Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.2790 OF 2012
(Arising out of SLP(C)No.8567 of 2008)
BHUSHAN POWER & STEEL LTD. & ORS. … APPELLANTS
Vs.
STATE OF ORISSA & ANR. … RESPONDENTS
J U D G M E N T
ALTAMAS KABIR, J.
1. Leave granted.
2. With the intention of setting up an integrated steel
plant in the State of Orissa, Bhushan Limited, entered into
discussions with the State Government in 2001 in that
regard. Pursuant to such discussions, Bhushan Limited
applied to the Industrial Development Corporation of India
(IDCO) for acquisition of land measuring 1250 acres, for
setting up the proposed plant in the identified villages of
Thelkoloi, Dhubenchhabrar and Khariapalli (Lapanga) in the
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District of Sambalpur. On 13 November, 2001, Bhushan
Limited applied to the Industrial Promotion and Investment
Corporation of Orissa Ltd. (IPICOL) for appraisal and
recommendation for acquisition of land for the aforesaid
purpose to IDCO. Bhushan Limited also addressed two letters
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to the Collector, Sundergarh and Collector, Keonjhar on 28
November, 2001, applying for grant of lease for mining of
iron ore for use in the proposed plant. The applications
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were received in the Collector’s office on 3 December,
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2001, 4 December, 2001 and 1 March, 2002. On the basis of
such applications filed by Bhushan Limited, a meeting was
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held on 27 March, 2002, between the Chief Secretary,
Government of Orissa and Bhushan Limited, in which the
Government agreed to accord due priority to Bhushan Limited
for grant of suitable iron ore areas and also agreed to
recommend the proposal of Bhushan Limited to the Government
of India for grant of a Coal Block.
3. Thereafter, meetings were held between Bhushan Limited
and the representatives of the State Government and one such
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meeting was held on 24 April, 2002, under the Chairmanship
of the Chief Minister, relating to the setting up of the
steel plant at Lapanga. The said meeting was confirmed by
IDCO and the Water Resources Department and it was decided
to prepare a Memorandum of Understanding (MOU) to be signed
by the parties for setting up of a 1.2 million tonnes steel
plant under Phase-I and a 2.8 million tonnes steel plant in
Phase-II in Lapanga, in the District of Sambalpur. The MOU
contained the commitment of the State Government to
recommend to the Central Government grant of iron ore mines
to the Appellant for its use in the plant to be set up at
Lapanga. As far as the grant of the iron ore mines is
concerned, the State Government agreed to make the following
recommendations to the Central Government:
a) For grant of 96 million tonnes iron ore
reserves in Joda Barbil Sector of Keonjhar
(Thakurani area) for 50 years requirement of
the plant.
b) For additional 128 million tonnes of iron ore
reserves in Keora, District Sundergarh, to meet
a requirement of 1.6 million tonnes for 50
years.
The total requirement of 200 million tonnes was split up
into two parts, i.e., 96 million tonnes and 128 million
tonnes respectively, and the same were to be met from the
Thakurani mines situated in the Joda Barbil sector and from
the Keora area of Sundergarh District.
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4. Pursuant to the aforesaid understanding, on 16 May,
2002, the Government of Orissa addressed two letters to the
Government of India, in its Ministry of Steel and Ministry
of Coal, for allotment of Jamkhani and Bijahan Coal Blocks
to Bhushan Limited. In aid of the decision to set up the
steel plant, the Department of Energy issued a No Objection
Certificate (NOC) for setting up of a power plant at
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Thelkoloi in the name of Bhushan Limited and, on 5 July,
2002, the State Government conveyed its approval for
acquisition of 632.28 acres of private land and 634.94 acres
of Government land in identified villages under Rengali
Tehsil of Sambalpur District, for establishment of the steel
plant. Several meetings took place between the Principal
Secretary and the representatives of Bhushan Limited, where
even the Joint Secretary of Mines was present and assurances
were given to Bhushan Limited to send the proposal for grant
of mining lease in favour of Bhushan Limited to the State
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Government by the first week of September, 2002. On 22
October, 2002, even the State Pollution Control Board gave
its approval in principle for setting up the plant in the
selected sites.
