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CASE NO.: Appeal (civil)  5572-5644 of 2005

PETITIONER: State of Tamil Nadu & Anr.                       

RESPONDENT: P. Krishnamurthy & Ors.                          

DATE OF JUDGMENT: 24/03/2006

BENCH: Arun Kumar & R V Raveendran

JUDGMENT: J U D G M E N T

RAVEENDRAN, J.

       These appeals by special leave against the judgment  dated 11.5.2004 of a Division Bench of the High Court of  Madras in W.A. Nos.3241-42/2003 and connected cases, relate  to the validity and scope of Rule 38A of the Tamil Nadu Minor  Mineral Concession Rules, 1959 (for short ’the Rules’) which  reads as under :

"38-A. Quarrying of sand by the State Government:-  

Notwithstanding anything contained in these rules, or any  order made or action taken thereunder or any judgment or  decree or order of any Court, all existing leases for  quarrying sand in Government lands and permissions/leases  granted in ryotwari lands shall cease to be effective on and  from the date of coming into force of this rule and the right  to exploit sand in the State shall vest with the State  Government to the exclusion of others. The proportionate  lease amount for the unexpired period of the lease and the  unadjusted seigniorage fee, if any, will be refunded."

Background facts          2.      We may briefly refer to the circumstances leading to the  insertion of Rule 38A in the Rules. A public interest litigation  (W.P. No.985/2000) was filed in the Madras High Court,  complaining about indiscriminate illicit quarrying of sand in  riverbeds. The High Court issued certain directions to curb  illicit quarrying while disposing of the said writ petition. A  contempt petition (Contempt Application No.561/2001) was  filed complaining of non-implementation of the said directions  by the State Government. In the said contempt proceedings, the   High Court issued a direction to the State Government on  26.7.2002 to constitute a High Level Committee consisting of  scientists, geologists and environmentalists to conduct a  thorough scientific survey of the sand quarrying activities in  rivers and riverbeds in the State and submit a report regarding  the damage caused on account of indiscriminate illicit quarrying  and to suggest the remedial measures. The High Court also  suggested that a suitable regulatory legislation may be made by  the State on the basis of the report of such Committee, and  issued certain interim directions pending such legislation.

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3.      Accordingly, a High Level Committee was constituted  which submitted a report detailing the extensive damage that  had occurred on account of haphazard, irregular and  unscientific manner of quarrying sand by the quarry  leaseholders, thereby impairing smooth flow of water and  causing damage to riverbeds, river banks as also the structures  (like bridges and transmission powerlines constructed across  rivers or imbedded on the riverbed) and drinking water systems  branching from  rivers, leading to ecological imbalances. It was  found that the unauthorized use of Poclain machines for  quarrying, and the tendency of lessees to extend quarrying  activities beyond the leased area and the permissible depth,  were the main causes for the devastating situation. The  Committee suggested several measures to remedy the situation,  one of which was to impose total prohibition on quarrying by  private parties. On considering the said report, the State  Government took a decision in public interest to stop quarrying  of sand in Government lands and Ryotwari (private patta) lands  by private agencies and take upon itself exclusively, all sand  quarrying activities in the State. It is in this background, Rule  38A came to be inserted in the Rules by  Notification dated  1.10.2003 with effect from 2.10.2003.

4.      Prior to insertion of the said Rule, the State Government  was granting quarrying leases, the term of such leases being  three years or less, under Rule 8 of the Rules. It is stated that as  on 2.10.2003, private agencies were holding 135 sand quarrying  leases granted by the State Government and 52 permissions for  sand quarrying in Ryotwari lands. Out of these, 19 were to  expire in 2003, 102 were to expire in 2004, 33 were to expire in  2005 and the remaining 33 were to expire in 2006; and in  addition, sand quarrying was carried on by some others on the  authority of orders of court, even though no leases had been  granted in their favour. With effect from 2.10.2003, the State  Government stopped all sand quarrying by private agencies.  Several writ petitions were filed in the Madras High Court by  the Lessees/permission holders, challenging Rule 38A.

Decision of the High Court

5.      On 8.10.2003, a learned Single Judge of the High Court  granted an interim stay, until further orders or till the leases  granted to the writ petitioners came to an end, whichever was  earlier. Being aggrieved by the interim stay, the State  Government moved the matter before a Division Bench  immediately which in turn issued an interim direction on the  same day (8.10.2003) directing both parties not to quarry sand  from areas covered by leases or court orders, until further  orders. Subsequently, the writ petitions, which were pending  before the learned Single Judge, were taken up for hearing by    the Division Bench along with the writ appeals against the  interim order, and were disposed of by a common order dated  11.5.2004.

