Holding

A premature termination order under section 4A is void unless the lessee is given a reasonable opportunity of being heard, as mandated by natural justice and sub‑section 4A(3).

Summary

Assam Sillimanite Ltd. held three mining leases for sillimanite in Meghalaya, which were prematurely terminated by the State Government on 7 December 1972 under section 4A of the Mines and Minerals (Regulation and Development) Act, 1951, without giving the lessee any notice. The company filed a writ petition under Article 32, contending that the termination violated the principles of natural justice. The Supreme Court, relying on State of Haryana v. Ram Kishan, held that the order was void because the lessee was not afforded a reasonable opportunity to be heard, and that sub‑section 4A(3) of the 1986 amendment expressly requires such a hearing. While the petition for quashing the termination was granted, the Court declined to order restoration of possession, noting the long pendency of the case and potential limitation bars. Instead, it referred the question of compensation to arbitration, limiting damages to a maximum of five years from termination or the original lease expiry, whichever is less.

Issues considered

The validity of the premature termination order under section 4A of the Mines and Minerals (Regulation and Development) Act, 1951 without a hearing.
Whether the principles of natural justice apply to the exercise of power under section 4A.
The appropriate remedy for the petitioner – restoration of lease or compensation, and the method of determining compensation.

Legislation cited

Industries (Development & Regulation) Act, 1951s. 18-AA
Mines and Minerals (Regulation and Development) Act, 1951s. 4A(1), s. 4A(3)
Mines and Minerals (Regulation and Development) Amendment Act, 1972s. 4A
Mines and Minerals (Regulation and Development) Amendment Act, 1986s. 4A(3)

Subjects

natural justicepremature terminationmining leasecompensationarbitrationArticle 32Mines and Minerals Actstatutory interpretation

Judgment

ASSAM SILLIMANITE LTD. AND ANR.
A
v.
UNION OF INDIA AND ORS.

MARCH 16, 1990

[S. RANGANATHAN AND A.M. AHMADI, JJ.] B

.lf' Mines and Minerals (Regulation and Development) Act, 1951:
Section 4A-Termination of mining /ease-Necessity for giving of
opportunity to holder.

The petitioner company had obtained three mining leases from
the Government of Assam to extract sillimanite in the Khasi and Jaintia
Hills District, for a period of 15 years.

Negotiations between the Union of India and the petitioner for
having the mining leases transferred to the public sector companies,
Hindustan Steel Ltd. and Bokaro Steel Ltd., having failed, the Govern- . D
ment of Meghalaya, on the request of the Central Government, passed an
order dated 7th December, 1972 prematurely terminating the mining
leases in terms of section 4-A( 1) of the Mines and Minerals (Regulation
& Development) Act, 1957 as amended by the Mines & Minerals (Regu-
lation and ,Development) Amendment Act, 1972. Thereupon, the
petitioner company filed the present petition under Article 32 of the E
Constitution.

On behalf of the petitioner it was inter alia contended that since no
notice had been issued by the State Government before terminating the
leases prematurely, it amounted to denial of natural justice thus vitiat-
ing the order of termination. F

State of Haryana v. Ram Kishan. & Ors., [1988] 3 S.C.C. 416,
relied upon.

It was further submitted that having regard to the comparatively
long periods of leases and the lapse of time, the petitioner would not G
pray for being put back in possession of the leased premises but would
be content with an award for compensation for wrongful premature
termination, to be determined by any arbitrator appointed by the
Court.

On behalf of the respondents it was submitted that the decision of H

983
984 SUPREME COURT REPORTS [1990] I S.C.R.

this Court in Ram Kishan's case was distinguishable; that the rules of
A natural justice could be statutorily excluded either expressly or by
necessary implication; that grant of an opportunity to the lessee would
be totally meaningless and futile; that the object and purpose of the
statute clearly excluded the provision of an opportunity to the lessee
before termination of the leases; that amendment of section 4-A of 1986
specifically providing for an opportunity of bearing became necessary
because the grounds for premature termination set out in the new sub- 'f·
section (1) of section 4-A were made wider and more comprehensive;
that in the writ petition the only prayer made was for quashing the
order of premature termination; and that it was open to the petitioner
to file a suit or take other appropriate remedies for obtaining compen-
sation in respect of the unlawful termination.

