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Case Number

Writ Petn. Nos. 16710 of 2002 and 17665 of 2003

Attorney(S)

Mrs. N. Shoba
for M. V. Vijaya Chandra Reddy
and M. Ravindranath Reddy
Addl. Advocate General

Judges

Devinder Gupta, C.J
G. Rohini, J.

Acts

sub-section (1) of Section 15 of the Mines and Minerals (Development and Regulation) Act, 1957, the Government of Andhra Pradesh made A.P. Minor Mineral Concession Rules, 1966
Rules 9-B to 9-X of A.P. Minor Mineral Concession Rules, 1966 (for short "the Rules"). Rule 9-W of the Rules in Pari materia to Rule 20 (e) of the A.P. Panchayat (Auctions
Amendment Act, 1999 (Act No. 38 of 1999) thereby inserting Section 23-C in the Principal Act
Rule 12 (5) (e) and Rule 12 (5) (f) (l) and (II) of A.P. Minor Mineral Concession Rules, 1966
A.P. Minor Mineral Concession Rules, 1966 thereby substituting Rule 9-B to 9-X
Section 3 (e) of the Mines and Minerals (Development and Regulation) Act, 1957.
Andhra Pradesh Mineral Dealers Rules 2000. Under sub-Rule (2) of Rule 3,
Rules 8-D and 19-B of Tamil Nadu Minor Mineral Concession Rules, 1959,
A.P. Panchayat Raj Act, 1994. Sub-rule (e) of Rule 20 of the said Rules
sub-clauses (a) to (g) of sub-section (2) of Section 23-C. 26.
Section 23-C by framing A.P. Mineral Dealers Rules, 2000,
Regulation) Act, 1957 (hereinafter referred to as "the Act")
Principal Act and inserted Section 23-C therein act
sub-sections (1) and (2). 24. Sub-section (1) of Section 15
Rule 9-W of A.P. Minor Mineral Concession Rules, 1966
Clause (O) of sub-section (1A) of Section 15
Rule 9-W of the Rules and Clause 8(III)
Rule 9-W of the Rules and Clause 8
Section 30, the Central Government
Rules. Sub-Rule 9-W of the Rules
A.P. Mineral Dealers Rules 2000
Sub-section (1-A) of Section 15
Rule 9-B of the said Rules
Rule 20 (e) of A.P. Panchayat
Gram Panchayat) Rules, 2000
G-1. Rule 9-W of the Rules,
Clause (2) of Section 23-C
Section 23-C in the Act,
Rule 20 (e) of the Rules
Rule 9-W of the Rules
Rule 9-A of the Rules
Gram Panchayat) Rules,
Section 23-C, rules
Rule 9-B. Rule 9-W
Rule 9-B to 9-X
Rules. Rule 6
Section 23-C
Rule 9-H (2)
Rule 20 (e),
Rule 8-D
Rule 9-W,
Rule 9-B.

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Smart Summary

Summary of Judgment — Andhra Pradesh High Court (Devinder Gupta, C.J.)

Factual and Procedural Background

These two writ petitions were heard together challenging the validity of Rule 9-W of the A.P. Minor Mineral Concession Rules, 1966 (as substituted by G.O. Ms. No. 1 dated 1-1-2001) and corresponding lease-condition Clause 8(III) that prohibits movement of sand across State borders.

W.P. No. 16710 of 2002 (Sri C. Narayana Reddy): originally challenged Rule 20(e) of the A.P. Panchayat Raj (Auction of Sand in the Water Courses vesting in Gram Panchayat) Rules, 2000 and Clause 8(III) of a lease agreement. While that petition was pending the Panchayat Raj Rules were held ultra vires in other writ petitions; subsequently the State amended the A.P. Minor Mineral Concession Rules, 1966 (substituting Rules 9-B to 9-X) and Rule 9-W (prohibiting transport of sand outside the State) was introduced. The petitioner amended his challenge to attack Rule 9-W and Clause 8(III).

W.P. No. 17665 of 2003 (Sri Y. Ramachandrarao / Sri G. Anantha Ramu): a similar challenge to Rule 9-W and Clause 8(III) was brought by the lessee who alleged that the restriction prevented him from transporting sand to neighbouring States and sought extension of lease for the unexpired period.

Relevant procedural facts include: both petitioners acquired leases by participating in tender-cum-auctions, paid bid amounts and executed lease deeds (Form G-1); at least one petitioner alleged inability to lift sand due to an interim stay in another writ proceeding; a show-cause notice and later termination order were issued in respect of one petitioner for alleged over-excavation and mining within 50 metres of bore wells; both petitions challenged the legality of Rule 9-W and the lease clause prohibiting inter-state transport.

Legal Issues Presented

Whether Rule 9-W of the A.P. Minor Mineral Concession Rules, 1966 (prohibiting movement of sand across State borders) is valid, intra vires the Mines and Minerals (Development and Regulation) Act, 1957 (the "Act"), and within the rule-making power of the State Government.
Whether Condition 8(III) of the lease agreement, incorporating the prohibition on inter-state movement of sand, is invalid and ultra vires the Act.
Whether petitioners who executed the lease deeds are estopped from challenging the legality of the clause forbidding transport outside the State.
Whether petitioners are entitled to extension of the lease to make up lost operating time (on grounds including interim stays or lawful prevention by the State), particularly in the light of Beg Raj Singh v. State of U.P.

