been received on the same date.   In  

view of  our  interpretation,  the  proceedings  of  the  Chief  

Minister and the recommendation dated 06.12.2004 are  

contrary to the Scheme of  the MMDR Act as they were  

based on Section 11(5) which had no application at all to  

54

applications  made  pursuant  to  the  notification  dated  

15.03.2003.   

38) We  have  already  extracted  Rules  59  and  60  and  

analysis  of  those  rules  confirms  the  interpretation  of  

Section  11  above  and  the  conclusion  that  it  is  Section  

11(4)  which would apply  to  a  Notification  issued under  

Rule  59(1).   Rule  59(1)  provides  that  the  categories  of  

areas  listed  in  it  including,  inter  alia,  areas  that  were  

previously held or being under a mining lease or which  

has  been  reserved  for  exploitation  by  the  State  

Government or under Section 17A of the Act, shall not be  

available  for  grant  unless  (i)  an  entry  is  made  in  the  

register and (ii) its availability for grant is notified in the  

Official Gazette specifying a date not earlier than 30 days  

from  the  date  of  notification.   Sub-rule  (2)  of  Rule  59  

empowers the Central Government to relax the conditions  

set  out  in  Rule  59(1)  in  respect  of  an  area  whose  

availability is required to be notified under Rule 59 if no  

application is issued or where notification is issued, the  

55

30-days  black-out  period  specified  in  the  notification  

pursuant  to  Rule  59(1)(i)(ii)  has  not  expired,  shall  be  

deemed to be premature and shall not be entertained.  As  

discussed earlier,  Section 11(4) is  consistent with Rules  

59  and  60  when  it  provides  for  consideration  only  of  

applications  made  pursuant  to  a  Notification.   On  the  

other hand, the consideration of applications made prior  

to  the  Notification,  as  required  by  the  first  proviso  to  

Section 11(2), is clearly inconsistent with Rules 59 & 60.  

In such circumstances, a harmonious reading of Section  

11  with  Rules  59  and  60,  therefore,  mandates  an  

interpretation under which Notifications would be issued  

under  Section  11(4)  in  the  case  of  categories  of  areas  

covered by Rule 59(1).   In those circumstances,  we are  

unable to accept the argument of learned senior counsel  

for Jindal and Kalyani with reference to those provisions.   

39) The Division Bench has clearly erred in concluding  

that applications made prior to the notification under Rule  

59(1)  which  are  premature  and  cannot  be  entertained  

56

under  Rule  60  would  revive  upon  issuance  of  the  

Notification.  This conclusion goes against basic principles  

of statutory interpretation.  We have already pointed out  

the  effect  of  Rule  60  which  is  couched  in  negative  

language that  is  mandatory in nature.   Further,  if  that  

was the intention of the Legislature, there was no reason  

for the Legislature to take pains to state in Rule 60(b) that  

an  application  made  during  the  black-out  period  of  30  

days specified in the Notification also would be premature  

and  could  not  be  entertained.   Accordingly,  the  

interpretation placed by the Division Bench on Rule 60  

would result in reading in a proviso at the end of Rule 60  

to  the  effect  that  once  the  30-days  black-out  period  

specified in the Notification contemplated by Rule 59(1)(ii)  

is over, premature applications would revive.  After taking  

such pains to make it clear that the applications would  

not  be  entertained until  the end of  the  30-days period,  

surely the Legislature itself  would have inserted such a  

proviso at the end of Rule 60 if that were its intention.    

57

40) In  Amritlal  Nathubhai  Shah  &  Ors. vs.  Union  

Government of India & Anr., (1976) 4 SCC 108 (para 7),  

this Court observed as follows:  

“….. Rule 60 provides that an application for the grant  of a prospecting licence or a mining lease in respect of  an area for which no such notification has been issued,  inter alia, under Rule 59, for making the area available  for grant of a licence or a lease, would be premature,  and “shall not be entertained and the fee, if any, paid in  respect of any such application shall be refunded.”  It  would therefore follow that as the areas which are the  subject-matter of the present appeals had been reserved  by the State Government for the purpose stated in its  notification,  and  as  those  lands  did  not  become  available  for  the  grant  of  a  prospecting  licence  or  a  mining lease, the State Government was well within its  rights  in  rejecting  the  applications  of  the  appellants  under Rule 60 as premature.  The Central Government  was thus justified in rejecting the revision applications  which were filed against the orders of rejection passed  by the State Government.”  

