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Issues Involved:
1. Cancellation of the quarry lease. 2. Failure to maintain proper accounts. 3. Transfer of the lease without prior sanction. 4. Rejection of the application for transfer of the lease. Detailed Analysis: 1. Cancellation of the Quarry Lease The lease was canceled on two grounds: the unauthorized transfer of the lease to the Company and the failure to maintain proper accounts. The court found that the lessee did not transfer or assign the lease by executing agreements with Dorab Cawasji Bajan and the Company. These agreements were legal, competent, and regular, and did not constitute a breach of Rule 18 or condition No. 9 of the lease. Hence, the ground for cancellation on the basis of unauthorized transfer was without foundation and untenable. 2. Failure to Maintain Proper Accounts The cancellation of the lease on the ground of failure to maintain proper accounts was in violation of Clause (xvi) of Rule 25 (1) of the Madhya Pradesh Minor Mineral Rules, 1961. This clause mandates that a notice must be given to the lessee to remedy the breach within 30 days before the lease can be determined. No such notice was given to the lessee Goenka, making the cancellation illegal and in breach of the statutory rule. The court emphasized that the lease, being subject to the Rules, must conform to Clause (xvi) of Rule 25, and any condition in the lease deed contrary to this would be invalid. 3. Transfer of the Lease Without Prior Sanction The agreements between the lessee and Dorab Cawasji Bajan and the Company did not amount to an assignment or transfer of the lease. Rule 18 and condition No. 9 of the lease contemplate legal assignments, transfers, or underletting, which was not the case here. The agreements were for the extraction and sale of limestone and did not transfer any rights or interests in the lease. The court rejected the argument that the practical effect of the agreements should be considered over their legal form. 4. Rejection of the Application for Transfer of the Lease The rejection of the lessee's application for transfer of the lease was based on "strong speculations in the proposed transaction." The court found this reasoning unclear and unjustified. The refusal of sanction must have a rational connection with the property or the character of the proposed transfer or assignee. The court held that the State Government failed to exercise its discretion properly under Rule 18 by misinterpreting the agreements. The lessee's application for sanction must be regarded as still pending and should be disposed of according to law. Conclusion Both the orders dated 7th April 1964 and 20th February 1964 were quashed. The State Government was directed to determine the lessee's application for transfer of the lease according to law. Costs were awarded to the petitioner, and the outstanding amount of the security deposit was ordered to be refunded.
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