Arguments of the Parties

Petitioners' Arguments

Rule 9-W is beyond the legislative competence of the State because Section 15 of the Act (the source of State rule-making power regarding minor minerals) does not empower the State to regulate movement of excavated minor minerals; once excavated and royalty paid the lessee becomes owner and the State cannot restrict movement or sale.
Reliance on the Supreme Court decision in State of Tamil Nadu v. M.P.P. Kavery Chetty (AIR 1995 SC 858) and the Division Bench decision in M/s. Ranjana Granites (1996) to argue that post-extraction control by the State is impermissible.
In one petition, an argument was also raised that Rule 9-W violated constitutional rights under Chapter III of the Constitution (the petition mentions a challenge under "Chapter XIII" but the text records the contention as alleging violation of constitutional rights).
Where a lessee was prevented from operating the full lease period (for example, due to interim stays), reliance was placed on Beg Raj Singh to seek extension of lease to make up lost operating time.

Respondents' / State's Arguments

The State defended the validity of Rule 9-W and Clause 8(III), relying on Section 23-C of the Act (inserted by Act No. 38 of 1999) which expressly empowers State Governments to make rules to prevent illegal mining, transportation and storage of minerals, and enumerates matters including regulation of minerals being transported from areas granted under mining/quarry licences.
The Additional Advocate General argued that even if the G.O. refers to Section 15 the impugned rule need not be struck down so long as a valid source of rule-making power (Section 23-C) exists; reliance was placed on earlier Supreme Court authorities (including State of Sikkim v. Dorjee Tshering Butia and Pine Chemicals Ltd. v. Assessing Authority) for the principle that the validity of subordinate action is determined by the true source of power.
The State also contended the petitioners are estopped from challenging the lease conditions after voluntarily executing the lease and taking benefit for one year under the same conditions; the lease-holder is bound by the terms of the lease deed.
With respect to the extension request, the State relied on facts showing the lease had been lawfully terminated because of the petitioner's alleged over-extraction and proximity to drinking-water bore wells, and therefore any extension analogous to Beg Raj Singh was not warranted because the deprivation (termination) was not wrongful.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
State of Tamil Nadu v. M.P.P. Kavery Chetty, AIR 1995 SC 858	Held that the State Government has no power under the Act to exercise control over minor minerals after they have been excavated; rule-making power restricted by Section 15 and does not cover regulation of sale/price of excavated minerals.	The Court acknowledged the decision as establishing that rule-making under Section 15 could not reach post-extraction control. The Court observed Parliament later inserted Section 23-C (Act 38 of 1999) after that decision, and consequently treated the Kavery Chetty ratio as subject to the effect of the statutory amendment.
M/s. Ranjana Granites (P) Ltd. v. State of A.P., 1996 (3) Andh LT 121 (Division Bench)	Held that on payment of royalty/seignorage the lessee becomes owner and is free to sell or export; rules imposing conditions on sale/transport after extraction were struck down.	The petitioners relied on this decision. The Court distinguished it on the ground that it was decided before insertion of Section 23-C; therefore the reasoning in Ranjana Granites was not decisive in the post-Section 23-C context.
State of Sikkim v. Dorjee Tshering Butia, AIR 1991 SC 1933	Referred for the proposition that when a valid source of power can be traced for State action, the action cannot be struck down merely because it was labelled under a different provision.	The Court relied on this principle to hold that Rule 9-W is sustainable if its true source can be traced to Section 23-C even if the G.O. refers to another provision.
Pine Chemicals Ltd. v. Assessing Authority, (1992) 2 SCC 683 : (1992 AIR SCW 702)	Relied on by the Additional Advocate General in support of the proposition that the legitimacy of subordinate action is determined by the true source of authority.	The Court referenced the case among authorities supporting the principle that the State's impugned rule need not be invalid merely by reference to how the rule was labeled if a valid source of rule-making (here Section 23-C) exists.
K. Satyanarayana v. Govt. of Andhra Pradesh, 2001 (4) Andh LD 36 (Division Bench)	Observed that exclusion of Central Government rules under Section 13 to minor minerals means the State is left to prescribe restrictions for minor minerals by framing rules under its own rule-making power; treated minor minerals differently from other minerals.	The Court cited this Division Bench decision to reinforce that the State may legitimately frame rules for minor minerals, and that minor minerals can be regulated differently from other minerals.
Beg Raj Singh v. State of U.P., (2003) 1 SCC 726 : AIR 2003 SC 833	Held that if a person is wrongfully disallowed to operate a mining lease for the full lease period, he must be allowed to operate for the full period subject to adjustments for the period already operated.	The Court held this precedent inapplicable because petitioners were not wrongfully prevented from operating; in at least one case the lease was lawfully terminated after show-cause and findings of over-excavation and risk to bore wells, and the prevention was therefore lawful.

Court's Reasoning and Analysis

The Court proceeded in a step-by-step legal analysis strictly grounded in the text of the Act and the sequence of legislative and judicial events recorded in the record:

