STATE OF GUJARAT AND OTHERS ETC. versus JAYESHBHAI KANJIBHAI KALATHIYA ETC.
[2019] 4 S.C.R. 96, Supreme Court of India, 2019
Outcome: Dismissed (Dismissed)
Segment: Ratio
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STATE OF GUJARAT AND OTHERS ETC.
v.
JAYESHBHAI KANJIBHAI KALATHIYA ETC.
(Civil Appeal Nos. 10373-10374 of 2010)
MARCH 01, 2019
[A. K. SIKRI, S. ABDUL NAZEER AND M. R. SHAH, JJ.]
Mines and Minerals:
Minor minerals – Resolution by State Government prohibiting
export of ordinary sand excavated in the State, to other States and
to other countries – Thereafter State in exercise of powers conferred
u/s. 15 r/w s.23-C of MMDR Act amended Gujarat Minor Mineral
Rules by inserting r. 44-BB and thereby prohibited movement of the
sand beyond the State – Writ petition challenging the Resolution as
well as insertion of r. 44-BB – High Court allowed the petition – On
appeal, held: Section 15(1) does not empower the State Government
to make rules for regulating grant of quarry leases, mining leases
or other concessions in respect of minor minerals – No such power
flows from even s.23-C to make rule for regulating transportation
of the legally excavated minerals – Impugned Rules also violate
Part XIII of the Constitution as the effect thereof is to fetter the
freedom of trade, commerce and intercourse u/Art. 301 – In view of
scheme of Chapter XIII, State Government could not have imposed
such prohibition under a statute whose object is to regulate mines
and minerals development and not trade and commerce per se –
Mines and Minerals (Development and Regulation) Act, 1957 – ss.
15 and 23-C – Gujarat Minor Mineral Rules, 1966 – r.44-BB –
Constitution of India – Part XIII – Arts. 301, 302 and 303.
Dismissing the appeals, the Court
HELD: 1. Power of the State Government under Section
15 of the Mines and Minerals (Development and Regulation)
Act, 1957 (MMDR Act) does not include control over minor
minerals after they are excavated.  Therefore, it is not correct
that sub-section (1) of Section 15 of MMDR Act empowers the
State Government to make rules for ‘regulating’ the grant of
quarry leases, mining leases or other concessions in respect of
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minor minerals and for the purposes connected therewith. Section
23-C of the MMDR Act was inserted by the Amendment Act of
1999 with the objective to prevent illegal mining.  That is clearly
spelled out in the Statement of Objects and Reasons. The words
‘transportation’ and ‘storage’ in Section 23-C 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. [Paras 35, 36, 41 and 42][120-A-
D; 123-G; 124-C, D]
State of Tamil Nadu v. M.P.P. Kavery Chetty (1995) 2
SCC 402 : [1995] 1 SCR 441; K.T. Varghese & Ors. v.
State of Kerala & Ors. (2008) 3 SCC 735 : [2008] 1
SCR 1205  – relied on.
D.K. Trivedi & Sons and Others v. State of Gujarat and
Others (1986) Supp SCC 20 : [1986] SCR 479; Amritlal
Nathubhai Shah and Others v. Union Government of
India and Another (1976) 4 SCC 108 : [1977] 1 SCR
372  – distinguished.
2.1 The impugned rules also 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
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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. [Para 43][124-E-H; 125-A]
2.2  Balanced development of the country is an equally vital
facet of economic integration.  No doubt, Part XIII permits some
forms of differentiation, for example, to encourage a backward
region or to create a level playing field for parts of the country
that may not have reached the desired level of development.  In
this context, Part XIII envisions a two-fold object: (i) facilitation
of a common market through ease of trade, commerce and
intercourse by erasing barriers; and (ii) Regulations (or
restrictions) which may have the effect of differentiating between
States or regions which may be necessary not only in emergent
circumstances of scarcity etc. or but even for development of
economically backward regions or otherwise justified in the public
interest.  That Part XIII is not about “freedom” alone but is a
code of checks and balances, intended at achieving economic
unity and parity. [Para 45][126-A-C]
Video Electronics Pvt. Ltd. & Anr. v. State of Punjab &
Anr. (1990) 3 SCC 87 : [1989] 2 Suppl. SCR 731  –
relied on.
2.3 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
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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.
[Para 46][127-B-D]
C. Narayana Reddy and etc. v. Commissioner of
Panchayat Raj and Rural Employment, A.P. Hyderabad
and others AIR 2004 AP 234; State of Tamil Nadu v.
Hind Stone and Others (1981) 2 SCC 205 : [1981] 2
SCR 742; T.N. Godavarman Thirumulpad v. Union of
India and Others (2006) 1 SCC 1 : [2005] 3 Suppl.
SCR 552; Uttar Pradesh Power Corporation Limited v.
National Thermal Power Corporation Limited and
Others (2009) 6 SCC 235 : [2009] 3 SCR 1060; K.
