Supreme Court of India
STATE OF KERALA & ORS.versusM/S. KERALA RARE EARTH & MINERALS LIMITED & ORS.
- Citation
- 2016 INSC 301
- Decided
- 8 April 2016
- Disposal
- Dismissed
- Bench
- T S THAKUR
Holding
A State may reserve mineral areas for public‑sector exploitation only by complying with Section 17A(2) of the Mines and Minerals (Development and Regulation) Act, 1957, and absent such a valid reservation the State’s refusal to grant mining leases is unlawful.
Summary
The State of Kerala granted mining leases for beach‑sand minerals but later stayed them pending an environmental impact study and subsequently rejected the applications, citing its 2007 industrial policy that such minerals be exploited only by State or Central public‑sector undertakings. The respondents filed revision petitions under Section 30 of the Mines and Minerals (Development and Regulation) Act, 1957, which were allowed by the Central Government, directing the State to reconsider the applications. The State again refused, arguing that it could reserve the mineral area under Section 17A(2) of the Act without a prior Central approval. The High Court held that the State had not complied with the statutory requirements of Section 17A(2) – namely Central approval and a gazette notification specifying boundaries – and quashed the refusal. The Supreme Court, by majority, affirmed that while the State owns the mineral deposits, it may reserve areas only in accordance with Section 17A(2), and since no valid reservation was made, the State's claim was untenable. The Court dismissed the appeals, upholding the High Court’s decision. The minority judgment argued that the State’s policy was within its legislative competence, but it did not form the binding ratio.
Issues considered
- Whether the State of Kerala has the legislative competence to reserve mineral sand areas for exploitation by public‑sector undertakings under its industrial policy.
- Whether the State complied with the procedural requirements of Section 17A(2) of the Mines and Minerals (Development and Regulation) Act, 1957 for reservation of mineral areas.
- Whether the State’s refusal to grant mining leases, after a Central revision order, amounts to institutional insubordination.
- Whether the doctrine of promissory estoppel or legitimate expectation can be invoked against the State in this context.
Legislation cited
Subjects
mining leasesection 17Astate ownership of mineralspublic sector undertakingenvironmental impact assessmentpromissory estoppelconstitutional competenceUnion‑State legislative fieldNational Mineral Policyindustrial policy
Judgment
[2016] 5 S.C.R. 515
STATE OF KERALA & ORS. A
v.
MIS. KERALA RARE EARTH & MINERALS
LIMITED & ORS.
(Civil Appeal No. 3608 of2016)
B
APRIL 08, 2016
[T.S. THAKUR, CJI., V. GOPALA GOWDA AND
R. BANUMATHI JJ.)
Mines and Minerals - Grant of mining lease by State
Government - For non-scheduled minerals - However, the State C
stayed further acJion on the ground that detailed study on
environmental impact of the proposed leases was required to be
taken - Further the lessee-company was informed that the State did
not intend to grant leases for mineral sand to private parties -
Revision applications uls. 3 of Mines and Minerals Act filed by the
Company - Central Government allowing the revision directed the D
State Government to reconsider the case :__ State Government, on
reconsideration, rejected the applications of the Company on the
ground that as per the Industrial Policy, 2007 of the State, mineral
deposits in question are to be expointed by a State agency only -
Writ petition against decision of the State Government - Allowed by E
Single Judge of High Court - Order of Single Judge confirmed by
Division Bench of High Court - On appeal, held: Per Majority:
State Government is the owner of mineral deposits in the land which
vest with the Government - The State Government has the power to
reserve the rights to exploit such deposits in its own favour or in
favour of State owned Companies or Corporations - However, the F
State Government can reserve such right only in terms of s. 17A of
the Mines and Minerals Act - Absence of procedure resorted to by
the State Government, as required by s. 17A, renders the State ·
Government's claim of reservation untenable, until a valid
reservation is made in accordance with law - Per Minority: State G
Government had legislative competence to take the policy decision
reserving the area for exploitation of minerals by a State agency -
The_ saicf policy is not dehors the provisions of Mines and .Minerals
· Act and of Mineral Concession Rules - Mines and Minerals
(Development and Regulation) Act, 1987 - s. J7A - Mineral
H
515
516 SUPREME COURT REPORTS [2016] S S.C.R.
A Concession Rules,1960.
Dismissing the appeals, the Court
Majority opinion(Per T.S. Thakur, CJI, for himself and for V.
Gopala Gowda,J.)
B HELD: 1. Once the Parliament decl~res it to be expedient
in public interest to bring the regulation and development of
mines and minerals under the control of the Union in public
interest, the subject to the extent laid down by the Parliament
comes within the exclusive domain of the Parliament and that
any legislation by the State after such declaration that has the
c effect of trenching upon the field, must necessarily be
unconstitutional. [Para 8) (530-B)
2. While the State Government is the owner of the mineral
deposits in the lands which vest in the Government, the
Parliament has by reason of the declaration made in Section 2 of
D Mines and Minerals (Development and Regulation Act, 1957)
acquired complete dominion over the legislative field covered
by the said legislation. The Act does not denude the State of the
ownership of the minerals situate within its territories but there
is no manner of doubt that it regulates, to the extent set out in
E the provisions of the Act, the development of mines and minerals
in the country. [Para 17](536-H; 537-A-B)
3.1 The State Government can reserve any area not already
held under any prospecting licence or mining lease for
undertaking prospecting or mining operations through a
Government company or corporation owned or controlled by it,
F
but, in terms of sub-Section(2) of Section 17A. [Para 14)[535-C-
D]
3.2 Three distinct requirements emerge from Section 17A(2)
for a valid reservation viz.: the reservation can only be with the
approval of the Central Government and must confine to areas
G
not already held under any prospecting licence or mining lease;
the reservation must be made by a notification in the official
gazette; and the notification m~st specify the boundaries of such
areas and the mineral or minerals in respect of which such areas
will be reserved. [Para 14](535-D-F]
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 517
MINERALS LIMITED
3.3 If the State Government proposes to reserve any area A
for exploitation by the State owned corporation or company, it
must resort to making of such reservation in terms of Section
17A of the Act with the approval of the Central Government and
by a notification specifying boundaries of the area and mineral or
minerals in respect of which such areas will be reserved. [Para 'B
17][537-B-C]
3.4 Thus, while the power to reserve an area not already
held under any prospecting licence or mining lease is squarely
and s.pecifically vested in the State Government, the exercise of
that power is not demonstrable in the present case. There is no
approval of the Central Government nor is there a notification
c
duly published in the official gazette specifying boundaries of the
reserved area and mineral or minerals in respect of which such
area will be or has been reserved. If the law requires a particular
thing to be done in a particular manner, then, in order to be valid
the act must be done in the prescribed manner alone. [Paras 15 D
and 16][535-G-H; 536-A-B]
3.5 Absence of the Central Government's approval to
reservation and a notification as required by Section 17 A,
therefore, renders the State Government's claim of reservation
untenable till such time a valid reservation is made in accordance E
with law. The State Government's general executive power cannot
be invoked to make a reservation delwrs Section 17A. The State
Government is denuded of its executive power in the light of
Section 2 of the Act. Therefore, the High Court was justified in
holding that there is no valid reservation. [Paras 16 and 17](536-
C-D; 537-D] F
3.6 However, the government can make such a reservation
if so advised in the manner prescribed by law. The dismissal ()f
the present appeals shall not prevent the State from invoking its
right under Section 17(A)(2) of the Act by issuing notification in
respect of the mineral deposits in question. [Para 17](537-C, DJ G
Shibu v. Tahsildar (1993 (2) KLT 870); Gem Granites
v. State of Kera/a and Ors. 2006 (2) KLT 899;
Hingir-Rampur Coal Co. Ltd. v. Smte of Orissa AIR
1961 SC 459 : 1961 SCR 537; State of Orissa v. MA.
H
518 SUPREME COURT REPORTS [2016] 5 S.C.R.
A Tulloch and Co. AIR 1964 SC 1284 : 1964 SCR
46; India Cement Ltd. v. State of Tamil Nadu (1990) 1
SCC 12: 1989 (1) Suppl. SCR 692; Orissa Cement
Ltd. v. State of Orissa 1991 Supp (1) SCC 430 : 1991
(2) SCR 105; State of Orissa v. Mahanadi Coalfields
Ltd. 1995 Supp (2) SCC 686; Saurashtra Cement &
B
Chemical Industries Ltd. and Am: v. Union of India
and Ors. (2001) 1 SCC 91; State of Madhya Pradesh
v. Mahalaxmi Fabric Mills Ltd. 1995 Supp (1) S C C
642: 1995 (1) SCR 756; Co111111issioner of Income Tax,
Mumbai v. Anjum MH. Ghaswala and ors. (2002) 1
c SCC 633 : 2001 (4) Suppl. SCR 303; Captain Sube
Singh and Ors. v. Lt. Governor of Delhi and Ors. (2004)
6 SCC 440 : 2004 (1) Suppl. SCR 929; State of U.P.
v. Singhara Singh AIR 1964 SC 358; Mohinder
Singh Gill v. Chief Election Commissioner (1978) 1 SCC
405 : 1978 (2) SCR 272; Sandur Manganese and Iron
D
Ores Ltd. v. State of Karnataka and Ors. (2010) 13
SCC 1 : 2010 (11) SCR 240; Bharat Coking Coal
Ltd. v. State of Bihar (1990) 4 SCC 557 : 1990 (3) SCR
744; State of Tamil Nadii v. Hind Stone (1981) 2 SCC
205 : 1981 (2) SCR 742 - relied on.
E Monnet !spat and Energy Limited v. Union of India and
Ors. 2012 (11) SCC 1 : 2012 (7) SCR 644 - referred
to.
Minority Opinion (Per R. Banumathi, J.):
F 1. In the federal structure of India, State Governments are
the owners of the mines and minerals located within the territory
.of the State concerned. There is nothing in the Mines and
Minerals (Development and Regulation) Act (MMDR Act) or the
Mineral Concession Rules (MC Rules) to detract from this basic
fact. Although, mineral wealth vests with the State Government,
G yet the subject of regulation of mines and mineral development
is covered under Seventh Schedule of the Constitution of India.To
the extent control of regulation of mines and mineral development
is taken over by the Union under the law made by Parliament
declaring that it is expedient in the public interest to do so, the
H scope and ambit of Entry 23 of List II is cut down to that extent.
STATE OF KERALA v. M/S. KERALA RARE EARTH & 519
MINERALS LIMITED
(Paras 7 and 8)(539-D-F; 540-B-C] A
Amritlal Nathubhai Shah & Ors. v. Union Government
of India & Am: (1976) 4SC,C 108: 1977 (1) SCR 372-
relied on.
State. of Orissa And Anr. v. M.A. Tulloch & Co. AIR
1964 SC 1284 : 1964 SCR 461 - referred to . B
•
2. In grant of mining lease of a property of the State, the
State Government has the discretion to grant or refuse to grant
any prospective licence or licence to any applicant. No applicant
has a right, much less vested right, to the grant of mining lease
for mining operations in any place within the State. No one has a c
vested right for grant of mining lease except the rights created
under MMDR Act and the Mineral Concession Rules. But State
Government being a public authority, its acts are necessarily
regulated by rules and regulations. [Para 12)(544-E-G; 545-A]
MP. Ram Mohan Raja v. State of T.N & Ors. (2007) 9 D
SCC 78 : 2007 (5) SCR 576; State of Tamil Nadu v.
Hind Stone & Ors., (1981) 2 SCC 205 : 1981 (2) SCR
742; Dharambir Singh v. Union of India & Ors. (1996)
6 SCC 702 : 1996 (6) Suppl. SCR 566; Monnet !spat
and Energy Ltd. v. Union of India and Ors. (2012) 11 E
SCC 1 : 2012 (7) SCR 644; Sandur Manganese &
Iron Ores Ltd. v. State ofKarnataka & Ors., (2010) 13
SCC 1 : 2010 (11) SCR 240 - relied on.
3. Section 17A deals with the reservation of area by Central
Government or by the State. Government for the purpose of f•
"conservation of minerals". The authority of the State to make ·
reservation of a particular mining area within its territory for its
own use is the offspring of the State's authority of ownership over
the mines and minerals. Section 17A(2) reserves the power of
the State Government with the approval of the Central
Government to reserve any area not already held under G
prospecting licence or mining lease. Section 17A(2). uses the
words "with the approval of the Central Government" and does ·
not use the expression "prior approval". [Paras 15 and 16)(545" ·
G; 546-A-B]
H
520 SUPREME COURT REPORTS [2016] 5 S.C.R.
A Monnet !spat & Energy Ltd. v. Union of India & Ors.