Statutory foundation: The Court observed that ordinary sand is a "minor mineral" under Section 3(e) of the Act and that Rule-making power under Section 15(1) empowers State Governments to make rules for regulating the grant of quarry leases, mining leases and other mineral concessions in respect of minor minerals.
Identification of the challenged provision: Rule 9-W (inserted by G.O. Ms. No. 1 dated 1-1-2001, substituting Rules 9-B to 9-X) provides: "No movement of sand shall be allowed across the border to the neighbouring State." Condition 8(III) of the lease agreement mirrors this restriction.
Petitioners' reliance on pre-amendment authority: The Court noted that the petitioners relied on State of Tamil Nadu v. M.P.P. Kavery Chetty (AIR 1995 SC 858) and subsequent Division Bench authority (Ranjana Granites) for the principle that State rule-making under Section 15 cannot extend to regulation of minor minerals after extraction (sale/transport), because Section 15 pertains to grant/regulation of leases and related matters.
Legislative change post-Kavery Chetty: The Court emphasized that Parliament had amended the Act by inserting Section 23-C (Act No. 38 of 1999), explicitly empowering State Governments to make rules for preventing illegal mining, transportation and storage of minerals and listing illustrative matters (check-posts, weigh-bridges, regulation of minerals being transported from leased areas, inspection/search during transit, maintenance of registers/forms, etc.). The insertion of Section 23-C followed the Kavery Chetty decision.
Source-of-power analysis: The Court applied the principle that validity of subordinate legislation is determined by the true source of power. It held that Section 23-C authorises rules concerning transportation and storage of minor minerals even after extraction, and sub-clause (c) of Section 23-C(2) specifically permits regulation of minerals being transported from areas granted under a lease. Thus Rule 9-W can be validly traced to Section 23-C.
Distinguishing earlier decisions: While acknowledging Kavery Chetty and the earlier Division Bench in Ranjana Granites, the Court distinguished them on the ground that they predated the insertion of Section 23-C; hence their holdings cannot override the clear rule-making power now vested by Parliament in Section 23-C.
Estoppel and voluntary acceptance of lease terms: The Court accepted the respondents' contention that the petitioners, having executed the lease deeds and operated under the same conditions for a year, took benefits under those terms and are estopped from challenging Clause 8(III). The Court observed that if the condition was unacceptable, petitioners could have executed the lease "without prejudice" or recorded reservations when signing.
Extension-of-lease claims and Beg Raj Singh: The Court considered Beg Raj Singh and held its principle (entitlement to operate for full lease period where wrongfully prevented) inapplicable because the petitioners were not wrongfully prevented. In one case the termination followed show-cause proceedings revealing over-excavation and proximity to bore wells causing damage; the prevention (and termination) was therefore lawful and not a wrongful deprivation requiring extension.
Conclusion of analysis: Given that Rule 9-W is supported by the rule-making power in Section 23-C and that petitioners accepted leases containing Clause 8(III) (and in at least one case had lease terminated for misconduct), the challenge to Rule 9-W and the corresponding lease clause failed.

Holding and Implications

Holding: DISMISSED.

Direct consequences for the parties (as recorded in the opinion):

The writ petitions challenging Rule 9-W and Clause 8(III) of the lease agreements were dismissed.
Rule 9-W of the A.P. Minor Mineral Concession Rules, 1966 (prohibiting movement of sand across State borders) was held to be a valid exercise of rule-making power traceable to Section 23-C of the Mines and Minerals (Development and Regulation) Act, 1957 (as inserted by Act No. 38 of 1999).
Corresponding lease condition (Condition 8(III)) incorporating the restriction was upheld; petitioners who voluntarily executed and operated under the lease terms were treated as estopped from attacking that clause.
Requests for extension of lease periods were refused: where termination arose from petitioner misconduct (over-excavation, proximity to bore wells and damage), the court found no basis for equitable extension; where petitioners alleged inability to operate due to interim stays, the court found termination and prevention were not wrongful so Beg Raj Singh did not afford relief.
Interim orders previously in force were vacated; no order as to costs was made.

Broader implications: The opinion reasons that the insertion of Section 23-C by Parliament materially altered the State's competence to frame rules affecting transportation and storage of minor minerals post-extraction. The Court distinguished pre-amendment authorities accordingly. The opinion does not state that it is laying down a novel doctrine beyond applying the statutory amendment; no new precedent beyond applying Section 23-C was expressly proclaimed.

Disposition

The writ petitions were dismissed. Interim orders were vacated. No costs were ordered.

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C. Narayana Reddy And Etc. v. Commissioner Of Panchayat Raj And Rural Employment, A.P, Hyderabad And Others

Judgement

DEVINDER GUPTA, C.J. :- The validity of Rule 9-W of A.P. Minor Mineral Concession Rules, 1966 as inserted by G.O.Ms. No. 1, Industries and Commerce (M) Department, dated 1-1-2001, is questioned in these two Writ Petitions. Hence, they are heard together and decided by this common order.

2. Sri C. Narayana Reddy, petitioner in W.P. No. 16710 of 2002 initially filed the writ petition, seeking to declare Rule 20 (e) of A.P. Panchayat Raj (Auction of Sand in the Water Courses vesting in Gram Panchayat) Rules, 2000 passed in G.O.Ms. No. 71, Panchayat Raj and Rural Development (Pts. III) dated 29-2-2001 and Clause 8(III) of the Lease Agreement dated 29-7-2002 as invalid, inoperative and ultra vires the provisions of The Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter referred to as "the Act") and for a consequential direction to permit him to carry on quarrying operations without reference to the said Rules.

3. It is relevant to note that by the date of filing of writ petition the auctioning of sand in water courses was governed by the Andhra Pradesh Panchayat Raj (Auction of Sand in the Water Courses vesting in Gram Panchayat) Rules, 2000 made under A.P. Panchayat Raj Act, 1994. Sub-rule (e) of Rule 20 of the said Rules prohibits transportation of sand outside the State. Hence, the petitioner sought a declaration that the said Rule 20 (e), which is beyond the Rule making power of the State Government is liable to be struck down. However, pending the writ petition, this Court in Writ Petition Nos. 6242 and 8255 of 2000 declared A.P. Panchayat Raj (Auction of Sand in the water courses vesting in Gram Panchayat) Rules, as ultra vires of the Panchayat Raj Act, 1994. Thereafter, the State Government issued G.O. Ms. No. 1, Industries and Commerce (M) Department, dated 1-1-2001 amending the A.P. Minor Mineral Concession Rules, 1966 thereby substituting Rule 9-B to 9-X in place of the existing Rule 9-B. By virtue of the said amendment the grant of leases in respect of sand bearing areas in the State is governed by Rules 9-B to 9-X of A.P. Minor Mineral Concession Rules, 1966 (for short "the Rules").