41) Even thereafter, this Court has consistently taken the  

position  that  applications  made  prior  to  a  Notification  

cannot be entertained.  In our view, the purpose of Rule  

59(1), which is to ensure that mining lease areas are not  

given  by  State  Governments  to  favour  persons  of  their  

choice  without  notice  to  the  general  public  would  be  

defeated.   In  fact,  the  learned  single  Judge  correctly  

58

interpreted Section 11 read with Rules 59 and 60.  The  

said conclusion also finds support in the decision of this  

Court  in  State of  Tamil  Nadu vs.  M.S.  Hindstone &  

Ors., (1981) 2 SCC 205 at page 218, where it has been  

held in the context of the rules framed under the MMDR  

Act itself  that a statutory rule, while subordinate to the  

parent statute, is otherwise to be treated as part of the  

statute  and  is  effective.   The  same  position  has  been  

reiterated  in  State  of  U.P. vs.  Babu  Ram  Upadhya,  

(1961)  2  SCR  679  at  701  and  Gujarat  Pradesh  

Panchayat  Parishad & Ors. vs.  State  of  Gujarat  &  

Ors.,  (2007)  7  SCC  718.   The  Division  Bench  did  not  

advert to these aspects as analyzed by the learned single  

Judge.  On the other hand, the Division Bench accepted  

Jindal’s contention that if Rule 60 is interpreted to render  

applications made prior to Rule 59(1) Notification non est,  

it  would  make  Rule  59(2)  unworkable  because  persons  

normally  apply  for  mining  lease  areas  along  with  an  

application  for  relaxation  under  Rule  59(2).   This  

59

conclusion  is  clearly  misplaced.   It  is  only  the  request  

under Rule 59(2) of any person for relaxation in respect of  

an  area  that  is  considered  and  not  the  application  for  

grant.  Only after the relaxation under Rule 59(2) by the  

Central  Government  of  the  requirement  of  Notification  

under Rule 59(1) that applications could be considered for  

grant  of  mining  lease.   The  decision  relied  on  by  the  

learned senior counsel for Jindal in TISCO (supra), (paras  

42, 44 and 47), that applications made by certain parties  

were considered after a relaxation under Rule 59(2) cannot  

be taken as laying down any law.   It  is  also seen that  

consideration of the applications made by various parties  

in the TISCO’s case was pursuant to the directions issued  

by  this  Court  and  not  independently  by  the  State  

Government under Section 11 of the Act.  As a matter of  

fact, the issue whether premature applications revived for  

consideration after  the  relaxation under  Rule  59(2)  was  

neither expressly raised nor decided in the TISCO’s case.  

In the light of  the above discussion about Section 11(2)  

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alongwith Rules 59 and 60, it should be interpreted that  

Section 11(2) is to cover virgin areas alone.  In view of the  

same,  the  Jindal’s  application  made  prior  to  the  

Notification  cannot  be  entertained  along  with  the  

applications  made  pursuant  to  the  Notification  dated  

15.03.2003 because it is Section 11(4) which covers the  

said Notification along with Rule 59(1) and not the first  

proviso to Section 11(2) as contended by the respondents.  

Issue (c) Whether  the  order  of  the  High  Court  of  Karnataka  in  Ziaulla  Sharieff’s  (supra)  permit  the  consideration  of  the  Jindal’s  application  dated  24.10.2002  which  was  made  prior  to  the  notification dated 15.03.2003.  

