National Mineral Development … vs State Of Karnataka And Others on 14 July, 1997

Karnataka High Court
National Mineral Development … vs State Of Karnataka And Others on 14 July, 1997
Equivalent citations: AIR 1997 Kant 331, ILR 1997 KAR 2528, 1997 (4) KarLJ 162
Bench: G Bharuka


ORDER

1. The present writ petition has been filed by a Government Company (hereinafter the ‘Company’) for issuance of a writ of prohibition restraining the Government of Karnataka and/or its Officers from interfering with its mining operations.

2. The Company is owned, managed and controlled by the Government of India with its 98.5% subscribed share capital. It is engaged in the business of mining in various minerals, more particularly iron ore.

3. It is not in dispute that the Company was granted a mining lease being ML. No. 839 for mining of iron ore over an area of 2013.35 hectares situated in Donimalai, Sandoor Taluka, Bellary District. The said lease was granted by the Government of Karnataka under and in accordance with the provisions of Minor and Minerals (Regulation and Development) Act, 1957 and The Mineral Concession Rules, 1960 (hereinafter in short ‘Mineral Act’ and ‘Mineral Rules” respectively). The lease was for a period of 20 years commencing from 4-11-1968. Therefore, it was 10 expire on 4-11-1988.

4. Before the expiry of the said lease, as required uuderRule24A of the Mineral Rules, the Company made an application on 3-4-1987 for renewal thereof for another period of 10 years. Since for one or the other reason, the State Government did not dispose of the said renewal application, therefore, pursuant to the working permits granted to it by the State Government from time to time, the Company continued with the mining operations till up to 16-9-1992. But since thereafter the State Government refused to grant even the working permits, the Company filed a writ petition being W.P. No: 27644/92 before this Court, wherein interim orders dated 16/25-9-1992 were passed permitting the Company to continue with the mining operations till further order. Copies of the said interim orders dt. 16-9-1992 and 25-9-1992 have been filed as annexures ‘A’ and ‘B’ respectively.

5. It appears that in the mean time the State Government under its letter No: AHFF 17 I:FM 90 Dt. 11 -4-1991 had sought the prior approval of

the Central Government in order to renew the mining lease of the Company as required under Section 2 of the Forest (Conservation) Act, 1980 (in short the ‘Conservation Act’). Pursuant to the said request, ‘the Central Government in its Ministry of Environment and Forest under communication dt. 22-10-1992 (Annexure ‘B’) intimated its agreement in principle to the State Government for approval for diversion of 608.00 ha. of forest land in the District of Bellary for renewal of mining lease as proposed subject to the following conditions-

“(i) The State Government should take immediate action for transfer and mutation of non-forest land equal to the area to be broken up afresh, in favour of the State Forest Department.

(ii) The user agency will transfer in favour of the State Forest Department the cost of (a) compensatory afforestation for (i) above, and, (b) penal compensatory afforestation over degraded forest land twice in extent to the area to be broken up afresh.

(iii) Funds for fencing, protection and regeneration of safety zone area and the cost of afforestation over one and half times of the safety zone area in the degraded forest elsewhere, will be provided by the user agency.”

6. In para 3 of the said communication at Annexure ‘B’, it was further observed by the Central Government that-

“After receipt of compliance report on the fulfilment of the above conditions from the State Government, formal approval will be issued in this regard under Section 2 of the Forest (Conservation) Act, 1980. Transfer of forest land to user agency should not be effected by the Slate Government till formal order approving diversion of forest are issued by the Central Government.”

7. It is a matter of record that the Company being the ‘user agency’ has already deposited the required cost assessed by the State Government

for compensatory afforestation being Rs. 94,87,500/- at the rate of Rs. 25,000/- per hectare area for raising compulsory plantation in the following manner-


 ___________________________________________________________________________________________________

   (1)  By D.D. No. 071740, dt. 3-7-95 of Canara Bank, Bangalore, for 
 raising compensatory plantation over 126.5 ha. of non-forest 
 land (areas to be broken afresh)     Rs. 31,62,500.00

   (2)  By D.D. No. 071739, dt. 3-7-95 of Canara Bank, Bangalore for
   raising compensatory plantation over double the extent on 
        degraded forest land.       Rs. 63,25,000.00
            ___________________
                 Rs. 94,87,500.00
                    ___________________


