1. Mining lease granted by auction — Dispute over applicability of general lease rules and mandatory nature of lease period and extension under Rajasthan Minor Mineral Concession Rules, 1955. (Para 1 , 2 )
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1965 Supreme(SC) 87
SUPREME COURT OF INDIA
P.B. GAJENDRAGADKAR, C.J.I., RAGHUBAR DAYAL AND V. RAMASWAMI, JJ.
State of Rajasthan and others, Appellants
Versus
M/s. Harishanker Rajendrapal, Respondent.
Civil Appeal No. 21 of 1963.
Advocates appeared
Mr. G. C. Kasliwal, Advocate General, for the State of Rajasthan and Mr. M. M. Tiwari, Senior Advocate (M/s K. K. Jain and R. N. Sachthey, Advocates, with them), for Appellants; M/s. Rameshwar Nath, S. N. Andley and P. I. Vohra, Advocates of M/s. Rajinder Narain and Co., for Respondent.
Advocates:
G.C.KASLIVAL, K.K.JAIN, M.M.TIVARI, P.I.VOHRA, R.N.SACH, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.N.ANDLEY
G.C.KASLIVAL, K.K.JAIN, M.M.TIVARI, P.I.VOHRA, R.N.SACH, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.N.ANDLEY
Rules governing essential incidents of mining leases apply regardless of the grant method. The term "may" in provisions specifying lease duration is mandatory ("shall"), requiring a five-year term unless the lessee requests a shorter period, ensuring investment guarantees are meaningful.
Headnote:(A) Rajasthan Minor Mineral Concession Rules, 1955 - Rules 19, 26, 27, 29, 30, 31, 32, 33, 41, 42 - Mines and Minerals (Regulation and Development) Act, 1948 - Section 5 - Applicability of general rules to leases granted by auction - Provisions dealing with essential incidents of mining leases, such as restrictions on grants, boundaries, transfer of leases, and the period of the lease, apply to leases granted by auction or tender if the specific chapter governing such grants is silent on those matters. (Paras 6, 16, 17)
(B) Interpretation of "may" as "shall" - In rules governing the period of mining leases, the word "may" is construed as "shall" to make the provision mandatory. The lease period must be five years unless the applicant desires a shorter period. (Para 20)
(C) Extension of mining lease - The power to extend a lease is mandatory if the lessee desires extension and meets the requisite investment guarantees. The first extension must be for five years to ensure that the requirement for investment in machinery and equipment within three years is meaningful. (Paras 21, 22)
Facts of the case:
A mining lease for extracting minerals was granted via auction for a period of less than five years. The lessee applied for an extension and renewal of the lease in accordance with the applicable rules. The state government refused the full extension, granting only a few months. The lessee challenged this in the High Court, asserting that the rules requiring a five-year lease period and subsequent extensions were mandatory and applicable to leases granted by auction.
Findings of Court:
The court found that the general rules governing the grant of mining leases apply to those granted by auction where the specific auction-related rules are silent. It further held that the provision specifying a five-year lease period is mandatory, and the government is bound to extend the lease for five years if the lessee requests it and provides the necessary investment guarantees.
Issues: (1) Whether the provisions of the chapter dealing with the general grant of mining leases apply to leases granted by auction or tender. (2) Whether the government has the discretion to fix a lease period or extension period shorter than five years under the relevant rules.
Ratio Decidendi: The court ruled that rules concerning the essential incidents of a lease are of general application. The word "may" in the context of the lease period must be read as "shall" to avoid redundancy and to give effect to the investment guarantee clause, which would be illogical if the extension period were shorter than the investment window.
Result: Appeal dismissed.
Legal Category Hierarchy
Table of Contents
2. Applicability of Chapter IV rules to auction-based leases under Chapter V — Whether the power to extend lease periods under Rule 30 is discretionary or mandatory. (Para 2 , 4 )
3. Chapter IV provides essential incidents of mining leases applicable to Chapter V grants — Rule 30's terminology implies mandatory periods to avoid redundancy and ensure investment security. (Para 6 , 7 , 9 , 11 , 12 , 14 , 15 , 16 , 17 , 18 , 20 , 21 , 22 )
4. General rules governing mining leases apply to auction-based grants where specific rules are absent — Rule 30 mandates a five-year lease period and extension unless otherwise desired. (Para 17 , 20 , 21 , 22 )
5. Appeal dismissed — State directed to renew the mining lease for five years with an option for further renewal subject to Rule 30 conditions. (Para 25 )
