Holding

Rule 8‑C is a valid exercise of the State’s rule‑making power under Section 15, does not infringe Articles 301/303, and is applicable to both fresh and renewal lease applications, including those pending before its enactment.

Summary

The State of Tamil Nadu, exercising its power under Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957, issued Rule 8‑C of the Tamil Nadu Minor Mineral Concession Rules, 1959, which barred private persons from obtaining leases for quarrying black granite and permitted only the State or its wholly‑owned corporations to do so. Several applications for fresh leases and renewals, some filed before the rule came into force, were rejected under the new rule, leading to writ petitions challenging its validity. The Supreme Court held that Rule 8‑C was a valid exercise of the State’s rule‑making authority, fell within the regulatory scope of Section 15, did not contravene Articles 301 or 303 of the Constitution, and could be applied to renewal applications and to pending cases. Consequently, the High Court’s order striking down the rule was set aside, the appeals were allowed and the writ petitions dismissed.

Issues considered

Whether Rule 8‑C is ultra vires the rule‑making power conferred on the State by Section 15 of the Mines and Minerals (Regulation and Development) Act, 1957.
Whether Rule 8‑C violates the constitutional guarantees of free trade under Articles 301 and 303.
Whether the rule, being a prohibition, exceeds the regulatory scope of Section 15.
Whether Rule 8‑C can be applied to renewal of leases and to applications pending before its commencement.
Whether the State may create a monopoly in the exploitation of a minor mineral through subordinate legislation.

Legislation cited

Mines and Minerals (Regulation and Development) Act, 1957s. 14, s. 15, s. 17, s. 18, s. 2, s. 3, s. 4A

Subjects

Mines and Minerals ActRule‑making powerUltra viresArticle 301Article 303Minor mineralsBlack graniteLease renewalState monopolyRegulation vs prohibitionPublic interest

Judgment

742

A STATE OF TAMIL NADU
11.
HIND STONE ETC.
February 5, 1981
B [R. S. PATHAK AND 0. CHINNAPPA REDDY, JJ.J
Mines and Minerals (Regulation and Development) Act, 1951-Section
15-Rule 8-C of Tamil Nadu Minor Mineral Concession Rules, 1959-Scope
of-Rule, if ultra vires the rule making power of the State Government-
Whether l'iolative of Articles 301 and 303 of the Constitution.
C lnJerpretation-"Regulation" whether includes ''prohibition". ···~
The Mines and Minerals (Regulation & Development) Act, 1957 (Central
Act) 'vas enacted in the public interest to enable the Union to take under its
contro1 the regulation of mines and the development of minerals. Exercising
its power u'.lder this Act, the Central Government declared by a notification
that b?ack granite was a minor mineral.
D Exercising power vested in it by section 15 of the Act, the State Government
made the Tamil Nadu Minor Mineral Concession Rules, 1959. Rule 8 of the

-
Rules pre.scribes the procedure for lease of quarries to private persons. Bv
rule 8·C, introduced in 1977. leases for quarrying black granite in favour of
private persons were banned. Sub·rule (2) of this rule enacts that the Statt"
Government themselves may engage in quarrying black granite or grant leases
for quarrying black granite in favour of any corporation v,,·holly O"Wned by the
State Government.
Several applications for the grant of fresh leases as well as for the rene\Val
of leases for quarrying black granite belonging to the State Government were
submitted to the State Government. sOme prior to the introduction of rule 8C
and some after the rule ca·me into force. The State Government considered
all the applications and rejected all of them in view of nlle SC.
The respondents filed writ petition questioning the vircs of Rule S·C on
various grounds. The High Court stn1ck do\vn Rule 8·C on the ground fhat
it exceeded the rule making power given to the State Government and held

G
that it was not open to the appellant Government to keep the applic~1tions
pending for a long time and then to dispose them of on the basis of n rule
\vhich had come into force later. As a result all the aprlications were disposed
of without reference to rule 8·C.
The appellant contended that : (T) The approach of the High Court was
-
vitiated by its failure to notice the crucial circumstance thnt the minerals
belonged to the Government, (TI) The respondents had no vested or indefe<lsible
right to obtain a lease or :i renewal to Quarry the minerals, (TIT) There \Vere
good reasons for banning the grant of lease to quarry black granite to private
parties and (IV) The Government could not be compelled to grant leases \~1hich (
H would result in the destn1ction of the mineral resources of th~ or;:nntry.
On behalf of the respondent it was submitted that (l) the ouestion of
ownership of the minerals was irrelevant, (TI) It was not open to the appe11ant
TAMIL NADU V. HIND STONE 743

to exercise its subordinate legislative function in a manner to benefit itself A
as owner of the minerals, nor was it open to the appellant to create monopoly
by such means, (Ill) There was violation of articles 301 and 303 of the
Constitution, (IV) Rule 8-C had no application to renewals and (V) That in
any event it would not have the effect Qf affecting applications made more
than 60 days before it can1e into force.
Accepting the appeals, it was
B
l-lliLD ; llule 8-C was 111ade in bonafi<le exercise 0£ the rule making
power of the Appellant Government and not in its misuse to advance its own
self interest. Making a rule which is perfectly in order is not to be considered
a n1isuse of the rule making power, if it advances the interest of State, which
really 111eans the people of the State. Rivers, forests, minerals and as such
other resojJrces constitute a nation's natural wealth. These resources are not
to be frittered away and exhausted by any one generation. Every generation c
owes a duty to all succeeding generations to develop & conserve the natural
resources qf the nation in th~ best possible way. It is in the interest of
mankind. It is in the interest of the Nation. It is recognised by Parliament.
Parliament bas declared that it is expedient in the public interest that the
I Union should take under its control the regulation of. mines and the
development of minerals. [751C-D, 753G-H]
D
2. The Public interest which induced Parliament to make the declaration
contained in S.2 of the Mines & Minerals (Regulation and Development) Act,
i 957 has naturally to be the pnramount consideration in all matters concerning
the regulation of Mines & Minerals. Parliament's Policy is clearly discernible
froln the provisions of the Act. It is the conservation and the prudent an<l
discriminating exploitation of minerals, with a view to secure maximum
benefit to the community. There are clear sign posts to lead and guide the E
subordinate legislating authority in the matter of the making of rules.
[751G-H]
3. The ether proyisions of the Act, particularly sections 4A, 17 and 18,
indicate that the rule making authority under S.15 has not exceeded its powers
in banning leases for carrying black granite in favour of private parties and
in stipulating that the State Government themselves may engage in quarrying
black granite or grant leases for quarrying black granite in favour of any F
corporation wholly owned by the State Government. To view such a rule
made by the Subordinate legislating body as a rule made to benefit itself
merely l)ecause the State Government happens to be the subordinate legislating
body is, but, to take too narrow a view of the functions of that body.
[751H, 752A-BJ
If. C. Naraya11appa & Ors. v. Stale of Mysore & Ors. [ 1960] 3 SCR 742 G
@ 745, 752-753 referred to.
5. 'Vbenever there is a switch over from 'private sector' to 'public sector•
it does not necessarily follow that a change of policy requiring express
legislative sanction is involved. It depends on the subject and the statute.
But if a decision is taken to ban private mining of a single minor mineral for
the purpose of conserving it, such a ban, if it is otherwise within the bounds
of the authority given to the Government by the Statute, cannot be said to B
involve any change of policy. The policy of the Act rem&ins the same and
it is, the conservation and the prudent and discriminating exploitation of
SUPREME COURT REPORTS [1981] 2 s.c.il.

