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PETITIONER: ASSAM SILLIMANITE LTD. AND ANR.

       Vs.

RESPONDENT: UNION OF INDIA AND ORS.

DATE OF JUDGMENT16/03/1990

BENCH: RANGNATHAN, S. BENCH: RANGNATHAN, S. AHMADI, A.M. (J)

CITATION:  1990 AIR 1417            1990 SCR  (1) 983  1990 SCC  (3) 182        JT 1990 (2)   248  1990 SCALE  (1)545

ACT:     Mines  and  Minerals (Regulation and  Development)  Act, 1951: Section 4A--Termination of mining lease--Necessity for giving of opportunity to holder.

HEADNOTE:     The petitioner company had obtained three mining  leases from  the Government of Assam to extract sillimanite in  the Khasi and Jaintia Hills District, for a period of 15 years.     Negotiations  between the Union of India and  the  peti- tioner  for  having  the mining leases  transferred  to  the public  sector  companies, Hindustan Steel Ltd.  and  Bokaro Steel  Ltd., having failed, the Government of Meghalaya,  on the request of the Central Government, passed an order dated 7th December, 1972 prematurely terminating the mining leases in terms of section 4-A(1) of the Mines and Minerals  (Regu- lation  & Development) Act, 1957 as amended by the  Mines  & Minerals  (Regulation and Development) Amendment Act,  1972. Thereupon, the petitioner company filed the present petition under Article 32 of the Constitution.     On behalf of the petitioner it was inter alia  contended that since no notice had been issued by the State Government before  terminating the leases prematurely, it  amounted  to denial of natural justice thus vitiating the order of termi- nation.     State  of Haryana v. Ram Kishan & Ors., [1988] 3  S.C.C. 416, relied upon.     It  was  further  submitted that having  regard  to  the comparatively long periods of leases and the lapse of  time, the petitioner would not pray for being put back in  posses- sion  of  the leased premises but would be content  with  an award  for compensation for wrongful premature  termination, to be determined by any arbitrator appointed by the Court. On  behalf  of  the respondents it was  submitted  that  the decision of 984 this  Court in Ram Kishan’s case was  distinguishable;  that the  rules of natural justice could be statutorily  excluded either expressly or by necessary implication; that grant  of an  opportunity to the lessee would be  totally  meaningless and  futile;  that  the object and purpose  of  the  statute

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clearly  excluded  the provision of an  opportunity  to  the lessee  before termination of the leases; that amendment  of section 4-A of 1986 specifically providing for an opportuni- ty  of  hearing  became necessary because  the  grounds  for premature  termination set out in the new subsection (1)  of section 4-A were made wider and more comprehensive; that  in the writ petition the only prayer made was for quashing  the order of premature termination; and that it was open to  the petitioner to file a suit or take other appropriate remedies for obtaining compensation in respect of the unlawful termi- nation.     The Barium Chemicals Ltd. and Anr. v. Company Law  Board and  Others, [1966] Supp. S.C.R. 311 and R.S. Dass v.  Union of India and Others, [1985] Supp. S.C.C. 617, referred to, Disposing of the writ petition, this Court,     HELD: (1) The order dated 7.12.1972 passed under section 4A of the Act whereby the leases were terminated prematurely was  null and void as it violated the principles of  natural justice and was passed without giving an opportunity to  the lessee of being heard.     State of Haryana v. Ram Kishan & Ors., [1988] 3 SCC 416, followed. Dharam  Veer  v. Union of India, AIR (1989) Delhi  227,  re- ferred to.     (2) Though it is true that the scope of section 4-A  (1) has been widened, the insertion of sub-section 4-A(3) clear- ly  reflects  a statutory intention that an  opportunity  of hearing  must  be given before the order of  termination  is passed,  presumably  as  such an order  widely  effects  the rights of the lessees. [992A]     (3)  It is difficult to accept the contention  that  be- cause an order under section 4-A is to be passed in order to give effect to a policy of the Government, it is not  neces- sary  or  useful to provide the lessees,  whose  leases  are about to be terminated, an opportunity of hearing. [992D] (4)  It is true that the petitioner could have filed a  suit or taken 985 other  appropriate  remedies for obtaining  compensation  in respect  of the unlawful termination. But, in the facts  and circumstances of this case, it is not fair to ask the  peti- tioner  to go hack and file a suit for compensation or  dam- ages  which may be barred by limitation. The  writ  petition was  filed  by the petitioner company in 1973 and  has  been pending  in this Court for about 17 years. After a lapse  of such  a long time the proper course is to adopt some  method for deciding the quantum of compensation and damages,  which can  at once be simple and expeditious and which will  avoid further unnecessary litigation. [992G-H; 993A]     (5)  The request made on behalf of the  petitioner  that the matter may be referred to arbitration is a fair one  and indeed  this  course is also not seriously resisted  by  the respondents.  The issue of compensation/ damages is  accord- ingly referred to Arbitration. [993B]     (6) Having regard to the circumstances of the case,  the compensation/damages  should  be restricted to a  period  of five  years  from the date of termination of the  leases  or upto the date of expiry of the original lease deeds whichev- er  is less and not for the entire unexpired period  of  all the leases. [993C]