6.      The Division Bench upheld the validity of Rule 38A in  so far as it created an exclusive right in the State to quarry sand.  It was, however, of the view that the leases/permissions which  had already been granted and were in force as on 2.10.2003  when the Rule came into force, could not be terminated without  giving a hearing to the concerned lessees/permission-holders.   Consequently, it upheld the validity of Rule 38A subject to the  following conditions :

"1.    The State is entitled to exploit the sand by quarrying  itself on the Government lands, which are not covered by

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the mining leases of the writ petitioners. The same is  applicable to patta lands subject to the permission of the  landholders or their tenants or lessees in occupation, which  are not covered by the mining leases.

2.      The writ petitioners whose Mining leases expired as  on this day and which are covered by the Court orders shall  not be entitled for any relief. This will not cover the Court  orders passed to make up the deficiency of the lease period.

3.      The respective District Collectors shall issue notices  to the petitioners with regard to the mining leases where  there is an allegation of infraction of environmental laws  and if there is a contest, then hold an enquiry by affording  opportunity to them and then pass orders basing on the  material on record. The above exercise shall be made by  the District Collector within a period of two months from  the date of receipt of a copy of this order and until then, the  status quo with regard to mining operations as obtained on  this day, shall be maintained.

4.      In so far as the cases not covered by environmental  violations are concerned, the said writ petitioners shall be  entitled to continue their sand quarry operations till the  expiry of their respective lease periods. But this shall not  preclude the respondents/Government from terminating  their leases by issuing a prior notice of six months as  contemplated under Clause 11 of Appendix I of the Rules  in so far as the Government lands are concerned.

5.      In the cases relating to the petitioners, where there  is an allegation of breach of conditions of lease, then a  notice has to be issued to them affording opportunity and  then pass orders basing upon the material on record. But  until then, they shall be entitled to quarry."

   Some of the writ petitioners, being aggrieved by the judgment  upholding validity of Rule 38A, approached this Court. This  Court did not entertain the SLPs.  

The Contentions & the Issue

7.      The State has challenged the judgment of the High Court  in these appeals by special leave, being aggrieved by the  conditions stipulated by the court while upholding the validity  of Rule 38A. According to the State, the Rule ought to have  been upheld unconditionally, so that there could be cessation of  all quarrying activities relating to sand in the State by private  agencies with effect from 2.10.2003. Though leave was granted  on 5.9.2005, the interim prayer of the State to stay the  conditions imposed by the High Court was not granted. Instead,   hearing was expedited. The State has raised the following  contentions :-

(i)     The High Court having upheld the validity of Rule  38A, ought not to have excluded the existing leaseholders  (in regard to Government lands) and permission holders (in  regard to Ryotwari lands) from the operation of the said  rule. Continuation of quarrying operations by the existing  leaseholders/permission-holders would negate the very  purpose (to save riverbeds from indiscriminate quarrying)  of the amendment to the Rules by adding Rule 38A.

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(ii)    The State has the power to regulate the grant of  quarrying and mining leases relating to minor minerals by  making appropriate rules, in view of the power delegated to  it by the Parliament under section 15 of the Mines and  Minerals (Development and Regulation) Act, 1957 (for  short the ’Act’). The power to regulate includes the power  to prohibit, in appropriate cases. Termination of all  quarrying leases and permissions is nothing but prohibition  of quarrying by lease/permission holders. The State was,  therefore, well within its power in making a rule which  directed cessation of quarrying of sand by all lease/  permission holders in the State and Rule 38A in entirety is  valid.   

(iii)   The decision to put an end to all leases/permissions  was not arbitrary or unreasonable. Rule 38A manifested the  policy of the State Government, formulated after duly  considering all relevant aspects and the recommendations  of the High Level Committee. Therefore, the High Court  erred in imposing conditions, for the applicability of Rule  38A to existing lease/permission holders.  

8.      The validity of Rule 38A in so far as it seeks to vest the  exclusive right in the State Government, in regard to sand  quarrying, does not arise for our consideration as the High  Court has held that creation of such monopoly is not illegal  having regard to the scheme of the Act and the decisions of this  Court recognizing the right of the State to create such  monopoly in State of Tamil Nadu v. Hind Stone & Ors. [1981  (2) SCC 205] and Gem Granites v. State of Tamil Nadu [1995  (2) SCC 413].   In Hind Stone (supra), this Court held that the  power of regulation vested in the State Government can extend  to total prohibition of leases and the State was entitled, in  exercise of its regulatory power, in appropriate cases, to take  over exclusive exploitation of a particular minor mineral or give  it to a sole agency or prohibit exploitation by private agencies  with the intention of conservation and prudent exploitation. In  Gem Granites (supra), this Court held that the State  Government as owner of a minor mineral, may decline to give  any lease to quarry such minor mineral to anyone and may  engage in such quarrying operations itself. Therefore, the High  Court rightly held that Rule 38A reserving the exclusive right  of quarrying sand, in itself, to the exclusion of others, was valid  and did not suffer from any infirmity. This Court also refused to  entertain the SLPs., filed by lessees in view of the said settled  legal position.  

