M/S Medley Minerals India
Ltd. Vs. State of Orissa
& Others  Insc 551 (17 September 2004)
Shivaraj V. Patil & B.N.
Srikrishna 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 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
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 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
"(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
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 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
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 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
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
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
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 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
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.