IMPORTANT POINTS
1. Rule 38A of the Tamil Nadu Minor Mineral Concession Rules, 1959, which vests the exclusive right to quarry sand, in the State Government, is held valid.
2. In regard to mining leases subsisting as on 2-10-2003, Rule 38A of the Tamil Nadu Minor Mineral Concession Rules is read down as terminating such leases in terms of the contract by six months, without assigning cause and without any liability to pay compensation.

Headnote:(i) Mines and Minerals (Development and Regulation) Act, 1957 — Sections 4A, 15 — Tamil Nadu Minor Mineral Concession Rules, 1959 — Rule 38A — Validity and scope — Rule 38A creating an exclusive right in the State to quarry sand — A public interest litigation was filed complaining about indiscriminate illicit quarrying of sand in riverbeds — High Court issued a direction to the State Government to constitute a High Level Committee — On considering its report State Government took a decision in public interest to stop quarrying of sand in Government lands and Ryotwari lands by private agencies and take upon itself exclusively, all sand quarrying activities in the State — Rule 38A came to be inserted in the Rules by Notification dated 1-10-2003 w.e.f. 2-10-2003 — Prior to insertion of the said Rule, State Government was granting quarrying leases in favour of private agencies which were continuing — With effect from 2-10-2003, State Government stopped all sand quarrying by private agencies — Writ petitions filed by the lessees/permission holders challenging Rule 38A — High Court upheld validity of Rule 38A by imposing conditions — Whether Rule 38A ought to be upheld unconditionally — Whether holders of existing leases and permissions should be protected till the expiry or termination of their leases/permissions as per law.
       Held : When the Act is read as a whole, the legislative intent is clear that a lease once validly granted can not be terminated prematurely without a notice and hearing. The reason is obvious. Exercise of power of termination will have civil consequences adversely affecting the interest of the lease-holders.(Para 19)
       It is not the case of the State that all the leaseholders have violated the terms of the lease or acted in a manner detrimental to environment. Learned counsel appearing for the State, in fact, fairly admitted that several leaseholders had carried on quarrying activities without violating the terms of lease and without causing environmental degradation. If any leaseholder had acted or acts in a manner likely to result in environmental degradation etc., it is always open to the State Government to terminate the lease after giving a hearing, as provided in section 4A(3).(Para 24)
       Section 4A(3) requires the grant of an opportunity of hearing only for premature termination of mining leases (and prospective licences with which we are not concerned). If anyone was carrying on quarrying of sand as on 2.10.2003 in whatsoever circumstances other than in pursuance of mining leases, there is no question of hearing them before stopping quarrying activities in pursuance of Rule 38A, as hearing is required only in regard to those holding subsisting leases. Therefore, all quarrying permits for sand stood terminated with effect from 2.10.2003. All quarrying by any person, other than those holding mining leases also ceased with effect from 2.10.2003. (Para 25)
       In regard to mining leases subsisting as on 2.10.2003, we have read down Rule 38A as terminating such leases in terms of the contract (lease deeds) by six months, without assigning cause and without any liability to pay compensation. Such of those writ petitioners (Respondents herein) whose leases were subsisting on 2.10.2003 (and whose activities were stopped with effect from that day) will be entitled to carry on the quarrying activities for a period of six months or for the actual unexpired period of the lease (as on 2.10.2003), whichever is less. This benefit will be available to even those who have orders of court for grant of mining leases, but where mining leases were not executed for one reason or the other. It is, however, made clear that the State Government is at liberty to prematurely terminate the leases for any of the causes mentioned in section 4A(2), by giving a notice and hearing under Section 4A(3), if they want to terminate any lease within the said period of six months. (Para 26)
       We, accordingly, allow these appeals in part. In place of the conditions stipulated by the Division Bench while upholding the validity of Rule 38A, we hold and direct as follows:
       (i)That part of Rule 38A which vests the exclusive right to quarry sand, in the State Government, is upheld.
       (ii)That part of Rule 38A which purports to terminate quarrying leases/permissions forthwith (from 2.10.2003) is read down in terms of Para 26 above.
       (iii)The provision in Rule 38A for refund of proportionate lease amount for the unexpired period of lease and unadjusted seigniorage fee, shall remain undisturbed.
       (iv)It is made clear that except to the limited relief as a consequence of reading down as per para 26 above, the respondents will not be entitled to any other reliefs which have been granted by the High Court. (Para 27)
       (ii) ADMINISTRATIVE LAW — Rules of Natural Justice — An act which is legislative in character, as contrasted from an executive act or a judicial/quasi judicial function, does not oblige the observance of rules of natural justice — Distinction between legislative acts and non-legislative acts — Premature termination of mining lease — Whether High Court was justified in holding that lease could not be terminated without giving a hearing to the concerned lessees/permission holders — (Yes) — Premature termination of lease u/s 4A of Mines and Minerals Act, after giving a hearing to the lessee is an executive act and not legislative act — Mines and Minerals (Development and Regulation) Act, 1957 — Section 4A. (Paras 15 and 17)
       (iii) ADMINISTRATIVE LAW — Delegated Legislation — Principles of natural justice — A delegated legislation, though legislative in character, will be invalid, on ground of violation of principles of natural justice, if the enabling Act under which the delegated legislation is made, specifically requires observance of the principles of natural justice for doing the act.(Para 18)

