P.N. BHAGWATI, D.A. DESAI

(1) This group of nineteen petitions raises an interesting question of construction of certain provisions of the Mines and Minerals (Regulation and Development) Act 1957 and the Mineral Concession Rules 1960 The facts giving rise to the petitions are identical save for difference in the area and location of the lands in respect of which mining lease is sought by the petitioners and it would therefore be sufficient if we take one of the petitions namely Special Civil Application No. 1045 of 1968 as a representative petition and state the facts of that petition.

(2) The petitioners in Special Civil Application No. 1045 of 1968 carry on business of mining and they are also dealers in minerals. Bauxite is an important mineral having its uses as raw material in several industries including manufacture of alumina. There are fairly large deposits of bauxite in three districts of the State of Gujarat namely Jamnagar Junagadh and Kutch. The Government of Gujarat by a notification dated 31 December 1963 notified for the information of the public that the lands in all the Talukas of Kutch District and Kalyanpur Taluka of Jamnagar District are reserved for exploitation of bauxite in the public sector. Similar notification was also issued by the Government of Gujarat for all areas of Jamnagar and Junagadh Districts on 26th February 1964. On 1st June 1967 the petitioners made an application to the State Government through the Collector of Kutch District in the prescribed form for grant of mining lease for bauxite in respect of an area of about 209 Acres 36 Gunthas forming part of Survey No. 151 situate in village Polandia Mandvi Taluka Kutch District. The application was made under Rule 22(1) of the Mineral Concession Rules 1960 and according to the petitioners it was in conformity with all the requirements of the Act and the Rules. There was no other prior application in respect of this area of land and the petitioners were the only applicants so far as this area of land was concerned. The State Government by its order dated 13th June 1967 rejected the application of the petitioners on the ground that the State Government has reserved the areas of Kutch District for public sector vide Government Notification....dated 31st December 1963. The petitioners being aggrieved by the order of rejection preferred a revision application to the Central Government under Rule 54 of the Mineral Concession Rules 1960 The Central Government invited the comments of the State Government against the revision application under Clause (1) of Rule 55 and on receipt of the comments from the State Government the Central Government gave an opportunity to the petitioners under Clause (2) of Rule 55 to make such further comments as they liked in reply to the comments of the State Government. The Central Government thereafter on a consideration of the revision application the comments of the State Government and the counter-comments of the petitioners made an order dated 30th April 1968 confirming the order of the State Government and rejecting the revision application of the petitioners. The ground on which the Central Government rejected the revision application may be stated in its own words:-

..The State Government have inherent rights to reserve any particular area for exploitation in the public sector. Minerals vest in them and they are the owners of minerals vest in them and they are the owners of minerals. Once a notification is issued no party can as a matter of right claim any mineral concession in the reserved area. Exceptions could be made and are made. So far as the grant of area to Carborundum Universal is concerned the case has been supported by the Central Government on their individual merits. They are actual users of bauxite and have established a calcinations plant costing about 25 lakh of rupees at Okha for which bauxite of a specific and High grade is the main raw material. It is the agreed policy of Government not to starve running industries of their basic raw materials. Similarly the Gujarat Mineral Development Corporation is a public sector undertaking and the purpose for which reservation has been made is not defeated by granting leases to it. Further the question of setting up an aluminum plant in the public sector in Gujarat is receiving active consideration in this Ministry and Central Government are in agreement with the State Government in so far as the reservation of areas is concerned....Your application for revision is therefore rejected.

There was a reference made to Carborundum Universal Ltd. in the order of the Central Government as a grievance was made by the petitioners in the revision application that Carborundum Universal Limited had been granted mining lease in respect of an area of land situate in Jamnagar District though all areas of Jamnagar District were reserved for exploitation of bauxite in the public sector under the notification dated 26th February 1964 and there was therefore no reason why the notification dated 31st December 1963 should stand in the way of the petitioners being granted mining lease in respect of the area applied for by them. The Central Government pointed out in its order that Carborundum Universal Ltd. had been granted mining lease as an exceptional case because they had set up a calcinations plant at a cost of Rs. 25 lakhs at Okha in Jamnagar District and-bauxite of a specific high grade was the main raw material for their plant and if they had not been granted mining lease they would have been starved of an essential raw material and that might have led to the closure of the plant. The distinction made by the Central Government was that Carborundum Universal Limited were actual users of bauxite as against the petitioners who were merely dealers. It is not necessary for the purpose of the present petitions to examine the validity of this distinction made by the Central Government as it was not the contention of the petitioners at the hearing of these petitions that any unfair or unjust discrimination was made by the Central Government in granting lease to Carborundum Universal Limited and refusing it to the petitioners though both were similarly situate and the refusal of the State Government and the Central Government to grant mining lease to the petitioners was on that account vitiated. The petitioners challenged the validity of the orders made by the State Government and the Central Government by filing Special Civil Application No. 1045 of 1968 and the main ground on which the challenge was based was that the State Government had no authority either within the four corners of the Act or outside to reserve any area of land for exploitation of bauxite in the public sector and the refusal to grant mining lease to the petitioners was therefore based on a ground which was extraneous and irrelevant not found in the Act or the Rules and it was accordingly liable to be quashed and set aside. Similar petitions were also filed by the other petitioners whose applications for mining lease were rejected on the same ground.

