This article is written by Jeffy Johnson, from School of Law, Christ (Deemed to be University). This is an exhaustive article on the analysis of Md. Serajuddin v. State of Orissa.

Introduction

Md. Serajuddin v. State of Orissa AIR 1969 Ori 152. This case is regarding the dispute of the mine belonging to the plaintiff. These mines have a rich deposit of chromite ore. Upon the orders given by the Government, the defendant acted accordingly. This plant was set up to manufacture ferrochrome and ferrosilicon. He had also obtained the required licence for the import of these types of machinery and other equipment which are necessary for the plant. The mining lease was provided in favour of the defendant. This was according to the Minerals Act, 1957. The Government also stated that this was regarding the permission given to supply mines to the ferrochrome plant. This lease came into incorporation when the defendant who is the managing partner on the failure of the Government to cancel without any compensation.

Facts

The plaintiff sent the defendant letters regarding the grant of the lease. Once the defendant agrees on the conditions mentioned in the lease agreement along with the Government approval, can the defendant start with the ferrochrome plant? If the defendant fails to comply then the plaintiff could cancel the grant. The defendant had communicated his non-acceptance to the terms and conditions. According to the plaintiff, the main intention for such a lease was to promote the defendant to start a plant and supply raw materials.

Although the Government had intimated numerous times, the defendant did not respond and failed in setting up the plant. The defendant failed to set up the plant within 5 years as agreed under clause 10 of the mining lease. The communication had to be made through the Collector of Cuttack. The defendant failed in its function and continued the possession of the plant. It was by illegal means, therefore, the defendant is treated as a trespasser due to which the defendant died to possess it and after negotiation between the parties. It was held that the defendant can have the possession through the assurance given by the State Government.

The defendant entered into a provisional agreement with Demag. This agreement was for the manufacture, supply and installation of the plant. A project report was received from Demag at a very huge cost. Defendant accepted the terms of the lease deed. It was contended that it was a violation of Article 299 of the constitution. Finally, the industrial licence was cancelled by the Government after due notice given to the defendant. The plant cannot be set up and therefore it was held null and void.

Issues raised

1. Whether Clause 10 of Part 9 of the lease deed is violative of Clause 4 of Part 9 of the lease agreement?
2. Whether Class 10 of the lease agreement breached the rights of the defendant?
3. Whether the mining lease required the approval of the State Government in light of the Mines and Minerals (Regulation and Development) Act, 1957?

Laws involved

According to Section 5 (2) of the Mines and Minerals ( Regulation and Development), Act 1957  without the approval of the Central Government no mining lease can be granted to parties. The term mining lease is mentioned in Clause 10 of Part 9 gives special directions to be done by the Central Government. Matters regarding the supply of electricity, vast land procurement for the plant, township etc are complex. If they are considered to be implied matters and terms concerning the execution of the lease, then it can be stated that Section 5 (2) of the Mines and Minerals (Regulation and Development), Act 1957  is violative and does not comply with these lines.

Arguments raised

It was further held that Clause 10 of Part 9 of the lease deed is in contravention to the Clause 4 of the said part. It is unlawful for the State Government to examine the matters of the lease and determine it without looking into Clause 4. There is no breach by the defendant in this case at any stage of this working. Clause 10 was arbitrary, and the defendant has no duty to set up the plant. Here the Deputy Secretary had no power to sign instead of the State Government. Thus the said order was void and ultra vires. As it is not operative and the assumptions made of the fact are wrong. The defendant could start a plant without aid by the State Government in financial means. And there were no measures taken to provide electricity to the plant. Backing by the above argument,  the defendant requested the suit to be dismissed with cost. 

The appellant stated that the duty of the defendant will only arise when the State Government would supply electricity to the plant. These are reciprocal promises that are the obligation of the State to provide the necessary arrangement which not only includes electricity supply but also provides raw material. This was to promote business and trade. During the cancellation of the lease, the documents were divided into:

• The documents before the date of order of the State Government for granting lease/ the actual execution of the deed.
• All the documents from 10-10-1958 to 26-3-1959.

Analysis

Later there was a meeting conducted among the Chief Secretary, the defendant and his technical consultant. The requirement for electricity was extended to 20,000 K.W. on account of the deliberation made in the meeting. It was not approved on if the Planning Commission can grant permission to institute a thermal station. Later the Government agreed to provide electricity of 20,000 K. W. It was due to the discussion and approval given by the Planning Commission. But it has not complied and it was uncertain. Thus it can be stated that the binding contract between the parties was not enforceable. The defendant contended that the State Government would provide them with cheap electricity, transportation, metallurgical coke and so on. Some letters were communicated between the State Government and the defendant. All this showed the Government’s desire to provide electricity shortly but nothing was done with immediate effect. All these were considered to be alleged promises made by the Government and they were failing in their duties. There was only an exchange of letters and talk about possibilities.

