BHUSHAN POWER AND STEEL LTD. AND ORS.versusSTATE OF ORISSA AND ANR.

                         [2012] 5 S.C.R. 16


A       BHUSHAN POWER AND STEEL LTD. AND ORS.
                                  v.
                   STATE OF ORISSA AND ANR.
                  (Civil Appeal No. 2790 of 2012)

                          MARCH 14, 2012
B
    [ALTAMAS KABIR AND SURINDER SINGH NIJJAR, JJ.]

         Mines and Minerals - Mineral Concession Rules, 1960
    - Rule 59 - Proposed integrated steel plant - Application for
C   grant of lease for mining of iron ore for use in the plant -
    Hejection of, by the State Government - Validity - Appellant-
    company with the intention of setting up an integrated steel
    plant, entered into discussions with respondent-State
    Government and inter alia applied for grant of lease for mining
D   of iron ore for use in the proposed plant - Memorandum of
    Understanding (MOU) dated 15th May, 2002 entered into
    between the parties wherein respondent· State Government
    agreed to recommend to Central Government grant of iron
    ore mines to appe/fant for its use in the proposed plant -
E   However, upon subsequent re-organisation and restructuring
    of the Bhushan group (of which appellant-company was a
    member), respondent-State Government informed appellant
    company that the earlier MOU dated 15th May, 2002 had
    ceased to exist and that a fresh MOU was required to be
F   entered into between the appellants and the State
    Government - Application of appellant company for mining
    lease in respect of iron ore rejected on various grounds - most
    significantly on the ground that the area in question came
    within the relinquished area of a mining lease which was not
    thereafter thrown open for re-allotment under Rule 59 of the
G   Mineral Concession Rules and the application of appellant
    was therefore premature - Writ petition filed by appellant
    dismissed by High Court - Whether the MOU dated 15th May,
    2002, continued to subsist in favour of the appellants; whether

H                                 16
 BHUSHAN POWER AND STEEL LTD. v. STATE OF                 17
            ORISSA AND ANR.
the State Government was obliged to make recommendations /'-,
for the grant of iron ore mines in terms of the stipulations
contained in the MOU dated 15th May, 2002,and whether in
respect of the areas which had not been notified under Rule
59(1), the State Government could make a recommendation
for relaxation of Rule 59(1)under Rule 59(2) - Held: Despite B
having allotted land and granted sanction to appellant
company to take steps for construction of the said plant, to
now tum around and take a stand that the application made
by appellant company was premature, is not only
unreasonable, but completely unfair to appellant company, c
who have already invested large sums of money in setting up
the plant - The State Government had, on its own volition,
entered into the MOU with appellant company on 15th May,
2002 - Whatever differences that may have resulted on
account of the dispute within the Bhushan Group, which could D
have led to rethinking on the part of the State Government,
have now been laid to rest by virtue of a settlement - The
action taken by the State Government appears to be highly
unreasonable and arbitrary and also attracts the doctrine of
legitimate expectation - Appellants have altered their position E
to their detriment in accordance with the MOU dated 15th
May,2002 which continued to be in existence and remained
operative - The State Government appears to have acted
arbitrarily in requiring appellant company to enter into a
separate MOU, notwithstanding the existence of the MOU
dated 15th May, 2002, which had been acted upon by the F
parties - Since the State Government has already made
allotments in favour of others in relaxation of the Mineral
Concession Rules, under Rule 59(2) thereof, no cogent
ground made out on behalf of the State to deny the said
privilege to the appellants as well - Judgment of the High G
Court and also the decision of the State Government rejecting
the appellant's claim for grant of mining lease set aside -
State Government directed to take appropriate steps to act in
terms of the MOU dated 15th May, 2002, as also its earlier
commitments to recommend the case of the appellants to the H
    18       SUPREME COURT REPORTS               [2012) 5 S.C.R.


A Central Government for grant of adequate iron ore reserves
    to meet the requirements of the appellants in their steel plant
    - Doctrines - Doctrine of legitimate expectation.

       Appellant-company [Bhushan Limited (now
B Bhushan Power & Steel Ltd. - BPSL)], with the intention
  of setting up an integrated steel plant in the State of
  Orissa, entered into discussions with the respondent-
  State Government and inter alia applied for grant of lease
  for mining of iron ore for use in the proposed plant. A
c Memorandum of Understanding (MOU) dated 15th May,
  2002 was entered into between the parties wherein the
  respondent-State Government agreed to recommend to
  Central Government grant of iron ore mines to appellant
  for its use in the proposed plant. However, upon
D subsequent re-organisation and restructuring of the
  Bhushan Group [of which appellant-company was a
  member], the respondent-State Government addressed
  letter to the appellant company stating that the earlier
  MOU dated 15th May, 2002 had ceased to exist and that
E accordingly a fresh MOU was required to be entered into
  between the appellants and the State Government. The
  application of appellant company for mining lease in
  respect of iron ore was rejected on various grounds •
  most significantly on the ground that the area in question
  came within the relinquished area of a mining lease which
F was not thereafter thrown open for re-allotment under
  Rule 59 of the Mineral Concession Rules, 1960 and that
  the application of the appellant was therefore premature.
  Having rejected the appellants' prayer for grant of mining
  lease, the State Government made recommendation to
G the Central Government to grant mining lease in favour
  of another applicant in relaxation of Rule 59(1) of the
  Rules, for a period of 30 years. Appellant filed writ petition
  which was dismissed by the High Court.

