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Friday, April 15, 2016

The rule of promissory estoppel can be invoked only if on the basis of representation made by the Government, the party has substantially altered the position. Within short time of ten days, in my view, first respondent could not have altered its position so as to invoke the doctrine of promissory estoppel.= No doubt by G.O (MS) No.105/04/ID dated 15.09.2004, State has sanctioned mining leases to the first respondent. But within ten days by order dated 25.09.2004, the mining lease granted to first respondent was stopped on the ground that the detailed study on the environment impact will be undertaken before taking further action in the matter.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL NO. 3608 OF 2016
                 (Arising out of S.L.P.(C) No.1490 of 2015)


State of Kerala & Ors.            ..Appellants

                                   VERSUS

M/s Kerala Rare Earth & Minerals
Limited & Ors.                         ..Respondents

                                    WITH

                        CIVIL APPEAL NO. 3609 OF 2016
                 (Arising out of S.L.P.(C) No.1840 of 2015)

State of Kerala & Ors.            ..Appellants

                                   VERSUS

M/s. Kerala Rare Earths & Minerals
Limited & Ors.                         ..Respondents

                                    WITH

                       CIVIL APPEAL NO. 3610  OF 2016
                  (Arising out of S.L.P(C) No.1914 of 2015)

State of Kerala & Ors.            ..Appellants

                                   VERSUS

M/s. Kerala Rare Earths & Minerals
Limited & Ors.                         ..Respondents
                               J U D G M E N T
T.S. THAKUR, CJI.
1.   Leave granted.

2.    These appeals arise out of a common  judgment  and  order  dated  13th
November, 2014 passed by the High Court of  Kerala  at  Ernakulam,  whereby,
Writ Appeals Nos.1610, 1611 and 1621 of 2014 filed by  the  appellants-State
of Kerala have been dismissed affirming thereby an order passed by a  Single
Bench of that Court, allowing the writ petitions filed by the respondent.

3.    By an order dated  15th  September,  2004  the  Government  of  Kerala
sanctioned the grant of  mining  leases  for  Ilmenite,  Rutile,  Leucoxene,
Zircon and Sillimanite (non-scheduled mineral) for a  period  of  20  years.
The order came in exercise of the powers  vested  in  the  State  Government
under Section 11(5) of the Mines and Minerals (Development  and  Regulation)
Act, 1957 and was preceded by the approval of the  Government  of  India  in
terms of Section 5(1) thereof. Shortly  after  the  issue  of  the  sanction
order, however, the State Government by another order dated 25th  September,
2004 stayed further action in the matter  on  the  ground  that  a  detailed
study on the environmental impact of the proposed leases need be  undertaken
before taking any further steps. This was followed  by  nine  letters  dated
12th October, 2006, 16th October, 2006 and 9th November, 2006  addressed  to
the respondent-company stating in no uncertain terms that the Government  of
Kerala did not consider it necessary to  grant  mining  leases  for  mineral
sand to private parties. Aggrieved by the said letters  and  communications,
the respondents filed nine revision  applications  No.  14(1)/2007-RC-II  to
14(3)/2007-RC-II and 14(6)/2007-RC-II to 14(11)/2007-RC-II under Section  30
of the Act aforementioned before the Government  of  India.  These  revision
applications were heard and allowed by the prescribed  revisional  authority
by a common order dated 30th November,  2009,  setting  aside  the  impugned
orders and remanding the matters to the State Government to  reconsider  the
cases in the light of the observations made  in  the  order  passed  by  the
revisional authority. The operative portion  of  the  order  passed  by  the
revisional authority was in the following words:

      “......... 9. After hearing both the sides, we  find  that  the  State
Government had recommended the mining lease applications  of  the  applicant
for seeking prior approval of  the  Central  Government  in  line  with  the
policy resolution dated 22.10.2002. In 7 cases the  Central  Government  had
also accorded its prior approval under Section 5(1) of the  MMDR  Act,  1957
for the proposal of the State Government  for  grant  of  mining  lease  for
mineral sand in favour of the revision applicant.  The impugned orders  have
been passed by the State Government after obtaining the  prior  approval  of
the Central Government in 7 cases, the State Government is required to  pass
order under Section 10(3) of the MMDR Act. In all  the  9  cases,  including
those in which prior approval of Central Government has been  conveyed,  the
impugned orders passed by the State Government are against competitive  edge
of the mining industry. The policy decision of the State Government  appears
to be not in consonance with  the  MMDR  Act,  1957  and  also  against  the
National Mineral Policy, 2008.

       10.    The  impugned  orders  in  all  the  9  revision  applications
mentioned above are set aside with a direction to the  State  Government  to
reconsider nil 9 cases in the light of the discussions made in para 9  above
and pass appropriate orders accordingly.

|Sd/-                        |Sd/-                       |
|(R. Raghupathi)             |(Ajita Bajpal Pande)       |
|Joint Secretary and Legal   |Joint Secretary (Mines)”   |
|Advisor                     |                           |


4.    Upon remand, the Government of Kerala once again examined  the  matter
and by an order dated 15th December,  2010  rejected  all  the  applications
filed by the respondents on the ground that although, as per Entry 54  List-
I (Union List), Schedule VII of the Constitution of  India,  the  Parliament
is competent to make laws for regulation of mines  and  mineral  development
to the extent such regulation and development is declared by the  Parliament
by law to be expedient in  public  interest,  yet,  the  power  of  granting
mining leases for mining minerals vested only in the State Government  under
Section 10 of the Act aforementioned. The Government referred to and  relied
upon its own industrial  policy  of  2007  according  to  which  mining  and
exploitation of minerals were permissible only through State/Central  Public
Sector  Undertakings  in  order  to  restrict  indiscriminate   mining   and
exploitations of minerals having regard in particular  to  the  geographical
and ecological conditions as well as the density of the  population  in  the
State of Kerala. The State Government took the view that it  had  the  power
and control over the minerals lying in the land  within  its  territory  and
that it was entitled to safeguard the same  in  larger  public  interest  by
formulating suitable policies on the subject.  Relying  upon  the  decisions
of the High Court of Kerala in Shibu v. Tahsildar [1993  (2)  KLT  870]  and
Gem Granites v. State of Kerala and Ors. [2006 (2) KLT 899]  the  Government
declared that as the owner of the minerals lying  in  the  land  within  its
territorial limits it was entitled to  determine  in  public  interest  that
mining  and  exploitation  of  minerals  will  be  permitted  only   through
State/Central Public Sector  Undertakings.  The  State  Government  insisted
that such a policy was not contrary to the Act nor did it  suffer  from  any
constitutional infirmity. It also relied upon  the  fact  that  minerals  in
question were categorised as Atomic Minerals as  per  Part-B  of  the  First
Schedule  to  the  Act  aforementioned.   The   Government   declared   that
environmental protection being  one  of  its  constitutional  mandates,  any
decision that may affect environment or sections of  people  living  in  the
coastal areas or which may affect environmental conditions  in  those  areas
cannot be said to be in public interest.

5.    Aggrieved by the order passed by the State Government, the respondent-
company filed Writ Petitions No.34345 of 2010, 34346 of  2010  and  5420  of
2011 before the High Court of Kerala  inter  alia  praying  for  a  writ  of
mandamus directing the State to implement the  revisional  order  issued  by
the Government of India and  grant  in  favour  of  the  respondents  mining
leases in respect of all the areas which were  the  subject  matter  of  the
said order. The respondents also prayed for  a  declaration  to  the  effect
that the order passed by the Central Government in exercise  of  its  powers
under Section 30 of the  Act  aforementioned  was  binding  upon  the  State
Government and that any policy decision by the State Government contrary  to
the said decision will not affect the rights of the  respondents  to  obtain
mining leases for the areas applied for. The respondent also  prayed  for  a
mandamus directing the State Government to  forward  to  the  Government  of
India for approval all the mining lease applications made by the respondent-
Company which had not so far been forwarded for such approval.

6.    By an order dated 21st February, 2013 passed  by  a  Single  Judge  of
High Court of Kerala, the Writ Petitions mentioned  above  were  allowed  in
part by the High Court inasmuch as the order passed by the State  Government
was quashed and the matter remitted back to the Government  to  pass  orders
in the light of the observations made by the High  Court.   The  High  Court
quashed the order by which further action in the matter was  stayed  by  the
Government with a direction to the Government to consider  the  applications
pending with it in accordance with law. The High Court took  the  view  that
the State Government had not reserved, in terms of Section 17  A(2)  of  the
1957 Act, the areas covered by the applications  filed  by  the  respondents
and that so long as no such reservation was made, the  direction  issued  by
the  Central  Government  to  the  State  Government   to   reconsider   the
applications could not be negated. The High Court also held that  the  State
Government had overlooked the provisions of  the  National  Mineral  Policy,
2008, which permitted facilitation of private entrepreneurs and  that  since
the Government of Kerala had already exercised its discretion  in  terms  of
the prevalent Mining Policy and recommended to the Government of  India  the
grant of approval for mining leases, the rejection of  the  applications  on
the basis of a changed policy after the Government  of  India  had  accorded
sanction for the proposed mining leases  was  unjustified.  The  High  Court
also took note of the fact that Government  of  Kerala  had  granted  mining
lease in respect of the area covered by four  other  applications  and  that
there could not be different policies in respect of different areas  covered
by different applications made by the same Company.

7.    Aggrieved  by  the  order  passed  by  the  Single  Judge,  the  State
Government preferred Writ Appeals No.1610, 1611 and 1621 of 2014 which  were
heard and dismissed by a Division Bench of that Court in terms of the  order
impugned in the present appeals. The High Court, while doing so,  held  that
the State Government was not justified in declining  mining  leases  on  the
ground that it had been  simply  directed  to  reconsider  the  matter.  The
refusal of  the  Government,  according  to  the  High  Court,  amounted  to
institutional insubordination. The appeals were accordingly  dismissed  with
the observation that the State Government’s role  in  issuing  the  sanction
was minimal, as the subject matter of the law  fell  within  the  domain  of
Central Government.  The present  appeals  by  special  leave  question  the
correctness of the above order, as already noted above.

