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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2206 OF 2013
(Arising out of S.L.P. (C) No.16139 of 2010)
State of Orissa & Ors. …Appellants
Versus
M/s Mesco Steels Ltd. & Anr. …Respondents
J U D G M E N T
T.S. THAKUR, J.
1. Leave granted.
2. This appeal arises out of a judgment and order dated
16th May, 2008 passed by the High Court of Orissa at
Cuttack whereby Writ Petition No.14044 of 2006 filed by the
respondent-company has been allowed, an interdepartmental
communication in the form of a letter dated
19th September, 2006 addressed by the Director of Mines to
Joint Secretary to Government of Orissa quashed and by
writ of mandamus the State Government directed to
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execute a mining lease for an area measuring 1519.980
hectares in favour of the respondent-company.
3. By Notification No.647/91 dated 23rd August, 1991, the
Government of Orissa de-reserved and threw open
Iron/Manganese Ore areas spreading over 282.46 square
miles in five blocks located in Keonjhar and Sundergarh
districts in the State. Applications were then invited from
interested private parties in terms of Rule 59 of the Mineral
Concession Rules, 1960 for grant of prospecting licenses and
mining leases in respect of the said blocks. The exercise
was, it appears, intended to boost the economy of the State
by ensuring optimum utilisation of its mineral reserves and
in the process generating employment opportunities for the
predominantly tribal population inhabiting the two districts
of the State. The invitation to apply for leases and to set up
steel plants was open to all leading steel manufacturers.
4. In response to the advertisement notice applications
were received from different parties including one filed by
respondent-Mesco Steels Ltd. These applications appear to
have been evaluated, culminating in a conditional
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recommendation made by the State Government in favour
of the respondent-company.
One of the conditions which the
State Government imposed in exercise of its power under
Rule 27 (3) of the Mineral Concession Rules, 1960 required
that the lessee shall set up two full-fledged Steel Plants
within a reasonable time to be intimated by the lessee at
the time of issue of the terms and conditions for the grant of
the proposed mining lease.
The other condition required
that the lessee would utilise the entire iron ore extracted
from the lease area for meeting the captive requirement of
the Steel Plants to be set up at Duburi and Jakhapura and
that no commercial trading of the mining material shall be
carried out by it.
5. By an order dated 7th January, 1999 the Government
of India, Ministry of Steel and Mines, Department of Mines,
conveyed the approval of the Central Government for grant
of the mining lease for extraction of iron ore from an area
measuring 1011.480 hectares in villages Kadakala and
Luhakala besides an area measuring 508.500 hectares in
villages Sundara and Pidapokhari in district Keonjhar for a
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period of 30 years. The approval was subject to the State
Government ensuring compliance of the amended provisions
of the Mines and Minerals (Regulation and Development)
Act, 1957 and the Rules made thereunder besides the
provisions of the Forest (Conservation) Act, 1980 and
Notification dated 27th January, 1994 issued in terms
thereof.
6. On receipt of the approval from the Central
Government the State Government conveyed to the
respondent-company the terms and conditions subject to
which it proposed to grant a mining lease for mining of iron
ore from the area mentioned above which included 377.690
hectares of forest land in villages Sundara and Pidapokhari
of Keonjhar district.
A letter dated 8th February, 1999 issued
by the State Government to the respondent-company
stipulated the terms and conditions that would govern the
proposed mining lease and required the respondent company to convey its acceptance to the same.
In response,
the respondent-company by its letter dated 15th February,
1999 conveyed its unconditional acceptance of the terms
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and conditions stipulated in the letter mentioned earlier.
The
acceptance letter was followed by another letter dated 13th
March, 1999 by which the respondent-company informed
the State Government that it had already taken steps for
preparation of a mining plan and initiated action for
preparation and approval of de-reservation proposal for the
mining lease in village Sundara and Pidapokhari over an
area measuring 508.500 hectares said to be forest land.