H        In the instant appeal, the appellants pointed out that
 BHUSHAN POWER AND STEEL LTD. v. STATE OF              19
            ORISSA AND ANR.
only two issues arose for consideration in the present       A
case, namely - a)Whether the Memorandum of
Understanding dated 15th May, 2002, continued to
subsist in favour of the appellants and b) Whether the
State     Government       was     obliged    to   make
recommendations for the grant of iron ore mines in terms     B
of the stipulations contained in the MOU dated 15th May,
2002,and whether in respect of the areas which had not
been notified under Rule 59(1) of the Mineral Concession
Rules, 1960, the State Government could make a
recommendation for relaxation of Rule 59(1 )under Rule       c
59(2).

     The appellants urged that during the pendency of the
proceedings, the dispute between the members of the
Bhushan Group had been settled and the parties had
mutually agreed to withdraw all the allegations and claims   D
relating to the MOU dated 15th May, 2002 and in the
changed circumstances, the question of execution of a
fresh MOU loses its relevance and the letter dated 31st
December, 2005, calling upon the Appellants to execute
a fresh MOU, is not required to be given effect to and       E
consequently, the MOU dated 15th May, 2002, continues
to be valid and subsisting between the State of Orissa
and the appellant company. On the question of Rule 59
of the Mineral Concession Rules, which formed the basis
of the State Government's decision to reject the             F
appellants' application for being recommended to the
Central Government for grant of a mining lease, the
appellants submitted that such recommendations had
been made by the State Government in favour of other
applicants as well and therefore, there was no reason to     G
deny the same benefits to the appellants as well.

    Allowing the appeal, the Court

    HELD: 1. Although, the MOU was entered into by the
State Government with the Bhushan Group for setting up       H
    20      SUPREME COURT REPORTS            [2012] 5 S.C.R.


A a steel plant at Lapanga, at a later stage, Bhushan Power
  & Steel Ltd (BSSL) also laid claim under the MOU for
  setting up a separate steel plant at Mehramandali and a
  suggestion was also made for execution of a fresh MOU
  between the State Government and BSSL to this effect.
B The mutual settlement of the disputes between the
  members of the Bhushan Group has, however, altered
  the situation considerably, since BSSL has withdrawn its
  claim under the MOU dated 15th May, 2002, and has
  declared that the said MOU was and had always been
c executed by the State Government in favour of Bhushan
  Power & Steel Ltd., which had set up its steel plant at
  Lapanga. [Para 30) [34-B-D]

         2. Pursuant to the MOU with Bhushan Limited, the
    State Government had not only allotted land for the
D   setting up of the steel plant at Lapanga, it had even
    extended all help for the commissioning of the plant,
    which, in fact, had already started functioning. However,
    it is the claim made by BSSL under the MOU executed
    on 15th May, 2002, that had created obstructions in the
E   setting up of the steel plant at Lapanga. Despite having
    allotted land and granted sanction to Bhushan Limited to
    take steps for construction of the said plant, it was
    subsequently contended that the application filed by
    Bhushan Limited was premature and could not, therefore,
F   be acted upon. Specific steps were taken by the various
    departments in extending cooperation to Bhushan
    Limited to set up its steel plant at Lapanga. To now turn
    around and take a stand that the application made by
    Bhushan Limited was premature, is not only
G   unreasonable, but completely unfair to Bhushan Limited,
    who have already invested large sums of money in setting
    up the plant. The State Government had, on its own
    volition, entered into the MOU with Bhushan Limited on
    15th May, 2002, and had even agreed to request the
H   Central Government to allot mining areas and coal blocks
  BHUSHAN POWER AND STEEL LTD. v. STATE OF              21
             ORISSA AND ANR.
for operating the steel plant. Whatever differences that      A
may have resulted on account of the dispute within the
Bhushan Group, which could have led to the rethinking
on the part of the State Government, have now been laid
to rest by virtue of the settlement arrived at between the
Bhushan Limited (now BPSL) and BSSL. The State                B
Government has also accepted the said position. In
addition to the above, the action taken by the State
Government appears to be highly unreasonable and
arbitrary and also attracts the doctrine of legitimate
expectation. There is no denying the fact that the            C
Appellants have altered their position to their detriment
in accordance with the MOU dated 15th May,2002.
Whatever may have been the arrangement subsequently
arrived at between the State Government and BSSL, the
original MOU dated 15th May, 2002, continued to be in
existence and remained operative. [Para 31) [34-D-H; 35-      D
A-DJ
     3. The State Government appears to have acted
arbitrarily in requiring Bhushan Limited to enter into a
separate MOU, notwithstanding the existence of the MOU        E
dated 15th May, 2002, which had been acted upon by the
parties. [Para 32) [35-D-E]
     4. The High Court erred in holding that it could not
interfere with the decision of the State Government
calling upon the Appellants to sign a fresh MOU with the      F
Government, during subsistence of the earlier MOU.
Since the State Government has already made allotments
in favour of others in relaxation of the Mineral
Concession Rules, 1960, under Rule 59(2) thereof, no
cogent ground had been made out on behalf of the State        G
to deny the said privilege to the Appellants as well. [Para
33) (35-F-D]
    5. The judgment and order of the High Court and
also the decision of the State Government dated 9th
February, 2006, rejecting the Appellant's claim for grant     H
    22       SUPREME COURT REPORTS                [2012) 5 S.C.R.


