Orissa High Court
Gem Corporation Of Orissa Ltd. vs State Of Orissa And Ors. on 27 March, 2000
Equivalent citations: AIR2000ORI127, AIR 2000 ORISSA 127
Author: P.K. Mohanty
Bench: P.K. Mohanty, P.K. Misra
JUDGMENT P.K. Mohanty, J.
1. The petitioner a public limited company and is a sub-lessee under the Orissa Mining Corporation (in snort "O .M. C."), has challenged the impugned notice dated 24-9-1999, copy of which is annexure-2 and prays for a direction to the opp. party No. 2 to permit the petitioner-company to lift stock lying in the mining area after making necessary payment of royalty and commission as provided under the sublease.
2. The short facts of the petitioner's case is that for Ruby (Gem stone) over an area of 35.686 hectares in village Jullingdher of Kalahandi district, a mining lease was granted in favour of the O.M.C. by the State Government and by letter dated 11-12-1991, the State Government also permitted the O.M.C. to sub-lease the mining lease in favour of the petitioner to the terms and conditions approved by the State Government. Pursuant to the lease agreement dated 1-10-1990 executed by the State Government in favour of the O.M.C. for a period of ten years from the date of execution of the lease deed, the O.M.C. sub-leased the said mining in favour of the petitioner-Company and for the said purpose, a sub-lease agreement was made between the Orissa Mining Corporation and Gem Corporation on 21-10-1992. A copy of the sub-lease agreement as Annexure-1 to the writ petition. According to the petitioner, under Clause 4(a) of the sub-lease agreement the sub-leasee was to carry on the mining operation for a period of seven years from the date of execution of the agreement and it shall be renewed after seven years for the balance period out of the granted period of the years of the lease subject to the satisfactory performance of the Gem Co. and for this purpose, the decision of the Chairman-cum-Managing Director /Chairman O.M.C. in this regard shall be final. Under Clause 4(b), the performance of the petitioner-company is to be reviewed by the State Government once in every two years i.e. 3rd, 5th and 7th year during the period of agreement. It is claimed that from 1992 till date, there is no review by the State Government with regard to the performance of the petitioner-Company nor there is any adverse report relating to its performance and as such, the petitioner-Company was entitled to carry on the sublease for the granted period of ten years. It is stated that suddenly by letter dated 24-9-1999, a copy of which is Annexure-2, the opp. party No. 2 has issued a letter to the petitioner-company indicating therein that the sub-lease will expire on 20-10-1999 and the letter should be treated as a notice for termination of the sub-lease, It is asserted that the letter did not indicate any specific reason for termination of the sub-lease which is contrary to the lease agreement under Annexure-4.
3. The petitioner claims that even though there is no provision for filling up of a renewal application in the agreement and the renewal of the sub-lease is automatic yet on 11-9-1999, the petitioner-company has formally requested the O.M.C. for renewal of the sublease but without considering the same, the notice (Annexure-2) has been issued, A copy of the said letter dated 11-9-1999 is Annexure-4 to the writ petition. It is alleged that the intention behind issuing the letter under Annexure-2 is evident from the notice published in the daily newspaper dated 5-10-1999, a copy of which is Annexure-3 and the said letter would indicate that the O.M.C. instead of renewing the sub-lease has issued the notice under Annexure-3 inviting other parties for undertaking the mining operation in the mining lease area of O.M.C. on contract basis. It has also alleged violation of terms of the agreement by the O.M.C. It is further asserted by the petitioner that on receipt of the notice (Annexure-5), it has submitted a representation to the opp. party No. 2 for their consideration, but as yet, it had received no satisfactory answer. A copy of the representation dated 7-10-1999 is Annexure-7 to the writ application.
