M/S. KABINI MINERALS PVT. LTD. AND ANR.versusSTATE OF ORISSA AND ORS.

           M/S. KABINI MINERALS PVT. LTD. AND ANR.                              A
                              v.
                  ST ATE OF ORIS SA AND ORS.

                          NOVEMBER 18, 2005

           (ARIJIT PASAYAT AND R.V. RAVEENDRAN, JJ.)                            B


      Mines and Minerals:

      Orissa Minor Mineral Concession Rules, 1990-Rule 6 (6-a)(i)-Quarry
lease for Decorative stones-Preference given to second applicant for grant      C
over the first applicant-Validity of-Held, valid as the second applicant had
already set up an industry for processing ofminor mineral-Question ofgiving
preference to be adjudged only at the time of considering application and not
at the time of making of application-Non-recording of reasons by the
authorities while giving preference to second applicant-Not necessary since     D
it has already set up similar industry which itself is a reason for giving
preference under sub-rule (6-a).

      Words & Phrases-'Setting up'-Meaning of

      Appellant no. 1 had applied for quarry lease to the Government of
Orissa Steel and Mines Department for 'decorative stones' for a period          E
of 10 years. For setting up of the unit, appellant no. 1 had entered into an
agreement to purchase land and had also ordered for machineries.
Subsequently, respondent no. 4 also applied for the quarry lease.
Thereafter, respondent no. 4 wrote letter to the Government informing
that it had purchased a sick unit "Valley Granites Pvt. Ltd." which was         F
engaged in the processing of the concerned minor mineral and requested
for consideration of its application for quarry lease. The lease was granted
to respondent no. 4. Appellant challenged the same by way of Writ
Petition. High Court dismissed the same holding that the case of
respondent no. 4 was covered by Rule 6(6-a)(i) of the Orissa Minor
Mineral Concession Rules, 1990 and it had priority over appellant No. 1.        G
Hence the present appeal.

     Dismissing the appeal, the Court

     HELD: 1.1. On a reading of the language of Rule 6 of Orissa Minor
                                    341                                         H
    342                     SUPREME COURT REPORTS (2005] SUPP. 5 S.C.R.

A Mineral Concession Rules, 1990, it is clear that three types of precedence/
    priority are embodied in the provision. First is a normal case where the
    application which has been received earlier is given precedence over the
    latter application. An exception is carved out in sub-rule (5-a) to the effect
    that if the State Government is of the opinion that in the interest of mineral
    department it is necessary to do so it may for reasons to be recorded in
B   writing, grant quarry lease in preference to the applications made earlier.
                                                                        (347-A, BJ

          1.2. Sub-rule (6-a) carves out a category of applicants who have
    applied for minor minerals of the enumerated categories i.e. all types of
C   rocks used for decorative, industrial or export purpose including
    dimension stories. The present case relates to priority as provided in the
    said Sub-rule. It provides for priority to a person who has already set up
    an industry for processing of such minor minerals. From the documents
    placed on record, it is clear that Mis Valley Granites (P) Ltd~ was operating
    a running unit and that possession of the same was handed over to
D   respondent No.4, and it is being run by the said Company. (347-B, C, DJ

          2.1. Appellant No.I had merely entered into an agreement for.
    purchasing the land and placed orders for the machineries and had not
    set up an industry. (347-Fl

E         2.2. The expression "setting up" means, as is defined in the Oxford
    English Dictionary, 'to place on foot' or 'to establish', and is
    contradistinction to 'commence'. The distinction is this that when a
    business is established and is ready to commence business, and then it can
    be said of that business that it is set up. But before it is ready to commence
    business it is not set up. (347-GJ
F
          Commissioner of Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills
    Ltd, (1967) 1 SCR 761, relied on.