A of mining lease are set aside. During the course of
  hearing, this Court was informed that Thakurani BlockA
  has large reserves of iron ore, in which the Appellants can
  also be accommodated. Accordingly, the State of Orissa
  is directed to take appropriate steps to act in terms of the
B MOU dated 15th May, 2002, as also its earlier
  commitments to recommend the case of the Appellants
  to the Central Government for grant of adequate iron ore
  reserves to meet the requirements of the Appellants in
  their steel plant at Lapanga.[Para 34) (35-G-H; 36-A-B]
c       CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    2790 of 2012.

        From the Judgment & Order dated 14.12.2007 of the High
    Court of Orissa at Cuttack in W.P. (C) No. 6646 of 2006.
D
      Mukul Rohatgi, L.N. Rao, K.V. Vishwanathan, S.K.
  Bagaria, Mahesh Agrawal, Rishi Agrawal, E.C. Agrawala,
  Ninad Laud, Nakul Mohta, Santosh Krishnan, Rajat J.D.,
  Sanjeev Kumar (for Khaitan & Co.) Rajat Jariwal, Abhishek
E Kaushik, Rahul Chandra (for Khaitan & Co.), Sunil Kumar Jain,
  Aneesh Mittal, Umesh Kumar, Jagmohan Sharma, K.P.S.
  Chani, Suresh Chandra Tripathy, Satya Mitra Garg, Sanjay Jain,
  Manjula Gupta, Shibashish Misra for the appearing parties.

         The Judgment of the Court was delivered by
F
         ALTAMAS KABIR, J. 1. Leave granted.

       2. 'Nith the intention of setting up an integrated steel plant
  in the State of Orissa, Bhushan Limited, entered into
  discussions with the State Government in 2001 in that regard.
G Pursuant to such discussions, Bhushan Limited applied to the
  Industrial Development Corporation of India (IDCO) for
  acquisition of land measuring 1250 acres, for setting up the
  proposed plant in the identified villages of Thelkoloi,
  Dhubenchhabrar and Khariapalli (Lapanga) in the District of
H Sambalpur. On 13th November, 2001, Bhushan Limited applied
 BHUSHAN POWER AND STEEL LTD. v. STATE OF                      23
    ORISSA AND ANR. [ALTAMAS KABIR, J.]
to the Industrial Promotion and Investment Corporation of            A
Orissa Ltd. (IPICOL) for appraisal and recommendation for
acquisition of land for the aforesaid purpose to IDCO. Bhushan
Limited also addressed two letters to the Collector,
Sundergarh and Collector, Keonjhar on 28th November, 2001,
applying for grant of lease for mining of iron ore for use in the    B
proposed plant. The applications were received in the
Collector's office on 3rd December, 2001, 4th December, 2001
and 1st March, 2002. On the basis of such applications filed
by Bhushan Limited, a meeting was held on 27th March, 2002,
between the Chief Secretary, Government of Orissa and                c
Bhushan Limited, in which the Government agreed to accord
due priority to Bhushan limited for grant of suitable iron ore
areas and also agreed to recommend the proposal of Bhushan
limited to the Government of India for grant of a Coal Block.

     3. Thereafter, meetings were held between Bhushan               D
Limited and the representatives of the State Government and
one such meeting was held on 24th April, 2002, under the
Chairmanship of the Chief Minister, relating to the setting up
of the steel plant at Lapanga. The said meeting was confirmed
by IDCO and the Water Resources Department and it was                E
decided to prepare a Memorandum of Understanding (MOU)
to be signed by the parties for setting up of a 1.2 million tonnes
steel plant under Phase-I and a 2.8 million tonnes steel plant
in Phase-II in Lapanga, in the District of Sambalpur. The MOU
contained the commitment of the State Government to                  F
recommend to the Central Government grant of iron ore mines
to the Appellant for its use in the plant to be set up at Lapanga.
As far as the grant of the iron ore mines is concerned, the State
Government agreed to make the following recommendations
to the Central Government:                                           G

      (a)   For grant of 96 million tonnes iron ore reserves in
            Joda Barbil Sector of Keonjhar (Thakurani area) for
            50 years requirement of the plant.