The Barium Chemicals Ltd. and Anr. v. Company Law Board
and Others, [1966] Suppl. S.C.R. 311 and R.S. Dass v. Union of India -""
and Others, [1985] Supp. S.C.C. 617, referred to.

D Disposing of the writ petition, this Court,

HELD: (1) The order dated 7.12.1972 passed under section 4A of
the Act whereby the leases were terminated prematurely was null and ).._
void as it violated the principles of natural justice and was passed
without giving an opportunity to the lessee of being heard.

State of Haryana v. Ram Kishan & Ors., [1988] 3 SCC 416,
followed.

Dharam Veer v. Union of India, AIR (1989) Delhi 227, referred
to.
p
(2) Though it is true that the scope of section 4-A (1) has been
widened, the insertion of sub-section 4-A(3) clearly reflects a statutory
intention that an opportunity of hearing must be given before the order
of termination is passed, presumably as such an order widely effects the
rights of the lessees. [992A]
q
(3) It is difficult to accept the contention that because an order
under section 4-A is to be passed in order to give effect to a policy of the
Government, it is not necessary or useful to provide the lessees, whose
leases are about to be terminated, an opportunity of hearing. [992D J

Ii (4) It is true that the petitioner could have r.Jed a suit or taken
ASSAM SILLIMANITE v. U.0.1. IRANGANATHAN, J.] 985

other appropriate remedies for obtaining compensation in respect of the
unlawful termination. But, in the facts and circumstances of this case, it A
is not fair to ask the petitioner to go back and tile a suit for compensa-
tion or damages which may be barred. by limitation. The writ P.,tition
was filed by the petitioner company in 1973 and has been pending in this
Court for about 17 years. After a lapse of such a long time the proper
course is to adopt some method for deciding the quantum of compensa- B
tion and damages, which can at once be simple and expeditious and
which will avoid further unnecessary litigation. [992G-H; 993A]

(5) The request made on behalf ofthe petitioner that the matter
may be referred to arbitration is a fair one and indeed this course is also
not seriously resisted by the respondents. The issue of compensation/
damages is accordingly referred to Arbitration. [993B] C

,).- (6) Having regard to the circumstances of the case, the rompensa-
tion/damages should be restricted to a period of five years from the ilate
of termination of the leases or upto the date of expiry of the original
lease deeds whichever is less and not for the entire unexpired period of D
all the leases. [993C]

ORIGINAL JURISDICTION: Writ Petition No. 105 of 1973.

(Under Article 32 of the Constitution of India)
E
::' Kapil Sibal, A.K. Sen, P.C. Jain, Ranbir Chandra, A. Minocha
.and Ms. Indu Goswami for the Petitioners.

Kuldip Singh, Additional Solicitor General, M.M. Abdul
Khadar, L.N. Sinha, V.C. Mahajan, R.B. Dattar, A.K. Ganguli, R.B.
Misra, Ms. A. Subhashini, D.N. Mukharjee, R.P. Gupta, T.V.S.N. F
Chari, Mrs. Binu Tamta, Mrs. B. Sunita Rao, Ms. Manjula Gupta and
Badrinath for the Respondents.

The Judgment of the Court was delivered by

RANGANATHAN, J. The petitioner company obtained mining G
leases from the Government of Assam to extract sillimanite in the
Khasi and Jaintia Hills District. In pursuance thereof, three lease
deeds were executed by the State Government in favour of the
petitioner. The first was a lease deed dated 25.4.1952 for a period of IS
years in respect of an area of 129.60 hectares at Lalmati. The second,
dated 10.4.1963, was for a period of 15 years in respect of an area of H
986 SfIPREME COURT REPORTS [1990] 1 S.C.R.

777.60 hectares at Nongmawait. The third one dated 8.6.1967 was for a
A
period of 15 years and covered an area of 363 hectares at Wamsophi. ~.
The three lease deeds were to expire on 26.5.77, 9.4.78 and 7.6.82
respectively but there was a clause for further renewal.

The petitioner company had also established a refractory Plant in
B 1961 near Ramgarh in District Hazaribagh. It appears, however, that
petitioner faced a number of difficulties in operating the refractory
plant and was explaining its difficulties to the State of Maghalaya
which was formed in 1970.