          3. The question of priority is to be adjudged only at the time of
    consideration of the applications. Undisputedly, respondent No.4 had taken
G   over the unit on the date the applications were considered. Therefore, the
    stand of the appellants that at the time the applicatioas were made by
    respondent No.4 it had not set up an industry is realiy without substance.
                                                                       (348-BI

          Indian Metals & Ferro Alloys Ltd. v. Union of India and Ors. AIR
H (1991) SC 818, referred to.
           KABINIMINERALSPVT.LTD.v. STATEOFORISSA[PASAYAT. J.] 343

             4. In a case covered by sub-rule (5-a) the State Government has to        A
      objectively assess as to whether in the interest of mineral development
      preference is given to a person though he made the application later. In
      such a case there is necessity to record reasons. So far as Sub-rule (6-a) is
      concerned, there is no requirement indicated to record reasons. The fact
      that priority is given to a person who has already set up an industry is         B
      itself the reason for giving priority. Therefore, the enumeration of the
      order of priority is itself the reason inbuilt in the process of consideration
      of the applications. That itself is the foundation and forms the rationale
      for the priority given. It is not the case of the appellant that the order of
      priority is irrational. That being so, stand of the appellants that reasons
      were not recorded and, therefore, the action is vitiated is really of no         C
      consequence. (348-E, F, G)

            CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8078 of2004.

           From the Judgment and Order dated 10.2.2004 of the Orissa High
      Court in C.W.P. No. 5994 of 2003.                                                D
            K. Swami and Mrs. Prabha Swami for the Appellants.

            Mrs. Kirti Mishra for the Respondent Nos. 1-3.

           Jayant Das, Ajit Pudussery, K. Vijayann and Aditya Narayan Das for          E
      the Respondent No.4.

            The Judgment of the Court was delivered by

            ARIJIT PASA YAT, J. Appellants call in question legality of the
      judgment rendered by a Division Bench of the Orissa High Court dismissing        F
      their challenge to the decision of the State of Orissa in the Department of
      Steel and Mines, granting lease over an area of 6.90 acres in the villages
      Bada Dalma and Jangia in Mayurbhanj District in favour of respondent No.4
      and consequentially rejecting appellant's No. I application dated 7th October,
      2002.
                                                                                       G
            Factual position in a nutshell is as follows:

            Appellant No. I applied for quarry lease to the Secretary, Government
      ofOrissa Steel and Mines Department, in Form A of the Orissa Minor Mineral
      Concession Rules, 1990 (in short the 'Rules') for "decorative stone" for a
--1   period of 10 years. On 25.10.2002, the Managing Director of the appellant        H
    344                      SUPREME COURT REPORTS [2005) SUPP. 5 S.C.R.

A   No.I-Company entered into an agreement with one R. Narayan Swami for
    purchase of land measuring 1.134 a~res in village Ambagan in the District of
    Ganjam to set up a cutting and polishing unit for decorative stones. On
    26. l 0.2002 the Mining Officer, Baripada Circle, Baripada issued Form B to
    ~ppellant No.I and confirmed the receipt of its quarry lease application dated
    7. l 0.2002. On 2.12.2002 appellant No. I placed orders with Metcons
B   Engineering Pvt. Ltd. for supply of machineries for setting up the cutting and
    polishing unit for decorative stones. On 5.12.2002 respondent No.4 applied
    for a quarry lease in Fonn A for decorative stones for a period of 10 years
    ovet an area of 6.90 acres. On 28.1.2003 respondent N0.4 wrote a letter to·
    the' Director of Mines regarding purchase of sick unit i.e. Mis. Valley Granites
C   (J:>) Ltd. from the Orissa State Financial Corporation (in short the 'Corporation')
    and requested consideration of its quarry lease application dated 5.12.2002.
    On 7.2.2003 appellant No. I vi de its letter of even date wrote to the Principal
    Secretary to the Government, Department of Steel and Mines infonning him
    regarding the agreement to purchase land and placement of orders for
    machineries of proposed unit. On 4.6.2003 the State Government took a
D   decision to grant the quarry lease in question in favour of respondent No.4.
    Writ Petition No.5994 of 2003 was filed by the appellants before the Orissa
    High Court questioning the decision of the Government to grant quarry lease
    in favour of respondent No.4. By the impugned judgment dated 10.2.2004
    the writ petition was dismissed. The High Court held that the case of respondent
E   No.4 was covered by Rule 6(6-a)(i) of the Rules and it had priority over the
    appellant No. I. Said judgment as noted above is the subject matter of challenge
    in this appeal.