What is significant is that the respondent-company also
pointed out that it was on the verge of completion of its
Steel Plant at Kalinga Nagar, Industrial Complex, Sukinda,
P.O. Danagadi, District Jajpur, Orissa which was expected to
be commissioned by April/May, 1999. The State
Government eventually sanctioned the grant of a lease in
favour of the respondent-company to the extent indicated
earlier in terms of its order dated 17th March, 1999.
7. By a letter dated 19th June, 2000 addressed to the
respondent-company the State Government pointed out
that the company had failed to submit the required mining
plan and obtain the approval of Ministry of Environment and
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Forest, Government of India, in regard to forest land
involved in the proposed mining lease despite extension of
time allowed to the respondent-company by the
Government in terms of its letter dated 11th October, 1999.
The State Government further pointed out that on account
of the company’s inaction in the matter of setting up the
proposed two steel plants, IDCO had initiated action for
cancellation of allotment of 3100 acres of land allotted in
favour of MESCO Kalinga Steel Plant, the sister concern of
the respondent-company, for the proposed steel plant,
captive power plant and township.
The letter in that
backdrop invited the respondent-company for a personal
hearing in terms of Rule 26(1) of the Mineral Concessions
Rules, 1960 to discuss whether the iron ore required by the
respondent-company for the steel plant which was already
in existence could be assessed to enable the company to
retain the iron ore deposits required for the said plant and
restore back the remainder to the Government.
8. The respondent-company acknowledged receipt of the
letter above mentioned and, inter alia, pointed out that the
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mining plan for the entire area had been prepared and
submitted separately on 31st January, 2000. It was also
pointed out that out of the total extent covered by the
proposed lease only 508.500 hectares was forest land for
which extent alone was a diversion proposal required to be
submitted. It also referred to certain other steps taken by
the company like survey and demarcation of the area which
was underway. More importantly, the company stated that it
had already invested Rs.57.12 crores in the project but had
to put the same on hold on account of the steel market
passing through a lean phase because of which all steel
majors were facing problems due to a glut in the market.
The respondent-company claimed to have undertaken
substantial work for developing the mine including financial
participation by a Canadian company and assured the
Government that the proposed project would create
enormous job opportunities for the people of Orissa.
9. For nearly four years thereafter the matter appears to
have remained pending for a final decision at different
administrative levels in the Government. What is significant
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is that by letter dated 26th May, 2004 the Director of Mines,
Orissa, wrote to the Joint Secretary, Department of Steel
and Mines, Government of Orissa, inter alia, pointing out
that an area measuring 469.25 hectares included in the
proposed lease in favour of the respondent-company was
overlapping with the area recommended for allotment to the
Orissa Mining Corporation Ltd. and that even though the
Government had moved for elimination of the said
overlapping area in terms of Director’s letter dated 1st June,
2000, no formal Government order in the matter had been
received. The Director further pointed out that D.F.O.,
Keonjhar had reported in terms of its letters dated 15th
January, 2004 and 7th February, 2004 that major portion of
the surveyed and demarcated area came under Khandadhar
D.P.F. and was reported to be forest land as per column 7 of
the D.L.C. report to which effect an affidavit had also been
filed before this Court by the State Government. It was also
mentioned that the Mining Officer had reported that an area
measuring 692.6953 hectares out of the surveyed and
demarcated area of 802.6678 hectares came under forest
land which attracted the provisions of Forest Conservation
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Act, 1980. Clearance from the Ministry of Environment and
Forests, Government of India, was, therefore, absolutely
necessary for execution of any mining lease in respect of the
said area and till such time this essential pre-condition was
not fulfilled, the execution of the lease deed was not legally
permissible. By another letter dated 19th September, 2006,
the Director of Mines recommended re-allocation of
resources based on the requirement of iron ore for the
existing steel plant set up by the respondent-company. It
was further recommended that the respondent-company
should not be permitted to carry on any trading activity in
iron ore removed from the area to be allocated in its favour
based on its actual requirement for the existing unit.
