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CASE NO.: Appeal (civil)  4702 of 2006

PETITIONER: M/s. Pallava Granite Industries (India) Pvt. Ltd.

RESPONDENT: Union of India and Others

DATE OF JUDGMENT: 07/11/2006

BENCH: ARIJIT PASAYAT & S. H. KAPADIA

JUDGMENT: J U D G M E N T (Arising out of S. L.P.(C) No.15690-15695 of 2004)

WITH [C.A. Nos 4703 /2006@ SLP (C) Nos.16109-16113/2004,  C.A. Nos. 4704 /2006@ SLP (C) Nos.18842-18844/2004,  C.A. No.  4705 /2006@ SLP (C) No.20281 of 2004,          C.A. No.  4707 /2006@  SLP (C) No.9670 of 2005,  C.A. Nos. 4706 /2006@ SLP (C) Nos.21905-21908/2004,  C.A. Nos. 4708 /2006@ SLP (C) Nos.20230-20232/2005,  C.A. Nos. 4709 /2006@ SLP (C) Nos.20225-20228/2005,  and Contempt Petition (c) No.157/2006 in SLP (c)  No.20225-20228/2005]

KAPADIA, J.

Leave granted in Special Leave Petitions. In this batch of civil appeals by grant of special  leave to appeal two questions arise for determination,  namely, whether the G.O.No.1290 dated 27.8.91  constitutes a decision to grant or whether it constitutes a  grant of mining lease per se and secondly whether the  decision to revoke the said G.O. was actuated by mala  fides in order to deprive the appellants of their mining  rights.

For the sake of clarity we reproduce herein the facts  in the case concerning M/s. Rita Industrial Corporation  Ltd. __ Appellant in C.A. Nos.               of 2006 @ S.L.P.  (C) Nos.20225-28 of 2005,  they are as follows:

An area admeasuring  Acs. 86.50 in Survey no.55/5  of Village Rajupalem-Lakshmipuram, Cheemakurthy  Mandal, Prakasam District, Andhra Pradesh, being  agricultural lands vested as surplus lands under Section  11 of the Andhra Pradesh Land Reforms (Ceiling on  Agricultural Holdings) Act, 1973 (for short, "the 1973  Act") in the State Government.   These lands were  surrendered by the land holders under the said 1973 Act  to the State Government.  Later on, it was realised that  these lands had galaxy granites and, therefore, proposals  were made by the Collector, District Prakasam, the  Commissioner of Land Reforms and the Director of Mines  and Geology to lease out the said area for mining  purposes.  By G.O.No.1290 dated 27.8.91, the State  Government accepted the above proposals and decided to  appropriate by leasing out the lands for mining under  Section 14 (6) of the 1973 Act; that out of the total area

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of the surrendered lands admeasuring Acs. 86.50, an  area admeasuring Acs. 60 be leased out to the four  appellants, namely, M/s. Rita Industrial Corporation  Ltd., M/s. Upendra Granites, M/s. Acropolis Granites  Ltd. and M/s. Pallava Granite Industries Ltd. and that  each of the appellant was to be given Ac.15 for mining  purposes.  Under the said G.O.No.1290, the State  Government stated that Acs. 15 each be leased out to the  above four firms on the terms and conditions in  G.O.No.876 dated 3.6.89 subject to the modification that  the lease shall be for 10 years and the lessees shall pay  Rs.600/- per acre, per annum for the first five years and  Rs.900/- per acre, per annum for the remaining five  years.  By the said G.O. the Collector, District Prakasam,  was requested to take further action by making proper  allotment of land keeping in view the principle of  contiguity.   

The said G.O.No.1290 was challenged in a PIL.   When the notice of the PIL was received by the State  Government, G.O.No.1361 dated 11.9.91 came to be  issued by which the earlier G.O.No.1290, stood  cancelled.  This cancellation was challenged by M/s. Rita  Industrial Corporation Ltd. vide Writ Petition No.12386 of  1991 in the High Court.

