Kabini Minerals Pvt. Ltd. and ANR Vs. State of Orissa & Ors  Insc 653 (18
Arijit Pasayat & R.V.
Raveendran Arijit Pasayat, J.
Appellants call in question legality of the judgment rendered by a Division
Bench of the Orissa High Court dismissing their challenge to the decision of
the State of Orissa in the Department of Steel and Mines, granting lease over
an area of 6.90 acres in the villages Bada Dalma and Jangia in Mayurbhanj
District in favour of respondent No.4 and consequentially rejecting appellant's
No.1 application dated 7th October, 2002.
Factual position in a nutshell is as follows:
Appellant No.1 applied for quarry lease to the Secretary, Government of
Orissa Steel and Mines Department, in Form A of the Orissa Minor Mineral
Concession Rules, 1990 (in short the 'Rules') for "decorative stone"
for a period of 10 years. On 25.10.2002, the Managing Director of the appellant
No.1-Company entered into an agreement with one R.
Narayan Swami for purchase of land measuring 1.134 acres in village Ambagan
in the District of Ganjam to set up a cutting and polishing unit for decorative
stones. On 26.10.2002 the Mining Officer, Baripada Circle, Baripada issued Form
B to appellant No.1 and confirmed the receipt of its quarry lease application
dated 7.10.2002. On 2.12.2002 appellant No.1 placed orders with Metcons
Ltd. for supply of machineries for setting up the cutting and polishing unit
for decorative stones. On 5.12.2002 respondent No.4 applied for a quarry lease
in Form A for decorative stones for a period of 10 years over an area of 6.90
acres. On 28.1.2003 respondent NO.4 wrote a letter to the Director of Mines
regarding purchase of sick unit i.e.
M/s Valley Granites (P) Ltd. from the Orissa State Financial Corporation (in
short the 'Corporation') and requested consideration of its quarry lease
application dated 5.12.2002. On 7.2.2003 appellant No.1 vide its letter of even
date wrote to the Principal Secretary to the Government, Department of Steel
and Mines informing him regarding the agreement to purchase land and placement
of orders for machineries of proposed unit. On 4.6.2003 the State Government
took a decision to grant the quarry lease in question in favour of respondent
No.4. Writ Petition No.5994 of 2003 was filed by the appellants before the
Orissa High Court questioning the decision of the Government to grant quarry
lease in favour of respondent No.4. By the impugned judgment dated 10.2.2004
the writ petition was dismissed. The High Court held that the case of
respondent No.4 was covered by Rule 6(6-a)(i) of the Rules and it had priority
over the appellant No.1. Said judgment as noted above is the subject matter of
challenge in this appeal.
According to learned counsel for the appellant, the view of the High Court
is clearly erroneous. Undisputedly, the appellant No.1 had filed the
application for the quarry lease earlier and his case was to have precedence
over that of respondent NO.4. Merely because the respondent No.4 had purchased
a sick unit which was not functional, priority under Rule 6 (6-a)(i) was not
available to it. It was submitted that no reasons were indicated as to why and
under what circumstances respondent No.4 could have priority vis- a-vis
In response, learned counsel for the State and respondent No.4 submitted
that the crucial expression in sub-rule (6-a)(i) of Rule 6 is "who has
already set up an industry". Undisputedly, the unit which was taken over
by respondent No.4 was engaged in the processing of the concerned minor
mineral. Therefore, rightly the Government decided to give priority to
respondent NO.4. It was further submitted that appellant No.1 has not even
established that it was covered by Rule 6(6-a)(ii) and, therefore, was
considered to be a person who belonged to the residual category i.e. Rule 6
In order to resolve the controversy it would be appropriate to take note of
Rule 6 of the Rules which reads as follows:
"6. Disposal of the application- (1) All applications received by the
competent authority shall be entered in the Register of Applications for quarry
leases which shall be maintained in Form 'C' appended to these rules;
(2) As soon as an application is received, it shall be acknowledged to the
applicant in Form 'B'. If the application is refused, an intimation which would
contain the reasons for refusal, shall be sent to the applicant;
(3) x x x x (4) No application shall be granted unless the applicant submits
the income-tax and Sales Tax clearance certificates in original or non-assessment
certificates in original;
(5) Subject to the provisions of sub-rules (6) and (6-a), where two or more
persons have applied for a quarry lease in respect of same land or area, the
applicant whose application was received earlier shall take precedence in
consideration for the grant over an applicant whose application was received
(5-a) Notwithstanding anything contained in sub-rule (5), if the State
Government is of the opinion that in the interest of mineral development, it is
necessary to do so, it may for the reasons to be recorded in writing grant
quarry lease in preference to the applications made earlier.
(6) Priority shall be given to the applicants in the following order,
(i) co-operatives of artisans using the minor mineral as raw material;
(ii) a person who has been operating an industry based on the minor mineral
applied for or, having completed all other formalities, would be able to
operate it if the lease is granted;
(iii)a person who is the raiyat of the land;
(iv) any other category.