8.    The law relating to mines and minerals development and  regulation  as
also the interpretation of the provisions of  the  1957  Act  has  been  the
subject matter of a long line of decisions of this Court.   It  is,  in  our
view, unnecessary to  refer  to  all  such  decisions  as  have  dealt  with
different facets of the controversy relating to the powers  of  the  Central
Government and those of the State Governments in relation to regulation  and
development of mines and minerals including the power  to  levy  taxes,  fee
and cesses and royalties. Decisions of this Court in Hingir-Rampur Coal  Co.
Ltd. v. State of Orissa [AIR 1961 SC 459]; State of Orissa v.  M.A.  Tulloch
and Co. [AIR 1964 SC 1284];  India  Cement  Ltd.  v.  State  of  Tamil  Nadu
[(1990) 1 SCC 12]; Orissa Cement Ltd. v. State of Orissa [1991 Supp (1)  SCC
430]; State of Orissa  v.  Mahanadi  Coalfields  Ltd.  [1995  Supp  (2)  SCC
686]; Saurashtra Cement & Chemical Industries Ltd. and Anr.   v.   Union  of
India and Ors. [(2001) 1 SCC 91]; and State of Madhya Pradesh  v.  Mahalaxmi
Fabric Mills Ltd. [1995 Supp(1) SCC 642] have  elaborately  dealt  with  the
legislative power of the States to  levy  taxes,  fees  and  cesses  on  the
minerals regulated by the Act. Dealing with  various  hues  and  colours  of
such levies this Court held that once  the  Parliament  declares  it  to  be
expedient in public interest to bring  the  regulation  and  development  of
mines and minerals under the control of the Union in  public  interest,  the
subject to  the  extent  laid  down  by  the  Parliament  comes  within  the
exclusive domain of the Parliament and that any  legislation  by  the  State
after such declaration that has the effect  of  trenching  upon  the  field,
must necessarily be unconstitutional.

9.    We are not, in the present case, dealing with a challenge to the  levy
of any tax, fee, cess or  royalty  nor  is  the  vires  of  any  legislation
enacted by the State under challenge before us.  We are, instead,  examining
whether the State Government was justified  in  declining  the  applications
for grant of leases in favour of the respondent-company on the  ground  that
the mineral wealth found in the coastal regions of the State was  vested  in
the State Government and that it was in exercise of its right  of  ownership
over the said deposits entitled to reserve in its own favour  or  in  favour
of  State  owned  companies  or  corporations  the  right  to  exploit  such
deposits. The State Government  as  noticed  in  the  earlier  part  of  the
judgment has, while declining applications for grant of lease,  relied  upon
its own policy according to which  the  mineral  deposits  in  question  are
reserved for exploitation by a State agency  only.  Two  precise  questions,
therefore, fall for consideration in the light of the stance  taken  by  the
State Government viz:

Whether the ownership in  the  mineral  reserves  is  vested  in  the  State
Government; and
If it is, whether the Government has the right  to  decline  leases  on  the
ground that the minerals or the areas where the same  are  found  have  been
reserved for exploitation by government companies or corporations.

10.   In Monnet Ispat and Energy Limited v. Union of  India  and  Ors.  2012
(11) SCC 1, Lodha, J., as His Lordship then was,  speaking  for  the  Court,
held that no  one  can  claim  any  right  in  any  land  belonging  to  the
Government or in any mines in any land belonging to  the  Government  except
under the 1957 Act and 1960 Rules nor can any person claim  any  fundamental
right to a lease or prospecting  license  qua  any  land  belonging  to  the
Government.  The  mines  and  minerals,  observed  the  Court,  within   the
territory of a State would vest in the State Government especially when  the
land where such minerals deposits are found is owned by  the  Government  as
is also the position in the case at hand.  In fairness to  counsel  for  the
respondents it must be mentioned that there was no real dispute  as  to  the
ownership of the minerals found in  the  Government  owned  land.  What  was
strenuously argued by learned counsel  for  the  respondents  was  that  the
State Government could not, on the basis of its own mineral policy,  decline
consideration to the  applications  filed  by  the  respondents,  when  such
policy was in conflict with the mineral policy of the Government of India.

11.   The Mineral Policy 2008  of  the  Government  of  India,  inter  alia,
provides as under:
“4. ROLE OF THE STATE IN MINERAL DEVELOPMENT

The role to be played by the Central  and  State  Government  in  regard  to
mineral development has been extensively dealt in  the  Mines  and  Minerals
(Development and Regulation) Act, 1957 and Rules made under the Act  by  the
Central Government and the State Governments in  their  respective  domains.
The provisions of the Act and the Rules  will  be  reviewed  and  harmonised
with the basic features of the new National Mineral Policy.  In  future  the
core functions of the State in mining will be  facilitation  and  regulation
of  exploration  and  mining  activities  of  investors  and  entrepreneurs,
provision of infrastructure  and  tax  collection.   In  mining  activities,
there shall be arms length distance between State  agencies  (Public  Sector
Undertakings)  that  mine  and  those  that   regulate.   There   shall   be
transparency and fair play  in  the  reservation  of  ore  bodies  to  State
agencies on such areas where private players are not  holding  or  have  not
applied  for  exploration  or  mining,  unless  security  considerations  or
specific public interests are involved.

xxx              xxx              xxx

5.2   While these Government agencies will continue  to  perform  the  tasks
assigned to them for exploration and survey, the  private  sector  would  in
future be the main source of investment in  reconnaissance  and  exploration
and government agencies will expend public funds primarily  in  areas  where
private sector investments are not forthcoming despite the  desirability  of
programmes due to reasons such as high uncertainties.”


12.   It would thus appear that for the minerals in question  there  was  no
reservation made in favour of any State owned corporation  or  agency.  That
is perhaps the reason why the Government of India had  granted  approval  to
the State Governments recommendations on some of the applications  filed  by
the respondents. The State Government Policy, however, runs contrary to  the
National Mineral  Policy,  2008  formulated  by  the  Government  of  India,
Ministry of Mines, in so far as it does not permit a mining lease in  favour
of any entity other than a State owned corporation  or  agency.   The  State
Industrial Policy - 2007, relied  upon  by  the  State  Government  in  this
regard to the extent it is relevant for our purposes, is as under:

“12.0 MINING & GEOLOGY
12.1  Intensive  efforts  will  be  made  to  explore  and  utilize  mineral
resources  of  the  State  without  adversely  affecting  the  ecology   and
environment. Mineral exploration activities for iron ores, high grade  china
clay, bauxite and other minerals will be streamlined and strengthened.
12.2  Mining of mineral sand  will  be  done  through  State/Central  Public
Sector Undertakings only. However mining of minerals will not  be  permitted
in  those  areas   where   the   Government   appointed   Expert   Committee
recommendation against mining.  Government  will  encourage  manufacture  of
Value Added Products.
12.3  The Government will conduct a scientific study on mineral deposits  in
the State.

12.2.1 Titanium
Considering the rich mineral deposits in the State, a  comprehensive  scheme
to produce Titanium Metal, Titanium  composites  by  using  State-of-the-art
technology shall be evolved with the help  of  Central  Government  agencies
and International organisations.  If the potential of this natural  resource
is used properly and scientifically, it will immensely pave  way  for  rapid
industrialisation of  the  State  as  Titanium  is  a  unique  material  for
strategic applications.  The approach is not  to  limit  the  activities  to
manufacturing alone but to harness its vast potential by setting up a  chain
of Titanium based industries through forward integration.   However,  utmost
care shall be taken to contain the adverse impact on environment by  mining,
processing and related activities by adopting strict monitoring and  control
measures. To develop a package for making use of the  immense  potential  of
titanium,  support  shall  be  availed  from  national   and   international
organisations.”

13.   It is  argued  by  Mr.  Parasaran,  learned  senior  counsel  for  the
appellant that the policy aforementioned must be taken to be  a  reservation
in favour of the State owned agencies within the  comprehension  of  Section
17A of the aforementioned  Act.  Section  17A  of  the  Mines  and  Minerals
(Development and Regulation) Act, 1957 reads as under:

“17A. Reservation of areas for purposes of conservation. - (1)  The  Central
Government, with a view to conserving any  mineral  and  after  consultation
with the State Government, may reserve any area not already held  under  any
prospecting licence or mining lease and, where it  proposes  to  do  so,  it
shall, by notification in the Official Gazette, specify  the  boundaries  of
such area and the mineral or minerals in respect of which such area will  be
reserved.

(1A) The Central Government may in consultation with the  State  Government,
reserve any area not already held under any prospecting  licence  or  mining
lease,  for  undertaking  prospecting  or  mining   operations   through   a
Government company or corporation owned or controlled by it,  and  where  it
proposes to do so, it  shall,  by  notification  in  the  Official  Gazette,
specify the boundaries of such area and the mineral or minerals  in  respect
of which such area will be reserved.

(2) The State Government may, with the approval of the  Central  Government,
reserve any area not already held under any prospecting  licence  or  mining
lease,  for  undertaking  prospecting  or  mining   operations   through   a
Government company or corporation owned or controlled by  it  and  where  it
proposes to do so, it  shall,  by  notification  in  the  Official  Gazette,
specify the boundaries of such area and the mineral or minerals  in  respect
of which such areas will be reserved.

(2A) Where in exercise of the powers conferred by sub-section (1A)  or  sub-
section (2), the Central Government or the State  Government,  as  the  case
may be, reserves any area for undertaking prospecting or mining  operations,
the State Government shall grant prospecting licence  or  mining  lease,  as
the case may be, in respect of such  area  to  such  Government  company  or
corporation:

Provided that in respect of any mineral specified in Part A and  Part  B  of
the First  Schedule,  the  State  Government  shall  grant  the  prospecting
licence or mining lease, as the  case  may  be,  only  after  obtaining  the
previous approval of the Central Government.

(2B) Where the Government company or corporation  is  desirous  of  carrying
out the prospecting operations or mining operations in a joint venture  with
other persons, the  joint  venture  partner  shall  be  selected  through  a
competitive process, and such Government company or corporation  shall  hold
more than seventy-four per cent of the paid up share capital in  such  joint
venture.

(2C) A mining lease granted to a Government company  or  corporation,  or  a
joint venture, referred to in sub-sections (2A) and (2B), shall  be  granted
on payment of such amount as may be prescribed by the Central Government.

(3) Where in exercise of the powers conferred by sub-section  (1A)  or  sub-
section (2) the Central Government or the State Government, as the case  may
be, undertakes prospecting or mining operations in any  area  in  which  the
minerals vest in a private person, it shall be liable,  to  pay  prospecting
fee, royalty, surface rent or dead rent, as the case may be,  from  time  to
time at the same rate at which it would have been payable under this Act  if
such prospecting or mining operations  had  been  undertaken  by  a  private
person under prospecting licence or mining lease.”

