Shivji Nathubhai vs The Union Of India and Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No. 428 of 1959

Decision Date: 19 January 1960

Coram: K.N. Wanchoo, Bhuvneshwar P. Sinha, P.B. Gajendragadkar, K.C. Das Gupta, J.C. Shah

In this matter, the Supreme Court of India delivered its judgment on 19 January 1960. The case was styled Shivji Nathubhai versus the Union of India and others. The petitioner was Shivji Nathubhai and the respondents were the Union of India together with other parties. The judgment was authored by Justice K.N. Wanchoo and the bench comprised Justices K.N. Wanchoo, Bhuvneshwar P. Sinha, P.B. Gajendragadkar, K.C. Das Gupta and J.C. Shah. The decision was reported in the 1960 AIR 606 and the 1960 S.C.R. (2) 775, and it has been cited in numerous subsequent reports, including RF 1961 S.C. 1361, R 1961 S.C. 1669, R 1962 S.C. 1110, D 1962 S.C. 1513, RF 1964 S.C. 1140, R 1964 S.C. 1643, R 1965 S.C. 1595, RF 1966 S.C. 671, RF 1967 S.C. 1507, R 1967 S.C. 1606, APL 1970 S.C. 1896, R 1973 S.C. 678, R 1974 S.C. 87, D 1987 S.C. 1802 and RF 1991 S.C. 818. The dispute concerned the grant of mining leases by a State Government, the subsequent cancellation of those leases on review by the Central Government, and whether such cancellation constituted a quasi‑judicial act under the Mineral Concession Rules 1949, particularly rules 52 and 54. Rule 54 of those Rules provided that, upon receiving an application for review, the Central Government could, at its discretion, call for relevant records from the Provincial Government, consider any explanation offered, and then either cancel or revise the Provincial Government’s order in a manner it deemed just and proper. The petitioner had been granted mining leases over five areas and had taken possession of those areas. After a respondent filed an application for review under rule 52, the Central Government, without offering the petitioner a hearing, cancelled the leases over two of the areas and directed the State Government to grant those leases to the respondent. The petitioner challenged this order before the High Court under article 226 of the Constitution, seeking its quashment. Both the single judge who first heard the petition and the Division Bench on appeal held that the cancellation order was merely administrative and therefore the petitioner was not entitled to a hearing. On appeal before this Court, it was argued that rules 52 to 55 indicated that the proceeding before the Central Government was quasi‑judicial and that the principles of natural justice should therefore apply. The Court held that this contention was correct, that the Central Government had acted judicially rather than administratively in exercising its review power under rule 54, and that consequently the order of cancellation was invalid and should be set aside. The Court further observed that, assuming the State Government’s grant of a mining lease was an administrative act, it could not be said that no rights accrued to the lessee until the Central Government finally decided on the review.

Rule 52, by granting the aggrieved party the right to obtain a review, created a dispute between that party and the lessee. Accordingly, in the absence of any provision to the contrary either in Rule 54 or in the enactment itself, there could be no doubt that the Central Government was exercising quasi‑judicial authority when it acted under Rule 54. The principle was applied in Province of Bombay v. Kushaldas S. Advani, [1950] S.C.R. 621, and the case of R. v. Electricity Commissioner, (1924) I.K.B. 171 was also referred to.

The judgment concerns Civil Appeal No. 428 of 1959, which was filed after the Punjab High Court (Circuit Bench) at Delhi delivered its judgment and order on 25 February 1959 in Letters Patent Appeal No. 47‑D of 1955. The appellate matter arose from the High Court’s judgment and order dated 28 November 1955 in Writ Petition No. 306‑D of 1954. Counsel for the appellant included N. C. Chatterjee, J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L. Vohra. Representing respondents 1 and 2 were C. K. Daphtary, the Solicitor‑General of India, together with R. Gapapathy Iyer, R. H. Dhebar and T. M. Sen. Respondent 3 was represented by G. S. Pathak, S. S. Shukla and Mrs. E. Udayaratnam. The judgment was delivered on 19 January 1960 by Justice Wanchoo.