Ramanathan v. State of Tamil Nadu and Another (1985)
2 SCC 116 : [1985]  2 SCR 1028; U.P. Cooperative
Cane Unions Federations v. West U.P. Sugar Mills
Association and Others (2004) 5 SCC 430 : [2004] 2
Suppl. SCR 238; Monnet Ispat and Energy Limited v.
Union of India and Others (2012) 11 SCC 1 : [2012] 7
SCR 644; State of  Tripura and Others v. Sudhir Ranjan
Nath (1997) 3 SCC 665 : [1997] 2  SCR  29  – referred
to.
Case Law Reference
AIR 2004 AP 234
referred to
Para 4
[1981] 2 SCR 742 
referred to
Para 15
[2005] 3 Suppl. SCR 552
referred to
Para 15
[1986] SCR  479
distinguished Para 17
[2009] 3 SCR 1060 
referred to
Para 19
[1985]  2 SCR
1028
referred to
Para 19
[2004] 2 Suppl. SCR 238
referred to
Para 20
[1995]  1 SCR  441
relied on
Para 21
[1977] 1 SCR 372 
distinguished Para 22
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[2012] 7 SCR 644
referred to
Para 22
[1997] 2 SCR  29 
referred to
Para 24
[2008] 1 SCR 1205 
relied on
Para 26
[1989] 2 Suppl. SCR 731
relied on
Para 44
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
10373-10374 of 2010.
From the Judgment and Order dated 19.10.2010 of the High Court
of Gujarat at Ahmedabad in Special Civil Application Nos. 6204 of 2010
with Special Civil Application Nos. 7321 of 2010.
Mrs. Madhavi Divan, A.S.G., Ashok Kumar Panda, Sr. Adv.,
Pritesh Kapur, Ms. Hemantika Wahi, Ms. Jesal Wahi, Ms. Puja Singh,
Ms. Vishakha, Amit Sharma, A.K. Kaul, Ms. Rekha Pandey, S. Wasim
A. Qadri, Raj Bahadur, Arun Kumar Yadav, Mrs. Sumita Ray, D.N.
Ray, Lokesh K. Choudhary, Dilip Kumar Nayak, Ms. Disha Ray, Mrs.
Sumita Ray, Praveen Kumar Rai and Hemal Kiritkumar Sheth, Advs.
for the appearing parties.
The Judgment of the Court was delivered by
A. K. SIKRI, J. 1. Two writ petitions were filed in the High
Court of Gujarat under Article 226 of the Constitution of India.  One writ
petition was filed by a single person (respondent herein) who had been
awarded contract for one year to extract, collect, gather and remove
ordinary sand from river Tapi falling within certain area at village Amboli,
Taluka Kamrej, Surat.  The sand being a mine and mineral, it is the State
Government which is empowered to grant such 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,
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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 Gujarat
Minor Mineral Rules, 1966 by making the Gujarat Minor Mineral
(Amendment) Rules, 2010 with the insertion of Rule 44-BB, with
immediate effect.  This amendment was done in purported exercise of
powers conferred under Section 15 read with Section 23-C of the Mines
and Minerals (Development and Regulation) Act, 1957 (hereinafter
referred to as the ‘MMDR Act’).  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.”
4. This led the respondents to amend the writ petitions thereby
incorporating challenge to Rule 44-BB of Amendment Rules as well as
Rule 71 of the Concession Rules.  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
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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 others1 had taken a contrary view.  Likewise, the
Madras High Court had also decided this issue vide its judgment dated
April 27, 2009 in D. Sivakumar v. Government of Tamil Nadu2 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 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).
7. Section 13 of the MMDR Act empowers the Central
Government to make rules in respect of minerals.
 1 AIR 2004 AP 234
 2 Writ Petition Nos. 23317 and 24211 of 2008
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8. It follows from the above that as far as minor minerals are
concerned, limited powers are given to the State Government inasmuch
as under Section 15 of the MMDR Act the State Government is
authorised to make rules in respect of minor minerals. Relevant portions
of this Section read as under:
“15.  Power of State Governments to make rules in respect
of minor minerals. – (1)  The State Government may by
notification in the Official Gazette make rules for regulating the
grant of quarry leases, mining leases or other mineral concessions
in respect of minor minerals and for purposes connected therewith.
(1A)  In particular and without prejudice to the generality of the
foregoing power, such rules may provide for all or any of the
following matters, namely –
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(d)  the terms on which, and the conditions subject to which and
the authority by which quarry leases, mining leases or other mineral
concessions may be granted or renewed;
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(o)  any other matter which is to be, or may be prescribed.