(3) Though the ground on which the orders of the State Government and the Central Government were challenged was a limited ground the arguments advanced on behalf of the parties ranged over a wide field and led to an interesting debate on the true scope of the executive power of the State Government in regard to reservation of land for mining purposes and the proper construction of some of the provisions of the Mines and Minerals (Regulation and Development) Act 1957 We shall presently refer to these arguments but before we do so it would be convenient at this stage to notice a few of the relevant provisions of the Mines and Minerals (Regulation and Development) Act 1957 and the Mineral Concession Rules 1960 The Mines and Minerals (Regulation and Development) Act 1957 came into force on 1st June 1958. It contained the following declaration in sec. 2 on contemplated under Entry 54 of List 1 of the Seventh Schedule to the Constitution:-

2 It is hereby declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent hereinafter provided.

The Act then proceeded to enact 33 sections separated by general headings which show the topics dealt with in those sections. The first group of secs. 4 to 9 provides for general restrictions on undertaking prospecting and mining operations. Of this group two sections are material namely secs. 4 and 5. Omitting portions immaterial they read as follows:-

4 (1) No person shall undertake any prospecting or mining operations in any are a except under and in accordance with the terms and conditions of a prospecting licence or as the case may be a mining lease granted under this Act and the Rules made thereunder

xxx xxx xxx xxx xxx

(2) No prospecting licence or mining lease shall be granted otherwise than in accordance with the provisions of this Act and the Rules made thereunder. 5 (1) No prospecting licence or mining lease shall be granted by a State Government to any person unless he

(a) holds a certificate of approval in the prescribed form from the State Government;

(b) produces from the Income-tax Officer concerned an income-tax clearance certificate in the prescribed form; and

(c) satisfies such other conditions as may be prescribed.

(2) Except with the previous approval of the Central Government no prospecting licence or mining lease shall be granted

(a) xxx xxx xxx xxx xxx

(b) to any person who is not an Indian national.

Sec. 6 prescribes the maximum area for which a prospecting licence or mining lease may be granted and sec. 7 the periods for which a prospecting licence may be granted or renewed and sec. 8 the periods for which a mining lease may be granted or renewed. Sec. 9 fixes the royalties payable by a holder of a mining lease in respect of minerals removed by him. Then follows another group of sec. 10 to 12 which lay down the procedure for obtaining prospecting licences and mining leases in respect of land in which the minerals vest in the Government. Secs. 10 and 11 are very material and they may be reproduced as under:-

10 (1) An application for a prospecting licence or a mining lease in respect of any land in which the minerals vest in the Government shall be made to the State Government concerned in the prescribed form and shall be accompanied by the prescribed fee.

(2) Where an application is received under sub-sec. (1) there shall be sent to the applicant an acknowledgment of its receipt within the prescribed time and in the prescribed form.

(3) On receipt of an application under this section the State Government may having regard to the provisions of this Act and any rules made thereunder grant or refuse to 8rant the licence or lease.

11 (1) Where a prospecting licence has been granted in respect of any land the licensee shall have a preferential right for obtaining a mining lease in respect of that land over any other person:-

Provided that the State Government is satisfied that the licensee has not committed any breach of the terms and conditions of the prospecting licence and is otherwise a fit Person for being granted the mining lease.

(2) Subject to the provisions of sub-sec. (1) where two or more persons have applied for a prospecting licence or a mining lease in respect of the same land the applicant whose application was received earlier shall have a preferential right for the grant of the licence or lease as the case may be over an applicant whose application was received later:-

Provided that where any such applications are received on the same day the State Government after taking into consideration the matters specified in sub-sec. (3) may grant the prospecting licence or mining lease as the case may be to such one of the applicants as it may deem fit.

(3) The matters referred to in sub-sec. (2) are the following:-

(a) any special knowledge of or experience in prospecting operations or mining operations as the case may be possessed by the applicant;

(b) the financial resources of the applicant;

(c) the nature and quality of the technical staff employed or to be employed by the applicant;

(d) such other matters as may be prescribed.

(4) Notwithstanding anything contained in sub-sec. (2) but subject to the provisions of sub-sec. (1) the State Government may for any special reasons to be recorded and with the previous approval of the Central Government grant a prospecting licence or a mining lease to an applicant whose application was received later in preference to an applicant whose application was received earlier. Sec. 12 requires that the State Government shall maintain a register of prospecting licences and mining leases. Sec. 13 belongs to the next group of sections and by sub-sec. (1) it confers power on the Central Government to make rules for regulating the grant of prospecting licences and mining leases in respect of minerals and for purposes connected therewith. Sub-sec. (2) sets out the specific matters on which rules may be made by the Central Government without prejudice to the generality of its power under sub-sec. (1). We then have secs. 14 and 15 which deal with minor minerals. We are not concerned with them since bauxite is not a minor mineral. Sec. 16 is not material. Sec. 17 confers special power on the Central Government to undertake prospecting or mining operations in respect of land in which the minerals vest in the Government of a State. Sub-sec. (2) of that section provides that notwithstanding anything contained in the Act the Central Government after consultation with the State Government may undertake prospecting or mining operations in any area not already held under any prospecting licence or mining lease and where it proposes to do so it shall by notification in the Official Gazette (a) specify the boundaries of such areas; (b) state whether prospecting or mining operations will be carried out in the area; and (c) specify the mineral or minerals in respect of which such operations will be carried out. Sec. 18 occurs under the heading Development of Minerals and it deals with the entire subject of conservation and development of minerals in India. Sub-sec. (1) of sec. 18 reads as follows:- 18 (1) It shall be the duty of the Central Government to take such steps as may be necessary for the conservation and development of minerals in India and for that purpose the Central Government may by notification in the Official Gazette make such rules as it thinks fit. Sub-sec. (2) provides that in particular and without prejudice to the generality of the power under sub-sec. (1) Rules made by the Central Government may provide for all or any of the matters there enumerated. These matters include (a) the opening of new mines and the regulation of mining operations in any area; (b) the regulation of the excavation or collection of minerals from any mine; (d) the development of mineral resources in any area. Then there are some miscellaneous provisions which are not material barring-sec. 19 which enacts that any prospecting licence or mining lease granted renewed or acquired in contravention of the provisions of the Act of any rules or orders made thereunder shall be void and of no effect.

