Cancelling Mining Lease: HC Cautions Authorities To Adopt Fairplay & Adhere To Prescribed Procedure [Read Judgment]

Background

The petition was filed by one Sunil Rajak, represented by Senior Advocate Anoop Trivedi with Advocate Abhinav Gaur, whose mining lease was cancelled by the Respondent no. 3, District Magistrate, for non-payment of annual royalty.

Being the highest bidder in the e-auction, the Petitioner was granted mining lease on the banks of river Yamuna at Tehsil Bara, Prayagraj, for a period of five years. In this regard, he had deposited the first installment of Rs. 1,21,20,000/- after due adjustment of the pre-bid deposit and a consequent work order was issued in his favour, allowing him to excavate 1,60,000 cubic meter sand for a period of one year i.e. till 20.02.2019.

However, on Petitioner's failure to deposit the next installment, a notice was issued by the Respondent no. 2, Senior Mines Officer, demanding a sum of Rs. 90,67,520/- towards first installment of second year of lease. In response to the same, the Petitioner deposited a sum of Rs. 20,00,000/- only as he had been unable to carry out his mining activities over lease area due to Kumbh Mela, 2019 and because about 80% lease area was submerged in the river water.

Thereafter, the Senior Mines Officer again issued a notice demanding the remaining sum of Rs.1,61,35,040/-. Against the aforesaid demand notice, the Petitioner submitted various representations ventilating all his grievances but, in vain.

The Petitioner submitted before the court that no response whatsoever was given by the Respondents and without considering his representations, the impugned order was passed by the District Magistrate under Sections 58 and 60 of the U.P. Minor Minerals (Concession) Rules, 1963, cancelling the lease deed granted in favour of the Petitioner and blacklisting the Petitioner for two years. The order also issued directions for recovery of royalty till the cancellation of lease deed.

Submissions

The Petitioner had challenged this order as being unjust and arbitrary on the following grounds:

1. That no opportunity of personal hearing was given;
2. That while the show-cause notice was issued to the Petitioner by Mines Officer, the order impugned had been passed by the District Magistrate; and
3. That the Petitioner had been blacklisted for a period of two years despite the fact that nothing regarding blacklisting of the Petitioner was mentioned in the show cause notice.

The Standing Counsel on the other hand, Sri Giyanadra Srivastava, opposed the petition stating that the action was rightly taken by the Magistrate because the Petitioner had violated the terms and conditions contained in the lease deed.

Findings

Concurring with the submissions made by the Petitioner, the Division bench of Justices Bala Krishna Narayana and Prakash Padia said that the impugned order was in complete violation of principles of natural justice in as much as while the show cause notice was issued by the Senior Mines Officer, the order was passed by District Magistrate.

The bench also noted that no opportunity of personal hearing was granted to the Petitioner, despite the several representations made by him.

On the issue of blacklisting of the Petitioner, the bench stated "the issue which was not raised even in the show cause notice, therefore, could not be made the basis for blacklisting of the petitioner… it is incumbent on the part of the department to state in show cause notice that the competent authority intended to impose such a penalty of blacklisting, so as to provide adequate and meaningful opportunity to show cause against the same". Reliance was placed on Gorkha Security Services v. Government (NCT of Delhi) & Ors., (2014) 9 SCC 105.

The bench also cited Raghunath Thakur v. State of Bihar, (1989) 1 SCC 229, wherein the Apex Court categorically stated "It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order."

In view of M/s Mahabir Auto Stores & Ors. v. Indian Oil Corporation Ltd., (1990) 3 SCC 752, the bench stated that there was a complete failure to follow due process and that the court was empowered to review every order suffering from arbitrariness and discrimination.

Accordingly, the impugned order was quashed and the Respondents were granted liberty to initiate fresh proceedings, in accordance with law and the observations made by the court.

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