9.      The question that arises in these appeals by the State  relates to the other part of the Rule, that is, whether the State  can, while making a rule providing for exclusive vesting of  right to exploit sand in itself, provide that all existing leases  relating to quarrying of sand in Government land (and all  existing permissions to quarry sand in ryotwari lands) shall  cease to be effective on and from the date when such rule  comes into force, and that too without providing a reasonable  opportunity of hearing to the aggrieved lease/permission  holders. In other words, the question is whether Rule 38A ought  to be upheld unconditionally or whether holders of existing  leases (Government lands) and permissions (ryotwari lands)  should be protected till the expiry or termination of their  leases/permissions as per law.  

10.     The Respondents contend that Rule 38A does not

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conform to section 4A(3) of the Act. It is pointed out that sub- section (3) of Section 4A of the Act mandates that no order  making a premature termination of a mining lease shall be made  except after giving the holder of the lease a reasonable  opportunity of being heard; and that it, therefore, follows that  any Rule made by the State Government for regulating mining  leases in respect of minor minerals, in exercise of the rule- making power conferred by the Act, should conform to Section  4A(3); and that Rule 38A made by the State, to the extent it  provides for termination or cessation of all existing  leases/permissions relating to sand, without affording a hearing  to the affected leaseholder/s, is clearly contrary to the express  provisions of Section 4A(3) is invalid.

Legal Provisions

11.     A brief reference to the relevant provisions of the Act  and Rules will facilitate decision on the said question.  

11.1)   Section 3(e) of the Act defines "Minor minerals" as  building stones, gravel, ordinary clay, ordinary sand (other than  sand used for prescribed purposes), and any other mineral  which the Central Government may, by notification in the  Official Gazette, declare to be a minor mineral. Section 4  requires the mining operations to be under leases granted under  the Act and the Rules made thereunder. Section 4A deals with  termination of mining leases. While sub-section (1) enables the  Central Government to request the State Government to  terminate a mining lease in respect of any mineral other than a  minor mineral in the circumstances stated therein, sub-section  (2) enables the State Government to make premature  termination of mining lease in regard to minor minerals. We  extract below sub-sections (2) and (3) of section 4A which are  relevant for our purpose :- "(2)    Where the State Government is of opinion that it is  expedient in the interest of regulation of mines and mineral  development, preservation of natural environment, control  of floods, prevention of pollution or to avoid danger to  public health or communication or to ensure safety of  buildings, monuments or other structures or for such other  purposes, as the State Government may deem fit, it may, by  an order, in respect of any minor mineral, make premature  termination of prospecting licence or mining lease with  respect to the area or any part thereof covered by such  licence or lease.

(3)     No order making a premature termination of a  prospecting licence or mining lease shall be, made  except after giving the holder of the licence or lease a  reasonable opportunity of being heard."    

[Emphasis supplied]

11.2)   Section 15 empowers the State Government to make  rules for regulating the grant of quarry leases, mining leases or  other mineral concessions in respect of minor minerals and for  purposes connected therewith. Section 17 deals with the special  power of the Central Government to undertake prospecting or  mining operations in certain lands. Section 17A provides for  reservation of any area (not already held under any mining  lease) for purposes of conservation of any mineral or for  undertaking mining operations through any  company/corporation owned by the Central Government or  State Government.  

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11.3)   The Tamil Nadu Minor Mineral Concession Rules, 1959  were made by the State Government in exercise of its power  under Section 15 of the Act. Rule 1(3) provides that the said  Rules shall apply to all the lands in the State of Tamil Nadu.  Rule 2(6) defines "quarry", "quarrying leases" and "quarrying  operations" and provides that they shall have the same meaning  assigned to "mine", "mining lease" and "mining operations" in  the Act. Rule 8 relates to leasing of Government lands for  quarrying minor minerals (other than certain types of granites  covered by Rules 8-A and 8-C). It contemplates the District  Collector granting lease to an applicant who offers the highest  bid amount for an area advertised and notified for grant of such  lease, followed by execution of a lease deed by the State  Government  and the lessee. Sub-rule (8) of Rule 8 provides  that the period of quarry lease for sand shall be three years; and  Sub-rules (8) and (11) of Rule 8 make it clear that a lease  granted under Rule 8 shall neither be extended nor be renewed.  Rule 15 provides for absolute prohibition or regulation of  quarrying or removal of sand from riverbeds to which Madras  River Conservancy Act, 1884 has been extended and for  regulating the quarrying or removal of sand from beds of river  in charge of the Public Works Department. The form of lease  for quarrying and removing minor minerals by private persons  is contained in Appendix I to the Rules and Clause 11 thereof  provides that such lease may be terminated by six months  notice in writing on either side (without any right in the Lessee  to seek compensation). It is not in dispute that all quarrying  leases granted by the State Government contained such a  provision for  termination simplicitor. Rule 36 deals with  general restrictions in respect of quarrying operations. The  proviso to sub-Rule (1) of Rule 36 provides that there shall be  no quarrying of any minor mineral in the river beds or adjoining  areas within 200 meters radial distance from the location of any  bridge, water supply system, infiltration well, or pumping  installation of any of the local bodies or Central or State  Governments or the State Water Supply and Drainage Board  head works.  Sub-rule 5(c) of Rule 36 provides that the lessees  and permit holders shall carry out quarrying operations in a  skilful, scientific and systematic manner, keeping in view  proper safety of the labour, structure and the public, and public  works located in that vicinity of the quarrying area and in a  manner to preserve the environment and ecology of the area.  

