IMPORTANT POINT
The Government cannot, by contract, hamper its freedom of action in matters concerning the welfare of the State.

Headnote:Andhra Pradesh Land Reforms (Ceiling on Agricultural Holdings) Act, 1973 - Sections 11, 14(6) - Mines and Minerals (Regulation and Development) Act, 1957 - Section 17A(2) - Mineral Concession Rules, 1960 - Leasing out lands for mining - Whether a decision to grant a mining lease constituted a fetter on the executive powers of the State Government to recall its decision in public interest - (No) - A Government cannot by contract hamper its freedom of executive action in matters which concern welfare of the State - Whether decision to cancel Government Order to execute a lease in favour of appellants for mining purposes stood vitiated by mala fides - (No) - Administrative Law.
       Held : G.O.No.1290 is not in the nature of the grant as alleged. In this connection we may recapitulate that the 1973 Act stood enacted to consolidate and amend the law relating to the fixation of ceiling on agricultural holdings and taking over the surplus lands. The land in question fell in the category of surplus lands. These surplus lands in Survey no.55/5 stood vested in the Government under the 1973 Act. These surplus lands were frozen under Prohibitory Order Book (POB). Subsequently it was detected that these lands contained galaxy granite. It was an important asset for the government. This aspect needed exploitation. Therefore, a proposal was made by the various authorities referred to above to release these lands from POB and to allow these lands to be exploited by private parties so that the State could earn revenue. Under the said 1973 Act these lands were meant for the benefit of the weaker sections. Therefore, they were kept under POB. However, in order to earn larger revenues the Government accepted the proposal to exploit the above-mentioned granite. This is done through G.O.No.1290. This was the primary purpose of the said G.O. Conferment of rights on the appellants was not the main purpose of the said G.O. In fact, as stated above, the said G.O.No.1290 was issued on 27.8.91 and within one month it was withdrawn on 18.10.91. As stated above, when the said G.O. was issued on 27.8.91 a public interest litigation, Writ Petition No.2356 of 1991, was filed in the High Court. On receipt of notices from the High Court in the said PIL the said G.O. was withdrawn.(Para 35)
       Creation of a right or interest in the property is different from transfer of those rights/interests. Whether a particular transfer is a grant or not is a mixed question of law and fact. (Para 38)
       Applying the above test to the facts of the present case, we are of the view that G.O.No.1290 dated 27.8.91 was not a grant but at the highest a decision of the State Government to execute a lease in favour of the appellants for mining purposes. There is no evidence of the appellants being put in possession, as claimed. The correspondence between the authorities, referred to above, makes it very clear that the District Collector took steps of writing to the Dy. Director of Mines and Geology in terms of the directions contained in the judgment of the learned Single Judge dated 18.10.96. That decision was subject to the decision of the Division Bench dated 27.6.97. In that decision it was made clear that the direction given in the order dated 18.10.96 to the District Collector to enter into land leases, did not disable the State Government from taking steps to cancel G.O.No.1290 in accordance with law.(Para 39)
       G.O.No.1290 was a decision to grant a mining lease in favour of the appellants. Even assuming for the sake of the argument that G.O.No.1290 constituted a grant by itself still, as held in the above decisions, such a grant cannot fetter or hamper future executive action/decision to revoke the grant in public interest. In the present case, the State Government detected an important source of revenue in the form of granite reserves. It is true that at one point of time the State Government decided to exploit the granite through private parties. However, later on with globalization, the State Government decided to go for global tender. This course of action was open to the State Government. The State Government decided to exploit the granite through its agency, namely, APMDC. The object was to earn commercial profits and revenue. APMDC was given liberty either to excavate the granite on its own or through joint ventures. The land belongs to the State Government. The granite belongs to the State Government. Therefore, a mere decision in G.O.No.1290 to grant mining leases to the appellants cannot hamper or fetter the power of the Government to exploit the resources through its own agency. In the circumstances, we do not find any mala fides in the decision of the Government reserving the area admeasuring Acs.61.50 for exploitation by APMDC, either on its own or through its joint ventures/partners.(Para 41)
       APMDC was entitled to enter into joint venture agreements with private partners. The alleged condition attached to the approval dated 29.10.99 was not to annul the transaction but only to render it subservient to the rights of the parties to the litigation. If the appellants were to succeed in the pending litigation they had the monetary claim against the joint venture. Therefore, in order to put the third parties to notice the above condition was incorporated. Such a condition did not make the approval a conditional approval and, therefore, it is not hit by Section 17A(2) of the 1957 Act.(Para 42)

JUDGMENT

Kapadia, J. - Leave granted in Special Leave Petitions.