A minerals, with a view to secure maximum benefit to the community,
E.'Xploitation of minerals by the private and/ or the public sector is contemplated.
If in the pursuit of the avowed policy of the Act, it is thought exploitation
(
by the public sector is best and wisest in the case of a particular mineral and 1
in consequence, the authority competent to make the subordinate iegislation
makes a rule banning private exploitation of such mineral, which was hitherto
permitted. There is no chaJlSC of policy merely because that was previously
B permitted is no longer permitted. [756A-D]
AJunicipal Corporation of the City of Toronto v. Virgo [1896] A.C 88,
AtJorney General for Ontario v. Attorney General fol' the Dominion
and the Di~tillers and Brewers Association, [1896] A.C. 348, State of
Uttar Ptadcsh and Others v. Hindustan Alunzinium Corporation Ltd. and
Ors., [19i9] 3 SCR 709, G. K. Krishnan etc. v. The State of Tamil Nadu
c ilnd .1i11r. t:tc. [1975] 2 SCR 7 15 @ 721, Co1n1nonwealth of Australia v ..
1

Bank of New South Wales [1950) A.C. 235 referred to.
6. The restrictions, freedom from which is guaranteed by Art. 301 would
be such restrictions as directly and immediately restrict or impede the free
How or movement of trade. The A~t and the rules properly made thereunder
are, therefore, outside the purview of Art. 301. Even otherwise Art. 302
which enables Parliament, by law, to impose such restrictions on the freedom
0 of trade, commerce or intercourse between one State and another or within
any part of the territory of India as may be required in the public interest
also furnishes an answer to the claim based on the alleged contravention of
Art. 301. [757F-H, 758A-B]
7. The Mines and Minerals (Regulation and Development) Act is a law
enacted by Parliament and declared by Parliament to be expedient m the
E public interest. Rule 8-C has been made by the appellant Govt. by notification
in the official Gazette, pursuant to the poWer conferred upon it by sec. 15
of the Act. A statutory rule, while ever subordinate to the parent statute,
is, otherwise, to be treated as part of the statute and as effective. "Rules made
under the Statute must be treated for all purposes of construction or obligation
exactly as if they were in the Act and are to be of the same effect as if
contained in the act and are to be judicially noticed for a·ll purposes of
F construction or obligation. [758B-G]
Atiabari Tea Co. Ltd. v. State of Assam & Ors. [1961] 1 SCR 809
The Automobile Transport Rajasthan Ltd., v. State of Rajasthan &
Ors. [1963] 1 SCR 491 and State of U.P. & Ors. v. Babu Ram Upadhya
[1961] 2 SCR 679, referred to.
8. Rule 9 makes it clear that a renewal is not to be obtained automatically,
G for the mere asking. The applicant for the renewal has, particularly, to
satisfy the Government that the renewal is in the interests of mineral develop-
ment and that the lease amount is reasonable in the circumstances of the case.
These conditions have to be fulfilled in addition to whatever criteria is applicable
at the time of the grant of lease in the first instance, suitably adapted, of.
course, to grant of renewal. Not to apply the criteria applicable in the first
instance may lead to absurd results. Therefore rule 8-C is attracted in
considering applications for renewal of leases also. [759A-D]
c
9. While the applications should be dealt with within a reasonable time,
it cannot on that account be said that the right to have an application disposed
TAMIL NADU v. HIND STONE (Chinnappa Reddy, J.) 7 45

of in a reasonable time clothes an applicant for a lease with a right to have A
the application disposed of on the basis of the rules in force at the time of
the making of the application. No one has a vested right to the grant or
) rene\val of a lease and none can claiin a vested right to have an application
for the grant or renewal of a lease dealt with in a particular way, by applying
particular provisions. In the absence of any vested rights in any one, an
application for a lease has necessarily to be dealt with according to the rules
in force on the date of the dJsposal of the application despite the fa~t_ that there
is a long delay since the making of the application. [759G-H, 760!.~

10. The language of Rule 8-C is clear that it can not have any application
to lands in which the right to minerals belongs to the applicants themselves.
In the case of lands in which the right to minerals belongs to private owners
and those owners seek permission to quarry black granite the applications will
have to be dealt with under the relevant rules in Sec. III of the Tamil Nadu c
Minor Mineral concession Rules. Rule 8-C does not impose a general ban
on quarrying black granite but only imposes a bar on the grant of leases for
quarrying black grnnite. [760D-F]

·CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2602-2604
of 1980.
D
A\ppeals by special leave from the Judgment and Order dated
20-6-1980 of the Madras High Conrt in Writ Petition Nos. 4467 of
.. 1977, 2933 and 4793 of 1978 .
Lal Narain Sinha Att. Genl. of India for the Appellant in CA
2602/80. E
Soll l. Sorabjee for the Appellant in CA 2603/80.
R. Krishnamurthy Adv. Genl. for the appellant in CA 2604/80.
A. V. Rangam and K. Venkatawani for the Appellant in all the
matters.
Y. S. Chitale (Dr.), Mrs. S. Ramachandran and Mukul Mudgal
for Respondent Nos. 11 and 42.
P. Chidambaram and A. S. Nambiyar for the Respondents.
F. S. Nariman, A. V. Rangam and R. N. Sachthey for the inter-
veners. G
V. Srinivasan, A. Venkatarayana and P. N. Ramalingam for Res-
pondent No. 45.
The Judgment of the Court was delivered by
CHINNAPPA REDDY, J.-Entry 23 of List II of the Seventh
Schedule to the Constitution is, "Regulation of mines and mineral R
development subject to the proviJ;ions of List I with respect to regu-
lation and development under the control .of the Union". Entry 54
746 SUPREME COURT REPORTS [1981] 2 S.C.R

A of List I of the Seventh Schedule is "Regulation of mines and mineral
development to the extent to which such regulation and development
under the control of the Union is declared by Parliament by law to (
be expedient in the public interest". Thus while 'regulation of mines
and mineral development' is ordinarily a subject for State legislation.
Parliament may, by law, declare the extent to which control of such
B
regulation and development by the Union is expedient in the public
interest, and, to that extent, it becomes a subject for Parliamentary
legislation. Parliament has accordingly enacted the Mines and
Minerals (Regulation and Development) Act, 1957. By S. 2 of the
Act it is declared that it is expedient in the public interest that! the
c Union should take under its control the regulation of mines and the
development of minerals to the extent thereafter provided. It is now
common ground between the parties that as a result of the declara-
tion made by Parliament, by S. 2 of the Act, the State legislatures are
denuded of the whole of their legislative power with resp_ect to regu-
lation of mines and mineral development and that the entire legislative .
D field has been taken over by Parliament. That this is the true position
in law is clear from the pronouncements of this Court in The Hingir·
Rampur Coal Co. Ltd. & Ors. v. The State of Orissa & Ors.( 1) State
of Orissa v. M.A., Tulloch & Co.( 2 ) and Baijnath Kedia v. State of
Bihar & Ors.(') S. 3 of the Mines and Minerals (Regulation and
Development) Act, 1957, defines various expressions occurring in the
E Act. S. 3 (a) defines 'minor minerals' and it includes any mineral dec-
-
lared to be a minor =era! by the Central Government by a notifica ·
tion in the Official Gazette. 'Black granite' has been so notified by the
Central Government as a minor mineral. Section 4 to 9A are grouped
under the heading 'General Restrictions on undertaking prospecting
and mining operations'. These provisions as well as Sections 10 to
F 13 are made inapplicable to 'minor minerals' by S. 14. S. 4 prohibits
all prospecting or mining qperations except under a licence or a lease
granted under the Act and the rules made thereunder. S.4A(l)
enables the State Government on a request made by the Central
Government in the interest of regulation of mines and mineral deve-
ldpment to terminate a mining lease pre-maturely and grant a fresh
G mining lease in favour of a Government Company or Corporation
owned or controlled by Government. Perhaps because s.4A(l) is
inapplicable to minor minerals because of the provisions of S.14,
S.4A(2) has been expressly enacted making somewhat similar pro-
vision, as in S.4A(l), in ~ of 'minor minerals' also. S.4A(2)
(
H (I) [1961] 2 SCR 537
(2) (1964) 4 SCil 461.
(3) [1970) 2 SCil 100.
TAMIL NADU r. HIND STONE (Chinnappa Reddy, J.) 747

J enables the State Government, after consultation with the Central A
Government, if it is of opinion that it is expedient in the interest of
.) regulation of mines and mineral development so to do, to prematurely
terminate a mining lease in respect of any minor mineral and grant
a fresh lease in respect of such mineral in favour of a Government
Company or Corporation owned or controlled by Government. S.5
imposes certain restrictions on the grant of prospecting licences and B
mining leases. S.6 prescribes the maximum area for which a pros-
pecting licence or mining lease may be granted. S. 7 prescribes the
period for which prospecting licences may be granted or renewed.
S.8 prescribes the period for which mining leases may be granted or
, renewed. S.9 provides for the payment of royalty and S.9A for the
payment of dead rent. Sections 10, 11 and 12 constitute a group c
of sections under the title 'Procedure for obtaining prospecting licences
or mining leases in respect of land in which the minerals vest in the
Government'. S.10 provides for making applications for prOSiP<:cting
licences or mining leases in respect of any land in which the minerals
vest in the Government. S.11 provides for certain preferential rights
D
in favour of certain persons in the matter of grant of mining leases.
S. 12 prescribes the Register of prospecting licences and mining leases
to be maintained by the State Government. S.13 empowers the
Central Government to make rules for regulating the grant of pros-
pecting licences and mining leases. In particular we may mention
that S.13(2) (a) empowers the Central Government to make rules E
providing for 'the persons by whom, and the manner in which, appli-
cations for prospecting licences or mining leases in respect of J:oand in
which the minerals vest in the Government may be made and the fees
to be paid therefor". S.13(2) (f), we may add, empowers the Cen-
tral Government to make rules providing for 'the procedure for obtain-
ing a prospecting licence or a mining lease in respect of any J:oand F
in which the minerals vest in a person other than the Government
and the terms on which, and the conditions subject to which, such
~. licence or lease may be granted or renewed'. S. I 4 makes the pro--
visions of Sections 4 to 13 inapplicable to minor minerals. S.15
empowers the State Government to make rules for regulating the
grant of quarry leases, mining leases and other mineral concessions G
in respect of minor minerals and purposes connected therewith.
S.15(3) provides for the payment of royalty in respect of minor
J minerals at the rate prescribed by the rules framed by the State
Government. S.16 provides for the modification of mining leases
\ granted before October 25, 1949. S.17 enables the Central Govern-
ment, after consultation with the State Government to undertake H
prospecting or mining operations in any area not already held under
any prospecting licence or mining lease, in which event the Central
SUPREME COURT REPORTS [1981] 2 S.C.R.
-
748

A Government shall publish a notification in the official Gazette giving
the prescribed particulars. The Central Government may also declare
.that no prospecting licence or mining lease shall be granted in respect
pf any land specified in the notification. S. l S casts a special duty on (
the Centra;I. Government to take all necessary steps for the conserva-
tion and development of minerals in India. Sections 19 to 33 are
B various miscellaneous provisions with which we are not now concerned.