Whether the Rule is valid in entirety ?

12.     There is a presumption in favour of constitutionality or  validity of a sub-ordinate Legislation and the burden is upon  him who attacks it to show that it is invalid. It is also well  recognized that a sub-ordinate legislation can be challenged  under any of the following grounds :-

a)      Lack of legislative competence to make the sub-ordinate  legislation.  

b)      Violation of Fundamental Rights  guaranteed under the  Constitution of India.

c)      Violation of any provision of the Constitution of India.  

d)      Failure to conform to the Statute under which it is made  or exceeding the limits of authority conferred by the  enabling Act.   

e)      Repugnancy to the laws of the land, that is, any  enactment .

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f)      Manifest arbitrariness/unreasonableness (to an extent  where court might well say that Legislature never  intended to give authority to make such Rules).

The court considering the validity of a sub-ordinate Legislation,  will have to consider the nature, object and scheme of the  enabling Act, and also the area over which power has been  delegated under the Act and then decide whether the  subordinate Legislation conforms to the parent Statute. Where a  Rule is directly inconsistent with a mandatory provision of the  Statute, then, of course, the task of the court is simple and easy.  But where the contention is that the inconsistency or non- conformity of the Rule is not with reference to any specific  provision of the enabling Act, but with the object and scheme  of the Parent Act, the court should proceed with caution before  declaring invalidity.  

13.     In Indian Express Newspapers (Bombay) Pvt. Ltd. v.  Union of India [1985 (1) SCC 641], this Court referred to  several grounds on which a subordinate legislation can be  challenged as follows:

"A piece of subordinate legislation does not carry the same  degree of immunity which is enjoyed by a statute passed by  a competent legislature. Subordinate legislation may be  questioned on any of the grounds on which plenary  legislation is questioned. In addition it may also be  questioned on the ground that it does not conform to  the statute under which it is made. It may further be  questioned on the ground that it is contrary to some other  statute. That is because subordinate legislation must  yield to plenary legislation. It may also be questioned on  the ground that it is unreasonable, unreasonable not in the  sense of not being reasonable, but in the sense that it is  manifestly arbitrary." [Emphasis supplied]

In  Supreme Court Employees Welfare Association vs. Union  of India [1989 (4) SCC 187], this Court held that the validity of  a sub-ordinate legislation is open to question if it is ultra vires  the Constitution  or the governing Act or repugnant to the  general principles of the laws of the land or is so arbitrary or  unreasonable that no fair-minded authority could ever have  made it. It was further held that Rules are liable to be declared  invalid if they are manifestly unjust or oppressive or outrageous   or directed to be unauthorized and/or violative of general  principles of law of the land or so vague that it cannot be  predicted with certainty  as to what it prohibited or so  unreasonable that they cannot be attributed to the power  delegated or otherwise discloses bad faith.  

In Shri Sitaram Sugar Co. Ltd. v. Union of India [1990 (3)  SCC 223], a Constitution Bench of this Court reiterated :  

"Power delegated by statute is limited by its terms and  subordinate to its objects. The delegate must act in good  faith, reasonably, intra vires the power granted, and on  relevant consideration of material facts. All his decisions,  whether characterized as legislative or administrative or  quasi-judicial, must be in harmony with the Constitution  and other laws of the land. They must be "reasonably  related to the purposes of the enabling legislation". See  Leila Mourning v. Family Publications Service [411 US

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356]. If they are manifestly unjust or oppressive or  outrageous or directed to an unauthorized end or do not  tend in some degree to the accomplishment of the objects  of delegation, court might well say, "Parliament never  intended to give authority to make such rules; they are  unreasonable and ultra vires": per Lord Russel of Killowen,  C.J. in Kruse v. Johnson (1898) 2 QB 91."