(4) We may then refer to the Mineral Concession Rules 1960 These Rules are made by the Central Government under sec. 13. They provide for various matters such as the procedure for obtaining certificate of approval prospecting licence and mining lease in respect of land in which the minerals vest in the Government etc. Only a few rules are relevant and they may be noticed. Rule 26 provides that the State Government may for reasons to be recorded in writing and communicated to the applicant refuse to grant or renew a mining lease over the whole or part of the area applied for This rule imports the requirement of giving reasons for refusal of an application for mining lease. Rules 54 and 55 lay down the procedure for revision of an order made by the State Government in exercise of the power conferred under the Act and the Rules. Rule 58 provides that no area which is being held under a prospecting licence or a mining lease or in respect of which an order had been made for the grant thereof but the applicant has died before the execution of a licence or lease as the case may be or in respect of which the order granting licence or lease has been revoked shall be available for grant unless an entry to that effect is made in the register and the date from which the area shall be available for grant is notified in the Official Gazette at least thirty days in advance. Then follow Rules 59 and 60 which are very important since they have been relied upon by the State Government in justification of the refusal of the application of the petitioners. They read as follows:-

59 In the case of any land which is otherwise available for the grant of a prospecting licence or a mining lease but in respect of which the State Government has refused to grant a prospecting licence or a mining lease on the ground that the land should be reserved for any purpose the State Government shall as soon as such land becomes again available for the grant of a prospecting or mining lease grant the licence or lease after following the procedure laid down in Rule 58. 60 Applications for the grant of a prospecting licence or mining lease in respect of the areas in which

(a) no notification has been issued under Rule 58 or Rule 59; or shall be deemed to be premature and shall not be entertained and the fee if any paid in respect of any such application shall be refunded. The other rules are not material and we need not refer to them.

(5) Having set out the relevant provisions of the Act and the Rules we may now briefly reproduce the arguments advanced on behalf of the parties. The petitioners pointed out that the only ground on which the State Government refused the application of the petitioners and the Central Government confirmed the order of the State Government was that the area of land in respect of which the application was made was reserved by the State Government for exploitation of bauxite in the public sector. This ground contended the petitioners was wholly unjustified and irrelevant and the argument in support of the contention proceeded on the following lines. The executive power of the State Government under Article 162 is limited to the matters with respect to which the State Legislature has power to make laws and the State Government can therefore exercise executive power only in respect of the matters set out in Lists II and III of the Seventh Schedule to the Constitution. Of all the entries in Lists II and III of the Seventh Schedule the only entry under which any area of land can be reserved for exploitation of bauxite in the public sector is Entry 23 of List II. But Entry 23 of List II is subject to Entry 54 of List I and the Parliament having made a declaration in sec. 2 and enacted the Act Entry 23 of List II is cut down and the whole subject of regulation of mines and development of minerals is taken out of the legislative competence of the State Legislature. The State Government had therefore no executive power to reserve any land for exploitation of bauxite in the public sector. Even if the State Government had such executive power it was taken away by the prohibition enacted in sec. 4 (1). The application of the petitioners could not in the circumstances be refused on the ground that the area of land applied for was reserved by the State Government for exploitation of bauxite in the public sector. Such a ground in any event could not be taken into account by the State Government or the Central Government for refusing the application of the petitioners under sec. 10(3). The only grounds on which the application of the petitioners could be refused by the State Government and the Central Government were those to be found in the Act and the Rules as provided in sec. 10(3) and since reservation of land for exploitation of minerals in the public sector was not a ground contemplated under any provision of the Act or the Rules it could not form a valid basis for refusal of the application of the petitioners. This argument of the petitioners was resisted by both the respondents namely the Union of India and the State Government. Their answer was to a large extent identical and covered the same ground but there were one or two small aspects on which their submissions differed. The respondents contended that the State Government was the owner of the minerals in the land and had executive power as such owner to deal with the minerals in such manner as it liked subject only to the provisions of the Act and the Rules and since there was nothing in the Act or the Rules which provided to the contrary it was competent to the State Government to reserve any area of land for exploitation of minerals in the public sector. The first respondent namely the Union of India conceded that by reason of the declaration in sec. 2 and the enactment of the Act Entry 23 of List II was denuded of its content as contended on behalf of the petitioners but sought to support the executive power of the State Government to make reservation by reference to Article 298 and Entries 18 24 and 35 of List II and Entry 20 of List III. The State Government which is the second respondent on the other hand disputed the contention of the petitioners in regard to the scope of Entry 23 of List II and relied upon that entry also in addition to Article 298 and Entries 18 24 and 35 of List II and Entry 20 of List III. The respondents agreed that the executive power of the State Government to reserve land for exploitation of minerals in the public sector was subject to the Parliamentary legislation contained in the Act or the Rules which in any manner affected the content of such executive power of the State Government. So far as sec. 4(1) is concerned the respondents contended that the prohibition enacted in that section had no application to the State Government and the State Government was therefore not precluded from undertaking mining operations in respect of minerals vested in it. The State Government according to the respondents was entitled to exploit the minerals vested in it either by itself or through a Corporation owned or controlled by it and reservation of land for exploitation of minerals in the public sector was within the executive power of the State Government. The respondents sought to draw support for this submission from Rules 59 which according to the respondents clearly recognized the power of the State Government to reserve land for any purpose which might include exploitation of minerals in the public sector. The respondents pointed out that there was nothing in the Act or the Rules which imposed an obligation on the State Government to grant an application for mining lease where it was the sole application. It was open to the State Government contended the respondents to refuse an application for mining lease even if there was no other rival applicant and the only obligation on the State Government while refusing such an application was to record the reasons for the refusal. These reasons could be examined by the Central Government in a revision application which may be filed by the applicant and the Central Government could in the proper exercise of its discretion confirm or set aside the refusal made by the State Government. But that did not take away the discretion of the State Government to refuse an application on proper relevant grounds. The respondents urged that the area of land applied for by the petitioners having been reserved for exploitation of bauxite in the public sector Rule 59 was applicable and since no notification had been issued in respect of this area of land under Rule 59 the application of the petitioners was premature by reason of Rule 60 and the State Government as well as the Central Government had no choice but to refuse it. It was also contended on behalf of the respondents that in any event even if the application of the petitioners was not premature the ground on which the application was refused namely that the area of land was reserved for exploitation of bauxite in the public sector was a valid ground which could properly be taken into account by the State Government and the Central Government in refusing the application. These were the rival contentions advanced on behalf of the parties and they raised some interesting questions of law which we will now proceed to consider.

