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TMI Blog2019 (3) TMI 1743X X X X Extracts X X X X X X X X Extracts X X X X ..... her the impugned rules are violative of Part XIII of the Constitution of India? - HELD THAT:- The power of State Legislature to impose reasonable restrictions on the freedom of trade, commerce or intercourse, as may be required in the public interest, requires such a Bill or amendment to be moved in the State Legislature only after receiving previous sanction from the President. The President, being the head of the State and the guardian of the federation, must be satisfied that such a law is indeed required and, thus, acts as a check on the promotion of provincial interests over national interest. Going by the aforesaid scheme of this Chapter, it becomes apparent that when there are such restrictions on a State Legislature, then the State Government could not have imposed such a prohibition under a statute whose object is to regulate mines and mineral development, and not trade and commerce per se. Freedom of movement of goods, services and the creation of a common market must be understood contextually and as necessary for creating an economic union. It is also rightly contended by all the respondents that balanced development of the country is an equally vital facet of eco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leases. After the excavation of sand, a part there of was subjected to further processing by addition of fly ash and the other part was sold as sand outside the State of Gujarat. Second petition was filed by ten petitioners (respondents in the second appeal). They are in the business of processing ordinary river sand after buying it from leaseholders. The process involves washing, cleaning and mixing fly ash to convert it into IS-Zone-2-Sand, which is then sold in 50 kg. Bags under a brand name. These respondents supply that sand to builders in the State of Maharashtra. 2) As is clear from the aforesaid facts, sand, after processing, is sold outside the State of Gujarat. The challenge laid in the writ petitions was against the Resolution No. GMR-102010-1-S-CHH dated May 04, 2010 whereby all leaseholders, stockists, traders and exporters were prohibited from exporting ordinary sand excavated from the areas in the State of Gujarat to other States within the country or other countries by transporting such sand outside the State or the country. When these writ petitions were pending consideration, the Government of Gujarat issued a Notification on June 11, 2010 thereby amending the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue vide its judgment dated April 27, 2009 in D. Sivakumar v. Government of Tamil Nadu Writ Petition Nos. 23317 and 24211 of 2008 by taking similar view as that of the Andhra Pradesh High Court. In the impugned judgment, the Gujarat High Court has, however, differed with the Andhra Pradesh and Madras High Courts. Having regard to the conflicting opinion of the High Courts, leave was granted in this matter. This is how the instant appeals came to be heard finally by this Court. 5) Before proceeding further, we would like to recapitulate, in broad, the scheme of the MMDR Act insofar as it relates to regulating minor minerals are concerned and the powers that are delegated by the Central Government to the State Governments in respect of minor minerals. In this very hue, we also propose to take note of the relevant provisions of the MMDR Act. 6) The MMDR Act is enacted by Parliament to provide for the regulation of mines and development of minerals under the control of the Union, i.e. the Central Government. Section 2 provides a declaration to this effect with the stipulation that it is expedient in the public interest that Union should take under its control, the regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1996, a Committee under the Chairmanship of the then Secretary, Ministry of Mines was constituted in February, 1997 to, inter alia, make recommendations regarding delegation of powers to the State Governments relating to grant and renewal of prospecting licences and mining leases and other related approvals and to suggest measures to reduce delay in this regard, review of the existing laws and procedures governing the regulation and development of minerals to make them more compatible with the changed policies and measures for prevention of illegal mining. The Committee in his report made wideranging recommendations in the area of delegation of powers to the State Governments, procedural simplifications, etc. which will go a long way to mitigate the problems faced by the States and the prospective investors while, at the same time, keeping the interests of the mining industry in particular and the national interest, in general, in tact. After careful consideration of the recommendations of the Committee, the Government has decided to amend the Mines and Minerals (Regulation and Development) Act, 1946. 2. Some of the more important amendments to be made are as follows: xx xx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). 10) As noted above, the impugned Rules are made in exercise of the powers conferred under Section 23-C of the MMDR Act. Further, as Section 14 categorically states that provisions of Section 5 to 13 are not applicable in respect of minor minerals, rule making power of the Central Government contained in Section 13 does not extend to minor minerals. It is in this context Section 15 gives power to the State Government to make rules in respect of minor minerals. The State Government, thus, is given power under Section 15. It is also given power under Section 23-C. 11) A perusal of Sections 15 and 23-C in relation to the aforesaid discussion would clearly suggest that the power of the State Government to make rules is restricted to: (a) making rules for grant of quarry leases, mining leases orother mineral concessions in respect of minor minerals and for the purposes connected therewith; and (b) making rules for preventing illegal mining, transportation andstorage of minerals and for the purposes connected therewith. 12) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or minerals, does not empower and cannot be stretched to empower the State Government to make rules directly prohibiting movement of minerals so as to impinge upon the freedom guaranteed by Article 301 of the Constitution. In fact, the State Government has admittedly made the Gujarat Mineral (Prevention of Illegal Mining, Transportation and Storage) Rules, 2005 in exercise of the powers conferred by section 23-C of the Act for regulating transport, possession and storage of minerals in the State; and those rules are not under challenge. Although it is not significant, in light of the view being taken herein about validity of the impugned rules, it needs to be noted that the part of new Rule 71 taking away the facility of compounding is apparently repugnant to section 23-A of the Act. And, if validity of the impugned rules cannot be upheld, the impugned resolution cannot stand without the support of any legal, executive or legislative authority. 13) We may also, at this stage, refer to the reasoning given by the High Courts of Andhra Pradesh and Madras in support of their view, which is in conflict with the view taken by the Gujarat High Court. The judgment of the Andhra Pradesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lared as bad in law. We are of the opinion that the word regulation has no fixed connotation. The said word will have to be given wider meaning when the public interest is involved. In the judgment reported in (1981) 2 SCC 205 (State of Tamil Nadu v. Hind Stone), the Hon ble Supreme Court has held as follows: 10. One of the arguments pressed before us was that Section 15 of the Mines and Minerals (Regulation and Development) Act authorised the making of rules for regulating the grant of mining leases and not for prohibiting them as Rule 8-C sought to do, and, therefore, Rule 8-C was ultra vires Section 15. Well-known cases on the subject right from Municipal Corporation of the City of Toronto v. Virgo and Attorney-General for Ontario v. AttorneyGeneral for the Dominions up to State of U.P. v. Hindustan Aluminium Corporation Ltd. were brought to our attention. We do not think that regulation has that rigidity of meaning as never to take in prohibition . Much depends on the context in which the expression is used in the statute and the object sought to be achieved by the contemplated regulation. It was observed by Mathew, J. in G.K. Krishnan v. State of Tamil Nadu : The wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India), the Hon ble Supreme Court has held that prohibition of trade in ivory does not offend Article 19(1)(g) and the same is a reasonable restriction under Article 19(6) of the Constitution. It is also to be noted only sand is prohibited from taking outside the State in view of the overwhelming public interest. Therefore, we are of the opinion that the definition of the word regulation is wide enough to cover the prohibition and movement of minerals outside the State. xx xx xx 16. Environmental Perspective The said rule has been introduced in view of the attempt made by the dealers of sand and contractors of building to transport the sand purchased from the Government outside the State. According to the Government, the said rule has been made in public interest and also taking into consideration of the hardship that caused to the consumers in the State of Tamil Nadu as well as the high rate of urbanisation in the State. In the counter affidavit, it is also stated by the Government that illegal, unaccounted sand is also transported outside the State. It is well known that sand in the present form has already undergone various changes over thousands of years. As foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has delegated to the States complete control over the subject matter, namely, minor minerals, especially in view of the fact that power has been conferred for all purposes connected with the regulation of the minor minerals. (ii) This power is not exhausted by the grant and continues to control activities even post grant. (iii) In respect of minor minerals, Parliament has not retained any control under the Act. Historically as well as under the 1957 Act, complete control over minor minerals has been delegated by Parliament to the State Government since these minerals have always been viewed as being important for local development. 17) To support the above plea, he invited the attention of this Court to the judgment in D.K. Trivedi Sons and Others v. State of Gujarat and Others 1986 Supp SCC 20 wherein this Court considered the power of the State Governments to make rules under the said Section 15 to enable them to charge dead rent and royalty in respect of leases of minor minerals granted by them and to enhance the rates of dead rent and royalty during the subsistence of such leases a power exercised by the State to govern conditions subsequent to the grant of the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of restrictive words, the power must be regarded as plenary over the entire subject...The power to regulate implies the power to check and may imply the power to prohibit under certain circumstances, as where the best or only efficacious regulation consists of suppression xx xx xx 23...One of the ways in which such regulation or control over the production, supply and distribution of, and trade and commerce in, an essential commodity like foodstuffs may be exercised is by placing a ban on inter-State or intra-State movement of foodstuffs to ensure that the excess stock of foodstuffs held by a wholesale dealer, commission agent or retailer is not transported