This appeal, based on a certificate granted by the Punjab High Court, raised the question of whether an order issued by the Central Government under Rule 54 of the Mineral Concession Rules, 1949—hereinafter referred to as “the Rules”—and made under Section 6 of the Mines and Minerals (Regulation and Development) Act, No. 53 of 1941—hereinafter referred to as “the Act”—should be classified as quasi‑judicial or merely administrative. The essential facts required for this determination are as follows. The appellant received a mining lease from the Ruler of Gangpur State on 30 December 1947, shortly before the State merged with Orissa on 1 January 1948. That lease was subsequently annulled on 29 June 1949. After the annulment, the appellant obtained certificates of approval for prospecting licences and mining leases. On 19 December 1949 the appellant applied for mining leases for manganese covering five areas in the Sundergarh district of Orissa. The authorities requested, on 4 July 1950, that a separate application be filed for each area; the appellant complied on 27 July 1950. Due to identified defects, the appellant filed fresh applications on 6 September 1950 after correcting the deficiencies.

Meanwhile, the third respondent also submitted applications for manganese mining leases for the same areas on 10 July 1950. Those applications lacked the deposit required by Rule 29 of the Rules. Consequently, the third respondent was asked on 24 July 1950 to deposit Rs. 500, which it did on 3 August 1950. It was later discovered that the third respondent’s applications were still defective. The authorities therefore required, on 5 September 1950, that the third respondent submit a separate application in the prescribed form for each block. The third respondent complied by filing fresh applications thereafter.

In this matter, the State of Orissa granted the appellant mining leases for five areas on 22 December 1952, relying on rule 32 of the Rules which established a priority system, and concluded that the appellant’s applications were earlier than those of the third respondent; consequently, the leases were awarded to the appellant and possession of the leased areas was delivered on 21 April 1953. Subsequently, the third respondent filed a review application with the Central Government under rule 52 of the Rules, and the Central Government approved that review on 28 January 1954, directing the Government of Orissa to issue a mining lease to the third respondent for two of the five areas. The appellant learned of the third respondent’s review filing in February 1954 and wrote to the Central Government requesting that he be given an opportunity to be heard before any decision was made on the review application. On 5 July 1955, the Government of Orissa informed the appellant of the Central Government’s order dated 28 January 1954, which cancelled the lease previously granted to the appellant for the two areas. In response, the appellant filed a writ petition under article 226 of the Constitution before the Punjab High Court, seeking to set aside the January 1954 order on the grounds that it was a quasi‑judicial act and that the principles of natural justice had been violated because he had not been afforded a hearing before the review was allowed, thereby affecting his lease rights. A learned single judge of the High Court held that the order was merely administrative, not quasi‑judicial, and that no lis existed to entitle the appellant to a hearing; consequently, the writ petition was dismissed. The appellant then appealed to a division bench of the same High Court under the Letters Patent, and that bench affirmed the single judge’s conclusion. After obtaining a certificate of fitness to appeal, the appellant brought the dispute before this Court. Counsel for the appellant argued that the Central Government was exercising a quasi‑judicial function when it issued the order under rule 54 of the Rules, and therefore was obligated to afford the appellant a hearing before deciding the review application; failure to do so, the counsel submitted, breached the principles of natural justice and rendered the order liable to be set aside. In support of this position, the counsel cited the decision in Nagendra Nath Bora and another v. The Commissioner of Hills Division and Appeals, Assam and others.

The respondent argued that Rules 52 to 55 of the mining regulations clearly indicate that the procedure before the Central Government constitutes a quasi‑judicial proceeding. He pointed out three specific features of the rules: first, Rule 52 expressly confers a statutory right on any person who is aggrieved by a State Government order refusing a mining lease to apply for a review; second, the same rule fixes a limitation period of two months for filing such an application; and third, Rule 53 requires the payment of a prescribed fee for an application made under Rule 52. The respondent further observed that a lis arises the moment an aggrieved person is given the right to seek review against the party in whose favour the State order was made, thereby rendering the Central Government’s review stage a quasi‑judicial process subject to the principles of natural justice.