In St. Johns Teachers Training Institute vs. Regional  Director, NCTE [2003 (3) SCC 321], this Court explained the  scope and purpose of delegated legislation thus :  "A regulation is a rule or order prescribed by a superior for  the management of some business and implies a rule for  general course of action. Rules and regulations are all  comprised in delegated legislations. The power to make  subordinate legislation is derived from the enabling Act  and it is fundamental that the delegate on whom such a  power is conferred has to act within the limits of  authority conferred by the Act. Rules cannot be made to  supplant the provisions of the enabling Act but to  supplement it. What is permitted is the delegation of  ancillary or subordinate legislative functions, or, what is  fictionally called, a power to fill up details. The legislature  may, after laying down the legislative policy confer  discretion on an administrative agency as to the execution  of the policy and leave it to the agency to work out the  details within the framework of policy. The need for  delegated legislation is that they are framed with care and  minuteness when the statutory authority making the rule,  after coming into force of the Act, is in a better position to  adapt the Act to special circumstances. Delegated  legislation permits utilization of experience and  consultation with interests affected by the practical  operation of statutes."  [Emphasis supplied]  

14.     It is submitted on behalf of the Appellant that where the  power exercised does not concern with the interest of an  individual, but relates to public in general, or where the power  exercised concerns with a direction of a general character  laying down the future course of action, it should be held to be  an exercise of legislative power and not an exercise of  administrative or judicial/quasi-judicial power. It is contended  that Section 4A(3) refers to performing executive or  administrative acts and not to a legislative act, as it requires  hearing before making a premature termination of mining leases  held by an individual. It is submitted that termination of all  leases/permissions relating to quarrying of sand, as a class,  under Rule 38A, is a legislative act and not an executive act and  therefore, section 4A(3) has application.  It is submitted that  Rule 38A being a delegated legislation, legislative in character,  is not open to question on the ground that it violates the  principles of natural justice.

15.     There is no dispute that making of Rule 38A is a  legislative act and not an administrative act. It is no doubt true  that an act which is legislative in character, as contrasted from  an executive act or a judicial/quasi-judicial function, does not  oblige the observance of rules of natural justice. In  Rameshchandra Kachardas Porwal v. State of Maharashtra  [1981 (2) SCC 722], this Court observed: "We are here not concerned with the exercise of a judicial  or quasi-judicial function where the very nature of the

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function involves the application of the rules of natural  justice, or of an administrative function affecting the rights  of persons, wherefore, a duty to act fairly. We are  concerned with legislative activity; we are concerned with  the making of a legislative instrument, the declaration by  notification of the government that a certain place shall be a  principal market yard for a market area, upon which  declaration certain statutory provisions at once spring into  action and certain consequences prescribed by statute  follow forthwith. The making of the declaration, in the  context, is certainly an act legislative in character and does  not oblige the observance of the rules of natural justice."

16.     In Union of India vs. Cynamide India Ltd. [1987 (2)  SCC 720], this Court differentiated between legislative acts and  non-legislative acts thus :-  

The distinction between the two has usually been expressed  as ’one between the general and the particular’. ’A  legislative act is the creation and promulgation of a general:  rule of conduct without reference to particular cases; an  administrative act is the making and issue of a specific  direction or the application of a general rule to a particular  case in accordance with the requirements of policy’.  ’Legislation is the process of formulating a general rule of  conduct without reference to particular cases and usually  operating in future; administration is the process of  performing particular acts, of issuing particular orders or of  making decisions which apply general rules to particular  cases.’ It has also been said "Rule making is normally  directed toward the formulation of requirements having a  general application to all members of a broadly identifiable  class" while, "an adjudication, on the other hand, applies to  specific ’ individuals or situations". But, this is only a broad  distinction, not necessarily always true. Administration and  administrative adjudication may also be of general  application and there may be legislation of particular  application only. That is not ruled out. Again, adjudication  determines past and present facts and declares rights and  liabilities while legislation indicates the future course of  action. Adjudication is determinative of the past and the  present while legislation is indicative of the future. The  object of the rule, the reach of its application, the rights and  obligations arising out of it, its intended effect on past,  present and future events, its form, the manner of its  promulgation are some factors which may help in drawing  the line between legislative and non-legislative acts.   17.     The contention that the act of premature termination  referred to in section 4A(3) is an executive act and not a  legislative act, finds support from the decision in State of  Haryana vs. Ram Kishan & Ors. [1988 (3) SCC 416] wherein  this Court considered the scope of section 4-A, as it originally  stood prior to the substitution thereof by Act No. 37 of  1986.  Section 4-A, considered in that case, read as under :- "4-A(1).  Where the Central Government, after consultation  with the State Government, is of opinion that it is expedient  in the interest of regulation of mines and mineral  development so to do, it may request the State Government  to make a premature termination of a mining lease in  respect of any mineral, other than minor mineral, and, on  receipt of such request, the State Government shall make an  order making a premature termination of such mining lease  and granting a fresh mining lease in favour of such

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government company or corporation owned or controlled  by government as it may think fit.  (2) Where the State Government, after consultation with  the Central Government, is of opinion that it is expedient in  the interest of regulation of mines and mineral development  so to do, it may, by an order, make premature termination  of a mining lease in respect of any minor mineral and grant  a fresh lease in respect of such mineral in favour of such  government company or corporation owned or controlled  by government as it may think fit."  