(2012) 11 SCC 1 : 2012 (7) SCR 644 - relied on.
4.1 Under Section 17A(2) the power is conferred upon the
State Government with the approval of the Central Government
to reserve any area for undertakillg prospecting or mining
B operations through a Government company or a Corporation
owned or controlled by it. The State Government has the
executive power to exploit its own minerals. Such power is thus
conferred upon the State by the MMDR Act _itself. Section 17A
(2) clearly recognizes the power of the State Government to
reserve the land for mining or exploitation of the mineral in public.
c sector. While so; a policy decision of the State reserving the area
for mining of mineral sand through State/Central Public Sector
Undertakings cannot be said to be in derogation of MMDR Act.
The policy of the State that the mining of minerals sand will be
done only through State/Central Public Sector Undertakings is
D well in consonance with the provisions of MMDR Act. [Para
20)(550-C-E]
Monnet !spat & Energy Ltd. v. Union of India & Ors.
(2012) 11 SCC 1 : 2012 (7) SCR 644 - relied on.
4.2 State Government being owner of the minerals lying
E within its territory by virtue of the powers conferred under
Sections 10 and 17 A(2) MMDR Act and having regard to the
Industrial Policy, Government of India, Department of Atomic
Energy dated 6.10.1998 granting liberty to the State to select the
companies/entrepreneurs of its choice for setting up projects/
F plants for exploitation of beach sand minerals, the policy of the
State Government, reserving the area for mining of the mineral
sand done through State/Central Public Sector Undertakings
cannot be said to be in derogation of MMDR Act and MC Rules.
It cannot be contended that the State has no legislative
competence and the Executive has no power to frame a policy
G rese..Ving the area for exploitation of beach sand mineral by State/
Central Public Sector Undertakings. [Para 23)(552-F-G]
4.3 As per Article 48A of the Constitution, the State shall
endeavour to protect and improve the environment and this is a
constitutional mandate. Kerala being a State with long coastal
H
STATE OF KERALA v. M/S. KERALA RARE EARTH & 521
MINERALS LIMITED
areas and backwaters and State being densely populated, State A
Government's decision to reserve mining lease of beach sand
minerals to State/Central Public Sector Undertakings is stated
to be in larger public interest. The policy adopted by the State of
Kerala is well in consonance with the National Mineral Policy as
both are designed to encourage the scientific methods of mining,
B
beneficiation and economic utilization. The National Policy
specifies that there shall be transparency and fair play in the
reservation for one over another in the public interest. Apparently
the State of Kerala has reserved the area for public sector
undertakings in order to prevent environmental degradation and
to ensure the maintainability of public health. [Para 25][553-C- c
G]
Pa/lava Granite Industries (India) (P) Ltd. v. Union of
India & Ors., (2007) 15 SCC 30 : 2006 (8) Suppl. SCR
633 - relied on.
Indian Charge Chrome Ltd. & Am: v. Union of India & D
Ors. (2006) 12 SCC 331 : 2006 (10) Suppl. SCR 640 -
referred to.
-~
4.4 The policy of the State is also in consonance with Section
18 of the MMDR Act which provides that it shall be the duty of
the Central Government to take all steps for conservation and E
systematic development of minerals in India. The State
Government's policy is in adherence to sustainable development
which is a constitutional mandate and the State has tried to balance
the developmental needs and the need for protection of
environment and ecology. Therefore, it cannot be said that the -p
State Government's policy is violative of provisions of the MMDR
Act and National Policy. The High Court failed to consider that
the State of Kerala keeping in view its policy decision and the
importance of environment protection rejected the application
moved by the first respondent. [Para 25][553-G-H;554-A-B]
G
4.5 The State Government has passed a reasoned order as
to why it has chosen to reserve the area for exploitation of mineral
sand in public sector_ undertakings and there is no arbitrariness
or unreasonableness in the policy of the State. [Para 26][554-D-
E]
H
522 SUPREME .COURT REPORTS [2016] 5 S.C.R.
A State of Tamil Nadu v. Hind Stone & Ors. (1981) 2 SCC
205 : 1981 (2) SCR 742; Monnet !spat & Energy Ltd.
v. Union of India & Ors. (2012) 11 SCC 1 : 2012 (7)
SCR 644 - relied on.
5.1 Under Section 17A(2) of the MMDR Act, the statutory
B dispensation is the approval of the Central Government and
reservation of area by the State Government by notification in
the Official Gazette specifying the boundaries of such area and
the mineral or minerals in respect of which such areas will be
reserved. No doubt, when the statute stipulates a procedure, it
should be done strictly as per the procedure stipulated thereon.
c State Government with the approval of the Central Government
has the power to reserve any area for undertaking mining
operation through public sector undertakings. Recommendation
of the State Government for approval of the Central Government
for such reservation and issuance of notification is only procedural.
D The policy of the State that mining of beach and mineral would be
done through public sector undertakings cannot be said to be
dehors the MMDR Act or unreasonable ,justifying interference
by the Court. [Para 30)(557-G-H; 558-A-B)
5.2 The plea regarding thwarting the procedure stipulated
E under Section 17 A(2) of the MMDR Act under the guise of
industrial policy has not been specifically raised before the High
Court in the writ petition. Only during the course of arguments
in this Court for the first time, such a plea was raised. Therefore
steps, if any, taken by the State of Kerala in furtherance of Section
17A (2) of MMDR Act is not available on record. [Para 31)(558-
F C]
5.3 The approval of the Central Government required by
Section 17A (2) is mandatory, but nowhere it is stated that the
approval must be sought prior to the reservation. Prior approval
of the Central Government before reserving any area by the State
G Government for the public sector undertaking is not required.
Therefore, what logically follows from Section 17A (2) is that the
State Government may seek approval of the Central Government
even after the framing .of the policy. [Para 33)[558-G-H]
5.4 Industrial Policy of the State can be said to be a prelude
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 523
MINERALS LIMITED
before the State makes the proposal reserving the area for A
exploitation of the mineral by the public sector undertakings. It
is not correct to say that under the guise of policy decision, the
State has bye-passed the procedure stipulated under Section
17A(2). [Para 33](559-F-G)
6. Merely because the Central Government has directed B
the State Government to reconsider the matter, it was not
obligated upon the State to grant mining lease in favour of the
first respondent. After remittance of the matter, State has the
power to consider the applications afresh on its own merits and
the constitutional mandate. Though MMDR Act confers the
revisional power on the Central Government for grant of mining c
lease for mining minerals other than a minor mineral, that does
not mean that the State Government is denuded of its power or
control over the minerals lying in the land within its territory.
The High Court fell in error in faulting the State Government
and the State cannot be faulted for the alleged "institutional D
insubordination". (Paras 35 and 36](560-F-G; 561-A-B)
Sandur Manganese And Iron Ores Ltd. v. State of
Karnataka & Ors. (2010) 13 SCC 1 : 2010 (11) SCR
240 - relied on.
Dharam Chand Jain v. State of Bihar (1976) 4 SCC E
427 : 1976 (0) Suppl. SCR 53 - referred to.
7. It is well settled that no one has legal or vested right for
the grant of mining lease. Mere disappointment of expectation
cannot be a ground for interfering with the policy of the State
reserving the areas for exploitation of beach sand mineral by State/ F
Central Public Sector Undertakings. No doubt by G.O (MS)
No.105/04/ID dated 15.09.2004, State has sanctioned mining
leases to the first respondent. But within ten days by order dated
25.09.2004, the mining lease granted to first respondent was
stopped on the ground that the detailed study on the environment G
impact will be undertaken before taking further action in the
matter. The rule of promissory estoppel can be invoked only if on
the basis of representation made by the Government, the party
has substantially altered the position. Within short time of ten
days, first respondent could not have altered its position so as to
H
524 SUPREME COURT REPORTS [2016] 5 S.C.R.
A invoke the doctrine of promissory estoppe/. [Paras 40 and 41)(562-
D-E; 563-B~D)
Monnet !spat & Energy Ltd. v. Union of India & Ors.
(2012) 11 SCC 1: 2012 (7) SCR 644 - relied on.
Case Law Reference
B
In the Judgment of T.S. Thakur, CJI:
(1993 (2) KLT S70) relied on Para4
2006 (2) KLT S99 relied on Para4
1961 SCR 537 relied on Paras
c 1964 SCR 461 relied on ParaS
19S9 (1) Suppl. SCR 692 relied on ParaS
1991 (2) SCR 105 relied on Paras
1995 Supp (2) sec 6S6 relied on Paras
D (2001) 1 sec 91 relied on Paras
1995 (1) SCR 756 relied on Para S
2012 (7) SCR 644 referred to Para 10
2001 (4) Suppl. SCR 303 relied on Para 16
E 2004 (1 ) Suppl. SCR 9.29 relied on Para 16
AIR 1964 SC 35S relied on Para 16
197S (2) SCR 272 relied on Para 16
2010 (11) SCR 240 relied on Para 16
F 1990 (3) SCR 744 relied on Para 16
19Sl (2) SCR 742 relied on Para 16
In the Judgment of R. Banumathi, J.:
1977 (1) SCR 372 relied on Para7
1964 SCR 461 referred to Para 9
G
2012 (7) SCR 644 referred to Para 11
relied on Paras 13 & 16
2007 (5) SCR 576 relied on Para 12
19Sl (2) SCR 742 relied on Para 12
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 525
MINERALS LIMITED
1996 (6) Suppl. SCR 566 relied on Para 12 A
2010 (11) SCR 240 relied on Para 14
2006 (8) Suppl. SCR 633 relied on Para 24
2006 (10) Suppl. SCR 640 referred to Para24
1981 (2) SCR 742 relied on Para26 B
1976 (0) Suppl. SCR 53 referred to Para34
2010 (11) SCR 240 relied on Para 37
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3608
of2016
c
WITH
C. A. Nos. 3609 and 3610 of2016.
From the Judgment and Order dated 13.11.2014 of the High Court
ofKerala at Ernakulam in Writ Appeal No. 1610of2014 in Writ Petition
(Civil) No. 34345 of2010. · D
• Mohan Parasaran, Sr. Adv., Jogy Scaria, Advs. for the Appellants.
Shyam Divan, Sr. Adv., Ritin Rai, Gopinath Menon, Siddhartha
Jha, V. K. Monga, Jayant Malik, Advs. for the Respondents.
The following Judgments and Order were delivered. E
T.S. THAKUR, CJI; I. Leave granted.
2. These appeals arise out of a common judgment and order dated
13 1h November, 2014 passed by the High Court ofKerala at Erriakulam,
whereby, Writ Appeals Nos.1610, 1611 and 1621 of 2014 filed by the
appellants-State of Kerala have been dismissed affirming thereby an F
order passed by a Single Bench of that Court, allowing the writ petitions
filed by the respondent.
3. By an order dated l5'h September, 2004 the Government of
Kerala sanctioned the grant of mining leases for Ilmenite, Rutile,
Leucoxene, Zircon and Sil/imanite (non-scheduled mineral) for a G
period of20 years. The order came in exercise of the powers vested in
the State Government under Section 11(5) of the Mines and Minerals
(Development and Regulation) Act, 1957 and was preceded by the
approval of the Government of India in terms of Section 5(1) thereof.
H
526 SUPREME COURT REPORTS [2016] 5 S.C.R.
A Shortly after the issue of the sanction order, however, the State
Government by another order dated 25'h September, 2004 stayed further
action in the matter on the ground that a detailed study on the
environmental impact of the proposed leases need be undertaken before
taking any further steps. This was followed by nine letters dated J2•h
October, 2006, l 61hOctober, 2006 and 9'hNovember, 2006 addressed to
B
the respondent-company stating in no uncertain terms that the
Government of Kerala did not consider it necessary to grant mining
leases for mineral sand to private parties. Aggrieved by the said letters
and communications, the respondents filed nine revision applications No.
14(1)/2007-RC-Jl to 14(3)/2007-RC-Iland 14(6)/2007-RC-Il to 14(11)/
c 2007-RC-II under Section 30 of the Act aforementioned before the
Government oflndia. These revision applications were heard and allowed
by the prescribed revisional authority by a common order dated 30th
November, 2009, setting aside the impugned orders and remanding the
matters to the State Government to reconsider the cases in the light of
the observations made in the order passed by the revisional authority.
