M/S. SUNDER MARKETING ASSOCIATESversusSTATE OF HARYANA & ORS.

                            [2017) 8 S.C.R. 438


A              MIS. SUNDER MARKETING ASSOCIATES
                                     v.
                      STATE OF HARYANA & ORS.
              (Special Leave to Appeal (C) No. 19166 of 2017)
B                            AUGUST 11, 2017
           [MADAN B. LOKUR AND DEEPAK GUPTA, JJ.f
         Mines and Minerals - Haryana Minor Mineral Concession,
  Stocking, Transportation of Minerals and Prevention of Illegal
C Mining Rules, 2012 - rr. 25, 41 (v) - Surrender of mining contract -
  Auction of mining leases - Joint venture (JV), formed between
  Petitioner and one • K ', was the highest bidder with a bid of Rs.115
  crores as dead rent - Writ petition by JV contending that HS/DC, a
  public sector undertaking was granted mining lease in a different
  area at a negligible amount which was not disclosed to JV and this
D seriously prejudiced its commercial interests - Writ petition dismissed
  by High Court granting time to JV to either continue with the
  contract or rescind it - However, 'K' decided to rescind the contract
  while the Petitioner wanted to continue with the contract -
  Respondent No.1-State transferred the mining lease in the favour
E of the Petitioner - However, later withdrew the permission for such
  transfer - Writ petition by Petitioner, dismissed by High Court - On
  appeal, held: In view of the peculiar facts of the case and the offer
  of surrender or rescission of the contract having been accepted by
  the State Government, the Petitioner is permitted to surrender the
  mining contract if the provisions of rr. 25 and 41 (v) are complied
F with by the Petitioner and the State Government - Further directions
  issued in view of the prayer made.
          Disposing of the special leave petition, the Court
        HELD: 1.1 This is a classic case of someone (the petitioner
  in this case) apparently having influence in high places, using
G that influence to violate the law and get a benefit that would
  ordinarily not be granted to anybody else. It cannot be said with
  any degree of certainty how high is the reach of the petitioner
  but it is quite apparent from the facts of the case, that the reach
  is pretty high. [Para 111440-G)
H
                                     438
    MIS. SUNDER MARKETING ASSOCIATES v. STATE OF                     439
                    HARYANA

       1.2 It was generally submitted by counsel for the petitioner A
that the cancellation of the mining lease granted to the petitioner
was illegal but that contention was not pressed beyond a point
particularly because it was very clear that the petitioner alone or
by itself was not a qualified bidder and that it was the JV between
the petitioner and KJSL that was qualified to bid at the auction. B .
That being the position, it was appreciated that under no·
circumstance could the letter of intent or· the mining lease have
been transferred from. the JV in favour of the petitioner. It is this
totally illegal transfer carried out within 5 years of the execution
of the mining lease that led to the belief that the petitioner could
exercise influence in high places. [Para 29)[447-C-E)                 C
      2.1 In view of the peculiar facts of the case and the offer of
surrender or rescission of the contract having been accepted by
the State Government, no hurdle is placed in the ,'agreement',
but the provisions of Rule 25 and Rule 41(v) of the Rules must
be complied with by the petitioner and the State Government. D
[Para 31)[448-C-D)
      2.2 The petitioner had made a prayer to the effect that the
petitioner may be permitted to continue its mining operations till
30th November, 2017 so that it could wind up its activities and
put its mine closure plan into operation. Keeping in view the        E
prayer made:
      (i) The petitioner is permitted to continue its mining
operations till 30th November, 2017 in accordance with the Mining
Plan. On or before that date, it shall ensure implementation of
the mine closure plan to the satisfaction of the concerned           F
authorities in the State of Haryana.
     (ii) The petitioner will be under an obligation to continue
paying the dead rent or royalty whichever is higher till 30th
November, 2017 regardless of whether it ceases its mining
operations before that date or not.                                  G
      (iii) The petitioner shall ensure that all the dues (including
wages etc.) of all the persons (including labour) employed in the
mining operations in terms of Rule 56(10) of the Rules are paid
to the satisfaction of the concerned authorities in the State of
Haryana. To ensure that the employees and labour (casual or H
440            SUPREME COURT REPORTS                           [2017) 8 S.C.R.


