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PETITIONER: MAHANTAPPA & ORS.

       Vs.

RESPONDENT: STATE OF KARNATAKA

DATE OF JUDGMENT:       01/12/1998

BENCH: K.VENKATASWAMI, M.JAGANNADHA RAO.

ACT:

HEADNOTE:

JUDGMENT: J U D G M E N T M. Jagannadha Rao, J. Leave granted. The appellant’s writ petition No. 1046 of  1997  was dismissed by a learned Single Judge of the Madras High Court by Judgment dated 20.10.1997 and further appeal filed by the appellant  before the Division Bench in Writ Appeal No. 1686 of 1998 was also dismissed. Aggrieved by the said  Judgments this appeal has been preferred. The following are the relevant facts. The District Collector, Tuticorin (First respondent) published  a notification in the District Gazetta in January 1995 calling for tender applications for grant of  lease  of sand  quarry  in 1.17 1/2 hectares for a period of two years from 1.1.95  to  31.3.1997.    The  said  advertisement  was amended and  modified  as a lease for three years i.e.  upto 31.3.98, rather than  for  two  years.    On  23.2.1995  the petitioner  submitted  his  tender  and offered a sum of Rs. 1.60 lakhs per annum.  The offer of the petitioners was  the highest.   The first respondent did not accept the offer but rejected the same by orders dated 22.3.1995 in  exercise  of his  powers  under  Rule  8(6)(b)(ii) of the Tamilnadu Minor mineral Concession  Rules,  1959  (hereinafter  called  ’the Rules’).   The  collector  felt  that the appellant’s offer, even though it was highest, was less than the upset price as estimated by the department.   The  appellant  preferred  an appeal   to  the  Director  of  Geology  and  Mines  (second respondent).   The  Director  allowed  the  appeal  of   the appellant  by his order dated 1.4.1997 on the ground that by the closing date of the tenders namely, 6.3.1995  the  upset price  was  not  fixed by the Assistant Geologist, that such upset price was fixed  only  on  10.3.1995  long  after  the closing date  namely, 6.3.1995.  The Director also held that compared to another tender where the  offer  of  Rs.    1.75 lakhs  of  this very appellant was accepted for an extent of 3.24 hectares, the present offer of the appellant  for  1.60 lakhs  was  not unreasonable particularly when the extent of the quarry area in this case was  only  1.17  1/2  hectares. However,  the  Director  applied the provisions contained in the amendment to Rule 8-A introduced  by  G.o.    Ms.235  on

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19.12.1996  by  which additional Seigniorage fee was payable in addition to lease amount.  By the date when the  Director allowed  the  appeal  on  1.4.1997, part of the lease period from 1.4.1995 upto 1.4.1997 had already expired.  Therefore, the Director granted the lease only for the remaining period from 1.4.1997 upto 31.3.1998. Aggrieved  by the said order to the extent that full three year lease was not granted  by  the  Director  amended Rules  dated 19.12.96, the appellant filed the writ petition in the High Court.  He  contended  that  when  the  Director applied the amended rules dated 19.12.1996 which were issued in  GOMs  No.235,  so  far as seigniorage was concerned, the Director should have also given the benefit of the amendment to Rule 8(8)(a) which stated that the lease should run for a period of three years form the date of the execution of  the lease   deed.   The  writ  petition  was  contested  by  the respondents before the learned Single Judge. The learned Single Judge while dismissing  the  writ petition  observed  that  the  auction  notice  specified  a particular period namely, 1.1.95 to 31.3.98 and,  therefore, the appellant could not claim that the three year period was to  run  as per the amended Rule 8(8)(a), that the amendment was prospective in nature and was not applicable  to  leases which  had already been processed and rejected the Collector earlier, - in this case on 22.3.1995.   Merely  because  the appellate  order  was  passed subsequent to the amendment of the rules in GOMs No.235  dated  19.12.1996,  the  appellant could not  seek  the  benefit  of the amendment.  Before the learned single Judge, the appellant relied upon the judgment of this Court in State of Tamilnadu vs.   Hind  Stone  [1981 (3)  SCR 742] for the proposition that if rules were amended during the pendency of an application for  the  grant  of  a mining  lease,  the  said  rules  should  be applied to such pending applications.  The said decision  was  distinguished by   the  learned  Single  Judge  on  the  ground  that  the appellant’s application was rejected  by  the  Collector  on 22.3.1995   long   before  the  rules  came  into  force  on 19.12.1996 and that the pendency of the appeal by  the  rime the  emended  rules  came  into  force, was not a sufficient reason for applying the amendment.  So far as the  appellate order   of   the   Director  asking  the  appellant  to  pay seigniorage as per  the  amended  rule  was  concerned,  the learned Single Judge justified the said charge on the ground that  the  said fee was leviable form 1.4.1997 to 31.3.1998. On these grounds, the writ petition was dismissed. When the  appellant  appealed  before  the  Division Bench  the  learned Judges too distinguished the decision of the Supreme Court in Hind Stone [1981 (2)  SCR  742].    The Bench also held that the new rules did not apply.  The Bench was  also of the view that the value of the sand by the time the appellate order came to be passed on 1.4.97  would  have been more than what the appellant offered at the time of the tender  of 21.3.1995 and that, therefore, in case the appeal were to be allowed, the interests of the State would suffer. For all these reasons, the appeal was dismissed. In this appeal before us, it was  contended  by  the learned senior counsel of the appellant Shri K.R.  Choudhary that the learned Single judge and the Division Bench as also the  Director (second respondent) were wrong in not applying the amended  rule  in  GOM  No.    235   dated   10.12.1996. According  to  him  the  judgment  of this Court in State of Tamilnadu vs.  Hind Stone [1981 (2) SCR 742] was directly in point when it said that the application for grant of a lease of minerals under these rules had to be disposed of  on  the basis  of  such  rules  as  may  be in force at the time the

