Full Judgment Text
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CASE NO.:
Appeal (civil) 10106 of 2003
PETITIONER:
M/s Medley Minerals India Ltd.
RESPONDENT:
State of Orissa & Others
DATE OF JUDGMENT: 17/09/2004
BENCH:
Shivaraj V. Patil & B.N. Srikrishna
JUDGMENT:
J U D G M E N T
Srikrishna, J.
The appellant calls in question the judgment and order dated
1.8.2003 of the Division Bench of the Orissa High Court, by which a
quarry lease granted in favour of the appellant was quashed and
cancelled.
On 11.2.1993 one Jitendra Kumar Lohia was granted quarry
lease No.192 for quarrying of decorative stones in village
Gandhargola, Tehsil Titilagarh, District Bolangir, Orissa. The said
lease was for a period of 10 years from11.02.1993 to 10.2.2003. The
said Jitendra Kumar Lohia and members of his family formed and
incorporated themselves into a company under the Companies Act,
1956, in the name and style of Medley Minerals India Private Limited
\026 the appellant before us. Jitendra Kumar Lohia is one of the
Directors of the said company. On 15th October 1998 Jitendra Kumar
Lohia applied to the competent authority under the Orissa Minor
Mineral Concessions Rules, 1990 (hereinafter referred to as ’he
Rules’) for transfer of the lease under Rule 12 in favour of the
appellant company. This application was not disposed of for a long
time.
Even when his above application was pending before the
competent authority on 11th October, 2002(much prior to 90 days
before the expiry of the lease), Jitendra Kumar Lohia applied to the
competent authority under Rule 9 of the Rules for renewal of the
quarry lease granted in his favour. In the said application for renewal
of the quarry lease, it was specifically stated thus :
"I have already applied for transfer of the subject
Quarry Lease in favour of M/s Medley Minerals India
Ltd. Should the said application for transfer be accepted
before the renewal of this lease, then this application
may be considered on behalf of the proposed Transferee
in the said application in the said application i.e. M/s
Medley Minerals India Ltd."
The attention of the competent authority was specifically drawn by
this application to the fact that Jitendra Kumar Lohia had already
applied for transfer of quarry lease no. 192 to the appellant company
and further, " if the same application for transfer is accepted by the
competent authority then this application for renewal may be
considered on behalf of the transferee i.e. M/s Medley Minerals India
Ltd".
On 5th February 2003, the State Government and the competent
authority acting upon the application dated 15.10.1998 filed by
Jitendra Kumar Lohia made an order transferring the existing quarry
leave no.192 from the name of Jitendra Kumar Lohia to the name of
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the appellant company for the unexpired period up to 10th February,
2003. This order specifically notes that Jitendra Kumar Lohia had
applied to the State Government on 15.10.1998 for transfer of the
existing quarry lease in favour of the appellant company and that the
proposed transferee and the transferor belong to the same category i.e.
Category IV 6-a of Rule 6 of the Rules. The transfer of lease was
granted for the unexpired period of the lease up to 10.2.2003, inter
alia, on the following conditions:
"(iii) Sri Jitendra Kumar Lohia, the transferor and his
family members as they hold controlling interest in
the proposed transferee company will seek prior
permission from the competent authority if they wish
to transfer such controlling interest in favour of an
outsider (i.e. other than himself & his family
members.
(iv) The transfer lease deed will be executed between
the transferor and the transferee in presence of Mining
Officer, Bolangir in compliance of all formalities as
per law and after clearance of up to date mining dues
in respect of this quarry lease."
The appellant company entered into a deed of indenture with
the State Government and Jitendra Kumar Lohia on 7.2.2003, which,
inter alia, contains the following two stipulations:
"2. The transferee hereby covenant with the State
Government that from and after transfer and
assignment of the Lease the Transferee shall be
bound by and be liable to perform, observe and
confirm and be subject to all the provisions of all
the covenants, stipulations and conditions
contained in said Lease herein before recited in
the same manner in all respect as if the lease had
been granted to the Transferee as the lessee
thereunder and he had originally executed it as
such."
viii. The Transferee has made a fresh security
deposit of Rs.3,000/- (Rupees three
thousand only) and the Transferor hereby
agree that the deposit made by the latter be
deemed to have been made by the former.
x. Sri Jitendra Kumar Lohia, the Transferor
and his family members hold controlling
interest in the proposed Transferee
Company, will seek prior permission from
the Competent Authority if they wish to
transfer controlling interest in favour of an
outsider (i.e. other than himself and his
family members)."