Pursuant to the power vested in it under S.15 of the Mines and
Minerals (Regulation and Development) Act, 1957, the Government
of Tamil Nadu has made the Tamil Nadu Minor Mineral Concession
Rules, 1959. Section II of the rules consisting of rules 3 to 16is_
1
G entitled "Government lands in which the minerals belong to the
Government". Rule 8 prescribes the procedure for the kase of
quarries to private persons. The ordinary procedure is to publish
a notice in the District Gazette inviting applications, thereafter to hold
~n auction and finally to grant a lease to the highest bidder. Rule SA
which was introduced by way of an amendment in 1972, provides for
D
a special procedure for the sanctioning of leases in favour of appli-
cants who require the minerals for their existing industries or who
have an industrial programme for the utilisation of the mineral in
their own industry. Rule SB was introduced in 1975 making special
provision for the grant of leases for quarrying b1'ack granite. The
E rule is as follows :

"S-B. Lease of quarries in respect of black granite to private
persons (1) Notwithstanding anything to the contrary con-
tained in rules 8 and SA, the authority competent to grant
leases in respect of quarrying black granite shall be the State
F Government.

(2) An application for the grant of a quarrying lease in
respect of any land shall be made to the Collector of thf.
District concerned in the prescribed form in triplicate and shall
be accompanied by a fee of Rs. 1001-. The Collector shall
G after scrutiny, forward the application along with his remarks
to the Director of Industries & Commerce who shall techni-
cally scrutinise the industrial programme given by the appli-
cant and forward the application with his remarks to the
Govetnment."
(
H "(G. o. Ms. No. 993 Industries dt. 25-S-1975". Rnle 8-C
was introduced by G. 0. Ms. No. 1312 Industries dated
December 2, 1977. By this rule leases for qaurrying black granite
TAMii, NADIJ v. HIND STONE (Chinnappa Reddy,!.) 749

ln favour of private persons are banned. Leases can only be granted A
in favour of a Corporation wholly owned by the State Government.
It is the vires of this rule which was nnder challenge before the High
Court and is also under challenge now. It will be useful to extract
the same. It is as follows :
"8-C Lease of quarries in respect of black granite to Govern- B
ment Corporation, etc.
( 1) Notwithstanding anything to the contrary contained
in these rules, on and from 7th December, 1977 no lease for
quarrying black granite shall be granted to private persons.
(2) The State Government themselves may engage in
quarrying blaek granite or gmnt leases for quarrying black
c
granite in favour of any corporation wholly owned by the State
Government.
Provided that in respect of any land belonging to any pri-
vate person, the consent of such person shall be obtained for
such quarrying or lease". D
Rule 9 provides for renewal of leases and it is in the following
terms :
•
"9. Renewal of lease.-{1) The Collector may on appli-
cation renew for a further period not exceeding the period for
which the lease was originally granted in each case if he is E
satisfied that-
(i) such renewal is in the interests of mineral develop-
ment, and
(ii) the lease amo)lnt is reasonable in the circumstances
of the case. F
(2) Every application for renewal shall be made to Col-
4 lector, sixty days prior to the date of expiry of the lease :
Provided that a lease, the period of which exceeds ten
years shall not be renewed except with the sanction of the
Director of Industries and Commerce".
G
A proviso was added to rule 9(2) in 1975 'Ind it said :
"provided also that the renewal for quarrying black granite
shall be made by the Government".
) ~~veral persons who held leases for quarrying black granite
belonging to the State Government and whose leases were about to H
expire, applied to the Government of Tamil Nadu for renewal of their
leases. In some of the cases applications were made long prior
750 SUPREME COURT REPORTS (1981] 2 S.C.J<

A to the date of G. 0. Ms. No. 1312 by which Rule SC was introduced.
Some applicatious were made after Rule S C came into force. There
were also some applications for the grant of fresh leases for quarrying (
black granite. All the applications were dealt with after Rule S C
came into force a.nd all of them were rejected in view of Rule SC.
Several Writ Petitions were filed in the High Court questioning the
B vires of Rule SC on various grounds. Apart from canvassing the
vires of Rule SC, it was contended that Rule SC did not aipply to
grant of renewals of lease at all. It was also argued that in any
event, in those cases in which the applications for renewal bad been
made prior to the coming into force of Rule SC, their applications .......
should have been dealt with without reference to Rule SC. The---· -.....
Madras High Court while not accepting some of the contentions raised
on behalf of the aplicants, struck down Rule SC on the ground that
it exceeded the rule making power given to the State Government
under S.15 which, it was said, was only to regulate and not to pro-
hibit the grant of mining leases. As a consequence all the applica-
D tions were directed to be di!\JlOSed of without reference to Rule SC.
It was also observed that even if Rule SC was valid it applied only
to the grant of fresh leases and not to renewals. It was also held
that it was not open to the Government to keep the applications
•
pending for a long time and then to dispose them of on the basis of
a rule which had come into force later. The State Government has
E come in appeal against the judgment of the Madras High Court while
the respondent-applicants have tried to sustain the judgment of the
Madras High Court on grounds which were decided against them by
the Madras High Court.
The learned Attorney General who appeared for the Government
F of Tamil Nadu submitted that the approach of the High Court was
vitiated by its failure to notice the crndal circumstance that the mine-
rals belonged to the Government and the applicants had no vested or ·
indefeasihle right to obtain a lease or a renewal to quarry the mine-.
rals. There were good reasons for banning the grant of leases to
quarry black granite to private parties and in the light of those reasons
G the Government could not be compelled to grant leases which would
result in the destruction of the mineral resources of the country. Shri
K. K. Venugopal, learned counsel who led the argument for the respon-
dents submitted that the question of o_wnership of the minerals was irre-
levant. In making the rules the State Government was acting as a de-
le~te and not as the owner of the minerals. He submitted that it was (
H not open to the State Government to exercise its subordinate legislative
function in a manner to benefit itself as owner of the minerals, nor was
it open to the State Government to create a monopoly by such means.
TAMIL NADU v. HIND STONE (Chinnappa Reddy, J.) 751

Accordin~ to Shri Venugopal creation of a monopoly in the State was A
essentially a legislative function and was incapable of delegation. It
was claimed that there was violation of Articles 301 and 303 of the
)
Constitution. It was further claimed that S. 15 of the Mines and
Minerals (Regulation and Development) Act 1957, enabled the State
Government to make rules to regulate the grant of leases and not to
prohibit them. In any case it was said that Rule 8G had no applica- B
tion to renewals and tbat in any event it would not have the effect of
affecting applications made more than 60 days befc:·o it came into
force.