42)  We have already discussed this issue.  In addition to  

the same, perusal of the order of the High Court in Writ  

Petition  No.  35915  of  2001  shows  that  the  State  

Government was directed to consider only the application  

of the MSPL and the applications filed by the impleading  

applicants and others pursuant to the Notification dated  

15.03.2003 in accordance with law and in terms of  the  

provisions  of  the  MMDR Act  and  MC  Rules.   In  other  

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words,  the  High  Court  did  not  issue  any  direction  to  

consider all applications made prior to the notification.  To  

put it clear, there was no mandamus from the High Court  

to consider prior applications.  The word “others” qualify  

the phrase “pursuant to” and not the class of applicants  

who had applied even prior to the “Held Area Notification”  

dated 15.03.2003.  As a matter of fact, the High Court had  

merely  directed  the  State  Government  to  consider  the  

applications  in  accordance  with  the  provisions  of  the  

MMDR Act and MC Rules.  Even otherwise, the said order  

was passed without going into the specific provisions in  

the Act or Rules.  Further, the order does not deal with the  

interpretation of Section 11 or Rules 59 and 60.  Hence,  

the  order  of  the  High  Court  of  Karnataka  in  Ziaulla  

Sharieff’s  case  does  not  permit  the  consideration  of  

Jindal’s  application  dated  24.10.2002  which  was  made  

prior to the notification dated 15.03.2003.

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Issue (d):

Whether Rule 35 of the MC Rules justify the recommendation of the  State  Government  and  the  proceedings  of  the  Chief  Minister  in  favour of the Respondents – Jindal & Kalyani?

“Rule 35.  Preferential rights of certain persons – Where  two  or  more  persons  have  applied  for  a  reconnaissance  permit or a prospecting licence or a mining lease in respect  of  the  same  land,  the  State  Government  shall,  for  the  purpose of sub-section (2) of section 11, consider besides the  matters mentioned in clauses (a) to (d) of sub-section (3) of  section 11, the end use of the mineral by the applicant. “

We  have  already  adverted  to  the  proceedings  of  the  Chief  

Minister  which  heavily  relied  on  Rule  35  to  justify  the  

recommendation  in  favour  of  the  respondents  –  Jindal  and  

Kalyani on the premise that it is intended to give preference to  

those who have made existing investments in industries based  

on iron ore and both of them qualify on this consideration.  

From  a  plain  reading  of  Rule  35,  it  is  clear  that  the  rule  

permits  the  State  Government  to  differentiate  between  the  

“end use” of the minerals for the purpose of sub-section (2) of  

Section 11 in addition to the matters in Section 11(3). In the  

case on hand, all the parties, namely, MSPL, Sandur, Jindal  

and Kalyani expressed their intention to use iron ore from the  

mines for producing steel and, therefore, the same “end use”  

requirement is satisfied.   

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43)   Rule  35,  at  best,  permits  the  State  Government  to  

differentiate between different “end uses”, for example, the use  

of iron ore to produce sponge iron instead of steel, or the use  

of gold in jewellery as compared to medicines.  Further, Rule  

35  does  not  differentiate  between  “proposed”  and  “existing”  

end  use.    Therefore,  it  could  have  enabled  the  State  

Government to take into account the claim of the respondents  

– Jindal and Kalyani, whose past investments would not have  

qualified  on  the  “proposed”  investment  criterion  under  

Section 11(3)(d),  in addition to MSPL and Sandur.  This could  

have been a basis to exclude those with proposed investments  

in steel plants from consideration.

44)  It is also relevant to point out that Rule 35 specifies one  

additional  factor  apart  from  the  factors  set  out  in  Section  

11(3).  The plain language of Rule 35 requires its application  

only  in  cases  covered  by  Section  11(2)  and  not  by  Section  

11(4).   Therefore,  to  the extent that it  is  Section 11(4)  that  

covers Notification under Rule 59(1) and not Section 11(2), in  

this  way also,  the State Government committed an error in  

relying on Rule 35 to exclude the appellants, i.e., MSPL and  

64

Sandur.   To  justify  the  recommendation  in  favour  of  the  

respondents-Jindal  and  Kalyani,  in  the  proceedings  of  the  

Chief Minister, State heavily relied on Rule 35 on the premise  

that it is intended to give preference to those who have made  

existing investments in industries based on iron ore and that  

the  respondents  –  Jindal  and  Kalyani,  qualify  on  this  

consideration.   However,  as  discussed  above,  Rule  35  only  

permits the State Government to take additional factor of the  

“end use”  of  the  minerals  and not  the  existing  investments  

made  by  the  applicants.   Moreover,  relying  on  the  existing  

investments made, the respondents also does not satisfy the  

requirements under Section 11(3)(d) which talks solely about  

proposed investments to be made and not the existing ones.   