14.   There is no gainsaying that the State Government can reserve any  area
not  already  held  under  any  prospecting  licence  or  mining  lease  for
undertaking prospecting or mining operations through  a  Government  company
or corporation owned or controlled by it, but, in  terms  of  sub-Section(2)
of Section 17A (supra) where the Government proposes to do so, it  shall  by
notification in the official gazette specify the  boundaries  of  such  area
and the mineral  or  minerals  in  respect  of  which  such  areas  will  be
reserved. Three distinct requirements  emerge  from  Section  17A(2)  for  a
valid reservation viz.:
the reservation can only be with the approval of the Central Government  and
must confine to areas not already held  under  any  prospecting  licence  or
mining lease;

the reservation must be made by a notification in the official gazette; and

the notification must specify the boundaries of such areas and  the  mineral
or  minerals in respect of which such areas will be reserved.

15.   Mr. Parasaran was unable to show us any  notification  issued  by  the
Government under Section 17A (2) (supra) nor was  it  possible  for  him  to
exalt the State’s industrial policy extracted  above  to  the  status  of  a
statutory reservation within the contemplation  of  Section  17A.   The  net
result, therefore, is that while the power to reserve an  area  not  already
held  under  any  prospecting  licence  or  mining  lease  is  squarely  and
specifically vested in the State Government, the exercise of that  power  is
not demonstrable in the case at hand. It is common ground that there  is  no
approval of  the  Central  Government  nor  is  there  a  notification  duly
published in the official gazette  specifying  boundaries  of  the  reserved
area and mineral or minerals in respect of which such area will be  or   has
been reserved.

16.   It is well settled that if the law requires a particular thing  to  be
done in a particular manner, then, in order to be  valid  the  act  must  be
done in the prescribed  manner  alone  [See:  Commissioner  of  Income  Tax,
Mumbai   v.   Anjum M.H. Ghaswala and ors. (2002) 1 SCC  633;  Captain  Sube
Singh and Ors. v. Lt. Governor of Delhi and Ors. (2004) 6 SCC 440; State  of
U.P. v. Singhara Singh AIR 1964 SC 358; and Mohinder  Singh  Gill  v.  Chief
Election  Commissioner  (1978)  1  SCC  405].   Absence   of   the   Central
Government’s approval to reservation  and  a  notification  as  required  by
Section 17A, therefore, renders the State Government’s claim of  reservation
untenable till such time a valid reservation  is  made  in  accordance  with
law. It is trite that the State Government’s general executive power  cannot
be invoked to make a reservation dehors Section  17A.  In  Sandur  Manganese
and Iron Ores Ltd.  v.  State of Karnataka and Ors.  (2010) 13  SCC  1  this
Court held that the State Government is denuded of its  executive  power  in
the light of Section 2 of the aforementioned Act.  To  the  same  effect  is
the decision of this Court in Bharat Coking Coal Ltd.  v.   State  of  Bihar
(1990) 4 SCC 557, where this Court observed that the  State  is  denuded  of
its executive power in regard to matters covered by the  MMDR  Act  and  the
Rules. Reference may also be made to the decision of this Court in State  of
Tamil Nadu v. Hind Stone (1981) 2 SCC 205 where this Court observed:
“10. … The statute with which we  are  concerned,  the  Mines  and  Minerals
(Development and Regulation) Act, is aimed … at  the  conservation  and  the
prudent and discriminating exploitation of minerals. Surely, in the case  of
a scarce mineral, to permit exploitation by the State or its agency  and  to
prohibit exploitation by private agencies is the most  effective  method  of
conservation and prudent exploitation. If  you  want  to  conserve  for  the
future, you must prohibit in the present.”


17.   The upshot of the above  discussion  then  is  that  while  the  State
Government is the owner of the mineral deposits in the lands which  vest  in
the Government as is the position in the case at hand,  the  Parliament  has
by reason of the declaration made in Section 2  of  the  1957  Act  acquired
complete  dominion  over  the  legislative  field  covered   by   the   said
legislation. The Act does not denude the  State  of  the  ownership  of  the
minerals situate within its territories but there  is  no  manner  of  doubt
that it regulates to the extent set out in the provisions  of  the  Act  the
development of mines and minerals in the country.  It follows  that  if  the
State Government proposes to reserve any area for exploitation by the  State
owned corporation or company, it must resort to making of  such  reservation
in terms of Section 17A with the approval of the Central Government  and  by
a notification specifying boundaries of the area and mineral or minerals  in
respect of which  such  areas  will  be  reserved.  Inasmuch  as  the  State
Government have not so far issued any notification in terms of Section  17A,
the Industrial Policy – 2007 of the Kerala State Government  does  not  have
the effect of  making  a  valid  reservation  within  the  comprehension  of
Section 17A.  The High Court  was,  therefore,  justified  in  holding  that
there is no valid reservation as at present no  matter  the  government  can
make such a reservation if so advised in the manner prescribed  by  law.  In
other words, the dismissal of this appeal shall not prevent the  State  from
invoking  its  right  under  Section  17(A)(2)  of  the   Act   by   issuing
notification in respect of the mineral deposits in question.  There  is,  in
that view, no reason for us to interfere with the judgment and order  passed
by the High Court. These appeals accordingly fail and are hereby  dismissed,
but in the circumstances without any order as to costs.

                                                        ................CJI.
                                                               (T.S. THAKUR)



                                                        ..................J.
                                                           (V. GOPALA GOWDA)

New Delhi;
April 08, 2016.
                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO. 3608   OF 2016
                (Arising out of S.L.P. (Civil) No.1490/2015)

   STATE OF KERALA & ORS.                                    ...Appellants

                                   Versus

M/S. KERALA RARE EARTH & MINERALS
        LIMITED & ORS.                                  …Respondents

                                    WITH
                   CIVIL APPEAL NOS. 3609 & 3610   OF 2016
          (Arising out of S.L.P. (Civil) Nos.1840/2015 & 1914/2015)


                               J U D G M E N T


R. BANUMATHI, J.


            I have gone  through  the  judgment  prepared  by  His  Lordship
Justice T.S. Thakur, Hon’ble the Chief Justice of India.  For  the  reasons,
which I have indicated below, I am unable to agree with the  reasonings  and
the final decision arrived at by His Lordship.  In  my  view,  the  judgment
passed by the Division Bench of the High Court of Kerala  is  liable  to  be
set aside and these appeals are to be allowed.
2.          It is not necessary for me to narrate the facts,  as  the  facts
are referred to in the judgment of His Lordship Justice T.S. Thakur.
3.          The points falling for consideration in these appeals are:-  (i)
Whether policy of State of Kerala  reserving  mining  of  beach  sand  along
coastal stretches for exploitation of minerals-ilmenite, rutile,  leucoxene,
zircon (and sillimanite- non  scheduled  mineral)  by  State/Central  Public
Sector Undertakings is not in consonance with the provisions  of  Mines  and
Minerals (Development  and  Regulation)  Act,  1957  (for  short  ‘MMDR  Act
1957’);  (ii)  Whether  State  Government’s  policy   of   reservation   for
exploitation of beach sand minerals by its  Public  Sector  Undertakings  is
untenable on the ground of non-compliance of the procedure stipulated  under
Section 17A(2) of the MMDR Act and (iii) Whether the High  Court  of  Kerala
is right in observing that after disposal of the matter  by  the  revisional
authorities for consideration of the matter afresh, the  State  Government’s
refusal of permission is statutory and institutional insubordination.
4.          Mr. Mohan Parasaran, learned Senior Counsel  appearing  for  the
appellant-State submitted that mines and minerals in the  territory  of  the
State are vested in the State and it is well within the powers of the  State
to frame a policy relating to mining activities  in  the  State  keeping  in
mind the public interest, welfare and ecological balance of the  State.   It
was submitted that the policy of the  State  Government  is  framed  as  the
mining lease of beach sand for exploitation of  mineral  involve  ecological
and environmental sensitive issues and national minerals  wealth  cannot  be
allowed to be exploited by indiscriminate mining by private players. It  was
further contended that the first respondent is a private party where  Indian
Rare  Earths  Ltd.  (Government  of  India)  and  Kerala  State   Industrial
Development Corporation (Government of Kerala) have  minimal  percentage  of
share holdings and no right accrued in favour of first respondent for  grant
of mining lease and while so, the High Court was not right in directing  the
State to consider the applications of the first respondent. It  was  further
submitted that inasmuch as mining leases are governed by statutes  and  M.C.
Rules, there is no question  of  any  promissory  estoppel  especially  when
mining lease granted on 15.09.2004 was cancelled within  ten  days  i.e.  on
25.09.2004.
5.          Mr. Shyam Divan, learned Senior Counsel appearing for the  first
respondent contended that earlier first respondent was found to satisfy  all
the conditions prescribed by the Government of Kerala for  grant  of  mining
lease  as  per  G.O.Ms.No.102/02/ID   dated   22.10.2002,   however,   first
respondent’s application was  rejected  only  on  the  basis  of  subsequent
policy of the State. It was contended that in the  light  of  constitutional
scheme and the statutory provisions of MMDR Act, State  has  no  legislative
competence to frame a policy dehors MMDR Act and MC  Rules  and  the  policy
decision of the appellant-State is in derogation of the provisions  of  MMDR
Act.  It was submitted that  in  the  light  of  industrial  policy  of  the
Central Government permitting private players in the exploitation  of  beach
sand mineral, the State Government has no competence to frame  any  rule  or
policy in contravention of the policy of  the  Central  Government.  It  was
contended that if the State desired  to  reserve  the  exploitation  of  the
beach sand minerals  in  any  area,  the  State  should  have  followed  the
prescribed procedure under  Section  17A(2)  and  the  procedure  stipulated
under the Statute cannot be thwarted  under  the  guise  of  policy  of  the
State. It was further submitted that in exercise of power under  Section  30
of the Act, the Central Government/ Revisional Authority directed the  State
to reconsider the matter, the State Government was not  justified  in  again
rejecting the applications and the High Court rightly directed the State  to
consider the applications of  the  first  respondent  for  grant  of  mining
lease.
6.          I have carefully considered the rival  submissions  and  perused
the impugned judgment and material on record.
7.          In the federal structure of India,  State  Governments  are  the
owners of the mines and minerals located within the territory of  the  State
concerned.  In Amritlal Nathubhai Shah & Ors. v. Union Government  of  India
& Anr., (1976) 4 SCC 108, while dealing with  the  scope  of  the  MMDR  Act
1957, this Court held that the State Government is  the  owner  of  minerals
within its territory and minerals vest in it and there  is  nothing  in  the
MMDR Act or the MC Rules to detract from this basic fact.
8.          Although, mineral wealth vests with the  State  Government,  yet
the subject of regulation of mines and mineral development is covered  under
Seventh Schedule of the Constitution  of  India.   In  order  to  appreciate
this, it is necessary to refer to few entries in  the  Seventh  Schedule  of
the Constitution.  Entry 54 of List I of Seventh Schedule reads as under:-
List I-Union List Entry 54. Regulation of mines and mineral  development  to
the extent  to which such regulation and development  under the control   of
the Union is declared by Parliament by law to be  expedient  in  the  public
interest.