to places outside the State or from one district to another with a view to maximise the procurement of such foodstuffs from the growers in the surplus area for their equitable distribution at fair prices in the deficit areas. The placing of such ban on export of foodstuffs across the State or from one part of the State to another with a view to prevent outflow of foodstuffs from a State which is a surplus State prevents the spiral rise in prices of such foodstuffs by artificial creation of shortage by unscrupulous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the minerals. Since it is the State Government which is the owner of the minerals and the minerals that vest in it, as held in Amritlal Nathubhai Shah and Others v. Union Government of India and Another (1976) 4 SCC 108 , while granting the licence, it can put conditions pertaining to movement and flow of such minerals as well. He also took support from the following observations in Monnet Ispat and Energy Limited v. Union of India and Others (2012) 11 SCC 1 : 86...The judgment of this Court in Amritlal Nathubhai Shah establishes the distinction between the power of reservation to exploit a mineral as its own property on the one hand and the regulation of mines and minerals development under the 1957 Act and the 1960 Rules on the other. The authority of the State Government to make reservation of a particular mining area within its territory for its own use is the offspring of ownership; and it is inseparable therefrom unless denied to it expressly by an appropriate law by the 1957 Act that has not been done by Parliament. Setting aside by a State of land owned by it for its exclusive use and under its dominance and control, in my view, is an incident of sovereignty and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 301. Likewise, according to him, in Sudhir Ranjan Nath s case, this Court had held that once a provision made by the State as the delegate of Parliament to carry out the purposes of the Act is saved by Article 302, it will not be hit by Article 301. Such a rule, therefore, would not offend the principle of federalism. 26) Having regard to the fact that it is the Union which can regulate and control the minerals in this country and States exercise power of minor minerals as delegates of the Union, this Court had deemed it fit to issue notice of these proceedings to Union of India as well in order to elicit its stand on this issue. The Union of India has filed its reply, taking a specific stand that there is no such power to frame rule like 44-BB of the 1966 Rules or Rule 71 of the 2010 Rules. Ms. Madhavi Divan, learned Additional Solicitor General, appeared for Union of India and pitched the case to even a higher level. Her argument was that there is no such power even with the Union of India to frame rules of the nature impugned in these proceedings as these would be offensive of Article 301 of the Constitution. Therefore, under no circumstances, such a power can vest with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose necessary for industrial development on a national scale. She submitted that it is totally different proposition. She also pointed out that in the said case the finding that the State Government could enhance dead rent even during the subsistence of a lease has no application in the present case. Such observations of this Court in D.K. Trivedi Sons were in the context of enhancement of dead rent which is collected as a fixed amount in consideration for the grant of the lease by the lessor apart from royalty and is incidental to the regulation and development of mines and minerals which is avowed object of the MMDR Act as stated in its Preamble. But, in the present case, what is sought is a blanket prohibition of the sale of minor minerals beyond the borders of the State of Gujarat. She argued that on the other hand, both M.P.P. Kavery Chetty and K.T. Varghese were matters wherein what was sought to be controlled post grant of lease was the sale of the excavated minerals. Such restrictions were found to be beyond the powers granted to the State as a delegate of Parliament and were accordingly struck down. 28) The learned Additional Solicitor General also rebutted the argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olative of Article 301 of the Constitution as they seek to fetter the freedom of trade, commerce and intercourse. Highlighting the purpose behind Part XIII of the Constitution which starts with Article 301, she emphasised that it was to achieve economic integration. Further, balancing development and economic equality of the country is equally vital facet of economic integration, stressed the learned Additional Solicitor General. She referred to various judgments of this Court on the aforesaid aspects and concluded her submissions with the submission that the conclusion of the High Court in the impugned judgment was correct on this aspect as well. 32) Mr. D.N. Ray, Advocate, appeared on behalf of the private respondents and made his submissions almost on the same lines as argued by the learned Additional Solicitor General. Therefore, it is not necessary to repeat the same. 33) We have give our due consideration to the arguments advanced by the counsel for the parties on both sides. 