JUDGMENT: ORIGINAL JURISDICTION: Writ Petition No. 105 of 1973.

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(Under Article 32 of the Constitution of India)     Kapil  Sibal,  A.K. Sen, P.C. Jain, Ranbir  Chandra,  A. Minocha and Ms. Indu Goswami for the Petitioners.     Kuldip  Singh, Additional Solicitor General, M.M.  Abdul Khadar, L.N. Sinha, V.C. Mahajan, R.B. Dattar, A.K. Gangu|i, R.B.  Misra, Ms. A. Subhashini, D.N. Mukharjee, R.P.  Gupta, T.V.S.N.  Chart,  Mrs. Binu Tamta, Mrs. B. Sunita  Rao,  Ms. Manjula Gupta and Badrinath for the Respondents. The Judgment of the Court was delivered by     RANGANATHAN,  J. The petitioner company obtained  mining leases  from the Government of Assam to extract  sillimanite in the Khasi and Jaintia Hills District. In pursuance there- of, three lease deeds were executed by the State  Government in  favour  of the petitioner. The first was  a  lease  deed dated  25.4.1952 for a period of 15 years in respect  of  an area  of  129.60  hectares at  Lalmati.  The  second,  dated 10.4.1963,  was  for a period of 15 years in respect  of  an area of 986 777.60 hectares at Nongmawait. The third one dated  8.6.1967 was  for  a period of 15 years and covered an  area  of  363 hectares  at Wamsophi. The three lease deeds were to  expire on  26.5.77, 9.4.78 and 7.6.82 respectively but there was  a clause for further renewal.     The petitioner company had also established a refractory Plant  in 1961 near Ramgarh in District Hazaribagh.  It  ap- pears, however, that petitioner faced a number of  difficul- ties  in operating the refractory plant and  was  explaining its difficulties to the State of Maghalaya which was  formed in 1970.     Between  1970 to 1972, the Union of India,  through  its public  sector  companies, Hindustan Steel Ltd.  and  Bokaro Steel  Ltd. negotiated with the petitioner for the  purchase of  its  refractory  plant and also for  having  the  mining leases transferred to them. Though the refractory plant  was not  functioning properly and was on the verge  of  closure, the petitioner was not willing to transfer its mining leases to the public sector companies but was willing to supply the required quantity of sillimanite to the Bakaro Steel  Plant. It  is  also stated that some negotiations took place  as  a result  of which the petitioner was planning to re-open  the factory  on 6.11. 1972. However, in the meantime on the  2nd of  November,  1972, the Central Government  took  over  the management  of the-refractory plant under section  18-AA  of the  Industries Development & Regulation Act, 1951.  Posses- sion  of the plant as well as its management was also  taken over by the Hindustan Steel Ltd. on the same day. This  take over was challenged by the petitioner company but its  chal- lenge  was  repelled by the Delhi High Court and  a  Special Leave Petition was filed, which is pending in this Court. We are not concerned with this issue in the present case.     On  12.9.1972,  the Mines and Minerals  (Regulation  and Development)  Act, 1951, was amended by Act No. 56 of  1972. By  this amendment, section 4-A was introduced in  the  Act, which reads as follows: "(1)  Where the Central Government, after consultation  with the  State Government is of opinion that it is expedient  in the interest of regulation of mines and mineral  development so  to  do  it may request the State Government  to  make  a premature  termination of a Mining Lease in respect  of  any mineral other than a minor mineral, and, on receipt of  such request,  the State Government shall make an order making  a premature termination of such mining lease and 987 granting  a fresh mining lease in favour of such  Government

