Case Note & Summary
The appeals arose from writ petitions decided by the Madras High Court on 23.12.1992. The State of Tamil Nadu enacted amendments to the Tamil Nadu Minor Mineral Concession Rules, 1959, through Government Order Ms. No. 214 dated 10.06.1992, introducing a preference for State Government companies or Corporations in the grant of quarrying leases for certain specified granites in ryotwari lands. Private quarrying applicants challenged the first proviso to amended Rule 19A as unconstitutional. Prior to the amendment, Rule 19A permitted private persons with an existing industry or a distinct industrial programme to obtain quarrying permission for coloured granites. Due to reports of illicit mining, meagre tender bids, monopolistic tendencies, and wastage in granite cutting and polishing, the State Government decided to canalise the granite trade through Tamil Nadu Minerals Ltd and to grant fresh leases on poramboke lands only to State Government companies, with preference in ryotwari lands for specified varieties such as Paradiso, Kashmir White, Kunnam Paithur, Bavanur Black, Blue Granite, Raw Silk, and Red Granite. The amendment added a first proviso requiring the State Government to give preference to State Government companies or Corporations in granting quarrying leases for these listed granites. The High Court had struck down the first proviso as ultra vires the Constitution for lacking guidelines and directed the State to permit the respondents to quarry and transport without reference to the rules, subject to payment of royalty and seigniorage. The core legal issues were whether the first proviso violated Article 14 of the Constitution by conferring unguided and arbitrary discretion, and whether such preference to State companies was permissible under Section 15 of the Mines and Minerals (Regulation & Development) Act, 1957. The appellant State relied on the decision in State of Tamil Nadu v. Hind Stone and argued that the rule-making power included the power to prohibit private leases for scarce minerals, that a valid differentia existed between State companies and private miners, and that adequate guidelines were provided by Appendix X read with Rule 3. The respondents argued that the rule gave no guidelines for the selection of land by State companies and conferred arbitrary discretion. The Supreme Court accepted the State's contentions. It referred to the declaration under Section 2 of the Act that public interest in regulation of mines and development of minerals was paramount. Parliament's policy was conservation and prudent and discriminating exploitation of minerals to secure maximum benefit to the community. In the case of a scarce mineral, the most effective method of conservation was to permit exploitation by the State or its agencies and to prohibit exploitation by private agencies. Prohibition of leases in certain cases was part of the regulation contemplated by Section 15. There was a valid differentia between State Government companies and Corporations on the one hand and private miners on the other, which bore a close nexus to the object of the Act. The Court further held that the necessary guidelines for exercise of preference were furnished by the application form in Appendix X read with Rule 3, which required details of the applicant, previous work, quantity, purpose, etc. Preference had to be given only when all things were equal. Accordingly, the first proviso was not arbitrary. The appeals were allowed, the High Court judgment was set aside, and the first proviso to Rule 19A was upheld as constitutional.
Headnote
A) Constitutional Law - Article 14 - Arbitrariness and Discrimination - Preference to State Government companies in grant of granite quarrying leases does not violate Article 14 when a valid differentia exists between State companies and private miners and bears nexus to conservation of scarce minerals - Mines and Minerals (Regulation & Development) Act, 1957, Section 15; Tamil Nadu Minor Mineral Concession Rules, 1959, Rule 19A first proviso - The High Court had struck down the first proviso for lack of guidelines, but the Supreme Court held that a valid differentia existed between State Government companies and Corporations on one hand and private miners on the other, and that this differentia bore close nexus to the object of the Act, namely conservation and prudent exploitation of granite. Held that the rule was not unconstitutional on this ground (Paras 8-9). B) Mines and Minerals - Rule-making Power - Scope and Extent - Rule-making authority under Section 15 can prohibit or restrict private leases for minor minerals when necessary for conservation and prudent exploitation, permitting exploitation by State or its agencies - Mines and Minerals (Regulation & Development) Act, 1957, Sections 2, 15 - The Court relied on State of Tamil Nadu v. Hind Stone and noted that Parliament's policy of conservation and prudent exploitation provided clear signposts; prohibiting leases in certain cases is part of regulation contemplated by Section 15; in case of scarce mineral, most effective conservation is State exploitation. Held that State could keep mining operations in its own hands by giving preference to State companies (Paras 7-8). C) Mines and Minerals - Administrative Guidelines - Absence of Express Guidelines - Guidance for exercise of preference to State companies is supplied by Appendix X application form read with Rule 3, which requires particulars of applicant, previous work, quantity, purpose etc.; preference must be given only when all things are equal - Tamil Nadu Minor Mineral Concession Rules, 1959, Rule 3, Appendix X - The Court rejected the contention that the first proviso conferred unguided discretion, holding that such guidelines as required were furnished by the form read with Rule 3; preference to State Government company or Corporation must be given all things being equal having regard to factors in the form. Held that the rule was not arbitrary for want of guidelines (Paras 9-10). D) Judicial Review - Subordinate Legislation - Constitutionality - Subordinate legislation cannot be struck down merely because discretion is conferred; validity must be tested against parent Act's object and policy, and object of public interest under Section 2 provides necessary guidance - Mines and Minerals (Regulation & Development) Act, 1957, Sections 2, 15 - The Court noted that public interest induced Parliament to make declaration under Section 2, and policy of conservation and prudent exploitation was discernible from the Act; this provided clear signposts for the subordinate legislating authority; hence the rule could not be said to exceed power. Held that the rule was not ultra vires the Act (Paras 7-8).
Issue of Consideration
Whether first proviso to Rule 19A of Tamil Nadu Minor Mineral Concession Rules, 1959, as amended, which gives preference to State Government Companies or Corporations in granting quarrying leases for specified granites, is ultra vires the Constitution for conferring unguided and arbitrary discretion.
Final Decision
Appeals allowed; High Court judgment and order dated 23.12.1992 set aside; first proviso to Rule 19A of Tamil Nadu Minor Mineral Concession Rules, 1959, as amended, upheld as constitutional. The State Government was entitled to give preference to State Government companies or Corporations in granting quarrying leases for specified granites.
Law Points
- Rule-making authority under Section 15 can restrict private leases for minor minerals to conserve scarce minerals
- Preference to State Government companies has valid differentia and nexus to conservation objective
- Guidelines for exercise of preference are contained in application form Appendix X read with Rule 3
- Public interest and conservation are paramount considerations under Section 2 declaration
- Prohibiting private leases is part of regulation under Section 15