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5. On 8 November, 2002, the Director, Mines, furnished his
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report on the application made by the Appellant on 4
December, 2001, for grant of mining lease over the Thakurani
Block area. In the said report it was recorded that
Thakurani Block A and Block B mines had been leased in
favour of the Sharda’s in 1934, by the Ex-Ruler of Keonjhar
and that the Thakurani Block A mines had been extensively
mined by the original lessee from 1934 onwards. The report
also disclosed that in 1998, the matter was settled in this
Court between the State, the Sharda’s and the Centre. It
was agreed that Thakurani Block A would be relinquished in
favour of the State and the mining lease of Block B would be
renewed in favour of the Sharda’s. Accordingly, in terms of
the settlement, the Thakurani Block A became available with
the State. It is on the aforesaid basis that the Appellant
had been advised to apply to the State Government for this
area, and the same was done in December, 2001. The report
also indicated that a mining licence could be granted to
Bhushan Limited in relaxation of Rule 59(2) of the Mineral
Concession Rules, 1960, hereinafter referred to as the “MC
Rules”, in view of the fact that the Thakurani Block A had
been mined by the original lessee from 1934 onwards. The
State Government was advised to recommend to the Centre for
grant of relaxation under Rule 59(2) of the MC Rules.
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6. On 19 February, 2003, the Orissa Electricity Regulatory
Commission (OERC) passed an order granting permission for
installation of a Captive Power Plant by Bhushan Limited.
7. It is at this stage that trouble began to brew. A
decision had been taken to merge Bhushan Ltd. with Bhushan
Steel and Strips Limited (BSSL) which had an identity which
was separate from that of Bhushan Limited, though treated to
be a family concern under the Bhushan family umbrella. On
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21 February, 2003, the Government of Orissa was informed by
Shri Brij Bhushan Singhal, Chairman of the Bhushan Group,
that Bhushan Limited, the Appellant herein, would not be
merging with BSSL, but that the papers were being processed
in the name of Bhushan Limited, as a group. Accordingly, the
State Government was requested not to process the papers for
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2-3 months. On 17 March, 2003, BSSL wrote to the Chief
Minister, informing him of the developments which had taken
place and that two companies had decided not to merge, with
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retrospective effect from 1 April, 2002, as had been
decided earlier.
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8. Thereafter, on 5 May, 2003, Shri Neeraj Singhal wrote
to the Chief Minister on behalf of BSSL informing him that
BSSL was unable to process the setting up of the steel plant
at Lapanga and in order to minimize the friction between the
two groups within the family, BSSL had decided to set up a
separate steel plant at a different location in Mehramandali
in the District of Dhankanal in respect whereof 1500 acres
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of land had been identified. On 17 June, 2003, the Water
Resources Department, Government of Orissa, wrote to Bhushan
Power & Steel Ltd. giving its approval of the layout for
intake well for drawal of 100 cusec water for the integrated
steel plant of the Company. This was followed by grant of a
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certificate by IDCO on 19 July, 2003, confirming sanction
of land for lease measuring 488.08 acres in favour of
Bhushan Limited comprising Thelkoloi, Dhubenchhapar and
Khadiapalli, which had been identified in the MOU for
establishment of the steel plant by Bhushan Limited.
9. The said sanctions were followed up by a meeting chaired
by the Chief Minister of Orissa on 25h July, 2003, wherein
the progress of the project was discussed and it was
resolved that the application of Bhushan Limited for iron
ore deposits would be recommended to the Government of India
and that no fresh MOU was required to be filed. It was
decided that the MOU executed earlier between the Bhushan
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Group and the State Government on 15 July, 2002, would
remain undisturbed, since, the same had already been acted
upon by both sides. It was also decided that the
application of Bhushan Limited for iron ore deposits would
be recommended to the Government of India in terms of the
MOU, after the same was placed before the Screening
Committee which was chaired by the Chief Secretary.
10. Further to the permission being granted to Bhushan
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Limited on 21 February, 2003, for installation of a Captive
Power Plant, OERC granted a “No Objection Certificate” to
Bhushan Limited for setting up of a Captive Power Plant for
increased capacity.