By judgment and order dated 18.10.96, the learned  Single Judge of the High Court held that the cancellation  of G.O.No.1290 was ab initio void for want of hearing and  reasons in support of the cancellation.  By the said  judgment of the learned Single Judge, the District  Collector was directed to execute the surface lease in  favour of M/s. Rita Industrial Corporation Ltd. in terms  of G.O.No.1290.  By the said judgment the Director of  Mines and Geology was also asked to dispose of the  application made by M/s. Rita Industrial Corporation  Ltd. for mining lease in accordance with law.    Being aggrieved by the judgment, the State  Government preferred Writ Appeal No.672 of 1997.   Pending the said writ appeal, the Collector, District  Prakasam, wrote to the Director of Mines and Geology  stating that in view of the judgment dated 18.10.96 he  had no objection to the grant of mining lease to the  extent of Acs.15 in terms of G.O.No.1290.  Similarly, by  letter dated 18.2.97 addressed by Deputy Director of  Mines and Geology to Director of Mines and Geology, a  request was made to consider the mining lease  application filed by M/s. Rita Industrial Corporation Ltd.  in terms of the judgment of the learned single judge  dated 18.10.96.  In the said letter, the Dy. Director has  stated that since the Collector, District Prakasam, had  allotted the land lease to M/s. Rita Industrial  Corporation Ltd. there could be no objection to grant  quarry lease over an extent of Acs.15 in Survey no.55/5.   Along with the said letter dated 18.2.97 an inspection  report was enclosed.  This inspection report was prepared  by Dy. Director of Mines and Geology.  In the said  inspection report it was stated that in terms of the  judgment of the learned Single Judge dated 18.10.96 the  Collector had handed over the lands to M/s. Rita  Industrial Corporation Ltd.; that the Collector had agreed  to grant the land lease and, therefore, till the judgment  dated 18.10.96 remains in force, M/s. Rita Industrial  Corporation Ltd. had a right to obtain a mining lease.  

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Accordingly, the Dy. Director requested the Director of  Mines and Geology to take a decision on the quarry  application of M/s. Rita Industrial Corporation Ltd. at  the earliest.  A survey report was also annexed with the  letter dated 18.2.97 in which it was recited that the Dist.  Collector had given N.O.C. for the grant of quarry lease  and, therefore, the application made by M/s. Rita  Industrial Corporation Ltd. for grant of quarry lease may  be disposed at the earliest.

By judgment and order dated 27.6.97, the Division  Bench disposed of the above-mentioned Writ Appeal  No.672 of 1997 stating that there was no infirmity in the  judgment of the learned Single Judge dated 18.10.96;  that, there was violation of the rules of natural justice  inasmuch as the decision to cancel G.O.No.1290 was  taken without hearing and without giving reasons and  was therefore void and accordingly the writ appeal was  dismissed.  However, it was made clear by the Division  Bench that its judgment and order dated 27.6.97 will not  prevent the Government from taking steps to cancel  G.O.1290, if such right exists in the Government, in  accordance with law.

Accordingly, a show cause notice was issued by the  State Government on 21.2.98 to the appellants.  That  show cause notice was challenged vide Writ Petition  No.6098 of 1998.  Pending the said writ petition, the  State Government issued G.O.Nos.267 and 268 on  27/29.9.97 under Rule 9-A(1) of the Andhra Pradesh  Minor Mineral Concession Rules, 1966 (for short, "the  1966 Rules").  Under the said G.Os. the State  Government, after examination of the report of the  Director of Mines and Geology, ordered that an area  admeasuring Acs.61.50 in Survey no.55/5 shall be  reserved for exploitation by Andhra Pradesh Mineral  Development Corporation Limited which is a State-owned  Corporation (for short, "APMDC"), in public interest.  

These G.O.Nos.267 and 268, however, were issued  without prior approval of the Central Government under  Section 17A(2) of the Mines and Minerals (Regulation and  Development) Act, 1957 (for short, "the 1957 Act").  These  G.O.Nos.267 and 268 were challenged by filing writ  petitions mainly on the ground that they were invalid as  prior approval of the Central Government was not  obtained.  These writ petitions were filed in October  1997.  On 24.10.97 pending the writ petitions the State  Government sought approval of the Central Government  stating that APMDC is a State-owned company, set up to  acquire mining rights from the Government; that the  Corporation is a profit making organisation; that the  Corporation is equipped with expertise and machinery to  undertake mining in a scientific manner; that the State  Government had identified Acs.61.50 in Survey no.55/5  for exploitation of galaxy granite and accordingly the  Central Government was asked to grant its approval  under Section 17A(2) of the 1957 Act.  By letter dated  23.7.99, the Central Government enquired from the State  Government whether there existed any order of  injunction from the competent court in the pending writ  petitions.  Ultimately, the Central Government vide letter  dated 29.10.99 gave its approval for reservation of  Acs.61.50 of granite bearing area in Survey no.55/5 out  of the total area of Acs.86.50 subject to two conditions,

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namely, that the reservation shall not be applicable to  areas held under mining or quarry lease; and secondly,  that the approval granted shall be subject to the outcome  of pending court cases.    In terms of the said approval the State Government  on 14.2.2002 issued G.O.No.72 (later on published in the  Official Gazette of A.P. as Notification No.88 dated  26.2.97).  By the said G.O.No.72 an area admeasuring  Acs.61.50 was declared as granite bearing area.  In the  said G.O.No.72 there is a reference to the approval  granted by the Government of India.  The said G.O.  further stated that it was issued without prejudice to  G.O.Nos.267 and 268 dated 27/29.9.97.

The above G.O.No.72 dated 14.2.97 became the  subject-matter of the second round of litigation which  has given rise to these civil appeals.

