Smt. Rathnamma vs A. Krishnappa and Others

This writ petition seeks a mandamus directing respondents 2 and 3 to renew the quarry lease earlier held by the petitioner, and for a certiorari quashing order dated 4th October, 1990 passed by the 4th respondent, Tribunal in Revision Petition Nos. 229 of 1989 and 117 of 1990.

A quarrying lease in respect of 1 acre of land in Sy. No. 27 of Malasandra Village, Bangalore South Taluk, granted in favour of the petitioner, for a period of 5 years, was prematurely terminated by the Deputy Director of Mines and Geology, by his order dated 16th of August, 1988. The petitioner questioned the said order before the Director in a revision which was allowed and the termination set-aside by his order dated 6th November, 1989.

The Director''s order notwithstanding, a lease for the area in question was granted in favour of the first respondent on 14th June, 1990, who in turn preferred Revision Petition No. 229 of 1989 before the Karnataka Appellate Tribunal against the revisional order passed by the Director inter alia on the ground that the Revision Petition filed by the petitioner was beyond time. In the meanwhile, the lease period of the petitioner''s lease having expired, the petitioner made an application for its renewal on 23rd August, 1989. This application was in terms of an interim order passed by the Tribunal, directed to be considered after giving an opportunity of being heard to the petitioner as also the 1st respondent. Consequently, the Deputy Director heard the petitioner and the 1st respondent on 21st of May, 1990 and 23rd of May, 1990, but eventually rejected the prayer for renewal by his order dated 28th May, 1990. While, doing so, the Deputy Director held that the petitioner had not submitted the prescribed returns and that the lease had been sublet and was being operated by one Nandulal. Aggrieved, the petitioner filed Revision Petition No. 117 of 1990 before the Tribunal in terms of Rule 61(1)(b) of the Karnataka Minor Mineral Concession Rules, 1969. The Tribunal has by its common order dated 4th October, 1990 disposed of both the revision petitions. Insofar as Revision Petition No. 229 of 1989 is concerned, the Tribunal has allowed the same holding that it was unnecessary for the Deputy Director to have issued a notice to the petitioner before terminating her lease. Order dated 6th November, 1989 passed by the Director setting aside the termination has thus been reversed and the termination of the lease upheld. As regards Revision Petition No. 117 of 1990, filed by the petitioner, the Tribunal has dismissed the same on the ground that the order refusing the renewal was fully justified in the context of the reasons given by the Deputy Director. Aggrieved, the petitioner has filed the present writ petition assailing the order passed by the Tribunal as also for a mandamus directing the respondents to renew the lease in her favour.

Mr. Achar, learned Counsel appearing for the petitioner argued that the view taken by the Tribunal, that a notice and an opportunity of being heard to the petitioner was unnecessary before her subsisting lease could be terminated on the ground of default in the payment of lease money was wholly unsustainable. He urged that the termination of a subsisting lease on the ground of an alleged default committed by the lease-holder could be sustained only if the same was preceded by a notice and an opportunity to the lease-holder to show-cause as to why the lease be not terminated. Principles of natural justice, contended, Mr. Achar, were applicable in all such situations particularly in cases where the authority concerned was acting under the provisions of a Statute and the order passed by it, was bound to adversely affect the persons against whom the same was being issued. Reliance in this regard was placed by Mr. Achar, upon Rule 20(xix) of the K.M.M.C. Rules, 1969, according to which the Competent Authority was bound to issue a notice in writing to the lessee asking him to remedy the breach alleged against him within the time prescribed for the purpose. The Competent Authority, it was urged, could determine the lease under the said provision only in case the breach alleged against the lessee was not remedied within the time granted. Inasmuch as there was neither a notice nor an opportunity to the petitioner to remedy the breach or otherwise show-cause against the proposed termination of the lease in her favour, the order of termination passed was unjustified and unsustainable. There is considerable merit in this submission. One of the conditions statutorily prescribed for a quarrying lease, is that the lessee shall pay royalty on the minor mineral despatched, from the leased area at the rates specified in the schedule. In terms of sub-rule (xix) of Rule 20 in the case of a breach by the lessee, his transferee or assignee, of any of the conditions specified including clause (i) relating to payment of royalty by the lessee, the Competent Authority is required to give a notice in writing to the lessee asking him to remedy the breach, within a period of 30 days from the date of the notice. It is only if the breach is not remedied within the said period that the Competent Authority may determine the lease, any such determination being itself subject to the confirmation by the controlling Officer. From a combined reading of Rule 20(1) and (xix), it is apparent that the termination of a subsisting lease on account of a breach on the part of the lessee of any one of the conditions specified in Rule 20(xix) is according to the conditions prescribed permissible only after the Competent Authority has issued to the lessee a written notice asking him to remedy the breach. No such notice was admittedly issued to the petitioner at any stage either calling upon the petitioner to remedy the breach or to show-cause why lease be not terminated on account of her failure to make the payment of the royalty amount. Even independent of the provisions contained in Rule 20, a notice of show-cause and an opportunity of being heard against the proposed termination of a subsisting lease would be necessary to satisfy the minimal requirements of the principles of natural justice. Termination of a subsisting lease is a serious consequence, adversely affecting the lessee. Any such order regardless of the ground on which the same proceeds could therefore be made only after putting the petitioner lessee on notice and granting to her an opportunity to explain her position and oppose the same. The Deputy Director had admittedly done nothing of this kind. The order of termination was at no stage preceded by any hearing to the petitioner which clearly rendered it invalid in the eye of law. The Tribunal was clearly in error in holding otherwise. The only reason given by the Tribunal in support of its conclusion is that there was no necessity of reminding the petitioner to deposit the amount due from her and since the deposit was not made as per the terms of the lease, the Department had every right to determine the same. The Tribunal obviously failed to appreciate that the question was not one of reminding the petitioner to make the deposit, the question was of giving to the petitioner an opportunity of ''being heard'' against an action which was bound to adversely affect her. Whether or not the petitioner had any valid explanation for the default allegedly committed by her, was besides the point for it is well-settled, that the principles of natural justice know of no exclusionary rules and the requirement of a notice cannot be dispensed with merely because in the opinion of the authority passing the order, the person concerned can possibly, furnish no explanation or that the nature of the order would remain the same even after any such explanation is furnished. Suffice it to say that the termination of the petitioner''s lease was legally bad and had been rightly set aside by the Director. The Tribunal committed an obvious error in reversing that view.