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 9. There was an amendment to this Act by way of Mines and
Minerals (Regulation and Development) Amendment Act, 1999 (No. 38
of 1999) which became effective from December 18, 1999.  By this
Amendment Act, Section 4(1A), Section 23-A and Section 23-C were
inserted.  We would like to reproduce these sections along with the
Statement of Objects and Reasons which prompted the Legislature to
insert these provisions:
STATEMENT OF OBJECTS AND REASONS
The
Mines and Minerals (Regulation and Development) Act, 1957
provides for the regular and development of minerals other than
petroleum and natural gas.  Consequent upon the decisions taken
in the Conference of the State Ministers/Secretaries of Mines
and Geology held in December, 1996, a Committee under the
Chairmanship of the then Secretary, Ministry of Mines was
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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
wide-ranging 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:
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(iii)  A new provision is proposed to be inserted 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.
Section 4(1A)
No person shall transport or store or cause to be transported or
stored any mineral otherwise than in accordance with the provisions
of this Act and the rules made thereunder.
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Section 23-C
(1)  The State Government may, by notification in the Official
Gazette, make rules for preventing illegal mining, transportation
and storage of minerals and for the purposes connected therewith.
(2)  In particular and without prejudice to the generality of the
foregoing power, such rules may provide for all or any of the
following mattes, namely:–
(a)  establishment of check-posts for checking of minerals under
transit;
(b)  establishment of weigh-bridges to measure the quantity of
mineral being transported;
(c)  regulation of mineral being transported from the area granted
under a prospecting licence or a mining lease or a quarrying
licence or a permit, in whatever name the permission to
excavate minerals, has been given;
(d)  inspection, checking and search of minerals at the place of
excavation or storage or during transit;
(e)  maintenance of registers and forms for the purposes of
these rules;
(f)  the period within which and the authority to which
applications for revision of any order passed by any authority
be preferred under any rule made under this section and the
fees to be paid therefor and powers of such authority for
disposing of such applications; and
(g)  any other matter which is required to be, or may be,
prescribed for the purpose of prevention of illegal mining,
transportation and storage of minerals.
(3)  Notwithstanding anything contained in section 30, the Central
Government shall have no power to 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
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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 or
other mineral concessions in respect of minor minerals and for the
purposes connected therewith; and
(b)  making rules for preventing illegal mining, transportation and
storage of minerals and for the purposes connected therewith.
12. In the aforesaid context, question arose before the High Court
as to whether in exercise of such powers delegated by the Legislature
upon the State Government, could the State Government make a rule to
the effect that the sand which is a minor mineral would not be allowed to
be taken beyond the borders of the State of Gujarat and making such
movement as punishable offence.  According to the High Court,
delegation of powers to the State Government under the aforesaid
provisions does not include or envisage restriction on inter-State trade,
commerce and intercourse which shall be free.  Thus, the
impugned
rules are held to be ultra vires the provisions of Section 15 and 23-C of
the MMDR Act.  They are also held to be violative of Article 301 of the
Constitution.  Relevant discussion on this aspect by the Gujarat High
Court in the impugned judgment runs as under:
“14.  As seen earlier, the provisions of section 4(1-A) and section
23-C were simultaneously added by the amendment of 1999, with
the objective of prohibiting transportation or storage of any mineral,
except in accordance with the provisions of the Act and the Rules
made in that behalf, with a view to preventing illegal mining.
Prohibition or restriction of inter-State trade of any mineral was
neither intended nor provided or envisaged either expressly or by
necessary implication.  On the other hand, delegation of powers
to make rules either in section 15 or in section 23-C of the Act is
not couched in general terms as in section 18.  Section 18
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exclusively empowers the Central Government to make such rules
as it thinks fit for the purpose of conservation and development of
minerals in the whole country.  Apart from delegation of such
powers couched in wider terms, the Central Government is
specifically authorized to make rules for regulation of excavation
or collection of minerals from any mine as well as for storage of
minerals.  As against that, the State Government is empowered to
make rules, in respect of all minerals, for regulation of minerals
being transported from the area granted under a prospecting
licence or a mining lease or a quarry licence or a permit.  The
context and the composite scheme of the Act contained in the
provisions of sections 4(1-A), 15, 18, 21 and 23-C clearly indicate
that the delegation of power to regulate or make rules for
transportation or storage of minerals, including minor 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 High Court proceeds to decide the
issue in the following manner:
“27.  Sector 23-C of the Act authorises the State Government to
make rules not only for the purpose of preventing illegal mining
but also for transportation and storage of minor minerals, which
power would imply that even after the minor mineral has been
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mined, the power is conferred on the State Government to frame
Rules for such mined minor mineral as regards its storage and/or
its transportation and also to frame rules to see that no illegal
mining activity is carried on.  Sub-clauses (a) to (g) of Clause (2)
of Section 23-C are illustrative of the matters, which are covered
under the rule making power.  Sub-section (2) says that in particular
and without prejudice to the generality of the powers conferred
under Section 23-C, rules may provide for all or any of the said
matters.  Sub-clause (c) itself say that regulations can be framed
of mineral being transported from the area granted under the
licence or a mining lease.  Rules can be framed on any of the
matters including transportation of the excavated mineral.  Section
23-C is the source of power under which Rule 9-W can be said to
have been framed by the State Government.  We have to keep in
mind that the Parliament passed the Amendment Act, 1999 (Act
No. 38 of 1999) thereby inserting Section 23-C in the Principal
Act after the decision of the Supreme Court in Kavery Chetty’s
case (supra).  By the said provision, power was specifically
conferred on the  State Government to make rules for preventing
illegal mining, transportation and storage of minerals.  The State
Government has framed the Rules thereafter.  Thus, there is ample
power with the State Government to frame Rules regarding
transportation of the
excavated minor mineral, which would include
restriction on the transport of the said minor mineral beyond the
limits of the State borders.  In this view of the matter, the challenge
to Rule 9-W is without any substance.”