4. Opposite parties 2 and 3 have filed a counter affidavit controverting and denying the assertions, allegations and the claim made by the petitioner. According to these opposite parties, the sub-lease agreement (Annexure-1) was executed between the Gem Co. and O.M.C. on 21-10-1992 and as per Clause 4(a) of the sub-lease, the Chairman-cum-Managing Director/Chairman, O.M.C. has the authority to take a final decision with regard to either renewal or a cancellation of the sub-lease. The performance of the petitioner-company having found to be unsatisfactory it was decided to cancel the sub-lease agreement and accordingly, the petitioner-company was given notice on 24-9-1999 (Annexure-2). The grounds of unsatisfactory performance has been stipulated in the counter affidavit in ground Nos. (A) to (F). In effect, it is the opp. parties' allegation that in terms of clause 2(a) of the sub-lease agreement, there should be valuation of the material produced by the petitioner by a committee on fort-night's production and In case valuation was not possible GEMCO may remove the material, making an unaccount payment. But neither the petitioner-company agreed for valuation of the materials produced nor made any unaccount payment to remove the gem stones from the lease hold area for which O.M.C. was deprived of its legitimate dues in time. It is asserted that the last valuation of the stock of Gemstone was undertaken in October, 1995 and thereafter the GEMCO have accumulated a stock of 768527 grams till stoppage of production. Despite repeated reminders and discussions, GEMCO has avoided to evaluate the gemstone, resulting in-non-payment of dues to the State Government as royalty and 14% commission to the O.M.C. Ltd. It is further stated that for the purpose of value addition of the Gemstone in the State of Orissa. It was decided that GEMCO will use the Gemstones for the purpose of cutting and polishing in the Lapidary units established by them in the State of Orissa and/or may sell the gemstones in its raw form for meeting the reasonable requirement of rough gemsgone by local Lapidary units. During the entire mining operation conducted by GEMCO, they have neither cut/polished gemstone in Orissa nor they have supplied the same to any Lapidary unit in the State. The petitioner-company has not intentionally submitted the final sale price for the 2nd and 3rd lot of gemstone removed during January, 1995 and February, 1996 period, and it has failed to cover insurance of gem-stone as per the agreement for a certain period and intentionally had avoided to take up such coverage. The petitioner-company has also violated engagement of women to the extent of 25% of the mines inasmuch as it has not given employment to any woman worker. These opposite parties further claim that in addition to the above violation and breach of contract, Gem Co. was to pay on quartly basis an annual rent of Rs. 5,29,230/-towards the Gem processing plant. It has never paid the instalment excepting once. The petitioner was to procure the Gem processing plant on their own but they failed to do so and in turn requested O.M.C. Ltd. to arrange and supply them the Gem processing Plant. It is submitted that the O.M.C. being a commercial Organisation of the State executed sub-lease with the Gem Co. for development of the valuable gem bearing deposit of the State in order to earn a sizable revenue for the State exchequer. But during the entire sub-lease period, the State Government has received Rs. 6,41,336/- towards royalty and O.M.C. has received Rs. 4,64,623.82 towards 14% commission as against O.M.C. spending a sum of Rs. 40 lakhs approximately for supervision and establishment purpose, resulting in a huge loss over the same period. It is further alleged that the Gem Co. stopped mining operations from August, 1997 without assigning any reason to the O.M.C. The opposite parties have alleged that even though the Gem Co. has undertaken to pay and clear up the outstanding dues of the O.M.C. towards the balance rent prior to removal of material from the lease-hold area and the mining operation and the plant are complementary to each other, it had failed to make the payment and on that ground also the opp. parties have a right not to renew the sub-lease agreement.