A otherwise) are not left in the lurch, the petitioner is restrained
  from alienating or transferring or otherwise creating any charge
  or encumbrance on the equipment and machinery and all other
  moveable property in the lease area and connected with the mining
  operations (such as trucks, excavators etc.) so that there is no
  difficulty in recovery of dues.
8
         (iv) All the laws applicable to the petitioner shall be strictly
  enforced by the State Government regardless of its apparent
  influence in high places. It is made clear that the Chief Secretary
  of the State ofHaryana will be held responsible for any lapse in
C this regard.
            (v) It is not clear whether or not the security deposit of Rs.
      28.75 crores has been refunded to 'K' or the petitioner. If the
      refund has not been made, it is deemed to have been forfeited to
      the State and is not adjustable against any dues of the petitioner.
      [Paras 32, 33((448-D-H; 449-A-DJ
D
            CIVIL APPELLATE JURISDICTION: Special Leave Petition
      (C) No. 19166 of2017.
         From the impugned final Judgment and Order dated I" June, 2017
   passed by the High Court of Punjab and Haryana at Chandigarh in C. W.P
 E No.20986/2016.
            Mukul Rohatgi, Sr. Adv., Puneet Bali, V. Jain, Aditya Soni, Shree
      Pal Singh, Advs. for the Appellants.
           Sushi! Balwada, Adv., Anil Grover, AAG, Ms. Noopur Singhal,
      Manik Garg, Sanjay Kr. Visen, Advs. for the Respondents.
 F
            The Judgment of the Court was delivered by
          MADAN B. LOKUR, J. 1. This is a classic case of someone
   (the petitioner in this case) apparently having influence in high places,
   using that influence to violate the law and get a benefit that would
   ordinarily not be granted to anybody else. We cannot say with any degree
 G of certainty how high is the reach of the petitioner but it is quite apparent
   from the facts of the case, that the reach is pretty high.
            2. The only real issue before us arising out of the judgment and
      order dated 1'' June, 2017 passed by the High Court of Punjab and
      Haryana in a writ petition filed by the petitioner is whether the petitioner
 H
      MIS. SUNDER MARKETING ASSOCIATES v. STATE OF                                441
              HARYANA [MADAN B. LOKUR, J .] .

  should be allowed to surrender the mining lease granted to it and if so, .A
  under what conditions, if any.
          . 3. The facts of the case reveal that a joint venture (for short JV)
  w.as formed between the petitioner and Karamjeet Singh and Co. Ltd.
  (for short KJSL). The JV was formed on or about 18"' September, 2012
  but the terms of the arrangement or partnership are not available on the .B
  record.
             ofthe case,                 '
                                                 . .       .   . ..     .
                                                                             .
         4. Be that as it may, it transpires that on 30~ November, 2013 the
  Mines and Geology Department of the Government of Haryana issued
  an auction notice for the grant of several mining leases; One of tl:le
  quarries sought to be auctioned for mining purposes was the Dadain C
  quarry in District Bhiwani from which stone could.be extracted. The
  reserve price(or dead rent or royalty) mentioned for this quarry in the
  auction notice was Rs. 6.25 crores per annum and the lease period was
  for 10 years. The JV of the petitioner and KJSL gave the highest bid for
  thi~ quarry in the auction conducted on 30ih December, 2013. Some of
  the terms and conditions of the auction need mention.                     D
         5, Condition No. 4 provided that the period of the ie~se shall .
  commence with effect from the date of environmental clearance by the
  competent authority as required under the EIA notification dated 14'h
  September, 2006 issued by the Ministry of Environment and Forests of
  the Government of India as amended from time to time or on expiry of a E
  period of 12 months from the date of acceptance of the highest bid or
  the issuance of a letter of intent, whichever is earlier.
        . .6. Condition No. 7 provided that all prospective bid~ers were
    expected and presumed to have surveyed the areas to make their own
_.,-assessment for the potential of the areas for which bids are to be offered.    F
         7. Condition No. 19 provided that after acceptance of the highest
   bid by the State Government and on the issuance of aletter of intent, its
   holder shall execute an agreement in form ML-I appended to the Haryana
   Minor Mineral Concession, Stocking, Transportation of Minerals and
   Prevention of Illegal Mining Rules, 2012 (for short the Rules) within a G
   period of 90 days of the grant of a letter of intent.
         8. Condition No. 36 provided that rio transfer of the lease shall be
   permissible for the first 5 years of the grant. However, on submission of
   an applicatiori, in accordance with the provisioris of the Rules and after
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442            SUPREME COURT REPORTS                         [2017) 8 S.C.R.