      (b)   For additional 128 million tonnes of iron ore            H
    24        SUPREME COURT REPORTS                 [2012] 5 S.C.R.


A               reserves in Keora, District Sundergarh, to meet a
                requirement of 1.6 million tonnes for 50 years.

       The total requirement of 200 million tonnes was split up
  into two parts, i.e., 96 million tonnes and 128 million tonnes
B respectively, and the same were to be met from the Thakurani
  mines situated in the Joda Barbi! sector and from the Keora
  area of Sundergarh District.

         4. Pursuant to the aforesaid understanding, on 16th May,
    2002, the Government of Orissa addressed two letters to the
C   Government of India, in its Ministry of Steel and Ministry of Coal,
    for allotment of Jamkhani and Bijahan Coal Blocks to Bhushan
    Limited. In aid of the decision to set up the steel plant, the
    Department of Energy issued a No Objection Certificate (NOC)
    for setting up of a power plant at Thelkoloi in the name of
D   Bhushan Limited and, on 5th July, 2002, the State Government
    conveyed its approval for acquisition of 632.28 acres of private
    land and 634.94 acres of Government land in identified villages
    under Rengali Tehsil of Sambalpur District, for establishment
    of the steel plant. Several meetings took place between the
E   Principal Secretary and the representatives of Bhushan Limited,
    where even the Joint Secretary of Mines was present and
    assurances were given to Bhushan Limited to 'send the
    proposal for grant of mining lease in favour of Bhush~n Limited
    to the State Government by the first week of September, 2002.
F   On 22nd October, 2002, even the State Pollution Control
    Board gave its approval in principle for setting up the plant in
    the selected sites.

       5. On 8th November, 2002, the Director, Min~s. furnished
  his report on the application made by the Appellant on 4th
G December, 2001, for grant of mining lease over the Thakurani
  Block area. In the said report it was recorded that Thakurani
  Block A and Block B mines had been leased in favour of the
  Sharda's in 1934, by the Ex-Ruler of Keonjhar and that the
  Thakurani Block A mines had been extensively mined by the
H original lessee from 1934 onwards. The report also disclosed
  BHUSHAN POWER AND STEEL LTD. v. STATE OF                     25
      ORISSA AND ANR. [ALTAMAS KABIR, J.]

that in 1998, the matter was settled in this Court between the       A
State, the Sharda's and the Centre. It was agreed that
Thakurani Block A would be relinquished in favour of the State
and the mining lease of Block B would be renewed in favour
of the Sharda's. Accordingly, in terms of the settlement, the
Thakurani Block A became available with the State. It is on the      B
aforesaid basis that the Appellant had been advised to apply
to the State Government for this area, and the same was done
in December, 2001. The report also indicated that a mining
licence could be granted to Bhushan Limited in relaxation of
Rule 59(2) of the Mineral Concession Rules, 1960, hereinafter        c
referred to as the "MC Rules", in view of the fact that the
Thakurani Block A had been mined by the original lessee from
1934 onwards. The State Government was advised to
recommend to the Centre for grant of relaxation under Rule
59(2) of the MC Rules.                                               D

    6. On 19th February, 2003, the Orissa Electricity
Regulatory Commission (OERC) passed an order granting
permission for installation of a Captive Power Plant by
Bhushan Limited.
                                                                     E
     7. It is at this stage that trouble began to brew. A decision
had been taken to merge Bhushan Ltd. with Bhushan Steel and
Strips Limited (BSSL) which had an identity which was
separate from that of Bhushan Limited, though treated to be a
family concern under the Bhushan family umbrella. On 21st            F
February, 2003, the Government of Orissa was informed by Shri
Brij Bhushan Singhal, Chairman of the Bhushan Group, that
Bhushan Limited, the Appellant herein, would not be merging
with BSSL, but that the papers were being processed in the
name of Bhushan Limited, as a group. Accordingly, the State          G
Government was requested not to process the papers for 2-3
months. On 17th March, 2003, BSSL wrote to the Chief
Minister, informing him of the developments which had taken
place and that two companies had decided not to merge, with
                                                                     H
    26       SUPREME COURT REPORTS                [2012] 5 S.C.R.


A   retrospective effect from 1st April, 2002, as had been decided
    earlier.

