Andhra HC (Pre-Telangana)
Isra Mineral Exports (P) Ltd. vs Government Of A.P. And Ors. on 12 March, 2004
Equivalent citations: 2004(3)ALD306, 2004(3)ALT696
Author: R. Subhash Reddy
Bench: R. Subhash Reddy
ORDER R. Subhash Reddy, J.
1. These writ petitions arise under similar legal and factual back-ground; hence, they are disposed of by this common order. For the sake of convenience, I will refer to the facts mentioned in Writ Petition No. 20087 of 2003.
2. The petitioner, a private limited company, promoted by fourth respondent-Andhra Pradesh Mineral Development Corporation and two other investor companies, has filed this writ petition, questioning the order dated 16-6-2003 passed by the Director of Mines and Geology, Hyderabad, cancelling the quary lease and the order of the revisional authority dated 15-9-2003, rejecting the revision petition filed by the petitioner.
3. The fourth respondent-Andhra Pradesh Mineral Development Corporation, a company owned by Government of Andhra Pradesh, has purchased an extent of Ac.89.06 cents of land in Sy.Nos. 52, 55/3C, 55/4A of R.L. Puram Village, Chimakurthy Mandal, Prakasam District. They have initially obtained prospecting licence for black granite over an extent of Ac.89.06 cents, for a period of two years, from the Director of Mines and Geology, Andhra Pradesh. For the said purpose, lease deed was executed on 10-8-2000 and it was valid up to 9-8-2002. The fourth respondent-Corporation has invited bids from the interested parties/investor companies for the purpose of prospecting and quarrying black granite in the offered blocks. Two investor companies, i.e., M/s. Krishna Sai Granites Private Limited and another, in terms of the agreement entered with the fourth respondent-Corporation, promoted a joint venture company, i.e., M/s. Margasree Granites Private Limited, petitioner herein, for prospecting and quarrying Galaxy granite. The fourth respondent-Corporation has entered into Project Co-operation and Investment Agreement, and, Mining Franchise Fee Agreement, with certain conditions. Thereafter, the fourth respondent-Corporation applied for transfer of their prospecting licence in favour of the petitioner-company over an extent of 20.71 acres of land. On the application filed by the fourth respondent-Corporation, transfer was ordered through Proceedings No. 20425/R3(2)/2001, dated 29-6-2001 by the Director of Mines and Geology, in favour of the petitioner-company, for the un-expired period of licence.
4. Subsequently, the petitioner-company has filed an application for grant of quarry lease over the subject land before the Assistant Director of Mines and Geology, Ongole, on 20-2-2002. As much as the fourth respondent-Corporation acquired ownership rights, and, as it has consented to transfer of surface rights in favour of the petitioner-company, for grant of quarry lease, quarry lease for black granite over an extent of 20.71 acres of land situated in R.L. Puram, was granted by the second respondent, through his Proceedings No. 6983/R3(2)/2002, dated 24-5-2002. The quarry lease was executed on 18-7-2002 in the prescribed performa, as per the provisions of the A.P. Minor Mineral Concession Rules, 1966, framed under Mines and Minerals (Regulation and Development) Act 1957 and same is valid up to 17-7-2022. Pursuant to the grant of lease, the petitioner-company has made investments and stated quarrying operations.