After executing the deed of transfer on 7.2.2003, the appellant
company by way of abundant caution made an application on the same
day for renewal of the lease in continuation of the application for
renewal already made by Jitendra Kumar Lohia on 11.10.2002. The
State Government and the competent authority not having made any
order for renewal of the quarry lease in favour of the appellant before
the date of expiry i.e. 10.2.2003, it amounted to a deemed refusal under
the Rules. The appellant applied for reconsideration of such deemed
refusal of application for renewal of quarry lease under the proviso to
sub-rule (2) of Rule 9 by his application dated 7.2.2003. In the
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application for renewal of quarry lease in Form E, the appellant
specifically averred:
" Any other particulars which the applicant wishes
to furnish.
(a) The application for this renewal
had already been filed by Sri
Jitendra Kumar Lohia on
11.10.2002 before the subject
Quarry Lease had been transferred
in our favour. Therefore, this
application may be treated in
continuation of his application
dated 11.10.2003 for the same
Quarry Lease.
(b) We have set up a Cutting and
Polishing Unit in industrial Estate
of Titilagarh, documents in support
of which are enclosed separately."
The application of the appellant was routed through the Mining
Officer, Bolangir Circle to the Director of Mines, Orissa. The
application was recommended for favorable consideration by the
Mining Officer who also stated:
"The original lessee Shri J.K. Lohia had applied
for R.Q.L. on 11.10.2002, i.e. within the time
prescribed for applying for renewal under OMMC
Rules 1990. But subsequently as a result of earlier
application the Q.L. was transferred in favour of
M/s Medley Minerals India Ltd. Which has been
executed on 7.2.03. Consequently, the transferee
company has also additionally applied for R.Q.L.
in continuation of the earlier R.Q.L. application of
the transferor. Therefore, the stipulation of
O.M.M.C. Rules to apply for R.Q.L. prior to 90
days before expiry of the Q.L. may be treated as
complied."
In his appeal to the State Government for reconsideration under
the proviso to Rule 9(2) the appellant drew the attention of the State
Government to the facts and circumstances of the case under which
the transfer order itself was made on 7.2.2003, although the
transferred lease itself was to expire on 10.2.2003. It was also pointed
out that, in the circumstances, it was impossible for the appellant to
apply for renewal of the transferred lease before a period of 90 days
before the date of expiry.
On 22.3.2003 the State Government made an order granting
renewal of the quarry lease for decorative stone for a further period of
10 years from 10.2.2003. The order makes it clear that the order had
been made on the application dated 7.2.2003 made by the appellant
for renewal of the lease and also to the fact that the appellant company
had accepted the terms and conditions under which the renewal was
proposed. The order granted renewal of quarry lease "for a period of
10 years subject to the conditions laid down in the State Government
letter No. 5423 dated 22.5.2003".
On 31.5.2003 a Deed of Indenture for renewal of quarry lease
was executed between the State Government and the appellant. The
appellant thereafter took possession of the leased area and started its
quarrying operations, which fact was intimated to the Mining Officer
by a letter dated 2.6.2003.
The fourth respondent, a rival business company aspiring for a
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quarry lease of the same type, filed a writ petition before the High
Court challenging the order of the State Government dated 22.5.2003
by which the quarry lease for decorative stones over the scheduled
area had been renewed in favour of the appellant and also seeking a
direction to the State Government to consider grant of a quarry lease
in its own favour. The High Court by its impugned judgment took the
view that though there had been no contravention of the provision to
Rule 9(3) of the Rules, there has been contravention of Rule 9(2),
consequently allowed the writ petition and quashed the renewal of the
quarry lease granted in favour of the appellant.
Being aggrieved, the appellant is in appeal before us.
Mr. Ramamoorthy, learned counsel for the appellant, urged that
a conspectus of the facts and circumstances clearly indicate that
Jitendra Kumar Lohia, who held the quarry lease in his favour, had
already applied for its renewal on 11.10.2002, much before the
prescribed limit of 90 days before the expiry of the lease as required
under Rule 9. It is also clear that even at that time the application for
transfer of the quarry lease was pending with the State Government.