6. Do general rules for granting mining leases apply to leases granted via auction or tender?
Yes. Where rules for auction-based grants (Chapter V) are silent on essential incidents of a mining lease, the general provisions (Chapter IV) apply to ensure comprehensive regulation. (Para 6 , 16 , 17 )
7. Is the five-year initial period for a mining lease under Rule 30 mandatory?
Yes. The word may is construed as shall, making the five-year period mandatory unless the applicant specifically desires a shorter period. (Para 20 )
8. Is the government obligated to extend a mining lease under the proviso to Rule 30?
Yes. The government must extend the lease for five years if the lessee desires it and provides the required investment guarantee in machinery and equipment. (Para 21 , 22 )
9. What is the requirement for a lessee to obtain an option for a second lease extension?
The lessee must guarantee investments in machinery and equipment totaling at least 20 times the annual dead-rent within three years from the grant of the first extension. (Para 19 , 21 , 22 )
Judgement
RAGHUBAR DAYAL, J. : This appeal, on certificate granted by the Rajasthan High Court, raises the question of the applicability of the provisions of Chapter IV and thereby of R. 30 of the Rajasthan Minor Mineral Concession Rules, 1955, hereinafter called the rules, to the grants of mining leases under the provisions of Chapter V of the rules.
2. The facts leading to this appeal are briefly these. The respondent obtained the mining lease for extracting sand-stone from the mines in certain area from the Government of Rajasthan in 1956. The lease was granted as a result of auction. The period of the lease was from April 1, 1956 to July 31, 1959. The respondent applied for extension of the period upto two years in view of the mandatory nature of the main provision of R. 30 and simultaneously also applied for the renewal of the lease for a further period in accordance with the provisions of the proviso to R. 30. The first prayer was refused and the State Government extended the period of the lease at first by six months and later by another two months. The respondent thereafter filed a writ petition under Art. 226 of the Constitution in the High Court and prayed for issue of a writ of mandamus directing the striking down of the order of the Government renewing the lease for 8 months and directing the State of Rajasthan further to extend the lease in the first instance for two years from July 30, 1959 to bring it in conformity with the period of lease specified in R. 30 and to renew, after the expiry of such extended period, for a further period of 5 years under R. 30 of the rules. The State of Rajasthan, appellant, contested the petition on the ground that the provisions of Chapter IV of the rules did not apply to the grant of mining leases by auction or tender provided for by Chapter V of the rules and that in any case the initial period short of 5 years must be deemed to have been at the desire of the respondent and that any further extension of the period of the lease under the proviso was in the discretion of the Government and, consequently, the respondent could not claim to have the period of the lease extended for a period of 5 years.
3. The High Court held that the provisions of Chapter IV of the rules were applicable as far as possible to the grant of mining leases by auction under Chapter V, that though the State Government had to give a lease for 5 years in view of R. 30, yet the shorter period of the lease in favour of the respondent must, in the circumstances, be deemed to have been at his request and that the respondent was entitled to an extension of the lease by a further period of 5 years in accordance with the provisions of the proviso. It, therefore, directed the State Government to renew the lease for a period of 5 years from the expiry of the original lease with option of further renewal, if so desired, by another period of 5 years subject to the conditions mentioned in R. 30. It is against this order that this appeal has been filed.
4. Two questions are raised for the appellant in this Court. The first is that the provisions of Chapter IV of the rules do not govern the grant of mining leases by auction under the provisions of Chapter V of the rules. The other is that the proviso to R. 30 give discretion to the State Government to extend the period of the lease for any period not exceeding 5 years and that it is not mandatory that the State Government must extend the lease by a period of 5 years as held by the High Court. We are of opinion that the High Court has come to a right conclusion on these two points.
5. Section 5 of the Mines and Minerals (Regulation and Development) Act, 1948 (Act LIII of 1948) empowered the Central Government to make rules, by notification in the official Gazette, for regulating the grant of mining leases or for prohibiting the grant of such leases in respect of any mineral in any area. In the exercise of its power the Central Government framed the Mineral Concession Rules, 1949