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application was disposed of and not by the rules in force at the time the  application  for  grant  of  lease  was  made. Learned   senior  counsel,  therefore,  contended  that  the Director.  Mines and Geology ought to have,  while  allowing the appeal of the appellant, granted a lease for a period of three  years  from  the  date  of  execution of the lease as provided in the amended rules in rule 8(8)(a). On  the  other  hand,  the  learned  counsel for the respondents contended that the tender being for  a  specific period from 1.4.1995 to 31.3.1998 it was not permissible for the  appellant to seek a lease for a period beyond 31.3.1998 on the basis of the amended rules.  The fact that the appeal before the Director was pending  upto  1.4.1997  was  not  a ground for  applying  the  amended  rules.    The rules were preceded  by  administrative  instructions  dated  12.3.1997 which  stated  that  if  any  application had been processed before  the  commencement  of  the  new  rules   then   such applications  should  not be disposed of on the basis of the amended rules.    Even  otherwise  the  amended  rules  were prospective in  nature.    The judgment of this court relied upon by the appellant  in  Hind  Stone  was  not  applicable inasmuch as the application of the appellant was disposed of by  the  Collector  on 22.3.1995 whereas the rules came into force long thereafter on 19.12.1995 whereas the  rules  came into force  long thereafter on 19.12.1996.  If the appellant were  granted  three  years  lease  from  the  date  of  the execution  of the lease then the appellant would be making a undue profit inasmuch as the  value  of  sand  has  gone  up between  1995  and  1998 and to that extent the interests of the Government would suffer. The point for consideration is whether the appellant is  entitled  to  a quarrying lease for sand for three years from the date of the execution of the  lease  dated  as  per rule 8(8)(a) of the rules as amended by the GOM No.235 dated 19.12.1996 or only upto 31.3.1998 as per the advertisement? It  may  be  noticed  that  Rule 8(8)(a), before its amendment by GOMs No. 235 dated 19.12.1996 read, in  so  far as it is material for the case before us, as follows :         "Rule 8(8)(a): The period  of  any  quarry         lease   granted   under   this   rule  for         quarrying stones shall be five  years  and         the  period  of quarry lease for quarrying         sand and other  minor  minerals  shall  be         three  years,  subject  to  the  following         conditions :-         (I) The date of commencement of the period         of a quarrying lease  granted  under  this         rule  shall  be the first day of the first         financial year of the lease period:         provided  that  where  the  lease         deed  could not be executed before the 1st         day of April in the first  financial  year         of  the lease period due to administrative         reasons,  the  lessee  is   entitled   for         proportionate   reduction  in  the  annual         lease amount in  the  first  year  of  the         lease period;         provided that. . . . . . . . .  .         provided   also  that  the  lease         amounts  for  the  second  and  subsequent         financial  years of the lease period shall         be fixed by enhancing the lease amount  of         the previous year by twenty per cent of as         prescribed  by  the  State Government from         time to time.