Rule 9-W of the Rules in Pari materia to Rule 20 (e) of the A.P. Panchayat (Auctions of Sand in the Water Courses vesting in Gram Panchayat) Rules, 2000 and prohibits the movement of sand across the border to the neighbouring State. In the circumstances, the petitioner was permitted to amend the prayer in the main writ petition by challenging the validity of Rule 9-W of the Rules by order dated 18-9-2002 in W.P.M.P. No. 21641 of 2002.

4. In the amendment petition, the petitioner is seeking a direction to declare Rule 9-W of the Rules and Clause 8 (III) of the Lease Agreement dated 29-7-2002 as invalid, inoperative and ultra vires of the Act and beyond the rule making power of the State Government. Consequential relief prayed for is to permit him to carry on quarrying operations, stock and transport the excavated sand to neighbouring states from Papangi River Reach of T. Sodam Gram Panchayat of P.T.M. (Mandal), Chittoor District without reference to Rule 9-W of the Rules and Clause 8(III) of the lease agreement dated 29-7-2002.

5. Mr. Y. Ramachandrarao, the petitioner in W.P. No. 17665 of 2003 has also prayed for a writ of mandamus declaring Rule 9-W of the Rules and the consequential condition imposed in Clause 8 (III) of the Lease Agreement dated 13-6-2002 to be arbitrary, illegal and ultra vires of the provisions of the Act and to direct respondents 2 and 3 to extend the lease period for the unexpired period of lease during which be allegedly was prevented from taking the sand to the neighbouring States.

6. Facts in detail as alleged in W.P. No. 16710 of 2001 may be stated. The petitioner allege that 5th respondent committee constituted under the Rules invited tenders to lift sand from Papagni River Reach of T. Sodam Gram Panchayat of PTM (Mandal). The petitioner quoted the highest bid amount of Rs. 55,55,556/- which was accepted. The bid amount was paid to the Chief Executive Officer, Zilla Parishad, Chittoor. Permission thus was accorded to the petitioner to lift the sand from Papagni Reach upto 30-9-2002. Some villagers of T. Sodam approached this Court by way of W.P. No. 3641 of 2002 challenging the Tender-cum-auction notification dated 8-2-2002. Pending the Writ Petition, this Court in W.P.M. No. 4494 of 2002 granted interim stay of auction on 26-2-2002. The petitioner was not impleaded as party. He got himself impleaded as 5th respondent. The Writ Petition was ultimately dismissed with certain directions. The petitioner states that he could not lift the sand during the period the stay operated and also due to adverse climatic conditions. He made a representation to the authorities to extend the lease for further period of one year. The District Sand Committee resolved to extend the lease period. 4th respondent executed a lease agreement in favour of the petitioner on 29-7-2002 to quarry sand from Papagni River reach of T. Sodam Gram Panchayat at PTM (Mandal) upto 29-7-2003. As the villagers could not succeed in W.P. No. 3641 of 2002, the 7th respondent in his personal capacity filed W.P. No. 6282 of 2002 seeking writ of Mandamus declaring the auction of Sand Quarry held on 28-2-2002 and allotment of the same to the petitioner as illegal and to cancel the same on the ground that lifting of sand would affect the ground water table in the area and that the petitioner would transport the sand to Karnataka State in spite of prohibition in the rules. Respondent No. 7 also sought interim direction not to permit the petitioner to lift the sand but no interim direction was issued.

7. The petitioner states that the reach allotted to him abuts the Karnataka border and bounded by territory of Karnataka State. Therefore, the sand lifted is necessarily to be transported by passing through the territory of Karnataka State. There is only one motorable road for ingress and egress and that road belongs to Karnataka State.

8. The auctioning of sand is governed by the Rules. Sub-Rule 9-W of the Rules says that the sand shall not be transported for sale outside the State. In accordance with Rule 20 (e) of the Rules a clause is incorporated in the lease Agreement as Clause 8 (III) which says that no movement of sand shall be allowed across the border to the neighbouring state. The petitioner thus challenged sub-Rule 9-W of the Rules as invalid, inoperative and ultra vires the provisions of the Act alleging that the Supreme Court in State of Tamil Nadu v. M.P.P. Kavery Chetty, AIR 1995 SC 858 held that there is no power conferred upon the state Government under the said Act to exercise control over minor minerals after they have been excavated. The power of the State Government, as the subordinate rule making authority, is restricted in the manner set out in Section 15 of the Act. The power to control the sale and the sale price of a minor mineral is not covered by the terms of Clause (O) of sub-section (1A) of Section 15 of the Act. This clause can relate only to the regulation of the grant of quarry and mining leases and other mineral concessions and it does not confer the power to regulate the sale of already mined minerals.

9. The Petitioner in W.P. No. 17665 of 2003 also made similar challenge to Rule 9-W alleging that he holds mining lease which was granted pursuant to Notification dated 15-5-2002 issued by the District Panchayat Officer inviting tenders for grant of lease for quarrying the ordinary sand for a period of two years with respect to several Panchayats of Nellore District including Pottepalem Gram Panchayat in question. It is alleged that in public auction conducted on 29-5-2002 he was declared the highest bidder at Rs. 23,90,000/- and executed agreement in Form G1 under Rule 9-A of the Rules on 13-6-2002. Validity of the agreement is for two years. Initially he was granted permit to quarry sand for one year upto 12th June, 2003 whereafter he was required to pay 10% additional amount over the previous year lease agreement. He accordingly paid Rs. 26,29,000/-. Lease was thus extended and is still operative but by virtue of the Rules and Clause 8 (III) in the agreement, which are under challenge, he is prevented from carrying the sand beyond the State borders to the neighbouring States. Thus, he has sought the directions aforementioned.