D
The operative portion of the order passed by the revisional authority
was in the following words:
"......... 9. After hearing both the sides. we find that
the State Government had recommended the mining lease
applications of the applicant for seeking prior approval
E of the Central Government in line with the policy
resolution dated 22.J0.2002. Jn 7 cases the Central
Government had also accorded its prior approval under
Section 5(1) of the MMDR Act, J957 for the proposal
of the State Government for grant of mining lease for
F mineral sand in favour of the revision applicant. .The
impugned orders have been passed by the State
Government after obtaining the prior approval of the
Central Government in 7 cases, the State Government
is required to pass order under Section J0(3) of the
MMDR Act. Jn all the 9 cases, including those in which
G prior approval of Central Government has been.
conveyed, the impugned orders passed by the State
Government are against competitive edge of the mining
industry. The policy decision. of the State Government
appears to be not in consonance with the MMDR Act,
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 527
MINERALS LIMITED [T. S. THAKUR, CJI]
1957 and also against the National Mineral Policy, A
2008.
10. The impugned orders in all the 9 revision
applications mentioned above are set aside with a
direction to the State Government to reconsider nil 9
cases in the light of the discussions made in para 9 B
above and pass appropriate orders accordingly.
Sd/- Sdl-
(R. Raghupathi) (Ajita Bajpal Pande)
Joint Secretary and Joint Secretary
Legal Advisor (Min es)"
c
4. Upon remand, the Government ofKerala once again' xamined
the matter and by an order dated J 5'h December, 20 I 0 rejected all the
applications filed by the respondents on the ground that although, as per
Entry 54 List-I (Union List), Schedule VII of the Constitution oflndia,
the Parliament is competent to make laws for regulation of mines and D
mineral development to the extent such regulation and development is
declared by the Parliament by law to be expedient in public interest, yet,
the power of granting mining leases for mining minerals vested only in
the State Government under Section I 0 of the Act aforementioned. The
Government referred to and relied upon its own industrial policy of2007
according to which mining and exploitation of minerals were permissible E
only through State/Central Public Sector Undertakings in order to restrict
indiscriminate mining and exploitations of minerals having regard in
particular to the geographical and ecological conditions as well as the
density of the population in the State ofKerala. The State Government
took the view.that it had the power and control over the minerals lying in
F
the land within its territory and that it was entitled to safeguard the same
in larger public interest bx formulating suitable policies on the subject.
Relying upon the decisions of the High Court of Kerala in Shibu le
Tahsildar [1993 (2) KLT 870] and Gem Granites ii. State of Kera/a
and Ors. [2006 (2) KLT 899] the Government declared that as the
owner of the minerals lying in the land within its territorial limits it was G
entitled to determine in public interest that mining and exploitation of
minerals will be permitted only through State/Central Public Sector
Undertakings. The State Government insisted that such a policy was not
contrary to the Act nor did it suffer from any constitutional infirmity. It
also relied upon the fact that minerals in question were categorised as
H
528 SUPREME COURT REPORTS (2016] 5 S.C.R.
A Atomic Minerals as per Part-8 of the First Schedule to the Act
aforementioned. The Government declared that environmental protection
being one of its constitutional mandates, any decision that may affect
environment or sections of people living in the coastal areas or which
may affect environmental conditions in those areas cannot be said to be
in public interest.
8
5. Aggrieved by the order passed by the State Government, the
respondent-company filed Writ Petitions No.34345 of2010, 34346 of
20 I 0 and 5420of2011 before the High Court ofKerala inter alia praying
for a writ of mandamus directing the State to implement the revisional
order issued by the Government of India and grant in favour of the
c respondents mining leases in respect of all the areas which were the
subject matter of the said order. The respondents also prayed for a
declaration to the effect that the order passed by the Central Government
in exercise of its powers under Section 30 of the Act aforementioned
was binding upon the State Government and that any policy decision by
D the St!lte Government contrary to the said decision will not affect the
rights of the respondents to obtain mining leases for the areas applied
for. The respondent also prayed for a mandamus directing the State
Government to forward to the Government of India for approval all the
mining lease applications made by the respondent-Company which had
not so far been forwarded for such approyal.
E
6. By an order dated 21" February, 2013 passed by a Single Judge
ofHigh Court ofKerala, the Writ Petitions mentioned above were al lowed
in part by the High Court inasmuch as the order passed by the State
Government was quashed and the matter remitted back to the
Government to pass orders in the light of the observations made by the
F High Court. The High Court quashed the order by which further action
in the matter was stayed by the Government with a direction to the
Government to consider the applications pending with it in accordance
with law. The High Court took the view that the State Government had
not reserved, in terms of Section 17 A(2) of the I 957 Act, the areas
G covered by the applications filed by the respondents and that so long as
no such reservation was made, the direction issued by the Central
Government to the State Government to reconsider the applications could
not be negated. The High Court also held that the State Government had
overlooked the provisions of the National Mineral Policy, 2008, which
permitted facilitation .of private entrepreneurs and that since the
H
STATE OF KERALA v. M/S. KERALA RARE EARTH & 529
MINERALS LIMITED [T. S. THAKUR, CJI]
Government of Kerala had already exercised its discretion in terms of A
the prevalent Mining Policy and recommended to the Government of
India the grant of approval for mining leases, the rejection of the
applications on the basis of a changed policy after the Government of
India had accorded sanction for the proposed mining leases was
unjustified. The High Court also took note of the fact that Government
B
of Kerala had granted mining lease in respect of the area covered by
four other applications and that there could not be different policies in
respect of different areas covered by different applications made by the
same Company.
7. Aggrieved by the order passed by the Single Judge, the State
Government preferred Writ Appeals No.1610, 1611 and 1621 of 2014
c
which were heard and dismissed by a Division Bench of that Court in
terms of the order impugned in the present appeals. The High Court,
while doing so, held that the State Government was not justified in
declining mining leases on the ground that it had been simply directed to
reconsider the matter. The refusal of the Government, according to the D
High Court, amounted to institutional insubordination. The appeals were
accordingly dismissed with the observation that the State Government's
role in issuing the sanction was minimal, as the subject matter of the law
fell within the domain of Central Government. The present appeals by
special leave question the correctness of the above order, as already
noted above. E
8. The law relating to mines and minerals development and
regulation as also the interpretation of the provisions of the 1957 Act has
been the subject matter of a long line of decisions of this Court. It is, in
our view, unnecessary to refer to all such decisions as have dealt wi-th
different facets of the controversy relating to the powers of the Central F
Government and those of the State Governments in relation to regulation
and development of mines and minerals including the power to levy taxes,
fee and cesses and royalties. Decisions of this Court in Hingir-Rampur
Coal Co. Ltd. " State of Orissa [AIR 1961 SC 459];· State of Orissa
"MA. Tulloch and Co. [AIR 1964 SC 1284]; India Cement Ltd."
State of Tamil Nadu [(1990) I SCC 12]; Orissa Cement Ltd. " State
of Orissa [ 1991 Supp (I) SCC 430]; State of Orissa v. Mahanadi
Coalfields Ltd. [ 1995 Supp (2) SCC 686]; Saurashtra Cement &
Chemical Industries Ltd. and Am: v. Union of India and Ors. [(200 I)
I SCC 91 ]; and State of Madhya Pradesh v. Mahafaxmi Fabric Miffs
H
530 SUPREME COURT REPORTS [2016] 5 S.C.R.
A Ltd. [1995 Supp(!) SCC 642] have elaborately dealt with the legislative
power of the States to levy taxes, fees and cesses on the minerals
regulated by the Act. Dealing with various hues and colours of such
levies this Court held that once the Parliament declares it to be expedient
in public interest to bring the regulation and development of mines and
minerals under the control of the Union in public interest, the subject to
B
the extent laid down by the Parliament comes within the exclusive domain
of the Parliament and that any legislation by the State after such
declaration that has the effect of trenching upon the field, must necessarily
be unconstitutional.
9. We are not, in the present case, dealing with a challenge to the
c levy of any tax, fee, cess or royalty nor is the vires of any legislation
enacted by the State under challenge before us. We are, instead,
examining whether the State Government was justified in declining the
applications for grant ofleases in favour of the respondent-company on
the ground that the mineral wealth found in the coastal regions of the
D State was vested in the State Government and that it was in exercise of
its right of ownership over the said deposits entitled to reserve in its own
favour or in favour of State owned companies or corporations the right
to exploit such deposits. The State Government as noticed in the earlier
part of the judgment has, while declining applications for grant oflease,
relied upon its own policy acc9rding to which the mineral deposits in
E question are reserved for exploitation by a State agency only. Two precise
questions, therefore, fall for consideration in the light of the stance taken
by the State Government viz:
{i) Whether the ownership in the mineral reserves is vested
in the State Government; and
F
(ii) If it is, whether the Government has the right to decline
leases on the ground that the minerals or the areas where
the same are found have been reserved for exploitation
by government companies or corporations.
G · 10. In Monnet !spat and Energy Limited 1< Union of India and
Ors. 2012 ( 11) SCC I, Lodha, J., as His Lordship then was, speaking for
the Court, held that no one can claim any right in any land belonging to
the Government or in any mines in any land belonging to the Government
except under the 1957 Act and 1960 Rules nor can any person claim any
fundamental right to a lease or prospecting license qua any land belonging
H
STATE OF KERALA v. M/S. KERALA RARE EARTH & 531
MINERALS LIMITED [T. S. THAKUR, CJ!]
to the Government. The mines and minerals, observed the Court, within A
the territory of a .State would vest in the State Government especially
when the land where such minerals deposits are found is owned by the
Government as is also the position in the case at hand. In fairness to
counsel for the respondents it must be mentioned that there was no real
dispute as to the ownership of the minerals found in the Government
B
owned land. What was strenuously argued by learned counsel for the
respondents was that the State Government could not, on the basis of its
own mineral policy, decline consideration to the applications filed by the
respondents, when such policy was in conflict with the mineral policy of
the Government oflndia.
11. The Mineral Policy 2008 of the Government of India, inter
c
alia, provides as under:
"4. ROLE OF THE STATE IN MINERAL
DEVELOPMENT
The role to be played by the Central and State D
Government in regard to mineral development has been
extensively dealt in the Mines and Minerals
(Development and Regulation) Act, 1957 and Rules made
under the Act by the Central Government and the State
Governments in their respective domains. The provisions
of the Act and the Rules will be reviewed and harmonised E
with the basic features of the new National Mineral
Policy. In future the core functions of the State in mining
will be facilitation and regulation of exploration and
mining activities of investors and entrepreneurs,
provision of infrastructure and tax collection. In mining F
activities, there shall be arms length distance between
State agencies (Public Sector Undertakings) that mine
and those that regulate. There shall be transparency
and fair play in the reservation of ore bodies to State
agencies on such areas where private players are not
holding or have not applied for exploration or mining, G
unless security considerations or specific public
interests are involved.
xxx xxx xxx
H
532 SUPREME COURT REPORTS [2016] 5 S.C.R.
A 5.2 While these Government agencies will continue to
perform the tasks assigned to them for exploration and
survey, the private sector would in future be the main
source of investment in reconnaissance and exploration
and government agencies will .expend public funds
primarily in areas where private sector investments are
B
not forthcoming despite the desirability of programmes
due to reasons such as high uncertainties. "
12. It would thus appear that for the minerals in question there
was no reservation made in favour of any State owned corporation or
agency. that is perhaps the reason why the Government of India had
c granted approval to the State Governments recommendations on some
of the applications filed by the respondents. The State Government Policy,
however, runs contrary to the National Mineral Policy, 2008 formulated
by the Government oflndia, Ministry of Mines, in so far as it does not
pennit a mining lease in favour of any entity other than a State owned
D corporation or agency. The State Industrial Policy- 2007, relied upon by
the State Government in this regard to the'extent it is relevant for our
purposes, is as under:
"I2.0 MINING & GEOLOGY
I2.1 lntensive efforts will be made to explore and utilize
E mineral resources of the State without adversely
affecting the ecology and environment. Mineral
exploration activities for iron ores, high grade china
clay, bauxite and other minerals will be streamlined
. and strengthened.
j
F 12.2 Mining of mineral sand will be done through State/
Central Public Sector Undertakings only. However
mining ofminerals will not be permitted in those areas
where the Government appointed Expert Committee
recommendation against mining. Government will
encourage manufacture of Value Added. Products.
