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3. Accordingly, a High Level Committee was constituted which submitted a report detailing the extensive damage that had occurred on account of haphazard, irregular and unscientific manner of quarrying sand by the quarry leaseholders, thereby impairing smooth flow of water and causing damage to riverbeds, river banks as also the structures (like bridges and transmission powerlines constructed across rivers or imbedded on the riverbed) and drinking water systems branching from rivers, leading to ecological imbalances. It was found that the unauthorized use of Poclain machines for quarrying, and the tendency of lessees to extend quarrying activities beyond the leased area and the permissible depth, were the main causes for the devastating situation. The Committee suggested several measures to remedy the situation, one of which was to impose total prohibition on quarrying by private parties. On considering the said report, the State Government took a decision in public interest to stop quarrying of sand in Government lands and Ryotwari (private patta) lands by private agencies and take upon itself exclusively, all sand quarrying activities in the State. It is in this background, Rule 38A came to be inserted in the Rules by Notification dated 1.10.2003 with effect from 2.10.2003.

4. Prior to insertion of the said Rule, the State Government was granting quarrying leases, the term of such leases being three years or less, under Rule 8 of the Rules. It is stated that as on 2.10.2003, private agencies were holding 135 sand quarrying leases granted by the State Government and 52 permissions for sand quarrying in Ryotwari lands. Out of these, 19 were to expire in 2003, 102 were to expire in 2004, 33 were to expire in 2005 and the remaining 33 were to expire in 2006; and in addition, sand quarrying was carried on by some others on the authority of orders of court, even though no leases had been granted in their favour. With effect from 2.10.2003, the State Government stopped all sand quarrying by private agencies. Several writ petitions were filed in the Madras High Court by the Lessees/permission holders, challenging Rule 38A.

(iii) The decision to put an end to all leases/permissions was not arbitrary or unreasonable. Rule 38A manifested the policy of the State Government, formulated after duly considering all relevant aspects and the recommendations of the High Level Committee. Therefore, the High Court erred in imposing conditions, for the applicability of Rule 38A to existing lease/permission holders.

8. The validity of Rule 38A in so far as it seeks to vest the exclusive right in the State Government, in regard to sand quarrying, does not arise for our consideration as the High Court has held that creation of such monopoly is not illegal having regard to the scheme of the Act and the decisions of this Court recognizing the right of the State to create such monopoly in State of Tamil Nadu v. Hind Stone & Ors. [1981 (2) SCC 205] and Gem Granites v. State of Tamil Nadu [1995 (2) SCC 413]. In Hind Stone (supra), this Court held that the power of regulation vested in the State Government can extend to total prohibition of leases and the State was entitled, in exercise of its regulatory power, in appropriate cases, to take over exclusive exploitation of a particular minor mineral or give it to a sole agency or prohibit exploitation by private agencies with the intention of conservation and prudent exploitation. In Gem Granites (supra), this Court held that the State Government as owner of a minor mineral, may decline to give any lease to quarry such minor mineral to anyone and may engage in such quarrying operations itself. Therefore, the High Court rightly held that Rule 38A reserving the exclusive right of quarrying sand, in itself, to the exclusion of others, was valid and did not suffer from any infirmity. This Court also refused to entertain the SLPs., filed by lessees in view of the said settled legal position.

9. The question that arises in these appeals by the State relates to the other part of the Rule, that is, whether the State can, while making a rule providing for exclusive vesting of right to exploit sand in itself, provide that all existing leases relating to quarrying of sand in Government land (and all existing permissions to quarry sand in ryotwari lands) shall cease to be effective on and from the date when such rule comes into force, and that too without providing a reasonable opportunity of hearing to the aggrieved lease/permission holders. In other words, the question is whether Rule 38A ought to be upheld unconditionally or whether holders of existing leases (Government lands) and permissions (ryotwari lands) should be protected till the expiry or termination of their leases/permissions as per law.