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TMI Blog2024 (11) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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. - CJI. DR. DHANANJAYA Y. CHANDRACHUD, J.B. PARDIWALA AND MANOJ MISRA JUDGMENT J.B. PARDIWALA, J.: 1. The petitioners have invoked the jurisdiction of this Court under Article 32 of the Constitution inter-alia seeking to challenge the validity of the Explanation to Rule 38 of the Mineral (Other than Atomic and Hydrocarbons Energy Minerals) Concession Rules, 2016 (for short, the MCR, 2016 ) and the Explanation to Rule 45(8)(a) of the Mineral Conservation and Development Rules, 2017 (for short, the MCDR, 2017 ) that stipulates the computation of royalty to be levied for the extraction or consumption of mined ores. A. BRIEF FACTUAL MATRIX 2. The petitioner no.1 herein is a mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exceed one-third of a tonne per month. (3) The Central Government may, by notification in the Official Gazette, amend the Second Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification: Provided that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of three years. 4. Section(s) 13 and 18 of the MMDR Act respectively further empowers the Central Government to frame Rules for regulating the grant of mineral concession and for the conservation and systematic development of minerals respectively. Pursuant to the above provisions, the Central Government enacted the Mineral Concession Rules, 1960 (for short, the MCR, 1960 ) which later came to be replaced by the MCR, 2016 for the computation and payment of royalty in terms of Section 9 read with Schedule II of the MMDR, Act. 5. The erstwhile MCR, 1960, more particularly Rule 64D that was inserted vide Notification bearing no. GSR 883(E) dated 10.12.2009, stipulated that the royalty to be paid for all non-atomic and non-fuel minerals would be computed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished by the Indian Bureau of Mines for primary gold, silver, copper, nickel, tin, lead and zinc during the period of computation of royalty as follows: Royalty = sale price X rate of royalty in percentage where sale price = Average price of metal as published by Indian Bureau of Mines during the month X Total contained metal in ore or concentrate produced X Rupee or Dollar exchange rate selling as on the last date of the month of computation of royalty: Provided that in case of by-product gold and silver the royalty shall be based on the total quantity of metal produced and such royalty shall be calculated as follows: Royalty = Sale price X rate of royalty in percentage Explanation - For the purpose of this sub-clause sale price means, average price of metal as published by Indian Bureau of Mines during the month X Total byproduct metal actually produced X Rupee or Dollar Exchange rate selling as on the last date of the month of computation of royalty. (iv) For bauxite or laterite ore despatched for use in alumina and aluminium metal extraction or despatched to alumina or aluminium metal extraction industry within India, the total contained alumina in the bauxite or laterite ore o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aximum of one-third of such royalty. Thereafter, the Mines and Minerals (Contribution to District Mineral Foundation) Rules, 2015 ( DMF Rules ) came to be enacted, Rule 2(a) of which stipulated that the contributions towards DMF shall be computed as ten percent of the royalty paid in accordance with the Second Schedule. On the other hand, the contributions towards the NMET under Section 9C of the MMDR Act, were calculated as a sum equivalent to two percent of the royalty paid. 9. On 04.03.2016, the Central Government vide Notification no. GSR 278(E) enacted and notified the MCR, 2016 rules replacing the erstwhile rules of MCR, 1960, in order to revamp the entire mechanism inter-alia for the calculation of royalty on minerals and the grant of concessions. 10. Rule 38 of the MCR, 2016 defines the term Sale Value as the gross amount payable as per the sale invoice where the sale transaction is on an arms length basis and such price is the sole consideration for the sale excluding taxes. The Explanation appended to the said rule further provides that for computation of Sale Value there shall no deduction in respect of royalty, payments or contributions towards DMF and NMET. The relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (b) where domestic sale has occurred, sale value of the mineral less the actual expenditure incurred towards transportation loading, unloading, rent for the plot at the stocking yard, charges for sampling and analysis and any other charges beyond mining lease area as notified by the Indian Bureau of Mines from time-to-time, divided by the total quantity sold. (c) where sale has occurred, between related parties and/or where the sale is not on arms length basis, then such sale shall not be recognized as a sale for the purpose of this rule and in such case, sub-clause (d) shall be applicable. (d) where sale has not occurred, the average sale price published monthly by the Indian Bureau of Mines for that mineral grade / concentrate for a particular State: Provided that if for a particular mineral grade / concentrate, the information for a State for a particular month is not published by the Indian Bureau of Mines, the last available information published for that mineral grade / concentrate for that particular State by the Indian Bureau of Mines in the last six months previous to the reporting month shall be used, failing which the latest information for All India for the mineral g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, less the actual expenditure incurred towards loading, unloading, transportation, rent for the plot at the stocking yard, charges for sampling and analysis and any other charges beyond mining lease area as notified by the Indian Bureau of Mines from time-to-time, divided by the total quantity sold; (III) where sale has occurred, between related parties and is not on arms length basis, then such sale shall not be recognised as a sale for the purposes