http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 3  

PETITIONER: M/S. VICTORIAN GRANITES (P) LTD.

       Vs.

RESPONDENT: P. RAMA RAO & ORS.

DATE OF JUDGMENT:       09/09/1996

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. G.B. PATTANAIK (J)

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      Leave granted.      This appeal  by special  leave arises from the judgment and order  of the  Division Bench of the Andhra Pradesh High Court made  on  December  14,  1995  in  W.P.  6592/94.  The appellant had  filed a  revision under  Section 35-A  of the A.P. Mines  & Mineral Concession Rules, 1966 (for short, the "Rules"). The Government after issuance of notice, set aside the transfer  of the  leasehold  rights  had  by  the  first respondent, P.Rama Rao, who was the original lessee, to M/s. Magam Inc. in respect of the leasehold interests in the four leases granted  in various  G.Os. for  about 103 acres which facts are  not in  dispute. When  the  matter  came  up  for hearing, this  Court issued  notice as to how and under what circumstances P.  Rama Rao  came to transfer these leasehold interests to  the second  respondent, and  whether they  are sustainable  in   law?  The  respondents  have  filed  their counter-affidavits. We  have heard  the learned  counsel  on both sides.      It is  not in  dispute that P. Rama Rao had applied for and obtained  leases on  various dates for quarrying granite in R.L.Puram  in Chimokurthy  Mandalam of  Prakasam District for a  period of  ten years on October 7, 1989 Subsequently, on October  8, 1990,  he had  executed the  lease  deed.  He transferred the leases in favour of Magam Inc. on October 8, 1992 The  question is: whether the transfer of the leasehold rights is  valid and  sustainable in  law? It  is  true,  as contended by  Shri K.R.Chowdhary,  learned counsel  for  the respondents, that  clause (8)  of Appendix  to the Lease and clause (ix)  of Rule  31 of  the Rules, prohibit transfer or assignment or  sub-lease of  the leasehold  interests in the mining lease,  granted in  favour of the lessee, except with prior permission  by the competent authority after expiry of two years  At the relevant time, the competent authority was the Deputy  Director. Exactly  on expiry of 2 years from the date of  the grant  of the lease, P. Rama Rao had applied on October 7,  1992 for  assignment of  the lease  in favour of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 3  

Magam Inc.  and the  next day,  viz., October  8, 1992,  the Deputy Director, promptly and willingly had ordered transfer to Magam Inc. of the leasehold rights had by P. Rama Rao. It does not  appear  that  any  publicity  was  given  inviting objections from others. the question, therefore, is: whether the action taken by the Deputy Director is valid in law?      It is  true that a facade of compliance of law has been done by  P. Rama  Rao and Magam Inc. for having the transfer of the leasehold interests had by P. Rama Rao made in favour of the  latter.  The  best  of  the  legal  brains  will  be available to  escape the  clutches of  law and  transactions would be  so shown  to be in compliance of semblance of law. In that  pursuit, payment of royalty and permits remained in the name of P. Rama Rao. The court has to pierce through the process, lift  the veil  and reach  the genesis  and effect. Article 39  (b) of the Constitution envisages that the State shall, in  particular, direct  its policies towards securing that the  ownership and control of the material resources of the community  are so  distributed as  best to  subserve the common good.  Socio-economic justice  is  the  arch  of  the Constitution.  The   public  resources  are  distributed  to achieve that objective since liberty and meaningful right of life are  hedged  with  availability  of  opportunities  and resources to  augment economic empowerment. The question is: whether the  transfer is  to subserve  the above common good and constitutional  objective? It  is  true  that  when  the individuals  have  been  granted  tease  of  mining  of  the property belonging  to the  Government, the  object of  such transfer was  to augment  the economic  empowerment  of  the transferee  by  himself  or  by  a  cooperative  Society  or partnership composing  persons to  work  out  the  mines  to achieve economic  empowerment. Whether such a transfer could be  made  a  subterfuge  to  circumvent  the  constitutional philosophy  and  thereby  the  constitutional  objective  be sabotaged in  that behalf?  Answer would be obviously in the negative. It  is seen  that the  Government has  amended the rules and  given powers  to the Director to grant assignment after the  two years  from date  of leave  from one firm, in favour of  another firm of the lease rights obtained by one, and if  it is  sought to  be transferred  within two  years, prior  permission  of  the  Government  is  required  to  be obtained. The  object is  to have control in the hanky-panky and shady  transactions done  in collaboration and collusion with the  lower level officers for illegal gratification and to prevent  the depletion  of the  assets of  the State  for personal benefit  of the  vested  interests,  defeating  the constitutional  objective   behind  Article   39(b)  of  the Constitution, the  preamble and fundamental rights enshrined in the Constitution. This system of transfer would encourage corruption and  nepotism and  official acts  done in secrecy would sabotage  the constitutional objectives. Big fish will always eats away small fish in diverse forms, so as to drive the latter  away from  the area.  Legal form  of action,  if given primacy,  the constitutional objective would be easily defeated, creating  monopoly in  the market  by  few  vested interests controlling  the economy.  The problem  has to  be broached from  this perspective  and must  seek an answer to the question  whether such  transactions would  elongate and subserve common good?      In  this  case,  as  rightly  contended  by  Shri  K.R. Chowdhary, there  is a  facade of compliance of law, but, as stated earlier,  it is  only a subterfuge to comply with the law and  an attempt  by a  private company  whose  polishing centre is  situated in  Chittor District  and Head Office in Madras to  secure unjustifiable  enrichment. We have got our

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

own  doubts   with  regard  to  the  very  constitution  and genuineness of  the partnership  said to  have been  entered into between  P. Rama  Rao and  other partners of Magam Inc. However, in this case, it is not necessary for us to go into that issue.  Suffice it to state that the entire transaction is smacked  of bonafides and would defeat the constitutional objectives. The  Government should  restructure their  rules and  contractual   clauses  consistent  with  constitutional philosophy. The  Government, therefore,  has rightly, though for different  reasons, set  aside the  assignment of leases granted by P. Rama Rao and sub-lease in favour of Magam Inc. by exercising its suo motu power.      The appeal  is accordingly  allowed. The  order of  the High Court  stands set  aside and  that  of  the  Government stands confirmed, but in the circumstances, without costs.