5. As the things stood thus, the fourth respondent-Corporation through their letter dated 16-5-2003 have informed the second respondent, that their agreements with the petitioner-company have been cancelled. They further informed through their letter dated 27-3-2003 that they have taken over the possession of the leased land on 26-3-2003 and consequently, the petitioner-company is no longer entitled to surface rights. Pursuant to the said letters addressed by the fourth respondent-Corporation, the second respondent has initiated proceedings for cancellation of quarry lease and issued show notice dated 26-5-2003, calling explanation from the petitioner-company, as to why the quarry lease granted to it should not be cancelled. The said show-cause notice was issued, stating that, in view of withdrawal of consent for the surface rights by the fourth respondent-corporation, the right of the petitioner to excavate the minerals in the subject land has been ceased to exit. The petitioner-Company has filed detailed explanation to the said show-cause notice, on 4-6-2003, opposing cancellation proceedings. It is the case of the petitioner in the reply that the petitioner is paying all the statutory levies to the Government, i.e., royalties, dead rent, seigniorage fee etc., and cancellation of lease can be only for violation of conditions of lease; as such, in absence of violation of any conditions of grant/lease, no order of cancellation can be made. With regard to consent for surface rights, the petitioner pleaded that the fourth respondent-Corporation is already given 26% of equity in the petitioner-Company; as such, the fourth respondent cannot withdraw consent at this stage. With regard to collection of Mining Franchise Fee, the case of the petitioner was that, the same was questioned in Writ Petition No. 11089 of 2002 by one of the investor companies and on dismissal of the said writ petition, the matter is carried to Supreme Court by filing SLP and the same is pending consideration. The petitioner has also made request for opportunity of personal hearing in the matter before further orders are passed.
6. On considering the explanation submitted by the petitioner, the second respondent-Director of Mines and Geology, has passed impugned order dated 16-6-2003 in Proceedings. No. 15719/R3(2)/2003, cancelling the quarry lease granted in favour of the petitioner-company, on the ground that, the consent of the owner of the land is the condition precedent for grant of quarry lease and now, by virtue of cancellation of Project Co-operation and Investment Agreement, and, Mining Franchise Fee Agreement, consent given by the fourth respondent-Corporation for surface rights over the subject land is ceased to exist. In the impugned order, reliance is placed on the judgment of the Supreme Court in the case of Pallava Granites Industrial India (P) Limited v. Government of A.P., .
7. As against the impugned order of cancellation passed by the second respondent-Director of Mines and Geology, the petitioner has filed revision petition before the first respondent-Government as provided under Rule 35-A of the A.P. Minor Mineral Concession Rules, 1966, which is also dismissed by order dated 15-9-2003 passed in Memo No. 11308/M.II(1)/2003-5. Hence this writ petition.
8. The petitioner questions the validity of the impugned order on several grounds. It is the case of the petitioner that there is no authority for the Director of Mines and Geology to cancel the quarry lease and the said power is conferred only on the State Government under Section 4-A of the Mines and Minerals (Regulation and Development) Act, 1957. Further, placing reliance on Section 4-A(3) of Mines and Minerals (Regulation and Development) Act, 1957, validity of the impinged order is questioned on the ground, that the petitioner was not heard before passing such order, of cancellation of quarry lease. It is the further case of the petitioner that in any event, quarry lese cannot be cancelled in absence of any violation of conditions with regard to grant/lease. With regard to consent, it is stated, once lease is granted based on the consent of the owner, continuance of the same, will not depend on the consent of the owner.
