2010 (9) TMI 1058 - SC - Indian Laws

Whether the State Government s recommendation dated 06.12.2004 and the proceedings of the Chief Minister are contrary to the provisions of Section 11 of the Act and Rules 59 and 60 of MC Rules and not valid in law? Whether the respondent-Jindal s application dated 24.10.2002 made prior to the Notification dated 15.03.2003 is capable of being entertained along with the applications made pursuant to the said notification? Whether the order of the High Court of Karnataka in Ziaulla Sharieff s case permit the consideration of the respondent-Jindal s application dated 24.10.2002 made prior to the notification dated 15.03.2003? Whether Rule 35 of the MC Rules justify the recommendation of the State Government in favour of the Respondents-Jindal and Kalyani? Whether the criterion of captive consumption referred to in Tata Iron and Steel Co. Ltd. vs. Union of India, (1996) 9 SCC 709, have any application in this case despite not being one of the factors referred to in Section 11 (3) of the MMDR Act or Rule 35 of the MC Rules? Whether factors such as the past commitments by the State Government to applicants who have already set up steel plants, matter for consideration for grant of lease despite the MMDR Act and the MC Rules constituting a complete Code? Whether the recommendation in favour of respondents-Jindal and Kalyani saved by the operation of the Law of Equity? Whether the learned single Judge as well as the Division Bench are justified in arriving at such conclusion? Whether it is advisable to remit it to the Central Government?

Issues involved:
1. Validity of State Government's recommendation and Chief Minister's proceedings under Section 11 of the MMDR Act and Rules 59 and 60 of MC Rules.
2. Entertaining Jindal's application dated 24.10.2002 along with applications made pursuant to the notification dated 15.03.2003.
3. Interpretation of the High Court's order in Ziaulla Sharieff's case regarding Jindal's application.
4. Justification of the State Government's recommendation under Rule 35 of the MC Rules.
5. Applicability of the criterion of "captive consumption" referred to in Tata Iron and Steel Co. Ltd. vs. Union of India.
6. Consideration of past commitments by the State Government for grant of lease.
7. Validity of the recommendation in favor of Jindal and Kalyani under the Law of Equity.
8. Justification of the conclusions of the learned single Judge and Division Bench.
9. Advisability of remitting the matter to the Central Government.

Detailed Analysis:

Issue (a): Validity of State Government's recommendation and Chief Minister's proceedings under Section 11 of the Act and Rules 59 and 60 of MC Rules:
The Supreme Court found that the State Government's recommendation dated 06.12.2004 and the Chief Minister's proceedings were contrary to the provisions of Section 11 of the MMDR Act and Rules 59 and 60 of the MC Rules. The Court noted that the State Government was pre-determined to favor Jindal and Kalyani without clear reasons and did not consider applications of other applicants favorably. The Chief Minister's proceedings did not adhere to the criteria mentioned in Section 11(3) and considered irrelevant factors such as past investments, which were not permissible under the MMDR Act.

Issue (b): Entertaining Jindal's application dated 24.10.2002 along with applications made pursuant to the notification dated 15.03.2003:
The Supreme Court held that Jindal's application dated 24.10.2002, made prior to the notification dated 15.03.2003, could not be entertained along with the applications made pursuant to the notification. The Court clarified that Section 11(4) of the MMDR Act and Rules 59 and 60 of the MC Rules mandate that only applications made pursuant to the notification should be considered. The Court emphasized that the notification under Rule 59(1) is intended for previously held areas and not for virgin areas.

Issue (c): Interpretation of the High Court's order in Ziaulla Sharieff's case regarding Jindal's application:
The Supreme Court found that the High Court's order in Ziaulla Sharieff's case did not permit the consideration of Jindal's application dated 24.10.2002. The High Court had directed the State Government to consider applications in accordance with the MMDR Act and MC Rules, which did not include applications made prior to the notification.

Issue (d): Justification of the State Government's recommendation under Rule 35 of the MC Rules:
The Supreme Court held that Rule 35 of the MC Rules did not justify the recommendation of the State Government in favor of Jindal and Kalyani. The rule permits consideration of the "end use" of the mineral but does not differentiate between proposed and existing investments. The Court noted that all applicants expressed their intention to use iron ore for steel production, satisfying the same "end use" requirement. Therefore, the State Government's reliance on Rule 35 to favor Jindal and Kalyani was misplaced.

Issue (e): Applicability of the criterion of "captive consumption" referred to in Tata Iron and Steel Co. Ltd. vs. Union of India:
The Supreme Court held that the criterion of "captive consumption" referred to in Tata Iron and Steel Co. Ltd. vs. Union of India did not apply to the present case. Section 11(3)(d) of the MMDR Act specifies "proposed investment" as a relevant factor, not past investments. The Court clarified that considerations of captive mining cannot be the controlling factor for granting leases under the MMDR Act.

Issue (f): Consideration of past commitments by the State Government for grant of lease:
The Supreme Court held that past commitments made by the State Government to applicants who have already set up steel plants are not relevant for consideration for the grant of a lease. The MMDR Act and MC Rules constitute a complete code, and the State Government must abide by the provisions of the Act and Rules without considering extraneous factors such as past commitments.

Issue (g): Validity of the recommendation in favor of Jindal and Kalyani under the Law of Equity:
The Supreme Court held that the Law of Equity cannot save the recommendation in favor of Jindal and Kalyani because equity stands excluded when a matter is governed by statute. The Court emphasized that equitable considerations cannot override statutory provisions, and the recommendation in favor of Jindal and Kalyani was in violation of the MMDR Act.

Issue (h): Justification of the conclusions of the learned single Judge and Division Bench:
The Supreme Court found that the Division Bench erred in concluding that Jindal's application made prior to the notification could be entertained along with applications made pursuant to the notification. The Court upheld the learned single Judge's decision to quash the State Government's recommendation dated 06.12.2004 but found that the single Judge had gone beyond the reliefs sought by quashing the entire notification dated 15.03.2003, which was not warranted.

Issue (i): Advisability of remitting the matter to the Central Government:
The Supreme Court rejected the request to remit the matter to the Central Government. The Court noted that the Central Government considers only the materials forwarded by the State Government and that if the recommendation of the State Government is flawed, the Central Government's approval based on such recommendation is also invalid. The Court emphasized that the matter should be reconsidered by the State Government in accordance with the MMDR Act and MC Rules.

Conclusion:
The Supreme Court quashed the impugned order of the Division Bench of the High Court dated 05.06.2009 and the decisions of the State Government dated 26/27.02.2002 and the Central Government dated 29.07.2003. The Court directed the State Government to reconsider all applications afresh in light of the interpretation of Section 11 of the MMDR Act and Rules 35, 59, and 60 of the MC Rules within four months. The Court clarified that it had not expressed any opinion on the eligibility or merits of any parties and that the State Government should take a decision in accordance with the law.

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