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PETITIONER: STATE OF RAJASTHAN

       Vs.

RESPONDENT: HARI SHANKAR RAJENDRA PAL

DATE OF JUDGMENT: 19/03/1965

BENCH: DAYAL, RAGHUBAR BENCH: DAYAL, RAGHUBAR GAJENDRAGADKAR, P.B. (CJ) RAMASWAMI, V.

CITATION:  1966 AIR  296            1965 SCR  (3) 402  CITATOR INFO :  R          1987 SC1073  (12,16)  D          1988 SC2187  (35)

ACT: Rajasthan Mines Mineral Concession Rules, 1958.  Chapters IV and V, r. 30-Matters not provided for in Chapter  IV-Chapter V, if applicable-Rule 30 if applicable to Chapter  IV-Period of first extension-Whose option.

HEADNOTE: The  respondent  who had as a result of auction  obtained  a mining   lease  from  the  appellant--State,   applied   for extension  of  the  lease period in view  of  the  mandatory nature  of the main provision of rule 30 and  simultaneously also applied for renewal of the lease in accordance with the provisions of the proviso to rule 30.  The appellant refused the  first prayer but extended the period by a  few  months. The respondent thereafter, filed a writ petition in the High Court for striking down the order of the Government renewing the lease by a few months and for directing the appellant to extend  the  lease in the first instance for  two  years  to bring it in conformity with the period of lease specified in rule  30  and  to renew after the expiry  of  such  extended period, for a further period of 5 years under rule 30.   The appellant contended that the provisions of Chapter IV of the rules did not apply to the grant of mining leases by auction or tender provided for by Chapter V of the rules and that in any case the initial period short of 5 years must be  deemed to  have been at the desire of the respondent and  that  any further  extension of the period of lease under the  proviso was in the discretion of the appellant and consequently, the respondent  could not claim to have the period of the  lease extended for a period of 5 years.  The High Court  disagreed with  the appellant’s contentions and allowed the  petition. In appeal by certificate; HELD:     Matters  not  provided for by rules in  Chapter  V with  regard to mining leases will be covered by  provisions relating to those matters in Chapter IV, as these provisions deal with the essential Incidents affecting grant of  mining leases. [404 H] Rule  30  applies  to leases granted under  Chapter  V  both

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because the rules under Chapter IV apply to such leases  and because there is no corresponding rule in Chapter V. [407 G- H] The  word "may" in the proviso in rule 30 in regard  to  the extension  of  the  period by,  Government  should  also  be construed  as  ’shall’,  so  as  to  mike  it  incumbent  on Government  to extend the period of the lease if the  lessee desires extension.  Of course no question for the  extension of  the lease can arise if the lessee himself does not  wish to have the lease for a further period.  It is on account of this option existing in the lessees that the word ’may’  has been  used  in this context.  But the option  given  to  the lessee to have the lease extended by period of another  five years  is  to  be respected only if  the  lessee  gives  the guarantee referred to in the proviso. [408 H] The  first extension must be five years and not  less.   The period of lease can be shorter than five years only when the applicant desires and not when the Government desires.  [409 B] 403

JUDGMENT: CIVIL APPFELLATE JURISDICTION: Civil Appeal No. 21 of 1963. Appeal  from the judgment and order dated August 1, 1961  of the Rajasthan High Court in Civil Writ No. 86 of 1960. C.   C. Kasliwal Advocate General for the State of Rajasthan and M. M. Tiwari, for the appellants. Rameshwar  Nath  S.  N. Andley, and P.  L.  Vohra,  for  the respondent. The Judgment of the Court was delivered by Raghubar  Dayal, J. This appeal, on certificate  granted  by the  Rajasthan  High  Court,  raises  the  question  of  the applicability of the provisions of Chapter IV and thereby of r. 30 of the Rajasthan Minor Mineral Concession Rules, 1955, hereinafter called the rules, to the grants of mining leases under the provisions of Chapter V of the rules. The  facts  leading to this appeal are briefly  these.   The respondent  obtained the mining lease for  extracting  sand- stone from the mines in certain area from the Government  of Rajasthan  in  1956.  The lease was granted as a  result  of auction.  The period of the lease was from April 1, 1956  to July 31, 1959.  The respondent applied for extension of  the period upto two years in view of the mandatory nature of the main provision of r. 30 and Simultaneously also applied  for the renewal of the lease for a further period in  accordance with  the  provisions of the proviso to r.  30.   The  first prayer  was  refused and the State Government  extended  the period  of  the lease at first by six months  and  later  by another two months.  The respondent thereafter filed a  writ petition  under  Art. 226 of the Constitution  in  the  High Court  and prayed for issue of a writ of mandamus  directing the striking down of     the   order   of   the   Government renewing the lease for 8 months    and  directing the  State of Rajasthan further to extend the lease     in  the   first instance  for  two years from July 30. 1959  to  bring,   it unconformity with the period of lease specified in r.  30 and to renew. after the expiry of such extended period,  for a further period  of 5 years under r. 30 of the rules.   The State of Rajasthan, appellant, contested the petition on the ground  that the provisions of Chapter IV of the  rules  did not apply to the grant of mining leases by auction or tender provided for by Chapter V of the rules  and that in any case the  initial period short of 5 years must be deemed to  have