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       (II)  .  . . . . . . . . . . . . . . . . "         By the amendment made w.e.f. 19.12.1996 in         GOMs No. 235 (Industries) it is stated  as         follows :         "Amendments.         In the said rules, in rule 6 --         (1) In sub-rule (80, in clause (a) --         (a)  for  sub-clause  (i)  including   the         provisos,  the  following sub-clause shall         be substituted, namely :-         (i)the  date  of commencement of the         period for which the  quarrying  lease  is         granted  under this rule shall be the date         on which the lease deed is executed.         (b) for  sub-clause  (ii),  the  following         sub-clause shall be substituted, namely :-         (ii)  the  lease  shall expire on the date         specified in the lease deed and in no case         extension of the period of lease shall  be         made.         (2) in sub-clause (iv),  for  clause  (b),         the following clause shall be substituted,         namely :-         (b)All leases, besides the one  time         payment  of  the bid amount/tender amount,         which is the lease amount, shall also  pay         seigniorage fee or  deed  rent  .    .   .         Besides   the   lease   amount   and   the         seigniorage  fee  or deed rent, the lessee         shall also pay such other levies,  as  may         be  prescribed  by  the  State Government,         ......." In is clear, therefore, that  after  the  amendment, the three year period for quarrying of sand is to be counted from the  date  of  execution  of the lease.  Apart from the lease amount, seigniorage fee or dead rent or other  charges have to be paid. In  the  present  case,  the above amendment by GOMs No.2355 dated 19.12.1996 came into force after the order  of rejection   was   passed  by  the  Collector  on  22.3.1995, obviously,  the  Collector  could  not  have   applied   the amendment.  But  the appeal was preferred to the Director on 20.4.1995 and it was during the pendency of the appeal  that the amendment dated 19.12.1996 came into being. As to the effect of the amendments to the Rules, the judgment of the Supreme Court in State  of  Tamil  Nadu  vs. Hind Stone  [1981  (20  SCR 742] is relevant.  In that case, when certain renewal applications were pending  under  these very  Rules, before the Government, Rule 8(c) was introduced by GOMs No.1312 (Industries) on 2.12.1977.   By  that  rule, "leases"  for  quarrying  black granits in favour of private parties were banned.  Question arose whether  the  amendment applied  only to fresh leases or whether the pending renewal applications were to be disposed of under the Rules as  they stood when  the  original  lease was granted.  Question also arose whether, the concerned authority could  apply  a  Rule which  came into force during the pendency of an application or whether the Rules in force on the date of the application alone applied.  It was  argued  for  the  application  alone applied.   It  was  argued  for the applicant that there was undue delay in the disposal of the renewal applications  and hence the  new  amendments could not be applied.  This Court initially observed (p.759) that an application  for  renewal is in substance an application for a lease.  It held :         "It must be remembered that an application

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       for the renewal of a lease is, in  essence         an  application for the giant of the lease         for a fresh period. We are, therefore,  of         the  view  that  Rule 8(c) is attracted in         considering applications  for  renewal  of         leases also."         This  Court  also  held  that if rules are         amended  during   the   pendency   of   an         application   for   a  mining  lease,  the         amended  rule  is  to  be  applied   while         disposing of the application. The argument         if  there  was  long  delay in disposal of         applications, subsequent amendments should         not   be   applied,   was   rejected.   At         (pp.759-760) it was held:         "while  it  is true that such applications         should be dealt with within  a  reasonable         time,  it  cannot  on that account be said         that the  right  to  have  an  application         disposed  of  in a reasonable time clothes         an applicant for a lease with a  right  to         have  the  application  disposed of on the         basis of the rules in force at the time of         the making of the application.  No one has         a vested right to the grant or renewal  of         a lease and none can claim a vested rights         in  anyone, an application for a lease has         necessarily to be dealt with according  to         the  rules  in  force  on  the date of the         disposal of the  application  despite  the         fact  that there is a long delay since the         making of the application." question for consideration is whether  in  cases  where  the application  for  lease  is rejected by the Collector and an appeal is filed by the applicant before  the  Director,  and the rules are amended during the pendency of the appeal, the above principle in Hind Stone can be applied? In our view, what applies  to  applications  applies equally  to  appeals  because,  an  appeal is nothing by the continuation  of  the  proceeding  which  stated   with   an application.  In our view it makes no difference whether the delay  has  occurred  on account of keeping the applications pending or on account of an appeal being filed.   In  either case, Hind Stone becomes applicable. The  learned single judge and the Division Bench, in our view, erred in not applying the judgment of  this  Court in  Hind  Stone  to  the  appeal that was pending before the appellate authority. We are of the  view  that  the  amended Rule  8(8)(a) which came into force on 19.12.1996 applied to the appeal which came to be disposed of on 1.4.1997. If that be so, the period of 3 years for a sand  quarry  lease  must necessarily  run  from  the  date  of execution of the lease deed. Learned  counsel  for  the State, however, relled on the fact that the advertisement for lease was for a specific period i.e.  1.4.1995 to 31.3.1998.  According to  him,  the appellant was entitled to a lease, by orders of the Director dated  1.4.1997,  only upto 31.3.1998 and if that period too had expired by now, no relief could  be  granted.    In  our opinion,  the  advertisement  having been issued in order to implement these very Rules, the terms of  the  advertisement cannot be  viewed in isolation.  They have necessarily to be read in conjuction with the rules. Yet another argument of the learned counsel for  the State  is  that  the amendment to the Rules dated 19.12.1996

