R IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF AUGUST 2017 PRESENT THE HON’BLE MR. SUBHRO KAMAL MUKHERJEE, CHIEF JUSTICE AND THE HON’BLE MR.JUSTICE P.S.DINESH KUMAR Writ Petition No 7335 of 2017 (GM-MM-S) BETWEEN:
M/s Deepchand Kishenlal, a registered partnership firm, Having its office at No.49, 3rd Floor, West Wing, Khanija Bhavan, Race Course Road, Bangalore – 560 001.
Represented by its Partner, Sri Basant Poddar,s/o Late K.P.Poddar, Aged about 57 years .. PETITIONER (By Sri Uday Holla, Senior Advocate, for Sri K.Dhiraj Kumar, Advocate) AND 1. The State of Karnataka, Represented by its Secretary, Department of Commerce and Industries, Vikasa Soudha, Bangalore – 560 001.
2. The Director, Department of Mines and Geology, No.49, Khanija Bhavana, Race Course Road, Bangalore-560 001. ..RESPONDENTS (By Sri A. S. Ponnanna, Additional Advocate General, for Sri V.G.Bhanuprakash, Additional Government Advocate) This Writ Petition is filed under Articles 226 and 227 of the Constitution of India praying to quash the order passed by respondent no.2 vide order dated 2.11.2016/28.11.2016 at Annexure-T.
This writ petition, having been heard and reserved, coming on for pronouncement of order, this day, Chief Justice pronounced the following:
O R D E R This writ petition is filed with a prayer to quash an order dated November 2, 2016 passed by the Director, Department of Mines and Geology, calling upon the petitioner to pay a sum of ` 215.75 Crores, on the premise that the petitioner had raised iron-ore mineral unlawfully.
2. We have heard Mr.Uday Holla, learned senior advocate for the petitioner and Mr.A.S.Ponnanna, learned Additional Advocate General for the respondents.
3. Briefly stated the facts of the case are, on July 6, 1954, a mining lease No.236 was granted in favour of Mysore Stoneware and Potteries Limited (MSPPL) in respect of 640 acres of land in Chikkanayakanahalli Taluk, for extracting manganese ore and kaolin. The said lease was transferred in favour of Deepchand Kishenlal, the petitioner, under a Deed of Transfer and Assignment dated March 21, 1961. The State Government issued a Notification dated June 20, 1962, permitting the petitioner to extract iron ore from the said land.
4. On June 26, 1962, a registered lease deed was executed by the Governor of Mysore in favour of the petitioner leasing the aforementioned land till July 5, 1974.
5. Before the expiry of lease, the petitioner on July 2, 1973 applied for renewal of the said mining lease in respect of reduced area of 310 acres out of 640 acres. As renewal was not considered by the State Government, a revision was filed by the petitioner before the Central Government and as per order dated August 18, 1979, the Central Government directed renewal of the lease.
6. Despite the order passed by the revisional authority, the State Government did not renew the lease for a long time. Later, on April 11, 2002, a survey and demarcation of the land was undertaken and a report was submitted to the Office of the Director of Mines and Geology. It is only, thereafter, that a registered lease deed dated April 1, 2004, came to be executed granting lease of 310 acres of land in favour of the petitioner. The lease deed states that the property is leased for a term of 20 years commencing from April 27, 2002.
7. After execution of the renewed mining lease, the petitioner continued his mining operations. He has paid royalty on the mineral extracted by him as seen from the audit reports and ‘inspection and verification reports’ for different years from 2001-02 ending with report dated September 29, 2010 for the year 2009-10, of the Deputy Director of Mines and Geology.
8. During 2007, the State Government referred various issues concerning illegal mining in Karnataka to the Lokayukta. On July 27, 2011, the Lokayukta submitted a report to the State Government. The said report, indicted the petitioner of illegal mining operation and recommended recovery of ` 215.75 crores towards the value of the iron-ore extracted between the period 2003 to 2008. The report did not indicate as to what has been the basis on which the amount of ` 1500/- per MT was arrived at for computing the alleged loss. The Director of Mines and Geology, however, issued a show cause notice dated June 22, 2012, to the petitioner to show cause as to why an amount of ` 215.75 crores be not recovered from the petitioner. A reply was sent by the petitioner to this notice denying its liability.
9. In the meanwhile, on April 18, 2013, Writ Petition (Civil) No.562 of 2009 filed before the Supreme Court of India by Samaja Parivarthana Samudaya, came to be allowed and all mining leases which fell under ‘C’ category were directed to be cancelled. Pursuant thereto, the State Government by their Notification dated September 12, 2013, have cancelled various leases including the lease granted in favour of the petitioner.