          According to learned counsel for the appellant, the view of the High
    Court is clearly erroneous. Undisputedly, the appellant No. I had filed the
F   application for the quarry lease earlier and his case was to have precedence
    over that of respondent No.4. Merely because the respondent No.4 had
    purchased a sick unit which was not functional, priority under Rule 6 (6-a)(i)
    was not available to it. It was submitted that no reasons were indicated as to
    why and under what circumstances respondent No.4 could have priority vis-
    a-vis appellant No. I.
G
           In response, learned counsel for the State and respondent No.4 submitted
    that the crucial expression in sub-rule (6-a)(i) of Rule 6 is "who has already
    set up an industry", Undisputedly, the unit which was taken over by respondent
    No.4 was engaged in the processing of the concerned minor mineral. Therefore,
H   rightly the Government decided to give priority to respondent No.4. It was
     KABINI MINERALS PVT. LTD. v. STATE OF ORISSA [PASAYAT, J.] 345

further submitted that appellant No. I has not even established that it was         A
covered by Rule 6(6-a)(ii) and, therefore, was considered to be a person who
belonged to the residual category i.e. Rule 6 (6-a)(iv).

     In order to resolve the controversy it would be appropriate to take note
of Rule 6 of the Rules which reads as follows:
                                                                                    B
       "6. Disposal of the application- (l) All applications received by the
       competent authority shall be entered in the Register of Applications
       for quarry leases which shall be maintained in Form 'C' appended to
       these rules;

       (2) As soon as an application is received, it shall be acknowledged          C
       to the applicant in Form 'B'. If the application is refused, an intimation
       which would contain the reasons for refusal, shall be sent to the
       applicant;

       (3) x x xx
                                                                                    D
       (4) No application shall be granted unless the applicant submits the
       income-tax and Sales Tax clearance certificates in origi;ial or non-
       assessment certificates in original;

       (5) Subject to the provisions of sub-rules (6) and (6-a), where two or
       more persons have applied for a quarry lease in respect of same land         E
       or area, the applicant whose application was received earlier shall
       take precedence in consideration for the grant over an applicant whose
       application was received later.

       (5-a) Notwithstanding anything contained in sub-rule (5), if the State
       Government is of the opinion that in the interest of mineral                 F
       development, it is necessary to do so, it may for the reasons to be
       recorded in writing grant quarry lease in preference to the applications
       made earlier.

       (6) Priority shall be given to the applicants in the following order, .
       namely:                                                                 G
            (i) co-operatives of artisans using the minor mineral as raw
                material;

            (ii) a person who has been operating an industry based on the
                 minor mineral applied for or, having completed all other           H
    346                     SUPREME COURT REPORTS [2005) SUPP. 5 S.C.R.

A                   formalities, would be able to operate it ifthe lease is granted;

               (iii) a person who is the raiyat of the land;

               (iv) any other category.

          (6-a) Notwithstanding anything contained in sub-rule (6), in respect
B         of all types of rocks used for decorative, industrial or export purpose
          including dimension stones the priority shall be in the following order,
          namely:

               (i) a person who has already set up an industry for processing
                   of such minor minerals in the State;
c
               (ii) a person who has a definite plan for setting up of an industry
                    in the State processing of such minor minerals if he has
                    furnished a copy of his project report on the proposed
                    processing industry and also a letter from the financing
                    institution, issued by the Chief Executive of such institution
D                   to the effect that his project report is being appraised by
                    such financing institution;

               Provided that in case of an applicant under category (ii), the
          initial lease shall be granted up to fifty hectares and a letter of assurance
          can be issued for grant of lease beyond fifty hectares before
E         commencement of production on confirmation received from the
          financing institution or the Deputy Director of Mines or the Mining
          Officer.

          (iii) a person who is a raiyat of the land;
F         (iv) any other category;

               Provided that in the case of an applicant under category (iii) or
          (iv) the lease may be granted by the competent authority on being
          satisfied that the applicant shall be able to invest or arrange sufficient
          funds to carry on his quarrying activity in a proper, skilful and
G         workmen-like manner.