14. Likewise, the Madras High Court has proceeded to discuss
the issue as follows:
“13.  Definition of the word ‘Regulation’
Shri V.T. Gopalan has contended that the word ‘regulation’
mentioned in Section 23-C of the Act should not be construed to
mean prohibition.  He further contended that a total prohibition is
impermissible in law, violative of Article 19(1)(g) and, therefore,
the impugned rule is liable to be declared 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
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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. Attorney-General 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
word ‘regulation’ has no fixed connotation. Its meaning differs
according to the nature of the thing to which it is applied.” In
modern statutes concerned as they are with economic and
social activities, “regulation” must, of necessity, receive so wide
an interpretation that in certain situations, it must exclude
competition to the public sector from the private sector. More
so in a welfare State. It was pointed out by the Privy Council
in Commonwealth of Australia v. Bank of New South Wales
— and we agree with what was stated therein — that the
problem whether
an enactment was regulatory or something
more or whether a restriction was direct or only remote or
only incidental involved, not so much legal as political, social or
economic consideration and that it could not be laid down that
in no circumstances could the exclusion of competition so as
to create a monopoly, either in a State or Commonwealth
agency, be justified. Each case, it was said, must be judged on
its own facts and in its own setting of time and circumstances
and it might be that in regard to some economic activities and
at some stage of social development, prohibition with a view to
State monopoly was the only practical and reasonable manner
of regulation. The statute with which we are concerned, the
Mines and Minerals (Development and Regulation) Act, is
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aimed, as we have already said more than once, at the
conservation and the prudent and discriminating exploitation
of minerals. Surely, in the case of a scarce mineral, to permit
exploitation by the State or its agency and to prohibit exploitation
by private agencies is the most effective method of conservation
and prudent exploitation. If you want to conserve for the future,
you must prohibit in the present. We have no doubt that the
prohibiting of leases in certain cases is part of the regulation
contemplated by Section 15 of the Act.”
Similarly, in (2000) 8 SCC 655 (Quarry Owners’ Assocation v.
State of Bihar) it has been held that the word ‘regulation’ will
have to be given a wide interpretation taking into consideration of
social, economic and political justice.  We are of the opinion that
while deciding as to whether the prohibition is reasonable, the
Court has to take into consideration the greater public and social
interest as against the fundamental right of the citizen.  In (2003)
7 SCC 59 (Indian Handicrafts Emporium v. Union of 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.
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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 found by the Expert Committee, due to
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over exploitation and indiscriminate mining of river sand, the
environment and the eco-system got very much affected.  The
Expert Committee has also found out that the indiscriminate mining
has resulted in deepening of the river beds, widening of the rivers,
damage of civil structures, depletion of ground water table,
degradation of ground quality, damage to the rivers system and
reduction of bio-diversity.  Therefore, what is important is to use
the barest minimum of sand for developmental activities.  If the
sand is allowed to be transported due to the demands in various
places outside the State it would only increase the demand for
more sand.  This in turn would affect the environment seriously.
Hence, one has to see the impact on the natural resources.
Whether it is authorized or not, legal or illegal what is important is
the conservation and protection of the environment.  The right to
clean environment is a guaranteed fundamental right under Article
21.  Article 48-A of the Constitution speaks about protection and
improvement of environment and Article 51(A) of the Constitution
deals with the fundamental duties to protect and improve the natural
environment including forest, lakes, rivers and wild life.  The
Hon’ble Supreme has held in (2003) 7 SCC 589 (Indian
Handicrafts Emporium v. Union of India) that the implementation
of Directive principle is within the expression of restriction in the
interest of general public.  Hence, we hold that from the
environmental perspective also the impugned rule has to be
sustained.”
15. The Court also took aid of the doctrine of public trust as
enunciated in State of Tamil Nadu v. Hind Stone and Others3 as well
as T.N. Godavarman Thirumulpad v. Union of India and Others4.