Rivers, Forests, Minerals and such other resources constitute a
nation's natural wealth. These resources are not to be frittered away c
and exhausted by any one generation. Every generation owes a duty
to all succeeding generations to develop and conserve the natural
resources of the nation in the best possible way. It is in the interest
of mankind. It is in the interest of the Nation. It is recognised by
Parliament. Parliament has declared that it is expedient in the public
D
interest that the Union should take under its control the regulation of
mines and the development of minerals. It has enacted the Mines and
Minerals (Regulation and Development) Act, 1957. We have already
referred to its salient provisions. S. 18, we have noticed, casts a spe-
cial duty on the Central Government to take necessary steps for the
conservation and development of minerals in India. S. 17 authorises E
the Central Government itself to undertake prospecting or mining
operations in any area not already held under any prospecting licence
or mining lease. S. 4A empowers the State Government on the request
of the Central Government, in the case of minerals other than minor
mineral,, to prematurely terminate existing mining leases and grant
fresh leases in favour of a Government Company or Corporation F
owned or controlled by Government, if it is expedient in the interest
of regulation of mines and mineral development to do so. In the case
of minor minerals, the State Government is similarly empowered, after
consultaticm with the Central Government. The public interest which
induced Parliament to make the declaration contained in S. 2 of the
Mines & Minerals (Regulation and Development) Act, 1957. has G
naturally to be the paramount consideration in all matters concerning
the regulation of mines and the development of minerals. Parliament's
policy is clearly discernible from the provisions of the Act. It is the
conservation and the prudent and discriminating exploitation of mine-
rals, with a view to secure maximum benefit to the community. There
are clear sign posts to lead and guide the subordinate legislating autho- R
rity in the matter of the making of roles. Viewed in the light shed by
the other provisions of the Act, particularly sections 4A, 17 and 18
752 SUPREME COURT REPORTS [1981] 2 S.C.R.

A it cannot be said that the rule making authority under S. 15 has ex-
ceeded its powers in banning leases for quaiTying black granite in
favcur of private parties and in stipulating that the State Govern- (
ment themselves may engage in quarrying black granite or grant leases
for quarrying black granite in favour of any corporation wholly owned
by the State Government. To view such a rule made by the Subor-
8 dinate legislating body as a rule made to benefit itself merely because
the State Government happens to be the subordinate legislatitng body,
is, but, to take too narrow a view of the functions of that body. The
reasons that prompted the State Government to make Rule 8-C were
explained at great length in the common counter affidavit filed on be-
half of the State Government before the High Court. We find no good
c reason for not accepting the statements made in the counter affidavit.
It was said there :

"I submit that the leases for black granite are governed
by the Tamil Nadu Minor Mineral Concession Rules 1959
under which ori14nally there was scope for auctioning of
D
quarries of minor minerals. In amendment i'5ned in the
G.O. dated 6-12-1972. under Rule 8-A it was indicated
that the Collector may sanction leases in favour of applicants
who are having an industrial programme to utilise the mine-
rals in their own industry. This provision is applicable to
all minerals including black granite.. However, it was
E
found that there were several cases where lessees who ob-
tained the black granite areas on lease by auction were not
quarrying in a systematic and planned manner taking into
consideration the welfare and safety measures of the wor-
kers as well as the conservation of minerals. Even after
'I!' the introduction of the amendment under Rule 8-A in most
cases, the industry set up was of a flimsy nature more to
circumvent the rule than to really introduce industry includ-
ing mechanised cutting and polishing. The lessees were also
interested only in obtaining the maximum profit in the shor-
test period of time without taking into consideration the
G proper mining and development of the mineral. There was
also considerable wastage of new materials due to wasteful
mmmg. Therefore, -Government issued a further amend-
ment as Rule 8-B wherein the competent authority to grant
leases in respect of the quarrying black granite was trans-
ferred from the Collector to the State Govenunent level. (
H They also prescribed a standard form and an application fee
to be paid with the application. The amendment states that
l he Director of Industries and Commerce shall technically
TAMIL NADU v. HIND STONE (Chinnappa Reddy,!.) 753

scrutinise the industrial programme given by the applicant A
while forwarding the same to Government. At the same
time, in the G.O. issued along with amendment, it was stated
' that if any of the State Government Organisations like Tamil
Nadu Small Industries Corporation Limited, Tamil Nadu
Small Industries Development Corporation Limited, famil
Nadu Industrial Development Corporation Limited is inte- B'
rested to obtain a lease ior black granite in a particular area,
preference will be given to Government undertaking over
other private entrepreneurs for granting the leases applied
for by them. However, in spite of these amendments to re.-
gulate the grant of mining lease, there were a large number
of lessees (exceeding 140), who were engaged in mining
c
without proper technical guidance or safety measures etc.
for the workers. These lessees made a strong representation
to the then Government in 19 76 expressing that though they
had given assurance to set up industries to use the granites
they were not able to do so far various reasons. They also
D
represented that they should be allowed to export the raw
blocks of black granites. Therefore, Government had issued
a. Government Order dated 15-2-1977 relating to relaxation
of the ban of export of raw blocks and provision for setting
up a polishing or finishing unit was not made a pre-requisite.
They have also stated that the terms and conditions for the E
existing losses would remain in force. However, on an exa-
mination of the performance of the lessees over the pa~t
several years, it h.as been found that excepting in a very few
cases, none of the lessees had set up proper industries or de-
veloped systematic mining of the quarries. The exports
continue to be mainly on the raw b:ack granite materials and F
not cut and polished slabs. A large number of the leases
were not operating ~ither due to speculation or lack of
finance from the lessees. Therefore, Government decided
that there should be no further grant of ]ease to private
entrepreneurs for black granite. This was mentioned in
G.0.Ms. No. 1312 Industries dated 2-12-1977. G

