V Rajlal Manilal and Co vs Union of India and Anr

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 115 and 116 of 1963

Decision Date: 10 March, 1964

Coram: N. Rajagopala Ayyangar, P.B. Gajendragadkar, K.N. Wanchoo, J.C. Shah, S.M. Sikri

In this matter the parties were V Rajlal Manilal & Co. as the petitioner and the Union of India together with another respondent. The judgment was delivered on 10 March 1964 by a bench of the Supreme Court of India comprising N. Rajagopala Ayyangar, P. B. Gajendragadkar, K. N. Wanchoo, J. C. Shah and S. M. Sikri. The case is reported in 1964 AIR 1643 and 1964 SCR (7) 97. The dispute arose under the Mines and Minerals (Regulation and Development) Act, 1948 (No. XLIII of 1948) and the Mines Concession Rules, 1949, particularly rules 57 and 59.

The petitioners were a mining partnership that held both a prospecting licence and a certificate of approval issued by the State Government pursuant to the Mineral Concessions Rules, 1949 made under the 1948 Act. The certificate of approval was initially granted for a period of one year and, up to December 1955, it was renewed annually. The State Government then declined to renew the certificate on the ground that the composition of partners in the firm had changed. In response, the petitioners filed an application under rule 57 of the Minerals Concession Rules with the Union Government seeking a review of the State Government’s order refusing renewal.

While the petitioners’ review application was still pending, the Union Government communicated with the State Government, obtained a report and the State Government’s remarks on the merits of the case, and did so without informing the petitioners. The petitioners requested copies of this correspondence and asked for an opportunity to be heard, but the Union Government refused both requests. Ultimately, the Union Government dismissed the review application, holding that there was no valid ground to interfere with the State Government’s decision. The petitioners then filed a special leave appeal before this Court.

On behalf of the petitioners it was argued that, when disposing of an application under rule 57(2) in accordance with rule 59, the Union Government functions as a quasi‑judicial authority. Consequently, an order issued on the basis of the State Government’s report, prepared behind the petitioners’ backs and without granting them a reasonable opportunity to present their case, violated the principles of natural justice and was void. The Court held that the Union Government, in exercising its power to review under rule 59, indeed acts as a quasi‑judicial authority. The Court relied on the earlier decision in Shivji Nathubhai v. Union of India, [1960] SCR 775, to support this view. The Court further observed that the principle articulated in Shivji Nathubhai’s case, concerning the necessity of affording a hearing before an adverse order is made, applies equally to review petitions decided on materials that were not made available to the applicant.

In this case the Court observed that the rule requiring an opportunity to be heard applies not only when a review application is considered but also when a petition for review is dismissed on the basis of material that was never disclosed to the applicant. The Court therefore held that the same principle of natural justice must govern situations where the reviewing authority decides the petition without having placed the relevant documents or information in the hands of the person seeking review. Applying that principle to the facts before it, the Court found that the order issued by the Central Government was invalid because it contravened the essential requirements of natural justice. Specifically, the decision had been made without providing the appellants a reasonable chance to present their case, and such an opportunity is a necessary condition for a fair hearing. The judgment was rendered in the civil appellate jurisdiction concerning Civil Appeals numbered 115 and 116 of 1963. Both appeals were filed by special leave under Article 136 of the Constitution, challenging judgments and orders dated 9 July 1958 and 24 September 1958 respectively, issued by the Union of India (Ministry of Steel, Mines and Fuel, New Delhi) and by the Punjab High Court (Circuit Bench) at Delhi. Counsel for the appellant, namely G.S. Pathak, Rameshwar Nath and S.N. Andley, appeared in both appeals, while counsel for respondent No. 1, S.G. Patwardhan and B.R.K.G. Achar, represented the Union of India, and I.N. Shroff acted for respondent No. 2 in Civil Appeal No. 116/1963. The judgment was delivered on 10 March 1964 by Justice Ayyangar. The Court explained that Civil Appeal No. 115 arose from a special leave granted under Article 136 and challenged an order of the Union of India dated 9 July 1958, which had rejected an application filed by the appellants under Rule 57 of the Mineral Concession Rules, 1949. The appellants had sought a review of an order of the Government of Madhya Pradesh that denied renewal of their Certificate of Approval. They had also moved the Punjab High Court under Article 226, seeking a writ of certiorari to set aside the Union’s order, but the High Court dismissed the petition in limine. Civil Appeal No. 116 of 1963, likewise filed by special leave, contested the High Court’s dismissal. Since both appeals aimed at overturning the same order, the Court decided to consider them together. The appellants, organized as a partnership, were engaged in mining activities and possessed a prospecting licence in Madhya Pradesh, together with several other mineral concessions in the state, the particulars of which were not essential to the present discussion. Under the Mines and Minerals (Regulation and Development) Act, 1948 (Act No. XLIII of 1948) and the Mineral Concession Rules, 1949 made thereunder, a prospecting licence could be granted only to a person who held a certificate of approval issued by the relevant State Government, and similarly, a mining lease could be granted only to those who possessed a comparable certificate of approval. The purpose of these provisions was to enable the appellants to carry out prospecting and mining operations in the areas where they held mineral concessions.

In order to carry out prospecting activities on lands for which they possessed mineral concessions, the appellants applied for and received a certificate of approval under the Mineral Concession Rules beginning in 1952. Each certificate was valid for one calendar year and had to be renewed annually to remain in force. The original certificate granted for the year 1952 was subsequently renewed each year, so that the appellants possessed a valid certificate covering the period up to 31 December 1955. Seeking renewal for the calendar year 1956, they submitted an application to the Government of Madhya Pradesh on 22 November 1955. They completed the information required by the prescribed application form, filed the necessary documents, and obtained a recommendation for the application from the District Officer of Bhandara. The State Government, however, issued an order dated 21 September 1956 refusing the renewal, stating that the refusal was due to a change in the partners comprising the firm. This order was communicated to the appellants on 6 October 1956.