A satisfying itself, the State Government may allow inducting other partners
  or shareholders to the extent of 49% of the total shareholding of the
  original lease holder. It may be mentioned that the petitioner had a 49%
  share while KJSL had a 51 % share in the JV.
        9. As mentioned above, the auction was held on 30'" December,
B 2013 and the JV was the highest bidder for the Dadam quarry in District
  Bhiwani with a bid of Rs. 115 crores per annum towards dead rent or
  royalty whichever is higher. At this stage, it may also be mentioned that
  the admitted position is that the JV was qualified to participate in the
  auction, but the petitioner by itself was not qualified to participate in the
  auction. The relevance of this will become apparent at a later stage.
c
             10. As required by Rule 55(3)(iii) of the Rules, the JV deposited
      Rs. 28.75 crores with the State Government towards 25% of the annual
      bid amount as security deposit.
         11. On 3'11 January, 2014 the JV received a letter of intent from
D the Director, Department of Mines and Geology of the Government of
  Haryana to the effect that its bid was the highest for the Dadam quarry
  and had been accepted by the State Government. The letter of intent
  laid down certain terms and conditions which were not at variance with
  the terms mentioned in the auction notice. In any event, there is no
  dispute in this regard.
 E
           12. Surprisingly, a short while after having received the letter of
   intent, the JV filed a writ petition in the High Court of Punjab and Haryana
   seeking an order quashing the grant of a mining lease in favour of the
   Haryana State Industrial and Infrastructure Development Corporation
   (a public sector undertaking under the control and management of the
 F State of Haryana - for short HSIIDC). The grievance of the JV was
   that while it had given a bid of Rs. 115 crores per annum as the dead
   rent, the HSIIDC had been granted a mining lease in a different area at
   a negligible amount. According to the JV this was not disclosed to it and
   the grant of the lease in favour of HSIIDC and the failure of the State
 G Government to disclose this to the JV had seriously prejudiced their
   commercial interests since it would give HSIIDC an unfair advantage
   because of the low dead rent payable by it. The writ petition came to be
   dismissed by the High Court on 4'" March, 2015.
          13. An alternative submission was made by the JV in the writ
 H petition to the effect that the JV desired the cancellation of its contract
     MIS. SUNDER MARKETINGASSOCIATES v. STATE OF                                443
             HARYANA [MADAN B. J,OKUR, J.]      ,...._.

 in view of the grant of amining lease to HSIIDC. In this regard, it was A
 stated by learned counsel appearirig on behalf of the Government of
 Haryana that it would refund the amount paid by the JV and that no
 penalty would be imposed if it wanted the contract to be cancelled and if
 the proposal was accepted by the State Government. The High Court
 granted time to the JV to exercise the option to either continue with the
 contract or rescind it by 301h April, 2015. It was made clear that ifthe JV B
 chooses to rescind the contract, the State Government shall refund all
·the amounts paid within 8 week~ of the demand: The JV was .entitled to
 take appropriate proceedings for recovery of compensation or damages
 on its own merits .
     .. 14. Feeling aggrieved, the JV preferred a petition for special leave C
to appeal in this Court an.don l'' May, 2015 the following order was
passed:
                                       .                .,

        "Dr, A.M.Singhvi, learned senior counsel, on instructions,'would
       ·submit that the petitioner(s) is/are not carrying o~ with the mining
        activities.                                                          D
      · We take on record the statement so made by learned senior
        counsel.
       The Division Bench of the High Court of Punjab & Haryana while
       dismissing the writ petition filed by the petitioners had granted        E
       time to.the petitioners till 30.04.2015to exercise their option either
       to continue with the contract or to rescind the same.
        The time has expired .and therefore, the learned senior counsel
      · requests us to grant ten days more to exercise the aforesaid option.
        In our opinion, if such permission is granted, it may not .cause any     F
        prejudice to either of the parties. Therefore, we extend the time
      . that was granted to the petitioners for exercising its option till
        10.05.2015.
        Accordingly, the special leave petitions are disposed of."
         15. On 7th May, 2015 the State Government was informed of its G
 decision by KJSL to rescind the contract and it also sought a refund of
 the deposit of Rs. 28. 75 crores with interest thereon. On the other hand
 on l 41h May, 2015 the petitioner wrote to the Chief Minister of the State
 of Haryana to the effect that it would have no objection if the other
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444            SUPREME COURT REPORTS                          [20I7] 8 S.C.R.