Between 1970 to 1972, the Union of India, through its public
F-
sector companies, Hindustan Steel Ltd. and Bokaro Steel Ltd.
c negotiated with the petitioner for the purchase of its refractory plant
and also for having the mining leases transferred to them. Though the
refractory plant was not functioning properly and was on the verge of
-""'
closure, the petitioner was not willing to transfer its mining leases to
the public sector companies but was willing to supply the required
D quantity of sillimanite to the Bakaro Steel Plant. It is also stated that
some negotiations took place as a result of which the petitioner was
planning to re-open the factory on 6.11.1972. However, in the
meantime on the 2nd of November, 1972, the Central Government
took over the management of the refractory plant under section ~
18-AA of the Industries Development & Regulation Act, 1951. Pos-
E session of the plant as well as its management was also taken over by
the Hindustan Steel Ltd. on the same day. This take over was chal-
lenged by the petitioner company but its challenge was repelled by the
-:
Delhi High Court and a Special Leave Petition was filed, which is
pending in this Court. We are not concerned with this issue in the 1""'
present case.
_...,
F
On 12.9.1972, the Mines and Minerals (Regulation and Develop-
ment) Act, 1951, was amended by Act No. 56 of 1972. By this amend-
ment, section 4-A was introduced in the Act, which reads as follows:

"(l) Where the Central Government, after consultation
G with the State Giwemment is of opinion that it is expedient
in the interest of regulation of mines and 1'1.ineral develop-
ment so to do it may request the State Government to make
a premature termination of a Mining Lease in respect of >1;
any mineral other than a minor mineral, and, on receipt of
such request, the State Government shall make an order
H making a premature termination of such mining lease and
ASSAM SILLIMANITE v. U.0.1. IRANGANATHAN, J.J 987

granting a fresh mining lease in favour of such Government
Comany or Corporation owned or controlled by Govern- A
ment as it may think fit.

(2) Where the State Government, after consultation with
the Central Government, is of opinion that it is expedient
in the iterest of regulation of mines and mineral develop- B
ment so to do, it may, be an order, make premature termi-
nation of a mining lease in respect of any minor mineral
and grant a fresh lease in respect of such mineral in favour
of such Government Company or Co-operation owned or
-
'
controlled by Government as it may think fit."

This amendment came into effect in September 1972. c

At this juncture it may be mentioned that Act 37 of 1986 has
further amended the 1951 Act and substituted section 4A by the fol-
lowing section, which in.sofar as it is relevant for our present purposes
reads as follows: D

"4A (1) Where the Central Government, after consultation
with the State Government, is of opinion that it is expe-
dient in the interest of regulation of mines and mineral
development, preservation of natural environment, control
of floods, prevention of pollution, or to avoid danger to E
public health or communications or to ensure safety of
buildings, monuments or other structures or for conserva-
tion of mineral resources or for maintaining safety in the
mines or for such other purposes, as the Central Govern-
ment may deem fit, it may request the State Government to
make a premature termination of a prospecting licence or F
mining lease in respect of any mineral other than a minor
mineral in any area or part thereof, and, on receipt of such
request, the State Government shall make an order making
a premature termination of such prospecting licence or
mining lease with respect to the area or any part thereof.
G
(2) Where the State Government, after consultation with
the Central Government, is of opinion that it is expedient
in the interest of regulation of mines and mineral develop-
ment, preservation of natural environment, control of
floods, prevention of pollution or to avoid danger to public
health or communications or to ensure safety of buildings, H
988 SUPREME COURT REPORTS [1990] I S.C.R.

monuments or other structures or for such other purposes,
A as the State Government may deem fit, it may, by an order,
in respect of any minor mineral, make premature termina-
tion of a prospecting licence or mining lease with respect to
the area or any part thereof covered by such licence or
lease:
B
Provided that the State Government may, after the
premature termination of a prospecting licence or mining
lease under sub-section (1) or sub-section (2), as the case
may be, grant a prospecting licence or mining lease in
favour of such Government company or corporation owned •
or controlled by Government as it may think fit.
c
(3) No order making a premature termination of a pros-
pecting licence or mining lease shall be made except after
giving the holder of the licence or lease a reasonable
opportunity of being heard.
D
In pursuance of the 1972 amendment, the State Government
passed an order termminating the mining leases granted to the
petitioner and granted fresh leases over the same areas in favour of
M/s. Hindustan Steel Ltd., a Government company, fully owned by
the Central Government. The order, made in the name of the Gover-
E
.
nor, reads as follows:
-
o FC

Dated, Shillong 7th Dec., 1972.