(6-a) Notwithstanding anything contained in sub-rule (6), in respect of all
types of rocks used for decorative, industrial or export purpose including
dimension stones the priority shall be in the following order, namely:
(i) a person who has already set up an industry for processing of such minor
minerals in the State;
(ii) a person who has a definite plan for setting up of an industry in the
State processing of such minor minerals if he has furnished a copy of his
project report on the proposed processing industry and also a letter from the
financing institution, issued by the Chief Executive of such institution to the
effect that his project report is being appraised by such financing
Provided that in case of an applicant under category (ii), the initial lease
shall be granted up to fifty hectares and a letter of assurance can be issued
for grant of lease beyond fifty hectares before commencement of production on
confirmation received from the financing institution or the Deputy Director of
Mines or the Mining Officer.
(iii) a person who is a raiyat of the land;
(iv) any other category;
Provided that in the case of an applicant under category (iii) or (iv) the
lease may be granted by the competent authority on being satisfied that the
applicant shall be able to invest or arrange sufficient funds to carry on his
quarrying activity in a proper, skilful and workmen- like manner.
(7) No quarry lease/permit/auction for road metals including ballas and
ordinary boulders shall be granted within the area for which a lease has been
granted for quarrying rocks used for decorative, industrial and export purposes
including dimension stones." On a reading of the language of Rule 6 it is
clear that three types of precedence/priority are embodied in the provision.
First is a normal case where the application which has been received earlier is
given precedence over the latter application. An exception is carved out in
sub-rule (5-a) to the effect that if the State Government is of the opinion
that in the interest of mineral department it is necessary to do so it may for
reasons to be recorded in writing grant quarry lease in preference to the
applications made earlier. Sub-rule (6) deals with another category of
priority. In the present case Sub-rule (6) does not have much relevance.
Sub-rule (6-a) carves out a category of applicants who have applied for minor
minerals of the enumerated categories i.e. all types of rocks used for
decorative, industrial or export purpose including dimension stones. The
present case relates to priority as provided in the said Sub-rule. It provides
for priority to a person who has already set up an industry for processing of
such minor minerals. From the documents placed on record more particularly the
letter of the Corporation dated 23.5.2003 it is clear that M/s Valley Granites
(P) Ltd. was operating a running unit. The letter in clear terms states that
possession of the unit was handed over to respondent No.4 and the unit is being
run by the said Company.
Learned counsel for appellant No.1 submitted that in fact the unit taken
over by respondent No.4 was not functional and it had applied for permanent
registration certificate which was under process as is evident from the letter
of the District Industrial Centre, Mayurbhanj.
The question really is whether the unit had been set up and not whether it
was running. Undisputedly, prior to its take over by respondent No.4 the
industry had been set up and used for processing of decorative stones. Though,
it was contended by learned counsel for appellants that by the time the
applications were made the respondent No.4 had not taken over the unit yet that
really is of consequence.
Appellant No.1 had also not set up an industry. It had merely entered into
an agreement for purchasing the land and placed orders for the machineries. The
expression 'set up' has a definite connotation of its own.
The expression "setting up" means, as is defined in the Oxford
English Dictionary, 'to place on foot' or 'to establish', and is contradistinction
to 'commence'. The distinction is this that when a business is established and
is ready to commence business, and then it can be said of that business that it
is set up. But before it is ready to commence business it is not set up. (See
Commissioner of Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills Ltd.
(1967 (1) SCR 761).
In the said case, it was further held that the word "set up" is
equivalent to the word established but operations for establishment cannot be
equated with the establishment of the unit itself of its setting up.
The question of priority is to be adjudged only at the time of consideration
of the applications. Undisputedly, respondent No.4 had taken over the unit on
the date the applications were considered. Therefore, the stand of the
appellants that at the time the applications were made by respondent No.4 it
had not set up an industry is really without substance. As was observed by this
Court in Indian Metals & Ferro Alloys Ltd. v. Union of India and Ors. (AIR 1991
SC 818), since the applicant had already set up an industry for processing
minor minerals on the date of consideration of the application its claim for
priority was to be judged on the basis of the factual position on the date of
consideration of the applications.
It was submitted by learned counsel for the appellants that no reasons were
indicated by the authorities as to why the respondent No.4 was to have priority
over the appellants. Reference in this context is made to sub-rule (5-a) of
It is to be noted that in a case covered by sub-rule (5-a) the State
Government has to objectively assess as to whether in the interest of mineral
development preference is given to a person though he made the application
later. In such a case the Government's opinion that in the interest of mineral
development it is necessary to do so obviously has an objective angle involved
and, therefore, there is necessity to record reasons. So far as Sub-rule (6-a)
is concerned, there is no requirement indicated to record reasons. The fact
that priority is given to a person who has already set up an industry is itself
the reason for giving priority. Therefore, the enumeration of the order of
priority is itself the reason inbuilt in the process of consideration of the
applications. That itself is the foundation and forms the rational for the
It is not the case of the appellant that the order of priority is
irrational. That being so, stand of learned counsel for the appellants that
reasons were not recorded and, therefore, the action is vitiated is really of
Looked at from any angle, the appellants have not made out any case for
interference with the judgment of the High Court. The appeal fails and is
dismissed. Costs made easy.