G 12.3 The Government will conduct a scientific study on
mineral deposits in the State.
12.2.I Titanium
Considering the rich mineral deposits in the State, a
comprehensive scheme to produce Titanium Metal,
H
STATE OF KERALA v. M/S. KERALA RARE EARTH & 533
MrNERALS LIMITED [T. S. THAKUR, CJI]
Titanium composites by using State-of-the-art A
technology shall be evolved with the help of Central
Government agencies and International
organisations. If the potential of this natural
resource is used properly and scientifically, it will
immensely pave way for rapid industrialisation of
the State as Titanium is a unique material for strategic
applications. The approach is not to limit the
activities to manufacturing alone but to harness its
vast potential by setting up a chain of Titanium based
industries through forward integration. However,
utmost care shall be taken to contain the adverse c
impact on environment by mining, processing and
related activities by adopting strict monitoring and
control measures. To develop a package for making
use ofthe immense potential oftitanium,· support shall
be availed from national and international
D
organisations. "
13. It is argued by Mr. Parasaran, learned senior counsel for the
appellantthat the policy aforementioned must be taken to be a reservation
in favour of the State owned agencies within the comprehension of
Section 17A of the aforementioned Act. Section I 7A of the Mines and
Minerals (Development and Regulation) Act, 1957 reads as under: E
"I 7A. Reservation of areas for purposes of
conservation. - (J) The Central Government, with a view
to conserving any mineral and after consultation with
the State Government, may reserve any area not already
held under any prospecting licence or mining lease and, F
where it proposes to do so, it shall, by notification in
the Official Gazette, specify the boundaries of such area
and the mineral or minerals in respect of which such
area will be reserved.
(JA) The Central Government may in consultation with
the State Government, reserve any area not already held G
under any prospecting licence or mining lease, for
undertaking prospecting or mining operations through
a Government company or· corporation owned or
controlled by it, and where it proposes to do so, it shall,
by notification in the Official Gazette, specify the H
534 SUPREME COURT REPORTS [2016] 5 S.C.R.
A boundaries of such area and the mineral or minerals in
respect of which such area will be reserved.
(2) The State Government may, with the approval of the
Central Government, reserve any area not already held
under any prospecting licence or mining lease, for
B undertaking prospecting or mining operations through
a Government company or corporation owned. or
controlled by it and where it proposes to do so, it shall,
by notification in the Official Gazette, specify the
boundaries of such area and the mineral or minerals in
respect of which such areas will be reserved.
c
(2A) Where in exercise of the powers conferred by sub-
section (IA) or sub-section (2), the Central Government
or the State Government, as the case may be, reserves
any area for undertaking prospecting or mining
operations, the State Government shall grant
D prospecting licence or mining lease, as the case may
be, in respect of such area to such Government company
or corporation:
Provided that in respect of any mineral specified in Part
A and Part B of the First Schedule, the State Government
E shall grant the prospecting licence or mining lease, as
the case may be, only after obtaining the previous
approval of the Central Government.
(2B) Where the Government company or corporation is
desirous of carrying out the prospecting operations or
F mining operations in a joint venture with other persons,
the join( venture partner shall be selected through a
competitive process, and such Government company or
corporation shall hold more than seventy-four per cent
of the paid up share capital in such joint venture.
G (2C) A mining lease granted to a Government company
or corporation, or a joint venture, referred to in sub-
sections (2A) and (2B), shall be granted on payment of
such amount as may be prescribed by the Central
Government.
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 535
MINERALS LIMITED [T. S. THAKUR, CJI]
(3) Where in exercise of the powers conferred by sub- A
section (JA) or sub-section (2) the Central Government
or the State Government, as the case may be, undertakes
prospecting or mining operations in any area in which
the minerals vest in a private person, it shall be liable,
to pay prospecting fee, royalty, surface rent or dead
B
rent, as the case may be, from time to time at the same
rate at which it would have been payable under this
Act if such prospecting or mining operations had been
undertaken by a private person under prospecting
licence or mining lease."
14. There is no gainsaying that the State Government can reserve c
any area not already held under any prospecting licence or mining lease
for undertaking prospecting or mining operations through a Government
company or corporation owned or controlled by it, but, in terms of sub-
Section(2) of Section 17 A (supra) where the Government proposes to
do so, it shall by notification in the official gazette specify the boundaries D
of such area and the mineral or minerals in respect of which such areas
will be reserved. Three distinct requirements emerge from Section
17A(2) for a valid reservation viz.:
(i) the reservation can only be with the approval of the
Central Government and must confine to areas not E
already held under any prospecting licence or mining
lease;
(ii) the reservation must be made by a notification in
the official gazette; and
(iii) the notification must specify the boundaries of such F
areas and the mineral or minerals in resJJ&ct of which
such areas will be reserved
15. Mr. Parasaran was unable to show us any notification issued
by the Government under Section 17A (2) (supra) nor was it possible
for him to exalt the State's industrial policy extracted above to the status G
of a statutory reservation within the contemplation of Section 17A. The
net result, therefore, is that while the power to reserve an area not already
held under any prospecting licence or mining lease is squarely and
specifically vested in the State Government, the exercise of that power
is not demonstrable in the case at hand. It is common ground that there
536 SUPREME COURT REPORTS [2016] 5 S.C.R.
A a
is no approval of the Central Government nor is there notification duly
published in the official gazette specifying boundaries ofthe reserved
ar!')a and mineral or minerals in respect of which such area will be or
has been reserved.
· 16. It is well settled that ifthe law requires a particular thing to be
B done in a particular manner, then, in order to be valid the act must be
done in the prescribed manner alone [See: Commissioner of Income
Tax, Mumbai v. Anjum MH Ghaswala and ors. (2002) I SCC
633; Captain Sube Singh and Ors. v. Lt. Governor of Delhi and
Ors. (2004) 6 SCC 440; State of U.P. v. Singhara Singh AIR 1964 SC
358; and Mohinder Singh Gill v. Chief Election Commissioner ( 1978)
c 1 SCC 4"05/. Absence of the Central Government's approval to
reservation and a notification as required by Section 17A, therefore,
renders the State Government's claim of reservation untenable till such
time a valid reservation is made in accordance with law. It is trite that
the State Government's general executive power cannot be invoked to
D make a reservation de hors Section 17A. In Sandur Manganese and
Iron Ores Ltd. v. StateofKarnatakaandOrs. (2010) 13 SCC I this
Court held that the State Government is denuded of its executive power
in the light of Section 2 of the aforementioned Act. To the same effect
is the decision of this Court in Bharat Coking Coal Ltd. v. State of
Bihar ( 1990) 4 SCC 557, where this Court observed that the State is
E denuded of its executive power in regard to matters covered by the
MMDR Act and the Rules. Reference may also be made to the decision
of this Court in State of Tamil Nadu v. Hind Stone ( 1981) 2 SCC 205
where this Court observed:
"IO. ... The statute with which we are concerned, the
F Mines and Minerals (Development and Regulation) Act,
i:S aimed ... at the conservation and the prudent and
discriminating exploitation of minerals. Surely, in the
case of a scarce mineral, to permit exploitation by the
State or its agency and to prohibit exploitation by private
G agencies is the most effective method of conservation
and prudent exploitation. If you want to conserve for
the future, you must prohibit in the present. "
17. The upshot of the above discussion then is that while the State
Government is the owner of the mineral deposits in the lands which vest
H in the Government as is the position in the case at hand, the Parliament
STATE OF KERALA v. M/S. KERALA RARE EARTH & 537
MINERALS LIMITED
has by reason of the declaration made in Section 2 of the 1957 Act A
acquired complete dominion over the legislative field covered by the
said legislation. The Act does not denude the State of the ownership of
the minerals situate within its territories but there is no manner of doubt
that it regulates to the extent set out in the provisions of the Act the
development of mines and minerals in the country. It follows that ifthe
B
State Government proposes to reserve any area for exploitation by the
State owned corporation or company, it must resort to making of such
reservation in terms of Section 17A with the approval of the Central
Government and by a notification specifying boundaries of the area and
mineral or minerals in respect of which such areas will be reserved.
Inasmuch as the State Government have not so far issued any notification c
in terms of Section 17A, the Industrial Policy- 2007,of the Kerala State
Government does not have the effect of making a valid reservation within
the comprehension of Section 17A. The High Court was, therefore,
justified in holding that there is no valid reservation as at present no
matter the government can make such a reservation if so advised in the
D
manner prescribed by law. In other words, the dismissal of this appeal
shall not prevent the State frdm invoking its right under Section l 7(A)(2)
of the Act by issuing notification in respect of the mineral deposits in
question. There is, in that view, no reason for us to interfere with the
judgment and order passed by the High Court. These appeals accordingly
fail and are hereby dismissed, but in the circumstances without any order E
as to costs.
R. BANUMATHI, J. I. I have gone through the judgment
prepared by His Lordship Justice T.S. Thakur, Hon'ble the Chief Justice
oflndia. For the reasons, which I have indicated below, I am unable to
agree with the reasonings anathe final decision arrived at by His Lordship. F
In my view, the judgment passed by the Division Bench of the High
Court of Kerala is liable to be set aside and these appeals are to be
allowed.
2. It is not necessary for me to narrate the facts, as the facts are
referred to in the judgment of His Lordship Justice T.S. Thakur. G
3. The points falling for consideration in these appeals are:-
(i) Whether policy of State of Kerala reserving mining of beach sand
along coastal stretches for exploitation of minerals-ilmenite, rutile,
Ieucoxene, zircon (and sillimanite- non scheduled mineral) by State/
Central Public Sector Undertakings is not in consonance with the H
538 SUPREME COURT REPORTS [2016] 5 S.C.R.
A provisions of Mines and Minerals (Development and Regulation) Act,
1957 (for short 'MMDR Act 1957'); (ii) Whether State Government's
policy of reservation for exploitation of beach sand minerals by its Public
Sector Undertakings is untenable on the ground of non-compliance of
the procedure stipulated under Section 17 A(2) of the MMDR Act and
(iii) Whether the High Court of Kerala is right in observing that after
B
disposal of the matter by the revisional authorities for consideration of
the matter afresh, the State Government's refusal of permission is
statutory and institutional insubordination.
4. Mr. Mohan Parasaran, learned Senior Counsel appearing for
the appellant-State submitted that mines and minerals in the territory of
c the State are vested in the State and it is well within the powers of the
State to frame a policy relating to mining activities in the State keeping in
mind the public interest, welfare and ecological balance of the State. It
was submitted that the policy of the State Government is framed as the
mining lease of beach sand for exploitation of mineral involve ecological
D and environmental sensitive issues and national minerals wealth cannot
be allowed to be exploited by indiscriminate mining by private players. It
was further contended that the first respondent is a private party where
Indian Rare Earths Ltd. (Governmentoflndia) and Kerala State Industrial
Development Corporation (Government of Kerala) have minimal
percentage of share holdings and no right accrued in favour of first
E responde)lt for grant of mining lease and while so, the High Court was
not right in directing the State to consider the applications of the first
respondent. It was further submitted that inasmuch as mining leases are
governed by statutes and M.C. Rules, there is no question of any
promissory estoppel especially when mining lease granted on 15 .09 .2004
F was cancelled within ten days i.e. on 25.09.2004.
5. Mr. Shyam Divan, learned Senior Counsel appearing for the
first respondent contended that earlier first respondent was found to
satisfy all. the conditions prescrib~d by the Government of Kerala for
grant of mining lease as per GO.Ms.No. I 02/02/ID dated 22.10.2002,
G however, first respondent's application was rejected only on the basis of ··
subsequent policy of the State. It was contended that in the light of
constitutional scheme and the statutory provisions ofMMDRAct, State
has no legislative competence to frame a policy dehors MMDR Act
and MC Rules and the policy decision of the appellant-State is in
derogation of the provisions ofMMDRAct. It was submitted that in the
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 539
MINERALS LIMITED [R. BANUMATHI, J.]
light of industrial policy of the Central Government permitting private A
players in the exploitation of beach sand mineral, the State Government
has no competence to frame any rule or policy in contravention of the
policy of the Central Government. It was contended that if the State
desired to reserve the exploitation of the beach sand minerals in any
area, the State should have followed the prescribed procedure under
B
Section 17 A(2) and the procedure stipulated under the Statute cannot
be thwarted under the guise of policy of the State. It was further
submitted that in exercise of power under Section 30 of the Act, the
Central Government/ Revisional Authority directed the State to reconsider
the matter, the State Government was not justified in again rejecting the
applications and the High Court rightly directed the State to consider the c
applications of the first respondent for grant of mining lease.