A partner in the JV that is KJSL surrenders its share. In such an eventuality,
  the State Government may consider the transfer of 5 I% share of KJSL
  in favour of the petitioner or permit any other mining agency to replace
  KJSL. It is not clear why the petitioner chose to write to the Chief
  Minister of the State but the fact is that it did.
B         I 6. Acting on the communication sent by the petitioner as well as
  the decision ofKJSL to rescind the contract, a detailed note was prepared
  by the concerned Mining Engineer on 25'h May, 20I5. The note drew
  attention to the anomalous situation where one partner in the JV was
  desirous of rescinding the contract while the other partner was desirous
c of continuing with the contract. The note also drew attention to Condition
  No. 36 of the auction notice and recorded that the request of one partner
  in the JV to rescind the contract does not qualify to be accepted as such
  but at the same time it might be better to allow KJSL to withdraw its
  share. Accordingly, it was proposed that the State Government may
  consider allowing the petitioner to continue with the lease and allowing
D KJSL to surrender its share. It was also proposed that the surrendered
  5 I% share of KJSL could either be allowed retention by the petitioner or
  the petitioner may induct a new partner. It was suggested that before a
  final decision is taken, it would be appropriate to take the opinion of the
  Advocate General of the State ofHaryana. This proposal was accepted
  by the next superior authority and eventually the opinion of the Advocate
E General of the State of Haryana was obtained.
             17. On the basis of the opinion given as well as on the basis of
      official notings, it was proposed by the concerned Mining Engineer on
      10th June, 2015 to allow the transfer of the entire share of KJSL in
      favour of the petitioner subject to certain conditions. This was approved
 F    by the superior authorities including the Chief Minister of the State of
      Haryana.
          18. At this stage, it is useful to recall that the petitioner by itself
   was not qualified to participate in the auction and this is the admitted
   position. Only the JV was qualified to bid in the auction. Therefore, it is
 G not clear how and why the petitioner alone was allowed to take over the
   share ofKJSL and be the sole beneficiary of the dissolution of the JV
   and to acquire the mining rights when it was originally not even qualified
   to participate in the auction.
             19. Be that as it may, on 17'h June, 2015 the Director General of
 H
     MIS. SUNDER MARKETING ASSOCIATES v. STATE OF                              445
             HARYANA [MADAN B. LOKUR, J.]

the Mines and Geology Department of the Government ofHaryanawrote A
to both the partners in the JV that the mining lease would continue with
the petitioner and that KJSL could walk out of the contract. It was also
stated that to avoid any complication it had been decided that the contract
may be transferred or changed in the name of the petitioner subject to        •
certain conditions.The c;iecision to transfer the contract in favour of the B
petitioner was challenged by some persons by filing Writ Petition No.
9419of2016 in the High Court the writ petition having been filed on 22 11d
April, 2016. We shall refer to this a little later.
       20. Subsequent to the above decision taken and communicated
 on l7 h June, 2015 the Ministry of Environment, Forests and Chmate
       1