No. MG. 133/72: Whereas the Central Govt., having con-
sulted the Govt. of Meghalaya, is of opinion that it is expe-
F dient in the interest of mineral regulation and development
that the mining leases of sillimanite mentioned below held
by M/s. Assam Sillimanite Ltd. (having its Registered
Office at 13 A.T. Road, Gauhati) in Megbalaya are ter-
minated forthwith;

G And, whereas, in terms of Sec. 4A of the Mines and
Minerals (Regulation & Development) Act, 1957, as
amended by the Mines and Minerals (Regulation &
Development) Amended Act, 1972, the Central Govt. has
requested the Govt. of Meghalaya to make a premature
termination of the said mining leases held by M/s. Assam
H Sillimanite Ltd.;
ASSAM SILLIMANl1E v. U.0.1. [RANGANATHAN, J.] 989

Now, therefore, the Govt. of Meghalaya in exercise A
} of the powers conferred by Sec. 4A(l) of the Mines and
Minerals (Regulation & Development) Act, 1957, as
amended by the Mines & Minerals {Regulation & Develop-
ment) Amendment Act, 1972 hereby terminates prema-
turely the mining leases of sillimanite. mentioned below
held by M/s. Assam Sillimanite Ltd. with immediate effect
B
and grants fresh mining leases over the same areas in
favour of M/s. Hindustan Steel Ltd., a Government Com-
pany, fully owned by the Central Government.

Lease Locality Area in Period of Date of c
No. hectares Lease expiry
. )..
5. Lalmati 129.60 15 years 24.4.1977
6. Nongmawait '777. 60 -do- 9.4.1978
7. Wamsophi 363.00 -do- 7.6.1982" D

The petitioner filed a writ petition in the Gauhati High Court
against the order dated 7 .12.1972 but it was not able to obtain any ex
· parte interim orders. The petition was withdrawn from the Gauhati
High Court and the present petition under Article 32 has been filed in E

-
~
this Court. On 5.3.1973, this Court issued rule nisi and also directed
the maintenance of the status quo pending notice. It, however, appears
that Hindustan Steel Ltd. had taken possession of the properties in
question and the interim stay was also vacated on 20th of January,
1987. The present position, therefore, is that the mining leases have
been granted to the Hindustan Steel Ltd. and they have also been F
operating the mines for the past several years.

Though several objections have been raised to the action of the
State Government in the writ petition, including a challenge to the
validity of section 4A, the arguments before us were restricted by Shri
P.C. Jain to only two aspects. He submitted that, admittedly, no G
notice had been issued by the State Government before terminating
the leases prematurely. This, according to him, amounts to denial of
natural justice and vitiates the order dated 7.12.1972. The second
contention is that the order does not fulfil the requirements specified
in section 4-A justifying the premature termination of leases in
pursuance thereof. H
990 SUPREME COURT REPORTS [ 1990] 1 S.C.R.

This writ petition came up for hearing on earlier occasions but it
A was adjourned from time to time as the same issue was pending deci-
sion in this Court in the case of State of Haryana v. Ram Kishan &
Ors., Civil Appeals Nos. 1472-77 of 1987. Our task in the present writ
petition has been considerably simplified because the above civil ap-
peals have been disposed of by this Court by its .iudgment date<.! 6th
B May, 1988, which Is reported in [1988] 3 S.C.C. 416. Shri P.C. Jain,
learned counsel for the petitioner company submits that the first point
raised by him has been squarely decided in his favour in the above case
and that, therefore, he is entitled to succeed in the present writ peti-
tion. Learned counsel also referred to a decision of the Delhi High
Court reported in Dharam Veer v. Union of {ndia, AIR 1989 Delhi
227, which has followed the decision in Ram Kishan's case. In that
C case, a similar order of premature termination was set aside by the
High Court and the lessees were directed to be put back in possession
of .the leased premises which had been taken away from .them in
pursuance of their unlawful order. Learned counsel submits that, in
the present case, having regard to the comparatively long periods of
.lj) leases and the lapse of time, be would not pray for the petitioner being
put back in possession of the leased premises b"t he contends that the
least that could be done is to award compensation to the petitioner
company for, (what has now to be held to be), the wrongful premature
termination of the leases. He submits that the petitioner is willing to
have this aspect of the matter referred to arbitration by any arbitrator
E appointed by this Court. ·