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Company or Corporation owned or controlled by Government  as it may think fit. (2) Where the State Government, after consultation with  the Central  Government, is of opinion that it is  expedient  in the interest of regulation of mines and mineral  development so to do, it may, be an order, make premature termination of a  mining lease in respect of any minor mineral and grant  a fresh  lease  in respect of such mineral in favour  of  such Government  Company or Co-operation owned or  controlled  by Government as it may think fit." This amendment came into effect in September 1972.     At this juncture it may be mentioned that Act 37 of 1986 has further amended the 1951 Act and substituted section  4A by  the following section, which insofar as it  is  relevant for our present purposes reads as follows: "4A  (1)  Where the Central Government,  after  consultation with the State Government, is of opinion that it is  expedi- ent  in  the  interest of regulation of  mines  and  mineral development, preservation of natural environment, control of floods,  prevention  ’of pollution, or to  avoid  danger  to public  health  or  communications or to  ensure  safety  of buildings, monuments or other structures or for conservation of mineral resources or for maintaining safety in the  mines or  for such other purposes, as the Central  Government  may deem  fit,  it may request the State Government  to  make  a premature  termination  of a prospecting licence  or  mining lease  in respect of any mineral other than a minor  mineral in  any  area or part thereof, and, on receipt of  such  re- quest,  the  State Government shall make an order  making  a premature termination of such prospecting licence or  mining lease with respect to the area or any part thereof. (2) Where the State Government, after consultation with  the Central  Government, is of opinion that it is  expedient  in the interest of regulation of mines and mineral development, preservation  of  natural environment,  control  of  floods, prevention of pollution or to avoid danger to public  health or communications or to ensure safety’of buildings, 988 monuments or other structures or for such other purposes, as the  State Government may deem fit, it may, by an order,  in respect of any minor mineral, make premature termination  of a  prospecting licence or mining lease with respect  to  the area or any part thereof covered by such licence or lease:           Provided that the State Government may, after  the premature  termination  of a prospecting licence  or  mining lease under sub-section (1) or sub-section (2), as the  case may  be,  grant  a prospecting licenee or  mining  lease  in favour  of such Government company or corporation  owned  or controlled by Government as it may think fit. ’(3) No order making a premature termination of a  prospect- ing  licence  or  mining lease shall be  made  except  after giving  the  holder  of the licence or  lease  a  reasonable opportunity of being heard.     In pursuance of the 1972 amendment, the State Government passed an order terminating the mining leases granted to the petitioner  and granted fresh leases over the same areas  in favour  of M/s. Hindustan Steel Ltd., a Government  company, fully  owned by the Central Government. The order,  made  in the name of the Governor, reads as follows: Dated, Shillong 7th Dec., 1972. No. MG. 133/72: Whereas the Central Govt., having  consulted the  Govt. of Meghalaya, is of opinion that it is  expedient in  the interest of mineral regulation and development  that the  mining  leases of sillimanite mentioned below  held  by M/s. Assam Sillimanite Ltd. (having its Registered Office at