16. Mr. Pritesh Kapur, learned counsel appearing for the State of
Gujarat submitted in the first instance that scope of language used in
Section 15(1) of the MMDR Act was extremely wide as per which the
Parliament had delegated to the States entire power to make rules for
regulating the grant of quarry leases, mining leases or other mineral
concessions in respect of minor minerals and for purposes connected
therewith.  According to him, this Court, by a series of judgments, settled
the following propositions:
 3 (1981) 2 SCC 205
 4 (2006) 1 SCC 1
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(i) The power to regulate under Section 15(1) is plenary and the
Parliament 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 Others5 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 lease.  After tracing the
legislative history in respect of minor minerals, it was observed that by
virtue of the Act the whole of the field was taken over by Parliament
and thereafter all
powers in respect of minor minerals had been delegated
to the State Governments.  The Court also observed, inter alia, that the
power to regulate minor minerals under Section 15 is extremely wide;
that control over minor minerals fell exclusively within the domain of the
State Governments;  that minor minerals have historically been viewed
by the Legislature, both pre and post Independence, as being for the use
of local areas and local purposes; and it is left to the State Governments
to prescribe such restrictions as they think fit by rules made under
Section 15(1).
18. From the above judgment, his line of action was that if the
power of regulation permits the States to utilise the minor minerals for
the benefit of the State through its own agency, it would necessarily also
encompass the power to ensure that even private parties utilise the sand
within the State as a condition of the lease.  Furthermore, the argument
 5 1986 Supp SCC 20
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that sub-section (1) of Section 15 is for regulating the grant of leases
and other mineral concessions in respect of minor minerals and that
rules under that sub-section can be made only with respect to the time
when such leases or concessions are granted and not with respect to
any point of time subsequent thereto, was specifically considered and
rejected in the case of D.K. Trivedi & Sons.
19. Mr. Kapur also argued that a three Judge Bench of this Court
in Uttar Pradesh Power Corporation Limited v. National Thermal
Power Corporation Limited and Others6 has reiterated the view that
the power of regulation conferred upon an authority is not spent or
exhausted with the grant of permission.  He relied upon the judgments in
Hind Stone and K. Ramanathan v. State of Tamil Nadu and Another7
wherein this Court reiterated that the word ‘regulate’ must be given the
widest amplitude.  He submitted that in K. Ramanathan’s case this
Court was considering the validity of an order issued by the State
Government under the Essential Commodities Act banning the transport
of paddy outside the State.  In that context, this Court has observed that:
“19...At the same time, the power to regulate carries with it full
power over the thing subject to regulation and in 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…
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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
 6 (2009) 6 SCC 235
 7 (1985) 2 SCC 116
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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 traders...These
are nothing but regulatory measures.”
20. Mr. Kapur further submitted that the above observations and
the expansive interpretation given to the power of regulation in both the
aforesaid cases have been approved by a Constitution Bench of this
Court in U.P. Cooperative Cane Unions Federations v. West U.P.
Sugar Mills Association and Others8.  In this case, the Constitution
Bench was considering the competence of the State Government to fix
the State advised price for purchase of sugarcane by an occupier of a
sugar factory over and above the minimum price fixed by the Central
Government.  The relevant section, i.e. Section 16, also provided merely
a power of regulation and the power to provide for terms and conditions
and did not grant the power to fix prices.  Discussing that aspect, it was
observed as under:
“...”Regulate” means to control or to adjust by rule or to subject
to governing principles.  It is a word of broad impact having wide
meaning comprehending all facets not only specifically enumerated
in the Act, but also embraces within its fold the powers incidental
to the regulation envisaged in good faith and its meaning has to be
ascertained in the context in which it has been used and the purpose
of the statute.”
21. On the basis of the aforesaid judgments, submission of Mr.
Kapur was that this Court has consistently held that power to regulate
was of widest amplitude and, therefore, it would encompass power to
regulate the movement of minor minerals as well, including the condition
not to transport the excavated sand outside the State of Gujarat in the
lease itself.  He submitted that this Court in State of Tamil Nadu v.
M.P.P. Kavery Chetty9 held that there is no power conferred upon the
State Government under the MMDR Act to exercise control over the
minor minerals after they have been excavated.  His submission was
that this is the only judgment which has taken discordant note and while
deciding this, the earlier judgment in D.K. Trivedi & Sons was not brought
to the notice of the Court.
22. Another submission of Mr. Kapur was that power to frame
 8 (2004) 5 SCC 430
 9 (1995) 2 SCC 402
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such a rule can be traced to Section 15(1A)(d) of the MMDR Act.  This
section empowers the State Government to impose conditions in a mining
lease and, therefore, would include the power to impose all such conditions
as flown from the ownership of 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 Another10, 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 Others11:
“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 ownership.”
23. In any case, argued Mr. Kapur, power to frame the
impugned
rule is conferred by Section 23-C of the MMDR Act as well.  According
to him, it would be erroneous to contend that the word ‘illegal’ occurring
in Section 23-C (1) must qualify the words ‘transportation and storage’
as well.  In any event, there are no such qualifying words in sub-section
(2)(c) which grants a power ‘without prejudice’ to sub-section (1).
