Department of Atomic Energy Can't Prohibit Grant Of Exploration License Of Atomic Minerals Permissible Under The Provisions Of OAMDR Act: Andhra Pradesh HC [Read Order]

The Bench of the Chief Justice Jitendra Kumar Maheshwari and Justice K. Suresh Reddy made it clear that in the matter of grant of the operating right, it may be given to any person or private company for the atomic minerals but at the stage of giving the production lease for atomic minerals or prescribed substance, the consultation with the department of the Government of India dealing with the Atomic energy is required.

Background of the OAMDR Act and allocation of blocks by it

The said authority issued notification dated 07.06.2010 in terms of the mandate of S. 10 of the OAMDR Act, which required the authority to issue notification within 6 months of the Act, indicating the offshore areas available for grant of license.

By the said notification, 62 offshores blocks were notified. The Administrating Authority, in the exercise of its power under Section 12 of the Act, issued orders dated 05.04.201 granting exploration licenses for the 62 blocks to 16 successful applicants, including the petitioner (M/s Standard Metalloys Private Limited) herein who was granted 6 blocks in the bay of Bengal (adjoining the coastline of Andhra Pradesh State).

Several private parties (who were not allotted the blocks) had moved various High Courts, however, they did not get any relief in any of the cases filed.

CBI Enquiry in the allocation of Blocks

Further, based on the news item published in newspapers, which sought to raise suspicion on the allocation of the blocks, the Central Bureau of Investigation initiated a preliminary inquiry.

However, the CBI submitted a closure report dated 28.03.2013, having found no evidence of mala fide on the part of any public servant and no evidence of quid pro quo between the public servants and the successful allottees.

Validity of the selection process and the same being in accordance with law attained finality

The report of the CBI was also accepted by the Ministry of Mines, because the Minister of Mines, GOI, in a reply to a question in Parliament, stated that no misconduct was found by the CBI on the part of any official, thus put the said matter at rest.

Importantly, before the Bombay High Court, respondent No. 1 [Union of India, Rep by Secretary (Ministry of Mines)] defended the action and criteria adopted by the then administrating authority in the process of selection.

SLP (C) No. 5530 of 2014 preferred by the private party against the Judgment of the Bombay High Court was also dismissed by the Apex Court (vide its order dated 21.03.2014)

Accordingly, the validity of the selection process and the same being in accordance with law attained finality.

Attempt to cancel the allotment of Blocks by Secretary (Mines) and Petitions in HCs

However, on 14.07.2015, the then Secretary (Mines) directed IBM to explore a way to cancel the allotment of the blocks so that the same blocks could be re-granted.

It was the contention of the petitioner (M/s Standard Metalloys Private Limited) that the said exercise was obviously undertaken to benefit certain private parties who had not been granted blocks in the previous allotment process.

Now, since the administrating authority was not executing the exploration licenses to the valid allottees despite the selection process having attained the finality by the court, some allottees approached the High Court of Bombay and Delhi seeking writs in the nature of mandamus to direct the authority to execute the exploration licenses. These petitions were filed in June 2016.

Surprisingly, the Administrating authority, in a hurried manner, by order dated 30.06.2016 issued an order to annul the notification and grants so as to defeat the pending writ petitions in Courts.

The said order was challenged in Delhi High Court, the Delhi High court directed the respondents to execute the exploration license and set aside order dated 30.06.2016.

The High Court delivered the findings against the officers of the Ministry of Mines indicating their mala fide and the manner in which the cancellation order dated 30.06.2016 was passed arbitrarily.

Based on these findings, a complaint was made to Central Vigilance Commission (CVC), which further directed for an independent investigation against the officers of the Ministry of Mines.

Being influenced by the said development, officers in the Ministry of Mines immediately wrote a letter to CBI on 01.04.2019, making a request to reopen the preliminary enquiry closed earlier on 28.03.2013 after thorough investigation.