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13  A.T. Road, Gauhati) in Meghalaya are  terminated  forth- with;           And, whereas, in terms of Sec. 4A of the Mines and Minerals (Regulation & Development) Act, 1957, as amended by the  Mines and Minerals (Regulation &  Development)  Amended Act,  1972,  the Central Govt. has requested  the  Govt.  of Meghalaya  to  make a premature . termination  of  the  said mining leases held by M/s. Assam Sillimanite Ltd.; 989           Now, therefore, the Govt. of Meghalaya in exercise of  the  powers  conferred by Sec. 4A(1) of  the  Mines  and Minerals (Regulation & Development) Act, 1957, as amended by the  Mines & Minerals (Regulation &  Development)  Amendment Act, 1972 hereby terminates prematurely the mining leases of sillimanite  mentioned below held by M/s. Assam  Sillimanite Ltd.  with immediate effect and grants fresh  mining  leases over the same areas in favour of M/s. Hindustan Steel  Ltd., a Government Company, fully owned by the Central Government. -----------------------------------------------------------      Lease   Locality    Area in   Period of  Date of      No.                 hecteres  Lease      expiry -----------------------------------------------------------       5.      Lalmati     129.60    15 years  24.4.1977       6.      Nongmawait  777.60     -do-      9.4.1978       7.      Wamsophi    363.00     -do-     7.6.1982" The  petitioner  filed a writ petition in the  Gauhati  High Court against the order dated 7.12. 1972 but it was not able to  obtain  any ex ’parte interim orders. The  petition  was withdrawn from the Gauhati High Court and the present  peti- tion under Article 32 has been filed in this Court. On  5.3. 1973,  this  Court issued rule nisi and  also  directed  the maintenance  of the status quo pending notice. It,  however, appears  that Hindustan Steel Ltd. had taken  possession  of the  properties  in question and the interim stay  was  also vacated  on  20th of January, 1987.  The  present  position, therefore,  is that the mining leases have been  granted  to the  Hindustan Steel Ltd. and they have also been  operating the mines for the past several years.     Though several objections have been raised to the action of  the State Government in the writ petition,  including  a challenge  to  the  validity of section  4A,  the  arguments before  us  were restricted by Shri P.C. Jain  to  only  two aspects.  He submitted that, admittedly, no notice had  been issued by the State Government before terminating the leases prematurely.  This, according to him, amounts to  denial  of natural justice and vitiates the order dated 7.12. 1972. The second  contention  is that the order does  not  fulfil  the requirements specified in section 4-A justifying the  prema- ture termination of leases in pursuance thereof. 990     This writ petition came up for hearing on earlier  occa- sions  but  it was adjourned from time to time as  the  same issue  was  pending decision in this Court in  the  case  of State  of Haryana v. Ram Kishan & Ors., Civil  Appeals  Nos. 1472-77  of 1987. Our task in the present writ petition  has been considerably simplified because the above civil appeals have  been disposed of by this Court by its  judgment  dated 6th  May,  1988, which is reported in [1988] 3  S.C.C.  416. Shri  P.C. Jain, learned counsel for the petitioner  company submits that the first point raised by him has been squarely decided in his favour in the above case and that, therefore, he  is  entitled to succeed in the  present  writ  petition. Learned  counsel  also referred to a decision of  the  Delhi High  Court reported in Dharam Veer v. Union of  India,  AIR 1989  Delhi  227,  which has followed the  decision  in  Ram