(6) The first question which arises for consideration on these arguments is as to whether the State Government had executive power to reserve any area of land for exploitation of bauxite in the public sector. Before we embark upon a consideration of this question we may at the outset clear the ground by disposing of a short contention urged on behalf of the petitioners. The contention was that the expression public sector was a vague and indefinite expression and it did not convey any recognizable meaning. It was in the submission of the petitioners nothing more than political jargon. We do not think so. The words public sector and private sector have by now acquired a definite and well-recognised connotation and though no judicial exposition of these words has so far been made at least none has been brought to our notice-it is clear what these words mean according to ordinary common usage. When we use the words public sector what we mean is that sector of industry or enterprise which is undertaken and run by the State Government or the Central Government or any statutory corporation or authority owned or controlled by the State Government or the Central Government. We do not wish to suggest that this meaning should be regarded as an exhaustive definition of the expression public sector but it comprehends nearly all that is commonly known by the designation of public sector. It would therefore seem that when the State Government reserves any area of land for exploitation of minerals in the public sector what it seeks to do is to declare that the particular area of land shall be exploited by itself or through a statutory Corporation or authority owned or controlled by it. The question is whether the State Government has executive power to do so.

(7) It is necessary to notice a few provisions of the Constitution in order to answer this question. We may first look at Entry 54 of List I and Entry 23 of List II for a major part of the controversy related to those two entries. Entry 54 of List I reads 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 and Entry 23 of List II reads Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union. Entry 23 of List II is by its very terms subject to Entry 54 of List I. The plain effect of subjection of Entry 23 of List II to Entry 54 of List I is that if the Parliament by law declares it to be expedient in the public interest to assume control of regulation of mines and mineral development the ambit and coverage of Entry 23 of List II is cut down to the extent to which regulation of mines and mineral development is taken under the control of the Union. The State Legislature would then have no legislative competence to enact legislation in the field which falls within the scope of the declaration made by the Parliament. The Parliament alone would be entitled to legislate in such field. This would appear to be clear on a plain construction of Entry 54 of List I and Entry 23 of List II and no authority would seem to be necessary in support of it but we may point out that there are at least two decisions of the Supreme Court which have accepted this view as to the interrelation between these two Entries. The first is the decision of the Supreme Court in State of Orissa v. M. A. Tullochand Co A.I.R. 1964 S.C. 1284. There the question was whether Orissa Mining Areas Development Fund Act 1952 was overborne by the Mines and Minerals (Regulation and Development) Act 1957 The former Act was enacted under Entry 23 of List II while the latter under Entry 54 of List I. The question was whether by reason of the declaration in sec. 2 and the enactment of the Central Act the Orissa State Legislature was denuded of its legislative power under Entry 23 of List II and the Orissa Act ceased to be in force. The Supreme Court speaking through Iyengar J. said:-

......to the extent to which the Union Government had taken under its control the regulation and development of minerals so much was withdrawn from the ambit of the State Legislature under Entry 23 and legislation of the State which had rested on the existence of power under that entry would to the extent of that control be superseded or be rendered ineffective for here we have a case not of mere repugnancy between the provisions of the two enactments but of a denudation or deprivation of State legislative power by the declaration which Parliament is empowered to make it and has made.....the Central Act covered the entire field of mineral development that being the extent to which Parliament had declared by law that it was expedient that the Union should assume control.......the terms of sec. 18(1) which laid a duty upon the Central Government to take all such steps as may be necessary for the conservation and development of minerals in India and for that purpose the Central Government may by notification make such rules as it deems fit. If the entire field of mineral development was taken over that would include the provision of amenities to workmen employed in the mines which was necessary in order to stimulate or maintain the working of mines............having regard to the terms of sec. 18(1) it appears clear to us that the intention of Parliament was to cover the entire field and thus to leave no scope for the argument that until rules were framed there was no inconsistency and no super session of the State Act.....If by reason of the declaration by Parliament the entire subject-matter of conservation and development of minerals has been taken over for being dealt with by Parliament thus depriving the State of the power which it therefore possessed it would follow that the matter in the State List is to the extent of the declaration subtracted from the scope and ambit of Entry 23 of the State List.

This decision was followed with approval by the Supreme Court in the subsequent case of Baijnath v. State of Bihar A.I.R. 1970 S.C. 1436. The question which arose in this case was whether the second proviso introduced by the Bihar Legislature in sec. 10 sub-sec. (2) of the Bihar Land Reforms Act 1950 was within the competence of the Bihar Legislature. The only entry in which the impugned proviso in its pith and substance could fall was Entry 23 of List II and it therefore became material to consider what was the effect of the declaration in sec. 2 and the enactment of the central Act on the scope and ambit of Entry 23 of List II. Hidayatullah C. J. speaking on behalf of the Supreme Court observed:-

Entry 54 of the Union List speaks both of Regulation of mines and minerals Development and Entry 23 is subject to Entry 54. It is open to Parliament to declare that it is expedient in the public interest that the control should rest in Central Government. To what extentsuch a declaration can go is for Parliament to determine and this must be commensurate with public interest. Once this declaration is made and the extent laid down the subject of legislation to the extent laid down becomes an exclusive subject for legislation by Parliament. Any legislation by the State after such declaration and trenching upon the field disclosed in the declaration must necessarily be unconstitutional because that field is abstracted from the legislative competence of the State Legislature.....The only dispute therefore can be to what extent the declaration by Parliament leaves any scope for legislation by the State Legislature. If the impugned legislation falls within the ambit of such scope it will be valid:- if outside it then it must be declared invalid.