Old section 4A did not provide for a hearing before premature  termination of the leases. This Court held that section 4A  providing for premature termination of a lease, was a provision  conferring power to the executive to take adverse decisions  involving civil consequences. This Court further held that as the  act of termination was an executive act and not a legislative act,  the provision must be interpreted as implying to preserve a right  of hearing to the affected person before taking the decision, in  the absence of exclusion of rules of natural justice. We may, for  convenience, extract the following reasoning of this Court : "The language of Section 4-A clearly indicates that the  section by itself does not prematurely terminate any mining  lease. A decision in this regard has to be taken by the  Central Government after considering the circumstances of  each case separately. For exercise of power it is necessary  that the essential condition mentioned therein is fulfilled,  namely, that the proposed action would be in the interest of  regulation of mines and mineral development. The section  does not direct termination of all mining leases, merely for  the reason that a government company or corporation has  equipped itself for the purpose\005...  Considered in this light, the section must be interpreted to  imply that the person who may be affected by such a  decision should be afforded an opportunity to prove that the  proposed step would not advance the interest of mines and  mineral development. Not to do so will be violative of the  principles of natural justice. Since there is no suggestion in  the section to deny the right of the affected persons to be  heard, the provisions have to be interpreted as implying to  preserve such a right. Reference may be made to the  observations of this Court in Baldev Singh v. State of  Himachal Pradesh [1987 (2) SCC 510], that where exercise  of a power results in civil consequences to citizens, unless  the statute specifically rules out the application of natural  justice, such rule would apply. The learned counsel placed  reliance on the observations in paragraphs 5 to 7 of the  judgment in Union of India v. Cynamide India Ltd. [1987  (2) SCC 720], which were made in connection with  legislative activity which is not subject to the rule of the  audi alteram partem. The principles of natural justice have  no application to legislative activities, but that is not the  position here. It has already been pointed out earlier that  the existing mining leases were not brought to their end  directly by Section 4-A itself. They had to be terminated by  the exercise of the executive authority of the State  Government."  

The old section 4A enabled the termination of lease either by  the Central Government or by the State Government (in  consultation with the other) only for the purpose of granting a  fresh lease in favour of any government company/corporation  owned by such government, if it was of the opinion that it was  expedient in the interest of regulation of mines and mineral  development to do so. Though old section 4A did not provide

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for a hearing before termination, this Court read such a  requirement into the section. On the other hand, present section  4A (substituted by Act 37 of 1986) enables the Central  Government to request the State Government to terminate a  mining lease in regard to any mineral (other than a minor  mineral) and also enables the State Government to terminate a  mining lease in regard to any minor mineral, where the  concerned government is of the opinion that it is expedient in  the interest of the regulation of mines and mineral development,  preservation of natural environment, control of floods,  prevention of pollution or to avoid danger to public health or  communication or to ensure safety of buildings, monuments, or  other structures  (and also additionally on the ground of  conservation of mineral resources or for maintaining safety in  the mines in the case of minerals other than minor minerals) or  for such other purposes, by making an order of premature  termination. Granting a lease in favour of government  company/corporation is no longer a purpose for which an  existing lease could be terminated under section 4A. In fact,  along with substitution of section 4A by Act 37 of 1986 with  effect from 10.2.1987, a new section (section 17A) was  introduced which provides for reservation of any area for  purpose of granting of a mining lease to a government company  or corporation provided such area is not already held under a  mining lease. The ground on which a lease could be  prematurely terminated under old section 4A and the grounds  on which a lease can be terminated under new section 4A are  completely different. Though the grounds for premature  termination have changed in section 4A, the principle laid down  in Ramkishan that premature termination of lease under section  4A, after giving a hearing to the lessee is an executive act and  not legislative act, however, continues to hold good. Therefore,  the act of termination of a mining lease, even under the new  section 4A, is an executive act.  