In the second round of litigation appellants sought  the declaration that G.O.Nos.267 and 268 were illegal  and void; that the show cause notice dated 21.2.98  issued by the State Government should be quashed;  that  the grant of approval dated 29.10.99 by the Central  Government was illegal, void and unenforceable; and  lastly that the cancellation and revocation of mining lease  applications, was arbitrary and bad in law.    By judgment and order dated 28.3.2002, the  learned Single Judge set aside G.O.Nos.267 and 268 on  the ground that prior approval of the Central Government  was not obtained.  Accordingly, the show cause notice  dated 21.2.98 was also set aside.  The Court further held  that the State Government did not disclose to the Central  Government the fact that the appellants were holding  leases which were the subject-matter of the pending writ  petitions in the High Court and consequently the State  Government had violated the above two conditions  imposed by the Central Government in its approval dated  29.10.99.  Consequently, the learned Single Judge held  that the orders cancelling the land leases and the  decision to reject the applications for grant of mining  leases, was illegal and accordingly set aside the decision  of the State Government rejecting the applications made  for grant of mining leases.  By the said decision the State  Government was directed to consider the mining lease  applications afresh and dispose of the same in  accordance with law.

Being aggrieved by the decision of the learned Single  Judge, the State Government went in writ appeal to the  Division Bench.  By impugned judgment dated  24.3.2004, the Division Bench after reciting the above  facts and after taking into account the arguments  advanced before it held that it was totally unnecessary to  examine the validity of G.O.Nos.267 and 268 respectively  since vide subsequent decision dated 29.10.99 the  Central Government had granted approval for reserving  an area admeasuring Acs.61.50 as granite bearing area.   Since the Central Government had granted approval the  subsequent G.O.No.72 dated 14.2.2002 cannot be  faulted.  By the aforestated judgment the Division Bench  took the view that G.O.No.72 dated 14.2.2002 was issued  after obtaining prior approval from the Central  Government and, therefore, the said G.O. did not suffer

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from any legal or constitutional infirmities.  The Division  Bench further held that the decision to cancel  G.O.No.1290 was valid; that the reservation of an area  admeasuring Acs.61.50 was in public interest and that  there were no mala fides in cancelling G.O.No.1290 as  alleged by the appellants.    Aggrieved by impugned judgment dated 24.3.2004  allowing the writ appeals filed by the State Government,  the appellants have come to this Court by way of special  leave to appeal.

Before coming to the arguments advanced before  us, we are required to summarise the relevant provisions  concerning the 1973 Act, the 1966 Rules and the 1957  Act read with the Mineral Concession Rules, 1960.

The 1973 Act is an Act to consolidate and amend  the law relating to the fixation of ceiling on agricultural  holding and taking over of surplus lands and to provide  for the matters connected therewith.  The said Act  provides for the imposition of a ceiling on agricultural  holdings ranging from Acs.27 to Acs.324 depending upon  the class of land.  Under Section 14(1) of the said Act the  surplus lands vested in the Government are to be allotted  for use as house-sites for agricultural labourers and  village artisans or transferred to the weaker sections of  the society depending on agriculture.  The main purpose  of the Act is to distribute agricultural land among the  landless and other persons to subserve the common good  and to limit the extent of land to be held by a person.    Section 14 of the said Act deals with disposal of  land vested in the Government.  Section 14 (6) begins  with a non-obstante clause.   It enables the Government  to lease out any land vested in it for such purposes and  on terms and conditions as may be specified.  It also  enables the Government to reserve such land for any  common use or benefit of the community.

In the Seventh Schedule to the Constitution, in the  Union List, Entry 54 provides for regulation of mines and  minerals to the extent to which such a regulation under  the control of the Union is declared by Parliament, by  law, to be expedient in public interest.  Accordingly, the  1957 Act provides for the development and regulation of  mines under the control of the Union.  Under Section 3(c)  "mining lease" is defined to mean a lease granted for the  purpose of undertaking mining operations, and includes  a sub-lease granted for such purpose.  Section 5 deals  with restrictions on the grant of prospecting licences or  mining leases.  Under Section 5(1) it is, inter alia,  provided that a State Government shall not grant a  mining lease unless such a person is an Indian national  or a company as defined under Section 3(1) of the  Companies Act, 1956 and satisfies such conditions as  may be prescribed.  There is a proviso to Section 5(1).   This proviso lays down that no mining lease, in respect of  any mineral specified in the First Schedule, shall be  granted without the prior approval of the Central  Government.  Under Section 5(2) no mining lease is to be  granted by the State Government unless it is satisfied  that an area, for which the lease is sought, has been  prospected earlier and that there is a mining plan duly  approved by the Central Government.  Section 8 deals