       8. Thereafter, on 5th May, 2003, Shri Neeraj Singhal wrote
  to the Chief Minister on behalf of BSSL informing him that
8 BSSL was unable to process the setting up of the steel plant
  at Lapanga and in order to minimize the friction between the
  two groups within the family, BSSL had decided to set up a
  separate steel plant at a different location in Mehramandali in
  the District of Dhankanal in respect whereof 1500 acres of land
C had been identified. On 17th June, 2003, the Water Resources
  Department, Government of Orissa, wrote to Bhushan Power
  & Steel Ltd. giving its approval of the layout for intake well for
  drawal of 100 cusec water for the integrated steel plant of the
  Company. This was followed by grant of a certificate by IDCO
  on 19th July, 2003, confirming sanction of land for lease
D measuring 488.08 acres in favour of Bhushan Limited
   comprising Thelkoloi, Dhubenchhapar and Khadiapalli, which
   had been identified in the MOU for establishment of the steel
   plant by Bhushan Limited.

E       9. The said sanctions were followed up by a meeting
  chaired by the Chief Minister of Orissa on 25h July, 2003,
  wherein the progress of the project was discussed and it was
  resolved that the application of Bhushan Limited for iron ore
  deposits would be recommended to the Government of India
F and that no fresh MOU was required to be filed. It was decided
  that the MOU executed earlier between the Bhushan Group and
  the State Government on 15th July, 2002, would remain
  undisturbed, since, the same had already been acted upon by
  both sides. It was also decided that the application of Bhushan
G Limited for iron ore deposits would be recommended to the
  Government of India in terms of the MOU, after the same was
  placed before the Screening Committee which was chaired by
  the Chief Secretary.

         10. Further to the permission being granted to Bhushan
H   Limited on 21st February, 2003, for installation of a Captive
 BHUSHAN POWER AND STEEL LTD. v. STATE OF                   27
     ORISSA AND ANR. [ALTAMAS KABIR, J.]

Power Plant, OERC granted a "No Objection Certificate" to         A
Bhushan Limited for setting up of a Captive Power Plant for
increased capacity.

      11. Subsequently, various other steps were taken for
establishment of the power plant at Lapanga by Bhushan Power 8
& Steel Ltd. On 10th February, 2004, the State Government
wrote to Shri Sanjay Singhal, representing Bhushan Limited,
that in view of the reorganization and restructuring of the
Bhushan Group, the earlier MOU ceased to exist and had lost
its force. Accordingly, a fresh MOU was required to be entered C
into between the Appellants and the State Government for
speedy implementation of the project which was on the anvil. It
is the case of the Appellants that this letter was never acted
upon by either party, since, thereafter, the State allotted and
granted possession of large tracts of land to the Appellants and
other agreements, such as drawal of water were entered into, D
permission was given for connectivity with the Grid and other
various other administrative sanctions, as also approval for
acquisition of land, were made in favour of Bhushan Power &
Steel Ltd., without any insistence for the execution of a fresh
MOU. Simultaneously, Shri Neeraj Singhal of BSSL was also E
informed by the State that since they wanted to set up a
separate steel plant at Mehramandali, a fresh MOU to this effect
could be entered into between the State and BSSL.

     12. Responding to the letter of 10th February, 2004,         F
Bhushan Limited wrote back on 21st February, 2004, stating
that no fresh MOU was required to be signed, since the earlier
MOU was quite valid. On 11th March, 2004, the Government
of Orissa, in its Department of Industries, informed IDCO that
the Government had been pleased to advise for immediate           G
transfer of acquired land, both Government and private, to
Bhushan Limited, after observing all the necessary formalities.
However, on 17th March, 2004, Shri Neeraj Singhal, Managing
Director of BSSL, wrote to the Principal Secretary, Department
of Steel and Mines, contending that Bhushan Limited, as also      H
    28       SUPREME COURT REPORTS                [2012] 5 S.C.R.


A   BSSL, were entitled to the benefits of the MOU, which had
    been signed on 15th May, 2002.

          13. Within a week thereafter, on 24th March, 2004, IDCO
    transferred the land for the project at Lapanga to Bhushan
8   Limited and possession thereof was also made over on
    several dates. On 12th May, 2004, the Ministry of Environment
    and Forest, Government of India, gave clearance to the project
    at Rengali in the name of Bhushan Limited. The Chief Inspector
    of Factories and Boiler, gave approval to the Steam and Feed
C   Water pipe line drawing for Bhushan Limited on 2nd July, 2004.
    On 3rd September, 2004, the Government of Orissa, in its
    Ministry of Environment and Forest, granted approval to
    Bhushan Limited for diversion of 59.16 hectares of forest land
    for establishment of the integrated steel plant and an agreement
    was also drawn up between the Government and Bhushan
D   Limited on 17th September, 2004, for drawal of water from the
    Hirakud Reservoir for use in the proposed integrated steel plant
    at Lapanga. On 2nd February, 2005, the State Government
    wrote to Bhushan Limited, seeking the status report of the steel
    plant project and on 16th March, 2005, permission was granted
E   for provisional energisation of 220 KV line issued by the Chief
    Electrical Inspector in favour of Bhushan Limited. Several other
    approvals were granted upto 9th August, 2005, and finally in
     March, 2005, Bhushan Limited (BPSL) commenced production
    at its steel plant. On 6th September, 2005, administrative
F   approval was given for acquisition of additional private land for
     Lapanga plant, granted by the Steel and Mines Department to
    Bhushan Limited. Similar approval was given in respect of other
    lands on 28th September, 2005 and 6th February, 2006.
G      14. Simultaneously, with administrative approval being
  given for acquisition of private land for the Lapanga plant on
  3rd November, 2005, an agreement was entered into between
  BSSL and the Government of Orissa for putting up the steel
  plant at Mehramandli. There was no mention of the MOU dated
H 15th May, 2002, in the said agreement. Within a matter of 10
 BHUSHAN POWER AND STEEL LTD. v. STATE OF                 29
    ORISSA AND ANR. [ALTAMAS KABIR, J.]
days, the Directorate of Factories and Boilers wrote to Bhushan A
Limited granting permission under the Factories Act, 1948, to
construct the steel plant at Lapanga.