Entry 23 of List II reads as under:-
List II-State List Entry 23. Regulation of  mines  and  mineral  development
subject  to  the provisions of  List  I  with  respect  to  regulation   and
development under the control of the Union.
By a reading of Entry 23 of List II, it is clear that Entry  23  is  subject
to the provisions of List I with respect to regulation  and  development  of
mines and mineral development under the control of the Union.  Section 2  of
the Act makes a declaration that it is  expedient  in  the  public  interest
that the Union should take under its control the  regulation  of  mines  and
the development of minerals to the extent provided  in  the  said  Act.   It
will therefore be seen, to the extent control of  regulation  of  mines  and
mineral development is taken over  by  the  Union  under  the  law  made  by
Parliament declaring that it is expedient in the public interest to  do  so,
the scope and ambit of Entry 23 of List II  is  cut  down  to  that  extent.
This would appear to be clear on a plain construction of Entry 54 of List  I
and Entry 23 of List II.
9.          Considering the scope of Article  246  of  the  Constitution  of
India and the wording of the  above  entries  in  Seventh  Schedule  to  the
Constitution and the scope, purpose and the effect  of  the  State  and  the
Central Legislations, in State of Orissa And Anr. vs. M.A.  Tulloch  &  Co.,
AIR 1964 SC 1284, this Court held as under:-
      “5. Before proceeding further it is necessary to specify  briefly  the
legislative power on the relevant topic, for it is on  the  precise  wording
of the entries in Schedule VII to the Constitution and  the  scope,  purpose
and effect of the State and the Central legislations which we have  referred
to earlier that the decision of the point turns. Article 246(1) reads:
‘246. Subject-matter of laws made by Parliament and by the  legislatures  of
States.—(1) Notwithstanding anything in clauses (2) and (3), Parliament  has
exclusive power to make laws with respect to any of the  matters  enumerated
in List I in the Seventh Schedule (in this Constitution referred to  as  the
Union List).’
and we are concerned in the present case with the State power in  the  State
field. The relevant clause in that context is  clause  (3)  of  the  article
which runs:
‘246. (3) Subject to clauses (1) and (2), the legislature of any  State  has
exclusive power to make laws  for  such  State  or  any  part  thereof  with
respect to any of the matters enumerated in List II in the Seventh  Schedule
(in this Constitution referred to as the “State List”).’
Coming now to Schedule VII, Entry 23 of the State List vests  in  the  State
Legislature power to enact laws on the subject of ‘regulation of  mines  and
minerals development subject to the provisions of List  I  with  respect  to
regulation and development under the control of  the  Union’.  It  would  be
seen that ‘subject’ to the provisions of List I the power of  the  State  to
enact legislation on the  topic  of  ‘mines  and  minerals  development’  is
plenary. The relevant provision in List I is, as already noticed,  Entry  54
of the Union List. It may be mentioned that this scheme of the  distribution
of legislative power between the Centre and the States is  not  new  but  is
merely a continuation of the state of  affairs  which  prevailed  under  the
Government of India Act, 1935 which included a provision  on  the  lines  of
Entry 54 of the Union List which  then  bore  the  number  Item  36  of  the
Federal List and an entry corresponding to Entry 23 in the State List  which
bore the same number  in  the  Provincial  Legislative  List.  There  is  no
controversy that the Central Act has been enacted by Parliament in  exercise
of the legislative power contained in Entry 54 or  as  regards  the  Central
Act containing a declaration in terms of what is required by  Entry  54  for
it enacts by Section 2:
‘2. Declaration  as  to  the  expediency  of  Union  control.—It  is  hereby
declared that it is expedient in the public interest that the  Union  should
take under its control the  regulation  of  mines  and  the  development  of
minerals to the extent hereinafter provided.’
It does not need much argument to realise that to the extent  to  which  the
Union  Government  had  taken  under  ‘its  control’  ‘the  regulation   and
development of minerals’ so much was withdrawn from the ambit of  the  power
of the State Legislature under Entry 23 and legislation of the  State  which
had rested on the existence of power under that entry would  to  the  extent
of that ‘control’ be superseded or be  rendered  ineffective,  for  here  we
have a case not of  mere  repugnancy  between  the  provisions  of  the  two
enactments but of a denudation or deprivation of State legislative power  by
the declaration which Parliament is empowered to make and has made.
6. It would, however, be apparent that the  States  would  lose  legislative
competence only to the ‘extent to which  regulation  and  development  under
the control of the Union has been declared by Parliament to be expedient  in
the public interest’. The crucial enquiry has therefore to  be  directed  to
ascertain this ‘extent’ for beyond it the legislative  power  of  the  State
remains unimpaired. As the legislation by the State is in  the  case  before
us the earlier one in point of time, it would be logical  first  to  examine
and analyse the State Act and determine its purpose,  width  and  scope  and
the area of its operation and then consider to  what  ‘extent’  the  Central
Act cuts into it or trenches on it.” (emphasis supplied)

10.         The policy of the State and impugned order of  the  State  dated
15.12.2010 which state that the  exploitation  of  the  beach  sand  mineral
would be done by the Public Sector Undertakings has to be  examined  in  the
light of the provision of the MMDR Act 1957 and MC  Rules  1960.   MMDR  Act
1957 was enacted to provide for the regulation of mines and oil  fields  and
for the development of the minerals. The declaration contained in Section  2
of MMDR Act speaks of taking under the control of the Union  the  regulation
of mines and the development of minerals to the extent provided in the  MMDR
Act. In Section 3, the words “Minerals”, “Mineral  Oils”,  “Minor  Minerals”
have been separately defined. The MMDR Act, 1957 mainly deals  with  general
restrictions  on  prospecting  and  mining  operations  and  the  rules  and
procedures for regulating grants of prospecting licences and mining  leases.
State Governments are competent to give licences  for  prospecting  and  for
granting mining leases.  The Act specifically provides that in the  case  of
minerals included in the First Schedule to the Act,  the  State  Governments
shall not grant or renew, prospecting licences or mining leases without  the
prior permission of the Union Government.  Sections 4 to 12 of the Act  deal
with the conditions and procedures and other allied  matters  regarding  the
prospecting or mining operations under licence or lease.   Sections  13  and
13A deal with the rule  making  power  of  the  Central  Government.  It  is
however, significant that Section 14 provides that Sections 4 to 13  of  the
Act shall not apply to minor minerals.  Further, Section  15  provides  that
the State Governments may by notification in the Official Gazette make  rule
for regulating the grant of  quarry-lease,  mining-lease  or  other  mineral
concessions in respect of minor minerals  and  for  the  purposes  connected
therewith. Section 17  confers  special  powers  on  Central  Government  to
undertake prospecting or mining operation  of  certain  lands.  Section  17A
inserted by Act 37 of 1986 (w.e.f. 10.02.1987)  deals  with  reservation  of
area for purposes of conservation of any mineral.   Section  17A  (2)  deals
with the power of the State Government with  the  approval  of  the  Central
Government to reserve any  area  not  already  held  under  the  prospecting
licence or mining lease by Government  Companies.   Section  30  deals  with
power of revision by the Central Government.
11.         Comprehensive view of the statutory  framework  with  regard  to
regulation of mines and minerals development, role and power  of  the  State
Government  vis-à-vis   the  power  of  the  Central  Government  has   been
elaborately dealt with by this Court in Monnet Ispat And Energy  Limited  v.
Union of India And Ors.,    (2012)  11  SCC  1.  Observing  that  the  State
Government has the paramount right over the mineral,  State’s  ownership  of
mines and minerals within its territory remains untouched by MMDR  Act  1957
except to the extent provided in the Act, in para (138),   it  was  held  as
under:-
“138.  …….  the  declaration  made  by  Parliament  in  Section  2  and  the
provisions that follow Section 2 in the 1957 Act  have  left  untouched  the
State’s ownership of mines and minerals within its  territory  although  the
regulation of mines and the development of minerals have  been  taken  under
the control of the Union. Section 4 deals with  activities  in  relation  to
land and does not extend to extinguish the State’s  right  of  ownership  in
such land. Section 4 regulates the right to transfer  but  does  not  divest
ownership of minerals in a State and does not preclude the State  Government
from exploiting its minerals. Section 4(1) can  have  no  application  where
the State Government wants to undertake  itself  mining  operations  in  the
area owned by it. On consideration of Section 5, I am of the view  that  the
same conclusion must follow. Section 5 or for that  matter  Sections  6,  9,
10, 11 and 13(2)(a) also do not take away the State’s  ownership  rights  in
the mines and minerals within its territory.  The  power  to  legislate  for
regulation of mines and development of minerals under  the  control  of  the
Union may definitely imply power  to  acquire  mines  and  minerals  in  the
larger public interest by appropriate legislation, but by the 1957 Act  that
has not been done. There  is  nothing  in  the  1957  Act  to  suggest  even
remotely—and there is  no  express  provision  at  all—that  the  mines  and
minerals that vested in the States have been acquired.  Rather,  the  scheme
and the provisions of the 1957 Act themselves show  that  Parliament  itself
contemplated State legislation  for  vesting  of  lands  containing  mineral
deposits in the State Government and  that  Parliament  did  not  intend  to
trench upon the powers of the State Legislatures under List II Entry 18.  As
noted above, the declaration made by Parliament in Section  2  of  the  1957
Act states that it is expedient  in  the  public  interest  that  the  Union
should take under its control the regulation of  mines  and  development  of
minerals to the extent provided in the Act itself. The declaration  made  in
Section 2 is, thus, not all-comprehensive.” (Underlining added)

12.         State Government’s  ownership  in  mines  and  minerals  in  its
territory and power of the State to grant or refuse application  for  mining
on the ground that the  land  in  question  is  not  available  in  view  of
reservation of area by the State for exploitation of the minerals  resources
in the public sector whether  permissible  under  MMDR  Act:-  In  grant  of
mining lease of a property of  the  State,  the  State  Government  has  the
discretion to grant or refuse to grant any prospective  licence  or  licence
to any applicant. No applicant has a right, much less vested right,  to  the
grant of mining lease for mining operations in any place within  the  State.
No one has a vested right for grant of mining  lease  vide  M.P.  Ram  Mohan
Raja v. State of T.N. & Ors., (2007) 9 SCC 78  and State of  Tamil  Nadu  v.
Hind Stone & Ors., (1981) 2 SCC 205.  The State has a  discretion  to  grant
or refuse to grant any mining lease.  No person can claim any right  in  any
land belonging to the Government or in any mines except the  rights  created
under MMDR Act and the  Mineral  Concession  Rules.   But  State  Government
being a public authority, its acts are necessarily regulated  by  rules  and
regulations.
13.          In Dharambir Singh v. Union of India & Ors., (1996) 6 SCC  702,
a three-Judge Bench of this Court while considering   Sections   10(3)   and
11(2)  of  the 1957 Act  observed as under:-
“4. … In grant of mining lease  of  a  property  of  the  State,  the  State
Government has a discretion to grant or  refuse  to  grant  any  prospective
licence or licence to any applicant. No applicant has  a  right,  much  less
vested right, to the grant of mining lease  for  mining  operations  in  any
place within the State. But the State Government  is  required  to  exercise
its discretion, subject to the requirements of the law…”