Issue (e):  

Whether  the  criterion  of  captive  consumption  referred  to  in  the  TISCO’s case has no application to the present case because it is not  one of the factors referred to in Section 11(3) or even in Rule 35.

45)   The  criterion  of  captive  consumption  referred  to  in  

TISCO’s case (supra)  does not have any application in this  

case, which we will refer in the later part of this paragraph.  

Section 11(4)  and even the  second proviso  to  Section 11(2)  

65

provide  that  the  State  Government  may  grant,  inter  alia,  a  

mining  lease  after  taking  into  consideration  the  matters  

specified  in  Section  11(3).   Section  11(3)(d)  specifies  “the  

investment which the applicant proposes to make in the mines  

and in the industry based on the minerals”  as one of such  

matters and on a plain interpretation, it is clear that only the  

proposed investment is  a relevant factor.   If  the Legislature  

had intended that it should include past investments also, the  

use of the word “proposed” is superfluous, which could never  

be  the  case.   Learned  senior  counsel  appearing  for  the  

respondents have not pointed out any other provision in the  

MMDR Act or the MC Rules permitting grant of mining lease  

based on past commitments or for captive purposes in existing  

industries.

46)  As observed in the earlier paragraphs, the strong reliance  

placed by the respondent-Jindal on the decision of this Court  

in  TISCO’s  case (supra) (Paras 9,15,20,25,27,34,54,56 & 57)  

is misplaced.  This case concerned solely on the interpretation  

of Section 8(3) of the MMDR Act in the context of a second  

renewal of a mining lease in favour of   TISCO, and not a fresh  

66

grant.  It is,  in this context the phrase “interest on mineral  

development” in Section 8(3) was interpreted to include captive  

requirements.  On the other hand, the case of fresh grant is  

covered by Section 11 of the MMDR Act.  Paragraph 54 of the  

TISCO’s case (supra) makes it clear that the case concerned is  

chromite whose known reserves were not abundant, whereas  

iron ore is in abundance.  Even otherwise, this judgment is of  

no assistance even on Rule 59(1) of the MC Rules since it was  

a case of relaxation by the Central Government under Rule  

59(2), as is clear from paragraph 15 of the judgment.

47)  It is useful to mention that subsequent to the decision in  

TISCO (supra), this Court in Indian Charge Chrome Ltd. &  

Anr. vs. Union of India & Ors., (2006) 12 SCC 331 (Paras 20  

& 26) held that considerations of captive mining cannot be the  

controlling factor for grant of lease.

Issue (f):

Whether  factors  such  as  past  commitments  made  by  the  State  Government to applicants who have already set up steel plants is  not a relevant matter for consideration for grant of lease.     

48) As  discussed  earlier,  the  State  Government  is  

denuded of all legislative and executive power under Entry  

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23  of  List-II  read  with  Article  162  after  passing  of  the  

MMDR Act which are as under:-  

“Entry  23,  List  II: Regulation  of  mines  and  mineral  development  subject  to  the  provisions  of  List  I  with  respect to regulation and development under the control  of the Union.”

“Article  162.  Extent of  executive  power  of  State.-  Subject  to  the  provisions  of  this  Constitution,  the  executive power of a State shall extend to the matters  with respect to which the Legislature of the State has  power to make laws.  

Provided that in any matter with respect to which  the Legislature of a State and Parliament have power to  make laws,  the executive  power  of  the State shall  be  subject to, and limited by, the executive power expressly  conferred by this Constitution or by any law made by  Parliament upon the Union or authorities thereof.”  

