Scope of section 23-C of Mines and Minerals (Development and Regulation) Act, 1957

Validity of Rule 44-BB framed under Section 15 read with Section 23-C of the Mines and Minerals (Development and Regulation) Act, 1957 by Gujarat Government.

By way of Rule 44-BB, movement of sand beyond the border of the State of Gujarat was prohibited. Rule 44-BB reads as under:

“No movement of sand shall be allowed beyond the border of the State. In case any vehicle is found transporting sand to the neighbouring State, even with authorized royalty pass or delivery challan, it shall be treated as violation of the Act and the Rules made thereunder and the penal provisions as specified therein shall be applicable.”

3) Within two months thereafter, i.e. on August 26, 2010, the State of Gujarat also notified the Gujarat Minor Mineral Concession Rules, 2010 so as to repeal the Gujarat Minor Mineral Rules, 1966. Rule 71 of the new Rules was to the same effect as Rule 44-BB and the same is as under:

“Rule 71. Prohibition to transport sand beyond border.

– No movement of sand shall be allowed beyond the border of the State. In case any vehicle is found transporting sand to the neighbouring State even with authorized royalty pass or delivery challan, it shall be treated as violation of the Act and the rules made thereunder and the penal provisions, except compounding, as specified therein shall be applicable.”

Ultra vires:

The High Court has, vide impugned judgment, allowed the writ petitions and struck down the aforesaid Rules as ultra vires on the ground that the rule making power of the State Government does not empower and cannot be stretched to empower the State Government to make Rules directly prohibiting movement of mineral so as to impinge upon the freedom guaranteed by Article 301 of the Constitution. It may be noted here itself that a Division Bench of the Andhra Pradesh High Court in C. Narayana Reddy and etc. v. Commissioner of Panchayat Raj and Rural Employment, A.P., Hyderabad and others had taken a contrary view.

MMDR Act:

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 regulation of mines and development of minerals, to the extent provided in the Act. It is for this reason the Union took control insofar as regulation of mines and development of minerals is concerned. In order to exercise this control, no reconnaissance or mining operations in any area are allowed by any person except with the permission of the Central Government. Even transportation or storage is prohibited otherwise than in accordance with the provisions of the MMDR Act and the Rules made thereunder (Section 4).

Decision of Supreme Court:

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 minerals.

We are also of the considered opinion that the impugned rules violate Part XIII of the Constitution as the effect thereof is to fetter the freedom of trade, commerce and intercourse under Article 301 of the Constitution. Under this Article, the expression ‘freedom’ must be read with the expression ‘throughout the territory of India’. Under Article 302, Parliament may impose restrictions on the freedom of trade, commerce or intercourse between one State and another as may be required in the public interest. The expression ‘public interest’ may include a regional interest as well. However, Article 302 is qualified by Article 303 which prohibits Parliament and the State Legislatures from making any law that gives preference to one State over another or discriminates between one State and another. Situations of scarcity are to be dealt with by Parliament under Article 302(2). 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.

Restrictions on movement of goods:

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, there is no restriction on the State importing sand from other states. If it is the case that the demand of any State is not being met, it may purchase sand from other states. In any event, the market will dictate trade in sand inasmuch as it may make no business sense for mining company to transport and sell its sand in a far away destination after incurring large costs on transportation.

[Source: State of Gujarat vs Jayeshbhai Kanjibhai Kalathiya decided by SC on 1 March, 2019]
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