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with periods for which mining leases may be granted.   Section 13 concerns power of Central Government to  make rules in respect of minerals.  Section 15 concerns  power of State Governments to make rules in respect of  minor minerals.  In exercise of the powers, conferred by  Section 15(1) of the 1957 Act, the State Government has  framed the 1966 Rules.  Rule 8 concerns the form in  which the lease deed shall be executed.  This is because  under Rule 5 of the 1966 Rules, no person can undertake  quarrying of any mineral except in accordance with a  quarry lease or a permit.  The mining lease has to be  executed in Form ’G’.  Rule 9-A of the 1966 Rules reads  as under:                      "9-A. Reservation of areas for  exploitation in the public sector, etc.: - (1)  The State Government may, by notification in  the Official Gazette, reserve any area for  exploitation by the Government, a Corporation  established by any Central, State or Provincial  Act or a Government Company within the  meaning of Section 617 of the Companies Act,  1956 (Central Act 1 of 1956).

(2) Availability of area for regrant to be  notified:- No area which has been reserved by  the Government under Rule 9-A (1) shall be  available for grant of quarry lease unless the  availability of the area for grant is notified in  the Official Gazette 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.

(3) Premature applications:- Applications  for the grant of a quarry lease in respect of  areas whose availability for grant is required to  be notified under Rule 9-A (2) shall if, -

(a) no notification has been issued under  that rule; or (b) Where any such notification has been  issued, the period specified in notification has  not expired, shall be deemed to be premature  and shall not be entertained; and the  application fee thereon, if any paid, shall be  refunded (Added in G.O. Ms.No.310, Ind. &  Com., dt. 11.7.84)"

       Section 17A of the 1957 Act concerns reservation of  area for purposes of conservation.  Under Section 17A(1)  the Central Government, with a view to conserving any  mineral and after consultation with the State  Government, may reserve any area not covered by a  mining lease by issuing a notification in the Official  Gazette.  The said notification will specify the boundaries  of the reserved area.  Under Section 17A(1A) the Central  Government may in consultation with the State  Government reserve any area not covered by a mining  lease for undertaking mining operations through a  Government company or corporation, owned or controlled  by it. Under Section 17A(2) the State Government may,  with the approval of the Central Government, reserve any  area not covered by any existing mining lease for  undertaking mining operations through a Government

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company or corporation and where it proposes to do so it  shall, by notification in the Official Gazette, specify the  boundaries of such area and the mineral in respect of  which such area will be reserved.   In this case, we are concerned with Section 17A(2)  of the 1957 Act.  In exercise of the powers conferred by  Section 13 of the 1957 Act, the Central Government has  enacted the 1960 Rules.  The said Rules require making  of an application for the grant of mining lease in respect  of the land in which the minerals vest in the Government  of State.

Mr. P.P. Rao, learned senior counsel appearing on  behalf of M/s. Rita Industrial Corporation Ltd.-Appellant,  submitted that G.O.No.1290 dated 27.8.91 conferred on  the appellant the right to get a lease of Acs.15 in Survey  no.55/5 for mining purpose.  In this connection, the  learned counsel urged that the State Government being  the competent authority for granting surface rights over  the land and also for granting mining lease under Section  5(1) of the 1957 Act after sanctioning the lease in favour  of the appellant, had directed the District Collector to  implement G.O.No.1290.  Further, learned counsel urged  that in the earlier round of litigation, the learned Single  Judge vide judgment dated 18.10.96 had directed the  District Collector in Writ Petition No.12386 of 1991 to  enter into surface lease with the appellant in respect of  the land admeasuring Acs.15 in Survey no.55/5; that, by  the said judgment the Director of Mines and Geology was  also directed to consider the appellant’s application for  grant of mining lease in accordance with law and  accordingly by reason of the said judgment dated  18.10.96 an important right stood conferred on the  appellant to obtain the land lease from the District  Collector and a further right to get the application for  grant of mining lease disposed of by the Director of Mines  and Geology.  This judgment dated 18.10.96, according  to learned counsel, got affirmed by the Division Bench  holding that there was no illegality in the judgment dated  18.10.96 and consequently it was urged that the State  Government was bound to implement the directions  contained in the judgment dated 18.10.96.  Learned  counsel submitted that it was not open to the State  Government to evade the implementation of the judgment  of the High Court dated 18.10.96 by taking recourse to  cancellation of  G.O.No.1290 or by taking recourse to the  reservation of the area in favour of APMDC.  It was  further submitted that rights became crystallized in  favour of the appellants by reason of the said judgment  dated 18.10.96 affirmed by the Division Bench, which  rights cannot be obliterated by cancellation of  G.O.No.1290 or by reservation in favour of APMDC.

The learned counsel for the appellant further  submitted that G.O.Nos.267 and 268 were illegal and  void ab initio for want of previous approval granted by the  Central Government.  In this connection, reliance was  placed on the provisions of Section 17A(2) of the 1957  Act.  In this connection, learned counsel urged that the  said G.O.Nos.267 and 268 purported to reserve granite  bearing area for exploitation by APMDC which required  prior approval of the Central Government and since such  approval was not obtained the said G.Os. were rightly set  aside in the second round of litigation by the learned  Single Judge vide judgment dated 28.3.2002.