It is clear that the State Government is purely a delegate  

of  Parliament  and  a  statutory  functionary,  for  the  

purposes of Section 11(3) of the Act, hence it cannot act in  

a  manner  that  is  inconsistent  with  the  provisions  of  

Section  11(1)  of  the  MMDR Act  in  the  grant  of  mining  

leases.  Furthermore, Section 2 of the Act clearly states  

that  the  regulation  of  mines  and  mineral  development  

comes within the purview of the Union Government and  

not  the  State  Government.   As  a  matter  of  fact,  the  

68

respondents  have not  been able  to  point  out  any other  

provision in the MMDR Act or MC Rules permitting grant  

of mining lease based on past commitments.  As rightly  

pointed out, the State Government has no authority under  

the MMDR Act to make commitments to any person that it  

will, in future, grant a mining lease in the event that the  

person makes investment in any project.  Assuming that  

the State Government had made any such commitment, it  

could not be possible for it to take an inconsistent position  

and proceed to notify a particular area.  Further, having  

notified  the  area,  the  State  Government  certainly  could  

not  thereafter  to  honour  an  alleged  commitment  by  

ousting other applicants even if they are more deserving  

on the merit criteria as provided in Section 11(3).  

49)   In  the  case  of  State  of  Assam  &  Ors. vs.  Om  

Prakash Mehta & Ors.,  AIR 1973 SC 678,  this  Court  

observed that the MMDR Act and MC Rules contain the  

complete  code  in  respect  of  the  grant  and  renewal  of  

prospecting  licences  as  well  as  mining  leases  in  lands  

69

belonging  to  Government.   In  Quarry  Owners  

Association (supra),  this  Court  again  reaffirmed  the  

notion  that  both  the  Central  as  well  as  the  State  

Government act as a mere delegates of Parliament while  

exercising the powers under the Act and Rules. [Vide M.A.  

Tulloch (supra), Baijnath Kedio (supra), Kesoram’s case  

(supra), and  Bharat Cooking Coal Ltd. (supra)].  From  

this,  it  becomes amply clear that the State Government  

has  divested  of  legislative  and  executive  powers  with  

respect to mines and minerals development.  In addition  

to  the  same,  Anjum  M.H.  Gaswala (supra),  Captain  

Sube Singh (supra), Singhara Singh’s case (supra), this  

Court  repeatedly  held  that  the  field  of  granting  mining  

leases  is  covered  by  express  statute  and rules  and the  

grants must be made in accordance with the provisions of  

the Act and Rules and no other consideration.  From a  

perusal of the above settled legal position, it becomes clear  

that  the  State  Government  cannot  grant  mining  leases  

keeping in mind any considerations apart from the ones  

70

mentioned  in  the  MMDR Act  and  MC Rules.   In  those  

circumstances, no extraneous considerations such as past  

commitments  made  by  the  State  Government  to  Jindal  

and Kalyani who have already set up steel plants can be  

entertained  by  the  State  Government  while  granting  

mining leases and must abide by the Act and Rules.  

Issue (g): Whether the recommendation in favour of Jindal and Kalyani saved  by operation of law of equity?

50) The Law of Equity cannot save the recommendation  

in favour of Jindal and Kalyani because it is a well settled  

principle  that  equity  stands  excluded when a  matter  is  

governed by statute.  This principle was clearly stated by  

this Court in the cases of  Kedar Lal vs.  Hari Lal Sea,  

(1952) SCR 179 at 186 and  Raja Ram vs.  Aba Maruti  

Mali (1962)  Supp.  1  SCR 739 at  745.   It  is  clear  that  

where the field is covered expressly by Section 11 of the  

MMDR Act, equitable considerations cannot be taken into  

account  to  assess  Jindal  and  Kalyani,  when  the  

recommendation in their favour is in violation of statute.  