     15. Surprisingly, on 31st December, 2005, the Government
of Orissa issued a letter to Bhushan Limited indicating that it B
had decided not to treat the MOU signed earlier with Mis
Bhushan Group of Companies as place specific after the
company had been divided into Bhushan Limited (BPSL) and
Mis Bhushan Steel and Strips Ltd. (BSSL). The Bhushan Group
was informed that the State Government had decided to deal C
with both the Companies separately and to sign two separate
agreements for the purpose of acquiring land, allotting mines
and providing other facilities for establishment and growth of
steel plants in Orissa.

    16. On 9th January, 2006, a letter was addressed by the D
Directorate of Factories and Boilers to Bhushan Steel Ltd.
approving the draft of the steam pipe line and on 13th January,
2006, on the recommendation of the Government of Orissa, the
Central Government allotted Bijahan Coal Block in the District
of Sundergarh to Bhushan Limited as per the MOU.                E

      17. Even more surprisingly, on 18th January, 2006, the
Government of Orissa issued a Show-Cause Notice to Bhushan
Limited to appear before the Joint Secretary on 17th February,
?006, for a personal hearing. Several deficiencies in the
application for mining lease of iron ore dated 4th December, F
2001, in respect of the Thakurani Block A, were also pointed
out. Thereafter, the State Government informed the Appellants
that their application dated 4th December, 2001, for mining
lease over the Thakurani area could not be allowed on various
grounds. However, the most significant ground was that the area G
in question came within the relinquished area of the mining
lease of Mis Sharda which was not thereafter thrown open for
re-allotment under Rule 59 of the aforesaid Rules. It was alleged
that the application made by Bhushan Limited was, therefore,
premature. Having rejected the Appellants' prayer for grant of H
    30          SUPREME COURT REPORTS              [2012] 5 S.C.R.


A   mining lease, on 9th February, 2006, the Government of Orissa
    made a recommendation to the Central Government to grant
    mining lease in favour of Mis Neepaz Metallicks (P) Ltd. in
    relaxation of Rule 59(1) of the aforesaid Rules, for a period of
    30 years.
B
       18. On 28th February, 2006, Bhushan Limited altered its
    name to Bhushan Power & Steel Ltd. (BPSL).

          19. On 8th May, 2006, Bhushan Limited filed Writ Petition
    No.6646 of 2006 before the Orissa High Court. On the next day,
C   the State Government issued a reminder to Bhushan Limited
    in regard to its letter dated 31st December, 2005, by which the
    State Government had asked for a separate MOU from
    Bhushan Limited, inspite of the MOU already existing between
    the parties, which had also been acted upon till as late as 26th
D   April, 2006. On 15th May, 2006, the High Court passed an
    interim order granting status-quo with regard to the applications
    for mining lease. On 5th September, 2006, an intervention
    application was filed by BSSL, which was allowed on 6th
    December, 2006.
E
          20. During the course of hearing of the Writ Petition, the
    High Court passed an interim order and directed that the
    problems relating to the Show-Cause Notice dated 18th
    January, 2006, should be resolved, keeping in view the
    commitments of the State. On 26th June, 2007, the High Court
F   directed circulation of the order dated 18th June, 2007, and
    liberty was given to Bhushan Limited to challenge the same by
    filing an affidavit in the writ proceedings.

         21. Such affidavit was duly filed on 10th July, 2007, and
G   the order impugned in the present appeal came to be passed
    by the High Court on 14th December, 2007, dismissing the
    aforesaid Writ Petition No.6646 of 2006. The substance of the
    order of the High Court while dismissing the Writ Petition is :-

          (a)    The Court cannot set aside the communication of
H
 BHUSHAN POWER AND STEEL LTD. v. STATE OF                    31
     ORISSA AND ANR. [ALTAMAS KABIR, J.]
            the State Government asking the Appellants to sign     A
            a fresh MOU with the Government as early as
            possible.