The State Government’s order was made on 5th February 2003 and
the transfer deed was executed on 7th February, 2003. The transfer of
lease was only for the unexpired period i.e. from 7.2.2003 to
10.2.2003. Thus it was impossible for the appellant to have complied
with the requirements of Rule 9(2), namely, to make an application in
Form E at least 90 days before the expiry of the lease. He also drew
our attention to Rule 31 under which the State Government is
empowered "in the interest of mineral development, to relax the
provisions of these rules in deserving cases in such manner as they
deem proper". Learned counsel contended that in the circumstances
the State Government was fully justified in relaxing the rules and
treating the application dated 7.2.2003 as continuation of the earlier
application of Jitendra Kumar Lohia for renewal of the lease. Thus,
according to the learned counsel, the High Court was not justified in
quashing the renewal of the quarry lease in favour of the appellant.
The learned counsel for the State Government supported the
view canvassed by the appellant’s counsel.
The learned counsel for the fourth respondent contended that
there was no such relaxation at all as evident from the impugned
order. He pointed out from the recital in the impugned order that what
had been relaxed was only "prescribed time limit for disposal of the
application as provided in proviso to sub-rule (3) of Rule 6 of the
OOMC Rules" in exercise of the State Government’s power of
relaxation under Rule 31. The learned counsel pointed out that Rule
6(3) was only the rule which laid down the period within which the
application by the competent authority is required to be disposed of.
As a matter of fact, sub-rule (3) of Rule 6 was omitted w.e.f. 8.2.1994
and was not even in existence on the date on which the State
Government made the impugned order. He also alleged that
application for renewal was granted contrary to the provisions of Rule
9 and was vitiated by malafides.
We are unable to accept the contention of the learned counsel
for the 4th respondent that the action of the State Government was
vitiated by malafides. It is trite that plea of malafides has to be
specific and demonstrable. Not only this, but the person against whom
the malafides are alleged must be made a party to the proceedings and
given reasonable opportunity of hearing. We find no such attempt
made in the writ petition before the High Court. At the highest even
putting the most liberal construction on the writ petition, what was
alleged was contravention of the Rules and, consequently, legal
malafides and nothing beyond that. The argument of malafides must
therefore fail. Next, it is urged by the learned counsel for the
respondent that it is an elementary principle of law that an individual
shareholder of a company cannot be considered as equivalent to the
company, for company has a distinct legal personality. Consequently,
he contends that the application made by Jitendra Kumar Lohia could
not have enured to the benefit of the appellant company. According
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to him, Jitendra Kumar Lohia and the appellant being two distinct
legal entities, the assumption of the State Government, that the
application for renewal of the quarry lease could be treated as a
continuation of Jitendra Kumar Lohia’s application, was erroneous
and unsustainable in law. We are unable to accept this contention.
We have highlighted as to how the State Government and Jitendra
Kumar Lohia treated the application for renewal of quarry lease made
by Jitendra Kumar Lohia as enuring for the benefit of the appellant
company. If the State Government had treated them to be separate
legal entities, there was no question of imposing a condition on the
appellant that the transfer of the lease was granted on the specific
condition that Jitendra Kumar Lohia and his family members hold the
controlling interest in the company. The facts and circumstances belie
this contention of the learned counsel for the fourth respondent. It
cannot be accepted.
Learned counsel for the fourth respondent took us through the
provisions of Rule 9 and contended that there is contravention of the
proviso to Rule 9(3). In fact, we find no such contention urged or
accepted before the High Court as evidenced from its judgment. On
the contrary, the judgment of the High Court clearly holds that there
was no contravention of the proviso to Rule 9(3). The writ petition
succeeded only on the sole ground that there was contravention of
Rule 9(2) inasmuch as the application of a renewal made by the
appellant company was not made at least 90 days before the expiry of
the lease. Barring this contention, nothing else seems to have
appealed to the High Court.
The contention, in our view, has no substance for two reasons.
First, the State Government was justified in treating the appellant’s
application as continuation of the application for renewal of the lease
made by Jitendra Kumar Lohia. Secondly, the State Government had
enough powers to relax the provisions of the Rules "in the interest of
mineral development in deserving cases in such manner as they deem
proper". True, that the order of the State Government quotes a wrong
rule for relaxation, but, that, in our view hardly matters. As long as
the State Government had the power of relaxation, then irrespective
of any recitation, it must construed that the State Government has in
its discretion made the order by exercising its power of relaxation.
Looked at from this point of view, we find no substance in the
contention.
In the result, we are of the opinion that the High Court erred in
quashing the order No.5507/IV(E)(DS)SM 4/2003 dated 22nd May
2003, by which the quarry lease had been renewed in favour of the
appellant company.
Hence, this appeal is allowed. The impugned judgment of the
High Court is set aside and the State Government’s order dated
22.5.2003 is restored.
No order as to costs.