9911796707
TMI Blog1998 (10) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 years with effect from 12-6-1967, by the State of Madhya Pradesh. Deposit 11-B is part of this land and lies in the middle of the area leased out to NMDC. It has the world's best quality iron-ore with ferrous content of above 65 per cent which is particularly suited for gas-based sponge iron plants. A Japanese delegation visited this iron ore deposit in May, 1991, and because of its superior quality ore showed interest in taking over this deposit only and not iron ore in other deposits. They were, however, not willing to pay remunerative price. Considering the non-availability of budgetary support from Government and lack of its internal resources, the NMDC in August/September, 1991 submitted a proposal to the Government for setting up of a JVC to develop this particular deposit. The NMDC Board in its meeting held on 15-11-1991, in terms of Item No. 274/2 decided that the project be opened up as a joint venture with not more than two private promoters apart from NMDC. The said two promoters were Essar Gujarat Ltd. and Nippon Denro Ispat Ltd. were to use the ore for their plants and not sell it. The Board also decided that the equity participation shall be static throughout the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r se, connecting roads from Bailadilla deposit 11-B to 11-C and approach road to the deposit had been done. The necessary railway siding was also provided by NMDC. The approach road connecting all the benches and further the approach road to waste dumps, workshop, etc., were also laid. According to NMDC, the expenditure incurred for 11-B deposit was about [Rs.] 5.85 crores towards exploration of the deposit and preparation of DPR. This amount did not include the expenditure on mine development including expenditure on develop- ment of approach roads, bench access roads and development of benches. 5. While the exercise for developing 11-B deposit as NMDC project with the approval of the Government was going on, the Government of India received a letter, dated 12-8-1993, from Chairman of 'M' group of compa-nies proposing that the lease of 11-B be transferred by NMDC to JVC with NMDC keeping only 11 per cent equity shares in it and the entire management control shall be with 'M' group. The petitioner claims that in a naked sell-out of this profit-making national industrial property, the Government started taking steps to transfer this ore mine in favour of 'M' on the terms proposed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Deposit 11B and Deposit 10/11A totally to NMDC for distribution to the various customers. Any change in this situation will adversely affect the availability and distribution envisaged in the above note. (5)With a party other than NMDC as a major partner the joint venture company will amount to total privatisation. In Bailadilla sector where NMDC has got major operations, there are different labour unions affiliated to different political parties. As such, it is only desirable in the event of entering into joint venture that NMDC should operate as major partner in order to maintain smooth industrial relations in the area. (6)There does not appear to be need or justification for NMDC to agree to the proposal of having a minority share of 11 per cent equity leaving the balance 89 per cent for Ispat Group and public. In case if a decision is taken for joint venture, the Committee has examined three alternatives at page 5. As given at alternative III, minimum 26 per cent equity participation by NMDC, a maximum of 25 per cent by one or two joint venture partner(s) and balance equity shares to the public/financial institutions with a specified mutually agreed quantity as a buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that there was no procedural or other infirmity in the decision sought to be challenged by the petitioner and that it has to be borne in mind that right from the year 1991, there was a proposal to transfer 11-B to a JVC and all through, it was contemplated that NMDC will have a minority shareholding in JVC. It was never stipulated or proposed at any stage that NMDC will have 51 per cent shareholding in JVC. One of the reasons to privatise this iron ore deposit was to reduce burden on NMDC. It was further submitted that the Government did not and could not have kept in view only commercial considerations in the matter of this nature. It was explained that the Government had to also bear in mind the interest of the industry and had to provide for captive consumption of iron ore by involving private parties. 11. Mr. V.R. Reddy the learned Additional Solicitor General representing NMDC also submitted that the revenue generation was not the only consideration and in fact, it was not relevant. According to the learned counsel, the relevant consideration was the captive consumption of the iron ore. Dealing with the plea urged by the petitioner that NMDC was not in favour of transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation and that only such directive has the force of law. The submission was that in absence of Presidential directive, the decision contained in the letter of Government of India dated 24-5-1994, would be without jurisdiction. 