This was reiterated in Monnet Ispat and Energy Ltd. vs. Union of  India  and
Others (2012) 11 SCC 1.
14.         Whether the State Government has the competence to frame  policy
under MMDR Act and reserve the area for  exploitation  of  minerals  in  the
Public Sector Undertakings:- Contention of the  respondent  is  that  policy
decision of the State Government has no role to play in a matter over  which
the decision of the Central Government must prevail  in  the  statutory  and
constitutional scheme.  Placing reliance upon the judgment of this Court  in
the case of Sandur Manganese & Iron Ores Ltd. v. State of Karnataka &  Ors.,
(2010) 13 SCC 1, Mr. Shyam Divan, learned Senior Counsel appearing  for  the
first respondent submitted that there is no question  of  the  State  having
any power to frame a policy dehors the MMDR Act and the MC  Rules  and  when
the Union List has occupied the entire field, executive power of  the  State
cannot extend to matters over which the State Legislature has  no  power  to
legislate.
15.         Section 17A deals  with  the  reservation  of  area  by  Central
Government or by the State Government for the purpose  of  “conservation  of
minerals”.  By amendment Act 37 of 1986  (w.e.f.  10.02.1987),  Section  17A
was inserted in the Act.  Section 17A reads as under:-
17A.  Reservation of area for purposes of  conservation.-  (1)  The  Central
Government, with a view to conserving any  mineral  and  after  consultation
with the State Government, may reserve any area not already held  under  any
prospecting licence or mining lease and, where it  proposes  to  do  so,  it
shall, by notification in the Official Gazette, specify  the  boundaries  of
such area and the mineral or minerals in respect of which such area will  be
reserved.
[1A] The Central Government may in consultation with the  State  Government,
reserve any area not already held under any prospecting  licence  or  mining
lease,  for  undertaking  prospecting  or  mining   operations   through   a
Government company or corporation owned or controlled by it,  and  where  it
proposes to do so, it  shall,  by  notification  in  the  Official  Gazette,
specify the boundaries of such area and the mineral or minerals  in  respect
of which such area will be reserved.
(2) The State Government may, with the approval of the  Central  Government,
reserve any area not already held under any prospecting  licence  or  mining
lease,  for  undertaking  prospecting  or  mining   operations   through   a
Government company or corporation owned or controlled by  it  and  where  it
proposes to do so, it  shall,  by  notification  in  the  Official  Gazette,
specify the boundaries of such area and the mineral or minerals  in  respect
of which such areas will be reserved.
(2A)                        xxxx
(2B)                        xxxx
(2C)                        xxxx
(3) Where in exercise of the powers conferred by sub-section  (1A)  or  sub-
section (2), the Central Government or the State  Government,  as  the  case
may be, undertakes prospecting or mining operations in  any  area  in  which
the minerals  vest  in  a  private  person,  it  shall  be  liable,  to  pay
prospecting fee, royalty, surface rent or dead rent, as  the  case  may  be,
from time to time at the same rate at  which  it  would  have  been  payable
under this Act if such prospecting or mining operations had been  undertaken
by a private person under prospecting licence or mining lease.
16.         The authority of the State to make reservation of  a  particular
mining area within its territory for its own use is the    offspring of  the
State’s authority of ownership over the mines and minerals.  Section  17A(2)
reserves the power of the State Government with the approval of the  Central
Government to reserve any area not already held  under  prospecting  licence
or mining lease.  Section 17A(2) uses the words “with the  approval  of  the
Central Government” and does not use the expression  “prior  approval”.   In
paragraph (160) of Monnet Ispat & Energy Ltd. vs. Union  of  India  &  Ors.,
(2012) 11 SCC  1,  it  was  held  that  Section  17A(2)  does  not  use  the
expression “prior approval” and I  will  advert  to  this  aspect  a  little
later.
17.         Re. Contention: State has no  legislative  competence  to  frame
Industrial Policy reserving area for exploitation of beach sand minerals  by
Public Sector Undertakings  in  derogation  of  the  National  Policy  which
encourages private participation:- India has large reserves  of  beach  sand
minerals in the coastal stretches around the country. There are  substantial
deposits of minerals  including  ilmenite  on  Kerala  Coast  especially  in
Kollam    and    Alappuzha    Districts.    The    impugned     order     in
G.O.(Rt.)No.1709/10/ID  dated  15.12.2010  states  that   “….It   has   been
estimated that out of the total ilmenite reserves in the world,  35%  is  in
India and out of this  30%  is  on  the  coastal  stretches  of  Kollam  and
Alappuzha  Districts…”.   Realising  the  potential  of  this  rich  mineral
deposits in the State, State of Kerala in its Industrial  Policy-2007,  vide
G.O.(P) No.78/2007/ID dated 18.06.2007, took  a  policy  decision  that  the
mining of mineral sand will be done through the State/Central Public  Sector
Undertakings only.  Relevant portion of the Industrial Policy of  the  State
reads as under:-
“12.2. Mining of mineral sand will  be  done  through  State/Central  Public
Sector Undertakings only. However mining of minerals will not  be  permitted
in those areas where the Government appointed Expert  Committee  recommended
against  mining.  Government  will  encourage  manufacture  of  Value  Added
Products.
12.2.1 Titanium.
Considering the rich mineral deposits in the State, a  comprehensive  scheme
to produce Titanium Metal, Titanium  composites  by  using  state-of-the-art
technology shall be evolved with the help  of  Central  Government  agencies
and International organizations. If the potential of this  natural  resource
is used properly and scientifically, it will immensely pave  way  for  rapid
industrialization of  the  State  as  Titanium  is  a  unique  material  for
strategic applications.  The approach is not  to  limit  the  activities  to
manufacturing alone but to harness its vast potential by setting up a  chain
of Titanium based industries through forward  integration.  However,  utmost
care shall be taken to contain the adverse impact on environment by  mining,
processing and related activities by adopting strict monitoring and  control
measures. To develop a package for making use of the  immense  potential  of
titanium,  support  shall  be  availed  from  national   and   international
organizations.”

18.         Mineral ilmenite, rutile, leucoxene, zircon and monazite  except
sillimanite and garnet  have  been  classified  as  “prescribed  substances”
under the Atomic Energy Act 1962.  Under the Central  Government  Industrial
Policy 1991, mining and production of  minerals  classified  as  “prescribed
substances” was reserved for the public sector. As per 1991  Policy,  Indian
Rare Earths Limited (IREL), a Government of  India  Undertaking  (Department
of  Atomic  Energy)  and  Kerala  Minerals  and  Metals  Limited  (KMML)   a
Government of Kerala Undertaking were  engaged  in  mining,  production  and
processing in Orissa, Tamil Nadu and Kerala.  In 1998, as per  the  national
policy of the Department of Atomic Energy  on  exploitation  of  beach  sand
minerals, Central Government (Department  of  Atomic  Energy)  has  taken  a
policy decision to encourage exploitation  of  beach  sand  mineral  through
private sector/judicious mix up of public and private  sector  participation
(including foreign investment).  The  relevant  portion  of  the  Policy  on
Exploitation  of  Beach  Sand  Minerals,   Department   of   Atomic   Energy
No.8/1(I)/97-PSU/1422 dated 06.10.1998, reads as under:-
“Under the Industrial Policy Resolution of 1991, the mining  and  production
of minerals classified  as  “prescribed  substances”  is  reserved  for  the
public sector.  However, the Policy Resolution also allows  selective  entry
of the private sector.  At present, the Indian Rare Earths  Limited  (IREL),
a Government    of India (Department  of Atomic  Energy)   undertaking   and
Kerala  Minerals & Metals Ltd. (KMML), a Government of   Kerala  undertaking
are engaged in mining, production and processing  of in Orissa,  Tamil  Nadu
and Kerala. Demand for these minerals and/or their value-added  products  in
the domestic as well as international markets and  the  potential  available
in the country, setting up of new plants for exploitation  of  the  deposits
in fresh locations would be in the interest of the country.   Production  of
various value-added  products  of  these  minerals     is,  however,  highly
capital intensive and it may  not  be  possible  for  only  the  PSUs  (both
Central and State owned) operating in this field to set up  the  new  plants
on their own.  It is, therefore necessary to allow the  private  sector  set
up such plants within the framework of some broad guidelines.

In view of the background explained above, Government of India has  recently
approved a  policy  to  encourage  further  exploitation  of  these  mineral
deposit through a judicious mix of public and private  sector  participation
(including foreign investment).  The other  objective   of  the  policy  are
maximization of value addition to  the  raw  minerals  within  the  country,
upgradation  of  the  existing   process   technologies   to   international
standards, attracting funds and new technology necessary  for  this  purpose
through participation   of  the  private  sector  (domestic   and  foreign),
appropriate dispersal of  the new production  facilities  with  an  eye   on
regional balance  and regulating the rate of exploitation  of  the  reserves
by the facilities  such  that  the   exploitable  reserves  last  for  about
hundred years without, of course adversely affecting  the investors’ techno-
economic considerations regarding plant size, etc.”