That however is not the end of the matter. The next question is as to whether the petitioner is entitled to a renewal in her favour for admittedly the lease period has expired long time back. The renewal was upon consideration declined by the Director of Mines and Geology after hearing the parties on the ground that the petitioner had not submitted her statutory returns during the period 1984-1986 and that one Shri Nandulal to whom the lease was sublet was actually operating the same. The Director was also of the view that the petitioner had been irregular in making the payment of the ''Royalty'' amount all going to show that she was not serious in retaining the lease for herself.

Learned Counsel appearing for respondent 1 supported the order passed by the Director, refusing renewal to the petitioner also on the ground that the application for renewal was belated having been filed less than 90 days before the expiry of the lease which according to the learned Counsel could be summarily rejected and ought to have been so rejected by the Director. There is however no merit in this submission. The Director has while noticing a similar argument advanced before him rightly held that the period prescribed by Rule 16(2) for the making of such an application was only a directory provision. Reliance was in this regard placed by him upon the judgments of the Supreme Court in K. Narasimhaiah v H.C. Singri Gowda, AIR 1966 SC 330, Krishna Kumar Mediratta v Phulchand Agarwala and Others, AIR 1977 SC 984, besides a judgment of the High Court of Madhya Pradesh in Dr. H.N. Bhargava v University of Sagar and Another, AIR 1974 MP 40. The rules do not admittedly provide for the consequence of the failure of the lessee to make an application for renewal, 90 days before the expiry of the lease period which is a very strong circumstance to show that the requirement of the rule is only directory in nature. The Director was therefore justified in overlooking the delay of a few days in the making of the application particularly so when the lease had been determined by the Deputy Director and the revision petition preferred by the petitioner against the said order was pending before the Revisional Authority. The application was, it is noteworthy, made much before the date on which the revision petition filed by the petitioner was allowed by the Director.

On behalf of the petitioner, it was urged that the order passed by the Director refusing renewal was legally unsustainable. The Director, argued Mr. Achar, was under an obligation not only to hear the petitioner in support of her application for renewal but also disclosed to her the material on the basis whereof he eventually decided to refuse the renewal. A hearing, contended, Mr. Achar, was unnecessary in cases where an application for grant of a lease was made for the first time but was essential in cases where the application made was for the renewal of a subsisting lease. In the latter class of cases, argued Mr. Achar, the obligation extended not only to a hearing to be provided to the lessee but also to the disclosure to the applicant the adverse material on which the authority proposed to decline the request for renewal. Disclosure of the material utilised for any such refusal alone could, according to Mr. Achar, making a hearing meaningful. Reliance was in this regard placed by Mr. Achar, upon the decisions of the Supreme Court in M/s. Chingleput Bottlers v M/s. Majestic Bottling Company, AIR 1984 SC 1030, Shivji Nathubhai v Union of India and Others, AIR 1960 SC 606 and Dr. Sarojini Pradhan v Union of India and Another, AIR 1988 Ori. 96.

