17 September 2004
Supreme Court
Download

M/S. MEDLEY MINERALS INDIA LTD. Vs STATE OF ORISSA

Case number: C.A. No.-010106-010106 / 2003
Diary number: 18957 / 2003
Advocates: PARIJAT SINHA Vs SHANKAR DIVATE


1

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

CASE NO.: Appeal (civil)  10106 of 2003

PETITIONER: M/s Medley Minerals India Ltd.

RESPONDENT: State of Orissa & Others

DATE OF JUDGMENT: 17/09/2004

BENCH: Shivaraj V. Patil & B.N. Srikrishna

JUDGMENT: J U D G M E N T

Srikrishna, J.

       The appellant calls in question the judgment and order dated  1.8.2003 of the Division Bench of the Orissa High Court, by which a  quarry lease granted in favour of the appellant was quashed and  cancelled.         On 11.2.1993 one Jitendra Kumar Lohia was granted  quarry  lease No.192 for quarrying of decorative stones in village  Gandhargola, Tehsil Titilagarh, District Bolangir, Orissa.  The said  lease was for a period of  10 years from11.02.1993 to 10.2.2003.  The  said Jitendra Kumar Lohia and members of his family  formed and  incorporated themselves into a company under the Companies Act,  1956, in the name and style of Medley Minerals India Private Limited  \026 the appellant before us.  Jitendra Kumar Lohia is one of the  Directors of the said company. On 15th October 1998 Jitendra Kumar  Lohia applied to the competent authority under the Orissa  Minor  Mineral Concessions Rules, 1990 (hereinafter referred to as ’he  Rules’) for transfer of the lease under Rule 12 in favour of the  appellant company.  This application was not disposed of for a long  time.  Even when his above application was pending before the  competent authority on 11th October, 2002(much prior to 90 days  before the expiry of the lease), Jitendra Kumar Lohia applied to the  competent authority under Rule 9 of the Rules for renewal of the  quarry lease granted in his favour. In the said application  for renewal  of the quarry lease, it was specifically stated thus : "I have already applied for transfer of the subject  Quarry Lease in favour of M/s Medley Minerals India  Ltd. Should the said application for transfer be accepted  before the renewal of this lease, then this application  may be considered on behalf of the proposed Transferee  in the said application in the said application i.e. M/s  Medley Minerals India Ltd."

The attention of the competent authority was specifically drawn by  this application to the fact that Jitendra Kumar Lohia had already  applied for transfer of quarry lease no. 192 to the appellant company  and further, " if the same application for transfer is accepted by the  competent authority then this application for renewal may be  considered on behalf of the transferee i.e. M/s Medley Minerals India  Ltd".  On 5th February 2003, the State Government and the competent  authority acting upon the application dated 15.10.1998 filed by  Jitendra Kumar Lohia made an order transferring the existing quarry  leave no.192 from the name of Jitendra Kumar Lohia to the name of

2

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

the appellant company for the unexpired period up to 10th February,  2003.  This order specifically notes that Jitendra Kumar Lohia had  applied to the State Government on 15.10.1998 for transfer of the  existing quarry lease in favour of the appellant company and that the  proposed transferee and the transferor belong to the same category i.e.  Category IV  6-a of Rule 6 of the Rules.  The transfer of lease was  granted for the unexpired period of the lease up to 10.2.2003, inter  alia, on the following conditions: "(iii)   Sri Jitendra Kumar Lohia, the transferor and his  family members as they hold controlling interest in  the proposed transferee company will seek prior  permission from the competent authority if they wish  to transfer such controlling  interest in favour of an  outsider (i.e. other than himself  & his family  members.

(iv) The transfer lease deed will be executed between  the transferor and the transferee in presence of Mining  Officer, Bolangir in compliance of all formalities as  per law and after clearance of up to date mining dues  in respect of this quarry lease."

       The appellant company entered into a deed of indenture  with  the State Government and Jitendra Kumar Lohia  on 7.2.2003, which,  inter alia, contains the following two stipulations: "2. The transferee hereby covenant with the State  Government that from and after transfer and  assignment of the Lease the Transferee shall be  bound by and be liable to perform, observe and  confirm and be subject to all the provisions of all  the covenants, stipulations and conditions  contained in said Lease herein before recited  in  the same manner in all respect as if the lease had  been granted to the Transferee as the lessee  thereunder and he had originally executed it as  such."

viii.   The Transferee has made a fresh security  deposit of Rs.3,000/- (Rupees three  thousand only) and the Transferor hereby  agree that the deposit made by the latter be  deemed to have been made by the former.

x.      Sri Jitendra Kumar Lohia, the Transferor  and his family members hold controlling  interest in the proposed Transferee  Company, will seek prior permission from  the Competent Authority if they wish to  transfer controlling interest  in favour of an  outsider (i.e. other than himself and his  family members)."