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was preceded by administrative instructions dated  12.3.1997 which  stated  that  if  by the date of amendment, the lease application had been  processed,  the  amendment  would  not apply.   The  relevant  part  of  the  instruction  reads as follows:         "The District Collectors are also informed         that in these cases where order confirming         the  auction/tender   have   been   issued         already,  the leases may be granted as per         certain rule and instructions issued.   In         cases  where  auction/tender  process  was         already over, the same  may  be  confirmed         under the earlier rules. It  is true that the latter part of this rule states that if the  processing  of  the  application  is  completed before  the  new  rules  come into force, than the new rules cannot be applied. In our opinion,  this  goes  against  the judgment  of this Court in Hind Stone case which stated that if the application for lease was not disposed of by the date of the  amendment,  then  the  amendment  would  apply.  The administrative  order  cannot,  therefore, be relied upon by the respondents. Further,   the   argument   that  the  amendment  is prospective and is  applicable  only  to  fresh  application filed  after the amendment cannot hold good again in view of what is decided in the Hind Stone case.  It is the  rule  in force  on  the date of disposal of the application or appeal that is applicable.  In case the amendment comes during  the pendency  of an appeal against a refusal to grant the lease, as in the case before us, the appeal by the applicant has to be disposed of by applying the amendment which has come into being during the pendency of the appeal. Lastly,   we   come   to   the   submission  by  the respondent’s counsel that the price of  sand  had  increased between 1995 and 1998 and if fresh tenders are called today, the state would get a higher amount. In  this  context,  we  may  point out that the rule 8(8)(a)(i) as it stood before the amendment  had  a  proviso that  the  lease  amounts  for  the  second  and  subsequent financial years shall be fixed by way of an annual  increase of  20%. We find, however, that the said proviso was dropped w.e.f. 19.12.1996. This is clear  from  the  fact  that  the amendment states. "for sub-clause (i) including the provisos, the ne amendment is substituted." In the present  case,  the  appellant’s  tender  was rejected   on  22.3.1995  and  the  provision  for  periodic increases was  there  till  19.12.1996   only.      in   the circumstances of the case, we have put it to the appellant’s senior  counsel  that  in  the  event  the  appeal  is to be allowed, we will apply the old rule upto a least  19.12.1996 so far  as  the  rate  is concerned.  Learned senior counsel agreed for such  enhancement.    The  enhancement  would  be roughly for  2  years.  In the peculiar circumstances of the case, we direct that the lease amount will stand  increased, to start,  by  40%  of  the  offer  i.e.  instead of Rs.1.60 lakhs, it will be Rs.2.24 lakhs per  annum,  the  period  of lease  will  run  for  a  period of 3 years from the date of execution of the lease as stated in the amended rule, at the rate of Rs.2.24 lakhs per annum.  The appellant  shall  have to  pay  the  seigniorage  also  as per the amended rules in addition to the lease amount.    Time  for  payment  of  the enhancement  in the lease amount or any balance of the lease amount or seigniorage, will be one month from today. The  judgment  of  the  learned  single  judge   and

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division  bench  are set aside. The order of the Director of Geology & Mining dated 1.4.1997 is modified accordingly. The appeal is allowed as stated  above.  In  the  circumstances, there will be no order as to costs.