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The learned counsel for the appellant next  contended that the approval granted by the Central  Government on 29.10.99 was not in accordance with law  for the following reasons: (a)     While granting approval, the Central  Government referred to letter dated 24.10.97,  letter dated 13.2.98, letter dated 5.11.98 and  letter dated 23.12.98 received from the State  Government; that, the Central Government  failed to take notice that in the last  communication dated 23.12.98, the State  Government had placed a new proposal for  reservation of the entire granite bearing areas  exceeding Acs.61.50 in favour of APMDC.   (b)     That, this last proposal was made in  substitution for reservation of Acs.61.50 only.   According to the learned counsel, the Central  Government in its approval dated 29.10.99 did  not refer to the contents of the last proposal  dated 23.12.98 which shows that the Central  Government gave its approval only to the  proposal dated 24.10.97 for reserving  Acs.61.50 and which, according to the learned  counsel, shows non-application of mind on the  part of the Central Government.  (c)     That, the grant of approval by the Central  Government dated 29.10.99 stood vitiated by  non-application mind since the State  Government had superceded its earlier  communication dated 24.10.97 by a  subsequent proposal dated 23.12.98.   

In the circumstances, it was urged that the approval  granted on 29.10.99 was liable to be set aside.    It was further submitted that the scheme under  Section 17A of the 1957 Act is not to disturb the existing  rights which stood crystallized in favour of the appellants  vide G.O.No.1290; that, the grant of mining lease, cannot  be set at knot by the State Government by cancellation of  the said G.O.No.1290 or by reserving the area allotted to  the appellants for exploitation by APMDC.  On behalf of  the appellants it was urged that the entire exercise  undertaken by the State Government was to defeat the  rights of the appellants which has crystallized by reason  of the judgment dated 18.10.96.  Accordingly, it was  submitted that the decision to reserve the said area  admeasuring Acs.61.50 as granite bearing area stood  vitiated by mala fides.  According to the learned counsel,  the entire exercise constituted colourable exercise of  power under Section 17A(2) of the Act.  In this  connection, it was further urged that the said section did  not contemplate conditional approval.  In this  connection, it was pointed out that in the approval  granted by the Central Government dated 29.10.99 two  conditions were stipulated, namely, that the reservation  shall not apply to areas covered by existing mining  leases/quarry leases and that the approval was subject  to the outcome of pending court cases.  The learned  counsel submitted that such conditional approvals run  counter to Section 17A(2) and, therefore, the approval  granted by the Central Government dated 29.10.99 was  bad in law.  It was urged that such conditional approvals  do not permit mining operations to be carried out by the

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Government Corporation till the pending cases are  decided and if the granite is exploited during the  pendency of the cases it would have the effect of  defeating the claims for mining leases in respect of that  very area for which litigation is pending and which would  amount to interference in the exercise of judicial power.   Moreover, while seeking approval of the Central  Government, the State Government had not brought to  the notice of the Central Government that, in fact, leases  were already granted to the appellants, that the  appellants were in possession of the land; that the writ  petitions were pending in the High Court and that if all  these particulars were to be submitted to the Central  Government, it would not have granted the approval.   According to the learned counsel, the approval dated  29.10.99 came to be issued on account of non-disclosure  of material facts by the State Government and, therefore,  it ought to have been set aside by the Division Bench.    On the above grounds, appellants have also  challenged G.O.No.72 dated 14.2.2002 which is based on  the approval granted by the Central Government on  29.10.99.  In this connection, it was urged that the said  G.O.No.72 was not valid as it did not stipulate the  conditions subject to which the Central Government gave  its approval on 29.10.99 and that, by the time the said  G.O. came to be issued the State Government had  withdrawn its proposal dated 23.12.98 except in respect  of Acs.61.50 to which there was no response from the  Central Government.

       Lastly, it was urged on behalf of the appellants that  during the pendency of the civil appeals, the State  Government by a Memo dated 14.3.2006 permitted  exchange of areas between APMDC and M/s. Victorian  Granite Private Limited in order to deprive M/s. Rita  Industrial Corporation Ltd. of its rights in the mining  lease; that without the approval of the Central  Government under Section 17A(2) of the 1957 Act it was  not permissible to exchange the lands and therefore the  said Memo dated 14.3.2006 was unlawful and invalid in  law and should be set aside by this Court.

       In conclusion, it was urged on behalf of the  appellants that the entire conduct of the State and its  officers show a colourable exercise of power to  circumvent the binding directions given by the High  Court in favour of the appellants vide judgment dated  18.10.96 and to frustrate the rights which have accrued  to the appellants on account of G.O.No.1290 which was  partly implemented by the Collector, District Prakasam,  by his communications to Director of Mines and Geology  dated 10.1.97 and by giving of possession of the land to  the appellants after demarcation and survey made by the  officers of the Revenue Department.