      (b)   The Appellants' application for grant of mining
            lease dated 4th December, 2001, should be
                                                                   8
            considered afresh by the appropriate authorities of
            the State Government in accordance with law, along
            with other similarly placed applicants.

      (c)   The Appellants would be at liberty to challenge the
            subsequent report of the Director of Mines dated       C
            31st May, 2007, in the hearing which would be
            afforded to the Appellants by the appropriate
            authority of the State.

      (d)   The Appellants would be at liberty to challenge the    D
            order dated 18th June, 2007, on merits, but it was
            also submitted that the application for mining lease
            of the Appellants would be considered after it
            executed a fresh MOU with the State Government.

      22. As indicated hereinbefore, on 21st April, 2008, this E
Court passed an interim order in the Special Leave Petition
filed by Bhushan Limited directing the parties to maintain status-
quo with regard to the lands indicated in the application filed
by the Appellants for grant of mining lease. However, one of
the most significant developments that subsequently took place F
was that on 15th November, 2011, Shri B.B. Singhal and Shri
Neeraj Singhal, Vice-Chairman and Managing Director of
Bhushan Steel and Strips Ltd. filed affidavits withdrawing all
their claims and rights in the MOU dated 15th May, 2002,
executed between the State Government and Bhushan Limited G
and declaring that the said MOU was and had always been in
favour of Bhushan Power & Steel Ltd. The above-named
persons also prayed for deletion of their names from the array
of parties.
                                                                   H
    32       SUPREME COURT REPORTS                (2012] 5 S.C.R.


A         23. Appearing for the Appellants, Mr. Mukul Rohatgi,
    learned Senior Advocate, pointed out that only two issues arise
    for the consideration of this Court in the present case, namely


B        (a) Whether the Memorandum of Understanding dated 15th
         May, 2002, continues to subsist in favour of the Appellants?

         (b) Whether the State Government is obliged to make
         recommendations for the grant of iron ore mines in terms
         of the stipulations contained in the aforesaid MOU dated
c        15th May, 2002, and whether in respect of the areas which
         had not been notified under Rule 59(1 ), the State
         Government can make a recommendation for relaxation
         of Rule 59(1) under Rule 59(2)?

o     24. Mr. Rohatgi submitted that having entered into a
  Memorandum of Understanding with the Appellant Company
  and having acted thereupon and having also caused the
  Appellants to change their position to their detriment, it was not
  open to the State Government to call upon the Appellants to
E execute a fresh MOU, during the subsistence of the MOU dated
  15th May, 2002.

       25. Mr. Rohatgi also submitted that notwithstanding the
  State Government's requirement that the Appellants should
  enter into a fresh MOU, the State Governmen~ continued to act
F under the MOU dated 15th May, 2002. Despite the
  communications dated 10th February, 2004, and 31st
  December, 2005, above recorded, the State Government went
  on further to hold that all the steps required to be taken for
  installation of the steel plant at Lapanga, had been taken,
G except that it did not comply with the obligations of making
  recommendations to the Central Government for grant of iron
  ore mines. Mr. Rohatgi urged that during the pendency of the
  proceedings, the dispute between the members of the Bhushan
  Group had been settled and the parties had mutually agreed
H to withdraw all the allegations and claims relating to the MOU
 BHUSHAN POWER AND STEEL LTD. v. STATE OF                    33
    ORISSA AND ANR. [ALTAMAS KABIR, J.]

dated 15th May, 2002. Incidentally, by filing l.A.No.13, BSSL      A
confirmed that Bhushan Power & Steel Ltd. was the sole
beneficiary under the MOU dated 15th May, 2002, and
withdrew all its claims under the MOU dated 15th May, 2002.

      26. Mr. L. Nageshwar Rao, learned Senior Advocate,           8
appearing for the State of Orissa, has also very fairly stated
that in view of the settlement of disputes between the members
of the Bhushan Group, the issue relating to the MOU did not
survive and, since, the State Government had already
performed its obligation under the MOU, the only thing remaining   C
to be done by the State is to make recommendations to the
Central Government for grant of iron ore mines to the Bhushan
Power & Steel Ltd.

      27. Mr. Rohatgi submitted that in the changed
circumstances, the question of execution of a fresh MOU loses      D
its relevance and the letter dated 31st December, 2005, calling
upon the Appellants to execute a fresh MOU, is not required to
be given effect to. Consequently, it may be held that the MOU
dated 15th May, 2002, continues to be valid and subsisting
between the State of Orissa and Bhushan Power & Steel Ltd.         E

     28. On the question of Rule 59 of the MC Rules, which
formed the basis of the State Government's decision to reject
the Appellants' application for being recommended to the
Central Government for grant of a mining lease, Mr. Rohatgi
submitted that such recommendations had been made by the           F
State Government in favour of other applicants as well, such
as Mis. S.M.C. Power Generation Ltd., Mis. Neepaz Metalics,
Mis. Sree Metaliks and Mis. Deepak Steel & Power. Therefore,
there was no reason to deny the same benefits to the
Appellants as well.                                                G

     29. Appearing for the Intervener, Mis. Jindal Steels Ltd.,
Mr. K.V. Vishwanathan, learned Senior Advocate, submitted
that so long as any allotment made in favour of the Appellants
did not impinge on the allotment made in favour of Mis. Jindal     H
    34       SUPREME COURT REPORTS               [2012) 5 S.C.R.