19.         Since the source of the executive power of the State  Government
is Article 298 of the Constitution of India, it is clear  from  the  proviso
to Article 298 that the exercise of this executive power  would  be  subject
to legislation by Parliament. The declaration made in Section 2 of the  MMDR
Act has resulted in bringing the entire field of  regulation  of  mines  and
development of minerals under  the  control  of  the  Union  to  the  extent
provided in the Act.   Therefore, to determine  the power of the State  that
is left  within Entry 23 of List II,  we have to work it  within  the  terms
of the MMDR Act and MC Rules.  We must therefore consider whether  there  is
anything in the MMDR Act or MC Rules which takes away  the  executive  power
of the State Government or in any  manner  controls  or  regulates  it.   If
there is any such provision in the Act or in MC Rules, then the  same  would
prevail and the executive power of the State Government would have  to  give
way to it.  Under Section 17A (2) of  the  MMDR  Act,  when  State  has  the
competence to reserve any  area  for  exploitation  of  minerals  by  public
sector  undertakings,  the  policy  of  the  State   of   Kerala   reserving
exploitation of beach sand minerals by public sector undertakings cannot  be
said to be in derogation of the provisions of MMDR Act.
20.         Under Section 17A(2) the  power  is  conferred  upon  the  State
Government with the approval of the Central Government to reserve  any  area
for undertaking  prospecting  or  mining  operations  through  a  government
company or a corporation owned or controlled by it.   The  State  Government
has the executive power to exploit its own minerals.   Such  power  is  thus
conferred upon the State by the MMDR Act itself.  Section  17A  (2)  clearly
recognizes the power of the State Government to reserve the land for  mining
or exploitation of the mineral in public sector. While so, it  is  difficult
to comprehend as to how a policy decision of the State  reserving  the  area
for mining of mineral sand through State/Central Public Sector  Undertakings
can be said to be in derogation of MMDR Act.  The policy of the  State  that
the mining of minerals sand will be done only through  State/Central  Public
Sector Undertakings is well in consonance with the provisions of  MMDR  Act.
It can hardly be disputed that the State Government has the executive  power
to  reserve  any  area  for  exploitation  of  minerals  to  public   sector
undertakings.
21.         Observing that the power of the State Government to reserve  the
area  for  exploitation  of  the  mineral  in  public  sector  undertakings,
authority of the State  Government  to  make  reservation  of  a  particular
mining   of the area is the off-spring of the ownership and after  referring
to various decisions in paragraph (144) in Monnet Ispat And  Energy  Limited
(supra), it was held as under:-
“144 …The authority of  the  State  Government  to  make  reservation  of  a
particular mining  area  within  its  territory  for  its  own  use  is  the
offspring of ownership; and it is inseparable therefrom unless denied to  it
expressly by an appropriate law. By the 1957 Act that has not been  done  by
Parliament. Setting aside by a State of land owned by it for  its  exclusive
use and under its dominance and control, in  my  view,  is  an  incident  of
sovereignty and ownership. There is no incongruity or inconsistency  in  the
decisions of this Court in Hingir-Rampur Coal Co.  AIR  1961  SC  459,  M.A.
Tulloch & Co. AIR 1964  SC  1284,  Baijnath  Kadio  (1969)  3  SCC  838  and
Amritlal Nathubhai Shah (1976) 4 SCC 108. The Bench  in  Amritlal  Nathubhai
Shah was alive to the legal position highlighted by this  Court  in  Hingir-
Rampur Coal Co., M.A. Tulloch & Co. and Baijnath Kadio although it  did  not
expressly refer to these decisions. This is apparent from  the  observations
made in   para 3 wherein it  has  been  stated  that  in  pursuance  of  its
exclusive power to make laws with respect to the matters enumerated in  List
I Entry 54 in Schedule VII, Parliament specifically declared  in  Section  2
of the 1957 Act that it was expedient in the public interest that the  Union
should take under its control, regulation of mines and  the  development  of
minerals to the extent provided therein. The Bench noticed  that  the  State
Legislature’s power under List  II  Entry  23  was,  thus,  taken  away  and
regulation of  mines  and  minerals  development  had  therefore  to  be  in
accordance with the  1957  Act  and  the  1960  Rules.  The  legal  position
exposited in Amritlal Nathubhai Shah  is  that  even  though  the  field  of
legislation with regard to regulation of mines and development  of  minerals
has been covered by the declaration of Parliament in Section 2 of  the  1957
Act, but that cannot justify the inference that  the  State  Government  has
lost its right to the minerals which vest in it as  a  property  within  its
territory and hence no person has a right to exploit the  mines  other  than
in accordance with the provisions of the 1957 Act and the  1960  Rules.  The
authority of the State Government to order reservation flows from  the  fact
that it is the owner of the mines and the  minerals  within  its  territory.
Such authority is also traceable to Rule 59 of the 1960 Rules.”

The above ratio laid down in Monnet Ispat answers the contentions raised  by
the respondent.
22.         As per Section 10 of the MMDR Act, the  power  to  grant  mining
lease is vested with the State Government.  In recognition of  the  position
that the State Government is the owner of the mines and minerals,  the  said
Industrial Policy of the Government of India, Department  of  Atomic  Energy
dated 06.10.1998 on exploitation of beach sand mineral, reserves  option  of
the State  of  selecting  the  companies/entrepreneurs  for  setting  up  of
projects/plants.  We may usefully refer to relevant portion of the  National
Policy which reads as under:-
“4(g). The provisions of the Atomic Energy Act and the  Rules    and  Orders
hereunder will  continue  to  apply  to  the  exploitation  of  beach  sands
minerals, including their import/export, to the  extent  such  minerals  are
notified as prescribed substances  and  require  licensing  under  the  said
provisions.  The mining leases under the Mines and  Minerals  (Regulation  &
Development) Act will continue to be granted by  the  State  Government  (s)
concerned.
(j).   Subject   to  the  broad  guidelines  set  forth  in  the   foregoing
paragraphs, the selection  of  companies/  entrepreneurs    for  setting  up
projects/plants  for  exploitation  of   beach   sand   minerals    in   the
private/joint sector would  be  left  to  the  State  Government  concerned.
However, where a central  PSU  (at  present  only  the  Indian  Rare  Earths
Limited in this field)  is  one  of  the  proposed  partners  in  the  joint
venture, the matter would also be  referred  to  the  Department  of  Atomic
Energy for prior consultation  and concurrence.”

23.         State Government being owner of the minerals lying   within  its
territory by virtue of the powers conferred under  Sections  10  and  17A(2)
and having regard to the aforesaid clauses in the National  Policy  granting
liberty to the State to select the  companies/entrepreneurs  of  its  choice
for setting up projects/ plants for exploitation  of  beach  sand  minerals,
the policy of the State Government, reserving the area  for  mining  of  the
mineral sand done through State/Central Public  Sector  Undertakings  cannot
be said to be in  derogation  of  MMDR  Act  and  MC  Rules.  It  cannot  be
contended that the State has no legislative  competence  and  the  Executive
has no power to frame a policy reserving the area for exploitation of  beach
sand mineral by State/Central Public Sector Undertakings.
24.         In Pallava Granite Industries (India)  (P)  Ltd.  vs.  Union  of
India & Ors., (2007) 15 SCC 30,  it was held  that the reservation of  right
in favour of a public sector enterprise was permissible inter  alia  on  the
ground of welfare requirements of the State.  In Indian Charge  Chrome  Ltd.
& Anr. vs. Union of India & Ors., (2006) 12 SCC 331, it was held  that  with
the approval of the  Central  Government  under  Section  17A(2)  the  State
Government has the power to reserve any area  not  already  held  under  any
prospecting  licence  or  mining  lease  for  undertaking  the  exploitation
through a government company or corporation owned or controlled by it.
25.         As per the Industrial Policy 2007 of the State  of  Kerala,  the
mining and exploitation of  beach  sand  minerals  will  be  permitted  only
through State/Central Public Sector Undertakings.   The  reason  behind  the
said  policy  decision  is  to  restrict  the  indiscriminate   mining   and
exploitation of minerals  by  scientific  mining  taking  into  account  the
geographical  and  ecological  conditions  as  well  as   density   of   the
population.  The applications of the respondents are  for  mining  lease  of
Titanium-bearing minerals ilmenite, rutile, leucoxene, zircon  minerals  and
as per Part B of the First Schedule to the  MMDR  Act,  these  minerals  are
categorized as Atomic Minerals. As per Article 48A of the Constitution,  the
State shall endeavour to protect and improve the environment and this  is  a
constitutional mandate.  Kerala being a State with long  coastal  areas  and
backwaters and State being densely populated,  State  Government’s  decision
to reserve mining lease of  beach  sand  minerals  to  State/Central  Public
Sector Undertakings is stated  to  be  in  larger  public  interest.   Major
portion of the land in which mining operation sought to be  carried  out  by
first respondent is Kayal Puramboke  and  Sea  Puramboke  Land.  The  policy
adopted by the State of Kerala is  well  in  consonance  with  the  National
Mineral policy as both are designed to encourage the scientific  methods  of
mining,  beneficiation  and  economic  utilization.  The   National   policy
specifies that there shall be transparency and fair play in the  reservation
for one over another in the public interest. Apparently the State of  Kerala
has reserved the area for public sector undertakings  in  order  to  prevent
environmental degradation  and  to  ensure  the  maintainability  of  public
health. The State Government cannot be expected to take any  decision  which
may have adverse health impact on the people of the State residing in  those
areas.  The policy of the State is also in consonance  with  Section  18  of
the MMDR Act which provides that  it  shall  be  the  duty  of  the  Central
Government to take all steps for conservation and systematic development  of
minerals in India.   The  State  Government’s  policy  is  in  adherence  to
sustainable development which is a constitutional mandate and the State  has
tried to balance the developmental needs and  the  need  for  protection  of
environment  and  ecology.    Respondent’s   contention   that   the   State
Government’s policy is violative of provisions of the MMDR Act and  National
Policy is wholly misplaced.  The High Court  failed  to  consider  that  the
State of Kerala keeping in view its policy decision and  the  importance  of
environment  protection  rejected  the  application  moved  by   the   first
respondent.
26.         While allowing the revision filed under Section 30 of  the  Act,
the revisional authority observed that “…The policy decision  of  the  State
Government appears to be not in consonance with the MMDR Act 1957  and  also
against the National  Mineral  Policy  2008.”    The  observation  that  the
policy decision of the State Government is not in consonance with  the  MMDR
Act 1957 is not correct.  Be it noted  that  the  policy  of  the  State  of
Kerala itself is not under challenge. The  State  Government  has  passed  a
reasoned order as to why it has chosen to reserve the area for  exploitation
of mineral sand in  public  sector  undertakings  and  I  do  not  find  any
arbitrariness or unreasonableness in the policy of the State.
27.         In State of Tamil Nadu vs. Hind Stone & Ors.,          (1981)  2
SCC 205,  it was observed as under:-
“10. ….The statute with which we  are  concerned,  the  Mines  and  Minerals
(Development and Regulation) Act, is aimed…..at  the  conservation  and  the
prudent and discriminating exploitation of minerals. Surely, in the case  of
a scarce mineral, to permit exploitation by the State or its agency  and  to
prohibit exploitation by private agencies is the most  effective  method  of
conservation and prudent exploitation. If  you  want  to  conserve  for  the
future, you must prohibit in the present.”