          (7) No quarry lease/permit/auction for road metals including ballas
          and ordinary boulders shall be granted within the area for which a
          lease has been granted for quarrying rocks used for decorative,
          industrial and export purposes including dimension stones."
H
     KABINIMINERALS PVT. LTD. v. STATEOFORISSA [PASAYAT, J.]                347

        On a reading of the language of Rule 6 it is clear that three types of A
precedence/priority are embodied in the provision. First is a normal case
where the application which has been received earlier is given precedence
over the latter application. An exception is carved out in sub-rule (5-a) to the
effect that if the State Government is of the opinion that in the interest of
mineral department it is necessary to do so it may for reasons to be recorded B
in writing grant quarry lease in preference to the applications made earlier.
Sub-rule (6) deals with another category of priority. In the present case Sub-
rule (6) does not have much relevance. Sub-rule (6-a) carves out a category
of applicants who have applied for minor minerals of the enumerated categories
i.e. all types of rocks used for decorative, industrial or export purpose including
dimension stones. The present case relates to priority as provided in the said C
Sub-rule. It provides for priority to a person who has already set up an
industry for processing of such minor minerals. From the documents placed
on record more particularly the letter of the Corporation dated 23.5.2003 it
is clear that M/s. Valley Granites (P) Ltd. was operating a running unit. The
letter in clear terms states that possession of the unit was handed over to D
respondent No.4 and the unit is being run by the said Company.

       Learned counsel for appellant No. I submitted that in fact the unit taken
over by respondent No.4 was not functional and it had applied for permanent
registration certificate which was under process as is evident from the letter
of the District Industrial Centre, Mayurbhanj.                                     E
      The question really is whether the unit had been set up and not whether
it was running. Undisputedly, prior to its take over by respondent No.4 the
industry had been set up and used for processing of decorative stones. Though,
it was contended by learned counsel for appellants that by the time the
applications were made the respondent No.4 had not taken over the unit yet         F
that really is of consequence.

     Appellant No. I had also not set up an industry. It had merely entered
into an agreement for purchasing the land and placed orders for the
machineries. The expression 'set up' has a definite connotation of its own.
                                                                                   G
        The expression "setting up" means,' as is defined in the Oxford English
Dictionary, 'to place on foot' or 'to establish', and is contradistinction to
'commence'. The distinction is this that when a business is established and
is ready to commence business, and then it can be said of that business that
it is set up. But before it is ready to commence business it is not set up. (See
Commissioner of Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills               H·
    348                      SUPREME COURT REPORTS [2005] SUPP. 5 S.C.R.

A ltd, [1967] I SCR 761).
          In the said case, it was further held that the word "set up" is equivalent
    to the word established but operations for establishment cannot be equated
    with the establishment of the unit itself of its setting up.

B         The question of priority is to be adjudged only at the time of
    consideration of the applications. Undisputedly, respondent No.4 had taken
    over the unit on the date the applications were considered. Therefore, the
    stand of the appellants that at the time the applications were made by
    respondent No.4 it had not set up an industry is really without substance. As
    was observed by this Court in Indian Metals & Ferro Alloys ltd. v. Union
C   of India and Ors., AIR ( 1991) SC 818, since the applicant had already set up
    an industry for processing minor minerals on the date of consideration of the
    application its claim for priority was to be judged on the basis of the factual
    position on the date of con~ideration of the applications.

           It was submitted by learned counsel for the appellants that no reasons
D   were indicated by the authorities as to why the respondent No.4 was to have
    priority over the appellants. Reference in this context is made to sub-rule (5-
    a) of Rule 6.

           It is to be noted that in a case covered by sub-rule (5-a) the State
E   Government has to objectively assess as to whether in the interest of mineral
    development preference is given to a person though he made the application
    later. In such a case the Government's opinion that in the interest of mineral
    development it is necessary to do so obviously has an objective angle involved
    and, therefore, there is· necessity to record reasons. So far as Sub-rule (6-a)
    is concerned, there is no requirement indicated to record reasons. The fact
F   that priority is given to a person who has already set up an industry is itself
    the reason for giving priority. Therefore, the enumeration of the order of
    priority is itself the reason inbuilt in the process of consideration of the
    applications. That itself is the foundation and forms the rational for the priority
    given. It is not the case of the appellant that the order of priority is irrational.
G   That being so, stand of learned counsel for the appellants that reasons were
    not recorded and, therefore, the action is vitiated is really of no consequence.

           Looked at from any angle, the appellants have not made out any case
    for interference with the judgment of the High Court. The appeal fails and
    is dismissed. Costs made easy.
H                                                                  Appeal dismissed.
    D.G.