There was a transmission of power made in the Jaipur road but no surplus of power was rendered. Although there was an assurance given that there will be a supply of power, which will facilitate the setting up of the plant within 5 years and complying with Clause10 of Part 9 of the lease agreement. But it can be said that there was no positive action taken by authorities. The whole intention or the setting up of the ferrochrome plant of the defendant wholly depended on the supply of electricity. On this issue, there was no progress made by the defendant. There was a lot of documentation done but no action was taken. There was no solid proposal made by the State Government on the plant matter concerning the acquisition of land.

Defendant made efforts by sending letters to the District Collector and the Chief Engineer. These letters addressed the need for electricity supply to start trade and commerce. But the final selection of the site, electricity and such related matters was only under consideration till now. On account of the delay made by Demag to give a project report. The Government informed the defendant that the land could not be acquired under the Land Acquisition Act. The issues address it to the Subdivisional Officer of Jaipur. The appellant requested to take measure for the settlement of land in their favour as there was no binding promise made between the parties. It can be stated that the State Government giving the land to the appellant for setting by the plant cannot be implied as to the terms of the lease.

It was contended that the promises made for electricity were not met. This was given by the plaintiff to the defendant. Thus Article 299 of the Constitution of India was favouring the defendant in this case. After 6 years of deliberation between the two parties, the defendant accepted all the terms and conditions of the lease agreement. But the defendant was still defended by the Government for the supply of electricity was still debatable. Article 299 contains the words “expressed to be made, and executed”. This is required in cases of a written contract made between parties. This article protects from any sort of unauthorised contracts rendered. 

In the case of Bhikrai v. Union of India, AIR 1962 SC 113 it was rightly quoted that “Government contracts are sometimes made in disregard of the forms prescribed, but would not be ground for holding that departure from the provision which is mandatory and at the same time salutary may be permitted”. In the present case, it can be rightly stated the alleged implied terms are too clear to be implied exist. The State Government impliedly extended the time for operation of Clause 10 of Part 9 till 1965. As the lease was not liable to be cancelled it was held in Keshavlal Lallubhai Patel v. Lalbhai Trikumlal Mills Ltd AIR 1958 SC 512.

According to the Mines and Minerals Act, the government cannot grant such a mining lease in favour of a person without getting previous express approval of the Central Government on the terms of the lease. The grant and execution of such a lease being circumscribed by various limitations and being subjected to and controlled by a special provision in the law and our Constitution, the Courts should be loath to read into its express provisions such implied terms as suggested by the learned counsel for the appellant. On merits and in law, the above contention of the learned counsel for the appellant regarding the alleged implied terms is fallacious and unacceptable.

For taking ‘effective steps’ as defined in Section 2 of the Registration and Licensing of commercial Undertaking Rules, 1952, it had been not necessary to attend for the complete bulk supply of electrical power, and intrinsically extension of your time till 1965 couldn’t be contemplated and/or intended. This being so, it can’t be said that the government by writing the aforesaid letter expressly or impliedly extended the time, which they weren’t empowered to try to unilaterally. Moreover, for reasons discussed above such implied extension wouldn’t strictly conform to the provisions of Article 299 of the Constitution. We, therefore, don’t accept the above contention advanced on behalf of the appellant.

Article 299 of the Indian Constitution

It is a mandatory provision that the State should not be saddled with any liability unless it is mentioned clearly in the deed. The competent authority has to use its power and not get misled by the terms in the contract. The main objective of this article is that the contract should show all terms and conditions on which the State is made of the party. It has rights and obligation to act upon.

In light of K.P. Chowdhury v. State of Madhya Pradesh AIR 1967 SC 203 concerning Article 299(1) of the Indian Constitution there is no implied contract between the Government and any other person was permitted under Article 299(1) unless. A person who had entered into a contract with the Government cannot be executed under Article 299(1) as it can be implied to counteract depending on facts and circumstances. It can be held that “if the contract between the Government and another person is not in full compliance with Article 299(1), it would be no contract at all and could not be enforced either by the Government or by the other person as a contract.” It was also discussed in Reigate v. Union Manufacturing Company (1918) 1 KB 592 and Eastbourne Ltd v. Cooper, 1941 AC 108.

Conclusion

On account of non-compliance of the terms and conditions which were expressed in the lease agreement. The stay order issued by the Central Government in no means could affect the rights of the State Government to determine the lease bypassing such orders. As there was no merit for appeal, it was dismissed with costs.

References

• https://indiankanoon.org/doc/222964/
• https://www.casemine.com/judgement/in/56095f32e4b01497112c9acc
• https://economictimes.indiatimes.com/topic/Serajuddin

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