28.         The decision in Hind Stone case  (supra)  was  referred  to  and
quoted with the approval in Monnet Ispat case in paragraphs (292) and  (293)
which read as under:-
“292. Although in Hind Stone, (1981) 2 SCC 205 the Court was concerned  with
the provision of this Rule which  was  concerning  a  minor  mineral,  while
examining the validity thereof this Court (per O. Chinnappa Reddy,  J.)  has
made certain observations towards the approach and the  scope  of  the  MMDR
Act which are relevant for our purpose. Thus in para 6, it was  observed  as
follows: (SCC p. 213)
“6. …The public interest which induced Parliament to  make  the  declaration
contained  in  Section  2  of  the  Mines  and  Minerals  (Development   and
Regulation) Act, 1957, has naturally to be the  paramount  consideration  in
all matters concerning the  regulation  of  mines  and  the  development  of
minerals, Parliament’s policy is clearly discernible from the provisions  of
the  Act.  It  is  the  conservation  and  the  prudent  and  discriminating
exploitation of minerals, with a view  to  secure  maximum  benefit  to  the
community.”
Again in para 9, this Court observed: (Hind Stone case, SCC pp. 216-17)
“9. … Whenever there is a switch  over  from  ‘private  sector’  to  ‘public
sector’ it does not necessarily follow that a  change  of  policy  requiring
express legislative sanction is involved. It depends on the subject and  the
statute. For example, if a  decision  is  taken  to  impose  a  general  and
complete ban on private mining  of  all  minor  minerals,  such  a  ban  may
involve the reversal of a major policy and so  it  may  require  legislative
sanction. But if a decision is taken to  ban  private  mining  of  a  single
minor mineral for the purpose of  conserving  it,  such  a  ban,  if  it  is
otherwise within the bounds of the authority given to the Government by  the
statute, cannot be said to involve any change of policy. The policy  of  the
Act remains the same and it  is,  as  we  said,  the  conservation  and  the
prudent and discriminating exploitation of minerals, with a view  to  secure
maximum benefit to the community. Exploitation of minerals  by  the  private
and/or the public sector is contemplated. If in the pursuit  of  the  avowed
policy of the Act, it is thought exploitation by the public sector  is  best
and wisest in the case of a particular  mineral  and,  in  consequence,  the
authority competent  to  make  the  subordinate  legislation  makes  a  rule
banning private exploitation of such mineral, which was  hitherto  permitted
we are  unable  to  see  any  change  of  policy  merely  because  what  was
previously permitted is no longer permitted.”
Last but not the least, in para 13 this Court observed as follows: (Hind
Stone case, SCC p. 220)
“13. … No one has a vested right to the grant or  renewal  of  a  lease  and
none can claim a vested right to  have  an  application  for  the  grant  or
renewal of a lease dealt with in a particular way,  by  applying  particular
provisions.”
293. Mines and minerals  are  a  part  of  the  wealth  of  a  nation.  They
constitute the material resources of the community.  Article  39(b)  of  the
directive principles mandates that the State shall,  in  particular,  direct
its policy towards securing that the ownership and control of  the  material
resources of the community are  so  distributed  as  best  to  subserve  the
common good. Thereafter, Article 39(c) mandates that State should see to  it
that operation of the economic system does not result in  the  concentration
of wealth and means of  production  to  the  common  detriment.  The  public
interest is very much writ large in the provisions of the MMDR  Act  and  in
the declaration under Section 2 thereof. The ownership of  the  mines  vests
in the State of Jharkhand in view of the declaration  under  the  provisions
of the Bihar Land Reforms Act, 1950 which Act is protected by placing it  in
Schedule IX  added  by  the  First  Amendment  to  the  Constitution.  While
speaking  for  the  Constitution  Bench  in  Waman  Rao  (1981)  2  SCC  362
Chandrachud, C.J. had the following to state on the correlationship  between
Articles 39(b) and (c) and the First Amendment: (SCC p. 387, para 26)
“26. Article 39 of the Constitution directs by clauses (b) and (c) that  the
ownership and control of the material resources  of  the  community  are  so
distributed as best to subserve the common good; that the operation  of  the
economic system does not result in the concentration of wealth and means  of
production to the common detriment.  These twin principles of  State  policy
were a part of the Constitution as originally enacted and it is in order  to
effectuate the purpose of these directive principles that the First and  the
Fourth Amendments were passed.”

Under the MMDR Act, when State Government has the right to reserve any  area
for exploitation in the public sector, the policy of  the  State  cannot  be
said to be in derogation of the  MMDR  Act  or  MC  Rules  or  the  National
Policy.
29.         Re. Contention. Procedure stipulated under Section      17A  (2)
cannot be thwarted under the guise of State’s  Industrial  Policy:-  Learned
Senior Counsel for the respondents submitted that under Section  17A(2)  the
State Government with the approval of the  Central  Government  can  reserve
any  area  for  exploitation  of  the  mineral  through  a   public   sector
undertaking and when the statute stipulates the procedure  to  be  followed,
then an area could be reserved for exploitation of  the  mineral  by  public
sector undertakings only as per the procedure stipulated in  Section  17A(2)
and the said statutory procedure cannot be thwarted under the  guise  of  an
industrial policy.  It was submitted that if  the  State  Government  really
intended to reserve any area for  exploitation  of  beach  sand  mineral  in
public sector, the State Government should have taken  steps  for  obtaining
approval of the Central Government and having not done so, the State  cannot
under  the  pretext  of  policy  decision  reject  the  first   respondent’s
application on the ground that the area  is  reserved  for  exploitation  of
minerals in the public sector.
30.          Under  Section  17A(2)  of  the   MMDR   Act,   the   statutory
dispensation is the approval of the Central Government  and  reservation  of
area by the  State  Government  by  notification  in  the  Official  Gazette
specifying the boundaries of such  area  and  the  mineral  or  minerals  in
respect of which such areas will be reserved.  No doubt,  when  the  statute
stipulates a procedure, it should be done  strictly  as  per  the  procedure
stipulated thereon. State  Government  with  the  approval  of  the  Central
Government has  the  power  to  reserve  any  area  for  undertaking  mining
operation through public sector undertakings.  Recommendation of  the  State
Government for approval of the Central Government for such  reservation  and
issuance of notification is  only  procedural.  As  discussed  earlier,  the
policy of the State that mining of beach and mineral would be  done  through
public sector undertakings cannot be said to  be  dehors  the  MMDR  Act  or
unreasonable justifying interference by the Court.
31.          Further,  be  it  noted,  the  plea  regarding  thwarting   the
procedure stipulated under Section 17A(2) of the MMDR Act  under  the  guise
of industrial policy has not been specifically raised before the High  Court
in the writ petition.  Only during the course of  arguments  in  this  Court
for the first time, such a plea was raised.  Therefore steps, if any,  taken
by the State of Kerala in furtherance of Section 17A (2) of MMDR Act is  not
available on record.
32.         That apart, grant of a mining lease to the first respondent  was
stopped by G.O.(MS)112/2004/ID dated 25.09.2004 and the matter  was  pending
consideration before the revisional authority-Central Government  from  2007
and the revision came to be dismissed on 30.11.2009 directing the  State  to
reconsider the matter afresh.  In the meanwhile, industrial  policy  of  the
State  stating  that  mining  of  minerals  sand  will   be   done   through
State/Central Public Sector Undertakings came into force w.e.f.  18.06.2007.
After reconsideration, the impugned order was passed
by the State Government on 15.12.2010.  Evidently, the State could not  have
made the proposal to the Central  Government  for  reserving  the  area  for
exploitation of the mineral by Public Sector Undertakings. Since  2007,  the
matter was sub-judice before one authority or the other.  Since  the  matter
was sub-judice, State could not have taken  further  steps  in  sending  any
proposal to the Central Government for obtaining the approval.
33.         The approval of the Central Government required by  Section  17A
(2) is mandatory, but nowhere it is stated that the approval must be  sought
prior to the reservation.  Prior approval of the Central  Government  before
reserving  any  area  by  the  State  Government  for  the   public   sector
undertaking  is  not  required.   Therefore,  what  logically  follows  from
Section 17A (2) is that the  State  Government  may  seek  approval  of  the
Central Government even after the framing of the policy.    Observing   that
Section 17A(2) does not  use the expression “prior  approval”  in  paragraph
(160) of Monnet Ispat case,  it was held as under:-
“160. The types of reservation under Section 17-A and their scope have  been
considered by this Court in Indian Metals and Ferro Alloys Ltd. 1992  suppl.
(1) SCC 91,  in paras 45 and  46  (pp.  136-39)  of  the  Report.  I  am  in
respectful agreement with that view. However, it was argued that Section 17-
A(2) requires prior approval of the Central  Government  before  reservation
of any area by the State Government for the public sector  undertaking.  The
argument is founded  on  an  incorrect  reading  of  Section  17-A(2).  This
provision does not use the expression, “prior approval” which has been  used
in Section 11. On the other hand, Section 17-A(2) uses the words, “with  the
approval of the Central Government”. These words in Section  17-A(2)  cannot
be equated with prior approval of the Central Government. According  to  me,
the approval contemplated in Section 17-A  may  be  obtained  by  the  State
Government before the exercise of power of reservation or after exercise  of
such power. The approval by the Central Government contemplated  in  Section
17-A(2) may be express or implied. In a case such as the present  one  where
the  Central  Government  has  relied  upon  the  2006  Notification   while
rejecting  the  appellants’  application  for  grant  of  mining  lease,  it
necessarily implies that the Central  Government  has  approved  reservation
made by the State Government in the 2006  Notification  otherwise  it  would
not have acted on the same. In any case,  the  Central  Government  has  not
disapproved  reservation  made  by  the  State  Government   in   the   2006
Notification.” (Underlining added)