 

8. There after the Principal Chief Conservator of Forest under his letter dated 25-1-1995 (Annexure ‘C’) communicated to the Principal Secretary to the Government of Karnataka, Department of Forests, Ecology and Environment, that the Company has fulfilled the conditions stipulated by the Central Government under Annexure ‘B’) and steps may be taken to move the Central Government for according final approval in terms of Section 2 of the Conservation Act, in order to facilitate renewal of the mining lease. It appears that the copy of this letter was also directly sent to the Central Government. Accordingly, the Central Government under its letter dated 4-2-1997 (Annexure ‘F’), conveyed its approval as required under Section 2 of the Central Act. The material part thereof is to the following effect:–

“After careful consideration of the proposal of the State Government, the Central Government hereby, conveys its approval under Section 2 of the Forest (Conservation) Act for diversion of 608.00 ha. of forest land in “the district Bellary. Karnataka, for renewal of mining lease, for mining of iron ore in favour of M/s. National Mineral Development Corporation Ltd., Sandur, subject to fulfilment of following conditions:–

(i) The legal status of forest land wilt remain unchanged.

(ii) Compensatory afforestation over non-forest land equivalent of forest area to be broken afresh will be done at the cost of user agency which will be notified as protected forests under Indian Forest Act.

(iii) Penal afforestation over degarded forest land equivalent to forest area to be broken, afresh at the cost of user agency.

(iv) Compliance of condition No. (iii) of this Ministry’s approval of even number dated 22-10-1992.

(v) Reclamination of mined area will be done at the cost of user agency.

(vi) In order to prevent any damage to nearby forest, free supply of fuel wood is to be provided to the labour working in the project, at the cost of project authorities.

(vii) Lease period shall be co-terminus with lease under the MMRD Act subject to a maximum of 30 years.

(viii) The user agency will stick to the environment safeguards as per Annexure ‘A’.

ix) The forest land shall not be used for any purpose other than that specified in the proposal.

(x) Any other condition that the State Government may impose from time to time in the interest of afforestation and protection of forests.”

9. It is worthwhile to notice here that before the Central Government accorded the said prior approval, the Supreme Court in its order dated in the case of T. N. Godavarman Thinimulkpad v. Union of India (Writ Petition (Civil) No. 202of 1995) (Annexure ‘D’) inter alia, issued general direction to the effect that:–

“Prior approval of the Central Government is required for any non-forest activity within the area of any ‘forest’. In accordance with Section 2 of the Act, all on-going activity within any forest in any State throughout the country, without the prior approval of the Central Government, must cease forthwith.”

10. In para 7 of the said order, it was further declared by the Supreme Court that-

“This order is to operate and to be implemented, notwithstanding any order at variance, made or which may be made by any Government or any authority, tribunal or Court, including the High Court.”

11. In pursuant to the said order of the Supreme Court, since till upto grant of the prior approval by the Central Government under its letter dt. 4-2-1997 (Annexure ‘F), despite the interim order passd by (his Court on 16/25-9-1992 in Writ Petition No. 27644/92 in favour of the Company, the respondent — Deputy Conservator of Forest under his notice dl. 17-1-1997 (Annexure “E’),

directed the Company to forthwith stop all mining operations until further orders. Accordingly, the entire operations of the Company abruptly came to grinding hall, causing substantial loss to the Company, and the other Governmental agencies, which according to their estimate, was to the extent of about Rs. 2 Crores per day.

12. It has been stated in the writ petition that the daily production target of the Company was about 20,000 tonnes during the quarter of January to March, 1997. The Company was employing more than 1,500 employees with a salary bill of about Rs. 16.00 crores per annum. It has further been averred that the closure of the mining operations has resulted in massive losses to the Company and the other Government agencies, tentatively to the following extent-

(i) About Rs. 50 lakhs per day to Donimalai Iron Ore Mine.

(ii) Rs. 55 to 60 lakhs per day to Railways for transportation.

(iii) Rs. 12 to 15 lakhs per day to Madras Port.

(iv) Rs. 1.20 crores per day as Forex.

(v) Rs. 3 lakiis per day as royally to Stale Govt.