71

It  was  pointed  out  that  Kalyani  does  not  have  a  

commitment from the State Government regarding its iron  

ore needs.  In the proceedings of the State Government,  

there is only a statement that it may apply for a lease.  No  

doubt, Jindal has emphasized that it has already set up  

its  steel  plant  based on the commitments  made by the  

State Government to grant a mining lease and it is in need  

of  iron  ore  for  these  steel  plants.   As  observed  earlier,  

commitments made by the State Government cannot be a  

relevant  factor  for  grant  of  lease  in  the  teeth  of  the  

consideration set out in Section 11(3).  If that was to be  

the sole criterion, the State Government ought not to have  

notified  the  area  vide  ‘Held  Area  Notification’  dated  

15.03.2003.  

51) It was also pointed out that Jindal has been mining a  

lease area of 85.50 hectares of Mysore Minerals Limited, a  

Public  Sector  Undertaking  through  a  joint  venture  in  

terms of the commitment made by the State Government.  

In  addition,  the  State  Government  has  made  a  

72

recommendation  for  grant  of  mining  lease  in  favour  of  

Jindal and its sister concerns in the following areas:    

(i) 188.128  hectares  in  favour  of  M/s  JSW  Steel  Limited  in  Donimalai Range, Sandur Taluk, Bellary District.

(ii) 181.70  hectares  in  favour  of  M/s.  Vijaynagara  Minerals  Pvt.  Ltd. In Donimalai Range, Sandur Taluk, Bellary District.

(iii) 184.14 hectares in favour of M/s. South West Mining Ltd. In  Donimalai Range, Sandur Taluk, Bellary District.

(iv)     200.73 hectares in favour of M/s JVSL in Kumaraswamy range            of Sandur Taluk, Bellary District, which si the subject matter of           the present SLP.

As a matter of  fact,  MSPL had filed an affidavit  in this  

regard before the Division Bench.  It is not clear whether  

Jindal  has  specifically  denied  the  specific  grants.   By  

drawing  our  attention  to  certain  factual  details,  it  was  

contended  that  Jindal  has  so  much  iron  ore  and  it  

actually exported iron ore for which reliance was made to  

its annual reports during the years 2002-03 to 2005-06.  

On the other hand, it  is  the claim of  the MSPL that in  

accordance with Section 11(3)(d) it had proposed to set up  

a steel plant for which it required iron ore.  It was also  

brought to our notice that it had received permission from  

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the State Government in this regard.  With reference to  

the allegation that MSPL has a mining lease over an area  

of 722.94 hectares, it was pointed out that in actual it has  

a  lease  over  an  area  of  347.22  hectares  only.   On  

05.06.2009,  MSPL  filed  an  affidavit  before  the  Division  

Bench  stating  that  it  holds  only  a  single  mining  lease  

granted over five decades ago and the major proportion of  

which has been afforestated.  It is also their grievance that  

the  iron  ore  reserves  in  this  lease  have  almost  been  

exhausted  over  a  period  of  58  years,  since  1952.   The  

remaining iron ore cannot support a steel plant of the size  

that is being set up by MSPL.  Since the entire field of  

granting mining lease is covered by MMDR Act and MC  

Rules,  the  State  Government  cannot  use  any  

consideration apart from the ones mentioned in the Act  

and Rules.  

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Issue (h):

About  the  impugned  judgments  of  the  single  Judge  and Division  Bench:          

52) In  view  of  our  conclusion,  the  Division  Bench  has  

erred  in  concluding  that  the  Jindal’s  application  made  

prior to the Notification can be entertained along with the  

applications  made  pursuant  to  the  said  Notification  

because  it  is  not  Section  11(4)  which  covers  the  said  

Notification  under  Rule  59(1)  but  the  first  proviso  to  

Section 11(2).  As a matter of fact, the Division Bench did  

not even mention Section 11(4) in its reasoning apart from  

stray references even though the conclusion of the learned  

single  Judge  hinged  on  how  Section  11(4)  would  be  

rendered  otiose  and  redundant  if  the  first  proviso  to  

Section 11(2) was taken as governing the consideration of  

applications under a Notification pursuant to Rule 59(1).  

