2012 (3) TMI 418 - SC - Indian Laws

Whether the Memorandum of Understanding dated 15th May, 2002, continues to subsist in favour of the Appellants? Whether the State Government is obliged to make recommendations for the grant of iron ore mines in terms of the stipulations contained in the aforesaid MOU dated 15th May, 2002, and whether in respect of the areas which had not been notified under Rule 59(1), the State Government can make a recommendation for relaxation of Rule 59(1) under Rule 59(2)?

Summary

Issues Involved:
1. Whether the Memorandum of Understanding (MOU) dated 15th May, 2002, continues to subsist in favor of the Appellants.
2. Whether the State Government is obliged to make recommendations for the grant of iron ore mines in terms of the stipulations contained in the MOU dated 15th May, 2002, and whether the State Government can make a recommendation for relaxation of Rule 59(1) under Rule 59(2) of the Mineral Concession Rules, 1960.

Issue-wise Detailed Analysis:

Issue 1: Continuation of the MOU dated 15th May, 2002:
The Appellants argued that the MOU dated 15th May, 2002, between them and the State Government should continue to subsist. They contended that the State Government had acted upon this MOU, causing the Appellants to change their position and invest significantly in setting up the steel plant. Despite communications from the State Government on 10th February, 2004, and 31st December, 2005, requesting a fresh MOU, the State continued to act under the original MOU. The Appellants emphasized that the dispute within the Bhushan Group, which led to the State's rethinking, had been resolved, and BSSL had withdrawn its claims under the MOU. The State Government also acknowledged that the dispute had been settled and agreed that the only remaining obligation was to recommend the grant of iron ore mines to the Appellants. The Court concluded that the State acted arbitrarily by requiring a new MOU and affirmed that the original MOU continued to be valid and subsisting.

Issue 2: State Government's Obligation to Recommend Iron Ore Mines:
The Appellants argued that the State Government was obliged to recommend the grant of iron ore mines as per the MOU dated 15th May, 2002. They pointed out that the State had made similar recommendations for other companies in relaxation of Rule 59(1) under Rule 59(2) of the Mineral Concession Rules, 1960. The State Government had initially rejected the Appellants' application for a mining lease on the grounds that it was premature and that the area had not been thrown open for re-allotment. However, the Court found this reasoning to be unreasonable and unfair, especially given the significant investments made by the Appellants. The Court noted that the State had already made allotments to others in relaxation of the rules and saw no reason to deny the same to the Appellants. Consequently, the Court directed the State to act in terms of the MOU and recommend the grant of adequate iron ore reserves to the Appellants.

Conclusion:
The Supreme Court allowed the appeal, setting aside the High Court's judgment and the State Government's decision rejecting the Appellants' claim for a mining lease. The Court directed the State of Orissa to act in accordance with the MOU dated 15th May, 2002, and recommend the grant of iron ore reserves to the Appellants for their steel plant at Lapanga. The judgment emphasized the principles of legitimate expectation and fairness, highlighting the State's arbitrary actions in requiring a new MOU despite the existing agreement.