10. In W.P. No. 17665 of 2003 Sri G. Anantha Ramu, District Collector filed counter-affidavit defending the legality and validity of the Rule and Clause 8 (III) in the Lease Agreement. Preliminary objection has also been raised stating that the petitioner having singed the mining lease, is estopped from questioning its legality and validity. It is alleged that the sand reach of Pottepallem Gram Panchayat was notified for grant of quarry lease for a period of two years. Writ Petitioner participated in the tender-cum-auction and offered to take the reach on lease. The petitioner being the highest bidder paid the bid amount and accordingly the bid was confirmed in his favour. The petitioner also executed the lease deed as required under Rule 9-H and he was permitted to quarry for a period of one year. The petitioner having executed the lease agreement is bound by the terms and conditions of the agreement. The petitioners lease was renewed for the second year for the period from 13-6-2003 to 12-6-2004 by proceedings dated 6-6-2003. Condition No. 8 (III) of the Terms and Conditions of the Lease Agreement entered into between the petitioner and the respondents specifically prohibits transportation of sand outside the State borders. The right of the petitioner to undertake quarrying operations is only on account of the lease agreement executed by the petitioner. As such the petitioner is bound by the terms and conditions of the said agreement and cannot question its legality and validity. The petitioner had undertaken quarrying operations during the 1st year without any grievance and for the first time after getting renewal of lease for second year, dispute has been raised.

11. As regards validity of the Rules, it is stated that transportation of sand outside the State is specifically prohibited under Rule 9-W as also the terms of the lease agreement. Judgment of the Supreme Court in M.P.P. Kavery Chetty, AIR 1995 SC 858 (supra) has no application. Parliament by virtue of central act no. 38 of 1999, has amended the Act by inserting Section 23-C in the Act, which confers power on the State Government to make rules for preventing illegal mining, storage and transportation of minor minerals. In exercise of the rule making power under the Act, the State Government, vide G.O.Ms. No. 1 dated 1-1-2001 amended the rules by substituting Rule 9-B to 9-X in place of the then existing Rule 9-B. Rule 9-W regulates the transportation of mineral from the area granted for mining lease and is intra vires the rule making power conferred under the Act. A reading of the definition of Minor Mineral as defined in the Act, would go to show that the Legislature has clubbed the Minerals that are required locally more particularly minerals used in construction activity and defined them as Minor Minerals. The Act confers power on the State Government to regulate the development and mining of minor mineral quarries. Rule 9-W is a reasonable restriction imposed in public interest and is intended to achieve the object of making available minor minerals within the State. The Government of A.P. in exercise of the rule making power, conferred under the Act, vide G.O.Ms. No. 537 Industries and Commerce (M1) dated 11-10-2000 notified the Andhra Pradesh Mineral Dealers Rules 2000. Under sub-Rule (2) of Rule 3, no person shall transport any mineral form the place of raising to another place without a valid transit pass issued by the competent authority under the Rules. Rule 6 stipulates that any person desiring to transport or carry away any mineral to any place shall file an application before the Dy. Director of Mines and Geology concerned along with the transit form books as prescribed in Form-E. In view of Rule 9-W no transport permits can be issued to any person for transporting sand outside the State.

12. Similarly in the counter-affidavit filed by Sri Y. V. Subba Reddy, Divisional Panchayat Officer, Madanapally, Chittoor in W.P. No. 16710 of 2002 while defending the legality and validity of the rules and the clause in the agreement on the grounds already noticed above, it is also alleged that the petitioner is estopped from questioning the same more particularly having signed the lease agreement, it is stated that the petitioner is not entitled to the relief prayed for and is also not entitled for extension of the lease. It is also stated that the Extension Office, P.R. and R.D. Pedda Thippa Samudram Mandal vide his proceedings dated 11-9-2002 submitted a report to the Mandal Parishad Development Officer, Pedda Thippa Samuduram Mandal stating that the petitioner is undertaking quarrying operations by excavating sand to depth in excess of two metres and that sand was being quarried within 50 metres of the bore wells supplying drinking water, as a result of which, the structures relating to the bore Wells, infiltration Wells, were being affected and damaged. Accordingly a show cause notice was issued to the petitioner on 31-10-2002 as to why the lease granted in his favour be not cancelled. No reply was received from the petitioner to the show cause notice. The District Collector having regard to the facts and circumstances that the petitioner had undertaken indiscriminate quarrying of sand in Papagni river and the quarried sand was being stored at places other than the sand reach and that apart the petitioner was transporting sand to Karnataka in violation of Rule 9-W of the Rules, issued orders dated 26-11-2002 directing the petitioner to stop qarrying thereby terminating the lease of the writ petitioner.

13. The learned counsel for the petitioner in Writ Petition No. 16710 of 2002, Smt. N. Shobha, contended that Rule 9-W of the Rules is beyond the legislative competence of the State since the State Legislature is denuded of power to make any law to control the movement of the excavated sand. According to the learned counsel, either Section 15 of the Act or any other provision under the Act does not empower the State Government to regulate the movement of excavated sand and, therefore, the impugned rule is ultra vires the Act. The learned counsel also contended that once minor mineral is excavated and royalty is paid, the lessee becomes the owner and thereafter there cannot be any restriction by the Government with regard to either movement or storage of the same. In support of the contentions, the learned counsel placed reliance upon decision of the Supreme Court in MPP Kavery Chettys case, AIR 1995 SC 858 (supra) and a decision of a Division Bench of this Court in M/s. Ranjana Granites (P) Ltd. v. State of A.P., (1996) 3 Andh LT 121.