53) The Division Bench has also faulted in arriving at the  

conclusion that the applications made prior to Notification  

under  Rule  59(1)  which  are  premature  and  cannot  be  

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entertained under Rule 60 would revive upon issuance of  

the Notification which is clearly not the case.  As pointed  

out earlier, had that been the intention of the Legislature,  

there  was  no  reason  for  the  Legislature  to  take  pains  

under  Rule  60(b)  that  an application made during the  

period of 30 days specified in the Notification also would  

be  premature  and  could  not  be  entertained.   If  the  

decision  of  the  Division  Bench  is  taken  to  its  logical  

conclusion, then it would result in reading in a proviso at  

the end of  Rule 60 to the effect  that once the 30 days’  

period specified in the Notification contemplated by Rule  

59(1) sub-clause (ii) is over, premature applications would  

revive.  After taking such pains to make it clear that the  

application would not be entertained until the end of 30  

days’ period, surely the Legislature itself would not have  

inserted such proviso in Rule 60 if that were its intention.  

If  such  premature  applications  are  allowed  to  be  

entertained,  it  would  result  in  the  State  Government  

giving  out  mining  leases  to  favoured  persons  without  

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notice to the general public.  

54) The  Division  Bench  has  also  accepted  Jindal’s  

contention  that  if  Rule  60  is  interpreted  to  render  

applications made prior to Rule 59(1) Notification non est,  

in  that  event,  it  would  make  Rule  59(2)  unworkable  

because persons will  normally  apply mining lease areas  

along with an application for relaxation under Rule 59(2).  

In view of our earlier reasons, this conclusion is clearly  

misplaced.   It  is  only  the  request  under  Rule  59(2)  for  

relaxation in respect of an area that is considered and not  

the application for grant.  It is only after the relaxation  

under  Rule  59(2)  by  the  Central  Government  of  the  

requirement of the Notification under Rule 59(1) that the  

applications could be considered for grant of mining lease.  

55) Though the learned single Judge in his order dated  

07.08.2008 quashed the communication/recommendation  

of the State Government dated 06.12.2004 proposing to  

grant  mining  lease  to  Jindal  and Kalyani,  however,  the  

learned  single  Judge  traveled  much  beyond  the  reliefs  

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sought  for  in  the  writ  petition  and  quashed  the  entire  

Notification  No.  CI.16:MMM.2003 dated 15.03.2003.   In  

our  view,  while  approving  earlier  part  of  his  order  and  

quashing  the  communication/recommendation  of  the  

State  Government  dated  06.12.2004,  the  other  

observations/directions are not warranted in the light of  

the  provisions  of  the  Act  and  the  Rules.   The  said  

observations/directions are deleted.  

Issue (i):   

Whether it is advisable to remit it to the Central Government:

56) Learned  senior  counsel  appearing  for  Jindal  and  

Kalyani  requested  that  inasmuch  as  the  Central  

Government has already given its approval under Section  

5 of the MMDR Act in their favour during the pendency of  

the writ petition, if this Court feels that fresh decision is to  

be  arrived,  the  same  may  be  remitted  to  the  Central  

Government.  In the earlier part of our judgment, we have  

pointed out that the Central Government considers only  

the materials  forwarded by the State  Government along  

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with its recommendation.  As rightly pointed out,  if  the  

recommendation  of  the  State  Government  cannot  be  

upheld  in  law,  all  consequential  orders  including  the  

subsequent approval by the Central Government are also  

liable to be quashed.   It  is  useful  to refer  Barnard vs.  

National Dock Labour Board (1953) 1 All E.R. 1113 at  

1120 para 1, McFoy vs. United Africa Co. (1961) All E.R.  

1169,  Pavani  Sridhara  Rao vs.  Govt.  of  A.P  & Ors.  

(1996)  8  SCC  298  (para  5)  and  State  of  Kerala vs.  