Renewal of the leases is regulated by Rule 16 of the K.M.M.C. Rules, 1969, as it existed at the relevant point of time. A plain reading of the rule shows that the same does not recognise any vested right of renewal in the lessee. All that the rule provides is that a lease may be renewed for one or more periods, each renewal not exceeding the duration of the original lease. It is at best an enabling provision without creating any enforceable obligation for the Competent Authority to necessarily exercise the power in any particular fashion. That however is not conclusive of the matter. What is important is that even in the absence of any statutory recognition of the right to secure a renewal, the lessee is entitled to legitimately expect that all other things remaining unaltered, there is no reason why the renewal applied for should not be granted. The doctrine of ''Legitimate Expectation'' rests on the principle that even when the citizen has no right stricto sensu, he may still have a basis and a justification which may entitle him to claim relief in an appropriate action. Whether or not there is any such basis or justification for the expectation to legitimately arise would vary from case to case but once it is found that the expectation was legitimate it gives rise to two distinct legal consequences. Firstly, the claim based on any such expectation cannot be denied without affording to him an opportunity of being heard in the matter. Stated differently, the principles of natural justice are attracted to the process of determination of any right based on any such expectation. Secondly, the authority dealing with the question ought not to defeat the legitimate expectation without some overriding reason of public policy to justify its doing so. This obligation flows from the duty cast upon the Public authority to act fairly by taking into consideration all relevant factors relating to any such legitimate expectation. See Navjyoti Co-operative Group Housing Society Limited v Union of India and Others, AIR 1993 SC 155, Food Corporation of India v M/s. Kamadhenu Cattle Feed Industries, AIR 1993 SC 1601 and State of Kerala and Others v K.G. Madhavan Pillai and Others, AIR 1989 SC 49.

Commenting upon the necessity and scope of fair hearing in all situations relating to licensing and commercial regulation, Wade has, in his Administrative Law, V Edition, made the following significant observation.-

"Since Ridge v Baldwin the situation has been transformed; and in particular the Courts have shown a strong disposition to bring licensing functions generally within their doctrine that the administrative powers must be exercised fairly. The wide statement by Lord Denning M.R. as to the duty to give fair hearings by a local authority licensing taxi-cabs has been quoted above; it is especially notable since it extends to decisions of licensing policy which affect whole classes of licence holders, and not merely to individual cases. Nor is the principle in any way confined to cases of cancellation or suspension on grounds of misconduct, where the claims of natural justice are obviously strongest. It is recognised that licensing is a drastic power, greatly affecting the rights and liberties of citizens, and that this alone demands fair administrative procedure.

It seems, furthermore, that no distinction is drawn between initial applications for the grant of licences and the revocation, suspension or non-renewal of licences already granted. Clearly natural justice is demanded in the latter case; but the Courts extend it to the former case equally, since the affected citizen is no less entitled to have his arguments heard.

Where a licence is due for renewal, the case is still stronger, and may be reinforced by ''reasonable expectation'', as already mentioned. It has been held in Canada that a new condition ought not to be attached to the renewed licence without first offering the holder an opportunity to make representations about it".

(emphasis supplied)

In M/s. Chingleput Bottlers case, supra, the Supreme Court referred to with approval that the distinction made byMegarry V.C. in Mc Innes v Onslow Fane, (1978)3 All ER 211, between cases of initial applications for grant of licence and the revocation, suspension or refusal to renew licenses already granted. Three categories of cases were in this connection identified viz., cases where applications for the grant of licences were being made for the first time, in which the applicant had neither a right to such a grant nor a reasonable expectation that the same would be made in his favour. The second category was of case where licence already granted was cancelled or forfeited, in which class of cases, the licensee would be entitled to a hearing since the forfeiture of the right to carry on business under the licence was in its very nature an adverse consequence that could not be permitted in law except after giving to him an opportunity of being heard in the matter. The third category of cases, which was recognised were cases where an application for renewal of licence was made. In this class of cases, the licensee applying for the renewal was held to have a reasonable expectation of a renewal on the ground that having previously held such a licence, it was entitled to reasonably expect that the said benefit would continue or at least to know the reasons for which he would be disentitled to the same. The relevant passage from the decision may, at this stage, be extracted.