11. Subsequently, various other steps were taken for
establishment of the power plant at Lapanga by Bhushan Power
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& Steel Ltd. On 10 February, 2004, the State Government
wrote to Shri Sanjay Singhal, representing Bhushan Limited,
that in view of the reorganization and restructuring of the
Bhushan Group, the earlier MOU ceased to exist and had lost
its force. Accordingly, a fresh MOU was required to be
entered into between the Appellants and the State Government
for speedy implementation of the project which was on the
anvil. It is the case of the Appellants that this letter was
never acted upon by either party, since, thereafter, the
State allotted and granted possession of large tracts of
land to the Appellants and other agreements, such as drawal
of water were entered into, permission was given for
connectivity with the Grid and other various other
administrative sanctions, as also approval for acquisition
of land, were made in favour of Bhushan Power & Steel Ltd.,
without any insistence for the execution of a fresh MOU.
Simultaneously, Shri Neeraj Singhal of BSSL was also
informed by the State that since they wanted to set up a
separate steel plant at Mehramandali, a fresh MOU to this
effect could be entered into between the State and BSSL.
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12. Responding to the letter of 10 February, 2004, Bhushan
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Limited wrote back on 21 February, 2004, stating that no
fresh MOU was required to be signed, since the earlier MOU
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was quite valid. On 11 March, 2004, the Government of
Orissa, in its Department of Industries, informed IDCO that
the Government had been pleased to advise for immediate
transfer of acquired land, both Government and private, to
Bhushan Limited, after observing all the necessary
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formalities. However, on 17 March, 2004, Shri Neeraj
Singhal, Managing Director of BSSL, wrote to the Principal
Secretary, Department of Steel and Mines, contending that
Bhushan Limited, as also BSSL, were entitled to the benefits
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of the MOU, which had been signed on 15 May, 2002.
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13. Within a week thereafter, on 24 March, 2004, IDCO
transferred the land for the project at Lapanga to Bhushan
Limited and possession thereof was also made over on several
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dates. On 12 May, 2004, the Ministry of Environment and
Forest, Government of India, gave clearance to the project
at Rengali in the name of Bhushan Limited. The Chief
Inspector of Factories and Boiler, gave approval to the
Steam and Feed Water pipe line drawing for Bhushan Limited
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on 2 July, 2004. On 3 September, 2004, the Government of
Orissa, in its Ministry of Environment and Forest, granted
approval to Bhushan Limited for diversion of 59.16 hectares
of forest land for establishment of the integrated steel
plant and an agreement was also drawn up between the
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Government and Bhushan Limited on 17 September, 2004, for
drawal of water from the Hirakud Reservoir for use in the
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proposed integrated steel plant at Lapanga. On 2 February,
2005, the State Government wrote to Bhushan Limited, seeking
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the status report of the steel plant project and on 16
March, 2005, permission was granted for provisional
energisation of 220 KV line issued by the Chief Electrical
Inspector in favour of Bhushan Limited. Several other
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approvals were granted upto 9 August, 2005, and finally in
March, 2005, Bhushan Limited (BPSL) commenced production at
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its steel plant. On 6 September, 2005, administrative
approval was given for acquisition of additional private
land for Lapanga plant, granted by the Steel and Mines
Department to Bhushan Limited. Similar approval was given in
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respect of other lands on 28 September, 2005 and 6
February, 2006.
14. Simultaneously, with administrative approval being given
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for acquisition of private land for the Lapanga plant on 3
November, 2005, an agreement was entered into between BSSL
and the Government of Orissa for putting up the steel plant
at Mehramandli. There was no mention of the MOU dated
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15 May, 2002, in the said agreement. Within a matter of 10
days, the Directorate of Factories and Boilers wrote to
Bhushan Limited granting permission under the Factories Act,
1948, to construct the steel plant at Lapanga.