 Change in the Government of India issued an Environment Clea~ance to C
 the JV on 3n1 July, 2015 with a proposed production capacity of 15.0 ·
 million tonnes per annum (RoM) of stone. It is quite clear that the
 Government of India was not kept informed of the developments that
 had taken place including the decision of the State Government to hand
 over the quarry to the petitioner alone.                               D
         21. On the basis of the decisions taken as well as the Environinent
  Clearance, the State ofHaryana granted a mining lease to the p~titioner
· on 5th Au&!!§t 2015 (actually signed on.19'h August, 2015). The dead
  rent was fixed at Rs. 115 -crores per annum or royalty whichever is
  higher. There were certain other terms and conditions of the mining          E
  lease but we are not presently concerned with them.
        22. Thereafter on the application of the petitioner, the Ministry of
 Environment, Forests and Climate Change of the Government of India
 transferred the Environment Clearance granted to the JV in favour of
 the petitioner on 28 1h October, 2015. On the basis of the mining lease F
 granted to the petitioner as well as the Environment Cle~rance, the
 petitiom:r started mining operations on l ''November, 2015 and began
 paying the dead rent or royalty from that date onwards.
         23~Asmentioned above, the permission granted to the petitioner
 on 17th June, 2015 by the Director General of the Mines and Geology G
 Department of the Government of Haryana was challenged by some
 persons by filing Writ Petition No. 9419 of2016. These persons had,
 prior to filing the writ petition, made a query under the Right to Information
 Act on 12'h of January, 2016 with regard to the transfer -cifthe contract
 in favour of the petitioner. A response was received by these persons on
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446            SUPREME COURT REPORTS                          [2017] 8 S.C.R.


A      I01h March, 2016 from the Government of Haryana to the effect that
      the file dealing with the subject was not available! The High Court has
      mentioned in its judgment and order that till the date of delivery of the
      judgment and order, the file was not made available even to the High
      Court. This is surprising indeed.
B         24. Be that as it may, perhaps as a result of all these developments,
   a notice was issued to the petitioner on 9'h August, 2016 by the Director
   General of the Mines and Geology Department of the Government of
   Haryana to show cause why the permission granted to transfer the mining
   lease or the share of 51 % of KJSL in favour of the petitioner as
   communicated on J7th June, 2015 should not be withdrawn with immediate
 C effect.
          25. The show cause notice was challenged by the petitioner by
   filing Writ Petition No. 16735 of 2016 in the High Court and that was
   disposed of on 271h August, 2016. It was directed by the High Court that
   the petitioner may file a supplementary response to the show cause
 D notice (it had already filed a response on 23n1August,2016). The persons
   who had filed Writ Petition No. 9419 of2016 were also given an option
   to be heard by the Director General of the Mines and Geology
   Department before a final decision is taken on the show cause notice.
            26. The petitioner then filed a supplementary response to the show
 E    cause notice on znd September, 2016 and since the Writ Petition No.
      9419 of2016 had become more or less infructuous, it was disposed of
      on 14'" September, 2016.
         27. On 29'" September, 2016 a detailed order was passed by the
   Director General of the Mines and Geology Department of the
 F Government ofHaryana withdrawing the permission granted to transfer
   the mining lease or the share of5 I% ofKJSL in favour of the petitioner
   as communicated on J71h June, 2015. Consequently, the lease deed
   executed on 51hAugust, 2015 with the petitioner on the basis of the letter
   dated J7th June, 2015 was declared void being not maintainable. However,
 G it was made clear that any action taken by the petitioner and the State
   Government in terms of the letter dated 17th June, 2015 and in terms of
   the lease deed shall remain valid and shall not have any adverse
   implication for any of the parties. It was also directed that the order
   dated 29th September, 2016 will not be given effect to for a period of two
   weeks after which the petitioner will immediately stop its mining
 H operations.
    MIS. SUNDER MARKETING ASSOCIATES v. STATE OF                               447
            HARYANA [MADAN B. LOKUR, J.]