6. I have carefully considered the rival submissions and perused
the impugned judgment and material on record.
7. In the federal structure of India, State Governments are the
owners of the mines and minerals located within the territory of the D
State concerned. In Amritlal Nathubhai Shah & Ors. v. Union
Government ofIndia & Am:, (1976) 4 SCC I 08, while dealing with the
scope of the MMDRAct 1957, this Court held thatthe State Government
is the owner of minerals within its territory and minerals vest in it and
there is nothing in the MMDR Act or the MC Rules to detract from this E
basic fact.
8. Although, mineral wealth vests with the State Government, yet
the subject ofregulation of mines and mineral development is covered
under Seventh Schedule of the Constitution of India. In order to
appreciate this, it is necessary to refer to few entries in the Seventh F
Schedule of the Constitution. Entry 54 of List I of Seventh Schedule
reads as under:-
List I-Union List Entry 54. Regulation of mines and
mineral development to the extent to which such regulation
and development under the control ofthe Union is declared G
by Parliament by law to be expedient in the public interest.
Entry 23 of List II reads as under:-
List II-State List Entry 23. Regulation of mines and
mineral development subject to the provisions of List I
H
540 SUPREME COURT REPORTS [2016] 5 S.C.R.
A with respect to regulation and development under the control
of the Union.
By a reading of Entry 23 of List II, it is clear that Entry 23 is subject to
the provisions of List I with respect to regulation and development of
mines and mineral development under the control of the Union. Section
B 2 of the Act makes a declaration that it is expedient in the public interest
that the Union should take under its control the regulation of mines and
the development of minerals to the extent provided in the said Act. It
will therefore be seen, to the extent control of regulation of mines and
mineral development is taken over by the Union under the law made by
Parliament declaring that it is expedient in the public interest to do so,
c the scope and ambit of Entry 23 of List II is cut down to that extent.
This would appear to be clear on a plain construction of Entry 54 of List
I and Entry 23 of List II.
9. Considering the scope of Article 246 of the Constitution of
India and the wording of the above entries in Seventh Schedule to the
D Constitution and the scope, purpose and the effect of the State and the
Central Legislations, in State of Orissa And Anr. vs. MA. Tulloch &
Co., AIR 1964 SC 1284, this Court held as under:-
"5. Before proceeding further it is necessary to specify
briefly the legislative power on the relevant topic, for it is
E on the precise wording of the entries in Schedule VII to the
Constitution and the scope, purpose and effect of the State
and the Central legislations which we have referred to
· earlier that the decision of the point turns. Article 246( I)
reads:
F '246. Subject-matter of fows made by
Parliament and by the legislatures of States.-
(!) Notwithstanding anything in clauses (2) and (3),
Parliament has exclusive power to make laws with
respect to any of the matters enumerated in List I
G in the Seventh Schedule (in this Constitution referred
to as the Union List).'
and we are concerned in the present case with the State
power in the State field. The relevant clause in that context
is clause (3) of the article which runs:
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 541
MINERALS LIMITED [R. BANUMATHI, J.]
'246. (3) Subject to clauses ( 1) and (2), the legislature of A
any State has exclusive powerto make laws for such State
or any part thereof with respect to 11ny of the matters
enumerated in List II in the Seventh Schedule (in this
Constitution referred to as the "State List").'
Coming now to Schedule VII, Entry 23 of the State List B
vests in the State Legislature power to enact laws on the
subject of 'regulation of mines and minerals development
subject to the provisions of List I with respect to regulation
and development under the control of the Union'. It would
be seen that 'subject' to the provisions of List I the power
of the State to enact legislation on the topic of'mines and
c
minerals development' is plenary. The relevant provision in
List I is, as already noticed, Entry 54 of the Union List. It
may be mentioned that this scheme of the distribution of
legislative power between the Centre and the States is not
new but is merely a continuation of the state of affairs which D
prevailed under the Government oflndia Act, 1935 which
included a provision on the lines of Entry 54 of the Union
List which then bore the number Item 36 of the Federal
List and an entry corresponding to .Entry 23 in the State
__J,_ist which bore the same number in the Provincial
Legislative List. There is no controversy that the Central E
Act has been enacted by Parliament in exercise of the
legislative power contained in Entry 54 or as regards the
Central Act containing a declaration in terms of what is
required by Entry 54 for it enacts by Section 2:
'2. Dec/aratio11 as to the e.xpedie11cy of U11io11 F
control.-lt is hereby declared that it is expedient
in the public interest that the Union should take
under its control the regulation of mines and the
development of minerals to the extent hereinafter
provided.' G
It does not need much argument to realise that to the extent
to which the Union Government had taken under 'its control'
'the regulation and development of minerals' so much was
withdrawn from the ambit of the power of the State
Legislature under Entry 23 and legislation of the State which H
542 SUPREME COURT REPORTS [2016] 5 S.C.R.
A had rested on the existence of power under that entry would
to the extent of that 'control' be superseded or be rendered
ineffective, for here we have a case not of mere repugnancy
between the provisions of the two enactments but of a
denudation or deprivation of State legislative power by the
declaration which Parliament is empowered to make and
B
has made.
6. It would, however, be apparent that the States would
lose legislative competence only to the •extent to which
regulation and development under the control of the Union
has been declared by Parliamentto be expedient in the public
c interest'. The crucial enquiry has therefore to be directed
to ascertain this 'extent' for beyond it the legislative power
of the State remains unimpaired. As the legislation by the
State is in the case before us the earlier one in point of
time, it would be logical first to examine and analyse the
D State Act and determine its purpose, width and scope and
the area of its operation and then consider to what 'extent'
the Central Act cuts into it or trenches on it." (emphasis
supplied)
I 0. The policy of the State and impugned order of the State dated
E 15.12.2010 which state that the exploitation of the beach sand mineral .
would be done by the Public Sector Undertakings has to be examined in
the light of the provision of the MMDRAct 1957 and MC Rules 1960.
MMDR Act 1957 was enacted to provide for the regulation of mines
and oil fields and for the development of the minerals. The declaration
contained in Section 2 ofMMDRAct speaks of taking under the control
F of the Union the regulation of mines and the development of minerals to
the extent provided in the MMDR Act. In Section 3, the words
"Minerals", "Mineral Oils", "Minor Minerals" have been separately
defined. The MMDR Act, I 957 mainly deals with general restrictions
on prospecting and mining operations and the rules and procedures for
G regulating grants of prospecting licences and mining leases. State
Governments are competent to give licences for prospecting and for
granting mining leases. The Act specifically provides that in the case of
minerals included in the First Schedule to the Act, the State Governments
shall not grant or renew, prospecting licences or mining leases without
the prior pennission of the Union Government. Sections 4.to 12 of the
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 543
MINERALS LIMITED [R. BANUMATHI, J.]
Act deal with the conditions and procedures and other allied matters A
regarding the prospecting or mining operations under licence or lease.
Sections 13 and 13A deal with the rule making power of the Central
Government. It is however, significant that Section 14 provides that
Sections 4 to 13 of the Act shall not apply to minor minerals. Further,
Section 15 provides that the State Governments may by notification in
B
the Official Gazette make rule for regulating the grant of quarry-lease,
mining-lease or other mineral concessions in respect of minor minerals
and for the purposes connected therewith. Section 17 confers special
powers on Central Government to undertake prospecting or mining
operation of certain lands. Section 17A inserted by Act 37of1986 (w.e.f.
I 0.02.1987) deals with reservation of area for purposes of conservation c
of any mineral. Section 17A (2) deals with the power of the State
Government with the approval of the Central Government to reserve
any area not already held under the prospecting licence or mining lease
by Government Companies. Section 30 deals with power of revision by
the Central Government.
D
11. Comprehensive view of the statutory framework with regard
to regulation of mines and minerals development, role and power of the
State Government vis-a-vis the power of the Central Government has
been elaborately dealt with by this Court in Monnet !spat And Energy.
Limited v. Union ofIndia And Ors., (2012) 11 SCC I. Observing that
the State Government has the paramount right over the mineral, State's E
ownership of mines and minerals within its territory remains untouched
by MMDR Act 1957 except to the extent provided in the Act, in para
(138), it was held as under:-
"138 . ....... the declaration made by Parliament in Section
2 and the provisions that follow Section 2 in the 1957 Act F
have left untouched the State's ownership of mines and
minerals within its territory although the regulation of mines
and the development of minerals have been taken under
the control of the Union. Section 4 deals with activities in
relation to land and does not extend to extinguish the State's G
right of ownership in such land. Section 4 regulates the right
to transfer but does not divest ownership of minerals in a
State and does not preclude the State Government from
exploiting its minerals. Section 4( I) can have no application
where the State Government wants to undertake itself
H
544 SUPREME COURT REPORTS [2016] 5 S.C.R.
A mining operations in the area owned by it. On consideration
of Section 5, I am of the view that the same conclusion
must follow. Section 5 or for that matter Sections 6, 9, 10,
11 and 13(2)(a) also do not take away the State's ownership
rights in the mines and minerals within its territory. The
power to legislate for regulation of mines and development
B
of minerals under the control of the Union may definitely
imply power to acquire mines and minerals in the larger
public interest by appropriate legislation, but by the 1957
Act that has not been done. There is nothing in the 1957
Act to suggest even remotely-and there is no express
c provision at all-that the mines and minerals that vested in
the States have been acquired. Rather, the scheme and the
provisions of the 1957 Act themselves show that Parliament
itself contemplated State legislation for vesting of lands
containing mineral deposits in the State Government and
that Parliament did not intend to trench upon the powers of
D
the State Legislatures under List II Entry 18. As noted above,
the declaration made by Parliament in Section 2 of the 1957
Act states that it is expedient in the public interest that the
Union should take under its control the regulation of mines
and development of minerals to the extent provided in the
E Act itself. The declaration made in Section 2 is, thus, not
all-comprehensive." (Underlining added)
12. State Government's ownership in mines and minerals in
its territory and power of the State to grant or refuse application
for mining on the ground that the land in question is not available
F in view of reservation of area by the State for exploitation of the
minerals resources in the public sector whether permissible under
MMDR Act:- In grant of mining lease of a property of the State, the
State Government has the discretion to grant or refuse to grant any
prospective licence or licence to any applicant. No applicant has a right,
much less vested right, to the grant of mining lease for mining operations
G in any place within the State. No one has a vested right for grant of
mining lease vide MP. Ram Mohan Raja v. State of T.N. & Ors.,
(2007) 9 SCC 78 and State of Tamil Nadu v. Hind Stone & Ors.,
(1981) 2 SCC 205. The State has a discretion to grant or refuse to
grant any mining lease. No person can claim any right in any land
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 545
MINERALS LIMITED (R. BANUMATHI, J.]
belonging to the Government or in any mines except the rights created A
under MMDR Act and the Mineral Concession Rules. But State
Government being a public authority, its acts are necessarily regulated
by rules and regulations.
13. In Dharambir Singh v. Union of India & Ors., (1996) 6
SCC 702, a three-Judge Bench of this Court while considering Sections B
I 0(3) and 11(2) of the 1957 Act observed as under:-
"4 . ... In grant of mining lease ofa property of the State,
the State Government has a discretion to grant or refuse to
grant any prospective licence or licence to any applicant.
No applicant has a right, much less vested right, to the grant c
of mining lease for mining operations in any place within
the State. But the State Government is required to exercise
its discretion, subject to the requirements of the law ... "
This was reiterated in Monnet !spat and Energy Ltd. vs. Union
of India and Others (2012) 11 SCC I. D
14. Wltetlier tlte State Government lias tlie competence to
frame policy under MMDR Act and reserve tlie area for exploitation
of minerals in tlte Public Sector Undertakings:- Contention of the
respondent is that pol icy decision of the State Government has no role to
play in a matter over which the decision of the Central Government E
must prevail in the statutory and constitutional scheme. Placing reliance
upon the judgment of this Court in the case of Sandur Manganese &
Iron Ores Ltd. v. State of Karnataka & Ors., (20 I 0) 13 SCC I, Mr.