of this rule and in such case, sub-clause shall be applicable; (IV) where the sale has not occurred, the average sale price published monthly by the Indian Bureau of Mines for that mineral grade or concentrate for a particular State: Provided that if for a particular mineral grade or concentrate, the information for a State for a particular month is not published by the Indian Bureau of Mines, the last available information published for that mineral grade or concentrate for that particular State by the Indian Bureau of Mines in the last six months previous to the reporting month shall be referred, failing which the latest information for all India for the mineral grade or concentrate, shall be referred; (V) the per unit cost of prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report has not been made publicly available, yet the Ministry of Mines pursuant to the aforesaid report has issued a Notice dated 25.05.2022 for public consultation on amending the MMDR Act to bring reforms in the mining sector by inter-alia proposing amendment to the relevant rules for removing the cascading impact of royalty on royalty in the calculation of the average sale price . The relevant portion of the aforesaid notice reads as under: - 1. Calculation of ASP: Removing the cascading impact of royalty on royalty (iv) A committee was constituted by the Ministry of Mines under chairmanship by Shri Praveen Kumar, /AS (Retd.) with members from Ministry of Mines, NIT/ Aayog, Ministry of Steel, Indian Bureau of Mines (IBM) and Indian Statistical Institute to examine the incidence of double calculation of royalty. The committee concluded that since the sale value already includes royalty, DMF and NMET, the Jessee pays royalty on royalty, DMF and NMET. Due to this, there is an additional charge on the miners under the current methodology. (vi) Accordingly, it is proposed to (i) introduce new section in the MMDR Act regarding ASP; (ii) the provision shall specifically provide that ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computing the sale value . He pointed out a similar method of computation in Rule 45(8)(a) of the MCDR, 2017 which prescribes the manner of filing of monthly and annual returns. 25. He submitted that the present petition seeks to challenge the Explanation to Rule 38 of the MCR, 2016 and Explanation to Rule 45(8)(a) of the MCDR, 2017 as they mandate the non-exclusion of royalty and the contributions made to DMF and NMET, in the computation of the sale value . 26. The learned senior counsel contended that the Impugned Explanations lead to a situation where the royalty as well as payments to DMF and NMET made previously, are included in the ASP, which, in turn, is used as the basis to compute royalty for the next month. Such method of computation of ASP effectively results in the payment of royalty as well as DMF and NMET contributions not only on the value of the ore/mineral, but also on the royalty, DMF and NMET contributions paid in the previous month. Thus, there is an imposition of royalty on a royalty. It was contended that the Impugned Explanations create a twin charge on royalty: first, a charge on the value of the mineral before payment of royalty at the prescribed rate; an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it is contemporeo exposito and is a valid aid of construction of the relevant Rules and the Impugned Explanations as per the dictum of this Court in K.P. Varghese v. ITO reported in (1981) 4 SCC 173. 31. Furthermore, such anomaly was remedied by the Ministry of Coal with respect to only coal by effecting an amendment to Schedule II of the MMDR Act, which defined actual price for the purpose of imposing royalty at ad valorem rates, to mean the sale invoice value of coal, net of statutory dues including taxes, levies, royalty, contribution to National Mineral Exploration Trust and District Mineral Foundation. The learned senior counsel submitted that remedying such anomaly for coal but not for iron ore creates a classification which has no intelligible differentia and is in violation of Article 14. 32. It was also submitted that lessees such as the petitioner herein, who have secured a mine in an auction, also pay a premium in terms of Rules 8 and 13(2) of the Mineral (Auction) Rules, 2015 respectively which is calculated on the basis of the flawed definition of ASP. 33. Dr. Singhvi while countering the submissions of the learned senior counsel for the Union of India, submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocation, In Re: Special Reference No. 1 of 2012 reported in (2012) 10 SCC 1 to submit that the methodology pertaining to disposal of natural resources is an economic policy entailing intricate economic choices. Therefore, the manner of computation of royalty is a matter of policy and must be left to the discretion of the executive and legislative authorities, as the case may be. 40. The learned ASG that the petitioner s challenge to the Impugned Explanations does not meet the threshold of manifest arbitrariness that is, whether an action was done or legislation was enacted capriciously, irrationally and/or without adequate determining principle, and cannot be excessive and disproportionate. He vehemently argued that no evidence or data was provided by the petitioner to show that the Impugned Explanations result in an endless monthly cumulative exaction of royalty. He submitted that the ASP for a succeeding month could in fact be lower than that of the previous month and no consistent monthly cumulative effect was possible. 41. Mr. Madiyal also contended that at the time of the auction of mining leases, the bids submitted are taking into consideration the existing legal regime, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of computation of the requisite royalty for subsequent months is manifestly arbitrary. The said mechanism of computation of royalty has a cascading effect on the rate of royalty for every subsequent month. (ii) Secondly, the exclusion of the royalty, and contributions towards DMF and NMET paid previously for coal but not for other minerals such as iron ore for computation of royalty is unreasonable and manifestly arbitrary. There exists no intelligible differentia between coal and iron ore or any other similar mineral and thus the act of the legislature in excluding the royalty, and contributions towards DMF and NMET for one but not for the other i.e., for coal but not for iron is in violation of Article 14 of the Constitution and thus, the Explanation(s) to Rule 38 of the MCR, 2016 and Rule 45 of the MCDR, 2017 is liable to be struck down. i. Whether the manner or mechanism of computation of royalty under the MCR, 2016 and MCDR, 2017 is manifestly arbitrary? 