10. Mr. Uday Holla, learned senior advocate contended that, in W.P.No.562 of 2009, an application- I.A.No.140 of 2013 was filed by Samaja Parivarthana Samudaya to direct the State Government to assess the quantum of loss caused to the exchequer on account of mining carried out by Category A, B, C lease holders. The Supreme Court of India while passing the final order dated April 18, 2013, directing cancellation of leases falling within ‘C’ Category, has dismissed all pending interlocutory applications including the said I.A.No.140 of 2013. He, further, contended that, subsequently another I.A.No.185 of 2013 was filed by the said Samaj Parivarthana Samudaya before the Supreme Court of India in W.P.No.562 of 2009. The prayer in the said application included a direction to the State Government to implement the recommendation of the report of the Lokayukta dated July 27, 2011, recommending recovery of a sum of ` 215.75 crores from the petitioner. The Supreme Court of India dismissed the said application on August 26, 2013 with liberty to file a review petition.
11. After dismissal of I.A.No.185 of 2013, Samaja Parivarthana Samudaya filed a review petition registered as Review Petition No.2800 of 2013, seeking review of the final order dated April 18, 2013 in W.P.No.562 of 2009. In the said review petition, it was stated that no order was passed on their application I.A.No.140, which was for a direction to assess the quantum of loss caused to the public exchequer on account of mining activity carried out in ‘C’ category mines. In the application, there was, also, a reference to the petitioner and the quantum of iron ore extracted by the petitioner and it was prayed that an order should be passed for recovery of damages on account of extraction of iron ore. This review petition was, also, dismissed by the Supreme Court of India on July 29, 2015.
12. On May 13, 2014, the Director of Mines and Geology passed an order holding that the objections of the petitioner to the show cause notice dated June 22, 2012, was not tenable and that the petitioner has to pay a sum of ` 215.75 crores. The order was based on the report of Lokayukta dated July 27, 2011.
13. This order of the Director was challenged by the petitioner in earlier writ petitions in W.P.Nos.50418-420 of 2015 and this court quashed the order of the Director of Mines and Geology and remanded the matter. Subsequent thereto, the Director passed a similar order holding that the petitioner is liable to pay a sum of ` 215.75 crores. This demand notice is challenged in this writ petition.
14. Mr. Holla, adverting to the earlier show-cause notice and the impugned order, contended that, in the light of the orders passed by the Supreme Court of India, it was definitely not open to the Director of Mines and Geology to seek recovery of value of the iron-ore extracted, by holding that the extraction of iron-ore was illegal.
15. The contention of Mr. Ponnanna, learned Additional Advocate General, is that the lease deed is for a period of 20 years from July 5, 1974, which expired on July 5, 1994 and, therefore, the extraction of iron ore during the period 2003 to 2008 was illegal and, thus, the order of the Director is proper. In reply, Mr.Udaya Holla, learned Senior Advocate appearing for the petitioner, submitted that the lease deed, which is a registered one specifically states that the lease is for a period of 20 years from April 27, 2002.
16. We have carefully considered the submissions of the learned advocates for the parties.
17. Indisputably, the order impugned herein, is to recover the value of mineral allegedly transported illegally during the period 2003 to 2008. The revised audit reports (Annexure ‘K1’), prepared by the Deputy Director, Mines and Geology, Tumakuru for the years 2003-04 and 2004-05 indicate that the petitioner had made excess payments of royalty during the said financial years. The communication dated September 12, 2006, (Annexure ‘K2’) by the Deputy Director of Mines and Geology, Tumkuru, indicates that the accounts for the year 2005-06 were verified on May 20, 2006 and the petitioner was called upon to pay the balance royalty amount. Similarly, communications dated October 24, 2007 and July 23, 2008, by the Deputy Director of Mines and Geology, Tumkuru (Annexures ‘K3’ and ‘K4’) also indicate the mine accounts were verified for the years 2006-07 and 2007-08. Persual of these audit reports, lead to an irresistible inference that the Department of Mines & Geology was fully aware of the mining operations carried on by the petitioner during the material period, that is, 2003-08. The Department of Mines and Geology has audited the ‘mine accounts’ for all these years and collected the royalty on the mineral extracted by the petitioner. Therefore, the very basis of allegation of illegal mining, propounded by the respondent-State is preposterous and far too fragile to be countenanced.