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Kishan’s  case. In that case, a similar order  of  premature termination was set aside by the High Court and the  lessees were  directed  to be put back in possession of  the  leased premises which had been taken away from them in pursuance of their  unlawful order. Learned counsel submits that, in  the present case, having regard to the comparatively long  peri- ods  of leases and the lapse of time, be would not pray  for the  petitioner being put back in possession of  the  leased premises  but he contends that the least that could be  done is  to  award compensation to the  petitioner  company  for, (what  has  now to be held to be),  the  wrongful  premature termination of the leases. He submits that the petitioner is willing to have this aspect of the matter referred to  arbi- tration by any arbitrator appointed by this Court.     On the other hand, Shri R.B. Datar, learned counsel  for the Union of India submits that, in the State of Haryana  v. Ram  Kishan  and Others, [1988] 3 S.C.C.  416,  the  Central Government  had expressed its willingness to reconsider  the matter after hearing the parties concerned and that,  there- fore,  the  decision of this Court in that case  is  distin- guishable. He sought to contend, on the strength of observa- tions  made by this Court in The Barium Chemicals  Ltd.  and Anr.  v. Company Law Board and Others, [1966] Suppl.  S.C.R. 311  as well as the decision in R.S. Dass v. Union of  India and  Others, [1985] Suppl. S.C.C. 617 that rules of  natural justice  can be statutorily excluded either expressly or  by necessary implication. In the present case, he submits  that it  became expedient in the interest of regulation of  mines and  mineral development, to have the mining  operations  in respect  of  raw materials necessary for the  production  of iron  and steel entrusted to public sector companies  and  a policy decision to this effect had been taken by the Govern- ment. In this context, he submits, the grant of an  opportu- nity to the lessee would be totally meaningless and  futile. He 991 says  that  the object and purpose of  the  statute  clearly excludes  the  provision of an opportunity  to  the  lessees before termination of the leases. If at all, he submits,  it will be open to a lessee, whose lease is prematurely  termi- nated under section 4-A, to challenge the order of premature termination, after it was passed, on the ground that it  did not  satisfy the conditions set out in section 4-A but  that the section should not be construed as envisaging a  hearing of  the lessees before an order of premature termination  is made.  Referring  to the amendment of section 4-A  in  1986, which  specifically provides for an opportunity  of  hearing under  sub-section (3), Shri Datar says that this  provision became necessary because the grounds for premature  termina- tion set out in the new sub-section (1) of section 4-A  were made  wider and made more comprehensive. Under the new  sub- section, premature termination of leases was permissible  in various other circumstances, such as: preservation of  natu- ral environment, control of floods, prevention of pollution, avoidance  of  danger to public  health  or  communications, ensuring of safety of buildings, monuments and other  struc- tures,  conservation  of mineral resources,  maintenance  of safety  in  mines  and such other purposes  as  the  Central Government  may deem fit. These were purposes in respect  of which  an  opportunity  of hearing to the  lessee  would  be really needed and helpful but that, in the context of earli- er sub-section, which was much narrower, no such opportunity of hearing was at all contemplated.     We  do not propose to reconsider this matter as, in  our opinion, the contention raised by Shri P.C. Jain is directly