14. Sri M. Ravindranath Reddy, learned counsel for the petitioner in Writ Petition No. 17655 of 2003 while reiterating the submissions made by Smt. N. Shobha, further contended that Rule 9-W of the Rules also liable to declared as violative of the Constitutional rights guaranteed under Chapter XIII of the Constitution of India.

15. On the other hand, the learned Additional Advocate general, Sri Ramesh Ranganathan, contended that the power of the State Government to impose a restriction on the transport of excavated sand to other States can be traced to Section 23-C of the Act, which has been inserted by Act 38 of 1999 with effect from 20-12-1999. He contends that the power can also be traced to section 15 (1-a) (d) of the Act. While placing reliance on the decisions of the Supreme Court in State of Sikkim v. Dorjee Tshering Butia, (1991) 4 SCC 243 : AIR 1991 SC 1933 and in Pine Chemicals Ltd. v. Assessing Authority, (1992) 2 SCC 683 : (1992 AIR SCW 702), the learned Additional advocate General contended that merely because G.O. Ms. No. 1 dated 1-1-2001 refers to Section 15 of the Act, the impugned rule cannot be held to be ultra vires, since the power of the State Government can be traced to Section 23-C of the Act.

16. Before adverting to the rival contentions raised by the parties, we may briefly note the statutory provisions relating to grant of sand quarrying.

17. Admittedly, ordinary send is a minor mineral as defined under Section 3 (e) of the Mines and Minerals (Development and Regulation) Act, 1957. In exercise of the powers conferred by sub-section (1) of Section 15 of the Mines and Minerals (Development and Regulation) Act, 1957, the Government of Andhra Pradesh made A.P. Minor Mineral Concession Rules, 1966 which regulate the grant of mining leases in respect of minor minerals in the State of Andhra Pradesh and for purposes connected therewith. So far as quarry lease for sand is concerned the procedure for granting the lease has been prescribed in detail under Rules 9-B to 9-X as inserted by way of amendment vide G.O.Ms. No. 1, Industries and Commerce (M) Department, dated 1-1-2001. Under Rule 9-B of the said Rules all the sand bearing areas in the State shall be leased out by sealed tender-cum-public auction for a period, which shall not exceed two years with an yearly enhancement of 10% of the knocked down amount. Rules 9-C to 9-G regulate the procedure for issue of tenders, processing of tenders, confirmation of bids etc. As per Rule 9-H (2) the lease deed in favour of the highest bidder will have to be executed in Form G-1. Rule 9-W of the Rules, the validity of which is under challenge in these two writ petitions runs as under :

No movement of sand shall be allowed across the border to the neighbouring State.

18. It is also relevant to note that the same restriction has been incorporated as Condition No. 8 (III) in the lease agreement executed in favour of the petitioners, which expressly prohibits movement of sand to the neighbouring State.

19. The contention of the learned counsel for the petitioners is that the power delegated to the State Government under Section 15 of the Act to make rules for regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals cannot be extended to impose any restriction on movement of the excavated minor mineral. It is contended that once the mineral is excavated the same becomes the property of the lessee and therefore the restriction under Rule 9-W regarding movement of excavated sand is beyond the rule making power of the State.

20. In M.P.P. Kavery Chetty, AIR 1995 SC 858 (supra) an identical question has been considered by the Supreme Court. In the said case, under Rules 8-D and 19-B of Tamil Nadu Minor Mineral Concession Rules, 1959, the State Government sought to control the sale price of certain coloured granites already quarried by the permit holder. Whereas the permit holders contended that Section 15 of the Act gave no power to the State to frame rules to regulate internal or foreign trade in granite after it had been quarried and that the State is not empowered to frame rules to fix a minimum price for granite, it was contended on behalf of the State Government that the rule making power of the State under section 15 (1-a) (O) was wide enough to encompass Rule 8-D and 19-B. The High Court did not accept the contention of the State Government and quashed the Rules 8-D and 19-B. The Apex Court while upholding the conclusion of the High Court held that Rules 8-D and 19-B are beyond the purview of the rule making power of the State Government. The Supreme Court after referring to various provisions under the statute held that there is no power conferred upon the State Government under the Act to exercise control over minor minerals after they have been excavated. It is further held that the power of the State Government, as the subordinate rule making authority, is restricted in the manner set out in Section 15 and that the power to control the sale and the sale price of a minor mineral is not covered by the terms of Clause (O) of sub-section (1A) of Section 15 and that the said Clause (O) can only relate to the regulation of the grant of quarry and mining leases and other mineral concessions and it does not confer the power to regulate the sale of already mined minerals.