       While adopting the arguments of Shri P.P. Rao,  learned counsel for M/s. Pallava Granite Industries Ltd.  submitted that reservation by the State Government  without adjudication of the show cause notice dated  21.2.1998 invalidated G.O.No.72 dated 14.2.02  particularly when G.O.No.1290 was in the nature of  government grant.  It was urged that by G.O.No.72 the  vested rights cannot be obliterated particularly when the  scheme of Section 17A(2) of the 1957 Act is not to

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interfere with such rights.

       Mr. Anoop G. Chaudhary, learned senior counsel  appearing on behalf of State of Andhra Pradesh,  submitted that the said G.O.No.1290 dated 27.8.91 did  not create any interest or right in favour of any of the  appellants.  He submitted that the said G.O. indicates  that proposals were made by certain officers of the State  Government to release the lands declared as surplus  under Section 14(6) of the 1973 Act in order to exploit  galaxy granite by granting lease to private parties,  namely, the appellants.  The learned counsel submitted  that the said G.O. was only an acceptance of the  proposals made by the District Collector, Commissioner  of Land Reforms, the Director of Mines and Geology and  the requests made by the above-mentioned four  applicants.  Therefore, according to the learned counsel,  the said G.O.No.1290 did not amount to crystallization of  any right in favour of the appellant, as alleged.  In this  connection, it was further pointed out that in this case  there is no execution of surface lease; that there is no  application in the prescribed form made by any of the  appellants seeking mining lease; that the Government till  date has not executed a mining lease in Form ’G’ and in  the circumstances no proprietary right could be claimed  by the appellants.  It was submitted further that the  decision to grant the lease vide G.O.1290 stood  withdrawn by the subsequent G.O.No.1361 followed by  the decision to reserve the area admeasuring Acs.61.50  for exploitation by APMDC either by itself or through joint  venture.  In this connection it was urged that the State  has decided to invite global tenders for exploitation of  galaxy granite and to earn revenue and profits and,  therefore, there is no merit in the submission made on  behalf of the appellants that the conduct of the State  Government was mala fide or that the exercise  undertaken by State of Andhra Pradesh was colourable  exercise of power to circumvent the judgment of the High  Court dated 18.10.96.

       Mr. Altaf Ahmad, learned senior counsel, appearing  on behalf of APMDC invited our attention to the  topographical picture of Acs.86.50 of land in question in  Survey no.55/5.  He submitted that the Memo dated  14.3.2006 had to be issued by the State Government  allowing exchange of areas between APMDC and M/s.  Victorian Granite Private Limited in order to form a  compact area of land in which APMDC could operate and  excavate the granite; that this exchange became  necessary since the land earlier leased to M/s. Victorian  Granite Private Limited on 2.4.94 admeasuring Acs.25  obstructed the formation of a compact area.  It was  submitted that no prior approval for the said exchange  was required to be obtained from the Central  Government under Section 17A(2) of the 1957 Act; that  such approval was required if the boundaries of the  reserve area stood altered.  The learned counsel urged  that in the present case the boundaries of the reserve  area admeasuring Acs.61.50 remained unaltered and,  therefore, prior approval of the Central Government was  not required.    The submissions made by the learned counsel  appearing on behalf of the APMDC were adopted by Mr.  R.F. Nariman, learned senior counsel appearing on behalf

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of M/s. Victorian Granite Pvt. Ltd.  Mr. Nariman, further  pointed out that in the matter of readjustment within the  demarcated boundary, prior approval of the Central  Government was not required under Section 17A(2) of the  1957 Act.  The learned counsel further pointed out that  the decision to exchange the lands was a business  decision; that the said decision was taken keeping in  mind that an area under lease dated 2.4.94 in favour of  M/s. Victorian Granite Pvt. Ltd. contained 2,60,000/-  cubic meter of granite as on 14.3.2006; that M/s.  Victorian Granite Pvt. Ltd. had a valid quarry lease in its  favour commencing from 1994 till 2007; and that the  exchange was undertaken in order to have convenient  mining operations in a contiguous area by shifting the  lease-hold areas of M/s. Victorian Granite Pvt. Ltd. to  one end in the said Survey no.55/5 so that a compact  mining area of Acs.61.50 is available to APMDC.  It was  further pointed out that before taking the above decision  concerning exchange of lands two reports of the high- level committees have examined the viability of the said  exchange and, therefore, it cannot be said that Memo  dated 14.3.2006 concerning exchange of lands was  actuated by mala fides or arbitrariness.  According to the  learned counsel the exchange was in the interest of  APMDC.