18.     A delegated legislation, though legislative in character,  will be invalid, on the ground of violation of principles of  natural justice, if the enabling Act under which the delegated  legislation is made, specifically requires observance of the  principles of natural justice for doing the act. This was made  clear in Rameshchandra Kachardas Porwal (supra) itself. In  Cynamide India Ltd., (supra), this Court observed :  

"\005 legislative action, plenary or subordinate, is not subject  to rules of natural justice. In the case of Parliamentary  legislation, the proposition is self-evident. In the case of  subordinate legislation, it may happen that Parliament  may itself provide for a notice and for a hearing\005. But,  where the legislature has not chosen to provide for any  notice or hearing, no one can insist upon it and it will not  be permissible to read natural justice into such legislative  activity\005." [Emphasis supplied]

Reference may also be made to the following observations of a  Constitution Bench in Shri Sitaram Sugar (supra) :

"If a particular function is termed legislative rather than  judicial, practical results may follow as far as the parties  are concerned. When the function is treated as  legislative, a party affected by the order has no right to  notice and hearing, unless, of course, the statute so  requires. It being of general application engulfing a wide  sweep of powers, applicable to all persons and situations of  a broadly identifiable class, the legislative order may not be

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vulnerable to challenge merely by reason of its omission to  take into account individual peculiarities and differences  amongst those falling within the class."

[Emphasis supplied]

19.     When the Act is read as a whole, the legislative intent is  clear that a lease once validly granted can not be terminated  prematurely without a notice and hearing. The reason is  obvious. Exercise of power of termination will have civil  consequences adversely affecting the interest of the lease- holders. We may refer to the three sections inserted by Act 37  of 1986 with effect from 10.2.1987, in this behalf. Section 24A  deals with the rights and liabilities of a holder of a mining lease.  It provides that on issue of a mining lease under the Act or the  Rules made thereunder, it shall be lawful for the holder of such  lease, to enter upon the leased land, at all times during its  currency for carrying on mining operations. Sub-section (1)  and (2) of Section 4A contemplates premature termination only  when the concerned government is of the view that it is  expedient to do so, in the interest of regulation of mines and  mineral development, preservation of natural environment,  control of floods, to prevent pollution or to avoid danger to  public health or communication or to ensure safety of buildings,  monuments or other structures or for such other purposes. Sub- section (3) of Section 4A prohibits any order of a premature  termination of a mining lease being made, without giving a  hearing to the lease holder. The Act does not contemplate  ’wholesale’ termination of all existing leases/permissions in  relation to a minor mineral without hearing. Section 17-A while  empowering Central Government to reserve areas for purposes  of conservation of minerals, and empowering Central/State  Government to reserve areas for mining operation by  Government Companies/Corporations, specifically exclude  areas already held under mining leases. Even, section 17 while  referring to the power of the Central Government to undertake  mining operations exclusively in any area, excludes areas  already held under mining leases. It is, thus, clear that the Act  extends a statutory protection to the holder of a mining lease to  carry on mining operations during the period of lease, in terms  of the lease deed. The Act further contemplates premature  termination only for the reasons stated in sub-section (1) or (2)  of section 4A and in the manner provided in sub-section (3) of  section 4A. There is no doubt that the Legislature can make a  provision in the Statute itself for termination of the mining  leases without observance or principles of natural justice. It did  not choose to do so. When the Act assures the Lessee the right  to carry on mining operations during the entire period of lease  and provides for termination only after giving a hearing, the  delegate cannot, while making a rule in exercise of the power  granted under the Act, make a provision for termination of all  leases relating to a particular minor mineral, without giving an  opportunity of hearing to the lease/permission holders. That  part of Rule 38A which purports to terminate all leases  forthwith, without notice or hearing to the lessees, does not  conform to the object, scheme and the provisions of the Act  under which it is made and therefore, invalid.  Borrowing the  words of Russell of Killowen CJ, we may as well say  ’Parliament never intended to give authority to make such a  rule’.

20.     We may look at it from another angle. The government  order dated 1.10.2003 states the reasons for making Rule 38A.  It states that rule is introduced as the High Level Committee

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appointed by it found that illicit and haphazard sand mining has  led to deepening of river beds, widening of the rivers, damage  to civil structures, depletion of groundwater table, degradation  of ground water quality, sea water intrusion in coastal areas,  damages to river systems and  reduction in bio-diversity, apart  from causing health hazards and environmental degradation.  These are the very grounds which are referred to in section 4A  as grounds for premature termination. When the Act requires a  hearing for termination on such grounds, it is inconceivable that  the delegate will be permitted to exercise the power of  termination on such grounds without a hearing.  

21.     If a rule is partly valid and partly invalid, the part that is  valid and severable is saved. Even the part which is found to be  invalid, can be read down to avoid being declared as invalid.  We have already held that premature termination of existing  leases, in law, can be only after granting a hearing as required  under sub-section (3) of section 4A for any of the reasons  mentioned in section 4A(1) or (2). Therefore, let us examine  whether we can save the offending part of Rule 38A (which  terminates quarrying leases/permissions forthwith) by reading it  down. Apart from the statutory provision for termination in  section 4A(3), there is a contractual provision for termination in  the mining leases granted by the State Government. This  provision enables either party to terminate the lease by six  months notice. No cause need be shown for such termination  nor such termination entails payment of compensation or other  penal consequences. In this case, after considering the High  Level Committee Report, the State has taken a decision that all  quarrying by private agencies in pursuance of the quarrying  leases granted in regard government lands or permissions  granted in respect of  ryotwari land should be terminated in  public interest. If Rule 38A is read down as terminating all  mining leases granted by the government by six months notice  (in terms of clause 11 in the lease deeds based on the model  form at Appendix 1 to the Rules) or for the remainder period of  the lease whichever is less, it can be saved, as it will then  terminate the leases after notice, in terms of the lease.  