Shyam Divan, learned Senior Counsel appearing for the first respondent
submitted that there is no question of the State having any power to
frame a policy dehors the MMDR Act and the MC Rules and when the F
Union List has occupied the entire field, executive power of the State.
cannot extend to matters over which the State Legislature has no power
to legislate.
15. Section 17A deals with the reservation of area by Central
Government or by the State Government for the purpose of"conservation G
of minerals". By amendment Act 3 7 of--1-986 (w.e.f. I 0.02.1987), Section
17A was inserted in the Act. Section 17A reads as under:-
17 A. Reservation of area for purposes of
conservation.-( I )The Central Government, with a view
H
546 SUPREME COURT REPORTS [2016] 5 S.C.R.
A to conserving any mineral and after consultation with the
State Government, may reserve any area not already held
under any prospecting licence or mining lease and, where it
proposes to do so, it shall, by notification in the Official
Gazette, specify the boundaries of such area and the mineral
or minerals in respect of which such area will be reserved.
B
[ 1A] The Central Government may in consultation with the
State Government, reserve any area not already held under
any prospecting licence or mining lease, for undertaking
prospecting or mining operations through a Government
company or corporation owned or controlled by it, and where
c it proposes to do so, it shall, by notification in the Official
Gazette, specify the boundaries of such area and the mineral
or minerals in respect of which such area will be reserved.
(2) The State Government may, with the approval of the
Central Government, reserve any area not already held
D under any prospecting licence or mining lease, for
undertaking prospecting or mining operations through a
Government company or corporation owned or controlled
by it and where it proposes to do so, it shall, by notification
in the Official Gazette, specify the boundaries of such area
E and the mineral or minerals in respect ofwhichsuch areas
will be reserved.
(2A) xxxx
(28) x.xxx
(2C) xxxx
F
(3) Where in exercise of the powers conferred by sub-
section (IA) or sub-section (2), the Central Government or
the State Government, as the case may be, undertakes
prospecting or mining operations in any area in which the
minerals vest in a private person, it shall be liable, to pay
G
prospecting fee, royalty, surface rent or dead rent, as the
case may be, from time to time at the same rate at which it
would have been payable under this Act if such prospecting
or mining operations had been undertaken by a private
person under prospecting licence or mining lease.
H
STATE OF KERALA v. MIS. KERA.LA RARE EARTH & 547
MINERALS LIMITED [R. BANUMATHI, J.]
16. The authority of the State to make reservation of a particular A
mining area within its territory for its own use is the offspring onhe
State's authority of ownership over the mines and minerals. Section
17A(2) reserves the power of the State Government with the approval
of the Central Government to reserve any area not already held under
prospecting licence or mining lease. Section 17A(2) uses the words •
B
"with the approval of the Central Government" and does not use the
expression "prior approval". In paragraph (160) of Monnet !spat &
Energy Ltd. vs. Union of India & Ors., (2012) 11 SCC I, it was held
that Section 17A(2) does not use the expression "prior approval" and I
will advert to this aspect a little later.
17. Re. Contention: State llas no legislative competence to c
frame Industrial Policy reserving area for exploitation of beacll
sand minerals by Public Sector Undertakings in derogation of tile
National Policy wl1icll encourages private participation:- India has
large reserves of beach sand minerals in the coastal stretches around
the country. There are substantial deposits of minerals including ilmenite D
on Kerala Coast especially in Kollam and Alappuzha Districts. The
impugned order in GO.(Rt.)No.1709/1 O/ID dated 15.12.2010 states that
" ... .It has been estimated that out of the total ilmenite reserves in
the world, 35% is in India and out of this 30% is on the coastal
stretches ofKol/am and Alappuzha Districts ...". Realisingthe potential
of this rich mineral deposits in the State, State ofKerala in its Industrial E
Policy-2007, videGO.(P) No.78/2007/ID dated 18.06.2007, took a policy
decision that the mining of mineral sand will be done through the State/
Central Public Sector Undertakings only. Relevant portion of the
Industrial Policy of the State reads as under:-
"12.2. Mining of mineral sand will be done through State/ F
Central Public Sector Undertakings only. However mining
of minerals will not be permitted in those areas where the
Government appointed Expert Committee recommended
against mining. Government will encourage manufacture
of Value Added Products. G
12.2.1 Titanium.
Considering the rich mineral deposits in the State, a
comprehensive scheme to produce Titanium Metal, Titanium
composites by using state-of-the-art technology shall be
H
548 SUPREME COURT REPORTS [2016) 5 S.C.R.
A evolved with the help of Central Government agencies and
International organizations. If the potential of this natural
resource is used properly and scientifically, it will immensely
pa:ve way for rapid industrialization of the State as Titanium
is a unique material for strategic applications. The approach
is not to limit the activities to manufacturing alone but to
B
harness its vast potential by setting up a chain ofTitanium
based industries through forward integration. However,
utmost care shall be taken to contain the adverse impact on
environment by mining, processing and related activities by
adopting strict monitoring and control measures. To develop
c a package for making use of the immense potential of
titanium, support shall be availed from national and
international organizations."
18. Mineral ilmenite, rutile, leucoxene, zircon and monazite except
sillimanite and garnet have been classified as "prescribed substances"
D ··under the Atomic Energy Act 1962. Under the Central Government
Industrial Policy 1991, mining and production of minerals classified as
"prescribed substances" was reserved for the public sector. As per 1991
Policy, Indian Rare Earths Limited (IREL), a Government of India
Undertaking (Department of Atomic Energy) and Kerala Minerals and
Metals Limited (KMML) a Government of Kerala Undertaking were
E engaged in mining, production and processing in Orissa, Tamil Nadu and
Kerala. In 1998, as perthe national policy of the Department of Atomic
Energy on exploitation of beach sand minerals, Central Government
(Department ofAtomic Energy) has taken a policy decision to encourage
exploitation ofbeach sand mineral through private sector/judicious mix
F up of public and private sector participation (including foreign investment).
The relevant portion ofthe Policy on Exploitation of Beach Sand Minerals,
Department ofAtomic Energy No.8/l(l)/97-PSU/1422 dated 06.10.1998,
reads as under:-
"Under the Industrial Policy Resolution ofl 991, the mining
G and production of minerals classified as "prescribed
substances" is reserved for the public sector. However,
the Policy Resolution also allows selective entry of the
private sector. At present, the Indian Rare Earths Limited
(IREL), a Government of India (Department of Atomic
Energy) undertaking and Kerala Minerals & Metals Ltd.
H
-
STATE OF KERALA v. MIS. KERALA RARE EARTH & 549
MINERALS LIMITED [R. BANUMATHI, J.]
(KMML), a Government of Kerala undertaking are A
engaged in mining, production and processing of in Orissa,
Tamil Nadu and Kerala. Demand for these minerals and/
or their value-added products in the domestic as well as
international markets and. the potential available in the
country, setting up of new plants for exploitation of the
B
deposits in fresh locations would be in the interest of the
country. Production of various value-added products of
these minerals is, however, highly capital intensive and it
may not be possible for only the PSUs (both Central and
State owned) operating in this field to set up the new plants
on their own. It is, therefore necessary to allow the private c
sector set up such plants within the framework of some
broad guidelines.
In view of the background explained above, Government
oflndia has recently approved a policy to encourage further
exploitation of these mineral depositthrough a judicious mix D
of public and private sector participation (including foreign
investment). The other objective of the policy are
maximization of value addition to the raw minerals within
the country, upgradation of the existing process technologies
to international standards, attracting funds and new
E
technology necessary for this purpose through participation
of the private sector (domestic and foreign), appropriate
dispersal of the new production facilities with an eye on
regional balance and regulating the rate of exploitation of
the reserves by the facilities such that the exploitable
reserves last for about hundred years without, of course F
adversely affecting the investors' techno-economic
considerations regarding plant size, etc."
19. Since the source of the executive power of the State
Government is Article 298 of the Constitution of India, it is clear from
the proviso to Article 298 that the exercise of this executive power would G
be subject to legislation by Parliament. The declaration made in Section
2 of the MMDRAct has resulted in bringing the entire field ofregulation
of mines and development of minerals under the control of the Union to
the extent provided in the Act. Therefore, to determine the power of
the State that is left within Entry 23 of List JI, we have to work it within
H
550 SUPREME COURT REPORTS [2016] 5 S.C.R.
A the terms of the MMDRAct and MC Rules. We must therefore consider
whether there is anything in the MMDR Act or MC Rules which takes
away the executive power of the State Government or in any manner
controls or regulates it. If there is any such provision in the Act or in
MC Rules, then the same would prevail and the executive power of the
State Government would have to give way to it. Under Section 17A (2)
B
of the MMDR Act, when State has the competence to reserve any area
for exploitation of minerals by public sector undertakings, the policy of
'the State of Kerala reserving exploitation of beach sand minerals by
public sector undertakings cannot be said to be in derogation of the
· provisions ofMMDRAct.
c 20. Under Section' 17 A(2) the power is conferred upon the State
· Government with the approval of the Central Government to reserve
any area for undertaking prospecting or mining operations through a
. government company or a corporation owned or controlled by it. The
State Government has the executive power to exploit its own minerals.
D · . Such power is thus conferred upon the State by the MMDR Act itself.
Section 17A (Z) clearly recognizes the power of the State Government .
to reserve the land for mining or exploitation of the mineral in public
sector. While so, it is difficult to comprehend as to how a policy decision
of the State reserving the area for mining of mineral sand through State/
Central Pu~ Sector Undertakings can be said to be in derogation of
E MMDR Act. The policy of the State that the mining of minerals sand
will be done only tlfrough State/Central Public Sector Undertakings is
well in consonance with the provisions ofMMDRAct. It can hardly be
disputed that the State Government has the executive power to reserve
any area for exploitation of minerals to public sector undertakings.
F 21. Observing that the power of the State Government to reserve
the area for exploitation of the mineral in public sector undertakings,
authority of the State Government to make reservation of a particular
mining of the area is the off-spring of the ownership and after referring
bvarious decisions in paragraph (l44) in Monnet /spat And EnerRJJ
G Limited (supra), itwas held as under:-
"144 ... The authority of the State Government to make
reservation of a particular mining area within its territory
for its own use is the offspring of ownership; and it is
inseparable therefrom unless denied to it expressly by an
H appropriate law. By the 1957 Act that has not been done by
STATE OF KERALA v. M/S. KERALA RARE EARTH & 551
MINERALS LIMITED [R. BANUMATHI, J.]
Parliament. Setting aside by a State ofland owned by it for A
its exclusive use and under its dominance and control, in
my view, is an incident of sovereignty and ownership. There
is no incongruity or inconsistency in the decisions of this
Court in Hingir-Rampur Coal Co. AIR 1961SC459, MA.
Tulloch & Co. AIR 1964 SC 1284, Baijnath Kadio
B
(1969) 3 SCC 838 and Amritlal Nathubhai Shah (1976)
4 SCC 108. The Bench in Amritlal Nathubhai Shah was
alive to the legal position highlighted by this Court in Hingir-
Rampur Coal Co., MA. Tulloch & Co. and Baijnath
Kadio although it did not expressly refer to these decisions.
This is apparent from the observations made in . para 3 c
wherein it has been stated that in pursuance ofits exclusive
power to make laws with respect to the matters enumerated
in List I Entry 54 in Schedule VII, Parliament specifically
dee.Jared in Section 2 of the 1957 Act that it was expedient
in the public interest that the Union should take under its
D
control, regulation of mines and the development of minerals
to the extent provided therein. The Bench noticed that the
State Legislature's power under List II Entry 2J.was, thus,
taken away and regulation of mines and minerals
development had therefore to be in accordance with the
1957 Act and the 1960 Rules. The legal position exposited E
in Amritlal Nathubhai Shah is that even though the field
of legislation with regard to regulation of mines and
development of minerals has been covered by the,
declaration of Parliament in Section 2 of the 1957 Act, but
that cannot justify the inference that the State Government
F
has lost its right to the minerals which vest in it as a property
within its territory and hence no person has aright to exploit
the mines other than in accordance with the provisions of
the 1957 Act and the 1960 Rules. The authority of the State
Government to order reservation flows from the fact that it
is the owner ofthe mines and the minerals within its territory. G
Such authority is also traceable to Rule 59 of the 1960
Rules."
The above ratio laid down in Monnet !spat answers the contentions
raised by the respondent.
