Holding

Premature termination of a mining lease under Section 4A without notice and an opportunity to be heard violates natural justice and is invalid.

Summary

The State of Haryana, having granted ten‑year mining leases for silica sand and ordinary sand to private lessees under the Mines & Minerals (Regulation & Development) Act, 1957, later terminated those leases prematurely under Section 4A, citing a request from the Central Government and the readiness of the public sector undertaking Haryana Minerals Ltd to take over operations. No notice or hearing was given to the lessees. The Delhi High Court set aside the termination, and the State appealed. The Supreme Court held that Section 4A does not itself empower termination; it requires a request from the Central Government after proper consultation and obliges the State to act only after such request. Moreover, the affected lessees must be afforded a hearing, as the principles of natural justice apply. The Court found that there was no effective consultation and no opportunity of hearing, rendering the termination invalid. Consequently, the appeals were dismissed.

Issues considered

Whether Section 4A of the Mines & Minerals (Regulation & Development) Act, 1957 authorises premature termination of a mining lease without notice and hearing.
Whether the principles of natural justice apply to the exercise of powers under Section 4A.
Whether the Central Government’s consultation and request are mandatory before a State can terminate a lease.
Whether Section 4A applies to leases of minor minerals under Section 14.

Legislation cited

Mines & Minerals (Regulation & Development) Act, 1957s. 14, s. 4A

Subjects

mining leasepremature terminationSection 4Anatural justiceaudi alteram partemconsultationcentral governmentstate governmentminor mineralmajor mineral

Judgment

STAIB OF HARYANA A
v.
RAM KISHAN & ORS.

MAY 6, 1988

[R.S. PATHAK, C.J, AND LALIT MOHAN SHARMA, J.) B

Mines & Minerals (Regulation & Development) Act, 1957-

, Whether a mining lease can be prematurely terminated in purported
exercise of powers under Section 4A of-Without notice to the party
affected and opportunity to that party to place its view point-Whether
such termination is violative ofprinciples of natural justice.

These appeals were directed against the common judgment of the
c
High Court in Writ applications itled by different petitioners, cballeng-
ing the termination of the mining leases granted to. them. The State of
Haryana which had executed the mining leases in favour of the wdt
petitioners for ten years under the provisions of the Mines & Minerals D
(Regulation & Development)' Act (the Act), terminated the said leases
prematurely in· the purported exercise of powers under Section 4A of
the Act without prior notice to the writ petitioners or any opportunity to
~ them to defehd their cases. The leases were so terminated on the ground
that the Haryana Minerals limited-a public sector undertaking-bad
fully equipped itself to undertake the mining operations. The High E
Court allowed the writ petitions. The State of Haryana and Haryana
• Minerals Limited appealed to this Court by Special leave against the
decision of the High Court .

.4~.· According to the appellant, the necessary consultation between
the Central Government and the State Government was held, fulf"dling F
the conditions under Section 4A of the Act and the decision impugned
was taken. The appellant contended that the writ petitioners-lessees
had no locus standi to place their view point and it was not necessary to
give them notice, and. that there was no violation of the principles of
natural justice.
G
>- Dismissing the appeals, the Court,

HELD: The language of Section 4A indicates that the Section
by itself does not permaturely terminate any mining lease. A decision in
this regard bas to be taken by the Central Government. The question of
the State Government granting a fresh mining lease in favour of a H
1015
1016 SUPREME COURT REPORTS I19881 3 S.C.R.

Government Company or a Corporation arises only after the existing
A
mining lease is terminated, the section does not direct termination of all
mining leases merely for the reason that a Government Company or a
Corporation has equipped itself for the purpose. It is not correct to say
that an existing mining lease can be· terminated for the reason that a
Government Company or a Corporation is ready to undertake the
B work. Viewed thus, the section must be interpreted to imply that a
person who may be affected by such a decision should be afforded an
opportunity to prove that the proposed step would not advance the
interest of mines and mineral development. Not to do so will be violative
of the principles of natural justice. Since there is no suggestion in the
section to deny the right of the affected persons to be heard, the provi-
sions have to be interpreted asimplyi"g to preserve such a right. A final
c decision to prematurely terminate a lease can be taken only after notice
to the lessee. [IOJ9C-H; J020E]

The Writ Petitioners-respondents before the Court were never
given an opportunity to be heard. If such an opportunity had been
D afforded, they would have shown that their standard of mining
operations was very high and favourably measured against the ex-
pected standard and was superior to that of the Haryana Minerals
Limited. [1021G]

.There was no effective consultation between the Union of India
'E and the State Government, and the Central Government did not form
any opinion as required under Section 4A of the Act; The respon-
dents before the Court were entitled to be heard before a decision •
to prematurely terminate their leases was taken but they were not
given any opportunity to place their cases. The respondents must
succeed. [1022A-BJ )>
'F
Baldev Singh and others v. State of Himachal Pradesh and others,
{1987] 2 SCC 510; Union of India and anotherv. Cynamide India Ltd.
and another, AIR 1987 SC 1802; D.C. Saxena v. State of Haryana, AIR
1987 SC 1463 and State of Tamil Nadu v. Hind Stone, etc., [1981] 2
SCR 742, referred to.
G
CIVIL APPELLATE JURISDICTION: Civil Appeals No. '~
1472-77of1987.