9. Separate Counter-affidavits are filed on behalf of the State and the fourth respondent-Corporation.
10. It is the case of the respondents, that the petitioner-Company was granted quarry lease, as much as the petitioner-Company possessed consent for surface rights, in terms of the Project Co-operation and Investment Agreement, and, Mining Franchise Fee Agreement between the fourth respondent-Corporation and petitioner. It is admitted that quarry lease was executed on 18-7-2002 and it is valid up to 17-7-2022. In the counter-affidavit filed on behalf of the first respondent, it is stated that the fourth respondent-Corporation has informed the second respondent vide letter dated 16-5-2003 that Project Co-operation and Investment Agreement, and, Mining Franchise Fee Agreement have been cancelled vide their letter No. APMDC/BG-GLX/T-3/MR/2003/2738, dated 17-3-2003 and consequently that have taken over the possession of the leased land on 26-3-2003; as such, quarry lease holder was no longer entitled to surface rights. It is further stated that one other investor company, by name, M/s. Midwest Granite Private Limited, had challenged the payment of Mining Franchise Fee, to the fourth respondent, before this Court in Writ Petition No. 11089 of 2002 and this Court has dismissed the writ petition, by order dated 9-9-2002; as against the same, the promoter of the petitioner-company carried the matter in SLP before the Supreme Court, which is admitted, however, no interim orders are passed; as such, it is the case of the respondents that the petitioner has violated the terms and conditions of the agreement, entered into with the fourth respondent-Corporation and it owes huge sum towards Mining Franchise Fee, to the fourth respondent-Corporation. With regard to the plea of the petitioner, for providing personal hearing before passing the order of cancellation, it is stated, there is no provision, providing personal hearing, and the petitioner was given an opportunity, by way of show-cause notice and orders are passed by complying the principles of natural justice. It is further stated, that pursuant to cancellation of lease granted to the petitioner-Company, the fourth respondent-Corporation and two other applicants have filed applications, for grant of quarry lease in their favour and ultimately, the Assistant Director of Mines and Geology has recommended for grant of quarry lease in favour of the fourth respondent-Corporation, while rejecting other applications. Accordingly, quarry lease for black granite over an extent of Ac.89.06 cents is granted in favour of the fourth respondent-Corporation, in preference to others, as much as the fourth respondent-Corporation is the owner, of the applied area. With regard to the power of cancellation, it is stated, the Director of Mines and Geology is the authority for grant of lease and cancel the same in exercise of powers under Rule 12(5) of the Andhra Pradesh Minor Mineral Concessions Rules, 1966, framed under Mines and Minerals (Regulation and Development) Act, 1957. With regard to investments made by the petitioner-Company, it is stated that the petitioner-Company had been carrying on granite quarry operations from 29-6-2001 and presumably, it has recovered its investments.
11. Heard Sri S. Ravi, learned Counsel appearing for the petitioner and Sri T. Ananta Babu, learned Advocate General appearing for the respondents.
12. It is contended by Sri S. Ravi learned Counsel appearing for the petitioner-Company that there are no valid grounds, for cancelling the lease granted in favour of the petitioner-Company. It is his contention that once quarry lease is granted, power of cancellation is conferred on the Government, under Section 4-A of the Mines and Minerals (Regulation and Development) Act, 1957, and, the Director of Mines and Geology is not empowered to cancel the lease. In any event, he further submits, before passing of the impugned order for cancellation, the petitioner was not given any opportunity of hearing and the same is in violation of Section 4-A(3) of the Mines and Minerals (Regulation and Development) Act, 1957. He further submits that the second respondent-Director of Mines and Geology is not empowered to cancel the lease, even as per the provisions of Andhra Pradesh Minor Mineral Concessions Rules, 1966, in absence of any violation of terms and conditions of lease. It is submitted, in the instant case, the impugned order of cancellation is passed only on the information furnished by the fourth respondent-Corporation regarding termination of Project Co-operation and Investment Agreement, and, Mining Franchise Fee Agreement, and, their claim of taking over the possession. As such, it is submitted that the said termination of agreement, as pleaded by the fourth respondent-Corporation and their claim of taking over possession is without any authority of law and on such basis, no order of cancellation can be made. He further submits that even the revisional authority has not considered all the relevant grounds and rejected the revision petition.
13. On the other hand, learned Advocate General, Sri T. Ananta Babu, appearing for the respondents, submits that the fourth respondent-Corporation has entered into Project Co-operation and Investment Agreement, and, Mining Franchise Fee Agreement entered, with the petitioner-Company and, in view of the said agreements, and consent for surface rights, quarry lease was granted to the petitioner; but, in view of termination of the said agreements, the said lease has became inoperative, in view of the withdrawal of the consent. It is further submitted that in view of termination of the agreements referred to above, the petitioner-Company has lost its surface rights to continue in possession over the subject land and in view of the same, rightly, the second respondent cancelled the quarry lease, granted in favour of the petitioner-Company. It is the case of the respondents that grant of quarry lease, is in the nature of contract and by virtue of termination of the agreements, the very contract is frustrated and the petitioner-Company has lost its right to continue the quarry operations over the subject land. It is the further case of the respondents that the black granite is a minor mineral, governed by the provisions under A.P. Minor Mineral Concession Rules, 1966; and, the second respondent is the competent authority to determine/cancel the lease. It is stated, the petitioner was given opportunity by issuing show-cause notice, before passing the impugned order of cancellation and the petitioner-Company is not entitle for hearing.