2. In this batch of civil appeals by grant of special leave to appeal two questions arise for determination, namely, whether the G.O. No.1290 dated 27.8.91 constitutes a decision to grant or whether it constitutes a grant of mining lease per se and secondly whether the decision to revoke the said G.O. was actuated by mala fides in order to deprive the appellants of their mining rights.

For the sake of clarity we reproduce herein the facts in the case concerning M/s. Rita Industrial Corporation Ltd.–Appellant in C.A. Nos. ______ of 2006 @ S.L.P. (C) Nos. 20225-28 of 2005, they are as follows:

3. An area admeasuring Acs. 86.50 in Survey no.55/5 of Village Rajupalem-Lakshmipuram, Cheemakurthy Mandal, Prakasam District, Andhra Pradesh, being agricultural lands vested as surplus lands under Section 11 of the Andhra Pradesh Land Reforms (Ceiling on Agricultural Holdings) Act, 1973 (for short, "the 1973 Act") in the State Government. These lands were surrendered by the land holders under the said 1973 Act to the State Government. Later on, it was realised that these lands had galaxy granites and, therefore, proposals were made by the Collector, District Prakasam, the Commissioner of Land Reforms and the Director of Mines and Geology to lease out the said area for mining purposes. By G.O.No.1290 dated 27.8.91, the State Government accepted the above proposals and decided to appropriate by leasing out the lands for mining under Section 14 (6) of the 1973 Act; that out of the total area of the surrendered lands admeasuring Acs. 86.50, an area admeasuring Acs. 60 be leased out to the four appellants, namely, M/s. Rita Industrial Corporation Ltd., M/s. Upendra Granites, M/s. Acropolis Granites Ltd. and M/s. Pallava Granite Industries Ltd. and that each of the appellant was to be given Ac.15 for mining purposes. Under the said G.O.No.1290, the State Government stated that Acs. 15 each be leased out to the above four firms on the terms and conditions in G.O.No.876 dated 3.6.89 subject to the modification that the lease shall be for 10 years and the lessees shall pay Rs.600/- per acre, per annum for the first five years and Rs.900/- per acre, per annum for the remaining five years. By the said G.O. the Collector, District Prakasam, was requested to take further action by making proper allotment of land keeping in view the principle of contiguity.

4. The said G.O.No.1290 was challenged in a PIL. When the notice of the PIL was received by the State Government, G.O.No.1361 dated 11.9.91 came to be issued by which the earlier G.O.No.1290, stood cancelled. This cancellation was challenged by M/s. Rita Industrial Corporation Ltd. vide Writ Petition No.12386 of 1991 in the High Court.

5. By judgment and order dated 18.10.96, the learned Single Judge of the High Court held that the cancellation of G.O.No.1290 was ab initio void for want of hearing and reasons in support of the cancellation. By the said judgment of the learned Single Judge, the District Collector was directed to execute the surface lease in favour of M/s. Rita Industrial Corporation Ltd. in terms of G.O. No.1290. By the said judgment the Director of Mines and Geology was also asked to dispose of the application made by M/s. Rita Industrial Corporation Ltd. for mining lease in accordance with law.

6. Being aggrieved by the judgment, the State Government preferred Writ Appeal No.672 of 1997. Pending the said writ appeal, the Collector, District Prakasam, wrote to the Director of Mines and Geology stating that in view of the judgment dated 18.10.96 he had no objection to the grant of mining lease to the extent of Acs.15 in terms of G.O.No.1290. Similarly, by letter dated 18.2.97 addressed by Deputy Director of Mines and Geology to Director of Mines and Geology, a request was made to consider the mining lease application filed by M/s. Rita Industrial Corporation Ltd. in terms of the judgment of the learned single judge d

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2006 Supreme(SC) 1059

IMPORTANT POINTThe Government cannot, by contract, hamper its freedom of action in matters concerning the welfare of the State.

Cases Referred (2)

IMPORTANT POINT
The Government cannot, by contract, hamper its freedom of action in matters concerning the welfare of the State.