Mr. G. S. Pathak, appearing for the third respondent, contended that the High Court’s view was correct and that the order dated 28 January 1954 was purely administrative, so there was no requirement for the Central Government to hear either side before issuing it. He explained that the minerals subject to mining leases are owned by the State and that an applicant has no entitlement to a lease until the State Government actually grants it. Accordingly, a right to the lease arises only after the State’s grant and any subsequent review by the Central Government, if a review is filed. He further argued that Rule 32, which deals with priority, does not bind the State Government to allocate a lease to the first applicant; the State may, for a special reason and with the Central Government’s prior approval, award the lease to a later applicant. Consequently, he maintained that the State’s initial lease grant is an administrative act, and the Central Government’s later review order must be treated in the same administrative manner. To resolve these opposing arguments, the Court noted that it was necessary to examine Rules 52 to 55 as they stood up to 1953, disregarding any amendments made after January 1954 or the replacement of the Act by the Mines and Minerals (Regulation and Development) Act, 1957. Rule 52, inter alia, provides that any person aggrieved by an order of the State Government

Under Rule 52 a person who is dissatisfied with a refusal to grant a mining lease may, within two months from the date of the refusal, make an application to the Central Government seeking a review of that order. Rule 53 mandates the payment of a prescribed fee in connection with such an application. Rule 54, which may be reproduced in its entirety, provides that upon receiving the application the Central Government, if it deems appropriate, may call for the relevant records and any other information from the State Government; after considering any explanation that the State Government may offer, the Central Government may either cancel the State Government’s order or modify it in a manner that it considers just and proper. Rule 55 further states that the order issued by the Central Government under Rule 54 shall be final, and, subject only to that order, any order made by the State Government under these rules shall also be final.

The Court has examined repeatedly the distinction between judicial acts, which include quasi‑judicial acts, and administrative acts. In the case of Province of Bombay v. Kushaldas S. Advani the Court adopted the well‑known definition of a quasi‑judicial body articulated by Atkin L.J. in R. v. Electricity Commissioners, namely: “Whenever any body of persons having legal authority to determine questions affecting rights of subjects, and having the duty to act judicially act in excess of their legal authority they are subject to the controlling jurisdiction of the King’s Bench Division exercised in these writs.” This definition stresses three essential requirements for an act to be classified as quasi‑judicial: the body must possess (1) legal authority; (2) authority to determine questions that affect the rights of subjects; and (3) a duty to act judicially. After analysing a series of decisions, Justice Das, then serving as a judge, elucidated principles drawn from the Kushaldas Advani case. He explained that (i) where a statute empowers a non‑court authority to decide disputes that arise from a claim made by one party under the statute and opposed by another party, thereby determining the respective rights of the contesting parties, a lis exists and, absent any contrary statutory provision, the authority is obligated to act judicially and its decision constitutes a quasi‑judicial act; and (ii) where a statutory authority possesses power to undertake an act that may prejudice a subject, even though the contest is between the authority and the subject, the final determination of the authority will still be deemed a quasi‑judicial act provided the statute requires the authority to act judicially. The Court indicated that these principles form the basis for assessing the nature of the Central Government’s action under Rule 54.

The Court observed that it is now firmly established that the first step must be to determine whether the Central Government, when it acts under rule 54, is exercising its functions in a quasi‑judicial capacity or in some other manner. The Court noted that, for the purposes of the present discussion, it was unnecessary to resolve the question of whether the State Government, when it grants a lease, is acting solely in an administrative capacity. Accordingly, the Court assumed that an order issued by the State Government granting a lease pursuant to the Rules constituted an administrative order.