From the Judgment and Order dated 4.12.1986 of the Delhi High
Court in Civil Writ Petition Nos. 2148 of 1986, 2417, 2173, 2174, 2175
H and 2166of1986.
STATE OF HARYANA v. RAM KISHAN !SHARMA, J.] 1017

S.C. Mohanta, Ravinder Bana and Mahabir Singh for the
Appellant.

A.K. Sen, P.P. Rao, Rajinder Sachhar, K.B. Rohatgi, S.K.
Dhingra, Praveen Jain, Shashank Shekhar, C.M. Nayar, P.N. Duda
and Randhir Jain for the Respondents.
B
The Judgment of the Court was delivered by

SHARMA, J. The present appeals by the State of Haryana and
the Haryana Minerals Limited are directed against the common judg-
ment of the Delhi High Court disposing of 6 writ applications filed by
different petitioners impleaded as respondent No. 1 herein.
c
2. Separate mining leases were executed on behalf of the State
of Haryana with respect to Silica sand and ordinary sand in favour of
the writ petitioners for a period of 10 years, in accordance with the
provisions of the Mines & Minerals (Regulation & Development) Act,
1957, hereinafter referred to as the Act. The State of Haryana, in D
purported exercise of powers under Section 4A of the Act prematurely.
terminated the leases by its order dated 1st October, 1986 which is
quoted in the judgment of the High Court, stating that it was proper to
• do so as the Haryana Minerals Limited, respondent No. 4 (appellant
" No. 2 herein) a public sector undertaking had informed that it had
fully equipped itself to undertake the mining operation and that neces- E
sary permission in terms of the Section had been obtained from the
Central Government to prematurely terminate the leases. Admittedly
• . - no prior notice to the writ petitioners or any opportunity to them to
place their case was given.

3. The lessees contended before the High Court that essential F
conditions for exercises of the powers under Section 4A are not
satisfied in the present cases and further, the impugned decision is
violative of the principles of natural justice. It was also urged that so
far as the lease in respect of ordinary sand which is a minor mineral
under the Act, is concerned, Section 4A being excluded by the provi-
sions of Section 14 is not applicable. It was also averred that forcible G
).. possession of the mining areas was taken even before communicating
the impugned order. The High Court agreed with these contentions
and allowed the writ petitions. The State of Haryana and the Haryana
Minerals Limited, respondents No. 2 and 4, respectively, in the writ
cases were allowed special leave to appeal under Article 136. Hence
these appeals. H
1018 SUPREME COURT REPORTS [1988] 3 S.C.R.

4. Section 4A as it stood at the relevant time read as follows:
A
"4A.(1) Where the Central Government, after con-
sultation with the State Government, is of opinion that it is
expedient in the interest of regulation of mines and mineral
development so to do, it may request the State Govern-
B ment to make a premature termination of a mining lease in ...1,
respect of any mineral, other than minor mineral, and, on

l
receipt of such request, the State Government shall make
an order making a premature termination of such mining
lease and granting a fresh mining lease in favour of such
Government company or corporation owned or controlled
by Government as it may think fit.
c
(2) Where the State Government, after consultation
with the Central Government, is of opinion that it is expe-
dient in the interest of regulation of mines and mineral
development so to do, it may, by an order, make prema-
D ture termination of a mining lease in respect of any minor
mineral and grant a fresh lease in respect of such mineral in
favour of such Government company or corporation owned
or controlled by Government as it may think fit."
5. Silica sand being a major mineral is governed by Sub-section 1.
(1) of Section 4A and ordinary sand by Sub-section (2). According to
E
the appellant, full and necessary consultation between the two Gov-
ernments i.e. the Central Government and the State Government was
held and it was considered expedient in the interest of regulation of ·
mines and mineral development to take the impugned decision. Refer-
ence in this regard was made by the learned counsel to the report of
the Indian Bureau of Mines referred to in the letters of the Director,.,...
F Department of Mines, Central Government to the Chief Secretary,·
Government of Haryana, dated 20th April, 1985, 8th July, 1985 and
10th July, 1985 and the State's letters dated 14th July, 1986, 17th
September, 1986 and 29th September, 1986. It has been contended
that since a decision was jointly taken by the two Governments to
grant mining lease of the entire area to the Haryana Minerals Limited,
G this by itself fulfilled the necessary conditions under Section 4A and as
the writ petitioners-lessees had no locus standi to place their point of ~
view with respect to this aspect, it was not necessary to give them a
notice. The argument is that in the circumstances there is no question
of violation of principles of natural justice. It was also claimed that the
H State was the final authority to take a decision under Section 4A with
respect to both major and minor minerals. '
STATE OF HARYANA v. RAM KISHAN [SHARMA, J.) 1019