       28. Feeling aggrieved by the order of 29'h September, 2016 the A
petitioner filed Writ Petition No. 20986 of2016 in the High Court which
came to be dismissed by the impugned judgment and order dated 1"
June,2017.                         ·
        29. At the outset, we must mention that the High Court dealt with
every submission raised by learned counsel for the petitioner in a lucid B
and well reasoned judgment. We really have nothing to add to the decision
rendered by the High Court. Perhaps that is. the reason why detailed
submissions on the merits of the case were rtot made before us and the
only issue agitated was the desire ·of the petitioner to walk out of the
contract without having to pay any penaltY ofsuffer any other adverse C
consequence. It was generally submitted by learned cotirisel for the
petitioner that the cancellation ofthe mining lease granted to the petitioner
was illegal but that contention was not pressed beyond a point particularly
because it was very clear that the petitioner alone or by itself was not a
qualified bidder and that it was the JV between the petitioner and KJSL
that was qualified to bid at the auction. That being the position, it was D
appreciated that under no circumstance could the letter of intent or the
mining lease have been transferred from the JV in favour ofthe petitioner.
It is this totally illegal transfer carried out within 5 years of the executiOll ·
 of the mining lease that has prompted us to believe that the petitioner
 could exercise influence in high places.
                                                                                E
     30. The surrender of a mining contract is dealt with in Rule 25
and Rule 4l(v) of the Rules. These rules read as follows:-
       "25. The Government may accept the contractor's request for
       surrender of a contract or part thereof in cases where it is
       established that it has not been found feasible to operate the           F
       contract grant for whatsoever reasons subject to the condition
       that the contractor:- ·
       (i) has been regular in furnishing thepr9duction returns as required
       in terms of the contract agreement;
                                                                                G
       (ii) has been taking the re.quisite steps for the progressive mine .
       closure plan as per the conditions of the contract grant; .
       (iii) is not in default of payment ofany dues of the Government as
       on the date of making such application and undertakes to pay all
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448            SUPREME COURT REPORTS                           [2017] 8 S.C.R.


A           such dues till the date of expiry of the notice period either in cash
            in advance or by way of adjustment of the security or both;
               Provided that in case the contractor makes an application for
               surrender of part of the contract area, it shall not result in any
               prorated reduction of the contract money and the rate of contract
B              amount payable and applicable for the entire area at the time
               of making such application shall remain intact."
            "41 (v) The lessee may surrender the lease at any time by giving
            not less than three calendar months notice in writing to the lessor
            after paying all outstanding dues to the lessor."
 c          31. In view of the peculiar facts of the case and the offer of
      surrender or rescission of the contract having been accepted by the
      State Government, we would not like to place any hurdle in the
      'agreement' but the provisions of Rule 25 and Rule 41(v) of the Rules
      must be complied with by the petitioner and the State Government.
D          32. Learned counsel for the petitioner had made a prayer to the
   effect that the petitioner may be permitted to continue its mining operations
   till 30'h November, 2017 so that it could wind up its activities and put its
   mine closure plan into operation. We had passed orders on 31 '' July,
   2017 and 3n1August,2017 permitting the petitioner to continue its mining
 E activities till judgment is delivered.
            33. Keeping in view the prayer made:
            (i) We permit the petitioner to continue its mining operations till
                30'h November, 2017 in accordance with the Mining Plan. On
                or before that date, it shall ensure implementation of the mine
 F              closure plan to the satisfaction of the concerned authorities in
                the State of Haryana.
            (ii) The petitioner will be under an obligation to continue paying
                the dead rent or royalty whichever is higher till 301hNovember,
                2017 regardless of whether it ceases its mining operations
 G              before that date or not.
            (iii) The petitioner shall ensure that all the dues (including wages
                etc.) of all the persons (including labour) employed in the mining
                operations in terms of Rule 56(10) of the Rules are paid to the
                satisfaction of the concerned authorities in the State of
 H
    MIS. SUNDER MARKETING ASSOCIATES v. STATE OF                                 449
            HARYANA [MADAN B. LOKUR, J.]

          Haryana. To ensure that the employees and labour (casual or A
          otherwise) are not left in the lurch, the petitioner is restrained
          from alienating or transferring or otherwise creating any charge
          or encumbrance on the equipment and machinery and all other
          moveable property in the lease area and connected with the
          mining operations (such as trucks, excavators etc.) so that there B
          is no difficulty in recovery of dues.
      (iv)All the laws applicable to the petitioner shall be strictly enforced
          by the State Government regardless of its apparent influence
          in high places. We make it clear that we will hold the Chief
          Secretary of the State of Haryana responsible for any lapse in
          this regard.                                                         C
      (v) It is not clear whether or not the security deposit of Rs. 28.75
          crores has been refunded to KJSLor the petitioner. If the refund
          has not been made, it is deemed to have been forfeited to the
          State and is not adjustable against any dues of the petitioner.
                                                                                 D
       34. The petition for special leave filed by the petitioner is disposed
of on the above terms and the judgment and order of the High Court is
modified to the above extent. No costs.


Divya Pandey                                                  SLP disposed of.