"The learned Vice-Chancellor went on to say that there was a substantial distinction between forfeiture cases and application cases. In forfeiture cases, there is a threat to take something away for some reason. In such cases, the right to an unbiased Tribunal, the right to notice of the charges and the right to be heard in answer to the charges which were the three features of natural justice are plainly apt. In application cases, on the other hand, nothing is being taken away, and in all normal circumstances there are no charges, and so no requirement of an opportunity of being heard in answer to the charges. Indeed, there is the far wider and less defined question of the general suitability of the applicant for membership or a licence. The distinction is well recognised for in general it is clear that the Courts will require natural justice to be observed for expulsion from a social club, but not on an application for admission to it. The intermediate category i.e., of the expectation cases, may at least in some respects be regarded as being akin to forfeiture cases than application cases; for although in form there is no forfeiture but merely an attempt at acquisition that fails, the legitimate expectation of a renewal of the licence or confirmation of the membership is one which raises the question of what it is that has happened to make the applicant unsuitable for the membership or licence for which he was previously thought suitable''''.

In Brajlal Manilal and Company v Union of India and Another, AIR 1964 SC 1643, the State Government had rejected an application for the renewal of a certificate of approval granted to the petitioner. An application made to the Central Government for review of the said order was also rejected and so was a writ petition filed against the same before the High Court. In a further appeal before the Supreme Court, it was held that the Central Government while disposing of the application under Rule 57, exercised quasi-judicial authority and an order that was passed taking into consideration an adverse report of the State Government was violative of the principles of natural justice. The report was not disclosed to the petitioner nor an opportunity of presenting its case afforded to it. The Court held that the Government could not act on the basis of material as regards, which the appellant had no opportunity to make its representation and in that regard it made little difference whether the order rejecting the application was for a review of an order already passed or an order adverse to the petitioner passed for the first time.

In Dr. Sarojini Pradhan''s case, supra, a Division Bench of the High Court of Orissa held that even though Section 5(2) of the Mines and Minerals (Regulation and Development) Act did not embody any provision for the grant of an opportunity to the applicant, yet having regard to the nature of the exercise and the consequences that would ensue it was incumbent to give an opportunity of being heard to the applicant particularly when the State Government was inclined to grant a lease. Principles of natural justice, it was observed, apply to such situations and oblige the authority competent to disclose reasons so as to enable the Court to examine whether or not the same were germane.

A conspectus of the above case law shows that cases where an application for renewal of a lease, earlier held by the petitioner is filed, the lessee has a reasonable expectation, that the renewal applied for shall be granted, except in situations where overriding public interest may warrant the rejection of any such request. Such an expectation is reasonable because the lessee is entitled to presume that all other factors remaining the same, there is no reason why he should be disentitled to a renewal. It would in any such case require strong and cogent reasons before a request for renewal can be declined. Cases of renewal are in that view closer to forfeiture cases where the application of the principles of natural justice before any such forfeiture can be ordered is beyond dispute. Suffice it to say that in cases of legitimate expectation like the present not only are the principles of natural justice attracted but there is a duty upon the authority concerned to act fairly. Fair play in action is one of the facets of the guarantee contained in Article 14 for whatever is unfair either in form or content must be held to be discriminatory hence offensive to Article 14.

When viewed in the context of the above, the refusal order passed by the Director cannot be sustained. This is so because the refusal is based almost entirely upon a report said to have been received from the Senior Geologist of Mines and Geology, Bangalore, according to which the petitioner had not submitted her statutory returns during the period 1984 to 1986 and had sublet the lease area to one Sri Nandulal. It is not in dispute that the report of the Senior Geologist was at no stage disclosed to the petitioner nor was she given any opportunity to dispute the correctness of the contents thereof. Reliance upon any such report, therefore was clearly in violation of the principles of natural justice and did not ensure fair play in action to the petitioner. That being so, the order passed by the Director and so also the one passed by the Tribunal upholding the same are liable to be quashed on that ground alone.

In the result, this writ petition succeeds and is hereby allowed. Order dated 4th of October, 1990, passed by the Tribunal and that passed by the Director, Mines and Geology dated 25/28th of May, 1990, are hereby quashed. The Director is directed to pass fresh orders on the application made by the petitioner for a renewal of the lease in her favour after giving to her an opportunity of being heard and filing objections against the report of the Senior Geologist. The petitioner shall also be at liberty to explain, the alleged failure on her part in paying the royalty amount, which has also been used as one of the grounds for refusal of the renewal applied for by her. The Director shall pass appropriate orders on the subject within as far as possible 6 months from today. Till any such orders are passed, the parties shall maintain status quo in respect of the lease area in question. In the circumstances, however, there shall be no orders as to costs.