Therefore, the two sub-sections must be construed independently and
neither can cut down the width of the other.
24. He also argued that while construing a similar power to regulate
transport of forest produce, this Court upheld a rule prohibiting transport
beyond the borders of the State in the case of State of Tripura and
Others v. Sudhir Ranjan Nath12 in the following words:
“...The object of the Act is to preserve and protect the forest
wealth of the country and to regulate the cutting, removal, transport
 10 (1976) 4 SCC 108
 11 (2012) 11 SCC 1
 12 (1997) 3 SCC 665
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and possession of the forest produce in the interest of the States
and their people.  It is for achieving the above purpose that the
Act provides for declaration of reserve forests, formation of village
forests and declaration of protected forests.  It is for achieving
the very purpose that the Act vests, in the Government, control
over forest and lands not being the property of the Government
and controls even the collection and movement of drift and stranded
timber.  It is not a taxing enactment but an enactment designed to
preserve, protect and promote the forest wealth in the interests of
the nation.  It must necessarily take within its fold catering to the
needs of the people of the State and that is what sub-rule (8)
provides.  In our opinion, therefore, sub-rule (8) of Rule 3 is
perfectly valid.”
25. Last submission of Mr. Kapur was that once it becomes clear
that power to regulate minor minerals conferred upon the State
Government would include power to regulate its movements as well,
there was no question of treating the same as violative of Article 301 of
the Constitution.  For this purpose, he relied upon certain judgments of
this Court.  Referring to the case of Hind Stone, he submitted that in
that case the Court specifically held that regulatory measures or measures
imposing compensatory taxes for the use of trading facilities do not come
under the purview of restrictions contemplated by Article 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
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301 of the Constitution.  Therefore, under no circumstances, such a
power can vest with the State Government.  She argued that Section 15
which empowers the State Government to make rules in respect of minor
minerals does not extend to the regulation of already excavated minor
minerals under the terms and conditions of a mining lease.  This is made
clear by the three Judge Bench in M.P.P. Kavery Chetty wherein this
Court upheld the striking down of rules made by the State Government
to fix minimum price for the sale of granite after its excavation.  The
Court emphatically held that the State Government had no power under
Section 15 of the MMDR Act to exercise to control over minor minerals
after they had been excavated.  The power under Section 15 was
restricted and did not empower the State to control the sale or sale price
of minor minerals once they had been mined.  The latter judgment has
been followed in another three Judge Bench judgment in K.T. Varghese
& Ors. v. State of Kerala & Ors.13.  In the latter case, one of the
impugned conditions of the license was that minerals could be sold only
within the State of Kerala, that too for domestic and agricultural purposes.
The same was found impermissible.  She also submitted that there is no
conflict whatsoever between the judgments of this Court in Amritlal
Nathubhai Shah and D.K. Trivedi & Sons on the one hand and M.P.P.
Kavery Chetty on the other.  Her contention was that in Amritlal
Nathubhai Shah,
while it was emphatically stated that the State
Government is the ‘owner of minerals’ within its territory and minerals
vest in it, this was held in the context of a challenge to the reservation by
the State Government of certain areas of exploitation of bauxite in the
public sector.  Private parties challenged the notification to that effect
and the Central Government to whom they applied for revision held that
the minerals vested in the State Government which was its owner and
that the State Government had the inherent right to reserve any area for
exploitation in the public sector.  She did not quarrel with such a
proposition.  However, her caveat was that this was a matter where
there were no leases in favour of private parties but rather the private
parties were petitioning the government for the grant of leases.
27. Likewise, in D.K. Trivedi & Sons, this Court held that minor
minerals are used mostly in local areas and for local purposes while
minerals other than minor minerals are those 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
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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
argument of the appellants that power to regulate would encompass
power to restrict the movement beyond the State. She argued that while
it is well settled that the expression ‘regulation’ has many shades of
meaning and can refer to prohibition (Sudhir Ranjan Nath and Hind
Stone), the issue in the present case is whether a prohibition on the
transportation of legally mined materials can be imposed under the
provisions of the
MMDR Act.  There is no doubt that a prohibition can
be imposed on mining under certain circumstances or on the grant of
leases under the aforesaid Act but not on transportation de hors illegal
mining.
29. In this hue, the learned ASG submitted that Section 23-C was
inserted with specific object to curb ‘illegal mining’.  Therefore, the
words ‘transportation’ and ‘storage’ occurring therein would take their
colour from the expression ‘illegal mining’ on the principle of noscitur a
sociis.  That was clear from the Statement of Objects and Reasons as
well.  On the aforesaid basis, Ms. Divan submitted that the High Court
rightly concluded that there was lack of power with the State Government
to make such a provision which could neither be traced to Sections 15,
15(1A) or 23 of the MMDR Act.