The Court then turned to examine the situation that arises after the State Government has granted a lease to one applicant while refusing the lease to other applicants. The counsel for the petitioner argued that, even in such circumstances, no enforceable right accrues to the individual to whom the lease has been granted until the Central Government issues an order on any review application that may be filed. The Court, however, pointed out that rule 55 expressly provides that the order of the State Government is final, subject only to any order that may be made by the Central Government under rule 54. It was observed that, once a lease is granted by the State Government, it is entirely possible that none of the rejected applicants will file a review application. In such an event, the State Government’s order would remain final.

Consequently, the Court held that it would be incorrect to say that no right of any kind is created in favour of the person to whom the lease is granted by the State Government. The Court explained that the analysis would be different only if the State Government’s order were ineffective until it received confirmation from the Central Government; under such a hypothetical scheme, no right would arise until such confirmation was obtained. However, the Court emphasized that rule 54 does not provide for any such confirmation by the Central Government. Instead, rule 54 merely empowers the Central Government to act when a review application is presented before it.

For this reason, the Court rejected the petitioner’s contention that, in substance, the State Government’s order becomes effective only after confirmation by the Central Government, noting that rule 54 offers no support for that view. The Court further observed that neither the Rules nor the Act contain any provision granting the Central Government the power to review, on its own initiative, the State Government’s lease‑granting order.

The Court found that the creation of some right upon the issuance of a lease order is evident from the facts of the case. Specifically, the lease order was issued in December 1952, and in April 1953 the appellant took possession of the allotted area and began actual cultivation. The Court reasoned that when a statutory rule allows an aggrieved party to file a review application before the Central Government, it inevitably follows that the party in whose favour the order is made also possesses a right to present his case before the authority to which the review application is addressed. In the circumstances, the Court concluded that as soon as rule 52 confers a right on an aggrieved party to apply for review, a cause of action arises between that party and the party whose favour the grant has been made.

The Court observed that rule 52 gives an aggrieved party a right to apply for review and that such a right creates a lis between the applicant and the party in whose favour the lease has been granted. The Court held that, unless the statute expressly provides otherwise, the reviewing authority must act judicially and its decision will therefore be a quasi‑judicial act. The next issue was whether any provision in the Rules negated the duty to act judicially on the part of the reviewing authority. Counsel for the petitioner argued that rule 54 confers upon the Central Government the unfettered power to act “as it may deem just and proper” and that the Government is not even required to call for the relevant records or other information from the State Government before deciding a review application. The Court acknowledged that this description of rule 54 is correct, but it found that the correctness of the rule does not demonstrate a denial of the duty to act judicially. The Court explained that the Rules merely require the Central Government to act justly and properly, which is precisely the standard that a judicially‑acting authority must meet. Moreover, the Court noted that the fact that the Central Government is not bound to call for records does not remove its duty to act judicially, since courts themselves may dismiss appeals without first obtaining records. Consequently, rule 54 does not lay down any provision that contradicts the duty to act judicially. The Court therefore concluded that, on a prima facie basis, a lis exists between the lease‑holder and the party aggrieved by the refusal, and that the reviewing authority is obliged to act judicially, with no provision in rule 54 to the contrary.

Accordingly, the Court held that, at the relevant time, the Central Government was exercising a quasi‑judicial function when it decided the application under rule 54. The Court stressed that, before reaching its decision, the Government was required to give the appellant—a party whose rights were affected by the review—to a reasonable opportunity to present his case. Because this opportunity was not afforded, the appellant was entitled to seek a writ of certiorari to quash the order dated 28 January 1954 issued by the Central Government. The Court therefore allowed the appeal, set aside the order of the High Court, and quashed the Central Government’s order of 28 January 1954. The Court further directed that the Central Government may rehear the review application, provided it first gives the appellant a reasonable chance to be heard. Finally, the Court ordered that the appellant shall recover his costs from the third respondent, who is the principal contesting party, and pronounced the appeal allowed.