We are satisfied that Rule 8C was made in bonafide exercise of the
rule making power of the State Government and not in its misuse
to advance its own self-interest. We however guard ourselves against
being understood that we h&ve accepted the position that making a
rnle which is perfectly in order to be considered a misuse of the H
rule making power, if it advances the interest of a State, which really
means the people of the State.
754 SUPREME COURT REPORTS [1981] 2 S.C.R.

A One of the submissions on behalf of the respondents "'as that ~
monopoly was a distinct legislative subject under entry 21 of List Ill
of the Seventh Schedule to the Constitution and therefore monopoly, ~
even in favour of a State Government can only be created by plenari
and not subordinate legislation. Parliament not having chosen to
exercise its plenary power it was not open to the subordinate legislat-
B ing body to create a monopoly by making a rule. Our attention was
invited to H. C. Narayanappa & Ors. v. Stare of Mysore & Ors.( 1)
where it was held that the expression 'Commercial and industrial
monopolies' in entry 21 of List Ill of the Seventh Schedule to the
Constitution was not confined to legislation to control of monopolies ·_ . . . .
but was wide enough to include grant or creation of commercial or - ..,.
c industrial m,onopolics in favour of the State Government, also. We
are unable to agree with Shri Venugopal's submission. The very
decision cited by him furnishes the answer. The validity of a scheme
for nationalisation of certain routes made pursuant to the powers
conferred by Chapter IVA of the Motor Vehicles Act was under
D attack in that case. One of the grounds of attack was that "by Chapter
IVA of the Motor Vehicles Act, 1939,
"Parliament had merely attempted to regulate the procedure
for entry by the States into the business of motor transport in
the State, and in the absence of legislation expressly under-
tuken by the State of Mysore in that behalf, that State was
E incompetent to enter into the arena of motor transport busi-
ness to the exclusion of private operators;"
Sustenance for the submission was sought to be drawn from the
language of Art. 19 ( 6) (ii) which provides that nothing in Art. 19 ( l )
(g) shall 'prevent the State from making any law rel'ating to' 'the
carrying on by the State, or by a Corporation owned or controlled
F
by the State, of any trade, business, industry or service. whether to
the exclusion, complete or partial, of citizens or otherwise'. The
argument was that the State or a Corporation owned or controlled
by the State could carry on a trade, business, industry or senice to
the exclusion. complete or partial, of citizens, only if the State made
a Jaw relating to it. The argument was repelled by the Court in
G
these words :
"The plea sought to be founded on the phraseology used
in Art. 19 ( 6) that the State intending to carry on trade or
business must itself enact the law authorising it to carry on
trade or business is equally devoid of force. The exnression r
H 'the State' as defined in Art. 12 is inclusive of the Government
and Parliament of India and the Government and the Legisla-
,,_

(I) [1960] J SCR 742@ 745, 752-753.
TAMIL NADU v. HIND STONE (Chinnappa Reddy, J.) 755

ture of each of the States. Under entry No. 21 of the Con- A
current List, the Parliament being competent to legislate for
creating commercial or trading monopolies, there is nothing
in the Constitution which deprives it of the power to create
a co=erial or trading monopoly in the constituent States.
Article 19(6) is a mere saving provision : its function is not
to create a [power but to immunise from attack the exercise B
of legislative power falling within its ambit. The right of the
State to carry on trade or busine;s to the exclusion of others
does not arise by virtue of Art. 19(6). The right of the
State to carry on trade or business is recognised by Art. 29R:
authority to exclude COID[petitors in the field of such trade or
business is conferred on the State by entrusting power to enact c
laws under entry 21 of List III of the Seventh Schedule, and
the exercise of that power in the context of fundamental rights
is secured from attack by Art. 19(6).
In any event; the expression 'law' as defined in Art. 13(3)
(a) includes any ordinance, order, bye-law, rule, regulation, D
notification, custom, etc., and the scheme framed under s.68C
may properly be regarded as 'law' within the meaning of
Art. 19 ( 6) made by the State excluding private operators from
notified routes or notified areas, and immune from the attack
that it infringes the fundamental right guaranteed by Art.
19(1){g)". E
Earlier in Rai Sahib Ram Jawaya Kapur & Ors. v. The State of
Punjab('), before the Seventh Amendment of the Constitution by
which the present Article 298 was substituted for the old Article, the
question arose whether it was beyond the competence of the executive
Government to carry on a business without specific Jegislatuve sanc-
tion. The answer was that it was not. What was said by the Court F
in that case was incorporated in the Seventh Amendment of the
Constitution. In that case the facts were that the State of Punjab.
by a series of executive orders had established for itself a monopoly
in the business of printing and celling textbooks for use in schools.
The argument that legislative sanction was necessary to enable the
G
State Government to carry on the business of printing and publishing
text books was repelled and it was held that no fundamental right of
the petitioners who had invoked the jurisdiction of the Court had been
infringed.
Another of the submissions of the learned counsel was that G.0.Ms.
No. 1312 dated December 2, 1977 involved a major change of policy. R
which was a legislative function and therefore beyond the competence
(1) [1955]2 SCR 225.
756 SUPREME COURT REPORTS (1981] 2 S.C.R.