18. The claim for the amount of ` 215.75 crores is based upon the recommendation of Lokayukta. This Court in M.A.Parthasarathy vs. The Special Deputy Commissioner, Bangalore District and others reported in ILR 2009 KAR 1940 held that Lokayukta has power to investigate the complaints only against the public servants and not against private persons and quashed the order passed by the Lokayukta, which held that there was encroachment of land by a private person. It was held that the Lokayukta could conduct investigation in respect of complaint against a public servant defined under the Karnataka Lokayukta Act, 1984.
19. The lease deed is produced as Annexure-H to the writ petition. It indicates that, it is for a period of 20 years from April 27, 2002. In the statement of objections, filed on behalf of the respondents, it is contended that the date of commencement of lease was wrongly recorded by pleading thus:
“14. It is submitted that at Annexure-H the mining lease granted to the petitioner was from 05.07.1974 to 04.07.1994. The petitioner has extracted Ore during the period for which there is no valid mining lease held by the petitioner. Hence, the impugned order passed by the respondents are in accordance with law.
15. It is submitted that there seems to be some error committed at Annexure-H wherein it is stated that the lease granted to the petitioner commences from 27.04.2002. However, the said entry is erroneous the mining lease granted to the petitioner expired as on 04.07.1994 and there has been no extension or renewal of the lease to the petitioner subsequent to 04.07.1994.”
(Emphasis supplied) 20. The mining lease is a registered document. Clause 9 of the Lease Deed, also, indicates that the lease is for a future period as the stamp duty is calculated on the basis of anticipated royalty. If the lease had, already, expired by the time the registered lease deed was executed, royalty would have been computed and stamp duty paid on the said amount. On the contrary, stamp duty is paid on the lease deed on an anticipated royalty, which is a future event. The Department of Mines & Geology have permitted mining of iron-ore and collected the royalty for the period subsequent to the date of execution of renewed mining lease. Therefore, the argument, that a wrong date was recorded in the mining lease is untenable and noted only to be rejected.
21. It was also urged on behalf of the respondents that, on an earlier occasion, the petitioner had moved this Court seeking directions for renewal of lease from 1994, and therefore, it must be construed, that he had rightly understood that the lease period was only between 1974 to 1994. We have considered this argument also. In W.P.No.562 of 2009, Supreme Court of India, has taken note of the fact that several of Category ‘C’ mines were being operated without requisite clearances or even in the absence of a mining lease by recording thus:
“44. The precise extent of illegal mining that took place in the three districts of Karnataka have been noted in detail in an earlier part of this order (para 23). The same, therefore, will not require any repetition. Illegal mining apart from playing havoc on the national economy had, in fact, cast an ominous cloud on the credibility of the system of governance by laws in force. It has had a chilling and crippling effect on ecology and environment. It is evident from the compilation submitted to the Court by the CEC that several of the Category ‘C’ mines were operating without requisite clearances under FC Act or even in the absence of a mining lease for a part of the area used for mining operations. The satellite imageries placed before the Court with regard to environmental damage and destruction has shocked judicial conscience. It is in the light of the above facts and circumstances that the future course of action in respect of the maximum violators/polluters, i.e., Category ‘C’ mines has to be judged. While doing so, the Court also has to keep in mind the requirement of Iron Ore to ensure adequate supply of manufactured steel and other allied products.”
(Emphasis supplied) 22. Thus, even if the argument advanced on behalf of the State that the lease was between 1974 and 1994, is accepted hypothetically, then the petitioner, shall have to be classified as, a minor operating in the absence of a mining lease. Such a contingency has been considered by the Supreme Court of India and the recommendations contained in paragraph No: VI & VII of CEC’s report dated February 03, 2012 with regard to Category ‘C’ mines have been accepted. The relevant portion of the direction reads as follows:
“(7) The recommendations contained in paragraphs VI and VII (Pg. 56 to 57) of the CEC Report dated 3.2.2012 are accepted, meaning thereby, the leases in respect of “C” Category mines will stand cancelled and the recommendations of the CEC (para VII Pg. 56) of Report dated 3.2.2012 with regard to the grant of fresh leases are accepted.”
23. The recommendation of CEC (VI & VII) referred to by the Supreme Court of India, read as follows:
(VI) In respect of mining leases falling in “CATEGORY-C” (details are given in Annexure-R11 to this Report) it is recommended that (a) such leases should be directed to be cancelled/determined on account of these leases having been found to be involved in substantial illegal mining outside the sanctioned lease area (b) the entire sale proceeds of the existing stock of iron ore of these leases should be retained by the Monitoring Committee and (c) the implementation of the R & R Plan should be at the cost of the lessee;
(VII) the area of the mining leases falling in the “Category-C”, after cancellation of the mining leases may be directed to be allotted/assigned through a transparent process of bidding to the highest bidder (s) from amongst the end users. The floor price for this purpose should be fixed on the basis of the market value of the permissible annual production of the iron ore during the period of the agreements/lease period. The iron ore produced from such mines should be used for captive use only and no sale/export will be permissible. The detailed schemes in this regard should be prepared and implemented after obtaining the permission of this Hon’ble Court.”