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15. Surprisingly, on 31 December, 2005, the Government of
Orissa issued a letter to Bhushan Limited indicating that it
had decided not to treat the MOU signed earlier with M/s
Bhushan Group of Companies as place specific after the
company had been divided into Bhushan Limited (BPSL) and M/s
Bhushan Steel and Strips Ltd. (BSSL). The Bhushan Group was
informed that the State Government had decided to deal with
both the Companies separately and to sign two separate
agreements for the purpose of acquiring land, allotting
mines and providing other facilities for establishment and
growth of steel plants in Orissa.
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16. On 9 January, 2006, a letter was addressed by the
Directorate of Factories and Boilers to Bhushan Steel Ltd.
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approving the draft of the steam pipe line and on 13
January, 2006, on the recommendation of the Government of
Orissa, the Central Government allotted Bijahan Coal Block
in the District of Sundergarh to Bhushan Limited as per the
MOU.
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17. Even more surprisingly, on 18 January, 2006, the
Government of Orissa issued a Show-Cause Notice to Bhushan
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Limited to appear before the Joint Secretary on 17
February, 2006, for a personal hearing. Several deficiencies
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in the application for mining lease of iron ore dated 4
December, 2001, in respect of the Thakurani Block A, were
also pointed out. Thereafter, the State Government informed
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the Appellants that their application dated 4 December,
2001, for mining lease over the Thakurani area could not be
allowed on various grounds. However, the most significant
ground was that the area in question came within the
relinquished area of the mining lease of M/s Sharda which
was not thereafter thrown open for re-allotment under Rule
59 of the aforesaid Rules. It was alleged that the
application made by Bhushan Limited was, therefore,
premature. Having rejected the Appellants’ prayer for grant
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of mining lease, on 9 February, 2006, the Government of
Orissa made a recommendation to the Central Government to
grant mining lease in favour of M/s Neepaz Metallicks (P)
Ltd. in relaxation of Rule 59(1) of the aforesaid Rules, for
a period of 30 years.
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18. On 28 February, 2006, Bhushan Limited altered its name
to Bhushan Power & Steel Ltd. (BPSL).
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19. On 8 May, 2006, Bhushan Limited filed Writ Petition
No.6646 of 2006 before the Orissa High Court. On the next
day, the State Government issued a reminder to Bhushan
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Limited in regard to its letter dated 31 December, 2005, by
which the State Government had asked for a separate MOU from
Bhushan Limited, inspite of the MOU already existing between
the parties, which had also been acted upon till as late as
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26 April, 2006. On 15 May, 2006, the High Court passed an
interim order granting status-quo with regard to the
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applications for mining lease. On 5 September, 2006, an
intervention application was filed by BSSL, which was
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allowed on 6 December, 2006.
20. During the course of hearing of the Writ Petition, the
High Court passed an interim order and directed that the
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problems relating to the Show-Cause Notice dated 18
January, 2006, should be resolved, keeping in view the
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commitments of the State. On 26 June, 2007, the High Court
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directed circulation of the order dated 18 June, 2007, and
liberty was given to Bhushan Limited to challenge the same
by filing an affidavit in the writ proceedings.
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21. Such affidavit was duly filed on 10 July, 2007, and the
order impugned in the present appeal came to be passed by
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the High Court on 14 December, 2007, dismissing the
aforesaid Writ Petition No.6646 of 2006. The substance of
the order of the High Court while dismissing the Writ
Petition is :-
(a) The Court cannot set aside the communication of the
State Government asking the Appellants to sign a fresh
MOU with the Government as early as possible.
(b)
The Appellants’ application for grant of mining lease
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dated 4 December, 2001, should be considered afresh
by the appropriate authorities of the State Government
in accordance with law, along with other similarly
placed applicants.
(c)
The Appellants would be at liberty to challenge the
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subsequent report of the Director of Mines dated 31
May, 2007, in the hearing which would be afforded to
the Appellants by the appropriate authority of the
State.
(d)
The Appellants would be at liberty to challenge the
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order dated 18 June, 2007, on merits, but it was also
submitted that the application for mining lease of the
Appellants would be considered after it executed a
fresh MOU with the State Government.