6. Mr. B. Datta, Additional Solicitor General, stated on behalf
A
of the Union of India; respondent No. 2 that the respondent is ready to
reconsider the matter after hearing the parties concerned. He refuted
the claim of the appellant that the State is the ultimate authority to
take a decision under Section 4A with respect to major minerals and
he appears to be right. Sub-section (1) which deals with major miner-
als empowers the Central Government to consider the matter and, B
after having consultation with the State Government, to take a deci-
sion in this regard and once it does so and makes a request to the State
Government for prematurely terminating a. lease, the State Govern-
ment shall be under an obligation to act. The use of "shall" in this
context indicates the binding nature of the request.

7. The languagepf;Section 4A clearly indicates that the Section
c
by itself does not prerl\afurely terminate any mining lease. A decision
in this regard has to be taken by the Central Government after consid-
ering the circumstances of each case separately. For exercise of power
it is necessary that the essential condition. mentioned therein is fulfil-
led, namely, that the proposed action would_ be in the interest of regu- D
lation of mines and mineral development. The question of the State
Government granting a fresh mining lease in favour of a Government
Company or a Corporation arises only after a decision to terminate the
. existing mining lease is arrived at and given effect to. The Section does
) not direct termination of all mining leases, merely for the reason that a
Government Company or Corporation has equipped itself for the E
purpose. The Section was enacted with a view to improve the effi-
ciency in this regard and with this view directs consulation between the
Central Government and the State Government to be held. The two
Governments have to consider wh~ther premature termination of a
..J.,_particulare minirig lease shall advance the object or not, and must,
' therefore, take into account all considerations relevant to the issue, F
· . with reference to the lease in question. rt"is not correct to say that an
existing mining lease can be terminated merely for the reason that a
Government Company or Co~f,ation is ready to undertake the work.
·,·_, ,_
<~
8. Considered in this light, the Section must be interpreted to
imply that the person who may be .affected by such a decision should G
be afforded an opportunity to p~e that the proposed step would not
advance the interest of mines and mineral development. Not to do so
will be violative of the principlc:S of natural justice. Since there is no
suggestion in the Section to deny.the right of the affected persons to be
heard, the provisions have to be interpreted as implying to preserve
such a right. Reference may be made to the observations of this Court H
1020 SUPREME COURT REPORTS [1988] 3 S.C.R.

in Baldev Singh and others v. State of Himachal Pradesh and others,
A
[198712 SCC 510, that where exercise of a power results in civil conse-
quences to citizens,.unless the statute specifically out the application
of natural justice, such rules would apply. The cases, Union of India
and another v. Cynamide India Ltd. and another, AIR 1987 SC 1802;
D.C. Saxena v. State of Haryana, AIR 1987 1463 and State of Tamil
B Nadu v. Hind Stone etc., [1981] 2 SCR 742, relied upon by Mr.
Mohanta do not help the appellant. The learned counsel placed
reliance on the observations in paragraphs 5 to 7 of the judgment in
Union of India v. Cynamide Ltd. which were made in connection with
legislative activity which is not subject to the rule of audi alteram
partem. The principles of natural justice have no application to legisla-
tive activities, but that is not the position here. It has already been
c pointed out earlier that the existing mining leases were not brought to
their and directly by Section 4A itself. They had to be terminated by
the exercise of the executive authority of the State Government.
Somewhat similar was the situation with regard to Section 4A of
Haryana Board of School Education Act, 1969 which was under Con-
D sideration in D.C. Saxena v. State of Haryana, AIR 1987 SC 1463. A
matter of policy was adopted and included by the legislature in the
impugned secticn. Besides, the validity of the Section was not under
challenge there, as was expressly stated in paragraph 6 of the judg-
ment. So far as the case, State of Tamil Nadu v. Hind Stone is con-
cerned, the learned counsel for the appellant cited it only with a view
E to emphasise the importance of the mineral wealth of the nation which
nobody denies. We, therefore, held that a final decision to prema-
turely terminate a lease can be taken only after notice to the leassee.