It will therefore be seen that to the extent that control of regulation of mines and mineral development is taken over by the Union under a law made by Parliament declaring that it is expedient in the public interest to do so the scope and ambit of Entry 23 of List II is cut down. The filed disclosed in the declaration made by Parliament becomes an exclusive subject of legislation by Parliament and it is taken out from the ambit and coverage of Entry 23 of List II. Now the declaration contained in sec. 2 speaks of taking under the control of the Union the regulation of mines and the development of minerals to the extent provided in the Act itself We have thus not to look outside the Act to determine what is left within Entry 23 of List II but have to work it out from the terms of the Act. The provisions of the Act and particularly secs. 13 and 18 clearly show that the entire field of regulation of mines and mineral development is covered by the Act. If we may again quote the words of Iyengar J. in State of Orissa v. M. A. Tulloch and Co. (supra) the Act covers the entire field of mineral development that being the extent to which the Parliament had declared by law that it was expedient that the Union should assume control. Hidayatullah C. J. also said in Baijnath v. State of Bihar that the whole of the legislative field was covered by the Parliamentary declaration read with the provisions of the Act. There can therefore be no doubt that Entry 23 of List II was completely denuded of its content by reason of the declaration in sec. 2 and the enactment of the Central Act.

(8) The question then is whether the reservation of different areas of land for exploitation of bauxite in the public sector could be said to be relatable to exercise of executive power with respect to the matter mentioned in Entry 23 of List II. Article 162 provides that subject to the provisions of the Constitution the executive power of a State shall extend to the matters with respect to which the Legislature of the State has power to make laws. The State Government would therefore have executive power with respect to the matter mentioned in Entry 23 of List II. But since Entry 23 of List II is rendered empty of any content by reason of the declaration in sec. 2 and the enactment of the Central Act no executive power can be claimed by the State Government by reference to that Entry. It must therefore follow that if reservation of different areas of land for exploitation of bauxite in the public sector is a matter falling within Entry 23 of List II the State Government would have no executive power to make such reservation under Article 162. The question is does reservation of land for exploitation of minerals in the public sector answer the subject matter of Entry 23 of List II The test for determining this question would be:- what is the Entry which would be applicable if such a reservation were made by legislation. If the notifications dated 31st December 1963 and 26th February 1964 were legislation which is the Entry they would answer Obviously Entry 23 of List II. When it is said that an area of land shall be reserved for exploitation of bauxite in the public sector it means that a particular area of land shall be exploited for bauxite either by the State Government itself or by a statutory Corporation or authority owned or controlled by the State Government. That would fall fairly and squarely within the topic of Regulation of mines and mineral development. Such a legislation would in its pith and substance be relatable to Entry 23 of List II. The respondents relied on Entry 18 of List II which reads Land that is to say rights in or over land... but it is difficult to see how a legislation providing that 8 particular area of land shall be exploited only in a particular manner and no other can be regarded as a legislation with respect to rights in or over land. So also with regard to Entries 24 and 35 of List It and Entry 20 of List III it is difficult to appreciate how a legislation which directly and in so many terms makes provision in regard to exploitation of minerals in land can be said to be a legislation with respect to the matters set out in those entries. It must be remembered that entries in legislative lists are intended merely to indicate topics of legislation and it is possible that they may sometimes overlap. The test which is therefore to be applied for the purpose of determining whether a particular legislation falls within one of the other legislative entry is to examine the legislation as a whole and find out to which entry does the legislation in its pith and substance relate. If we apply this test in the present case it is clear that if reservation of different areas of land for exploitation of bauxite in the public sector had been made by legislation instead of the notifications dated 31st December 1963 and 26th February 1964 the legislation in its pith and substance would have fallen within Entry 23 of List II and not Entry 18 or 24 or 35 of List II of Entry 20 of List III. But as pointed out above Entry 23 of List II is completely overborne by Entry 54 of List I by reason of the declaration in sec. 2 and the enactment of the Central Act and such a legislation could therefore no longer be made by the State Legislature it could only be made by Parliament. It must therefore be held a fortiori that the executive power of the State Government under Article 162 did not extend to reservation of any area of land for exploitation of bauxite in the public sector.

(9) But that does not mean an end of this controversy. The question still remains whether the State Government had executive power to make reservation of land for exploitation of bauxite in the public sector under Article 298. This Article reads as follows:- 298. The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition holding and disposal of property and the making of contracts for any purpose:- Provided that:- (a) xxx xxx xxx xxx

(b) the said executive power of each State shall in so far as such trade or business or such purpose is not one with respect to which the State Legislature may make laws be subject to legislation by Parliament.

Article 162 merely provides an extensible limit and not a maximum limit of the executive power of the State Government. It does not define the limits of the executive power of the State Government but sets out matters to which such executive power shall extend. Article 298 enlarges the scope of the executive power of the State Government by adding various matters in respect of which the State Government may exercise its executive power. It includes within the executive power of the State Government the power to carry on any trade or business and acquire hold and dispose of property for any purpose. Some reliance was placed on behalf of the petitioners on the words for any purpose and it was sought to be argued that these words have a limitative effect:- they indicate that acquisition holding and disposal of property must be affected with some purpose in the sense that there must be an obligation in the nature of trust on the State Government in regard to the property in order to attract Article 298. The contention was that here in the present case the notifications dated 31st December 1963 and 26th February 1964 did not create any obligation on the State Government to use the land for exploiting bauxite in the public sector but merely amounted to intimation to the public that the land would be used for exploitation of bauxite in the public sector without there being legal obligation to do so and it could not therefore be said that the land was held by the State Government for a purpose so as to warrant invocation of Article 298. This contention is in our opinion wholly untenable. It seeks to place on the words for any purpose a meaning which they can never bear These words were introduced in Article 298 when it was amended by the Constitution (Seventh Amendment) Act 1956 and the object clearly was that the executive power of the State Government to acquire hold and dispose of property or make contracts should not be limited by the division of legislative powers between the Union and the States. Prior to the amendment the power of acquisition and disposition of property of the Union and the States was confined to the respective purposes of the two Governments. But the Parliament made it clear by amending Article 298 and adding the words for any purpose that the Union or the State Government may acquire hold and dispose of property and make contracts for any purpose irrespective whether it is a purpose of the Union or a purpose of the State. These words which are added to expand the width and amplitude of the executive power of the Union and the States cannot be construed as delimiting such executive power. The State Government has therefore now after the amendment undoubted executive power to carry on any trade or business and to acquire hold and dispose of property for any purpose. The question is whether reservation of land for exploitation of bauxite in the public sector is comprehended within the scope and ambit of this executive power.