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been  at the desire of the respondent and that  any  further extension  of the period of the lease under the proviso  was in  the discretion of the Government and  consequently,  the respondent  could not claim to have the period of the  lease extended for a period of 5 years. The High Court held that the provisions of Chapter IV of the rules  were  applicable as far as possible to the  grant  of mining M/B(N) 3SCI-13 404 leases  by  auction under Chapter V. that though  the  State Government had to give a lease for 5 years in view of r. 30, yet  the  shorter  period  of the lease  in  favour  of  the respondent  must,  in the circumstances, be deemed  to  have been at his request and that the respondent was entitled  to an extension of the lease by a further period of 5 years  in accordance with the provisions of the proviso.  It therefore directed  the  State  Government to renew the  lease  for  a period of 5 years from the expiry of the original lease with option of further renewal, if so desired, by another  period of 5 years subject to the conditions mentioned in r.   30. It is against this order that this appeal has been filed. Two  questions are raised for the appellant in  this  Court. The first is that the provisions of Chapter IV of the  rules do  not govern the grant of mining leases by  auction  under the provisions of Chapter V of the rules.  The other is that the  proviso  to  r.  30  gives  discretion  to  the   State Government to extend the period of the lease for any  period not  exceeding  5 years that it is not  mandatory  that  the State  Government  must extend the lease by a  period  of  5 years as held by the High Court.  We are of opinion that the High  Court  has  come to a right conclusion  on  these  two points. Section 5 of the Mines and Minerals (Regulation and Develop- ment)  Act,  1948 (Act LIII of 1948) empowered  the  Central Government  to make rules, by notification in  the  official Gazette,  for regulating the grant of mining leases  or  for prohibiting  the  grant  of such leases in  respect  of  any mineral  in  any  area.  In the exercise of  its  power  the Central  Government  framed the  Mineral  Concession  Rules, 1949, hereinafter referred to as the Central rules.   Clause (ii) of r. 3 of the Central rules defined ’minor mineral’ to mean ’building stone’ etc., which admittedly included  sand- stone Rule 4 stated that the rules would not apply to  minor minerals the extraction of which would be regulated by  such rules as the State Government might prescribe.  The State of Rajasthan  made  the rules in 1955 in the  exercise  of  the powers conferred by r. 4 of the Central rules. Chapter  IV of the rules deals with grant of  mining  leases and consists of rr. 19 to 32.  Chapter V deals with grant of mining leases and royalty collection contracts by auction or by inviting tenders or by other methods and consists of  rr. 33  to  42.  Apart from the heading of Chapter IV  being  in general  terms and so applicable to the grant of all  mining leases  by whatever process, a comparison of the  provisions of rules in Chapter IV and those in Chapter V shows that all the incidents of a grant of a mining refuse contemplated and provided  for in Chapter IV ire not provided for by  Chapter V.  This leads to the irresistible conclusion  that  matters not provided for by rules in Chapter V with regard to mining leases  will  be  covered by provisions  relating  to  those matters  in  chapter IV, as these provisions deal  with  the essential incidents affecting grant of mining lease. 405 We may therefore go through the provisions of Chapter IV  to