5. In view of the pleadings of the parties, the undisputed factual position is that the O.M.C. sub-leased the mining for Rubby (Gem Stone) over an area of 35,686 hectors in village-Jillinghiher of Kalahandi district, in favour of the petitioner and an agreement was executed on 21 -10-1992. Under Clause 4(a), the petitioner-cum-lessee was to carry on the mining operation for a period of seven years from the date of execution of the agreement subject to the provisions of the Mineral Conservation and Development Rules, 1958. The sub-lease shall be renewed after seven years for the balance period out of the granted period of ten years subject to the satisfactory performance of the petitioner Gem Co. and for this purpose, the decision of the Chairman-cum-Managing Director/Chairman, O.M.C. is final. Under Clause 4(b), the performance of the petitioner Gem Co. is to be reviewed by the State Government once fn every two years i.e. in 3rd, 5th and 7th year during the period of agreement. The State Government undisputedly has not reviewed the performance of the petitioner-company from the date of execution of the sub-lease i.e. from the year 1992 till date even though the O.M.C. claims to have reviewed the performance regularly and communicated the petitioner-company regarding its short comings and directed removal of the short comings to meet their contractual obligations. The letter dated 14-9-1999 of the O.M.C. Ltd. Annexure-2 stipulates that the agreement executed between the O.M.C. and Gem Co. on 21-10-1997 will expire on 20-10-1999 and the said letter is directed to be treated as a notice for termination of sub-lease executing between the parties. But however, nothing has been stated about the reason for termination of the lease. The petitioner-company by its letter dated 11-9-1999 (Annex-ure-4) requested the O.M.C. for renewal of the sub-lease, but no reply to the said letter has been sent by the O.M.C. The petitioner-company has also submitted a representation on 7-10-1999 (Annexure-7), on receipt of the termination notice (Annexure-2) and no action has been taken on that representation.
6. Mr. G. Rath, learned Senior Advocates for the petitioner has referred to Clause 4(a) and (b) of the lease agreement (Annexure-1) to contend that the granted period of sublease was for ten years subject to renewal after seven years on the condition of satisfactory performance inasmuch as it is the State Government, who is to review the performance under Clause 4(b) thereof. Since the State Government has not reviewed the performance nor there is any adverse report, the questions of non-renewal of lease does not arise inasmuch as the period of lease being for ten years the same was to be renewed for the balance period of three years after completion of seven years automatically. However, the petitioner has made an application for renewal by the letter dated 11-9-1999 (Annexure-4). It is further contended that since no reason whatsoever has been assigned in the notice for termination of lease (Annexure-2) on the face of it, the notice cannot be sustained in law. It is his further submission that the grounds of unsatisfactory performance alleged by the opp. parties 2 and 3 are Imaginary inasmuch as they are not and cannot be construed as unsatisfactory performance in terms of the agreement to incur termination of the lease.
7. Mr. J. M. Mohanty, learned counsel appearing for the opp. parties 2 and 3 however, contended that the writ petition is misconceived in law inasmuch as in view of Clause 4(a) of the sub-lease, the Chairman-cum-Managing Director/Chairman of O.M.C. Ltd. has the authority to take a final decision with regard to either renewal or cancellation of the sub-lease and the petitioner-company having defaulted and acted contrary to the agreement, for which several letters and reminders were issued for rectification which went in vain, the termination cannot be questioned. According to the learned counsel as per Clause 2(a) of the agreement, there should be valuation of the material produced by the petitioner, but Gem Co. did not agree for the valuation of the material produced nor made any on account payment to remove the gem stones from the lease-hold areas, for which O.M.C. was deprived of its legitimate dues in time. The Gem Co. has accumulated a stock of 768527 grams till stoppage of production and despite repeated reminders and discussions, Gem Co. has avoided to evaluate the gem stone, resulting in nonpayment of dues to the State Government as royalty and 14% commission to O.M.C. Ltd. Further, the company has intentionally not submitted the final sale price for 2nd and 3rd lot inasmuch as violated the terms of the agreement in not engaging at least 25% of the, women as workers. It is further stated that the petitioner-company (sic).
8. In view of the pleadings of the parties, the question that needs determination is as to whether the sub-lease granted in favour of the petitioner was for a term of 10 (ten) years, subject to renewal on satisfaction by performance of the petitioner Company after 7 (seven) years as claimed and whether the Corporation had the right to terminate the sub-lease on completion of seven years without assessment of satisfactory performance of the petitioner Company by the State Government in terms of Clause 4(a) read with Clause 4(b) of the 'deed of sub-lease'.