9. Coming to the facts of the present case it will be observed that
the question of terminating the mining leases in question before us was ~
F introduced for the first time under the letter dated 14.7.1986 (page 80) j
of the State of Haryana. The earlier letter dated 20.4.1985 and
8.7.1985, of the Department of Mines, Union of India sent to the State
Government discussed the general question about the desired
improvement in the mining field and referred to the report of the
Indian Bureau of Mines on silica sand mining in Haryana. The report
G had highlighted various aspects of silica sand mining in the State and
made several positive suggestions. It was stated in the letter dated 20th ".-k
April, 1985 that if the lessees did not comply with the requirements
mentioned therein, their leases "deserve to be terminated in accord-
ance with the procedure established under law." In the letter dated 8th
July, 1985, further emphasis was laid on ensuring scientific mining of
H optimum utilisation of natural resources, ensuring safety in operation
STAIB OF HARYANA v. RAM KISHAN (SHARM'\, J.} 1021

and ensuring payment of fair wages to the mine workers. In this letter
A
the desirability of entrusting mining operations to the public sector was
mentioned but it was also stated that the representatives of the
Government of Haryana had in the earlier meetings expressed their
inability to entrust the Haryana Minerals Ltd. (appellant No. 2 before
us) with the mining operations in the entire State immediately. Addi-
tional terms and conditions were also suggested to be imposed in the B
future mining leases to be granted in favour of private parties. Later
on, it appears that the Haryana Minerals Ltd. became ready to take
over the mining operations and intimated its preparedness by letter
. dated 10.7.1986 and thereupon the State of Haryana wrote on
14.7.1986 to the Union of India that it was appropriate to prematurely
(
terminate the 6 leases mentioned in the letter of the date. It will be
significant to note that the State· Government did not take a decision to c
terminate all the mining leases; on the countrary, fresh mining leases
in favour of private individuals were in contemplation of the State
authorities, as indicated by the aforementioned letters and by
. Annexure P-5 (page 273) to the Writ Petition of Ram Kishan in the
High Court. The State's letter dated the 14th July, 1986 was followed D
by another letter dated 5.9.1986 and in reply to it, the Central Govern-
ment asked for a report on several specific points mentioned in their
letter which is at page 85 of the paper-book. In place of sending the .
~ required information, the State Government, in its letter dated
17.9.1986, took the erroneous stand that the information sought for
was not relevant. Instead of pointing out that the information E
demanded was very pertinent in the context of the proposed termina-
tion of the mining lease, the Central Government by its letter dated
26th November, 1986 agreed to the proposal, but took care to advice
that while taking any action for premature termination of the leases the
4_authority should "ensure that the provisions of Section 4A of the Act
"\ are complied with". As has been mentioned earlier, the Union of India F
does not deny the right of hearing to the affected lessees and is ready,
even now, to give an oppor.unity to them. Admittedly, the writ
petitioners who are respondents before us were never given any such
opportunity and according to their assert;on if such an opportunity had
been afforded, they would have shown that the standard of their
mining operation was very high and favourably measured against the G
~)-. expected standard suggested in the report of the Indian· Bureau of
•" Mines and mentioned in the letter of the Mines Department of the
Central Government and that it was definitely superior to that of
Haryana Minerals Limited.

10. On a consideration of the facts and circumstances of the H
1022 SUPREME COURT REPORTS [1988] 3 S.C.R. i
A present case, we are of the opinion that there was no effective consul-
tation between the Union of India and the State Government, and the
Central Government did not form any opinion as required under Sec-
tion 4A of the Act. We are further of the view that the lessees, the
respondents before us, were entitled to be heard before a decision to
prematurely terminate their leases was taken \;ut they were not given
B
any opportunity to place their case. ·

11. Mr. Sen, the learned counsel for the respondents, very fairly
stated that he could not support the plea that leases in respect of minor
minerals are saved from the application of Section 4A altogether by
reason of Section 14. This Court in State of Tamil Nadu v. Hind Stone,
C [1981] 2 SCR 742 (at pages 746H and 747A) pointed out that perhaps
since Section 4A(l) is inapplicable to minor minerals because of the
provisions of Section 14, Section 4A(2) has been specially enacted
making somewhat similar provision. It must, therefore, be held that
leases in respect of minor minerals also can be prematurely terminated
in appropriate cases. However, in view of our earlier finding the
D respondents must succeed. We accordingly dismiss these appeals with
costs.

S.L. Appeals dismissed.