Whether conditions imposed by High Court require to be  modified ?

22.     The respondents submitted that from 2.10.2003 when  Rule 38A was inserted, the State Government had prevented the  existing leaseholders/permission holders from quarrying and  removing sand. It is submitted that on 8.10.2003, the Division  Bench issued a direction that neither party should quarry sand  in regard to the area covered by the existing leases and that  order was in force till the disposal of the writ petitions. On  11.5.2004, the writ petitions were disposed of upholding Rule  38A and, at the same time, recognizing the right of the existing  leaseholders to continue with the quarrying operations till the  expiry of their respective lease period. It is submitted that in  spite of the said judgment, the State did not permit the lease  holders to carry on quarrying operations, apparently, in view of  its decision to challenge the said judgment. The State filed the  SLPs in November, 2004. As this Court did not stay the order  of the High Court, the state government was bound to permit  the Respondents to carry on quarrying operations in terms of  the order of the High Court, but did not do so. The respondents,  therefore, submit that they should be permitted to continue  quarrying operations for the unexpired periods of lease as on  2.10.2003. They rely on the decision of this Court in Beg Raj  Singh V. State of U.P. [2003 (1) SCC 726], wherein the lease  holders were permitted to carry on operations during the  lease

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period of three years, subject to adjustment of the period during  which they have already operated.                                    

23.     On the other hand, learned counsel for the State  Government, submitted that Rule 38-A was made to prevent  environmental degradation and indiscriminate quarrying and,  therefore, if the leaseholders are permitted to continue the  quarrying operations, the very purpose of Rule 38A will be  defeated.

24.     It is not the case of the State that all the leaseholders have  violated the terms of the lease or acted in a manner detrimental  to environment. Learned counsel appearing for the State, in  fact, fairly admitted that several leaseholders had carried on  quarrying activities without violating the terms of lease and  without causing environmental degradation. If any leaseholder  had acted or acts in a manner likely to result in environmental  degradation etc., it is always open to the State Government to  terminate the lease after giving a hearing, as provided in section  4A(3).  

25.     Section 4A(3) requires the grant of an opportunity of  hearing only for premature termination of mining leases (and  prospective licences with which we are not concerned). If  anyone was carrying on quarrying of sand as on 2.10.2003 in  whatsoever circumstances other than in pursuance of mining  leases, there is no question of hearing them before stopping  quarrying activities in pursuance of Rule 38A, as hearing is  required only in regard to those holding subsisting leases.  Therefore, all quarrying permits for sand stood terminated with  effect from 2.10.2003. All quarrying by any person, other than  those holding mining leases also ceased with effect from  2.10.2003.  

26.     In regard to mining leases subsisting as on 2.10.2003, we  have read down Rule 38A as terminating such leases in terms of  the contract (lease deeds) by six months, without assigning  cause and without any liability to pay compensation. Such of  those writ petitioners (Respondents herein) whose leases were  subsisting on 2.10.2003 (and whose activities were stopped  with effect from that day) will be entitled to carry on the  quarrying activities for a period of six months or for the actual  unexpired period of the lease (as on 2.10.2003), whichever is  less. This benefit will be available to even those who have  orders of court for grant of mining leases, but where mining  leases were not executed for one reason or the other. It is,  however, made clear that the State Government is at liberty to  prematurely terminate the leases for any of the causes  mentioned in section 4A(2), by giving a notice and hearing  under Section 4A(3), if they want to terminate any lease within  the said period of six months.  

27.     We, accordingly, allow these appeals in part. In place of  the conditions stipulated by the Division Bench while  upholding the validity of Rule 38A, we hold and direct as  follows :        

(i)     That part of Rule 38A which vests the exclusive right to  quarry sand, in the State Government, is upheld.  

(ii)    That part of Rule 38A which purports to terminate  quarrying leases/permissions forthwith (from 2.10.2003)  is read down in terms of Para 26 above.

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(iii)   The provision in Rule 38A for refund of proportionate  lease amount for the  unexpired period of lease and  unadjusted seigniorage fee, shall remain undisturbed.  

(iv)    It is made clear that except to the limited relief as a  consequence of reading down as per para 26 above, the  respondents will not be entitled to any other reliefs which  have been granted by the High Court.  

(v)     Parties to bear their respective costs.