H
552 SUPREME COURT REPORTS [2016] 5 S.C.R.
A 22. As per Section IO of the MMDR Act, the power to grant
mining lease is vested with the State Government. In recognition of the
position that the State Government is the owner of the mines and minerals,
the said Industrial Policy of the Government of India, Department of
Atomic Energy dated 06. l 0.1998 on exploitation of beach sand mineral,
reserves option of the State of selecting the companies/entrepreneurs
B
for setting up of projects/plants. We may usefully refer to relevant portion
of the National Policy which reads as under:-
"4(g). The provisions of the Atomic Energy Act and the
Rules and Orders h~reunder will continue to apply to the
exploitation of beach sands minerals, including their import/
c export, to the extent such minerals are notified as prescribed
substances and require licensing under the said provisions.
The mining leases under the Mines and Minerals (Regulation
& Development) Act will continue to be granted by the
State Government (s) concerned.
D U). Subject to the broad guidelines set forth in the foregoing
paragraphs, the selection of companies/ entrepreneurs for
setting up projects/plants for exploitation of beach sand
minerals in the private/joint sector would be left to the
State Government concerned. However, where a central
E PSU (at present only the Indian Rare Earths Limited in this
field) is one of the proposed partners in the joint venture,
the matter would also be referred to the Department of
Atomic Energy for prior consultation and concurrence."
23: State Government being owner of the minerals lying within
F its territory by virtue of the powers conferred under Sections I 0 and
17A(2) and having regard to the aforesaid clauses in the National Policy
granting liberty to the State to select the companies/entrepreneurs of its
choice for setting up projects/ plants for exploitation of beach sand
minerals, the policy of the State Government, reserving the area for
mining of the mineral sand done through State/Central Public Sector
G Undertakings cannot be said to be in derogation ofMMDRAct and MC
Rules. It cannot be contended that the State has no legislative competence
and the Executive has no power to frame a policy reserving the area for
exploitation of beach sand mineral by State/Central Public Sector
Undertakings.
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 553
MINERALS LIMITED [R. BANUMATHI, J.]
24. In Pa/lava Granite Industries (India) (P) Ltd. vs. Union of A
India & Ors., (2007) 15 SCC 30, it was held that the reservation of
right in favour of a public sector enterprise was permissible imer alia
on the ground of welfare requirements of the State. In Indian Charge
Chrome Ltd. & Anr. vs. Union oflhdia & Ors., (2006) 12 SCC 331, it
was held that with the approval of the Central Government under Section
B
17A(2) the State Government has the power to reserve any area not
already held under any prospecting licence or mining lease for
undertaking the exploitation through a government company or corporation
owned or controlled by it.
25. As per the Industrial Policy 2007 of the State ofKerala, the
mining and exploitation of beach sand minerals will be permitted only c
through State/Central Public Sector Undertakings. The reason behind
the said policy' decision is to restrict the indiscriminate mining and
exploitation of minerals by scientific mining taking into account the
geographical and ecological conditions as well as density of the population.
The applications of the respondents are for mining lease ofTitanium- D
bearing minerals ilmenite, rutile, leucoxene, zircon minerals and as per
Part B of the First Schedule to the MMDR Act, these minerals are
categorized as Atomic Minerals. As per Article 48A of the Constitution,
the State shall endeavour to protect and improve the environment and
this is a constitutional mandate. Kerala being a State with long coastal
.E
areas and backwaters and State being densely populated, State
Government's decision to reserve mining lease of beach sand minerals
to State/Central Public Sector Undertakings is stated to be in larger
public interest. Major portion of the land in which mining operation
sought to be carried out by first respondent is Kayal Puramboke and
Sea Puramboke Land. The policy adopted by the Stati: of Kerala is well F
in consonance with the National Mineral policy as both are designed to
encourage the scientific methods of mining, beneficiation and economic
utilization. The National policy specifies that there shall be transparency
and fair play in the reservation for one over another in the public interest.
Apparently the State of Kerala has reserved the area for public sector
undertakings in order to prevent environmental degradation and to ensure G
the maintainability of public health. The State Government cannot be
expected to take any decision which may have adverse health impact on
the people of the State residing in those areas. The policy of the State is
also in consonance with Section 18 of the MMDR Act which provides
H
554 SUPREME COURT REPORTS [2016] 5 S.C.R.
A that it shall be the duty of the Central Governmentto take all steps for
conservation and systematic development of minerals in India. The State
Government's policy is in adherence to sustainable development which
is a constitutional mandate and the State has tried to balance the
developmental needs and the need for protection of environment and
ecology. Respondent's contention that the State Government's policy is
B
violative of provisions of the MMDRAct and National Policy is wholly
misplaced. The High Court failed to consider that the State ofKerala
keeping in view its policy decision and the importance of environment
protection rejected the application moved by the first respondent.
26. While allowing the revision filed under Section 30 of the Act,
c the revisional authority observed that ;.... The policy decisiiJn of the
State Government appears to be not in consonance with the MMDR
Act 1957 and also against the National Mineral Policy 2008." The
observation that the policy decision of the State Government is not in
consonance with the MMDR Act 1957 is not correct. Be it noted that
D the policy of the State ofKerala itself is not under challenge. The State
Government has passed a reasoned order as to why it has chosen to
reserve the area for exploitation of mineral sand in public sector
undertakings and I do not find any arbitrariness or unreasonableness in
the policy of the State.
E 27. In State of Tamil Nadu vs. Hind Stone & Ors., (1981) 2
sec 205, it was observed as under:-
" 10 . ....The statute with which we are concerned, the Mines
and Minerals (Development and Regulation) Act, is
aimed ..... at the conservation and the prudent and
F discriminating exploitation of minerals. Surely, in the case
· of a scarce mineral, to permit exploitation by the State or
its agency and to prohibit exploitation by private agencies is
the most effective method of conservation and prudent
(!~ploitation. If you want to conserve for the future, you
must prohibit in the present."
G
28. The decision in Hind Stone case (supra) was referred to and
quoted with the approval in Monnet !spat case in paragraphs (292) and
(293) which read as under:-
"292. Although fo Hind Stone, (1981) 2 SCC 205 the
Court was concerned with the provision of this Rule which
H
STATE OF KERALA v. M/S. KERALA RARE EARTH & 555
MINERALS LIMITED [R. BANUMATHI, J.]
was concerning a minor mineral, while examining the validity A
thereof this Court (per 0. Chinnappa Reddy, J.) has made
certain observations towards the approach and the scope
of the MMDR Act which are relevant for our purpose.
Thus in para 6, it was observed as follows: (SCC p. 213)
"6 . ... The public interest which induced Parliament B
to make the declaration contained in Section 2 of
the Mines and Minerals (Development and
Regulation) Act, 1957, has naturally to be the
paramount consideration in all matters concerning
the regulation of mines and the development of
minerals, Parliament's policy is clearly discernible c
from the provisions ofthe Act. It is the conservation
and the prudent and discriminating exploitation of
minerals, with a view to secure maximum benefit
to the community."
Again in para 9, this Court observed: (Hind Stone case, D
sec pp. 216-17)' -
"9 . ... M'henever there is a switch over from 'private
sector' to 'public sector' it does not necessarily
follow that a change of policy requiring express
legislative sanction is involved. It depends on the E
subject and the statute. For example, if a decision
is taken to impose a general and complete ban on
private mining of all minor minerals, such a ban may
involve the reversal of a major policy and so it may
require legislative sanction. But if a decision is taken F
to ban private mining of a single minor mineral for
the purpose of conserving it, such a ban, if it. is
otherwise within the bounds of the authority given
to the Government by the statute, cannot be said to
involve any change of policy. The policy of the Act
remains the same and it is, as we said, the G
conservation and the prudent and discriminating
exploitation of minerals, with a view to secure
maximum benefit to the community. Exploitation of
minerals by the private and/or the public sector is
contemplated. !fin the pursuit of the avowed policy H
556 SUPREME COURT REPORTS [2016] 5 S.C.R.
A of the Act, it is thought exploitation by the public
sector is best and wisest in the case of a particular
mineral and, in consequence, the authority
competent to make the subordinate legislation
makes a rule banning private exploitation of such
mineral, which-was hitherto permitted we are unable
B
to see any change of policy merely because what
was previously permitted is no longer permitted."
Last but not the least, in ·para 13 this Court observed as
follows: (Hind Stone case, SCC p. 220)
c "13 . ... No one has a vested right to the grant or
renewal of a lease and none can claim a vested
right to have an application for the grant or renewal
of a lease dealt with in a particular way, by applying
particular provisions."
D 293. Mines and minerals are a part of the wealth ofa nation.
They constitute the material resources of the community.
Article 39(b) of the directive principles mandates that the
State shall, in particular, direct its policy towards securing
that the ownership and control of the material resources of
the community are so distributed as best to subserve the
E common good. Thereafter, Article 39(c) mandates that State
should see to it that operation of the economic system does
not result in the concentration of wealth and means of
production to the common detriment. The public interest is
very much writ large in the provisions of the MMDRAct
F and in the declaration under Section 2 thereof. The
ownership of the mines vests in the State of Jharkhand in
view of the declaration under the provisions of the Bihar
Land Reforms Act, 1950 which Act is protected by placing
it in Schedule IX added by the First Amendment to the
Constitution. While speaking for the Constitution Bench in
G Woman Rao (1981) 2 SCC 362 Chandrachud, C.J. had
the following to state on the correlationship between Articles
39(b) and (c) and the First Amendment: (SCC p. 387, para
26)
"26. Article 39 of the Constitution directs by clauses
H
STATE OF KERALA v. M/S. KERALA RARE EARTH & 557
MINERALS LIMITED [R. BANUMATHI, J.]
(b) and (c) that the ownership and control of the A
material resources of the community are so
distributed as best to subserve the common good;
that the operation of the economic system does not.
result in the concentration of wealth and means of
production to the common detriment. These twin
B
principles of State policy were a part of the
Constitution as originally enacted and it is in order
to effectuate the purpose of these directive
principles that the First and the Fourth Amendments
were passed."
Under the MMDR Act, when State Government has the right c
to reserve any area for exploitation in the public sector, the policy of the
State cannot be said to be in derogation of the MMDRAct or MC Rules
or the National Policy.
29. Re. Contention. Procedure stipulated under Section 17A
(2) cannot be thwarted under the guise of State's Industrial Policy:- D
Learned Senior Counsel for the respondents submitted that under Section
17 A(2) the State Government with the approval of the Central
Government can reserve any area for exploitation of the mineral through
a public sector undertaking and when the statute stipulates the procedure
to be followed, then an area could be reserved for exploitation of the E
mineral by public sector undertakings only as perthe procedure stipulated
in Section 17A(2) and the said statutory procedure cannot be thwarted
under the guise of an industrial policy. It was submitted that ifthe State
Government really intended to reserve any area for exploitation of beach
sand mineral in public sector, the State Government should have taken
steps for obtaining approval of the Central Government and having not F
done so, the State cannot under the pretext of policy decision reject the
first respondent's application on the ground that the area is reserved for
exploitation of minerals in the public sector.
30. Under Section 17 A(2) of the MMDR Act, the statutory
dispensation is the approval of the Central Government and reservation G
of area by the State Government by notification in the Official Gazette
specifying the boundaries of such area and the mineral or minerals in
respect of which such areas will be reserved. No doubt, when the
statute stipulates a procedure, it should be done strictly as per the
procedure stipulated thereon. State Government with the approval of H
558 SUPREME COURT REPORTS [2016] 5 S.C.R.
A the Central Government has the power to reserve any area for
undertaking mining operation through public secfor undertakings.
Recommendation of the State Government for approval of the Central
Government for such reservation and issuance of notification is only
procedural. As discussed earlier, the policy of the State that mining of
beach and mineral would be done through public sector undertakings
B
cannot be said to be dehors the MMDR Act or unreasonable justifying
interference by the Court.
31. Further, be it noted, the plea regarding thwarting the procedure
stipulated under Section 17A(2) of the MMDR Act under the guise of
industrial policy has not been specifically raised before the High Court in
c the writ petition. Only during the course of arguments in this Court for
the first time, such a plea was raised. Therefore steps, if any, taken by
the State ofKerala in furtherance of Section l 7A (2) ofMMDRAct is
riot available on record.
32. That apart, grant of a mining lease to the first respondent was
D stopped by G.O.(MS)l 12/2004/ID dated 25.09.2004 and the matter was
pending consideration before the revisional authority-Central Government
from 2007 and the revision came to be dismissed on 30.11.2009 directing
the State to reconsider the matter afresh. In the meanwhile, industrial
policy of the State stating that mining of minerals sand will be done
E through State/Central Public Sector Undertakings came into force w.e.f.