In the meantime, the said order dated 06.02.2019 of the Single Judge of the Delhi High Court was challenged by Respondent Number 1, this decision was upheld by the division bench vide Judgment dated 25.04.2019.

Respondent No. 1 moved Apex Court

Aggrieved by the above Judgment, Respondent no. 1 [Union of India, Rep by Secretary (Ministry of Mines)] preferred SLPs before the Apex Court.

In the said SLPs, vide order dated 23.05.2019 the Apex Court directed the Secretary, Department of Atomic Energy, to file an affidavit about the policy decision of the central Government asking whether they want to go by the bids invited or they want to interdict all private players, if so, how they can do so in view of the provision fo the statute.

Importantly, in response to the said order, the Secretary, DAE, filed his affidavit in July 2019 and depose that any policy decision of the Government as adopted under the OAMDR Act could be implemented to an amendment in the OAMDR Act.

Secretary, DAE's Controversial Notification

Further, on 27.07.2019, referring to Section 6 of the OAMDR Act and Rule 18 (1) (iv) (b) of the OMC rules the Secretary, DAE immediately issued a notification and sought to contend that it has the power under Section 3 and 14 of the AE Act (Atomic Energy Act) to cancel the grant orders for exploration licenses and that too retrospectively.

Notably, by the said notification, the grant of operating rights was prohibited in respect of atomic minerals in any offshore areas in the country, including the sixty-two blocks to any person, except to the Government or a Government Company or a corporation owned or controlled by the Government and all actions taken in this behalf by the Central Government under the OAMDR Act prior to the date of the notification (dated 27.07.2019) was rescinded.

Show Cause notice issued to the Petitioner

Pursuant to this notification, Respondent no. 1 [Union of India, Rep by Secretary (Ministry of Mines)] issued a show-cause notice dated 19.08.2019 to the petitioner (M/s Standard Metalloys Private Limited).

After hearing the petition, respondent no. 1 passed order dated 06.11.2019 under section 7 of the OAMDR Act pre-maturely terminating the order of the grant of exploration license dated 05.04.2011.

Contentions of the Petitioner (M/s Standard Metalloys Private Limited)

The petitioner (M/s Standard Metalloys Private Limited) has contended that notification dated 27.07.2019 is liable to be quashed, being ultra vires to the provisions of OAMDR Act as well as the Atomic Energy Act, 1962.

While placing reliance on Rule 18 of the OAMC rules, it has been contended that Department of Atomic Energy does not have any discretion with regard to grant of an exploration license for atomic minerals, therefore the said authority is seeking something indirectly, which could not have been done directly.

It was also submitted that the notification dated 27.07.2019 which was an executive instruction cannot override the statutory provisions which have already received a judicial examination by the inter-party Judgment.

Further it was contended that Section 30 of the Atomic Energy Act requires rules to be framed to give effect to the object of the AE Act prospectively. The respondents have not framed any rule to the extent as is being sought to be provided by the executive instructions.

It was also contended that the said notifications seek to undermine the statutory provision that is parliamentary Law viz the OAMDR Act, and the Secretary, DAE, who has issued the said notification was fully aware of the legal position as is evident from his affidavit filed before the Apex Court, wherein he had categorically admitted that any policy of the Government could be implemented only after an amendment to the OAMDR Act.

In this fact, the said notification travels beyond the scope of the OAMDR Act as well as the AE Act and therefore, is required to be quashed.

Four Questions Answered By the Court

Question No. 1 before the Court - Whether the policy decision of the DAE taken vide notification dated 27.07.2019 is within the ambit and power of the AE Act and/or OAMDR Act and not ultra vires to the statute, or it is dehors the provisions of both the Acts, and issued arbitrarily with lack of bona fides?

Observations of the Court – The Court noted that the notifications issued by the DAE in the exercise of the power under Section 3 and 14 of the AE Act is beyond competence, since these sections apply in connection with the production, development, use or disposal of atomic energy or to carry out the research into any matters connected therewith.

The said provisions do not confer power to the DAE to prohibit grant of exploration the license of the atomic minerals to any private person permissible under the provisions of the OAMDR Act.