Judgement Key Points

Key Points: - The Tamil Nadu Rule 38A creates an exclusive right in the State to quarry sand (upholding its validity) while modifying the treatment of existing leases/permissions (p_26, p_27, p_75-77) (!) (!) (!) (!) . - Section 4A(3) requires notice and hearing before premature termination of mining leases; the Court read down Rule 38A to allow six months’ termination for subsisting leases with no compensation, rather than immediate termination, preserving a limited benefit to those leases as of 2-10-2003 (!) (!) (!) . - The decision allows existing leases to continue for up to six months or the unexpired lease period, whichever is less, with liberty to terminate earlier on notice and hearing under Section 4A(3) for environmental/other grounds (!) . - Hearing is required for termination of subsisting mining leases under Section 4A(3); Rule 38A’s blanket termination without hearing is invalid, and the Court saved the separable valid portion by reading it down (!) (!) . - The High Court’s conditions upholding Rule 38A were modified; the State’s appeals are allowed in part with limited relief and costs allocated (!) (!) . - Refund of proportionate lease amount and unadjusted seigniorage fee remains undisturbed (!) (!) . - The decision references and distinguishes legislative vs. executive actions in the context of delegated rule-making and natural justice principles (!) (!) (!) (!) .

What is the legality of Rule 38A: does it vest exclusive right to quarry sand in the State Government and under what conditions can existing leases be terminated?

How to determine whether Rule 38A’s provision for premature termination of mining leases without hearing complies with Section 4A(3) of the Mines and Minerals (Development and Regulation) Act, 1957?

What are the rights of existing leaseholders/permission holders as on 2-10-2003 in light of Rule 38A and the High Court/SC judgments?

JUDGMENT

Raveendran, J. — These appeals by special leave against the judgment dated 11.5.2004 of a Division Bench of the High Court of Madras in W.A. Nos.3241-42/2003 and connected cases, relate to the validity and scope of Rule 38A of the Tamil Nadu Minor Mineral Concession Rules, 1959 (for short the Rules) which reads as under :

"38-A. Quarrying of sand by the State Government:-

Notwithstanding anything contained in these rules, or any order made or action taken thereunder or any judgment or decree or order of any Court, all existing leases for quarrying sand in Government lands and permissions/leases granted in ryotwari lands shall cease to be effective on and from the date of coming into force of this rule and the right to exploit sand in the State shall vest with the State Government to the exclusion of others. The proportionate lease amount for the unexpired period of the lease and the unadjusted seigniorage fee, if any, will be refunded."

Background facts

2. We may briefly refer to the circumstances leading to the insertion of Rule 38A in the Rules. A public interest litigation (W.P. No.985/2000) was filed in the Madras High Court, complaining about indiscriminate illicit quarrying of sand in riverbeds. The High Court issued certain directions to curb illicit quarrying while disposing of the said writ petition. A contempt petition (Contempt Application No.561/2001) was filed complaining of non-implementation of the said directions by the State Government. In the said contempt proceedings, the High Court issued a direction to the State Government on 26.7.2002 to constitute a High Level Committee consisting of scientists, geologists and environmentalists to conduct a thorough scientific survey of the sand quarrying activities in rivers and riverbeds in the State and submit a report regarding the damage caused on account of indiscriminate illicit quarrying and to suggest the remedial measures. The High Court also suggested that a suitable regulatory legislation may be made by the State on the basis of the report of such Committee, and issued certain interim directions pending such legislation.

3. Accordingly, a High Level Committee was constituted which submitted a report detailing the extensive damage that had occurred on account of haphazard, irregular and unscientific manner of quarrying sand by the quarry leaseholders, thereby impairing smooth flow of water and causing damage to riverbeds, river banks as also the structures (like bridges and transmission powerlines constructed across rivers or imbedded on the riverbed) and drinking water systems branching from rivers, leading to ecological imbalances. It was found that the unauthorized use of Poclain machines for quarrying, and the tendency of lessees to extend quarrying activities beyond the leased area and the permissible depth, were the main causes for the devastating situation. The Committee suggested several measures to remedy the situation, one of which was to impose total prohibition on quarrying by private parties. On considering the said report, the State Government took a decision in public interest to stop quarrying of sand in Government lands and Ryotwari (private patta) lands by private agencies and take upon itself exclusively, all sand quarrying activities in the State. It is in this background, Rule 38A came to be inserted in the Rules by Notification dated 1.10.2003 with effect from 2.10.2003.

4. Prior to insertion of the said Rule, the State Government was granting quarrying leases, the term of such leases being three years or less, under Rule 8 of the Rules. It is stated that as on 2.10.2003, private agencies were holding 135 sand quarrying leases granted by the State Government and 52 permissions for sand quarrying in Ryotwari lands. Out of these, 19 were to expire in 2003, 102 were to expire in 2004, 33 were to expire in 2005 and the remaining 33 were to expire in 2006; and in addition, sand quarrying was carried on by some others on the authority of o

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2006 Supreme(SC) 264

What is the legality of Rule 38A: does it vest exclusive right to quarry sand in the State Government and under what conditions can existing leases be terminated?

How to determine whether Rule 38A’s provision for premature termination of mining leases without hearing complies with Section 4A(3) of the Mines and Minerals (Development and Regulation) Act, 1957?

What are the rights of existing leaseholders/permission holders as on 2-10-2003 in light of Rule 38A and the High Court/SC judgments?

Cases Referred (10)