A careful perusal of the above shows that, the recommendations of CEC, do not include recovery of cost of mineral attempted by the State through the impugned order.
24. Further, respondents’ argument, demonstrably, defeats logic also. If petitioner’s lease was not in force as on April, 18, 2013, the question of Supreme Court of India cancelling the said lease would not arise. Similarly, if the lease of the petitioner was not in force as on September 12, 2013, the question of State Government cancelling the said lease, also would not arise.
25. The impugned order of the Director of Mines and Geology is equivocal in nature. In one breath, it states that, pursuant to directions by the Supreme Court of India, the State Government have cancelled as many as 51 leases including petitioner’s lease. This is a clear indicator that the respondents’ understanding was unambiguous, that, the lease was in force as on September 12, 2013, on which date, the respondents cancelled the lease. In the other breath, it states that, a clerical error has crept into the lease deed and the starting date mentioned therein has been mistakenly shown as April 27, 2002 instead of July 5, 1974. If this is accepted, then, the lease could not have been not in existence during 2003 to 2008, the period when alleged illegal mining was carried on. But, the preamble in the impugned order contains a contrary recital that the petitioner’s lease was cancelled pursuant to the directions issued by the Supreme Court of India. These two stands are contradictory to each other and mutually antithetical and, therefore, cannot co-exist. Suffice to state that, the respondents’ stand is wholly incomprehensible.
26. Indubitably, the impugned order has stemmed out of the recommendations made by the Lokayukta. In I.A.No.185 of 2013, the petitioner in W.P.No.562 of 2013 sought for a direction to the State Government to implement the recommendations contained in the two reports of the Lokayukta dated December 18, 2008 and July 27,2011. The said application was not entertained, but liberty was granted to file a review petition. The review petition was filed and the same stood dismissed by order dated July 29, 2015. Therefore, when the Supreme Court of India did not deem it necessary to saddle the persons, who were lessees and whose leases have been cancelled, with the market value of the iron- ore extracted by them till the period the lease was cancelled, it was definitely not permissible for the Director of Mines and Geology to do so.
27. Therefore, the report of Lokayukta cannot be the basis for the amount claimed since Lokayukta has no jurisdiction against any private individual and the Supreme Court of India has rejected the plea for saddling the petitioner with the amount assessed by the Lokayukta.
28. Incidentally, there is another aspect, that is, the right of the state to unilaterally compute and collect the value of iron- ore. The State has leased the mine to the petitioner. According to it, it has assessed the damage caused to it and is trying to recover the same. The Supreme Court in State of Karnataka vs. Shree Rameshwara Rice Mills, Thirthahalli reported in 1987(2) SCC 160, held that the powers of the State under an agreement entered into by them with a private person for assessment of damages for breach of conditions and recovery of damages would stand confined only to those cases where the breach was admitted or not in dispute. The interest of justice and equity required that, where a party to a contract disputed the committing of any breach of conditions, the adjudication should be by an independent authority and not by the other party to the contract. Thus, a party to an agreement could not be an arbitrator in his own case, when there has been a dispute regarding breach of contract. This court in the case of Jayanna and Brothers vs. State of Karnataka and others, reported in 1986(2) Karnataka Law Journal 143, also, held to a similar effect that it was only the competent Civil Court, which could assess the claim and not by the very authority, who asserted the claim for and on behalf of the State.
29. It is the duty of the Government to act and deal in a fair manner. State Government were party before the Supreme Court of India. Therefore, they shall be estopped from taking recourse to the report submitted by the Lokayuktha to collect any sum by whatever name called. The Government machinery had a duty to think about the pros and cons before issuing the aforementioned notice. The State mechanism must reasonably be exercised to avert harassments to individuals.
30. Viewed from any angle, the order impugned is unsustainable especially having regard to the fact that the Supreme Court of India has negatived such a claim in its order passed on I.A.No.140, I.A.No.185 and the review petition, in Writ Petition (Civil) No.562 of 2009.
31. In view of our discussions above, we allow the writ petition by quashing the order passed by respondent no.2 dated November 02, 2016/November 28, 2016 being Annexure-T to the writ petition.
32. In view of disposal of the writ petition, the pending interlocutory applications do not survive for consideration and are, also, disposed of.
33. We make no order as to costs.
Sd/- CHIEF JUSTICE Sd/- JUDGE Dkb/-cp*