(vi) Rs. 2 lakhs per day towards electricity charges to K.E.B.

(vii) Rs. 0.20 lakhs per day towards sales/ commercial taxes (Rs. 60-70 lakhs pec annum).

13. It was because of the said reason that as soon as the Company learnt about the grant of prior approval of the Central Government (Annexure ‘F’), it apprised the 2nd respondent–Principal Secretary to the State Government through a letter dated 5-2-1997 (Annexure ‘H’), requesting him to issue immediate instructions to the Forest officials to enable the Company to proceed with the mining operations. The Company seems to have also made several representations vide its tele-fax message dated 6-2-1997 (Annexure ‘J’) and letter dt. 10-2-1997 (Annexure ’13’) to the Chief Secretary to the Government to give proper instructions to the officials of Forest Department. Since, the requests/letters were not responded to by the Senior Officers of the State Government, the Chairman and Managing Director along with other Officers of the Company called on the Chief Secretary and other Senior Officers of the State Government on 14-2-1997 and made fervent request to ensure immediate

commencement of mining operations of the Company atleast keeping in view the national and public interest, because the loss which was being suffered was to ultimately fall on public ex chequer.

14. Since, all the requests so made went on deaf ears reflecting complete apathy on the part of the higher officers of the State Government, the Company, keeping in view the interim order dt. 16/25-9-1992 passed by this Court, the approval of the Central Government and the provision of sub-rule (6) of Rule 24A of the Mineral Rules as inserted by notification No. GSR 724 (E) dated 27-9-1994, recommenced the mining operations of its own on 26-2-1997 with due intimation of the same to the 6th respondent–Deputy Conservator of Forests. On receipt of this communication, the 6th respondent immediately swung into action and reported with the impugned communication dt. 27-2-1997 (Annexure ‘L’) directing the Company immediately to stop the mining activities till it obtains explicit order in the said regard from the State Government coupled with threatenings of legal action including to propose for cancellation of the mining lease itself. Faced with the said direction and threat, the Company forthwith stopped its mining operations.

15. It has been stated on behalf of the Company that as a consequence of the said directions virtually a calamity had fallen on the Company, its workers and depending agencies, since it had resulted in colossal loss not only to the Company but it also caused loss of royally, frieght charges, power charges, income tax and other revenues to the various State and Central Governments which would have flown to them resulting from the working of the mines. According to them such an inaction on the part of the State Government also caused substantial loss of valuable forex to the country. The heartfelt cry raised on behalf of the Company was that all these had happened only because the State Government, despite its constitutional and statutory obligations, had failed to act promptly.

16. Under the aforesaid circumstances, after hearing Mr. V. R. Reddy, learned Addl. Solicitor General of Union of India, appearing for the Company and the learned Advocate General, appearing for the respondent– State Government and its Officers at length, on 11-3-1997 the following interim order was passed-

“Keeping in view the facts of the present case and particularly the prior approval granted by the Central Government in terms of Sec, 2 of the Forest (Conservation) Act, 1980 and the financial loss the petitioner is suffering to the tune of about two crores per day, and the requirement of its fulfilling the commitment with foreign buyers, interim order is granted permitting the petitioner to recommence its mining operating till further orders subject to the condition that, it will not work in any new area.”

Subsequently, the matter was finally heard on 17-3-1997, 20-3-1997 and 21-3-1997 orders were reserved.

17. From the above facts, it is further clear that despite the fact that the Company had filed an application for renewal of the mining lease much within the period prescribed under Rule 24A of the Mineral Rules and had even discharged its obligations of paying the cost of compulsory and penal afforestation, as required under the ‘Conservation Act’ and the Rules framed thereunder, on 3-7-1995, but still it had to close down its mining operations to its great detriment and loss during the periods commencing from 17-1-1997 to 26-2-1997 (41 days) and again between 27-2-1997 to 11-3-1997 (13 days), thus for a total period of 54 days. According to the Company, this stoppage of mining operations has caused it a tentative loss of Rs. 27 Crores being at the rate of Rs. 50 lakhs per day, which fact has not been controverted by the State Government or its officers by filing any counter-affidavit/statement of objections.

