STATE OF ORISSA Vs. UNION OF INDIA

JUDGEMENT

(1.) THE State of Orissa through the Secretary, Department of Mining and Geology, is the petitioner. Its case may be stated in short. It is the owner in possession of an area of 462. 16 acres of land in village Boula in the district of Keonjhar. The said area contains chromite minerals ores. This area had been held under a mining lease by Sri M. A. Tulloch (hereinafter to be referred to as Tulloch ). The term of that lease expired on 1-6-1965. On 27-11-1964 Tulloch applied, for renewal of the lease. By an order (Annexure I) dated 27-5-1965 the application was rejected by the petitioner on the ground inter alia that the State Government had decided not to grant lease of the area to private parties and the same was required for exploitation by the State itself. There was an overall shortage of chromite in the state and it was intended that the ores raised from the area would feed the industries run by the State in the public sector. On 10-6-1965 Tulloch filed a revision petition before the Union of India (opposite party No. 1) under Rule 54 of the Mineral Concession Rules, 1960 (hereinafter to be referred to as the Rules) against the order (Annexure I ). Comments were invited from the petitioner by opposite party No. 1 under Rule 55, The petitioner in reply pointed out by the letter (Annexure II) dated 16-7-1966 that the State had a limited deposit of hard and lumpy chromite in the districts of Keonjhar, Cuttack and Dhenkanal and that the State Government had decided not to grant any mineral concession for chromite ore to private parties considering the importance of that ore for future industrial use and over-all shortage of chromite. The petitioner also pointed out that it had already set up a public undertaking in the name of Orissa Industrial Development Corporation which was going ahead with a ferro chrome plant and for that purpose both industrial and import licence had been obtained from the Government of India as it had been decided by the petitioner that the Orissa Mining Corporation, an undertaking of the Government itself, would work out the chromite ores held by the State. For utilisation of the ores in the ferro chrome plant and other industrial undertakings of the State the petitioner had recommended to opposite party No. 1 that the revision petition filed by Tulloch should be rejected. In Annexure III dated 19-6-1967 opposite party No. 1 rejected the revision petition with the following observation:--"since the State Government has decided not to grant mineral concession for chromite to private parties over the area as they want to exploit the mineral in the public sector, the State Government's order of rejection of the renewal application does not appear to be illegal and there are no grounds for interfering with the decision of the Government of Orissa. . . . . " opposite party No. 2 applied for mining lease of 187. 03 acres in respect of chromite mineral ores out of the total area of 462. 16 acres. The application was not taken into consideration by the State Government as it did not want to lease out that area. As the application was not disposed of within nine months from the date of its receipt it was deemed to have been refused under Rule 24 (3) Opposite party No. 2 filed a revision petition before opposite party No. 1 under Rule 54. In annexure IV dated 6-11-1968 the petitioner furnished its comments on the revision petition. Therein the petitioner stated that Tulloch's renewal application had been rejected on the ground that the State Government would not grant mineral concession over the area to any private party and the said decision had been affirmed by opposite party No. 1 in the public sector. In exercise of its revisional powers under Rule 55 opposite party No. 1 directed the petitioner by an order (Annexure V) dated 18-2-1969 to grant mining lease for chromite over the area in favour of opposite party No. 2 after relaxing the provisions of Rule 58 (1) (b) under Rule 58 (2 ). The petitioner's point was that the ferro chrome plant set up by it in the public sector was expected to go into production shortly and would be up to 12,00,000 tonnes. Taking the future expansion of the plant into account it was estimated that the total requirement of chrome for the plant would go up to two million tonnes in future. The proved reserves of chromite ores in the State including the deposits in mines held by private parties being less than the requirements estimated above and the present known deposit of hard and lumpy chromite ore in the mines vested in the State being very much inadequate, uncertainty hinged around the ferro chrome plant set up by the petitioner at a huge cost. The petitioner's stand is that Rule 58 (2) could be invoked only when any area was available for grant and not when the area in question was not open to be leased out at all. The impugned order (Annexure V) on the face of it is discriminatory as the ground on which Tulloch's renewal application was rejected was not kept in mind when allowing the application of opposite party No. 2. The direction for grant of mining lease in favour of opposite party No. 2 was not in consonance with the industrial Policy Resolution of 1956 wherein opposite party No. 1 declared that mining of ore was in the exclusive ownership of the State. It was alleged that opposite party No. 1 did not disclose its interest in opposite party No. 2 which in fact it had through the Life Insurance Corporation of India and the Unit Trust of India, both of whom are stated to have invested in shares in opposite party No. 2 and there was no justification for exercising preference in favour of opposite party No. 2 adversely to the interest of the Orissa Industrial development Corporation and the Orissa Mining Corporation. The petitioner averred that Mines and Minerals (Regulation and Development) Act, 1957 (Central Act 67 of 1957) (hereinafter to be referred to as the Act) is ultra vires the Constitution. It was further asserted that the rules are also ultra vires the constitution and the Act. The two main prayers in the writ application are to declare the Act and the Rules ultra vires the Constitution, and quash the impugned order (Annexure V) whereby opposite party No. 1 directed the petitioner to grant lease of the disputed area for mining to opposite party No. 2.