30. The learned Additional Solicitor General additionally argued
that there was no question of public interest as well.  On this aspect, her
contention was that Parliament was wholly conscious of the environmental
concerns impacted on account of mining activity, which concern is
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reflected in Section 4A of the MMDR Act.  This provision provides for
termination of prospecting licenses or mining leases on account of
expediency in the interest of, inter alia, reservation of the natural
environment and conservation of mineral resources. Further, Section 18
provides that it shall be the duty of the Central Government to take all
such steps as may be necessary for the conservation and systematic
development of minerals in India and for the protection of environment
by preventing or controlling any pollution which may be caused by
prospecting mining operation.  In this regard, the Central Government is
empowered to make rules as it thinks fit.  In other words, there are
specific provisions empowering the Central Government to make rules
in respect of conservation of minerals in the interest of the environment.
31. Ms. Divan also argued that the impugned rules are violative
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 rules framed by the State of Gujarat
as a delegate of Parliament are beyond the powers granted to it under
the MMDR Act?  In other words, whether the impugned rules are ultra
vires Sections 15, 15A and 23-C of the MMDR Act?
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(b) Whether the impugned rules are violative of Part XIII of the
Constitution of India?
35. The appellants have submitted that Section 15 gives such a
power.  Sub-section (1) of Section 15 empowers the State Government
to make rules for ‘regulating’ the grant of quarry leases, mining leases
or other concessions in respect of minor minerals and for the purposes
connected therewith.  This power of regulation pertains to granting of
leases.  It is the submission of Mr. Kapur that the expression ‘regulating’
is of widest amplitude and would, therefore, confer power to make the
rules of the nature made herein.  He has referred to various judgments
of this Court wherein the expression ‘regulating’ has been explained.
He has also submitted that in any case under Section 15(1A) such a
power is there and this provision has to be read independent of Section
15(1).
36. It is difficult to accept the aforesaid contention in view of the
judgments of this Court in M.P.P. Kavery Chetty and K.T. Varghese.
In those judgments, it has been categorically held that power of the
State Government under Section 15 of the MMDR Act does not include
control over minor minerals after they are excavated.  Following
observations from the said judgment are extracted herein:
“19. The High Court quashed Rules 8-D and 19-B principally on
the ground that Section 15 of the said Act gave no power to the
State Government to frame rules to regulate internal
or foreign
trade in granite after it had been quarried. Section 15 also did not
empower the State Government to frame rules to enable a State
Government company or corporation to fix a minimum price for
granite.
20.  Learned counsel for the appellant State submitted that Rules
8-D and 19-B were valid having regard to the Preamble of the
said Act and Section 18 thereof. He submitted that the rule-making
power of the State under Section 15(o) was wide enough to
encompass Rules 8-D and 19-B.
21.  The said Act is enacted to provide for the regulation of mines
and the development of minerals under the control of the Union.
Section 2 of the said Act declares that it is expedient in the public
interest that the Union should take 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
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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 are payable; the protection of the rights of third parties; the
protection of flora; the manner in which leases may be transferred;
the construction, maintenance and use of roads, power transmission
lines, etc. on the land; the form of registers to be maintained;
reports and statements to be submitted and to whom; and the
revision of any order passed by any authority under the said Rules.
Clause (o) of sub-section (1-A) reads “any other
matter which is
to be or may be prescribed”. Section 18 of the said Act states that
it shall be the duty of the Central Government to take all such
steps as may be necessary for the conservation and systematic
development of the environment by preventing or controlling any
pollution which may be caused by prospecting or mining
operations.
22. Rules 8-D and 19-B empower the State Government or its
officers or a State Government company or corporation as the
State Government may direct to control the sale by every permit-
holder of quarried granite or other rock suitable for ornamental or
decorative purposes. They also empower the State Government
or its officers or a State Government company or corporation, as
the case may be, to fix the minimum price for the sale thereof.
The object, as is shown by the terms of Government Order No.
214 dated 10-6-1992, quoted above, is to conserve and protect
granite resources.
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23.  It is difficult to see how granite resources can be protected
by controlling the sale of granite after its excavation and fixing
the minimum price thereof.
24.  There is no power conferred upon the State Government
under the said Act to exercise control over minor minerals after
they have been excavated. The power of the State Government,
as the subordinate rule-making authority, is restricted in the manner
set out in Section 15. The power to control the sale and the sale
price of a minor mineral is not covered by the terms of clause (o)
of sub-section (1-A) of Section 15. This clause can relate only to
the regulation of the grant of quarry and mining leases and other
mineral concessions and it does not confer the power to regulate
the sale of already mined minerals.”
37. Likewise, the condition of license granted by the State of Kerala
to the effect that it could be sold only within the Sate, that too for domestic
and agricultural purposes, was struck down in the following words:
“3.  The appellants’ complaint 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 and the subject matters
in those cases were entirely different.  It is not necessary to point out
the differences in two sets of cases, as we entirely agree with the
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argument of Ms. Divan in drawing the distinction between the two and
pointing out that there is no conflict whatsoever.  She is right that the
two sets of cases can be read harmoniously.