18. Under these circumstances, the question that falls for consideration is as to whether, the 6th respondent-Deputy Conservator of Forest under his letter dt. 27-2-1997 (Annexurc ‘L’) was justified in directing the Company lo stop its mining activities forthwith by taking shelter under the order of the Supreme Court dt. 12-12-1996 passed in W.P. (Civil) No. 171/96.

STATUTORY ASPECTS

19. In the present case, I am primarily concerned with the provisions of two Central Acts and the Rules framed thereunder, namely, the Minerals Act, the Minerals Rules, the Conservation Act and the Conservation Rules. Section 8 of the Mineral Act as substituted by the Central Act 37/86 reads as under:–

“8. Periods for which mining lease may be granted or renewed :– (1) The period for which a mining lease may be granted shall not exceed twenty years.

(2) A mining lease may be renewed for two periods each not exceeding ten years :

Provided that no mining lease granted in respect of a mineral specified in the First Schedule shall be renewed except with the previous approval of the Central Government.

(3) Notwithstanding anything contained in sub-section (2), if the Central Government is of opinion that in the interests of mineral development it is necessary so to do, it may, for reasons to be recorded, authorise the renewal of a mining lease for a further period or periods not exceeding in each case the period for which the mining lease was originally granted.”

20. Rule 24A of the Mineral Rules provides the procedure for renewal of mining lease. To the extent it is relevant for the present purpose it is extracted below :–

“Rule 24A.– Renewal of mining lease:– (1) An application for the renewal of a minimum lease shall be made to the State Government in Form-J, at least twelve months before the date on which the lease is due to expire, through such officer or authority as the State Government may specify in this behalf.

(2) An application for the first renewal of a mining lease granted in respect of a mineral specified in the First Schedule to the Act may, subject to the provisions of sub-section (2) of Section 8 and with the previous approval of the Central Government, be granted by the State Government.

(3) An application for the first renewal of a mining lease granted in respect of a mineral which is not specified in the First Schedule to the Act may, subject to the provisions of sub-section (2) of Section 8, be granted by the State Government.

(4) |xxx] Omitted by GSR 6(E), dt. 7-1-1993.

(5) [xxx) Omitted by GSR 6(E), dt. 7-1-1993.

(6) If an application for renewal of mining lease made within the lime referred to in sub-rule (1) is not disposed of by the State Government before the date of expiry of the lease, the period of that lease shall be deemed to have been extended by a further period of one year or end with the date

of receipt of the orders of the State Government thereon, whichever is shorter.

(7) xxx xxx xxx,”

21. Subsequently, by notification No. GSR 724(B) dt. 27-9-1994, the Central Government substituted the above sub-rule (6) of Rule 24A of the Mining Rules by the following sub-rule :–

“(6) If an application for renewal of a mining lease made within the time referred to in sub-rule (1) is not disposed of by the State Government before the date of expiry of the lease, the period of that lease shall be deemed to have been extended by a further period till the State Government passes order thereon.”

22. From the above, it is crystal clear that for seeking renewal of a mining lease the lessee is required to make an application to the State Government in Form-J at least 12 months before the date on which the lease was due to expire. In the present case, admittedly the Company had filed its application on 3-4-1987 which was much within the prescribed time since the lease was to expire on 4-11 -1988. As such, keeping in view the substituted sub-rule(6) of Rule 24 A of the Mineral Rules, the Company would have been entitled to carry on its mining operations even without renewal of lease because of deeming provision contained in the substituted sub-rule (6) of Rule 24A of the Mineral Rules till the State Government passes an order on the application for renewal of mining lease filed by the lessee. But the said sub-rule (6) of Rule 24A of the Minerals Rules has to be read subject to the restrictions contained in Section 2 of Conservation Act and also in view of the explicit order of the Supreme Court dt. 12-12-1996 referred to above.

23. Therefore, it has to be held that in such cases, where an application for renewal of mining lease has been filed in accordance with Rule 24A(1) of the Minerals Rules for carrying on mining operations in non-forest areas, then keeping in view the deemed extension stipulated in sub-rule (6) of Rule 24A of the Mineral Rules, the lessee can continue with the mining operations for which it held the lease till the State Government passes appropriate orders thereon, but the said deeming provision contained in the above Rule 24A(6) cannot become operative for renewal of mining lease in respect of forest lands till the provisions of Section 2 of Conservation Act and the Rules framed thereunder are complied with.