A of a subordinate legislating body. We do not agree with the submis-
sion. Whenever there is a switch over from 'private sector' to 'public
sector' it does not necessarily follow that a change of policy requiring
express legislative sanction is involved. It depends on the subject and
the statute. For example, if a decision is taken to impose a general
and complete ban on private mining of all minor minerals, such a
B ban may involve the reversal of a major policy and so it may require
Legislative sanction. But if a decision is taken to ban private mining
of a single minor mineral for the purpose of conserving it, such a ban,
if it is ctherw:se within the bounds of the authority given to the Go-
vernment by the Statute, cannot be said to involve any change of
policy. The policy of the Act remains the same and it is, as we said,
the conservation and the prudent and discriminating exploitation of
minerals, with a view to secure maximum benefit to the community.
Exploitation of minerals by the private and/or the public sector is
contempleted. If in the pursuit of the avowed policy of the Act, it
is thought exploitation by the public sector is best and wisest in the
D case of a particular mineral and, in consequence, the authority com-
petent to make the subordinate legislation makes a rule banning
private exploitation of such mineral, which was hitherto permitted
we are unable to see any change of policy merely because what was
previously permitted is no longer permitted.
One of the arguments pressed before us was that Sec. 15 of the
E Mines and Minerals (Regulation and Development) Act authorised
the making of rules for regulating the grant of mining leases and not
for prohibiting them as Rule 8-C sought to do, a.nd. therefore, Rule
8-C was ultra vires Act, S. 15. Well known cases on the subject right
from Municipal Corporation of the City of Toronto v. Virgo('), and
Attorney General for Ontario v. Attorney General for the Dominion
F and the Distillers and Brewers Association of Ontario (2 ) upto State
of Uttar Pradesh & Ors. v. Hindustan Aluminium Corporation Ltd. &
Ors.,(") were brought to our attention. We do not think that
'Regulation· has the rigidity of meaning as never to take in Prohibi-
tion'. Much df1Pends on the context in which the expression is used
in the Statute aµd the object sought to be achieved by the contem-
G plated regulation. It was observed by Mathew J. in G. K. Krishnan
etc. etc. v. The State of Tamil Nadu & Anr. etc.,(') "the word
'regulation' has no fixed connotation. Its meaning differs according
to the nature of the thing to which it is applied". Tn modern statutes
concerned as they are with economic and social activities, 'regulation'
(!) [1896] A.C. 88.
r
II
(2) [1896] A.C. 348.
(3) [1979] 3 SCR 709.
(4) [1975] 2 SCR 715@ 711
TAMIL NADU \'.HIND STONE (Chinnappa Reddy, J.) 757

must. of necessity, receive so wide an interpretation that in certain A
situations, it must exclude competition to the public sector from the
private sector. More so in a welfare State. It was pointed out by
the Privy Council in Commonwealth of Australia v. Bank of New
South Wales(' )-and we agree with what was stated therein-that
the problem whether an enactment was regulatory or something more
or whether a restriction was direct or only remote or only incidental It.
involved, not so much legal as political, social or economic considera-
tion and tha.t it could not be laid down in no circumstances could
the exclusion of competition so as to create a monopoly, either in
a State or Commonwealth agency, to be justified. Each case, it
was said, must be judged on its own facts and in its own setting of
time and circumstances and it might be that in regard to some eco- c
nomic activities and at some stage of social development, prohibition
with a view to State monopoly was the only practical and reasonable
manner of regulation. The statute with which we are concerned, the
Mines and Minerals (Development and Regulation) Act, is aimed,
as we have already said more than once, at the conservation and the
prudent and discriminating exploitation of minemls. Surely, in the
case of a scarce mineral, to permit exploitation by the State or its
agency and to prohibt exploitation by private agencies is the most
effective method of conservation and prudent exploitation. If you
want to conserve for the future, you must prohibit in the present. We
have no doubt that the prohibiting of leases in certain cases is part
of the regulation contemplated by Sec. 15 of the Act.
E

The submission of the learned counsel that the impugned rule
contravened Articles 301 and 303 of the Constitution is equally
without force. Now, 'the restrictions freedom from which is guaran-
teed by Art. 301 would be such restrictions as directly and imme-
diately restrict or impede the free flow or movement of trade" F
(Atiabari Tea Co. Ltd. v. State of A~sam & Ors.).(') And, "regu-
latory measures or measures imposing compensatory !'axes for the
use of trading facilities do not come within the purview of restrictions
contemplated by Art. 301". "They are excluded from the purview
of the provisions of Part XIII of the Constitution for the simple reason
that they do not hamper, trade, commerce or inter-course but rather G:
facilitate them" The Automobile Transport Rajasthan Ltd. v. State
of Rajasthan & Ors. ( 3 ). The Mines and Minerals (Regulation and
Development) Act is, without doubt a regulatory measure, Parlia-
ment having enacted it for the express purpose of "the regulation of
mines :.nd the development of minerals". The Act and the rules
(1) [1950) A.C. 235.
. (2) [1961] 1 SCR 809.
(3) [1963] I SCR 491.
758 SUPREME COURT REPORTS [1981) 2 S.C.R.

A properly made thereunder are, therefore, outside the purview of Art.
301. Even otherwise Art. 302 which enables Parliament, by Jaw,
to impose such restrictions on the freedom of trade, commerce or
intercourse between one State l!_nd another or within any pmt of the
territory of India as may be required in the public interest also fur-
nishes an answer to the claim based on the alleged contravention of
Art. 301. The Mines and Minerals (Regulation and Development)
Act is a low enacted by Parliament and declared by Parliament to be
expedient in the public interest. Rule SC has been made by the
State Government by notification in the official Gazette, pursuant to
the power conferred upon it by Sec. 15 of the Act. A statutory rule.
while ever subordinate to the parent statute, is, otherwise, to be treated
c as part of the statute and as effective. "Rules made under the Statute
must be treated for 11ll purposes of construction or obligation exactly
as if they were in the Act and are to be of the same effect as if
contained in the Act and are to be judicially noticed for al! purposes
of construction or obligation. . (State of U.P. & Ors. v. Babu Ram
D Upadhya)('); (See also Maxwell : Interpretation of Statutes, 1 lth
Edn. pp. 49-50). So, Statutory rules made pursuant to the power
entrusted by Parliament are law made by Parliament within the mean-
ing of Art. 302 of the Constitution. To hold otherwise would be to
ignore the complex demands made upon modern legislation which
necessitate the plenary legislating body to discharge its legislative func-
E tion by laying down broad guidelines and standards, to lead and
guide as it were, leaving it to the subordinate legislating body to fill
up the details by making necessary rules and to amended the rules from
time to time to meet unforeseen and unpredictable situations, all
within the framework of the power entrusted to it by the plenary
legislating body. State of Mysore v. H. Sanjeeviah(') was cited to
F us to show that rules did not become part of the statute. This was
a case where by reference to Sec. 77 of the Mysore Forest Act which
declared the effect of the rules, it was held that the rules when made
did not become part of the Act. That was apparently because of
the specific provisions of Sec. 77 which while declaring that the rules
wonld have the force of lllw stopped short of declaring that they would
become part of the Act. In the absence of any express provision, as
now, the ordinary rule as enunciated in Maxwell and State of Uttar
Pradesh & Ors. v. Babu Ram Upadhya (supra) would perforce apply.
The next question for consideration is whether Rule SC is attracted
when applications for renewal of leases are dealt with. The argument
JI was that Rule 9 itself lllid down the criteria for grant of renewal of
leases and therefore rule SC should be confined, in its application, to
(I) [1961] 2 SCR 679 @ 702. (2) [1967] 2 SCR 361.
'JAMIL NADU v. lllNDSTONE (Chinnappa Reddy, J.) 759