10. Aggrieved by the said inter-departmental
communication the respondent-company filed Writ Petition
No.14044 of 2006 before the High Court of Orissa at
Cuttack in which the company prayed for quashing of the
recommendations made by the Director of Mines proposing
to reduce the lease area granted to the respondentcompany and prayed for a mandamus directing the State
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Government to execute the mining lease in respect of the
entire 1519.980 hectares of land in the villages mentioned
earlier. By an order dated 1st February, 2007 the High Court
directed maintenance of status quo. Despite the said order,
however, the Government of Orissa issued a notice dated 6th
February, 2007 by which it called upon the respondent company
to show cause as to why the overlapping area of
469.25 hectares of the State PSU and 921.258 hectares
granted in excess of the captive requirement of the unit set
up by the respondent-company may not be deducted from
the total mining lease area of 1519.980 granted to the
company. The High Court ignored the show cause notice
primarily on the ground that the same had been issued in
the teeth of the interim order by which the parties had been
directed to maintain status quo, and eventually came to the
conclusion that the proposed reduction of the mining lease
area whether on account of the alleged overlapping of the
areas with the area approved for Orissa Mining Corporation
or on account of the failure of the respondent-company and
its sister concern to set up the second steel plant was not
justified. The High Court held that although the State
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Government had not issued any final order so far regarding
the deduction of the area yet since a final decision appeared
to have been taken by it, thereby implying that the issue of
a show cause notice after taking of such a decision was a
mere formality. In coming to that conclusion, the High Court
placed reliance upon paragraph 8 of the counter affidavit
filed by the State Government before the High Court. The
High Court also held that in the absence of a mining lease in
favour of the respondent-company, it could not take the risk
of setting up of a steel plant. The High Court accordingly
quashed letter dated 19th September, 2006 and by
mandamus directed the State Government to execute a
formal mining lease in favour of the respondent-company.
The present appeal assails the correctness of the said
judgment of the High Court as already noticed earlier.
11. Appearing for the appellant, Mr. U.U. Lalit, learned
senior counsel, made a three-fold submission before us.
Firstly, he contended that the writ petition filed by the
respondent-company was manifestly premature as the
Government had not taken any final decision that could have
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been challenged by the respondent-company nor was the
writ petition, according to the learned counsel, maintainable
against a mere inter-departmental letter dated 19th
September, 2006, which did not by itself finally decide any
right or obligation of the parties so as to furnish a cause of
action to the respondent to challenge the same in the extra
ordinary writ jurisdiction of the High Court. Secondly, it was
contended that even if the letter could be described as a final
decision taken by the State Government in regard to the
reduction of the lease area, the respondent-company ought
to have taken recourse to proceedings under Section 30 of
the Act before the Central Government instead of rushing to
the High Court in a writ petition. Thirdly, it was contended
that the very issue of a show cause notice to the respondent company
suggesting reduction of the lease area after
assessment of the actual requirement by reference to the
plant already set up, meant that the Government had not
taken any final decision in the matter and that the
respondent-company could say whatever it intended to say
in opposition to the action proposed in the show cause notice
where upon the Government could notify a final order on the
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same, which order could then be challenged by the
respondent-company either before the Central Government
or before the High Court in a writ petition if otherwise
permissible. Inasmuch as the High Court ignored the show
cause notice and proceeded on the assumption that the
same was an exercise in futility, it fell in a serious error,
argued Mr. Lalit. The proper course, according to the learned
counsel, was to allow the State Government to take a final
view on the show cause notice after considering the response
which the respondent-company may have to make.