14. Reference was made by the parties to the Mineral Policy (National Mineral Policy, 1993). In March, 1993, the Government announced a new National Mineral Policy, opening up the mineral sector for exploitation by the private sector. The Industrial Policy Resolution of July, 1991, see [1991] 2 Comp. LJ 97 (SC), whereby certain minerals including iron ore appearing in the list of industries exclusively reserved for public sector were deleted. The new policy, inter alia, provides that one of the basic objectives is to develop mineral resources taking into account the national and strategic considerations and to ensure their adequate supply and best use keeping in view the present needs and future requirements. It also provides as an objective to promote necessary linkage for smooth and uninterrupted development of the mineral industry to meet the needs of the country. The mineral policy also provides that the guiding principle in the strategy or development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at reasonable distance from existing mines and projects of CIL in order to avoid operational problems. 15. The petitioner's contention that the aforesaid guidelines would and should be squarely kept in view while transfer of iron one mines. The contention was that the objective of blocks being offered to private sector being at a reasonable distance from existing mines and projects is to avoid pilferage problem and illegal mining by the private sector. It was contend-ed that if the deposit transferred to private sector is not at a reasonable distance, it may almost be impossible to check pilferage and illegal mining by the private sector from the areas/deposit not even transferred to the private sector. Our attention was drawn by the petitioner to the plan to show the location of Deposit 11-B. On the basis of location, it was contended that Deposit 11-B was just in the middle of Deposits 11-A and 11-C and the location suggests high degree of possibility of illegal mining by private sector. The contention was that it was not a case of transfer of green fields but was a case of transfer of the area in respect whereof the basic infrastructure like road, rail links, etc., had alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e two articles 77(3) and 166(3) is the decision of the President or the Governor, respectively. The Court held that in the cabinet system of Government, wherever the Constitution requires the satisfaction of the President or the Governor, for the exercise by the President or the Governor of any power or function, the satisfaction required by the Constitution is to the personal satisfaction of the President or the Governor but the satisfaction of the President or the Governor in the constitutional sense in the cabinet system of Government, i.e., satisfac-tion of his Council of Ministers on whose aid and advice the President or the Governor generally exercises all his powers and functions. 20. Apart from the above, we are even otherwise unable to accept the submission that in view of articles 86 and 119 of memorandum and articles of association, it was mandatory on the part of NMDC to reserve the matter for the decision of the President of India or that the Minister for Steel had to seek cabinet approval before issue of letter dated 24-5-1994. The cabinet approval was taken before transfer of lease to joint venture company. Having perused the Transaction of Business Rules, we are un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State. It is expected to protect the financial interest of the State. The right to refuse the lower or any other tender is always available to the Government. But, the principles laid down in Article 14 of the Constitution have to be kept in view while accepting or refusing a tender. There can be no question of infringement of Article 14 if the Government tries to get the best person or the best quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose, the exercise of the power will be struck down." 24. The Supreme Court has also cautioned the fall-out of uncontrolled exercise of power of judicial review and highlighted the advantage of exercising judicial restraint while dealing with such matters. The two advantages of judicial restraint noticed are the ambit of judicial intervention and the scope of Court's ability to quash an administrative decision on its merits. It is also opened that the judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself. The ['correct'] prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sole method of distribution of State largesse and even absence thereof, State largesse may be dealt with by negotiation and not through tender or auction. The ultimate question to be examined in these matters is whether there has been compromise with public interest or not. Whether there has been violation of article 14 or not? The tender or no tender if the State largesse is distributed not in public interest, but for some oblique motive such an action, though arising out of a contract is required to be quashed by the Courts in exercise of power of judicial review. At the same time, however, it has to be borne in mind that the State is allowed greater latitude in the matters of economic policy. It is not for the Courts even if two views may be possible and the Court may lean in favour of the view opposite to that of the Government. In R.K. Malhotra v. Union of India [1995] 35 DRJ 100 (Delhi), a Division Bench of this Court held that the industrial policy framed by the Central Government is a step towards open economy for India to become a major player in the global economy and it is a policy with which the Court would not interfere. In substance, the Court held to go private or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be allowed to the legislature. Such matters were based on experi-mentation or trial and error method and, therefore, cannot provide for all possible situation or anticipate all possible abuses. 