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have  a comprehensive view of what the rules provide and  to see whether all of them are such that the Legislature  could have  intended  their not applying to leases  granted  under Chapter  V  or whether they, by their nature, can  apply  to leases  granted under Chapter IV only.  Rule 19  deals  with restrictions  on  grant  of  mining  leases.   There  is  no corresponding  rule in Chapter V. It is  inconceivable  that the restrictions mentioned in r. 19 be not applicable to the grant  of  mining leases by auction or tender or  any  other method.   The matters of substance are the contents  of  the lease,  the persons to whom the minerals about which  leases can  be  granted  and not the procedure to  be  followed  in granting  the  lease.  Chapter IV deals with  the  grant  of mining  leases on applications for such a grant.  Chapter  V mainly  deals with grant of mining leases by auction  or  by inviting tenders or by other methods.  It is clear that  the procedure to be followed for the grant of leases is left  to the discretion of the Government though, ordinarily, in  the absence  if  general or special orders, the  procedure  laid down  in Chapter IV is to be followed.  Sub-r. (3) of r.  33 provides that leases by public auction or tender under  sub- r. (1) shall be given only in such a case as the  Government may,  by  general or special order, direct and r.  42  gives discretion  to  Government  to adopt any  other  method  for leasing  out  minor  mineral deposits  in  the  interest  of industry  and development of the deposit.  The  restrictions laid down by r. 19 are that no mining lease is to be granted in  respect of any minor mineral notified by  Government  in that  behalf, that no mining lease for the notified  mineral will  be  granted  to  a person  unless  he  holds  a  valid certificate  of approval and that no mining lease  shall  be granted  to an individual person unless he be a  citizen  of India  except with the prior approval of Government.   These restrictions are of a general nature and salutary in  effect and  the Legislature, in our view, could not have made  them inapplicable  to the grant of mining leases under the  rules in Chapter V. Rules  20 to 23 are applicable to applications for grant  of mining   leases.   They  mention  the  person  to  whom   an application  is  to be made, the fee which is  to  accompany such  application, what the application should  contain  and how  priority  is  to be given if there  be  more  than  one application  in  respect  of the  same  land.   These  rules cannot, by their nature, apply to the grant of mining leases by auction or tender or by any other method. Rule 24 provides for the Register of Mining Leases.  Most of the  particulars to be noted in this Register relate to  the grant  of  mining  leases on application  but  some  of  the particulars  could  be entered with respect  to  the  mining leases   granted  by  following  the  other  procedure   and therefore  its provisions can partially apply to the  mining leases  granted under Chapter V. Rule 25 will  also  usually apply  to  applications only, as in the case of  granting  a mining-   lease   otherwise,  the  Government   would   have ordinarily already decided 406 the  area for which the lease is to be given.  Rule 26  lays down  a restriction on the length and breadth of an area  to be  leased, but gives discretion to the Government to  relax the  provisions  of  the  rule.  This  rule  is  of  general application, subject to the discretion in the Government  to relax  its  provisions and there is no reason why  it  would have  been made inapplicable to mining leases granted  under Chapter V. Rule 27 provides that the boundaries of the  area covered  by a mining lease shall run vertically  down  below

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the  surface  towards  the  centre of  the  earth.   Such  a specification  of  the  boundaries  of  the  area  is   very essential  in  connection with mining leases  and  the  rule about  it  must  apply to all mining  leases  granted  under Chapter V. Rule  28  deals  with deposit of  security  and  applies  to applicants for mining leases and not to those who are to get leases  under Chapter V. There is a specific  provision  for security under r. 37 (iv), in Chapter V. Rule  29 deals with transfer of mining leases  and  provides that  a lessee with the previous sanction of the  Government and  subject to certain conditions could transfer his  lease or any right or interest therein.  There is no corresponding rule  in Chapter V. This indicates that r. 29 will apply  to the transfer of mining leases granted under Chapter V. There is no good reason why such a lessee be deprived of his right to  transfer or be free from any restriction laid down in  r 29.  Rule 30 deals with the period of lease and is the  rule which is to be considered by us. Rule 31 lays down the conditions subject to which the mining lease  is  granted.  This rule has 24 clauses  dealing  with various  matters.   It  is clear from r.  41  in  Chapter  V dealing  with  the  execution of lease that  the  terms  and conditions mentioned in r. 31 would be included in the lease executed  by  the lessee to whom a mining lease  is  -ranted under  Chapter V. of course, r. 41 provides that Such  terms and conditions would be so modified as might be necessary by reason of the provisions of rr. 33 and 34. Sub.r,  (2)  of  r. 23 provides that in cases  of  grant  of mining  leases by auction or by inviting tenders the  annual dead-rent of the lease would be determined in the auction or by  tend as the case may be and may exceed the rate give  in the  Second  Schedule  to the rules.   Rule  34  deals  with payment  of  royalty  through  the  contractor  for  royalty collection.  These provisions of rr. 33(2) and 34 would  re- quire modification in conditions (3) and (4) of r. 31. It  has been urged that the specific mention of r. 31 in  r. 41  indicates  that the other rules in Chapter  IV  are  not applicable to the grant of mining leases under Chapter V. We do not agree and 407 are of opinion that the specific mention of r. 31 is made in r. 41 In view of the fact that it was to apply with suitable modifications.   Rules  in Chapter IV which  apply  as  they stand do require no specific mention for their applicability to the -rant of mining leases under Chapter V. Rule  32 deals with the currency of the lease  and  provides that  the  currency of the lease shall be from the  date  of communication to the party unless otherwise stated, that the lessee shall have no right to continue work or to accumulate stock  on  or  after the date of termination  of  the  lease however  unless otherwise sanctioned by Government and  that all  accumulated  stock and immovable property left  in  the leased out area after the date of expiry of the lease  shall be deemed to be Government property.  The provisions of this rule  are  essential to define the currency  of  the  mining lease  granted  under  Chapter V and to the  rights  of  the lessee and the State in regard to continuing the work  after the date of termination of the lease or to the matter  lying in the leased out area after the expiry of the lease.  There is  no  corresponding  rule in Chapter V. Rule  32  must  be deemed to apply to the leases granted under Chapter V. It  would thus appear that the provisions of rr. 19, 26,  27 29 and 32, by their nature, must apply to the leases granted under  Chapter V as they are expressed in general terms  and