A   Steels Ltd., it could have no grievance against a separate
    allotment being made in favour of the Appellants.

       30. The mutual settlement of the disputes between the
  members of the Bhushan Group has altered the situation
8 considerably,  since BSSL has withdrawn its claim under the
  MOU dated 15th May, 2002, and has declared that the said
  MOU was and had always been executed by the State
  Government in favour of Bhushan Power & Steel Ltd., which had
  set up its steel plant at Lapanga. As indicated hereinbefore,
C although, the MOU was entered into by the State Government
  with the Bhushan Group for setting up a steel plant at Lapanga,
  at a later stage, BSSL also laid claim under the MOU for
  setting up a separate steel plant at Mehramandali and a
  suggestion was also made for execution of a fresh MOU
  between the State Government and BSSL to this effect.
D
       31. Pursuant to the MOU with Bhushan Limited, the State
  Government had not only allotted land for the setting up of the
  steel plant at Lapanga, it had even extended all help for the
  commissioning of the plant, which, in fact, had already started
E functioning. However, it is the claim made by BSSL under the
  MOU executed on 15th May, 2002, that had created
  obstructions in the setting up of the steel plant at Lapanga.
  Despite having allotted land and granted sanction to Bhushan
  Limited to take steps for construction of the said plant, it was
F subsequently contended that the application filed by Bhushan
  Limited was premature and could not, therefore, be acted upon.
  Specific instances have been mentioned hereinabove of the
  steps taken by the various departments in extending
  cooperation to Bhushan Limited to set up its steel plant at
G Lapanga. To now turn around and take a stand that the
  application made by Bhushan Limited was premature, is not
  only unreasonable, but completely unfair to Bhushan Limited,
  who have already invested large sums of money in setting up
  the plant. The State Government had, on its own volition,
  entered into the MOU with Bhushan Limited on 15th May, 2002,
H
 BHUSHAN POWER AND STEEL LTD. v. STATE OF                       35
     ORISSA AND ANR. [ALTAMAS KABIR, J.]
and had even agreed to request the Central Government to allot        A
mining areas and coal blocks for operating the steel plant.
Whatever differences that may have resulted on account of the
dispute within the Bhushan Group, which could have led to the
rethinking on the part of the State Government, have now been
laid to rest by virtue of the settlement arrived at between the       B
Bhushan Limited (now BPSL) and BSSL. The State
Government has also accepted the said position. In addition
to the above, the action taken by the State Government appears
to us to be highly unreasonable and arbitrary and also attracts
the doctrine of legitimate expectation. There is no denying the       C
fact that the Appellants have altered their position to their
detriment in accordance with the MOU dated 15th May, 2002.
Whatever may have been the arrangement subsequently
arrived at between the State Government and BSSL, the
original MOU dated 15th May, 2002, continued to be in                 D
existence and remained operative.

     32. The State Government appears to have acted
arbitrarily in requiring Bhushan Limited to enter into a separate
MOU, notwithstanding the existence of the MOU dated 15th
May, 2002, which, as mentioned hereinabove, had been acted            E
upon by the parties.

     33. In the light of the above, the High Court erred in holding
that it could not interfere with the decision of the State
Government calling upon the Appellants to sign a fresh MOU
                                                                      F
with the Government, during subsistence of the earlier MOU.
Since the State Government has already made allotments in
favour of others in relaxation of the Mineral Concession Rules,
1960, under Rule 59(2) thereof, no cogent ground had been
made out on behalf of the State to deny the said privilege to         G
the Appellants as well.

     34. Accordingly, we allow the appeal and set aside the
judgment and order of the High Court of Orissa and also the
decision of the State Government dated 9th February, 2006,
rejecting the Appellant's claim for grant of mining lease. During     H
    36       SUPREME COURT REPORTS                 (2012] 5 S.C.R.


A the course of hearing, we have been informed that Thakurani
  Block A has large reserves of iron ore, in which the Appellants
  can also be accommodated. We, accordingly, direct the State
  of Orissa to take appropriate steps to act in terms of the MOU
  dated 15th May, 2002, as also its earlier commitments to
B recommend the case of the Appellants to the Central
  Government for grant of adequate iron ore reserves to meet
  the requirements of the Appellants in their steel plant at
  Lapanga.

         35. There will be no order as to costs.
c
    B.B.B.                                          Appeal allowed.