29. In G.B. Mahajan v. Jalgaon Municipal Council [1991] 3 SCC 91, it was held that a project otherwise legal does not become any less permissible by reason alone that the legal authority instead of executing the project itself had entered into an agreement with a developer for its financing and execution. In that case, the Supreme Court was concerned with the real estate development. It was reiterated that the trial and error method was permissible so long as it was bona fide and within the limits of authority. It was also noticed that there was a scope for reasonable belief to hold different opinions both being bona fide. While dealing with the trial and error method, it was said that this again is a judicial recognition of administrator's right to trial and error, as long as both trial and error are bona fide and within the limits of authority. The dissenting opinion of Justice Brandeis as expressed in New State Ice Co. v. Ernest A. Liebmann 285 US 262, 310, 311, as noticed in this dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s privatisation has taken place. We have already noticed the factum of amendment of Industrial Policy Resolution of July 1991 and formation of New National Mineral Policy in 1993. In such policy matters, the interference by courts has to be minimal and that is only when there may be a clear case of arbitrariness and mala fides and the decision is demonstrably contrary to public interest. It has also to be borne in mind that in the matters of policy, particularly, dealing with economic matters, the Government is well within its rights to try various experiments so long as such experiments are not arbitrary and mala fide. 33. Regarding the plea that if the deposit was to be transferred to private sector, the global tender would have brought many international opera- tors thus bringing to Indian Government much large, amounts than compared to what has been given by 'M' group, again, it has to be kept in view that for transfer of such rights, the tender system is not the only system though usually, it may be so advisable. It is, however, not an inflexible rule. 34. Further, the stand of the Government has also to be borne in mind that in such matters, the economic consideration is se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roup. The viewpoint of NMDC was duly taken note of by the Government and thereafter, a conscious decision was taken to transfer this iron ore with management control in favour of the 'M' Group. Two equally strong views are quite possible on the subject of transfer of mine and NMDC losing management control over such a valuable nation- al asset. We, however, see no per se illegality in the Government deciding to take one view which has resulted in the NMDC losing the management control. We would quash this decision if found to be arbitrary and mala fide. We do not think that the petitioner has been able to establish that the impugned decision is arbitrary or mala fide. Whatever view we may have, it is not really legally permissible to substitute it in place of viewpoint of the Government. 37. While dealing with the plea of mala fides, one cannot lose sight of the fact that the basic decision to go private was taken in 1991. However, in absence of private operators who may be willing to make investments without asking for management control and other factors noticed above, the Government of India did agree for development of the mine in question by NMDC as its own project. The matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the amounts spent by NMDC. On a detailed examination of the record by this Court, it is difficult to infer mala fides on this score. On the facts and circumstances of the case, we feel that petitioner's contention on this aspect alone does not deserve to be accepted. 39. It was then contended that the industrial policy only stipulated that blocks in green field areas where necessary infrastructure like roads, rail links, etc., are yet to be developed should be given to the private sector and not the blocks where development work has already been done. It was contended that in the present case, what has been transferred is not the green but the iron ore deposit where considerable development work has been done. A perusal of the policy itself shows that it does not provide for a complete prohibition to transfer the developed or semi-developed blocks. The guidelines under the industrial policy only stipulate that preferably blocks in green field where public sector infrastructure is yet to be developed should be given to the private sector. The cost incurred by NMDC for the development work has been agreed to be reimbursed to it. It also cannot be seriously disputed that for ful ..... X X X X Extracts X X X X X X X X Extracts X X X X
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