9. Clause 4(a) and (b) of the sub-lease agreement (Annexure-1) is quoted hereunder for proper appreciation :--
"Clause 4(a) :
That the Sub-lessee shall carry on the aforesaid operation for a period of 7 (seven) years from the date of execution of the agreement and shall be subject to provisions of the Mineral Conservation and Development Rules, 1958. The sub-lease shall be renewed after 7 (seven) years for the balance period out of the granted period of 10 (ten) years of the said lease, subject to the satisfactory performance of GEMCO. The decision of the Chairman-cum-Managing Director/Chairman, OMC In this regard shall be final.
Clause-4(b) :
The performance of the GEMCO will be reviewed by the State Government once in every two years, i.e. in the third year, fifth year and seventh year during the period of the agreement."
On a plain reading of Clause-4(a) of the sub-lease agreement under Annexure-1, it is abundantly clear that initial period of grant is for a period of seven years and the petitioner (sub-lessee) was to carry on the mining operation for a period of seven years from the date of execution of the agreement i.e., from 21-10-1992 and the sub-lease was renewable for a further period subject to satisfactory performance for the balance period out of the granted period of ten years of the said lease. The granted period of ten years of the said lease obviously refers to the period for which the lease has been granted by the State Government in favour of Orissa Mining Corporation. In other words, the sub-lease is subject to renewal for the balance period i.e. unexplred period of the lease granted in favour of O.M.C. by the State Government. In any event, under Clause-4(a) the sub-lessee has been given a right of renewal for a further period subject to satisfactory performance. The decision of the Chairman-cum-Managing Director/Chairman, O.M.C. in this regard shall be final. Howover, Clause 4(b) envisages that the performance of the GEMCO is to be reviewed by the State Government once in every two years i.e. third year, fifth year and seventh year during the period of agreement. Thus, on a conjoint reading of Clause 4(a) with Clause 4(b) of the agreement, there cannot be any manner of doubt that the performance of contemplated under Clause 4(a) of the GEMCO is to be reviewed by the State Government in the manner indicated therein. The contention of Sri Rath, learned senior Advocate for the petitioner that the State Government under the agreement is the authority to review and assure the performance of the petitioner sub-lessee, carries considerable force. Under Clause 4(a), the decision of the Chairman, O.M.C. in this matter is to be treated as final, but that has to be read and understood in the contest of determination of the satisfactory performance by the State Government under Clause 4(b). It is, therefore, submitted by Sri Rath that the State Government having not reviewed the performance of the petitioner, It cannot be contended that the performance of the petitioner was not satisfactory so as not to renew the lease for the balance period. The opp. party, O.M.C. has however, alleged unsatisfactory performance and non-fulfilment of certain conditions of the agreement giving the notice of termination in Annexure-2 does not indicate any such ground whatsoever, for which the termination is completed.
10. A bare perusal of the notice under Annexure-2 would rather reveal that it is an intimation to the petitioner that the initial period of seven years of the sub-lease shall expire on 10-10-1999, inasmuch as the petitioner Company was directed to make certain payments towards rest of Gem Processing Plant royalty and cess on Gem Stone purchase with evaluation expertise of GEMCO.
Sri Rath has relied on the decision of the apex Court in Mohinder Singh Gill v. The Chief Election Commissioner, New Delhi, AIR 1978 SC 851, to contend that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise the order bad in beginning may, by the time it comes to Court on account of challenge, get validated by additional grounds later brought out.
A reference may be made to the decision in Commissioner of Police, Bombay v. Gobardhan Bhanji, AIR 1952 SC 16 (at Page 18):
"Public orders publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the actions and conduct of these to whom they are addressed and must be construed objectively with reference to the language used in the order itself."