(2.) OPPOSITE Parties Nos. 1 and 2 filed two separate counter-affidavits. Essentially, however, their stand is the same. In paragraph 3 of the counter-affidavit of opposite party No. 1 it was admitted that the area in question was reserved by the state Government for exploitation in the public sector. The case of the opposite parties is that the area applied for by opposite party No. 2 which had been previously exploited by Tulloch contained good deposit of minerals and could be exploited immediately without further prospecting. Opposite party No. 2 had been granted an industrial licence for setting up a ferro chrome plant with foreign collaboration and had established the factory. The rules recognise the principle that parties who are in a position to make use of mineral for further production as opposed to parties who conduct mining operation only for the purpose of sale of minerals should be preferred. It is not in the interest of mineral development that the State Government should keep large area in the State idle. It was considered to be in the interest of mineral development of the State in case opposite party no. 2 was allowed to exploit immediately areas containing good deposit of chrome which is a very important item in the manufacture of high grade steel and other alloys greatly needed by the country. Considering all these factors the Central government directed the State Government to grant mining lease in respect of this area. Opposite party No. 1 took into consideration the fact that the State Government although it had reserved very large areas of more than 35 sq. miles for working mines in the public sector since long, it had not yet installed any factory based on the minerals in the area and prospecting in those areas had not been done by it. The State Government had no immediate scheme of prospecting or undertaking the mining operation in those areas. Besides, the Life Insurance Corporation and unit Trust of India and the Andhra Pradesh Industrial Development Corporation had made investment in opposite party No. 2 which is also a kind of public limited company. In the best interest of the industrial development of the country there should be proper distribution of the area between the State and individual or between the public sector and private sector undertakings. There was a denial of the averment that opposite party No. 1 bypassed the Industrial Policy Resolution of 1956. The State Government had been keeping vast areas reserved for a long time without having any immediate scheme for mining them and the area in question was simply lying idle. The Act and the Rules are constitutional and the high Court of Orissa has no jurisdiction as under Article 131 of the Constitution any dispute between the State and the Union is entertainable only in the Supreme court. Opposite party No. 2 traversed almost the same grounds and took a further plea that the State Government cannot maintain the writ application under Articles 226 and 227 of the Constitution.

(3.) THE learned Advocate-General for the State of Orissa raises the following contentions:- (i) The Act is beyond the legislative competence of Parliament and the rules are ultra vires the Act and the Constitution. (ii) Opposite party No. 1 had no jurisdiction to relax the requirement of rule 58 (1) (a) and (b) under Rule 58 (2), the area being not available for grant as the same had been reserved by the State for its own exploitation and the impugned order interferes with the proprietary rights of the State and discharge of its executive functions in respect of subjects enumerated in List II of the Seventh Schedule of the constitution. (iii) The impugned order is contrary to, and inconsistent with the earlier order (Annexure III) dated 19-6-1967 rejecting Tulloch's application for renewal and is hit by Article 14 of the Constitution. (iv) The impugned order shows undue, favour to opposite party No. 2 to the prejudice of the public sector undertakings set up by the petitioner and is mala fide inasmuch as opposite party No. 1 has interest in opposite party No. 2 through the Life Insurance Corporation of India and the Unit Trust of India.