24. Section 2 of the Conservation Act reads us under:–

“Sec. 2. Restriction on the preservation of forest or use of forest land for non-forest purpose :– Notwithstanding anything contained in any other law for the time being in force m a State Government or other authority shall make, except with the prior approval of the Central Government, any order directing :

(i) that any reserved forest (within the meaning of the expression “reserved forest” in any law for the time being in force in that State) or any portion thereof, shall cease to be reserved;

(ii) that any forest land or any portion thereof may be used for any non-forest purpose;

(iii) that any forest land or any portion thereof may be assigned by way of lease or otherwise to any private person or to any authority corporation, agency or any other organisation not owned, managed or controlled by Government;

(iv) that any forest land or any portion thereof may be cleared of trees which have grown naturally in that land or portion, for me purpose of using it for reafforestation.

Explanation:– For the purpose of this Section “non-forest purpose” means the breaking up or clearing of any forest land or portion thereof for :–

(a) the cultivation of tea, coffee, spices, rubber, palms, oil bearing plants, horticultural crops or medicinal plants;

(b) any purpose other man reforestation, but does not include any work relating or ancillary to conservation, development and management of forests and wild-life, namely, the establishment of check-posts, firelines, wireless communications and construction of fencing, bridges and culverts, dams, waterholes, trench marks, boundary marks, pipeline or other like purposes.”

25. Section 4 of the Conservation Art empowers the Central Government to make rules for carrying out the provisions of the Act through a notification in the official gazette. Accordingly, the Central Government has framed the Conservation Rules. Rule. 4 of the Conservation Rules provides that every State Government or other authority seeking prior approval under Section 2 of the Conservation Act has to send its proposal to the Central Government in the Form

appended to the Conservation Rules. The said rule further provides that all proposals involving clearing of naturally grown trees in forest land or portion thereof for the purpose of using it for reafforestation shall be sent in the form of Working Plan/Management Plan.

26. Rule of the Conservation Rules provides that every proposal has to be referred to the Committee constituted under Section 3 of the Conservation Act for its ad vice in the manner provided thereunder. Thereafter, as provided under Rule 6 of the Conservation Rules, the Central Government is required to consider the advice of the committee and after such further enquiry as it may consider necessary grant approval to the proposal with or without condition or reject the same.

27. In the said legal perspective, now reverting to the facts of the present case as noticed above, it is clear that pursuant to the proposal sent by the State Government under Section 2 of the Conservation Act read with Rule 4 of the Conservation Rules in relation to the grant of renewal of mining lease to the Company, the Central Government under its letter dt. 22-10-1992 (Annexure ‘B’) clearly intimated to State Government that in principle the Central Government agree for approval for diversion of 608.00 ha. of forest land in question for renewal of mining lease subject to fulfilment of conditions contained therein which I have already extracted above. It is also not in dispute that as soon as the Company was intimated about its obligation to pay the compensatory and penal afforestation charges, the Company did so on 3-7-1995. Thereafter, the Company was not required to do anything further on its pan for seeking renewal of its mining lease.

28. On the contrary, thereafter, it was for the State Government to act with promptness to communicate to the Central Government about the compliance for obtaining the prior approval in terms of Conservation Act. But, surprisingly, even the Chief Conservator of Forests took more than 4 months in communicating the compliance aspect to the Principal Secretary to the department concerned of the State Government, with a copy to the Central Government. But even thereafter, the State Government did not find it necessary to formally apprise the Central Government of the required compliance. It is, for these reasons and

that because of intervening directions passed by the Supreme Court under its order dt. 12-12-1996 as noticed above the Company had to face the first closure of its mining operations. But still, despite repeated requests made by the management of the Company the State Government did not feel to oblige to discharge its part of the statutory obligations. Under these circumstances, and possibly looking at the interest of the Company and its workers, the Central Government took notice of the fact of compliance communicated to it by the Chief Conservator of Forests and accorded its approval for renewal of mining lease in question to the Company under its letter dt. 4-2-1997 (Annexure ‘F’). The Company, having learnt about the same and having felt that the legal impediments in recommencing the mining operations have been crossed over, started the mining operations on 26-2-1997, under intimation to the respondents.