34) From the subject matter of these appeals as well as arguments noted above, it clearly follows that the main issues that arise for consideration are as under: (a) Whether the impugned rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake under its control the regulation of mines and the development of minerals to the extent provided in the said Act. Section 13 empowers the Central Government to make rules for regulating the grant of prospecting licences and mineral leases in respect of minerals and for purposes connected therewith. Sub-section (1) of Section 15 empowers the State Government to make rules for regulating the grant of quarry leases, mining leases and other mineral concessions in respect of minor minerals and for purposes connected therewith. Sub-section (1-A) of Section 15 states that such rules may provide for the matters set out therein, namely, the person by whom and the manner in which an application for a quarry lease, mining lease and the like may be made; the fees to be paid therefor; the time and the form in which the application is to be made; the matters which are to be considered where applications in respect of the same land are received on the same day; the terms and conditions on which leases may be granted or regulated; the procedure in this behalf; the facilities to be afforded to lease-holders; the fixation and collection of rent and other charges and the time within which they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaint is that certain conditions in the form of restrictions have been incorporated while issuing the licences. One of such conditions which the appellants attack is that the minerals permitted to be stocked were to be purchased only from authorised quarrying permit-holders on that behalf. Another condition is that they are permitted to sell the minerals only within the State of Kerala, that too for domestic and agricultural purposes. The appellants' complaint is that as far as cooperative societies are concerned, they are not saddled with any such restrictions imposed in the case of the appellants. Thus, according to the appellants, there is a clear discrimination between the cooperative societies and the individuals in the matter of restrictions imposed in the licences granted to them. Apart from that there is no legal sanction for such restrictions. 38) Argument of Mr. Kapur that M.P.P. Kavery Chetty did not consider the earlier judgment in D.K. Trivedi Sons is misplaced. In this behalf, we entirely agree with the learned Additional Solicitor General that judgment in D.K. Trivedi Sons and other judgments cited by Mr. Kapur are clearly distinguishable as the context ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in the Act prohibiting transportation or storage or anything causing transportation or storage of any mineral except under the due provisions of the Act, with a view to preventing illegal mining. Further, the Act is proposed to be amended to cover the breach of the provisions of the proposed new provision of the Act to be punishable. It is also proposed to insert a new provision to provide for anything seized under the Act as liable for confiscation under court orders. A new section is proposed to be inserted to empower the State Governments to make rules for preventing illegal mining, transportation and storage of minerals and for purposes connected therewith. (emphasis supplied) 42) It is in this context the words transportation and storage in Section 23-C are to be interpreted. Here the two words are used in the context of illegal mining . It is clear that it is the transportation and storage of illegal mining and not the mining of minor minerals like sand which is legal and backed by duly granted license, which can be regulated under this provision. Therefore, no power flows from this provision to make rule for regulating transportation of the legally excavated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the matters relating to List II of the Seventh Schedule on the States. It also confers plenary powers on States to raise revenue for its purposes and does not require that every legislation of the State must obtain assent of the President. Constitution of India is an organic document. It must be so construed that it lives and adapts itself to the exigencies of the situation, in a growing and evolving society, economically, politically and socially. The meaning of the expressions used there must, therefore, be so interpreted that it attempts to solve the present problem of distribution of power and rights of the different States in the Union of India, and anticipate the future contingencies that might arise in a developing organism. Constitution must be able to comprehend the present at the relevant time and anticipate the future which is natural and necessary corollary for a growing and living organism. That must be part of the constitutional adjudication. Hence, the economic development of States to bring these into equality with all other States and thereby develop the economic unity of India is one of the major commitments or goals of the constitutional aspirations of this la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... backward areas which can be developed only if some special incentives are granted. If the incentives in the form of subsidies or grant are given to any part of (sic or) units of a State so that it may come out of its limping or infancy to compete as equals with others, that, in our opinion, does not and cannot contravene the spirit and the letter of Part XIII of the Constitution. However, this is permissible only if there is a valid reason, that is to say, if there are justifiable and rational reasons for differentiation. If there is none, it will amount to hostile discrimination . 46) In order to justify any preference or discrimination under Article 303, a scarcity of goods would have to be made out. It is a matter of record that the Study Group s report on which reliance is placed by the appellant focuses on the need to restrict the export of sand outside India and not within India. In any case, nothing prevents the appellant from restricting the quantum of sand being excavated. However, once the appellant State permits sand to be excavated, neither can it legally restrict its movement within the territory of India nor is the same constitutionally permissible. Likewise, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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