2024 (11) TMI 340 - SC - Indian Laws

Validity of the Explanation to Rule 38 of the Mineral (Other than Atomic and Hydrocarbons Energy Minerals) Concession Rules, 2016 - Explanation to Rule 45(8)(a) of the Mineral Conservation and Development Rules, 2017 - computation of royalty to be levied for the extraction or consumption of mined ores - Whether, the Explanation(s) appended to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 respectively are unreasonable and manifestly arbitrary and in consequence of violation of Article 14 of the Constitution? HELD THAT - In M.P. OIL EXTRACTION VERSUS STATE OF M.P. 1997 (7) TMI 660 - SUPREME COURT , this Court held that policy decisions are the domain of the executive authority of the State and that the courts should not embark on the unchartered ocean of public policy and should not question the efficacy or otherwise of such policy so long the same does not offend any provision of the stature or the Constitution of India. It further observed that unless the policy framed is absolutely capricious or not informed by reasons, the court cannot and should not outstep its limit and tinker with the policy decision of the executive functionary of the State. In PREMIUM GRANITES VERSUS. STATE OF T.N. 1994 (2) TMI 302 - SUPREME COURT , this Court observed that it is not the domain of the courts to consider as to whether a particular policy is wise or that a better public policy can be evolved, and that such matters must be left to the discretion of the executive and legislature. In BALCO EMPLOYEES UNION (REGD.) VERSUS UNION OF INDIA 2001 (12) TMI 808 - SUPREME COURT this Court held that it is not for the courts to consider the relative merits of different economic policies and consider whether a better policy may be evolved. It further held that when it comes to policy decisions on economic matters, the courts ought to be very circumspect in disturbing such conclusions unless there is an illegality in the decision itself. While courts have the power of judicial review to ensure that executive actions and legislative enactments comply with the Constitution, this power is not absolute. Judicial review is meant to act as a safeguard against actions that overstep legal boundaries or infringe on fundamental rights, but it does not entail a comprehensive re-evaluation of the policy s wisdom. The judicial review of policy decisions is limited to assessing the legality of the decision- making process rather than the substantive merits of the policy itself. In the present case, there is no doubt that the mechanism for computation of royalty in terms of Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 devised by the respondents might have onerous implications in monetary terms on the mining leaseholders inasmuch as there is a compounding effect on the rate of royalty for every subsequent month. However, this Court in the absence of anything to show that such policy is in excess of the powers or domain of the respondents herein or in breach of any statutory provision, cannot strike down the same. Merely because the Explanation(s) to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 provides that there shall be no deduction of royalty, payments to the District Mineral Foundation and payments to the National Mineral Exploration Trust from the gross amount for the purpose of computing sale value does not in any manner makes the aforesaid Explanation in derogation of the main provision. The aforesaid Explanation(s) are merely clarificatory in nature inasmuch as it explains the ambiguities in the main provisions of Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017, and thus, they cannot be said to exceed the ambit of the main provisions or in contravention of the statutory scheme. Whether the exclusion of royalty, and contributions towards DMF and NMET paid previously for coal but not for other minerals is unreasonable and manifestly arbitrary? - HELD THAT - In RK. GARG VERSUS UNION OF INDIA AND OTHERS 1981 (11) TMI 57 - SUPREME COURT , this Court observed that laws relating to economic activities should be viewed with greater latitude and the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula. The respondents a period of 2-months from the date of pronouncement of this judgment to conclude the public consultation process undertaken for amending the MMDR Act initiated pursuant to the Notice dated 25.05.2022 and take a final decisive call in regard to the cascading impact of royalty on royalty in the calculation of the average sale price by virtue of the Explanation(s) to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017. The challenge to the validity of Explanation(s) appended to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 is answered accordingly. The Registry shall notify this matter before an appropriate Bench after a period of two months from the date of pronouncement of this judgment to report compliance of the directions.

Summary

Issues Involved:
1. Validity of the Explanation to Rule 38 of the Mineral Concession Rules, 2016 (MCR, 2016) and Rule 45(8)(a) of the Mineral Conservation and Development Rules, 2017 (MCDR, 2017).
2. Alleged compounding or cascading effect of royalty computation.
3. Differential treatment in royalty computation between coal and other minerals like iron ore.
4. Alleged violation of Article 14 of the Constitution due to arbitrary policy.

Issue-wise Detailed Analysis:

1. Validity of the Explanation to Rule 38 of MCR, 2016 and Rule 45(8)(a) of MCDR, 2017:
The petitioners challenged the validity of these provisions, arguing that they lead to a compounding effect in royalty computation, as they do not allow deductions for previously paid royalty and contributions to the District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET). The court examined whether these provisions were unreasonable or manifestly arbitrary, potentially violating Article 14 of the Constitution. The court concluded that the Explanations are clarificatory, explaining ambiguities in the main provisions, and do not exceed the statutory scheme's ambit.

2. Alleged Compounding or Cascading Effect of Royalty Computation:
The petitioners contended that the Explanations lead to a cascading effect, where royalty is charged on previously paid royalty, DMF, and NMET contributions, resulting in a "royalty on royalty" situation. The court noted that policy decisions, especially those involving economic matters, are the domain of the executive and legislative branches. It emphasized judicial restraint, stating that courts should not interfere with policy decisions unless they exceed legal boundaries or infringe on constitutional rights. The court found no statutory violation in the policy and therefore did not strike down the provisions.

3. Differential Treatment in Royalty Computation Between Coal and Other Minerals:
The petitioners argued that excluding previously paid royalty and contributions for coal but not for other minerals like iron ore is arbitrary and violates Article 14. The court acknowledged the anomaly but noted that economic policies require flexibility and deference to legislative judgment. It highlighted that the legislature has the discretion to determine royalty computation methods for different minerals. The court recognized the ongoing public consultation process to address the anomaly and refrained from declaring the provisions unconstitutional.

4. Alleged Violation of Article 14 Due to Arbitrary Policy:
The petitioners claimed that the differential treatment in royalty computation violates Article 14, which ensures equality before the law. The court reiterated that economic policies should be viewed with greater latitude, allowing the legislature some "play in the joints" due to the complexity of economic issues. It emphasized the need for judicial deference in economic matters, provided there is no breach of constitutional or statutory provisions. The court urged the respondents to conclude the public consultation process and address the anomaly in royalty computation.

Conclusion:
The court granted the respondents two months to finalize the public consultation process and take a decisive call on the cascading impact of royalty in the calculation of the average sale price. It refrained from striking down the provisions but allowed the petitioners to challenge the final policy decision after the consultation process concludes. The matter will be reviewed by an appropriate Bench after two months to ensure compliance with the court's directions.