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and squarely concluded by the decision in Ram Kishan’s  case (supra).  It is no doubt true that in that case the  Central Government  appears to have been willing to reheat the  par- ties  but  the  court did not proceed on the  basis  of  any concession.  The court discussed the provisions  of  section 4-A at great length and held that there was no suggestion in the section to deny the right of the affected persons to  be heard and that the section must be interpreted to imply that the person who may be affected by such a decision should  be afforded  an  opportunity to prove that  the  proposed  step would not advance the interest of mines and mineral develop- ment.  Not to do so, it was held, would be violative of  the principles of natural justice. The court concluded that  the lessee-respondents were entitled to be heard before a  deci- sion  to  prematurely terminate their leases was  taken  and that,  since  it was not done, the High Court was  right  in quashing the order passed under section 4-A.     In our opinion, the decision in Ram Kishan’s case  fully covers  the  present case and should be followed by  us.  In fact, we think that the 992 subsequent  amendment in 1986 lends support to the  plea  of the petitioners. Though it is true that the scope of section 4-A  (1) has been widened, the insertion of sub-section  (3) clearly  reflects a statutory intention that an  opportunity of hearing must be given before the order of termination  is passed,  presumably  as  such an order  widely  affects  the rights  of the lessees. We are not able to agree  with  Shri Datar  that under section 4-A, as it stood before  1986,  no useful purpose would have been served by the giving of  such an opportunity. Several situations and circumstances can  be conceived  of  where, given an opportunity of  hearing,  the lessee  may be able to either dissuade the  Government  from terminating  the  leases prematurely or  in  persuading  the government  to do it subject to certain safeguards  for  its benefit.  For example, the lessee may be able to  show  that the  public  sector corporation to whom it  is  proposed  to entrust  the  working  of the mines is  not  yet  adequately equipped  to  exploit the mines and that, atleast  for  some more  time  the status quo should continue;  or,  again,  if there is only a short period before the leases are to expire in the normal course, the lessee may be able to persuade the Government  that  no  great advantage would  be  derived  by premature termination of the lease. These are only illustra- tive. Several such other situations can be thought of. It is very  difficult,  therefore, to accept the  contention  that because an order under section 4-A is to be passed in  order to  give  effect to a policy of the Government,  it  is  not necessary or useful to provide the lessees, whose leases are about  to  be  terminated, an opportunity  of  hearing.  We, therefore, hold, respectfully following the decision in  Ram Kishan’s  case (supra), that the order passed under  section 4-A  dated  7.12.1972 is null and void as  it  violated  the principles of natural justice and was passed without  giving an opportunity to the lessees of being heard.     The next question is regarding the relief to be  granted to  the  petitioner.  Shri Datar submits that  in  the  writ petition the only prayer made by the petitioners is for  the quashing  of the order dated 7.12. 1972 and that no  further claim has been made in the writ petition. He submits that if the  petitioners  are  aggrieved because  of  the  premature termination of the leases, it is open to them to file a suit or  take other appropriate remedies for obtaining  compensa- tion in respect of the unlawful termination. We do not think that this a fair course to be adopted in this case. The writ

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petition was filed by the petitioner company as early as  in February  1973 and has been pending in this Court for  about 17 years. It is true that the petitioner could have filed  a suit  for  the  same purpose with a  prayer  for  additional relief  by  way of compensation or damages. But  we  do  not think that it should now be 993 asked to go back to file a suit for compensation or  damages which may be barred by limitation. After the lapse of such a long  time,  in our opinion, the proper course is  to  adopt some method for deciding the quantum of relief that could be granted  to the petitioner by way of compensation  and  dam- ages, which can at once be simple and expeditious and  which will avoid further unnecessary litigation. We think that the request  of the learned counsel that the matter may  be  re- ferred  to arbitration is a fair one and indeed this  course is also not seriously resisted by the respondents. The short question that remains to be decided is whether the petition- ers  have suffered any damages as a result of the  premature termination  of the three leases in their favour  either  in the  shape of loss of profits for the unexpired  periods  of the  leases or in any other material respect.  We,  however, direct that, having regard to the circumstances of the case, the compensation/damages should be restricted to a period of five  years  from the date of termination of the  leases  or upto the date of expiry of the original lease deeds referred to above whichever is less and not for the entire  unexpired period  of all the leases. We refer this issue  to  arbitra- tion.     Shri Justice S. Natarajan, retired Judge of this  Court, is  appointed as Arbitrator to decide the above  issue.  The Union  of  India  has promised to place the  services  of  a mining engineer/expert at the disposal of the arbitrator  to assist him on the technical aspects of the matter. The  name of  the  nominee should be communicated  to  the  arbitrator within  four weeks from today. It will be open to the  arbi- trator  to  avail himself of the services of  such  nominee. Parties  may settle the terms of arbitration with the  arbi- trator.  The  company and Union of  India  should,  however, deposit  Rs. 10,000 each with the arbitrator as soon as  the terms  are  settled to enable him to start  the  proceedings without  delay. The Arbitrator may enter upon the  reference within four weeks of the date of communication of this order to him. He may make his award within a period of four months thereafter.  He will not be obliged to give reasons for  his conclusions. A copy of this order may be sent to the learned Arbitrator  by the Registry. The writ petitions disposed  of in  the above terms. In the circumstances, we make no  order as to costs. R.S.S.                                              Petition disposed of. 994