grant of leases in the first instance. We are unable to see the force A
of the submission. Rule 9 makes it clear that a renewal is not to be
obtained automatically, for thl' mere asking. The applicant for the
renewal has, particularly, to satisfy the Government that the renewal
is in the interests of mineral develqpment and that the lease
amount is reasonable in the circumstances of the case. These condi-
tions have to be fulfilled in addition to whatever criteria is applicable B
at the time of the grant of lease in the first instance, suitably adapted,
of course, to grant of renewal. Not to apply the criteria applicable in
the first instance may lead to absurd results. If as a result of expe-
rience gained after watching the performance of private entrepreneurs
in the mining of minor minerals it is decided to stop grant of leases
in the private sector in the interest of conservation of the particular c
mineral resource, attainment of the object sought will be frnstrated
if renewal is to be granted to private entrepreneurs without regard
to the changed outlook. In fact, some of the applicants for renewal
of leases may themselves be the persons who are responsible for the
changed outlook. To renew leases in favour of such persons would
D
make the making of Rule SC a mere exercise in futility. It must be
remembered that an application for the renewal of a lease is, in
essence an application for the grant of a lease for a fresh period. We
are, therefore, of the view that Rule BC is attracted in considering
applications for renewal of leases also.

Another submission of the learned counsel in connection with the E
consideration of applications for renewal was that applications made
sixty days or more before the date of G.O.Ms. No. 1312 (2-12-1977)
should be dealt with as if Rule BC had not come into force. It was
also contended that even applications for grant of leases made long
before the date of G.0.Ms. No. 1312 should be dealt with as if
F
Rule BC had not come into force. The submission was that it was
not open to the Government to keep applications for the grant of
leases and applications for renewal !Pending for a long time and then
to reject them on the basis of Rule BC notwithstanding the fact that
the applications had been made long prior to the date on which Rule
8C came into force. While it is true that such applications G
should be dealt with within a reasonable time, it cannot on that
account be said that the right to have an application disposed of in
a reasonable time clothes an applicant for a lease with a right to have
the 11PPlication disposed of on the basis of the rules in force at the
time of the making of the application. None has a vested right to
the grant or renewal of a lease and none can claim a vested right to H
have an application for the grant or renewal of a lease dealt with in
a particular way, by applying particular provisions. In the absence
760 SUPREME COURT REPORTS (1981] 2 S.C.R.

A of any vested rights in anyone, an application for a lease has neces-
sarily to be dealt with according to the rules in force on the date of
the disposal of the 8JPplication despite the fact that there is a long
delay since the making of the application. We are, therefore, unable
to accept the submission of the learned counsel that applications for
the grant of renewal of l~ses !llade long prior to the date of G.0.Ms.
B No. 1312 should be dealt with as if Rule SC did not exist.
In the view that we have taken on the several questions argued be-
fore us all the appeals arising out of applications for the grant or renewal!
of leases for quarrying black granite in Government lands are allowed
and the Writ Petitions filed in the Higb Court are dismissed. Special
c leave is granted in cases in which leave had not been previously
granted. The appeals are allowed and disposed of in the same manner.
There are, however, a few appeals in which the applications were
not for the grant or renewal of leases to quarry black granite in Gov-
ernment lands but were for permission to quarry black granite in
Patta lands in which the right to minerals belonged to the applicants-
D private owners themselves. Apart from the fact that Rule 8C occurs
in a group of Rules in Section II, which bears the head "Government
lands in which the minerals belong to the Government" while the rules
relating to lands in which the right to minerals belongs to private
owners are dealt with in Section III. The language of Rule 8C is
clear that it cannot have any application to lands in which the right
E to minerals belongs to the uppficants themselves. Rule SC is only
concerned with leases for quarrying black granite and it cannot, there-
fore, have any application to cases where no lease is sought from the
Government. In the case of lands in which the right to minerals
belongs to private owners and those owners seek permission to quarry
black granite the applications will have to be dealt with under the
F
relevant rules in Sec. III of the Tamil Nadu Minor Mineral Con-
cession Rnles. Rule 8C, it may be noted, does uot impose a general
ban on quarrying black gmnite but only imposes a bar on the grant
of leases of quarrying black granite. Appeals and Special Leave
Petitions which arise out of applications for the grant of permission
G to quarry bJoack granite in the Patta lands belonging to the applicants
themselves, have therefore, to be dismissed. The result is, Special
Leave Petition Nos. 9257, 9259, 9260, 9271, 9273 to 9282 and
9284 of 1980 are dismissed and Special Leave Petition Nos. 9234 to I
9248. 9250 to 9256, 9258, 9261 to 9270, 9272, 9283, 9285, 9286,
9288, 9289 and 9290 of 1980 are granted and Appeals allowed. ~
H Civil A~peal Nos. 2602 to 2604 of 1980 -are allowed. There will
be no order as to costs.
N.K.A. Ordered accordingly.
MGIPF-152 SCI/81-2.500-24-8·81