14. With reference to the above submissions, it is to be seen, grant of quarry lease to the petitioner-Company is governed by the statutory rules, i.e., Andhra Pradesh Minor Mineral Concession Rules, 1966, framed in exercise of powers under Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957. Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957 empowers the State Government to make rules, for regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals and for the purposes connected therewith. In the instant case, the quarry lease relates to black granite, which is a minor mineral covered by Andhra Pradesh Minor Mineral Concessions Rules, 1966. Initially the fourth respondent-Corporation has obtained prospecting licence for a period of two years; thereafter, after accepting the offers from the investor companies and on incorporation of the petitioner-joint venture company, the very prospecting licence was transferred in favour of the petitioner-Company, for the un-expired period. Subsequently, the petitioner-Company has applied for grant of quarry lease and the application of the petitioner was processed, in accordance with the A.P. Minor Mineral Concession Rules, 1966 and orders were passed on 24-5-2002 by the competent authority, granting quarry lease in favour of the petitioner-Company, for a period of twenty years. Thereafter, lease deed was executed for a period of twenty years commencing from 18-7-2002 to 17-7-2022.
15. As per the rules, under Andhra Pradesh Minor Mineral Concessions Rules, 1966, quarry lease, once granted, it confers on the lessee a right of quarry, carry away, sell or dispose of minor mineral or minerals specified in the lease deed. From the reading of the provisions under Mines and Minerals (Regulation and Development) Act, 1957, coupled with Andhra Pradesh Minor Mineral Concession Rules, 1966, framed under the Act, it is clear that the Director of Mines and Geology is empowered under Rule 12 of A.P. Minor Mineral Concession Rules, 1966, to determine/cancel leases in cases where lessee violates conditions of grant, covenants of the lease deed. This power conferred on the Director of Mines and Geology, so far as the minor minerals are concerned, is independent of the power of the State Government, for premature termination of licence/lease on the grounds specified under Section 4-A, of the Mines and Minerals (Regulation and Development) Act, 1957. Grant of lease for minor minerals is governed by Rule 12 of the A.P. Minor Mineral Concession Rules, 1966; Rule 12(3) provides preference for disposal of quarry lease applications for minor minerals; where as Rule 12(3-A) further provides preference, for grant of quarry leases, in respect of patta lands, to the pattadars or their consent holders.