In our considered opinion the decision of the Apex Court referred to above, may not be strictly applicable to the facts of the present case since the order impugned is not a statutory order passed by a statutory authority. But however, if the contracting party a statutory Company issues a notice of termination of a lease in terms of the agreement it has to indicate some reasons as to why it is so intended.
Sri J. M. Mohanty, learned counsel for the opp. party-Corporation however, submits that the petitioner was required to make payment of some outstanding dues towards royalty and case on Gem Stones and the flat of the Gem Processing Plant, which is to the tune of more than Rs. 33 lakhs and that having not been paid the sub-lease is liable to be terminated/not extended.
11. Undisputedly, the petitioner has filed an application for renewal of the sub-lease by its letter dated 11-9-1999, a copy whereof is Annexure-4 and subsequently, a representation was filed, but no decision thereon has been taken.
12. The text of the notice issued by the Orissa Mining Corporation Ltd. dated 24-4-1999 (Annexure-2) reads thus :
"Sir, I am directed to intimate that the agreement executed between OMC and GFMCO on 21-10-92 for sub-leasing Jillingdhar M.L. area will expire on 20-10-99.
You are requested to make the following payment to OMC on or before 19-10-99 failing which GMC will be compelled to initiate legal action in the proper forum. The payment due to OMC is indicated herein below:
1. Payment towards rent of the gem processing plant (Calculation sheet is Enclosed) Rs. 30,45,615.40
2. Payment towards royalty and cess on Gem stones purchased with evaluation Expertise of GEMCO. Rs. 2.63.298.90 Rs. 33,07,914.30 (Rupees Thirty three lakhs seven thousand nine hundred fourteen & paise thirty only).
This may be treated as notice for termination of sub-lease of Jillingdher N.L. area executed between GEMCO & OMC on 21 -10-91,"
In view of Clause 4(a) read with Clause 4(b) of the sub-lease agreement, the petitioner after operating the lease for a period of 7 (seven) years had a right of removal for a further term of unexpired period of ten years, granted in favour of Orissa Mining Corporation subject to satisfactory performance by the petitioner during these seven years of, initial grant. Thus, the notice dated 24-9-1999 (Annexure-2) that the sub-lease dated 21-10-1992 between the parties will expire on 20-10-1999 and that the notice to be treated as a notice of termination of the sublease, without either assessing the performance of the petitioner or without rejecting the application of the petitioner for renewal of the lease is thoroughly misconceived. The notice otherwise does not indicate any reason whatsoever for such a notice of termination. In terms of the sub-lease agreement, Clause 4(a) the petitioner's right of renewal of the sublease for a further period was reserved subject to satisfactory performance etc. as laid therein the agreement, The petitioner certainly had the right for consideration of his application for renewal, but that having not been done the notice of termination of lease in Annexure-2 is not sustainable in law. However, we do not agree with the contention of Sri Rath, learned senior Advocate for the petitioner that the renewal of the sub-lease was automatic and no application for such renewal is contemplated under the agreement for the simple reason that the initial granted period of the sub-lease was for seven years, from the date of execution and the petitioner had to carry on the mining operation for a period of 7 (seven) years in terms of Clause-4(a) of the agreement subject to renewal for the balance period out of a period of ten years of the lease granted in favour of the owner, Orissa Mining Corporation.
13. In any view of the matter, the notice of termination of the sub-lease so dated 24-9-1999 in Annexure-2 cannot be sustained in law and accordingly the same is quashed. The petitioner's application for the renewal of the sub-lease being pending consideration, we direct the Chairman, Orissa Mining Corporation (opp. party No. 2) to consider the said application in accordance with law and in terms of the sub-lease agreement (Annexure-1) and take an appropriate decision within a period of 4 (four) weeks from the date of receipt of this order.
The writ petition is allowed to the extent indicated, but however, their shall be no order as to costs.
Ch. P.K. Misra, J.
14. I agree.