Mr. Vikas Singh, learned Additional Solicitor  General of Union of India, submitted that Memo dated  14.3.2006 is the subsequent development.  According to  the learned counsel, in view of Section 17A(2) of the 1957  Act, the State Government should have taken prior  approval before issuing the said Memo dated 14.3.2006.   The learned counsel submitted that this aspect is under  consideration by the Central Government and it will take  action in accordance with law in near future.

The short question which needs to be answered is:  whether on the facts and circumstances of this case the  said G.O.No.1290, being a decision to grant a mining  lease constituted a fetter on the executive powers of the  State Government to recall its decision in public interest.   

At the outset, we are of the view that G.O.No.1290  is not in the nature of the grant as alleged.  In this  connection we may recapitulate that the 1973 Act stood  enacted to consolidate and amend the law relating to the  fixation of ceiling on agricultural holdings and taking  over the surplus lands.  The land in question fell in the  category of surplus lands.  These surplus lands in Survey  no.55/5 stood vested in the Government under the 1973  Act.  These surplus lands were frozen under Prohibitory  Order Book (POB).  Subsequently it was detected that  these lands contained galaxy granite.  It was an  important asset for the government.  This aspect needed  exploitation.  Therefore, a proposal was made by the  various authorities referred to above to release these  lands from POB and to allow these lands to be exploited  by private parties so that the State could earn revenue.   Under the said 1973 Act these lands were meant for the  benefit of the weaker sections.  Therefore, they were kept  under POB.  However, in order to earn larger revenues  the Government accepted the proposal to exploit the  above-mentioned granite.  This is done through  G.O.No.1290.  This was the primary purpose of the said  G.O.  Conferment of rights on the appellants was not the

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main purpose of the said G.O.  In fact, as stated above,  the said G.O.No.1290 was issued on 27.8.91 and within  one month it was withdrawn on 18.10.91.  As stated  above, when the said G.O. was issued on 27.8.91 a  public interest litigation, Writ Petition No.2356 of 1991,  was filed in the High Court.  On receipt of notices from  the High Court in the said PIL the said G.O. was  withdrawn.

In the case of Antoni Buttigieg v. Stephen H.  Cross -  AIR 1947 Privy Council 29, it has been held  that a government cannot by contract hamper its  freedom of executive action in matters which concern the  welfare of the State [See: page 31].

In the case of Edward Keventers (Successors) Pvt.  Ltd. v. Union of India etc. \026 AIR 1983 Delhi 376, the  Delhi High Court has held that every grant has to be  subject to any future executive action, which must be  decided by the needs of the community and that the  Government cannot, by contract, hamper its freedom of  action in matters concerning the welfare of the State [See:  page 382].

Creation of a right or interest in the property is  different from transfer of those rights/interests.  Whether  a particular transfer is a grant or not is a mixed question  of law and fact.  In this connection, we quote hereinbelow  the relevant passage from "The Transfer of Property  Act" by Dr. Sir Hari Singh Gour, 11th Edition, page 46: "It is further subject to any future  executive action, which must necessarily be  determined by the needs of the community  when the question arises, as the Government  cannot by contract hamper its freedom of  action in matters which concern the welfare of  the states.   Whether a particular transfer is a  grant governed by the Government Grants Act  or not is mixed question of law and fact.  The  character of the land, the manner of making  lease and its contents in this case all indicate  that the lease in question was a Government  grant and in the absence of any legislation  prior or posterior thereto on its subject matter  the lease shall take effect according to its tenor  and will not be regulated by the provisions of  the Transfer of Property Act unless justice,  equity and good conscience require that the  principles contained therein should be  applied.                          

Applying the above test to the facts of the present  case, we are of the view that G.O.No.1290 dated 27.8.91  was not a grant but at the highest a decision of the State  Government to execute a lease in favour of the appellants  for mining purposes.  There is no evidence of the  appellants being put in possession, as claimed.  The  correspondence between the authorities, referred to  above, makes it very clear that the District Collector took  steps of writing to the Dy. Director of Mines and Geology  in terms of the directions contained in the judgment of  the learned Single Judge dated 18.10.96.  That decision  was subject to the decision of the Division Bench dated  27.6.97.  In that decision it was made clear that the  direction given in the order dated 18.10.96 to the District

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Collector to enter into land leases, did not disable the  State Government from taking steps to cancel  G.O.No.1290 in accordance with law.    The question which arises for determination in this  case is : whether the decision to cancel G.O.No.1290 was  valid in law and whether that decision stood vitiated by  mala fides.    As stated above, G.O.No.1290 was a decision to  grant a mining lease in favour of the appellants.  Even  assuming for the sake of the argument that G.O.No.1290  constituted a grant by itself still, as held in the above  decisions, such a grant cannot fetter or hamper future  executive action/decision to revoke the grant in public  interest.  In the present case, the State Government  detected an important source of revenue in the form of  granite reserves.  It is true that at one point of time the  State Government decided to exploit the granite through  private parties.  However, later on with globalization, the  State Government decided to go for global tender.  This  course of action was open to the State Government.  The  State Government decided to exploit the granite through  its agency, namely, APMDC.  The object was to earn  commercial profits and revenue.  APMDC was given  liberty either to excavate the granite on its own or  through joint ventures.  The land belongs to the State  Government.  The granite belongs to the State  Government.  Therefore, a mere decision in G.O.No.1290  to grant mining leases to the appellants cannot hamper  or fetter the power of the Government to exploit the  resources through its own agency.  In the circumstances,  we do not find any mala fides in the decision of the  Government reserving the area admeasuring Acs.61.50  for exploitation by APMDC, either on its own or through  its joint ventures/partners.