29. An objection has been taken by the learned Advocate General appearing on behalf of the State Government that the Central Government could have granted prior approval in terms of the Conservation Act, only on receiving the report of compliance by the ‘user agency’ namely, the Company, from the State Government and not on the basis of the report to the said effect sent by the Chief Conservator of Forests. For the said purpose, he has placed reliance on certain clauses of the guidelines framed by the Central Government for effective compliance of the statutory provisions in the said regard. But, I do not find it is not necessary to deal with this aspect at any greater length, because it is quite well settled that the guidelines issued by way of executive instructions cannot override the statutory provisions nor any statutory order passed in violation of such guidelines can be held to be illegal, void or inoperative. Non-statutory guidelines framed by enforcing authorities can be pressed into service only to ensure that any deviation from those do not lead to discrimination defeating the equality clause as enshrined in Article 14 of the Constitution of India, which is a constitutional mandate against the States and its instrumentalities.

30. In the present case, it has not been disputed on behalf of the respondents that the statutory proposal as required under Rule 4(1) of the ‘Conservation Rules’ was sent by the State Government and on an examination thereof the

Central Government had agreed in principle for according permission to renew the mining lease of the Company subject to certain compliances and the same were in fact made by the Company.

31. Therefore, in my opinion, it is not very relevant as to who had sent the compliance report. But since admittedly, the compliance was made, therefore, the Central Government was within its statutory competence to accord prior approval as has been done in the present case.

32. Apart from the above, on 17-4-1997, an affidavit was filed on behalf of the Company raising issues of mala fide pertaining to the present controversy. A reply thereto was filed by the State Government on 19-4-1997. These arc in the form of allegations and counter allegations touching upon the aspect of mala fide. But, for the reasons set out above, I do not find it necessary to enter into those aspects.

33. Now, coming to the impugned communication dt. 27-2-1997 (Annexure ‘L’) of the 6th respondent — Deputy Conservator of Forests directing the Company to stop its mining operations. I find that the basic reason which had prevailed with him for issuing the said direction was that even if the Central Government had accorded the prior approval in terms of Section 2 of the Conservation Act, still mining operations could not have been commenced unless appropriate orders in this regard were obtained from the Stale Government on the renewal application filed by the Company.

34. As discussed above, I have no hesitation in holding that the reasoning so given by the 6th respondent — Deputy Conservator of Forests is fallacious and is based on misconception of law and even if not mala fide in facts but it is definitely so in law. In my opinion, once the prior approval is accorded by the Central Government in terms of the Conservation Act, then in respect of the applications pending for grant of renewal of mining leases, sub-rule (6) of Rule 24A of the Mineral Rules automatically comes into operation and the period of existing lease shall be deemed to have
been extended, by a further period till the State
Government passed order thereon. Therefore, the deemed extension is based on the statutory provisions and not on any order passed by the Stale Government. It seems that the Central Government as a rule making authority was

possibly compelled to incorporate such a deeming
provision in the Mineral rules considering the
necessity of continuation of mining operations
and their experience of lethargy and inaction on
the part of the State Governments in disposing of
the applications for renewal of mining leases with
expected expediency and speed. The said provision
was found necessary to he incorporated despite
the fact that under sub-rule (1) of Rule 24A of the Mineral Rules it was made obligatory on [he part of the lessees to file applications for renewal of
mining leases atleast twelve months before the
expiry of their lease period.

35. In the result, [he impugned letter/
communication bearing No. M2-MNG-NMDC-

3725/1991 dt. 27-2-1997 (Annexure ‘L.’) issued by the 6th respondent — Deputy Conservator of Forests, Bellary is quashed. It is further observed
that it will be open, if so advised, for the Company
to institute appropriate proceedings before the
competent Civil Court for claiming damages
against the concerned respondent for the loss it
claims to have suffered because of stoppage of
mining operations.

36. The Writ Petition is accordingly allowed with costs, which is assessed keeping in view the high cost of litigation as is now judicially recognised, at Rs. 1,50,000/- to be paid by the State of Karnataka through its Chief Secretary within ONE month from today.

37. Let a copy of this order be mage available to the learned Advocate General for compliance.

38. Petition allowed.

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