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22. As indicated hereinbefore, on 21 April, 2008, this
Court passed an interim order in the Special Leave Petition
filed by Bhushan Limited directing the parties to maintain
status-quo with regard to the lands indicated in the
application filed by the Appellants for grant of mining
lease. However, one of the most significant developments
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that subsequently took place was that on 15 November, 2011,
Shri B.B. Singhal and Shri Neeraj Singhal, Vice-Chairman and
Managing Director of Bhushan Steel and Strips Ltd. filed
affidavits withdrawing all their claims and rights in the
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MOU dated 15 May, 2002, executed between the State
Government and Bhushan Limited and declaring that the said
MOU was and had always been in favour of Bhushan Power &
Steel Ltd. The above-named persons also prayed for deletion
of their names from the array of parties.
23. Appearing for the Appellants, Mr. Mukul Rohatgi, learned
Senior Advocate, pointed out that only two issues arise for
the consideration of this Court in the present case, namely
–
a) Whether the Memorandum of Understanding dated
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15 May, 2002, continues to subsist in favour of the
Appellants?
b) Whether the State Government is obliged to make
recommendations for the grant of iron ore mines in
terms of the stipulations contained in the aforesaid
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MOU dated 15 May, 2002, and whether in respect of
the areas which had not been notified under Rule
59(1), the State Government can make a
recommendation for relaxation of Rule 59(1) under
Rule 59(2)?
24. Mr. Rohatgi submitted that having entered into a
Memorandum of Understanding with the Appellant Company and
having acted thereupon and having also caused the Appellants
to change their position to their detriment, it was not
open to the State Government to call upon the Appellants to
execute a fresh MOU, during the subsistence of the MOU dated
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15 May, 2002.
25. Mr. Rohatgi also submitted that notwithstanding the
State Government’s requirement that the Appellants should
enter into a fresh MOU, the State Government continued to
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act under the MOU dated 15 May, 2002. Despite the
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communications dated 10 February, 2004, and 31 December,
2005, above recorded, the State Government went on further
to hold that all the steps required to be taken for
installation of the steel plant at Lapanga, had been taken,
except that it did not comply with the obligations of making
recommendations to the Central Government for grant of iron
ore mines. Mr. Rohatgi urged that during the pendency of
the proceedings, the dispute between the members of the
Bhushan Group had been settled and the parties had mutually
agreed to withdraw all the allegations and claims relating
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to the MOU dated 15 May, 2002. Incidentally, by filing
I.A.No.13, BSSL confirmed that Bhushan Power & Steel Ltd.
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was the sole beneficiary under the MOU dated 15 May, 2002,
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and withdrew all its claims under the MOU dated 15 May,
2002.
26. Mr. L. Nageshwar Rao, learned Senior Advocate, appearing
for the State of Orissa, has also very fairly stated that in
view of the settlement of disputes between the members of
the Bhushan Group, the issue relating to the MOU did not
survive and, since, the State Government had already
performed its obligation under the MOU, the only thing
remaining to be done by the State is to make recommendations
to the Central Government for grant of iron ore mines to the
Bhushan Power & Steel Ltd.
27. Mr. Rohatgi submitted that in the changed circumstances,
the question of execution of a fresh MOU loses its relevance
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and the letter dated 31 December, 2005, calling upon the
Appellants to execute a fresh MOU, is not required to be
given effect to. Consequently, it may be held that the MOU
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dated 15 May, 2002, continues to be valid and subsisting
between the State of Orissa and Bhushan Power & Steel Ltd.
28. On the question of Rule 59 of the MC Rules, which formed
the basis of the State Government’s decision to reject the
Appellants’ application for being recommended to the Central
Government for grant of a mining lease, Mr. Rohatgi
submitted that such recommendations had been made by the
State Government in favour of other applicants as well, such
as M/s. S.M.C. Power Generation Ltd., M/s. Neepaz Metalics,
M/s. Sree Metaliks and M/s. Deepak Steel & Power. Therefore,
there was no reason to deny the same benefits to the
Appellants as well.
29. Appearing for the Intervener, M/s. Jindal Steels Ltd.,
Mr. K.V. Vishwanathan, learned Senior Advocate, submitted
that so long as any allotment made in favour of the
Appellants did not impinge on the allotment made in favour
of M/s. Jindal Steels Ltd., it could have no grievance
against a separate allotment being made in favour of the
Appellants.