       After executing the deed of transfer on 7.2.2003, the appellant  company by way of abundant caution made an application on the same  day for renewal of the lease in continuation of the application for  renewal already made by Jitendra Kumar Lohia on 11.10.2002.  The  State Government and the competent authority not having made any  order for renewal of the quarry lease in favour of the appellant before  the date of expiry i.e. 10.2.2003, it amounted to a deemed refusal under  the Rules. The appellant applied for reconsideration of such deemed  refusal of application for renewal of quarry lease under the proviso to  sub-rule (2) of Rule 9 by his application dated 7.2.2003.  In the

3

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

application for renewal of quarry lease in Form E, the appellant  specifically averred: " Any other particulars which the applicant  wishes  to furnish.

(a)     The application for this renewal  had already been filed by Sri  Jitendra Kumar Lohia on  11.10.2002 before the subject  Quarry Lease had been transferred  in our favour.  Therefore, this  application may be treated in  continuation of his application  dated 11.10.2003 for the same  Quarry Lease.

(b)     We have set up a Cutting and  Polishing Unit in industrial Estate  of Titilagarh, documents in support  of which are enclosed separately."

       The application of the appellant was routed through the Mining  Officer, Bolangir Circle to the Director of Mines, Orissa.  The  application was recommended for favorable consideration by the  Mining Officer who also stated: "The original lessee Shri J.K. Lohia had applied  for R.Q.L. on 11.10.2002, i.e. within the time   prescribed for applying for renewal under OMMC  Rules 1990. But subsequently as a result of earlier  application the  Q.L. was transferred in favour of  M/s Medley Minerals India Ltd. Which has been  executed on 7.2.03.  Consequently, the transferee  company has also additionally applied for R.Q.L.  in continuation of the earlier R.Q.L. application of  the transferor. Therefore, the stipulation of  O.M.M.C. Rules to apply for R.Q.L. prior to 90  days before expiry of the Q.L. may be treated as  complied."

       In his appeal to the State Government for reconsideration under  the proviso to Rule 9(2) the appellant drew the attention of the State   Government to the facts and circumstances of the case under which  the transfer order itself was made on 7.2.2003, although the  transferred lease itself was to expire on 10.2.2003.  It was also pointed  out that, in the circumstances, it was impossible for the appellant to  apply for renewal of the transferred lease before a period of 90 days  before the date of expiry.   On 22.3.2003 the State Government made an order granting  renewal of the quarry lease for decorative stone for a further period of  10 years from 10.2.2003.  The order makes it clear that the order had  been made on the application dated 7.2.2003 made by the appellant   for renewal of the lease and also to the fact that the appellant company  had accepted the terms and conditions under which the renewal was  proposed.  The order granted renewal of quarry lease "for a period of  10 years subject to the conditions laid down in the State Government  letter  No. 5423 dated 22.5.2003".  

On 31.5.2003 a Deed of Indenture for renewal of quarry lease  was   executed between the State Government and the appellant.  The  appellant thereafter took possession of the leased area and started its  quarrying operations, which fact was intimated to the  Mining Officer  by a letter dated 2.6.2003.   