Following the receipt of the refusal, the appellants filed an application on 15 November 1956 with the Union Government seeking a review of the State Government’s order under rule 57 of the Mineral Concession Rules. Rule 57(2) provides that when a State Government fails to dispose of an application for renewal of a certificate of approval, a prospecting licence or a mining lease within the period prescribed in the Rules, such failure is deemed to be a refusal, and any aggrieved person may, within two months of the expiry of that period, apply to the Central Government for a review. The procedure for such a review is set out in rule 59, which authorises the Central Government, upon receipt of the application, to call for the relevant records and other information from the State Government, to consider any explanation offered by the State Government, and then to cancel, revise or make any order it deems just and proper.

Subsequent correspondence appears to have taken place between the Central Government and the Government of Madhya Pradesh concerning the propriety of granting the review. The appellants learned, from a letter addressed to them by the Government of India, that the State Government was required to submit a report of its remarks in connection with the review application. The appellants then made enquiries as to the status of their application, requested information on the progress of the review, and asked to be afforded an opportunity for a personal hearing at which they could demonstrate the genuineness of their case. Portions of this correspondence between the Government of India and the State Government regarding the merits of the appellants’ application are now on record. It is accepted as common ground that the appellants were not provided with these documents prior to the issuance of the order, now under challenge, which rejected their application for review.

In the present proceedings, the appellants had asked that they be permitted to satisfy the Government of India regarding the genuineness of their case. Some portions of the correspondence exchanged between the Government of India and the Government of Madhya Pradesh concerning the merits of the appellants’ application have been placed on record. However, it is a matter of common agreement that the appellants were not shown these documents before the impugned order, which rejected their application for review, was issued. On 9 July 1958 the Union Government issued an order rejecting the appellants’ application. The order read: “The Central Government have come to the conclusion that there is no valid ground for interfering with the decision of the Government of Madhya Pradesh rejecting your application for renewal of a certificate of approval for the year 1956.” After receiving this order, the appellants wrote to the Government of India requesting a copy of the report prepared by the State Government on which the rejection was based. The reply they obtained stated that the Government of India regretted its inability to accede to their request. The validity of the 9 July 1958 order is the subject of appeal No. 115 of 1963. Counsel for the appellants, Mr Pathak, submitted that when the Union Government disposes of an application under section 57(2) in accordance with rule 59, it functions as a quasi‑judicial authority. He argued that the order, which was made after considering the State Government’s report, was passed without the appellants knowing the contents of that report and without giving them a reasonable opportunity to present their case; consequently, the order violated the principles of natural justice and was void. In support of this submission, counsel relied upon the Court’s decision in Shivji Nathubhai v. Union of India [1960] 2 S.C.R. 775. The Court found that counsel’s argument regarding the nature of the jurisdiction exercised by the Union Government under rule 59 was well‑founded. The cited decision confirmed that the Central Government, when acting under the rule, operates as a quasi‑judicial body. Accordingly, the Central Government could not base its decision on material to which the appellants had no opportunity to make representations. Although the decision in Shivji Nathubhai concerned a situation where an order prejudicial to respondents was passed before the Central Government without affording them a chance to meet the case, the same principle, the Court held, applies when a petition for review is rejected on the basis of materials that were not disclosed to the applicant. The factual background, as already indicated, is that the State Government refused to renew the certificate of approval because it believed a change in the composition of the partnership had destroyed the firm’s identity. The appellants, however, contended that the terms of their partnership deed expressly provided for the continuance of the firm’s identity despite changes in partnership due to death, retirement, or the addition of new members.

In this case, the partnership deed contained explicit clauses that ensured the firm would retain its identity even if members died, retired, were replaced, or otherwise changed; the deed therefore provided for continuity of the firm despite any alteration in its composition. The Court observed that if the State Government’s report raised any objections to the statements made by the appellants, and if the Union Government was relying on those objections, then, in the interest of fairness, the appellants had a right to be told what those objections were and to be given an opportunity to explain how those objections might affect the arguments they had advanced. The counsel for the Union of India did not attempt to justify the Central Government’s refusal to disclose the contents of the State Government’s report, which formed the factual basis for rejecting the appellants’ application for review. Consequently, the Court found no difficulty in declaring that the Central Government’s order, now appealed, was void because it violated the principles of natural justice by denying the appellants a reasonable chance to be heard, a requirement that is essential for a fair hearing. The learned judges of the Punjab High Court had dismissed the petition filed under Article 226, apparently on the basis that the Central Government’s exercise of power under Rules 57 and 59 of the Mineral Concession Rules was merely administrative and therefore did not demand the procedural safeguards required in quasi‑judicial proceedings. That position echoed the earlier decision in Shivji Nathubhai v. The Union of India and Ors., which this Court later reversed. It is noteworthy that the Punjab High Court rendered its judgment before the Supreme Court’s later pronouncement, and therefore it could not have relied on that subsequent authority. As a result, the Court allowed the appeals, set aside the Central Government’s order dated 9 July 1958 and the Punjab High Court’s order dated 24 September 1958, and directed that the Central Government reconsider the review application anew, disposing of it in accordance with law and the observations made in this judgment. The appellants were also awarded costs in this Court, specifically one set of hearing fees, and the appeals were permitted.