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can  apply to all mining leases.  If they were not  intended to  apply  to  mining leases granted under  Chapter  V,  the legislature  would have made an express provision  about  it and  would  have  also  made  some  suitable   corresponding provisions for the leases granted under Chapter V. We  are  therefore of opinion that the contention  that  the rules under Chapter IV do not apply to mining leases granted under Chapter V is not sound and that the High Court rightly held  that  they  do apply so far as  applicable  to  mining leases granted tinder Chapter V. Rule  30  deals with the period of lease.   This  rule  will apply  to  leases granted under Chapter V both  because  the rules  under  Chapter IV apply to such  leases  and  because there  is no corresponding rule in Chapter V. Reference  has been  made  to rr. 38 and 39 in Chapter V  which  deal  with certain  payments if the period of lease is not more than  1 year  or is more than one year respectively.  The fixing  of the  period of the lease is an essential term of the  lease, Rule  32  in  Chapter  IV provides  when  the  lease  is  to commence.   The lease should also provide the time  when  it should  terminate.  That can be done either by setting  down the  actual date or by expressing the period of  the  lease. Rules  38 and 39 provide for different matters.  They  apply when  the  period of the lease is already fixed  tinder  the terms of the lease and in accordance with the rules. 408 The next matter to be considered is the construction of r.30 which reads:               Period of lease-A mining lease may be  granted               for  a period of 5 years unless the  applicant               himself desires it shorter period;               Provided  that the period may be  extended  by               the   Government   for  another   period   not               exceeding  5 years with option to  the  lessee               for  renewal for another equivalent period  in               case  the  lessee  guarantees  investments  in               machinery equipments and the like, it least to               the tune of 20 times the value of annual dead-               rent   within  3  years  from  the   of   such               extension.    The  value  of  the   machinery,               equivalent and the like shall be determined by               the Government.  Were the lease is so renewed,               the  dead rent and the surface rent  shall  be               fixed  by  the Government  within  the  limits               given  in the Second Schedule to these  rules,               and shall in no case exceed twice the original               dead  rent and surface rent respectively,  and               the  royalty shall be charged at the rates  in               force at the time of renewal". It is urged for the appellant that the State Government  has discretion to fix the initial period of the lease as well as to fix the of the extension of the lease after the expiry of the initial period.  The High Court did not agree with  this submission of the and, we think, rightly. The  word ’may’ in the main provision of the rule must  mean shall’  and make the provision mandatory.  This  is  obvious from  the  last  portion of the  provision.   If  the  State Government  had discretion to fix any period of  the  lease, the  last portion of the provision would be redundant.   The Government  could fix the period of the lease at any  period shorter  than live yea-AS.  But the provision  requires  the fixing  of  the period shorter than 5 years  only  when  the applicant desires a shorter period.  The period of the lease therefore  can  be  shorter than five years  only  when  the applicant  desires  and  not when  the  Government  desires.