On the other hand, Shri R.B. Datar, learned counsel for the
Union of India submits that, in the State of Haryana v. Ram Kishan
and Others, [1988] 3 S.C.C. 416, the Central Government had expres-
sed its willingness to reconsider the matter after hearing the parties
F concerned and that, therefore, the decision of this Court in that case is
distinguishable. He sought to contend, on the strength of observations
made by this Court in The Barium Chemicals Ltd. and Anr. v. Com-
pany Law Board and Others, [1966] Suppl. S.C.R. 311 as well as the
decision in R.S. Dass v. Union of India and Others, [1985] Suppl.
S.C.C. 617 that rules of natural justice can be statutorily excluded
G either expressly or by necessary implication. In the present case, he
·submits that it became expedient, in the interest of regulation of mines
and mineral development, to have the mining operations in respect of
raw materials necessary for the production of iron and steel entrusted
to public sector companies and a policy decision to this effect had been
taken by the Government. In this context, he submits, the grant of an
H opportunity to the lessee would be totally meaningless and futile. He
ASSAM SILLIMANITE v. U.O.l. IRANGANATHAN, J.J 991

says that the object and purpose of the statute clearly excludes the
).- provision of an opportunity to the lessees before termination of the A
leases. If at all, he submits, it will be open to a lessee, whose lease is
prematurely terminated unper section 4-A, to challenge the order of
premature termination, after it was passed, on the ground that it did
not satisfy the conditions set out in section_ 4-A but that the section
should not be construed as envisaging a hearing of the lessees before B
an.order of premature termination is made. Referring to the amend-
ment of section 4-A in 1986, which specifically provides for an
opportunity of hearing under sub-section (3), Shri Datar says that this
provision became necessary because the grounds for premature termi-
~ nation set out in the new sub-section (1) of section 4-A were made
wider and made more comprehensive. Under the new sub-section,
premature termination of leases was permissible in various other c
circnmstances, such as: preservation of natural environment, control
)>._
~f floods, prevention of pollution, avoidance of danger to public
health or communications, ensuring of safety of buildings, monuments
and other structures, conservation of mineral resources, maintenance
of safety in mines and such other purposes as the <;entral Government D
may deem fit. These were purposes in respect of which an opportunity
of hearing to the lessee would be really needed and helpful but that, in
,J, the context of earlier sub-section, which was much narrower, no such
opportunity of hearing was at all contemplated.

- We do not propose to reconsider this matter as, in our opinion,
the contention raised by Shri P.C. Jain is directly and squarely con-
eluded by the decision in Ram Kishan's case (supra). It is no doubt true
E

{ that in that case the Central. Government appears to have been willing
to rehear the parties but the court did not proceed on the basis of any
concession. The court discussed the provisions of section 4-A at great
>- length and held that there was no suggestion in the section to deny the F
right of the affected persons to be heard and that the section must be
interpreted to imply that the person who may be affected by such a
decision should be afforded an opportunity to prove that the proposed
step would not advance the interest of mines and mineral develop-
ment. Not to do so, it was held, would be violative of the principles of
natural justice. The court concluded that the lessee-respondents were G
entitled to be heard before a decision to prematurely terminate their
---( leases was taken and that, since it was not done, the High CQJirt was
right in quashing the order passed under section 4-A.