12. On behalf of the respondent-company it was contended
by Mr. Rakesh Dwivedi, learned senior counsel, that although
the show cause notice issued by the appellant-State had not
been specifically challenged in the writ proceedings before
the High Court, this Court could look into the notice and
examine whether the same had been validly issued on
grounds and material that are legally tenable. He urged that
although the State Government may be competent to recall
its recommendations in exceptional situations, any such
exercise of powers of recall can never be exercised arbitrarily
or whimsically. At any rate, the exercise of power of recall
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was, according to the learned counsel, wholly unjustified in
the facts and circumstances of this case as the whole
attempt of the Government appeared to be to somehow
deprive the respondent-company of the benefit of the mining
lease already sanctioned in its favour. It was also contended
that the question of overlapping of the area had since been
examined and rejected by the State Government as was
apparent from the Minutes of the Meeting held in the office of
the Chief Minister on 29th October, 2001, a copy whereof has
been placed on record as Annexure R-1. It was also
contended that the State Government was making much ado
about nothing regarding the setting up of the second steel
plant and that the same was no more than a pretext to deny
to the respondent-company its rightful due under the
sanction order issued by the Central Government and the
grant made by the State. It was contended by Mr. Dwivedi
that the requirement of an approved mining plan which was
one of the conditions for the grant of lease had already been
complied with while the execution of a lease deed could be
made subject to the clearance of the project and the grant of
a no objection by the Ministry of Environment and Forest
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under Section 2 of the Forest (Conservation) Act, 1980. The
order passed by the High Court could to that extent be
modified, argued Mr. Dwivedi. Inasmuch as the High Court
had not taken note of the requirement of such clearance
being essential not only under the Act aforementioned but
also because of the directions issued by this Court in T.N.
Godavarman Thirumulkpad v. Union of India & Ors.
(1997) 2 SCC 267, it had no doubt committed a mistake
but that did not warrant, setting aside of the entire order
passed by the High Court.
13. We have given our anxious consideration to the
submissions made at the bar.
The following questions, in our
opinion, arise for determination:
(1) Whether the writ petition filed by the respondent company was premature, the same having been filed against
an inter-departmental communication that did not finally
determine any right or obligation of the parties?
(2) Whether the show cause notice could be ignored by the
High Court simply because it had been issued in violation of
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the interim order passed by it requiring the parties to
maintain status quo?
(3) Whether the show cause notice was without jurisdiction
and could, therefore, be quashed?
14. We propose to deal with the questions ad seriatim.
Regarding Question No.1
15. The writ petition, as already noticed above, was
directed against a communication that had emanated from
the office of Director of Mines and brought forward certain
factual aspects relevant to the question whether a lease deed
could be immediately executed in favour of the respondent company.
A careful reading of the said communication would
show that it was issued in pursuance of a letter dated 12th
January, 2006 from the Joint Secretary, Government of
Orissa to the Director of Mines and another letter dated 29th
August, 2006. By the former letter the Joint Secretary to the
Government had instructed the Director of Mines to take
action pursuant to certain directions issued by the Chief
Minister of Orissa. This included making a real assessment of
the requirement of respondent-company and permitting
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execution of a lease deed subject to clearance of the Ministry
of Environment and Forest, Government of India. The
instructions issued to the Director of Mines also required him
to resume the excess area for reallocation of the same to
other deserving parties. The Director of Mines had responded
to the said communication and assessed the mineral deposits
in the area by reference to maps and surveys and made a
recommendation back to the State Government. It is obvious
from a conjoint reading of letter dated 12th January, 2006
and communication dated 19th September, 2006 sent by the
Director of Mines in response thereto that a final decision on
the subject had yet to be taken by the Government, no
matter the Government may have provisionally decided to
follow the line of action indicated in its communication dated
12th January, 2006 issued under the signature of the Joint
Secretary, Department of Steel and Mines. It is noteworthy
that there was no challenge to the communication dated 12th
January, 2006 before the High Court nor was any material
placed before us to suggest that any final decision was ever
taken by the Government on the question of deduction of the
area granted in favour of the respondent so as to render the
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process of issue of show cause notice for hearing the
respondent-company an exercise in futility. On the contrary,
the issue of the show cause notice setting out the reasons
that impelled the Government to claim resumption of a part
of the proposed lease area from the respondent-company
clearly suggested that the entire process leading up to the
issue of the show cause notice was tentative and no final
decision on the subject had been taken at any level. It is only
after the Government provisionally decided to resume the
area in part or full that a show cause notice could have been
issued. To put the matter beyond any pale of controversy,
Mr. Lalit made an unequivocal statement at the bar on behalf
of the State Government that no final decision regarding
resumption of any part of the lease area has been taken by
the State Government so far and all that had transpired till
date must necessarily be taken as provisional. Such being
the case the High Court was in error in proceeding on an
assumption that a final decision had been taken and in
quashing what was no more than an inter-departmental
communication constituting at best a step in the process of
taking a final decision by the Government.