As per the provision of Section 6 of the OAMDR Act, it is clear that the operating right can be granted to any person who is an Indian National or a company as defined I Section 3 of the Companies Act, 1956, regarding the atomic minerals specified in Part B of the First Schedule to the MMDR Act.

The OAMDR Act applies to all the minerals in the offshore areas, including any mineral prescribed by notification in clause (g) of Subsection (1) of Section (2) of the AE act.

For the purpose reconnaissance operation, exploration operation or production operation, the grant may be made to any person. It does not prohibit the grant to a private person.

In the matter of grant of the operating right, it may be given to any person or private company for the atomic minerals but at the stage of giving the production lease for atomic minerals or prescribed substance, the consultation with the department of the Government of India dealing with the Atomic energy is required.

The role contemplated for DAE is under the proviso to rule 18 (1) (iv) (b) of the OAMC rules applied in the event of discovering of any atomic mineral during exploration which was not specified in the exploration license, the approval of the DAE to be taken for its inclusion in the exploration license.

The notification dated 27.07.2019 is, therefore, beyond the power as specified in Section 3 and 14 of the AE Act and ultra vires to the status and dehors the provision of both the Acts and issued arbitrarily with lack of bona fides. Accordingly, the notification dated 27.07.2019 was quashed.

Question No. 2 before the Court - Whether the order dated 06.11.2019 passed by Respondent no. 1 is after due application of mind or merely relying upon the notification dated 27.07.2019 and such action is in consonance to the provisions of Section 7 of the OAMDR Act, in observance of the principles of natural justice?

Observations of the Court – The order dated 06.11.2019 issued for cancellation of exploration license is without due application of mind, in violation of principles of natural justice and merely relying upon the notification dated 27.07.2019, which already stands quashed.

The cancellation of exploration license taking the plea of conservation of mineral resources is flimsy and against the spirit, of the definition of conservation of the minerals resources as prescribed in the National Mineral Policy 2019.

Thus, the order dated 06.11.2019 being biased and not in consonance with the provisions of Section 7 of the OAMDR Act, is bad in law and was accordingly, quashed.

Question No. 3 before the Court - Whether rule 3A of the OAMC rules, as notified on 23.08.2019, is ultra vires to Section 35 of the OAMDR Act, and having the sanction of Law.

Observations of the Court – Rule 3A of the OAMC rules, as notified on 23.08.2019, is against the intent and object of the OAMDR Act and also beyond the power as specified in Section 35 of the OAMDR Act.

Therefore, the Rule 3A of the OAMC Rules, having no sanction of Law, in declared Ultra Vires of the OAMDR ACT

Question No. 4 before the Court - Whether the letter dated 01.04.2019 sent by respondent no. 1 to the director of CBI to reopen the preliminary enquiry bearing no. PE AC1 2012 A0005 already closed vide closure report dated 28.03.2013, after six years is tainted with mala fide looking to the facts of the case?

Observations of the Court – the letter dated 01.04.2019 issued by Mr. Niranjan Kumar Singh Joint Secretary of the Ministry of Mines, for re-opening the PE bearing No. PE AC1 2012 A0005 already closed vide closure report dated 28.03.2013 is tainted with mala fide and it is an act in retaliation to stall an enquiry by the CVC against him.

More so, in view of the discussion made in question number 4 and findings of the Bombay High Court and the Delhi High Court, duly upheld by the Apex Court, any action on the letter dated 01.04.2019 is contemptuous and vitiated which can be permitted to stand.

Therefore, the letter 01.04.2019 for reopening the said PE after six years of its closure by the CBI and consequential actions taken on the basis of the said letter stand quashed.

In view of the above observations of the Court, the Court directed the deed for the exploration license dated 05.04.2011 be now executed by the respondents in favour of the petitioner (M/s Standard Metalloys Private Limited) within a period of 4 weeks from the date of communication of this order.

Accordingly, this writ petition was allowed.

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