46. In M.P. Oil Extraction Anr. v. State of Madhya Pradesh Ors, reported in (1997) 7 SCC 592, this Court held that policy decisions are the domain of the executive authority of the State and that the courts should not emb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmitted cannot function properly unless each of the three organs appreciate the need for mutual respect and supremacy in their respective fields. (Emphasis supplied) 47. Similarly, in Premium Granites Anr. v. State of Tamil Nadu Ors. reported in (1994) 2 SCC 691, 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. The relevant observations read as under:- 54. It is not the domain of the Court to embark upon unchartered ocean of public policy in an exercise to consider as to whether the particular public policy is wise or a better, public policy can be evolved. Such exercise must be left to the discretion of the executive and legislative authorities as the case may be. (Emphasis supplied) 48. In yet one another decision of this Court in Delhi Science Forum and Others v. Union of India and Another reported in (1996) 2 SCC 405 it was observed that the courts should not express opinion as to whether a particular policy should be adopted or not, and no such direction can be given unless they pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself. The relevant observations read as under: - 93. Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the Courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved. For testing the correctness of a policy, the appropriate forum is the Parliament and not the Courts. xxx xxx xxx 98. In the case of a policy decision on economic matters, the Courts should be very circumspect in conducting any enquiry or investigation and must be most reluctant to impugn the judgement of the experts who may have arrived at a conclusion unless the Court is satisfied that there is illegality in the decision itself. (Emphasis supplied) 50. It is possible that at the relevant time in respect of some of the minerals, royalty was being computed without inclusion of the royalty, DMF and NEMT contributions previously paid, however, that does not mean that the Central Government s power is restricted and that the Central Government cannot alter the mode of computation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separation of powers supports the idea that each branch has a unique role, and mutual respect between these branches is essential for the proper functioning of government. The courts are to ensure that laws and policies do not infringe upon citizens' rights or exceed the authority granted by law. However, this role does not extend to evaluating whether a policy is wise or whether a better one could be devised, and rather this process is entrusted to the legislature and executive, which have the expertise to make these determinations. 54. The doctrine of judicial restraint, which is central to this discussion, emphasizes that courts should exercise caution and avoid involvement in policy decisions, as these are complex judgments that require a balancing of diverse and often competing interests. Policies are crafted based on thorough analysis of social, economic, and political factors, considerations beyond the court s purview. The court is tasked with ensuring that policies do not breach constitutional provisions or statutory limits; however, they should not replace policymakers' judgments with their own unless absolutely necessary. 55. Policy decisions often require the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cits, or budget allocations are best managed by the executive, which has access to economic data and is accountable to the public for its financial management. Judicial interference in such areas risks creating disruptions in the economic balance that policy- makers are trying to achieve. 59. Courts should assume that policy-makers act in good faith unless there is clear evidence to the contrary. As long as the policy does not contravene the Constitution or violate statutory provisions, it is not the role of the courts to question the wisdom or fairness of such policy. 60. While judicial restraint is essential in respecting the boundaries of each branch of government, it does not mean that courts abdicate their responsibility to protect constitutional rights. The courts must still intervene if a policy infringes on fundamental rights, discriminates unfairly, or breaches statutory provisions. The role of the court in such instances is to protect individuals and groups from unlawful actions while maintaining the overall integrity of the policy-making process. This balance ensures that while courts do not interfere in matters of policy wisdom, they remain vigilant guardians of constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n employee, but also applicable where voluntary retirement is sought by an employee. It cannot be said that no further restriction by Explanation has been added in a case where an employee has decided to obtain voluntary retirement. The public interest is the prime consideration on which authority has to decide such a prayer as per the rules applicable in the State of Uttar Pradesh. (Emphasis supplied) 65. What can be discerned from the above is that an Explanation must be read so as to harmonise with and clear up any ambiguity in the main section. It should not be so construed as to widen the ambit of the section. An explanation does not enlarge the scope of the original section that it is supposed to explain. It is axiomatic that an explanation only explains and does