The writ petition
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in that view was pre-mature and ought to have been
disposed of as such. Our answer to question No.1 is
accordingly in the affirmative.
Regarding Question No.2
16. In the light of what we have said while deciding
question No.1 above, this question should not hold us for
long. It is true that the High Court had by an interlocutory
order directed the parties to maintain status quo, but
whether the said order had the effect of preventing the State
Government from issuing a show cause notice was arguable.
The issue of show cause notice did not interfere with the
status quo. It simply enabled the respondent-company to
respond to the proposed action. Be that as it may, once the
show cause notice was issued, the High Court could have
directed the respondent-company to respond to the same
and disposed of the writ petition reserving liberty to it to take
recourse to such remedy as may have been considered
suitable by it depending upon the final order that the
Government passed on the said notice. What was significant
was that the respondent-company had not assailed the
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validity of the show cause notice on the ground of jurisdiction
or otherwise. If the validity of the show cause notice was
itself in question on the ground that the Government had no
jurisdiction to issue the same, nothing prevented the
company from maintaining a writ petition and challenging the
notice on that ground. The High Court would in that event
have had an opportunity to examine the validity of the
notice. In the absence of any such challenge the High Court
could not simply ignore the notice even if it was issued in
breach of the order passed by the Court. It was one thing to
prevent further steps being taken pursuant to the notice
issued by the Government but an entirely different thing to
consider the notice to be non est in the eye of law. The High
Court could have taken the show cause notice as a reason to
relegate the parties to a procedure which was just and fair
and in which the respondent could urge all its contentions
whether on facts or in law. Our answer to question No.2 is,
therefore, in the negative.
Regarding Question No.3
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17. Although it is not necessary for us now to examine the
question of validity of the show cause notice as the same was
not questioned before the High Court in the writ petition filed
by the respondent-company, we may to the credit of Mr.
Dwivedi, learned senior counsel appearing for the
respondent-company, mention that he did not seriously
challenge the validity of the notice on the ground of
jurisdiction. Mr. Dwivedi fairly conceded that the State
Government could, in appropriate situations, exercise the
option of recalling or modifying its recommendations but
contended that the present case did not present a situation
that could justify such a recall.
18. We do not propose to make any comment or express
any opinion to the merits of the show cause notice. So long
as the notice is not without jurisdiction as indeed it does not
appear to be so, the question whether the grounds taken in
the same provide a good basis for proposed action can be left
open for the Government to decide. All that we need say is
that learned counsel for the parties made detailed
submissions in regard to the grounds given in the notice and
the validity thereof from their respective points of view and
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in support of their respective versions. Some of these
grounds and submissions were quite attractive also. But so
long as the matter is yet to be examined by the State
Government, we consider it unnecessary to prejudice the
issues or express any opinion about the merits of the said
contentions on either side. The proper course, in our opinion,
would be to leave the contentions available to the parties
open for being determined by competent authority in the
Government who would, in our opinion, do well to carefully
consider the reply which the respondent may submit to the
said show cause notice and pass a reasoned order on the
subject. Question No.3 is answered accordingly.
19. In the result we allow this appeal, set aside the
judgment and order passed by the High Court and direct that
the respondent-company shall submit its reply to the show
cause notice dated 6th February, 2007 issued by the State
Government within three months from today. The
Government may then upon consideration of the reply so
submitted pass a reasoned order on the subject within two
months thereafter under intimation to the respondent. If the
order so made is, for any reason found to be unacceptable by
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the respondent-company, it shall have the liberty to take
recourse to appropriate proceedings before an appropriate
forum in accordance with law.
20. Parties are left to bear their own costs.
……………………………..…J.
(T.S. Thakur)
..…………………………..…J.
New Delhi (Gyan Sudha Misra)
March 6, 2013
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