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Government  must fix the period of the lease at 5  years  in the absence of any expression of desire by the applicant for taking the lease for a shorter period. The word ’may’ in the proviso in regard to the extension  of the period by Government should also be construed as  ’shall so  as  to  make it incumbent on Government  to  extend  the period  of  the lease if the lessee desires  extension.   Of course no question for the extension of the lease can  arise if the lessee himself does not wish to have the lease for  a further period.  It is on account of this option existing in the  lessee  that  the  word ’may’ has  been  used  in  this context.  The lessee has been given a further option to have the lease extended by another five years but such an  option is  to be respected only if he gives the guarantee  referred to  in  the proviso.  If he is not prepared to give  such  a guarantee, he cannot exercise the option for 409 the extension of the lease and the lease must  automatically expire at the end of the first extended period. The  first extension has to be for five  years.   Government has  no  option in that regard as well.  This  appears  from what is provided in connection with the option of the lessee for a second extension. The second extension, at his option, is to be for a period equivalent to the period of the  first extension.  The guarantee to be given is to the effect  that the  lessee would invest in machinery etc., at least to  the tune of 20 times the value of the annual dead-rent within  3 years  from the grant of such extension.  There is no  point in,  taking  a gurantee to make certain  investments  within three years if the second extended period of the lease is of a  shorter  duration  as  it can  be  if  Government  has  a discretion in granting extension for a period shorter than 5 years.  If the first extension be for less than three  years the second extension cannot be for a longer period.  If that expression  ’such extension’ refers to the extension on  the exercise of the option of the lessee at the end of the first extension,  it  would be a preferable  construction  of  the proviso  to hold that the Government is bound to extend  the period  of  the lease for five years at the  expiry  of  the initial  period of the lease and that the lessee  will  have the  option for renewal of the lease for another five  years in case be guarantees the requisite investment as  mentioned in the proviso.  Another way of looking at the provision-and a better way--is that the expression ’such extension’ refers to  the first extension which the Government grants  at  the expiry of the initial term of the lease.  This means that at the  time of granting the first extension the lessee has  to choose  whether  he  should also ask for the  option  for  a second extension.  The option would then be an integral part of  the agreement about the first extension.  This  is  also indicated  from  the  language of the  proviso  linking  the period of extension with the option for renewal of the lease for  an equivalent period If no option as such is  given  at the time and is not a term of the lease, the lessee may  not be  able  to ask for a second extension at the  end  of  the first  extended  period of the lease.  When he  secures  the exercise of such an option as a term of the lease, he has to guarantee that within the first three years of the  extended period  of  the  lease he will  make  the  heavy  investment mentioned in the proviso with the resultant confidence  that he  will have undisturbed lessee rights for a period  of  10 years  from  the expiry of the initial term  of  the  lease: Whichever construction be put, with respect to the time when the term about option is to be settled between the  parties, it  must follow that the period of the first extension  must

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be five years and not less. We  are further of opinion that the High Court is  right  in holding that the respondent’s taking the lease for a  period upto  July 31, 1959 must amount to his expressing  a  desire for  having  a  lease for that period.  If  he  did  not  so desire,  he  need not have bid and taken the lease  for  the period for which it was to be given by auction. 410 it has been argued for the State that the High Court granted relief  to the respondent in excess of what he  had  prayed, inasmuch  as the High Court had directed the  Government  to renew  the respondent’s first lease for a period of 5  years with  option  to further renewal if so desired  for  another period  of 5 years subject to the condition mentioned in  r. 30 when the respondent had not prayed for any direction with respect  to the option for a second extension of the  lease. The  contention is not sound.  The relief claimed after  the expiry of the period of the first lease, which, according to the respondent, was also to be extended by two years, reads: " and then, after the expiry of the period of five years the lease  be renewed for a period of five years under  Rule  30 ,of Rajasthan Minor Mineral Concession Rules, 1955". The renewal was to be under r. 30.  Rule 30 itself  requires extension  of  the  lease  with option  in  the  lessee  for obtaining another extension for an equivalent period.   This option  must  be a term of the lease and therefore  must  be incorporated  in  the  lease  at the  time  when  the  first extension is granted.  The prayer therefore should be deemed to  include  a prayer for an extension of 5 years  with  the necessary  option.  Even if the prayer was not so made,  the High Court was competent to make the direction in accordance with  the  requirements  of  the  proviso  to  r.  30.   The direction  for renewal is, in our view. in  full  accordance with what the proviso requires. The  result is that the appeal fails and is  dismissed  with costs. Appeal dismissed. 411