30. The mutual settlement of the disputes between the
members of the Bhushan Group has altered the situation
considerably, since BSSL has withdrawn its claim under the
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MOU dated 15 May, 2002, and has declared that the said MOU
was and had always been executed by the State Government in
favour of Bhushan Power & Steel Ltd., which had set up its
steel plant at Lapanga. As indicated hereinbefore,
although, the MOU was entered into by the State Government
with the Bhushan Group for setting up a steel plant at
Lapanga, at a later stage, BSSL also laid claim under the
MOU for setting up a separate steel plant at Mehramandali
and a suggestion was also made for execution of a fresh MOU
between the State Government and BSSL to this effect.
31. Pursuant to the MOU with Bhushan Limited, the State
Government had not only allotted land for the setting up of
the steel plant at Lapanga, it had even extended all help
for the commissioning of the plant, which, in fact, had
already started functioning. However, it is the claim made
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by BSSL under the MOU executed on 15 May, 2002, that had
created obstructions in the setting up of the steel plant at
Lapanga. Despite having allotted land and granted sanction
to Bhushan Limited to take steps for construction of the
said plant, it was subsequently contended that the
application filed by Bhushan Limited was premature and could
not, therefore, be acted upon. Specific instances have been
mentioned hereinabove of the steps taken by the various
departments in extending cooperation to Bhushan Limited to
set up its steel plant at Lapanga. To now turn around and
take a stand that the application made by Bhushan Limited
was premature, is not only unreasonable, but completely
unfair to Bhushan Limited, who have already invested large
sums of money in setting up the plant. The State Government
had, on its own volition, entered into the MOU with Bhushan
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Limited on 15 May, 2002, and had even agreed to request the
Central Government to allot mining areas and coal blocks for
operating the steel plant. Whatever differences that may
have resulted on account of the dispute within the Bhushan
Group, which could have led to the rethinking on the part of
the State Government, have now been laid to rest by virtue
of the settlement arrived at between the Bhushan Limited
(now BPSL) and BSSL. The State Government has also accepted
the said position. In addition to the above, the action
taken by the State Government appears to us to be highly
unreasonable and arbitrary and also attracts the doctrine of
legitimate expectation. There is no denying the fact that
the Appellants have altered their position to their
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detriment in accordance with the MOU dated 15 May, 2002.
Whatever may have been the arrangement subsequently arrived
at between the State Government and BSSL, the original MOU
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dated 15 May, 2002, continued to be in existence and
remained operative.
32. The State Government appears to have acted arbitrarily
in requiring Bhushan Limited to enter into a separate MOU,
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notwithstanding the existence of the MOU dated 15 May,
2002, which, as mentioned hereinabove, had been acted upon
by the parties.
33. In the light of the above, the High Court erred in
holding that it could not interfere with the decision of the
State Government calling upon the Appellants to sign a fresh
MOU with the Government, during subsistence of the earlier
MOU. Since the State Government has already made allotments
in favour of others in relaxation of the Mineral Concession
Rules, 1960, under Rule 59(2) thereof, no cogent ground had
been made out on behalf of the State to deny the said
privilege to the Appellants as well.
34. Accordingly, we allow the appeal and set aside the
judgment and order of the High Court of Orissa and also the
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decision of the State Government dated 9 February, 2006,
rejecting the Appellant’s claim for grant of mining lease.
During the course of hearing, we have been informed that
Thakurani Block A has large reserves of iron ore, in which
the Appellants can also be accommodated. We, accordingly,
direct the State of Orissa to take appropriate steps to act
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in terms of the MOU dated 15 May, 2002, as also its earlier
commitments to recommend the case of the Appellants to the
Central Government for grant of adequate iron ore reserves
to meet the requirements of the Appellants in their steel
plant at Lapanga.
35. There will be no order as to costs.
……………………………………………………… J.
(ALTAMAS KABIR)
………………………………………………………J.
(SURINDER SINGH NIJJAR)
New Delhi
Dated:14.03.2012