Industrial Policy of the State can be said to be a prelude before the  State
makes the proposal reserving the area for exploitation  of  the  mineral  by
the public sector undertakings.  Respondent is not right in contending  that
under the guise of policy decision, the State has bye-passed  the  procedure
stipulated under Section 17A(2).
34.         Under Section 30 of MMDR Act after  remittance  of  the  matter,
the right of the  State  to  reconsider  the  matter:-  While  allowing  the
revision petitions filed under Section 30  of  the  MMDR  Act,  the  Central
Government directed the State Government to reconsider the matter. The  High
Court faulted the  State  Government  that  when  the  revisional  authority
directed reconsideration of the matter based on the “facts in  issue”,   the
binding  nature  of  the  decisions  of  the  superior  authorities  in  the
hierarchy was not kept  in  view  and  that   “it  is  sheer  statutory  and
institutional insubordination” on the part of the State.   Placing  reliance
upon the judgment of this Court in Dharam Chand Jain  vs.  State  of  Bihar,
(1976) 4 SCC 427, learned counsel  for  the  appellant  submitted  that  the
State Government being “a subordinate authority” in the matter  of  granting
mining lease was obligated under the law to carry  out  the  orders  of  the
Central Government.  Relying upon the above decision, it was submitted  that
if the State Government could decline to carry out the order of the  Central
Government, it would be subversive of judicial discipline.
35.         The decision in Dharam Chand Jain (supra) was  rendered  in  the
year 1976, that  is  prior  to  insertion  of  Sections  17A  (1A)  and  (2)
(inserted and modified respectively by Act 25  of  1994  with  retrospective
effect 25.01.1994).  In the year 1976, barring Rule 59 of  MC  Rules,  there
was no provision in the MMDR Act to reserve the area  for  mining  operation
through the public sector  undertakings.  Under  Section  10(3),  the  State
Government has the power to take a decision  keeping  in  view  the  overall
interest of the State and also the scientific mining of  the  mineral.   The
minerals to be exploited in this case are ilmenite,  rutile,  leucoxene  and
zircon, which have been  classified  as  “prescribed  substance”  under  the
Atomic Energy Act 1962.  In the order passed by the State Government,  State
has emphasized the need for environmental protection which is the  statutory
obligation of the State and the interest of larger  section  of  people  who
are residing in  the  coastal  areas  of  Kollam  and  Alappuzha  Districts.
Merely because the Central Government has directed the State  Government  to
reconsider the matter, it was not obligated upon the State to  grant  mining
lease in favour of the first respondent.  After remittance  of  the  matter,
State has the power to consider the applications afresh on  its  own  merits
and the constitutional mandate.
36.          By  perusal  of  the  order  dated  30.11.2009  passed  by  the
Revisional Authority, it is seen that the order  was  passed  by  the  Joint
Secretary (Mines) and Joint Secretary and Legal  Advisor.   The  order  only
directed the State Government to  reconsider  the  matter.  When  the  State
Government was required to reconsider the matter, State Government was  free
to consider the applications and take a decision.  Though MMDR  Act  confers
the revisional power on the Central Government for  grant  of  mining  lease
for mining minerals other than a minor mineral, that does not mean that  the
State Government is denuded of its power or control over the minerals  lying
in the land within its territory. The State Government is the  custodian  of
the land, mines and minerals. Under Section 10(3) State  has  the  power  to
reconsider the applications in the light of its  constitutional  mandate  of
environmental protection. The     High Court fell in error in  faulting  the
State Government and in my  view,  the  State  cannot  be  faulted  for  the
alleged “institutional insubordination”, as observed by the High Court.
37.         At this juncture, we may usefully refer to  the  observation  of
this Court that many a times Central  Government  hears  revision  petitions
through an executive officer  and  without  participation  of  the  judicial
member. In Sandur Manganese And Iron Ores Ltd.  vs.  State  of  Karnataka  &
Ors., (2010) 13 SCC 1  para (95), it was held as under:-
“95. It is  also  brought  to  our  notice  that  as  on  date  the  Central
Government  hears  revision  petitions  through  an  executive  officer  and
without participation of a judicial member. It is also pointed out that  the
exact procedure of the Revisional Tribunal has kept changing over  the  last
few months. It is clear that it would not be an independent and  efficacious
alternative forum in terms of the guidelines laid down by  the  Constitution
Bench in Union of India v. Madras Bar Assn.(2010) 11 SCC 1  As  observed  by
the three-Judge Bench of this Court in Indian Charge  Chrome  Ltd.(2006)  12
SCC 331, when there was no valid recommendation by the State Government  for
the grant of lease, there cannot  be  any  valid  approval  of  the  Central
Government relying on the defective recommendation.”

38.          In  the  present  case,  Joint  Secretary  (Mines)  and   Joint
Secretary and Legal Advisor have passed the order in the revision  petition.
 By allowing revision petition, Central Government  directed  the  State  to
reconsider the matter.  As noticed earlier, National Policy on  Exploitation
of Beach Sand Minerals issued by the Department of  Atomic  Energy  reserves
liberty to the State for selection of  Companies/Entrepreneurs  for  setting
up of projects/plants for exploitation of  beach  sand  minerals.  Grant  or
refusal of mining lease and mining of minerals  involves  considerable  high
stakes both in terms of commercial value and the fact that such  a  decision
will have impact on the concept of mineral development, it is for the  State
to exercise its discretion either to grant or refuse mining lease.
39.         Plea of promissory estoppel and legitimate  expectation:-  First
respondent  raised  the  plea  of   promissory   estoppel   and   legitimate
expectation. It was submitted that State has granted approval for mining  by
its order dated 15.09.2004 and the same cannot be supplanted by  purportedly
changing the policy.   Learned  Senior  Counsel  for  the  first  respondent
submitted that on the basis of representations on  the  part  of  the  State
Government, the first respondent had expended an amount in excess of  rupees
eighteen crores inter-alia for the  project  including  substantial  amounts
for acquisition of mineral bearing lands for mining beach sand minerals  and
by doing so, first respondent has altered its position irretrievably to  its
prejudice.
40.         It is well settled that no one has legal  or  vested  right  for
the grant of mining lease. Mere disappointment of expectation  cannot  be  a
ground for interfering with the policy of the State reserving the areas  for
exploitation  of  beach  sand  mineral  by   State/Central   Public   Sector
Undertakings. After referring  to  various  judgments  on  the  doctrine  of
promissory estoppel, in Monnet Ispat case, this  Court  has  summarized  the
principles in paragraph (182) as under:-
“182.1. Where one party has by his words or conduct  made  to  the  other  a
clear and unequivocal promise which is intended to  create  legal  relations
or affect a legal relationship to arise in the future, knowing or  intending
that it would be acted upon by the other party to whom the promise  is  made
and it is, in fact, so acted upon by the other party, the promise  would  be
binding on the party making it and he would not be entitled to go back  upon
it, if it would be inequitable to allow him to do so having  regard  to  the
dealings which have taken place between the parties, and this  would  be  so
irrespective of whether there is any pre-existing relationship  between  the
parties or not.
182.2. The doctrine of  promissory  estoppel  may  be  applied  against  the
Government where the interest  of  justice,  morality  and  common  fairness
dictate such a course. The doctrine is applicable against the State even  in
its governmental, public or sovereign capacity  where  it  is  necessary  to
prevent fraud or manifest injustice.  However,  the  Government  or  even  a
private party under the doctrine of promissory estoppel cannot be  asked  to
do an act prohibited in law. The nature and function  which  the  Government
discharges is not very relevant. The Government is subject to  the  rule  of
promissory estoppel and if the essential ingredients of  this  doctrine  are
satisfied, the Government can be compelled to carry out the promise made  by
it.
182.3.  The  doctrine  of  promissory  estoppel  is  not  limited   in   its
application only to defence but it can also furnish a cause  of  action.  In
other words, the doctrine of promissory estoppel can by itself be the  basis
of action.
182.4. For  invocation  of  the  doctrine  of  promissory  estoppel,  it  is
necessary for the promisee to show that by acting on  promise  made  by  the
other party, he altered his position. The  alteration  of  position  by  the
promisee is a sine qua non for the applicability of the  doctrine.  However,
it is not necessary for him to prove  any  damage,  detriment  or  prejudice
because of alteration of such promise.
182.5. In no case, the doctrine of promissory estoppel can be  pressed  into
aid to  compel  the  Government  or  a  public  authority  to  carry  out  a
representation or promise which is contrary to law or which was outside  the
authority or power of the  officer  of  the  Government  or  of  the  public
authority  to  make.  No  promise  can  be  enforced  which  is  statutorily
prohibited or is against public policy.
182.6. It  is  necessary  for  invocation  of  the  doctrine  of  promissory
estoppel that a  clear,  sound  and  positive  foundation  is  laid  in  the
petition. Bald assertions, averments or allegations without  any  supporting
material are not sufficient to press into aid  the  doctrine  of  promissory
estoppel.
182.7. The doctrine of promissory estoppel cannot be  invoked  in  abstract.
When it is sought to  be  invoked,  the  court  must  consider  all  aspects
including the result sought to be achieved and the  public  good  at  large.
The fundamental principle of equity must forever be present to the  mind  of
the court. Absence of  it  must  not  hold  the  Government  or  the  public
authority to its promise, assurance or representation.”

41.         No doubt by G.O (MS) No.105/04/ID dated  15.09.2004,  State  has
sanctioned mining leases to the first respondent.  But within  ten  days  by
order dated 25.09.2004, the mining lease granted  to  first  respondent  was
stopped on the ground that the detailed  study  on  the  environment  impact
will be undertaken before taking further action in the matter.  The rule  of
promissory estoppel can be invoked only if on the  basis  of  representation
made by the Government, the party has substantially  altered  the  position.
Within short time of ten days, in my view, first respondent could  not  have
altered its position so as to invoke the doctrine of promissory estoppel.
42.         State of Kerala has  the  legislative  competence  to  take  the
policy decision reserving the area  for  exploitation  of  minerals  by  the
public sector undertakings and the said policy cannot be said to  be  dehors
the MMDR Act 1957 and MC Rules.   The  High  Court  fell  in  error  in  not
appreciating the policy of the State in  the  light  of  the  constitutional
mandate and the decision taken by the State for the  welfare  of  the  State
and exploitation of the  mineral  by  scientific  mining  by  public  sector
undertakings.
43.         In the result, the impugned common judgment of  the  High  Court
is set aside and these appeals are allowed.  No order as to costs.

                                                                ..……………………J.
                                      (R. BANUMATHI)
         New Delhi;
April 8, 2016



                         IN THE SUPREME COURT OF INDIA
                         CIVIL APPELLATE JURISDICTION

                        Civil Appeal NO.3608 of 2016
                 (Arising out of SLP(C) No(s). 1490 of 2015)

STATE OF KERALA & ORS.                             Appellant(s)

                                VERSUS

M/S KERALA RARE EARTH & MINERALS LIMITED & ORS.    Respondent(s)


                                    WITH

                        Civil Appeal NO.3609 of 2016
                   (Arising out of SLP(C)No.1840 of 2015)

                                     AND

                        Civil Appeal NO.3610 of 2016
                   (Arising out of SLP(C)No.1914 of 2015)


                                  O R D E R

      In view of the majority of opinion, these appeals fail and are  hereby
dismissed.

                                                   .....................CJI.
                                             (T.S. THAKUR)



                                                    ......................J.
                                             (V.GOPALA GOWDA)



                                             ......................J.
                                             (R.BANUMATHI)

NEW DELHI
DATED 8th APRIL, 2016.

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