2006 (3) TMI 741 - SC - Indian Laws

Whether Rule 38A of the Tamil Nadu Minor Mineral Concession Rules 1959 constitutionally valid? Whether holders of existing leases (Government lands) and permissions (ryotwari lands) should be protected till the expiry or termination of their leases/permissions as per law?

Issues Involved:

1. Validity and scope of Rule 38A of the Tamil Nadu Minor Mineral Concession Rules, 1959.
2. Whether the State can terminate existing leases without providing a reasonable opportunity of hearing.
3. Conditions imposed by the High Court regarding the continuation of quarrying operations by existing leaseholders.

Detailed Analysis:

1. Validity and Scope of Rule 38A:

The appeals challenge the judgment upholding Rule 38A, which vests the exclusive right to exploit sand in the State Government. Rule 38A states, "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 High Court upheld the validity of Rule 38A, recognizing the State's right to create a monopoly in sand quarrying. The Supreme Court affirmed this, noting that the power of regulation vested in the State Government can extend to total prohibition of leases and exclusive exploitation by the State, as recognized in previous judgments (State of Tamil Nadu v. Hind Stone & Ors., Gem Granites v. State of Tamil Nadu).

2. Termination of Existing Leases Without Hearing:

The core issue was whether the State could terminate existing leases without a hearing. Section 4A(3) of the Mines and Minerals (Development and Regulation) Act, 1957 mandates that no order making a premature termination of a mining lease shall be made except after giving the holder of the lease a reasonable opportunity of being heard. The respondents argued that Rule 38A, to the extent it provides for termination or cessation of all existing leases/permissions without a hearing, is invalid.

The Court noted that the legislative intent of the Act is clear that a lease once validly granted cannot be terminated prematurely without notice and hearing. The Act provides statutory protection to the leaseholders, allowing mining operations during the lease period unless terminated for specific reasons mentioned in Section 4A(1) or (2) and after a hearing as per Section 4A(3). Therefore, the part of Rule 38A that terminates all leases forthwith without notice or hearing is invalid.

3. Conditions Imposed by the High Court:

The High Court imposed conditions while upholding Rule 38A, allowing existing leaseholders to continue operations until the expiry of their leases, subject to certain conditions. The State challenged these conditions, arguing that the rule should have been upheld unconditionally to prevent environmental degradation and indiscriminate quarrying.

The Supreme Court modified the High Court's conditions, holding that the part of Rule 38A which terminates quarrying leases/permissions forthwith is read down. The Court directed that the existing leaseholders as of 2.10.2003 could continue quarrying activities for six months or the actual unexpired period of the lease, whichever is less. The State Government retains the liberty to terminate leases prematurely for any causes mentioned in Section 4A(2) after giving notice and hearing under Section 4A(3).

Conclusion:

The Supreme Court allowed the appeals in part, upholding the validity of Rule 38A in vesting exclusive quarrying rights in the State Government but reading down the provision for immediate termination of leases to include a six-month notice period. The provision for refund of the proportionate lease amount and unadjusted seigniorage fee remains undisturbed. The respondents are not entitled to any reliefs beyond the limited relief granted by reading down Rule 38A.

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