(10) Now as we pointed out above when land is reserved for exploitation of bauxite in the public sector exploitation may be made either by the State Government or by a statutory Corporation or authority owned or controlled by the State Government. Where the State Government itself exploits bauxite it may do so either for selling it or for using it in an industry carried on by it. The former would amount to carrying on of trade or business and would be within the executive power of the State Government. The latter would also be a part of its business activity of running the industry. Any activity calculated to procure and maintain supply of raw material to the industry whether by purchase exploitation would be an integral part of the business of running the industry and the executive power of the State Government would clearly extend to it. It is also possible to look at the question from another standpoint. It is a well-settled principle that where power is conferred on an authority to do something it carries with it by necessary implication power to do everything which is necessary for effectual exercise of that power. The State Government would therefore have executive power to do all that is necessary for effectively disposing of the minerals vested in it either by sale or by use and that would include mining of such minerals. It must therefore be taken as settled that the State Government has executive power to exploit its own minerals. The State Government can also grant mining lease to a statutory Corporation or authority owned or controlled by it that is not only comprehended within the executive power to dispose of its property but is also authorized by the Act. Now when the State Government reserves any area of land for exploitation of bauxite in the public sector it intimates to the public its decision that bauxite belonging to it and lying underneath the particular area of land shall be exploited either by itself or by a statutory Corporation or authority owned or controlled by it. It is difficult to see how the taking of such decision can be said to be outside the executive power of the State Government when the purpose for the accomplishment of which the decision is taken is within such executive power. Why can the State Government not set apart an area of land for exploitation of bauxite in the public sector which is an activity within the executive power of the State Government It is a fundamental rule of law that everything necessary to the exercise of a power is included in the grant of the power. Where there is a main purpose expressed and authority given to effectuate that purpose things which are incidental to it and which may reasonably and properly be done for effectuating the main purpose may and ought prima facie to follow from the conferment of the authority. The executive power to exploit bauxite in the public sector would thus include the power to reserve or set apart any area of land for that purpose as that is incidental to the execution of the main power and is calculated to facilitate its exercise and effectuate it. It must therefore be held and in view of the above discussion it can hardly be disputed that the State Government has executive power to reserve any area of land for exploitation of bauxite in the public sector.

(11) There is also inherent evidence in the Mineral Concession Rules 1960 which strongly supports this conclusion. Rule 59 contemplates a case where the State Government has refused to grant a prospecting licence or a mining lease on the ground that the land should be reserved for any purpose and thus clearly recognises the executive power of the State Government to reserve land for any purpose. Prior to the amendment of Rule 59 by the notification dated 9th July 1963 the words used in the rule were land should be reserved for any purpose other than prospecting and mining minerals but by the amendment the words other than prospecting or mining minerals were omitted so that it is now sufficient to attract the applicability of the rule that the land is reserved for ally purpose which may include even reservation for mining minerals. The words land should be reserved for any purpose are highly significant and they clearly postulate that the State Government has executive power to reserve land for any purpose which would include exploitation of bauxite in the public sector. The respondents sought to explain away these words by suggesting that the reservation referred to in these words must be read to mean reservation under a rule framed by the Central Government under sec. 13 or sec. 18. But this suggestion is wholly untenable. There is no rule made by the Central Government under sec. 13 or sec. 18 reserving land for any purpose or empowering the State Government to do so and if there is no such rule it is difficult to imagine why the Central Government should have framed Rule 59 dealing specifically with the case where a prospecting licence or mining lease has been refused by the State Government on the ground that the land should be reserved for any purpose. There is also no reason why the Central Government should have found it necessary to amend Rule 59 by omitting the words other than prospecting or mining for minerals. If the contention urged on behalf of the petitioners were correct not only would the enactment of Rule 59 but also its amendment be rendered an exercise in futility on the part of the Central Government. Moreover there is nothing in Rule 59 to warrant the submission that the reservation contemplated there is a reservation under a statutory rule made by the Central Government. Rule 59 as it stands clearly recognises that the State Government has executive power to reserve land for any purpose and such purpose may include mining or exploitation of bauxite in the public sector.