not expand or add to the scope of the original section. The purpose of an explanation is, however, not to limit the scope of the main provision. The construction of the explanation must depend upon its terms, and no theory of its purpose can be entertained unless it is to be inferred from the language used. An 'explanation' must be interpreted according to its own tenor. Sometimes an explanation is appended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. (Emphasis supplied) 68. Similarly in State of Tamil Nadu and Anr. v. National South Indian River Interlinking Agriculturist Association reported in (2021) 15 SCC 534 it was held that courts should show a higher degree of deference to matters concerning economic policy. The relevant observations read as under: - 11. It is also settled that the Courts would show a higher degree of deference to matters concerning economic policy, compared to other matters of civil and political rights. 69. While examining the challenge to the validity of laws relating to economic activities, the courts must be slow and circumspect. A higher degree of deference needs to be shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Tata Steel Ltd. v. Union of India, reported in (2015) 6 SCC 193 while examining Rule 64B of the erstwhile MCR, 1960 has observed that the aforesaid rules were general in nature and applicable to types of minerals including coal. This Court rejected the categorization of coal on a different pedestal from other minerals under the MMDR Act for the purpose of levy of royalty. The relevant observations read as under: - 70. There is nothing to indicate in Rule 64-B and Rule 64-C of the MCR that coal has been put on a different pedestal from other minerals mentioned in the MMDR Act read with the Second Schedule thereto. It is, therefore, difficult to accept the view canvassed by the Union of India that these Rules may not be particularly applicable on coal minerals . That apart, the stand of the Union of India is not definite or categorical ( may not be ). In any event, we are not bound to accept the interpretation given by the Union of India to Rule 64-B and Rule 64-C of the MCR as excluding only coal. On the contrary, in NMDC [National Mineral Development Corpn. Ltd. v. State of M.P., (2004) 6 SCC 281] this Court has observed that these Rules are general in nature, applicable to all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the MCR, 2016 and Rule 45 of the MCDR, 2017. We direct the respondents to conclude the process of public consultation in respect of the compounding of royalties and take a well-meaning decision keeping in mind the representations made by the petitioners herein. 78. We may remind the respondents that, it cannot continue to keep the aforesaid issue in limbo on the pretext of ongoing process of public consultation process. In this regard, we may refer to the decision in State of Jharkhand v. Brahmputra Metallics Ltd., reported in (2023) 10 SCC 634, wherein the following observations of this Court are significant: - 50. It is one thing for the State to assert that the writ petitioner had no vested right but quite another for the State to assert that it is not duty-bound to disclose its reasons for not giving effect to the exemption notification within the period that was envisaged in the Industrial Policy, 2012. Both the accountability of the State and the solemn obligation which it undertook in terms of the policy document militate against accepting such a notion of State power. The State must discard the colonial notion that it is a sovereign handing out doles at its will. Its polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we must make a reference to the decision in Narottam Kishore Deb Varman v. Union of India, reported in (1964) 7 SCR 55 wherein this Court was called upon to decide a batch of petitions challenging the validity of Section 87B of the Code of Civil Procedure, 1908. In the said decision, although this Court stopped short from holding the provision as unconstitutional yet it called upon the government to examine if the provision was to be allowed to continue for all times to come. It further observed that the considerations on which the validity of the provision is founded will wear out with the passage of time and may later become open to a serious challenge. The relevant observations read as under: - 11. Before we part with this matter, however, we would like to invite the Central Government to consider seriously whether it is necessary to allow Section 87-B to operate prospectively for all time. The agreements made with the Rulers of Indian States may, no doubt, have to be accepted and the assurances given to them may have to be observed. But considered broadly in the light of the basic principle of the equality before law, it seems somewhat odd that Section 87-B should continue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd remove the inequality arising out of the application of the Madras Act of 1951 to the district of South Kanara only, the Act will have to suffer a serious and successful challenge in the not distant future. We do hope that the Government of Karnataka will act promptly and move an appropriate legislation, say, within a year or so . A comprehensive legislation which will apply to all temples and Mutts in Karnataka, which are equally situated in the context of the levy of fee, may perhaps afford a satisfactory solution to the problem. This, however, is a tentative view-point because we have not investigated whether the Madras Act of 1951, particularly Section 76(1) thereof, is a piece of hostile legislation of the kind that would involve the violation of Article 14. Facts in regard thereto may have to be explored, if and when occasion arises . (Emphasis supplied) 83. In view of the decisions referred to above, we may only say that since the respondents herein are already in seisin of the anomaly in computation of royalty and the policy is being reconsidered on the grounds raised by the petitioners herein, we do not say anything further as regards the provisions in question other th ..... 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