39. In the cases of Amritlal Nathubhai Shah, D.K. Trivedi &
Sons and Hind Stone, the measures in question had a direct nexus with
the grant or the refusal to grant a lease.  In the instant appeals, which
concern the sale of already excavated minerals that belong to the lessee,
a prohibition by the State Government on sale thereof outside the State
is not permissible under the MMDR Act.  In the case of Hind Stone,
this Court succinctly stated the scope and ambit of the MMDR Act,
highlighting that the Act is aimed at the ‘conservation and the prudent
and discriminating exploitation of minerals’.  Following passage from
the said judgment shows that as a method of regulation, prohibition is
clearly permissible, provided, however, that it has a direct nexus with the
conservation, exploitation and excavation of minerals:
“10...The statue with which we are concerned, the Mines and
Minerals (Development and Regulation) Act, is aimed, as we have
already said more than once, at the conservation and the prudent
and discriminating exploitation of minerals.  Surely, in the case of
a scarce mineral, to permit exploitation by the State or its agency
and to prohibit exploitation by private agencies is the most effective
method of conservation and prudent exploitation.  If you want to
conserve for the future, you must prohibit in the present.  We
have no doubt that the prohibiting of the leases in certain cases is
part of the regulation contemplated by Section 15 of the Act.”
40. On the other hand, the prohibition on the transport or sale of
the already mined minerals outside the State has no direct nexus with
the object and purpose of the MMDR Act which is concerned with
conservation and prudent exploitation of minerals.
41. Insofar as Section 23-C of the MMDR Act is concerned, it
was inserted by the Amendment Act of 1999 with the objective to prevent
illegal mining.  That is clearly spelled out in the Statement of Objects and
Reasons.  We may reproduce a portion thereof again:
“(iii)  A new provision is proposed to be inserted 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.
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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 minerals.
43. As far as Issue No. (b) above is concerned, 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
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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.
44. That apart, we find force in the submission of the learned
Additional Solicitor General that Part XIII of the Constitution is a code
on checks and balances on the legislative power intended to achieve the
objective of economic integration of the country.  This was emphasised
in Video Electronics Pvt. Ltd. & Anr. v. State of Punjab & Anr.14
wherein this Court held:
“20.  ...In our opinion, Part XIII of the Constitution cannot be
read in isolation. It is part and parcel of a single constitutional
instrument envisaging a federal scheme and containing general
scheme conferring legislative powers in respect 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 land.
For working of an orderly society economic equality of all the
States is as much vital as economic unity.”
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.
 14 (1990) 3 SCC 87
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45. It is also rightly contended by all the respondents that balanced
development of the country is an equally vital facet of economic
integration.  No doubt, Part XIII permits some forms of differentiation,
for example, to encourage a backward region or to create a level playing
field for parts of the country that may not have reached the desired level
of development.  In this context, Part XIII envisions a two-fold object:
(i) facilitation of a common market through ease of trade, commerce
and intercourse by erasing barriers; and (ii) Regulations (or restrictions)
which may have the effect of differentiating between States or regions
which may be necessary not only in emergent circumstances of scarcity
etc. or but even for development of economically backward regions or
otherwise justified in the public interest.  That Part XIII is not about
“freedom” alone but is a code of checks and balances, intended at
achieving economic unity and parity.  Such a desired objective for
economic integration through checks and balances was also articulated
in Video Electronics Pvt. Ltd.:
“36. ...Economic unity is a desired goal, economic equilibrium and
prosperity is also the goal. Development on parity is one of the
commitments of the Constitution. Directive principles enshrined
in Articles 38 and 39 must be harmonised with economic unity as
well as economic development of developed and under developed
areas. In that light on
Article 14 of the Constitution, it is necessary
that the prohibitions in Article 301 and the scope of Article 304(a)
and (b) should be understood and construed. Constitution is a living
organism and the latent meaning of the expressions used can be
given effect to only if a particular situation arises. It is not that
with changing times the meaning changes but changing times
illustrate and illuminate the meaning of the expressions used. The
connotation of the expressions used takes its shape and colour in
evolving dynamic situations. A backward State or a disturbed State
cannot with parity engage in competition with advanced or
developed States. Even within a State, there are often 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
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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, 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.
47. We, thus, answer both the questions against the appellants.
48. As a result, we do not approve the view of Andhra Pradesh
High Court and Madras High Court.  Rather, we affirm the impugned
judgment of  the Gujarat High Court and dismiss these appeals.
Kalpana K. Tripathy
Appeals dismissed.
STATE OF GUJARAT v. JAYESHBHAI KANJIBHAI KALATHIYA
[A. K. SIKRI, J.]