18.06.2007. After reconsideration, the impugned order was passed by
the State Government on 15.12.2010. Evidently, the State could not
have made the proposal to the Central Government for reserving the
area for exploitation of the mineral by Public Sector Undertakings. Since
2007, the matter was sub-judice before one authority or the other. Since
F the matter was sub-judice, State could not have taken further steps in
sending any proposal to the Central Government for obtaining the
approval.
33. The approval of the Central Government required by Section
17 A (2) is mandatory, but nowhere it is stated that the approval must.be
G sought prior to the reservation. Prior approval of the Central Government
before reserving any area by the State Government for the public sector
undertaking is not required. Therefore, what logically follows from Section
17A (2) is that the State Government may seek approval of the Central
Government even after the framing of the policy. Observing that Section
H 17A(2) does not use the expression "prior approval" in paragraph ( 160)
STATE OF KERALA v. M/S. KERALA RARE EARTH & 559
MINERALS LIMITED [R. BANUMATHI, J.]
of Monnet !spat case, it was held as under:- A
"160. The types of reservation under ·Section 17-A and
their scope have been considered by this Court in Indian
Metals and Ferro Alloys Ltd. 1992 suppl. (If SCC 91,
in paras 45 and 46 (pp. 136-39) of the Report. I am in
respectful agreement with that view. However, it was B
argued that Section I 7-A(2) requires prior approval of the
Central Government before reservation of any area by the
State Government for the public sector undertaking. The
argument is founded on an incorrect reading of Section I 7-
A(2). This provision does not use the expression, "prior
approval" which has been used in Section 11. On the other
c
hand, Section I 7-A(2) uses the words, "with the approval
of the Central Government". These words in Section 17-
A(2) cannot be equated with prior approval of the Central
Government. According to me, the approval contemplated
in Section 17-A may be obtained by the State Government D
before the exercise of power of reservation or after exercise
of such power. The approval by the Central Government
contemplated in Section I 7-A(2) may be express or implied.
In a case such as the present one where the Central
Government has relied upon the 2006 Notification while
rejecting the appellants' application for grant ofmining lease, E
it necessarily implies that the Central Government has
approved reservation made by the State Government in the
2006 Notification otherwise it would not have acted on the
same. In any case, the Central Government has not
disapproved reservation made by the State Government in F
the 2006 Notification." (Underlining added)
Industrial Policy of the State can be said to be a prelude before
the State makes the proposal reserving the area for exploitation oftne
mineral by the public sector undertakings. Respondent is not right in
contending that under the guise of policy decision, the State has bye- G
passed the procedure stipulated under Section l 7A(2).
34. Under Section 30 of MMDR Act after remittance of tlie
matter, tlie rig/it oftlie State to reconsider tlie matter:- While allowing
the revision petitions filed under Section 30 of the MMDRAct, the Central
Government directed the State Government to reconsider the matter. H
560 SUPREME COURT REPORTS [2016] 5 S.C.R.
A The High Comt faulted the State Government that when the revisional
authority directed reconsideration of the matter based on the "facts in
issue", the binding nature. of the decisions of the superior authorities in
the hierarchy was not kept in view and that "it is sheer statutory and
institutional insubordination" on the part of the State. Placing reliance
upon the judgment of this Comt in Dharam Chand Jain vs. State of
B
Bihar, (1976) 4 SCC 427, learned counsel for the appellant submitted
that the State Government being "a subordinate authority" in the matter
of granting mining lease was obligated under the law to carry out the
orders of the Central Government. Relying upon the above decision, it
was submitted that ifthe State Government could decline to carry out
c the order of the Central Government, it would be subversive ofjudicial
discipline.
35. The decision in Dharam Chand Jain (supra) was rendered
in the year 1976, that is prior to insertion of Sections 17A (I A) and (2)
(inserted and modified respectively by Act 25 of 1994 with retrospective
D effect 25.01.1994). Jn the year 1976, barring Rule 59 of MC Rules,
there was no provision in the MMDR Act to reserve the area for mining
operation through the public sector undertakings. Under Section I 0(3),
the State Government has the power to take a decision keeping in view
the overall interest of the State and also the scientific mining of the
mineral. The minerals to be exploited in this case are ilmenite, rutile,
E
leucoxene and zircon, which have been classified as "prescribed
substance" under the Atomic Energy Act 1962. In the order passed by
the State Government, State has emphasized the need for environmental
protection which is the statutory obligation of the State and the interest
oflargersection of people who are residing in the coastal areas ofKollam
F and Alappuzha Districts. Merely because the Central Government has
directed the State Government to reconsider the matter, it was not
obligated upon the State to grant mining lease in favour of the first
respondent. After remittance of the matter, State has the power to
consider the applications afresh on its own merits and the constitutional
mandate.
G
36. By perusal of the order dated 30.11.2009 passed by the
Revisional Authority, it is seen that the order was passed by the Joint
Secretary (Mines) and Joint Secretary and Legal Advisor. The order
only directed the State Government to reconsider the matter. When the
State Government was required to reconsider the matter, State
1-1
STATE OF KERALA v. M/S. KERALA RARE EARTH & 561
MINERALS LIMITED [R. BANUMATHI, J.]
Government was free to consider the applications and take a decision. A
Though MMDR Act confers the revisional power on the Central
Government for grant of mining lease for mining minerals other than a
minor mineral, that does not mean that the State Government is denuded
of its power or control over the minerals lying in the land within its
territory. The State Government is the custodian of the land, mines and
B
minerals. Under Section 10(3) State has the power to reconsider the
applications in the light of its constitutional mandate of environmental
protection. The High Court fell in error in faulting the State Government
and in my view, the State cannot be faulted for the alleged "institutional
insubordination", as observed by the High Court.
3 7. At th is juncture, we may usefully refer to the observation of
c
this Court that many a times Central Government hears revision petitions
through an executive officer and without participation of the judicial
member. In Sandur Manganese And Iron Ores Ltd. vs. State of
Karnataka & Ors., (20 I 0) 13 SCC 1 para (95), it was held as under:-
"95. It is also brought to our notice that as on date the D
Central Government hears revision petitions through an
executive officer and without participation of a judicial
member. It is also pointed out that the exact procedure of
the Revisional Tribunal has kept changing over the last few
months. It is clear that it would not be an independent and E
efficacious alternative forum in terms of the guidelines laid
down by the Constitution Bench in Union of India v.
Madras Bar Assn .(20 I 0) 11 SCC I As observed by the
three-Judge Bench of this Court in Indian Charge Chrome
ltd.(2006) 12 sec 331, when there was no valid
recommendation by the State Government for the grant of F
lease, there cannot be any valid approval of the Central
Government relying on the defective recommendation."
38. In the present case, Joint Secretary (Mines) and Joint Secretary
and Legal Advisor have passed the order in the revision petition. By
allowing revision petition, Central Government directed the State to G
reconsider the matter. As noticed earlier, National Policy on Exploitation
of Beach Sand Minerals issued by the Department of Atomic Energy
reserves liberty to the State for selection of Companies/Entrepreneurs
for setting up of projects/plants for exploitation of beach sand minerals.
Grant or refusal of mining lease and mining of minerals involves
H
562 SUPREME COURT REPORTS [2016] 5 S.C.R.
A considerable high stakes both in terms of commercial value and the fact
that such a decision will have impact on the concept of mineral
development, it is for the State to exercise its discretion either to grant or
refuse mining lease.
39. Plea of promissory estoppel and legitimate expectation:-
B First respondent raised the plea of promissory estoppel and legitimate
expectation. It was submitted that State has granted approval for mining
by its order dated 15.09.2004 and the same cannot be supplanted by
purportedly changing the policy. Learned Senior Counsel for the first
respondent submitted that on the basis of representations on the part of
the State Government, the first respondent had expended an amount in
c excess of rupees eighteen crores inter-alia for the project including
substantial amounts for acquisition of mineral bearing lands for mining
beach sand minerals and by doing so, first respondent has altered its
position irretrievably to its prejudice.
40. It is well settled that no one has legal or vested right for the
D grant of mininglease. Mere disappointment of expectation cannot be a
ground for interfering with the policy of the State reserving the areas for
exploitation of beach sand mineral by State/Central Public Sector
Undertakings. After referring to various judgments on the doctrine of
promissory estoppel, in Monnet !spat case, this Court has summarized
E the principles in paragraph ( 182) as under:-
" 182.1. Where one party has by his words or conduct made
to the other a clear and unequivocal promise which is
intended to create legal relations or affect a legal relationship .
to arise in the future, knowing or intendingthat it would be
F acted upon by the other party to whom the promise is made
and it is, in fact, so acted upon by the other party, the promise
would be binding on the party making it and he would not
be entitled to go back upon it, if it would be inequitable to
allow him to do so having regard to the dealings which have
taken place between the parties, and this would be so
G irrespective of whether there is any pre-existing relationship
between the parties or not.
182.2. The doctrine of promissory estoppel may be applied
against the Government where the interest of justice,
morality and common fairness dictate such a course. The
H
STATE OF KERALA v. MIS. KERALA RARE EARTH & 563
MINERALS LIMITED [R. BANUMATHI, J.]
doctrine is applicable against the State even in its A
governmental, public or sovereign capacity where it is
necessary to prevent fraud or manifest injustice. However,
the Government or even a private party under the doctrine
of promissory estoppel cannot be asked to do an act
prohibited in law. The nature and function which the
B
Government discharges is not very relevant. T~e
Government is subject to the rule of promissory estoppel
and ifthe essential ingredients of this doctrine are satisfied,
the Government can be compelled to carry out the promise
made by it.
182.3. The doctrine of promissory estoppel is not limited in
c
its application only to defence but it can also furnish a cause
of action. In other words; the doctrine of promissory estoppel
can by itself be the basis ofaction.
182.4. For invocation of the doctrine of promissory estoppel,
it is necessary for the promisee to show that by acting on D
promise made by the other party, he altered his position.
The alteration of position by the promisee is a sine qua non
for the applicability of the doctrine. However, it is not
necessary for him to prove any damage, detriment or
prejudicebecause of alteration of such promise. E
182.5. In no case, the doctrine of promissory estoppel can.
be pressed into aid to compel the Government or a public
authority to.carry out a representation or promise which is
contrary to law or which was outside the authority or power
of the officer of the Government or of the public authority F
to make. No promise can be enforced which is statutorily
prohibited or is against public policy.
182.6. It is necessary for invocation of the doctrine of
promissory estoppel that a clear, sound and positive
foundation is laid in the petition. Bald assertions, avennents G
or allegations without any supporting material are not
sufficient to press into aid the doctrine of promissory
estoppel.
182.7. The doctrine of promissory estoppel cannot be
invoked in abstract. When it is sought to be invoked, the
H
564 SUPREME COURT REPORTS [2016] 5 S.C.R.
A court must consider all aspects including the result sought
to be achieved and the public good at large. The fundamental
principle of equity must forever be present to the mind of
the court. Absence of it must not hold the Government or
the public authority to its promise, assurance or
representation."
B
41. No doubt by GO (MS) No. I 05/04/ID dated 15.09 .2004, State
has sanctioned mining leases to the first respondent. But within ten
days by order dated 25.09.2004, the mining lease granted to first
respondent was stopped on the ground that the detailed study on the
environment impact will be undertaken before taking further action in
c the matter. The rule of promissory estoppel can be invoked only if on
the basis of representation made by the Government, the party has
substantially altered the position. Within short time often days, in my
view, first respondent could not have altered its position so as to invoke
the doctrine of promissory estoppel.
D 42. State of Kerala has the legislative competence to take the
policy decision reserving the area for exploitation of minerals by the
public sector undertakings and the said policy cannot be said to be dehors
the MMDR Act 1957 and MC Rules. The High Court fell in error in not
appreciating the policy ofthe State in the light of the constitutional mandate
E and the decision taken by the State for the welfare of the State and
exploitation of the mineral by scientific mining by public sector
undertakings.
43. In the result, the impugned common judgment of the High
Court is set aside and these appeals are allowed. No order as to costs.
F ORDER
l. In view of the majority of opinion, these appeals fail and are ·
hereby dismissed. ·
G Kalpmm K. Tripathy Appeals dismissed.
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