(12) But since the source of this executive power of the State Government is Article 298 it is clear from proviso (b) to that Article that the exercise of this executive power would be subject to legislation by Parliament. We must therefore proceed to consider whether there is anything in the Act or the Rules which annihilates this executive power of the State Government or in any manner controls or regulates it. If there is any such provision it would prevail and the executive power of the State Government would have to give way. The petitioners contended that sec. 4(1) of the Act imposes a prohibition that no person shall undertake any prospecting or mining operations in any area and the only relaxation of this prohibition that prospecting or mining operations can be undertaken under and in accordance with the terms and conditions of a prospecting licence or mining lease granted under the Act or the Rules. This restriction applies equally to the State Government since by reason of the decision of the Supreme Court in State of West Bengal v. Corporation of Calcutta A.I.R. 1967 S C 997 the State is as much bound by a statute as the citizen and the State Government therefore not entitled to undertake any mining operations in any area unless it obtains a mining lease under the Act or the Rules But the State Government being the owner of the minerals cannot obtain a mining lease for mining such minerals and therefore the restriction on the State Government to under take mining operations is absolute and the State Government cannot escape from its rigour. The petitioners urged that the State Government therefore prohibited by sec. 4(1) from exploiting its minerals. The only way in which the State Government can exploit its minerals is by granting a mining lease to a third party. This contention plausible though it may seem is wholly fallacious because it is based on a misreading of sec. 4(1) and ignores the plain effect of sec. 5. It is no doubt true that having regard to the decision of the Supreme Court in State of West Bengal v. Corporation of Calcutta the rule of construction that the Crown is not bound by a statute unless it is expressly named or bound by necessary implication does not apply in interpretation of statutes in this country and the State is as much bound by a statute as any other citizen but it is recognised that the statute may expressly or by necessary implication except the State from its operation. Now there is admittedly no express provision in sec. 4(1) or any other provision of the Act which expressly excepts the State Government from the operation of sec. 4(1). But we have to see whether the State Government is excluded from the operation of sec. 4(1) by necessary implication from the provisions of the Act. The language of sec. 4(1) clearly suggests that the person there referred is a person other than the owner of the minerals. Sec. 4(1) prohibits a person from undertaking any mining operations unless he obtains a mining lease under the Act and the Rules. Now the owner of minerals cannot possibly obtain a mining lease and comply with this requirement of sec. 4(1). Sec. 4(1) would therefore apply only to a person who is not the owner of the minerals and who can therefore obtain a mining lease from the owner. It is a well-settled principle that if a statute provides that no person shall do a particular act except on a particular condition it is prima facie natural and reasonable (unless there is something in the context or in the manifest object of the statute or in the nature of the subject matter to exclude that construction) to understand the Legislature is intending such persons as by the use of proper means may be able to fulfill the condition and not those who though called persons in law have no capacity to do so at any time by any means or under any circumstances whatsoever. This principle was applied by the House of Lards in Pharmaceutical Society v. London and Provincial Supply Association 5 App. Cas. 857. The Act which was under discussion in that case provided that it shall be unlawful for any person to sell or keep open shop for retailing. dispensing or compounding poisons or to assume or use the title of chemist and druggist or chemist or druggist or pharmacist or dispensing chemist or druggist in any part of Great Britain unless such person shall be a pharmaceutical chemist or a chemist and druggist. The question arose whether the prohibition enacted in this section applied to a Corporation and the answer given by the House of Lords was that it did not. Lord Blackburn after referring to the words of the section pointed out; ... standing there it does seem to me though without laying down any technical rule that the plain meaning of the words is and they are used in this sense-such a person as could become a pharmaceutical chemist. A Corporation could not an individual can. It seems to me therefore that the Act plainly says in the 1st section. It shall be unlawful to sell or keep open shop or assume the name of a chemist or druggist for any person that is to say natural person that is to say any natural person unless he becomes a pharmaceutical chemist. The same principle was also applied by the Court of Kings Bench Division in Law Society v. United Service Bureau Ltd. (1934) I K. B. 343. Sec. 46 of the Solicitors Act 1932 which came up for construction in that case provided any person not having in force a practicing certificate who willfully pretends to be....qualified to act as a solicitor shall be liable to penalty. The question was whether a limited Company which willfully pretends to be qualified or recognised by law as qualified to act as solicitors was within the terms of the prohibition so as to be liable to penalty under sec. 46. The Court observed that on a proper construction of its language sec. 46 applied only to those persons who could have a practicing certificate as a solicitor and since a corporate body was incapable of being admitted as a solicitor it could not have a practicing certificate and therefore it would not come within the words any person in sec. 46. These two decisions clearly support the line of reasoning which has appealed to us and following these two decisions we would be justified in holding that since a person who is the owner of minerals cannot obtain a mining lease for carrying on mining operations to win his own minerals he cannot be brought within the words no person in sec. 4(1). We find that the same view has also been taken by a Division Bench of this court consisting of N. K. Vakil J. and myself in Jilubha v. A. J. Thakkar (1967) VIII G.L.R. 705 where it has been held that sec. 4(1) can have no application where the owner of the minerals wants to carry in mining operations himself for the purpose of winning his own minerals. It is therefore obvious that where the State Government is the owner of the minerals it is not precluded by sec. 4(1) from undertaking any prospecting or mining operations.

(13) The same conclusion would also follow on a consideration of the provisions of sec. 5. That section provides inter alia in sub-sec. (1) that no mining lease shall be granted by a State Government to any person unless he holds a certificate of approval in the prescribed form from the State Government and produces from the Income-tax Officer concerned an income-tax clearance certificate in the prescribed form and sub-sec. (2) says that except with the previous approval of the Central Governments no prospecting licence or mining lease shall be granted to any person who is not an Indian national. Now these conditions set out in sub-secs. (1) and (2) of sec 5 cannot be fulfilled by the State Government. The State Government cannot be expected to obtain a certificate of approval in the prescribed form nor can it produce from the Income-tax Officer concerned an income-tax clearance certificate in the prescribed form. It cannot also be an Indian National. These conditions would clearly be inapplicable to the State Government and it would be impossible for the State Government to obtain mining lease even in respect of minerals vested in another person. Now the Parliament could not possibly have intended to impose a restriction on the State Government that the State Government should not undertake any mining operations unless it obtains a mining lease which obviously it cannot do because it cannot satisfy the conditions enumerated in sub-secs. (1) and (2) of sec. 5. The words no person in sec. 4(1) must therefore be held to be inapplicable to the State Government and it must be concluded that the State Government is outside the scope of the restriction enacted in sec. 4(1).

(14) It is therefore clear from the above discussion that sec. 4(1) does not in any manner detract from the executive power of the State Government to reserve any land for exploitation of bauxite in the public sector. The only restriction brought in by sec. 4(1) is that if the State Government wants bauxite to be exploited by a statutory Corporation or authority owned or controlled by it would have to grant a mining lease to such statutory Corporation or authority in accordance with the provisions of the Act and the Rules. Sec. 4(1) apart no other provision of the Act or the Rules was relied upon on behalf of the petitioners as taking away the executive power of the State Government to reserve any land for exploitation of bauxite in the public sector. The conclusion must therefore inevitably follow that the State Government had executive power to reserve diverse areas of land for exploitation of bauxite in the public sector and this executive power could be exercised by the State Government subject to the provisions of the Act and the Rules.

(15) Now if the reservation of land for exploitation of bauxite in the public sector was within the authority of the State Government as we hold it to be the application of the petitioners for mining lease was premature by reason of Rule 60 since admittedly no notification in respect of such land was issued by the State Government under Rule 59. Rules 59 and 60 being statutory rules made by the Central Government under sec. 13 the State Government was bound to give effect to those rules and the State Government had therefore no choice but to reject the application of the petitioners as premature. The Central Government exercising revisional power under sec. 30 read with Rules 54 and 55 was also bound by Rules 59 and 60 which had the force of law and the Central Government was therefore right in confirming the order of the State Government rejecting the application of the petitioners. We may observe that the Central Government in fact could not have acted otherwise than it did since it is clear on a combined reading of Rules 59 and 60 that once land is reserved by the State Government for any purpose the application for mining lease in respect of such land would be premature and it cannot be entertained This of course does not mean that the Central Government is powerless to override the reservation made by the State Government. The Central Government can always make Rules under sub-secs. (1) and (2) of sec. 18 and such rules having binding force on the State Government by virtue of sec. 18 sub-sec. (3) they can set at naught any reservation made by the State Government.