16. In the instant case, the fourth respondent-Corporation, which has acquired ownership over the subject land has entered into Project Co-operation and Investment Agreement, and, Mining Franchise Fee Agreement with the petitioner-Company. It is also not in dispute, that there was consent of the fourth respondent-Corporation, for grant of quarry lease to the petitioner-Company and basing upon their consent, application of the petitioner was processed and quarry lease was granted in accordance with the Andhra Pradesh Minor Mineral Concession Rules, 1966, over the subject land, for a period of twenty years. As per the terms of the lease deed executed in the prescribed formant and grant, the petitioner-company started quarrying operations. Proceedings for cancellation of quarry lease are initiated on the communication made by the fourth respondent-Corporation, to the effect that they have terminated the Project Co-operation and Investment Agreement, and, Mining Franchise Fee Agreement, for non-payment of Franchise fee as per the said agreements entered into and alleged taking over of the possession by the fourth respondent-Corporation. Payment of franchise fee in favour of the fourth respondent-Corporation is, as per the terms of the agreement entered into by the fourth respondent-Corporation with the petitioner-Company. Though there are certain statutory levies, viz., seigniorage fee, dead rent etc., payable as per the terms of the lease entered into, under the Andhra Pradesh Minor Mineral Concession Rules, 1966, there is no condition for payment of franchise fee. If any such franchise fee is payable by the petitioner-Company, as per the terms of the agreements, entered into, it is always open for the fourth respondent-Corporation to recover such amount. But, in the instant case, the question that required to be considered is: quarry lease granted to the petitioner-Company, subject to the consent of the fourth respondent-Corporation, can be cancelled subsequently on the claim of withdrawal of such consent, on account of termination of Project Co-operation and Investment Agreement, and, Mining Franchise Fee Agreement. The consent, which is given, is only for the purpose of disposal, on priority among the applicants for grant of quarry lease initially; but, once quarry lease application is disposed of and quarry lease is granted, it will not depend on the consent of the land owner. Quarry lease granted in favour of the petitioner-Company is governed by the provisions under Andhra Pradesh Minor Mineral Concession Rules, 1966. Even determination or cancellation of lease, can only be in accordance with the said Rules and, in which event, as per Rule 12(5), the power of Director of Mines, for cancellation/determination of lease, is only on account of breach, on the part of the lessee of any convenant or condition contained in the grant. In the instant case, even as per the terms of the quarry lease, and conditions of grant, payment of franchise fee is not a condition. In absence of which, merely because information furnished by the fourth respondent regarding termination of agreements entered by them with the petitioner cannot be a valid ground for cancellation of quarry lease. Breach of contractual terms, inter se between the fourth respondent-Corporation and the petitioner-Company, cannot be the basis for cancellation of quarry lease granted to the petitioner-Company. Once consent is given by the fourth respondent-Corporation and there is grant of lease by the competent authority and consequential lease deed is executed in favour of the petitioner-Company, the fourth respondent-Corporation cannot claim taking over of possession on their own; and such claim is without any authority of law. Once quarry lease is granted, even with regard to patta lands, on the consent given by the pattadar/owner, it won't depend on continuance of such consent of pattadar/owner. There is no such requirement under the Andhra Pradesh Minor Mineral Concession Rules, 1966. In absence of which, withdrawal of the consent by the fourth respondent-Corporation, on account of termination of Project Co-operation and Investment Agreement, and, Mining Franchise Fee Agreement, entered between the Corporation and the petitioner-company, cannot be a valid ground for cancellation of lease. Consent of owner of the land is the relevant factor, while disposing the applications for grant of quarry lease, for minor minerals at initial stage. Once the application is considered and quarry lease is granted, the continuance of lease will not depend upon the discretion of the land owner. The case of Pallava Granites Industrial India (P) Limited (supra) referred to in the impugned order dated 16-6-2003 is a case in which, the Supreme Court has considered the requirement of consent of landlord, at the time of grant of lease. In that context, the Apex Court has held that the right of grant of mining lease to excavate the mines beneath the surface, is subject to consent of the land owner. But, in the instant case, it is not in dispute that such a consent is given by the land owner at the time of considering the application for grant of lease and there upon the lease was granted and a lease deed is executed for a period of twenty years. As such, the judgment referred to in the impugned order cannot be pressed into service having regard to the facts and circumstances of this case.