Puthenkavu N.S.S. Karayogam & Anr., (2001) 10 SCC  

191 (para  9).   If  the  very  same recommendation of  the  

State Government is sent back to the Central Government  

on  the  administrative  side  in  its  role  as  an  approving  

authority  under  Section  5(1)  without  setting  aside  the  

impugned  judgment,  it  is  more  likely  that  the  Central  

Government  would simply  follow its  previous order.   In  

that event, the Central Government would be influenced  

by the judgment passed by the Division Bench upholding  

the grant made in favour of Jindal and Kalyani.  Such an  

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exercise would be in the nature of post-decisional hearing  

which would be impermissible.  [Vide H.L. Trehan & Ors.  

vs. Union of India & Ors., (1989) 1 SCC 764 (paras 12 &  

13)  K.I. Shephard & Ors.  vs.  Union of India & Ors.,  

(1987)  4  SCC  431  (para  16)  and  Shekhar  Ghosh vs.  

Union of India & Anr.,  (2007) 1 SCC 331].   It  is also  

brought  to  our  notice  that  as  on  date  the  Central  

Government hears revision petitions through an Executive  

Officer and without participation of a Judicial Member.  It  

is also pointed out that the exact procedure of the revisional  

Tribunal has kept changing over the last few months.  It  is  

clear  that  it  would  not  be  an  independent  and  efficacious  

alternative forum in terms of the guidelines laid down by the  

Constitution  Bench  in  Union  of  India  vs.  R.  Gandhi,  

President,  Madras Bar Association, JT  2010 (5)  SC 553.  

As observed by three Judge Bench of this Court in Indian  

Charge Chrome Ltd.  (supra),  when there  was no valid  

recommendation by the State Government for the grant of  

lease, there cannot be any valid approval of the Central  

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Government relying on the defective recommendation.  We  

have already concluded that the recommendation of the  

State  Government  dated  06.12.2004  is  not  valid  with  

reference to the provisions of MMDR Act and the Rules,  

hence the invalid recommendation cannot be looked into  

by the Central Government.  Further, proviso to Section  

5(1) itself provides only for the Central Government either  

to grant or reject its approval to the State Government’s  

recommendation in the case of mining lease for a mineral  

such as iron ore in the First Schedule.  In our view, such  

consideration on the administrative side does not involve  

consideration of all the applicants based on their mining  

lease  applications  and  after  giving  an  opportunity  of  

hearing.  Inasmuch as the Central Government does not  

have all  relevant materials before it,  it  may not be in a  

position to substitute itself for the State Government and,  

if not, it would be proper, in fact, it would be inconsistent  

with the provisions of  the MMDR Act  and the Rules  to  

frame the issue on the administrative side of the Central  

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Government.  Even otherwise, inasmuch as we have heard  

the matter at length and we satisfy that there is a flaw in  

the  recommendation  of  the  State  Government  which  

requires  reconsideration,  we  reject  the  request  for  

remitting  the  matter  to  the  Central  Government  for  its  

decision.  

Conclusion:

57) In the light  of  the above discussion,  the impugned  

order  of  the  Division  Bench  of  the  High  Court  dated  

05.06.2009 in Writ  Appeal  No.  5084 of  2008 and allied  

matters as well as the decision of the State Government  

dated 26/27.02.2002 and the subsequent decision of the  

Central Government dated 29.07.2003 are quashed.  We  

direct the State Government to consider all  applications  

afresh in light of our interpretation of Section 11 of the Act  

and  Rules  35,  59  and  60  of  MC  Rules  and  make  a  

recommendation  to  the  Central  Government  within  a  

period of four months from the date of receipt of the copy  

of  this  judgment.   It  is  made  clear  that  we  have  not  

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expressed anything on the eligibility or merits of any of the  

parties before us and our conclusion as to the decision of  

the State Government is based on the interpretation of the  

statutory  provisions  mentioned  above  for  which  we  

adverted to certain factual details of the parties.  The State  

Government is free to consider the applications and take a  

decision  one  way  or  other  in  accordance  with  law,  as  

discussed above, within the time scheduled.  

58) All the appeals are allowed to the extent mentioned  

above.  No costs.

...…………………………………J.                 (P. SATHASIVAM)  

...…………………………………J.   (H.L. DATTU)    

NEW DELHI; SEPTEMBER 13, 2010.

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