(16) The same conclusion must follow even if we take the view that the application of the petitioners was not premature. It is clear on a reading of sec. 10 sub-sec. (3) that the State Government is not under any obligation to grant an application for mining lease even if there is only one applicant. The State Government is given the discretion to grant or refuse to grant mining lease applied for by the applicant. The discretion is not an unrestricted or uncanalised discretion. There are fetters upon it. In the first place the discretion has to be exercised having regard to the provisions of the Act and the Rules. The rules do not lay down any guidelines for exercise of the discretion but some guidelines are to be found in sec. 11. It is not necessary to refer in detail to the provisions of sec. 11. Sec. 11 lays down certain principles for determining who should have a preferential right when there is a contest between two or more applicants. These principles would obviously have application only when the State Government decides to grant the application of one person and refuse the applications of the others. They do not provide any standard or guidance for determining as to when the State Government may altogether refuse to grant the application of any person. There being no obligation on the State Government under the Act or the Rules to grant mining lease to any person the State Government may in exercise of its discretion refuse the application of a sole applicant or where there are more than one applicants the applications of all of them. The question is:- what principle or policy should guide the discretion of the State Government in this behalf Is it an unfettered and unrestricted discretion The answer is plainly no. It must now be taken as well settled that when discretion is conferred on an authority to do an act such discretion must not be held to be arbitrary or capricious unless of course the words used by the Legislature are such as to show that it was intended to be unrestricted and untrammeled and it must be held to be limited by the purposes of the statute. The discretion conferred by the Legislature can be exercised only for the purposes of achieving the object for which the discretion is conferred. This principle is now so well settled that no authority is necessary in support of it but we may quote an illuminating passage from the judgment of Rand J. in Boncarnelli v. Duplessis (1959) S.C.R. (Can.L.R.) 121 where dealing with the discretionary power of the Quebec Liquor Commission to cancel a liquor licence the learned Judge observed:-

A decision to deny or cancel such a privilege lies within the discretion of the Commission; but that means that decision is to be based upon a weighing o f considerations pertinent to the object of the administration....In public regulation of this sort there is no such thing as absolute and untrammeled discretion that is that action can be taken on any ground or for any reason that can be suggested to the mind of administrator; no legislative Act can without express language be taken to contemplate an unlimited arbitrary power exercisable for any purposes however capricious or irrelevant regardless of the nature or purpose of the statute. Fraud and corruption in the Commission may not be mentioned in such statutes but they are always implied as exceptions. Discharging public duty; there is always a perspective within which a statute is intended to operate; and any clear departure from its lines or objects is just as objectionable as fraud or corruption. Could an applicant be refused a permit because he had been born in another province or because of the colour of his hair The ordinary language of the Legislature cannot be so distorted. In particular we would like to emphasize the observation that there is always a perspective within which a statute is intended to operate.

This passage was quoted with approval by the Supreme Court in Rohtas Industries Ltd. v. S. D. Agarwal A.I.R. 1969 S.C. 707. The discretion to refuse an application for mining lease can therefore be exercised only on proper and relevant grounds which have relation to the purposes of the Act. If for example the application of an applicant is refused by the State Government on the ground that the colour of his skin is black it would be a wholly irrelevant consideration and the refusal would be clearly vitiated. The question would therefore always be whether the ground on which the application is refused is a proper and relevant ground. Now the ground on which the application of the petitioner was refused in the present case was that the State Government had reserved the land for exploitation of bauxite in the public sector. This ground cannot possibly be said to be improper or irrelevant or in any way unrelated to the object of the legislation. While considering the relevance or validity of this ground we cannot overlook the fact that it is one of the Directive Principles of State policy enshrined in Article 39 of the Constitution that the ownership and control of the material resources of the community should be so distributed as best to sub serve the common good and that the operation of the economic system should not result in concentration of wealth and means of production to the common detriment. Mineral resources constitute the most generous bounty of nature and they belong to the people for being used for the common good of the community. If in these circumstances the State Government decides that exploitation of mineral resources should not be handed over to persons who do not actually use the mineral resources but sell them at a profit to the actual users and instead the State itself which represents the people should exploit the mineral resources either by itself or through a statutory Corporation or authority owned or controlled by it would be merely carrying out an important Directive Principle of State Policy. We find that as a matter of fact in several other spheres of activity the State Government has been eliminating middlemen with a view to preventing exploitation by intermediaries and making available the resources of the community to those who need them without the intervention of such intermediaries. The reservation of land for exploitation of mineral resources in the public sector cannot therefore be said to be an improper or irrelevant ground for refusing to grant mining lease to dealers such as the petitioners. We are therefore of the view that the State Government and the Central Government were right in rejecting the applications of the petitioners.

(17) The petitions therefore fail and the Rule issued in each petition will stand discharged with costs. Mr. Modi learned advocate appearing on behalf of the petitioners in all the petitions applies for leave to appeal to the Supreme Court under Articles 132(1) and 133(1)(c) of the Constitution. It is apparent from the above discussion that these petitions involve a substantial question of law relating to the interpretation of the Constitution and the case in each of the petitions is also a fit one for appeal to the Supreme Court. We therefore grant leave to the petitioners to appeal to the Supreme Court under Articles 132 (1) and 133(1)(c). Mr. Modi applies for an interim injunction against the respondents. It is not necessary to grant any such interim injunction since it is stated on behalf of the State Government that the State Government will keep in tact the areas of land in respect of which the applications for mining lease were made by the petitioner upto 1st August 1972.