21. A Division Bench of this Court in M/s. Ranjana Granites Ltd., 1996 (3) Andh LT 121 (supra) had an occasion to consider the scope of Section 15 of the Act as well as the Rules framed by the State Government and held that the entire file relating to the regulation of mines and development of minerals is taken over by the Parliament by virtue of Section 2 of the Act and accordingly the State is denuded of the power to legislate under Entry 23 of the List II. The Division Bench while following the ratio laid down by the Supreme Court in MPP Kavery Chetty, AIR 1995 SC 858 (supra) held that as per the scheme of the Act and the Rules, mining leases are granted on payment of royalty and seignorage fee as fixed by the State Government and that as soon the royalty and the seignorage fee are paid to the Government in respect of mining lease, lessee becomes the owner of the minor mineral and he is free to sell the same in domestic market or export the same subject to laws made by the competent authority. It is further held that whatever may be the right of the Government initially over the underground minerals, once the mining lease is granted, royalty and seignorage fee are paid by the lease-holder to the Government and the mineral is extracted, the ownership of mineral so extracted passes on from the Government to lease-holder and for all purposes he will be deemed to be the owner. Thus, it was concluded that once the leaseholder becomes owner of the property, any control or interference, not provided for in the Act, amounts to violation of his rights. The Division Bench thus struck down Rule 12 (5) (e) and Rule 12 (5) (f) (l) and (II) of A.P. Minor Mineral Concession Rules, 1966 which imposed conditions on quarry leaseholders of black granite and coloured granite after they are excavated and double the seignorage fee was imposed for exports made through harbours.

22. In the light of the ratio laid down in the above decisions, it is clear that once the minor mineral is excavated and the required royalty and seignorage fee is paid, it becomes the property of the lessee. Under the Rules framed by the State Government under Section 15 of the Act, no restrictions could be imposed by the State Government on such minor mineral, after it has been excavated.

23. After decision of the Supreme Court in Kavery Chettys case, AIR 1995 SC 858 holding that the power of the State Government as subordinate rule making authority is restricted in the manner set out in Section 15 of the Act and it does not confer power to regulate the sale of minor mineral, which has already been mined but only confers power to frame rules to regulate grant of quarry and mining lease and other matters connected therewith, Parliament amended the Principal Act and inserted Section 23-C therein act which reads :

23-C : Power of State Government to make rules for preventing illegal mining, transportation and storage of minerals: (1) The State Government may, by Notification in the Official Gazette, make rules for preventing illegal mining, transportation and storage of minerals and for the purposes connected therewith.

(2) In particular and without prejudice to the generality of foregoing power, such rules may provide for all or any of the following matters, namely :

(a) establishment of check-posts for checking of minerals under transit.

(b) Establishment of weigh-bridges to measure the quantity of mineral being transported.

(c) Regulation of mineral being transported from the area granted under a prospecting licence or a mining lease or a quarrying licence or a permit, in whatever name the permission to excavate minerals, has been given.

(d) Inspection, checking and search of minerals at the place of excavation or storage or during transit.

(e) Maintenance of registers and forms for the purposes of these rules.

(f) The period within which and the authority to which applications for revision of any order passed by any authority be preferred under any rule made under this section and the fees to be paid therefor and powers of such authority for disposing of such applications; and

(g) Any other matter which is required to be, or may be, prescribed for the purpose of prevention of illegal mining, transportation and storage of minerals.

(3) Notwithstanding any thing contained in Section 30, the Central Government shall have no power to revise any order passed by a State Government or any of its authorised officers or any authority under the rules made under sub-sections (1) and (2).

24. Sub-section (1) of Section 15 in exercise of which amendment was made to Rule 9 reads :

15. Power of State Governments to make rules in respect of minor minerals : (1) The State Government may by notification in the official Gazette, make rules for regulating the grant of quarry leases, mining leases or other mineral concessions in respect of minor minerals and for purposes connected therewith.

25. Though the learned Additional Advocate General urged that even after insertion of Section 23-C State Government can frame Rules under sub-section (1) of Section 15 of the Act as regards transport and movement of the sand, but, we are of the view that a bare reading of Section 15 would show that the power of State Government to make rules under Section 15 is only for regulating the grant of quarry lease, mining lease or other mineral concessions in respect of minor minerals and for purposes connected therewith. Sub-section (1-A) of Section 15 which was inserted by central act no. 37 of 1986, it was clarified that in particular and without prejudice to the generality of the power in section 15 (1) such rules may provide for matters enumerated in sub-clauses (a) to (o). None of the clauses can be said to be pertaining to matter of movement of sand or minor mineral, after it had been mined. However, Section 23-C aforementioned does authorise the State Government to frame rules in particular and without prejudice to the generality of power for preventing illegal mining or transportation or for storage of the minor minerals. Thus. power is conferred on the State Government to frame Rules even qua the minor mineral which has been mined and in respect of matters as are enumerated in sub-clauses (a) to (g) of sub-section (2) of Section 23-C.

26. Learned counsel for the petitioners submitted that pursuant to the powers conferred under Section 23-C, the State Government has already framed A.P. Mineral Dealers Rules 2000 by G.O. Ms. No. 537, Industries and Commerce (MI) dated 11-10-2000. The said rules do not have a rule like Rule 9-W of the Rules. Power having been exercised by the State Government under Section 23-C by framing A.P. Mineral Dealers Rules, 2000, it cannot be said that the Rules specifically framed under sub-section (1) of Section 15 of the Act can be said to have been framed under the rule making power provided under Section 23-C of the Act.

27. The above submission has no force. It is a well-settled principle that when the source of power can validly be traced, the state action in exercise of such power cannot be struck down on the ground that it was labelled under a different provision. We need not make reference to number of decisions of the Apex Court on this proposition except by making reference to the decision in Dorjee Tshering Butias case, AIR 1991 SC 1933 (supra).