17. With regard to the contention of the learned Counsel for the petitioner that the second respondent is not the competent authority and petitioner is entitled to opportunity of personal hearing under Section 4-A(3) of the Mines and Minerals (Regulation and Development) Act, 1957, it is to be seen, the impugned order of cancellation of quarry lease, is not passed in exercise of powers under Section 4-A(2) of the Mines and Minerals (Regulation and Development) Act, 1957. Though the State Government is empowered to pass an order for premature termination of lease on the grounds specified under Section 4-A(2) of the Mines and Minerals (Regulation and Development) Act, 1957, so far minor minerals are concerned, further power is conferred on the Director of Mines, under the A.P. Minor Mineral Concession Rules, 1966, for cancellation or determination of lease, in case of any breach on the part of the lessee, of any covenant or condition contained in the grant. So far the power of determination of lease under the provisions of Andhra Pradesh Minor Mineral Concession Rules, 1966 is concerned, lessee is not entitled to an opportunity of hearing. In view of the same, the contention of the learned Counsel for the petitioner that the second respondent is not the competent authority to pass the impugned order to cancel the lease and the petitioner is entitled to opportunity of personal hearing, cannot be accepted. The learned Counsel for the petitioner placed reliance on the judgments of the Supreme Court in State of Haryana v. Ram Krishan, , Assam Sillimanite Limited v. Union of India, , Baldev Singh and Ors. v. State of Himachal Pradesh and Ors., and the judgment of the Division Bench of Delhi High Court in Sahiram v. Avtar Singh, . It is to be seen that all these cases, except the case of Baldev Singh (supra), relate to passing of an order under Section 4-A of the Mines and Minerals (Regulation and Development) Act, 1957. So far Baldev Singh case (supra) is concerned, it is a case relating to the provisions of Himachal Pradesh Municipal Act. So far as orders to be passed under Section 4-A of the Mines and Minerals (Regulation and Development) Act, 1957 by the Government is concerned, there is an express provision under Section 4-A (3) of the Mines and Minerals (Regulation and Development) Act, 1957, providing an opportunity of hearing. But, the impugned order is passed in exercise of powers under Andhra Pradesh Minor Mineral Concessions Rules, 1966, in which no such express provision for hearing; as such the judgments referred to by the petitioner will not render any assistance. In view of the same, it cannot be said that the impugned order is passed in violation of principles of natural justice.
18. The learned Counsel for the petitioner placed reliance on the judgment of the Division Bench of this Court in Writ Petition No. 20965 of 2000, dated 4-11-2003, wherein this Court has considered the requirement of consent of the land owner at the time of renewal of lease with regard to major mineral. Referring to the judgment of the Supreme Court in Pallava Granites Industrial India (P) Limited (supra), and State of Tamil Nadu v. M.P.P. Kavery Chetty, , in the said judgment, this Court has held that in case of renewal of lease under Mineral Concession Rules, 1960 is concerned, where consent has already been obtained at the time of grant of lease, no further consent would be required at the time of renewal. Though the said judgment is rendered with reference to Rule 22(3) of the Mineral Concession Rules 1960 Rules, it supports the case of the petitioner to the extent that in absence of any provision for continuous consent of the land-owner, on such ground quarry lease cannot be cancelled. As much as quarry lease with regard to black granite is governed by A.P. Minor Mineral Concession Rules, 1966, in absence of any breach on the part of the lessee of any covenant or condition contained in the grant, lease cannot be cancelled on the ground that consent is withdraw. Even the revisional authority has not considered several contentions raised in proper perspective.
19. In that view of the matter, I am of the considered view that the impugned order for cancellation is not passed on any valid grounds. Termination of Mining Franchise Fee Agreement and the claim of taking over possession by the fourth respondent-Corporation cannot constitute valid grounds to cancel the quarry lease granted in favour of the petitioner-Company. As much as the quarry lease is granted for a period of twenty years, the petitioner is entitle to operate quarry, in terms of the grant and by following the terms of quarry lease, for such period. If any claims are there, on account of agreements entered by the fourth respondent-Corporation with the petitioner-Company, it is left open for the fourth respondent-Corporation, to take such steps available under law to recover the same.
20. For the foregoing reasons, the writ petitions are allowed. The order passed by the second respondent-Director of Mines and Geology, cancelling the quarry lease and the orders of the revisional authority, dismissing the revision petitions filed by the petitioners, are set aside. No order as to costs.