It has been vehemently urged before us on behalf of  the appellants that the approval dated 29.10.99  contained in G.O.No.72 is invalid since Section 17A(2) of  the 1957 Act does not contemplate conditional approval.   In this connection, the following facts are required to be  noted.  The Central Government granted approval for  reservation of an area admeasuring Acs.61.50 subject to  two caveats, namely, that the reservation shall not be  applicable in case of areas already held under any mining  lease or quarry lease and that the approval was subject  to the outcome of pending cases.  It was submitted on  behalf of the appellants that such conditional approval  did not permit mining operations to be carried out by the  State Government Corporation till the pending cases were  decided and, therefore, if APMDC is allowed to exploit  during the pendency of the cases then the conditional  approval would have the effect of defeating the claims for  mining leases in respect of the very area pending  adjudication.  We do not find any merit in these  arguments.  As stated above APMDC was entitled to enter  into joint venture agreements with private partners.  The  alleged condition attached to the approval dated 29.10.99  was not to annul the transaction but only to render it  subservient to the rights of the parties to the litigation.  If  the appellants were to succeed in the pending litigation  they had the monetary claim against the joint venture.   Therefore, in order to put the third parties to notice the  above condition was incorporated.  Such a condition did

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not make the approval a conditional approval and,  therefore, it is not hit by Section 17A(2) of the 1957 Act.

We also do not find any merit in the contention of  the appellant that the approval dated 29.10.99 granted  by the Central Government stood vitiated on account of  non-application of mind.  In the approval granted by the  Central Government dated 29.10.99 the subject-matter  referred to four communications, namely, letter dated  24.10.97, letter dated 13.2.98, letter dated 5.11.98 and  letter dated 23.12.98.  These letters were addressed by  the State Government.  The initial proposal of the State  Government was to reserve an area admeasuring  Acs.61.50 only in Survey no.55/5 for exploitation by  APMDC.  However, later on in the last letter dated  23.12.98 the State Government proposed reservation for  a larger area covering the entire granite bearing area to  be exploited by the APMDC.  It is equally true that while  granting approval dated 29.10.99 the Central  Government did not refer to the last proposal dated  23.12.98 and as a result gave its approval for reserving  Acs.61.50 only.  On that basis it is urged on behalf of the  appellants that the Central Government had never  applied its mind to the later proposal of the State  Government and consequently even the approval granted  for reserving a limited area of Acs.61.50 stood vitiated on  account of non-application of mind.  As stated above, the  property belongs to the State Government.  The mineral  vests in the State Government.  The State has decided to  earn more revenue by inviting global tenders.  The State  has obtained the prior approval of the Central  Government.  The Central Government has restricted its  approval to an area admeasuring Acs.61.50.  In the  circumstances, we do not find any illegality in the State  Government’s order of reserving the area admeasuring  Acs.61.50 for mining operations through APMDC or  through private/public sector enterprises.  We reiterate  that the rights, if any, under G.O.No.1290 were inchoate  rights.  These rights never stood crystallized.  No mining  lease was ever granted by the State Government to the  appellants.  In the circumstances, there was no bar in  reserving an area admeasuring Acs.61.50 for exploitation  of galaxy granite through State public sector  undertaking.

Before concluding one aspect needs to be  mentioned.  During the pendency of these civil appeals,  the State Government permitted exchange of areas  between APMDC and M/s. Victorian Granite Pvt. Ltd.  vide Memo dated 14.3.2006.  This event took place  during the pendency of the special leave petition.  The  question as to whether such an exchange required  approval of the Central Government and whether such  exchange was in the interest of the State exchequer,  cannot be decided by us in the present proceedings.  It is  a distinct and separate cause of action.  We do not wish  to express any opinion on the validity of the said  exchange as well as on the merits of the said exchange.   It is for the Central Government to examine the validity of  the said exchange.  In any event, it is a subsequent cause  of action.  Hence, we express no opinion on the validity of  the said exchange.

Subject to above, we do not find any merit in these  civil appeals and the same are accordingly dismissed.  

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Contempt petition, filed by M/s. Rita Industrial  Corporation Ltd. during the course of pending of civil  appeals, is also accordingly disposed of.  No order as to  costs.