28. Section 23-C of the Act does authorises the State Government to make rules not only for the purpose of preventing illegal mining but also for transportation and storage of minor minerals, which power would imply that even after the minor mineral has been mined, the power is conferred on the State Government to frame Rules for such mined minor mineral as regards its storage and/or its transportation and also to frame rules to see that no illegal mining activity is carried on. Sub-clauses (a) to (g) to Clause (2) of Section 23-C are illustrative of the matters, which are covered under the rule making power. Sub-section (2) says that in particular and without prejudice to the generality of the powers conferred under Section 23-C, rules may provide for all or any of the said matters. Sub-clause (c) itself say that regulations can be framed of mineral being transported from the area granted under the licence or a mining lease. Rules can be framed on any of the matters including transportation of the excavated mineral. Section 23-C is the source of power under which Rule 9-W can be said to have been framed by the State Government. We have to keep in mind that the Parliament passed the Amendment Act, 1999 (Act No. 38 of 1999) thereby inserting Section 23-C in the Principal Act after the decision of the Supreme Court after the decision of the Supreme Court in Kavery Chettys case, AIR 1995 SC 858 (supra). By the said provision, power was specifically conferred on the State Government to make rules for preventing illegal mining, transportation and storage of minerals. The State Government has framed the Rules thereafter. Thus, there is ample power with the State Government to frame Rules regarding transportation of the excavated minor mineral, which would include restriction on the transport of the said minor mineral beyond the limits of the State Borders. In this view of the matter, the challenge to Rule 9-W is without any substance.

29. Learned counsel for the petitioners relying on the Division Bench decision of this Court in M/s. Ranjana Granites (P) Ltd. case, (1996 (3) Andh LT 121) (supra) urged that once the leaseholder has paid the royalty he becomes the owner of the minor mineral extracted and there cannot be any control or interference over his trade of the said mineral. Any such control sought to be exercised would amount to violation of leaseholders rights. It was also held that the restrictions imposed are undue burden on lessee and are violative of Articles 301 to 304 of the Constitution.

30. Reliance by the petitioners on the said decision is also misconceived inasmuch as the decision was rendered on 4-8-1995 relying upon the decision of the Supreme Court in Kavery Chettys case (AIR 1995 SC 858) (supra) when there was no power vested with the State Government to restrict movement of the minor mineral after its extraction. Now, there is power conferred on the State Government when Section 23-C has been inserted in the principal Act. Therefore, any amount of arguments on the basis of which the judgment of the Division Bench proceeded is of no consequence. Reasonable restrictions can always be put on such trade of minor mineral, after it is extracted and there is no prohibition in the statute not to impose such restriction.

31. We may also make reference at this stage to a decision of the Division Bench of this Court in K. Satyanarayana v. Govt. of Andhra Pradesh, 2001 (4) Andh LD 36 that the exclusion of the application of the rules framed by the Central Government under Section 13 of the Act to minor minerals means that these restrictions will not apply to minor minerals but it is left to the State to prescribe such restrictions as they think fit by framing rules under its rule making power conferred by the Act on the State Government. The Division Bench gave a valid reason treating minor mineral differently from the minerals other than the minor minerals that they are minerals which are mostly used in local areas and for local purposes, while the other minerals other than minor minerals are those which are necessary for industrial development on a national scale and for the economy of the country.

32. In the view we have taken, there is hardly any force in the submission made on behalf of the petitioners questioning the legality and validity of the rules. Once we have traced the source of power under the statute and held that Rule 9-W of the Rules was validly made by the State Government in exercise of its powers conferred under the Act, challenge that similar conditions contained in the lease deed is bad also does not hold good.

33. We would also like to make reference at this stage to the submission on behalf of the respondents that the petitioners having operated the lease for a period of one year under the same terms and conditions as contained in the lease deed which also contain the offending clause, namely, Clause 8 (III) which was inserted by virtue of Rule 9-W, the petitioners are estopped from questioning the legality and validity of the said clause in the lease deed. Without demur they accepted the terms contained in the mining lease and took benefit of the same. In case the condition was not acceptable to them, nothing prevented them while executing the lease deed to indicate specifically therein that it was being executed without prejudice to their rights. But having voluntarily executed the lease deeds they are not entitled to question the legality and validity of the condition in Clause No. 8 (III) of the mining lease.

34. As regards the prayer for extension of period of lease, reliance placed by the petitioners in Beg Raj Singh v. State of U.P., (2003) 1 SCC 726 : (AIR 2003 SC 833) is also totally misplaced. In such an eventually where a person is wrongfully disallowed to operate the mining lease for the full lease period, it was held that such a person must be allowed to operate the mine for the full period of lease subject to adjustment for the period for which he has already operated. Therefore, the condition precedent for grant of such a benefit would be only in a situation when a person is wrongfully disallowed to operate the mining lease. The petitioners herein were not deprived of their right to quarry the sand. They were deprived to transport the excavated sand to the neighbouring states pursuant to the Rules and Clause in the Agreement. The same being a lawful prevention, extension cannot be granted since it was not a wrongful act on the part of the State.

35. In W.P. No. 16710 of 2002, it was also urged that the petitioner was prevented from operating the mining lease due to orders of stay passed in a writ petition, therefore, the benefit should be extended to him for the period he could not operate the mining lease during the period the order of stay was in operation. We are of the view that such a relief cannot also be granted to the petitioner even on the ratio of the decision in Beg Raj Sings case, (AIR 2003 SC 833) inasmuch as it is only due to the petitioners conduct that the lease has been terminated by order dated 26-11-2002 after notice to him, when it was found that he had been undertaking quarrying operations by excavating sand to a depth in excess of two metres and that the sand was being quarried within 50 metres of the bore wells supplying drinking water to the villagers, as a result of which, the structures relating to the bore wells, infiltration wells, were being affected and damages. Therefore, conduct of the petitioner itself is such that it would not warrant grant of any equitable relief in his favour.

36. We, therefore, find no force in the Writ Petitions, which are hereby dismissed. Interim orders are vacated. No order as to costs.

Petitions dismissed.

C. Narayana Reddy An... v. Commissioner Of Panc...