The fourth respondent, a rival business company aspiring for a

4

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

quarry lease of the same type, filed a writ petition before the High  Court challenging the order of the State Government dated 22.5.2003  by which the quarry lease for decorative stones over the scheduled  area had been renewed in favour of the appellant and also seeking a  direction to the  State Government to consider  grant of a quarry lease  in its own favour.  The High Court by its impugned judgment took the  view that though there had been no contravention of the provision to  Rule 9(3)  of the Rules, there has been contravention of Rule 9(2),   consequently allowed the writ petition and quashed the renewal of the  quarry lease granted in favour of the appellant.  Being aggrieved, the appellant is in appeal before us.  Mr. Ramamoorthy, learned counsel for the appellant, urged that  a conspectus of the facts and circumstances clearly indicate that  Jitendra Kumar Lohia, who held the quarry lease in his favour, had  already applied for its renewal on 11.10.2002, much before the  prescribed limit of 90 days before the expiry of the lease as required  under Rule 9.  It is also clear that even at that time the application for  transfer of the quarry lease was pending with the State Government.  The State Government’s order  was  made on 5th February 2003 and  the transfer deed was executed on 7th February, 2003. The transfer of  lease was only for the unexpired period i.e. from 7.2.2003 to  10.2.2003.  Thus it was impossible for the appellant to have complied  with the requirements of Rule 9(2), namely, to make an application in  Form E at least 90 days before the expiry of the lease.  He also drew  our attention to Rule 31 under which the State Government is  empowered "in the interest of mineral development, to relax the  provisions of these rules  in deserving cases in such manner as they  deem proper". Learned counsel contended that in the circumstances  the State Government was fully justified in relaxing the rules and  treating the application dated 7.2.2003 as continuation of the earlier  application of Jitendra Kumar Lohia for renewal of the lease. Thus,  according to the learned counsel,  the High Court was not justified in  quashing the renewal of the quarry lease in favour of the appellant.  The learned counsel for the State Government supported the  view canvassed by the appellant’s counsel. The learned counsel for the fourth respondent contended that  there was no such relaxation at all as evident from the impugned  order.  He pointed out from the recital in the impugned order that what  had been relaxed was only "prescribed time limit for disposal of the  application as provided in proviso to sub-rule (3) of Rule 6 of the  OOMC Rules" in exercise of the State Government’s power of  relaxation     under Rule 31. The learned counsel pointed out that Rule  6(3) was only the rule which laid down the period within which the  application by the competent authority is required to be disposed of.   As a matter of fact, sub-rule (3) of Rule 6 was omitted w.e.f. 8.2.1994  and was not even in existence on the date on which the State  Government made the impugned order.  He also alleged that   application for renewal was granted contrary to the provisions of Rule  9 and was vitiated by malafides.  We are unable to accept the contention of the learned counsel  for the 4th respondent that the action of the State Government was  vitiated by malafides.  It is trite that plea of malafides has to be  specific and demonstrable. Not only this, but the person against whom  the malafides are alleged must be made a party to the proceedings and  given reasonable opportunity  of hearing. We find no such attempt  made in the writ petition before the High Court. At the highest even  putting the most liberal construction on the writ petition, what was  alleged was contravention of the Rules and, consequently, legal  malafides and nothing beyond that. The argument of malafides must  therefore fail. Next, it is urged by the learned counsel for the  respondent that it is an elementary principle of law that an individual  shareholder of a company cannot be considered as equivalent to the   company, for company has a distinct legal personality. Consequently,  he contends that the application made by Jitendra Kumar Lohia could  not have enured  to the benefit of the appellant company.  According

5

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

to him, Jitendra Kumar Lohia and the appellant being two distinct  legal entities, the assumption of the State Government, that the  application for renewal of the quarry lease could be treated as a  continuation of Jitendra Kumar Lohia’s application, was erroneous  and unsustainable in law.  We are unable to accept this contention.   We have highlighted as to how the State Government and Jitendra  Kumar Lohia treated the application for renewal of quarry lease made  by Jitendra Kumar Lohia as enuring for the benefit of the appellant  company. If the State Government had treated them to be separate  legal entities, there was no question of imposing a condition on the  appellant that the transfer of the lease  was granted on the specific  condition that Jitendra Kumar Lohia and his family members hold the  controlling interest in the company.  The facts and circumstances belie  this contention of the learned counsel for the fourth respondent. It  cannot be accepted. Learned counsel  for the fourth respondent took us through the  provisions of Rule 9 and contended that there is contravention of the  proviso to Rule 9(3).  In fact, we find no such contention urged or  accepted before the High Court as evidenced from its judgment.  On  the contrary, the judgment of the High Court clearly holds that there  was no contravention of the proviso to Rule 9(3).  The writ petition  succeeded only on the sole ground that there was contravention of  Rule 9(2) inasmuch as the application of a renewal made by the  appellant company was not made at least 90 days before the expiry of  the lease.  Barring this contention,  nothing else seems  to have  appealed to the High Court.  The contention, in our view, has no substance for two reasons.  First, the State Government was justified in treating the appellant’s  application as continuation of the application for renewal of the lease  made by Jitendra Kumar Lohia. Secondly, the State Government had  enough powers to relax the provisions of the Rules "in the interest of  mineral development in deserving cases in such manner  as they deem  proper".  True, that the order of the State Government quotes a wrong  rule for relaxation, but, that, in our view hardly  matters.  As long as  the State Government  had the power of relaxation, then irrespective  of any recitation, it must construed that the State Government has in  its discretion  made the order by exercising its power of relaxation.   Looked at from this point of view, we find no substance in the  contention. In the result, we are of the opinion that the High Court erred in  quashing the order No.5507/IV(E)(DS)SM 4/2003 dated 22nd May  2003, by which the quarry lease had been renewed in favour of the  appellant company.   Hence, this appeal is allowed.  The impugned judgment of the  High Court is set aside and the State Government’s order dated  22.5.2003 is restored. No order as to costs.