In our opinion, the decision in Ram Kishan's case fully covers the
present case and should be followed by us. In fact, we think that the H
992 SUPREME COURT REPORTS I1990) 1 S.C.R.
A subsequent amendment in 1986 lends support to the plea of the
petitioners. Though it is true that the scope of section 4-A (1) has been
widened, the insertion of sub-section (3) clearly reflects a statutory
intention that an opportunity of hearing must be given before the
order of termination is passed, presumably as such an order widely
affects the rights of the lessees. We are not able to agree with Shri
B Datar that under section 4-A, as it stood before 1986, no useful
purpose would have been served by the giving of such an opportunity.
Several situations and circumstances can be conceived of where, given
an opportunity of hearing, the lessee may be able to either dissuade
the Government from terminating the leases prematurely or in
persuading the government to do it subject to certain safeguards for its
benefit. For example, the lessee may be able to show that the public
c sector corporation to whom it is proposed to entrust the working of the
mines is not yet adequately equipped to exploit the mines and that,
atleast for some more time the status quo should continue; or, again, if
there is only a short period before the leases are to expire in the
normal course, the lessee may be able to persuade the Government
D that no great advantage would be derived by premature termination of
the lease. These are only illustrative. Several such other situations can
be thought of. It is very difficult, therefore, to accept the contention
that because an order under section 4-A is to be passed in order to give
effect to a policy of the Government, it is not necessary or useful to
provide the lessees, whose leases are about to be terminated, an op-
portunity of hearing. We, therefore, hold, respectfully following the
decision in Ram Kishan's case (supra), that the order passed under
section 4-A dated 7 .12.1972 is null and void as it violated the principles
of natural justice and was passed without giving an opportunity to the
lessees of being heard.

F The next question is regarding the relief to be granted to the
petitioner. Shri Datar submits that in the writ petition the only prayer
made by the petitioners is for the quashing of the order dated
7 .12.1972 and that no further claim has been made in the writ petition.
He submits that if the petitioners are aggrieved because of the prema-
ture tenilination of the leases, it is open to them to file a suit or take
G other appropriate remedies for obtaining compensation in respect of
the unlawful termination. We do not think that this a fair course to be
adopted in this case. The writ petition was filed by the petitioner
company as early as in February 1973 and has been pending in this
Court for about 17 years. It is true that the petitioner could have filed a
suit for the same purpose with a prayer for additional relief by way of
H compensation or damages. Bnt we do not think that it should now be
ASSAM SILLIMANITE v. U.0.1. [RANGANATHAN, J.] 993

asked to go back to file a suit for compensation or damages which may A
be barred by limitation. After the lapse of such a long time, in our
opinion, the proper course is to adopt some method for deciding the
quantum of relief that coutd_be granted to the petitioner by way of
compensation and damages, which can at once be simple and expedi-
tious and which will avoid further unnecessary litigation. We think that
the request of the learned counsel that the matter may be referred to B
arbitration is a fair one and indeed this course is also not seriously
resisted by the respondents. The short question that remains to be
decided is whether the petitioners have suffered any damages as a
· result of the premature termination of the three leases in their favour
either in the shape of loss of profits for the unexpired periods of the
leases or in any other material respect. We, however, direct that, c
having regard to the circumstances of the case, the compensation/dam-
ages should be restricted to a period of five years from the date of
termination of the leases or upto the date of expiry of the original lease
deeds referred to above whichever is less and not for the entire unex-
pired period of all the leases. We refer this issue to arbitration.
D
Shri Justice S. Natarajan, retired Judge of this Court, is
appointed as Arbitrator to decide the above issue. The Union of India
has promised to place the services of a mining engirieet/expert at the
disposal of the arbitrator to assist him on the technical aspects of the
matter. The name of the nominee should be communicated to the
arbitrator within four weeks from today. It will be open to the E

- arcitrator to avail himself of the services of such nominee. Parties may
settle the terms of arbitration with the arbitrator. The company and
Union of India should, how.ever, deposit Rs.10,000 each with the
arbitrator as soon as the terms are settled to enable him to start the
proceedings without delay. The Arbitrator may enter upon the refe-
~ rence within four weeks of the date of communication of this order to F
him. He may make his award within a period of four months there-
after. He will not be obliged to give reasons for his conclusions. A
_copy of this order may be sent to the learned Arbitrator by the
Registry. The writ petitions disposed of in the above terms. In the
circumstances, we make no order as to costs.
G
R.S.S. Petition disposed of.