STATE OF ODISHA & ORS. versus M/S. JINDAL STEEL AND POWER LTD. & ORS. on 30 January 2020

JUDGMENT

The following Judgment of the Court was delivered :

1. With the consent of learned counsel for the parties, SpecialLeave to Appeal is taken up for final hearing along with the captionedGInterlocutory Applications.

2. Leave Granted. Heard learned counsel for the parties.

3. This Civil Appeal is directed against the order of a DivisionBench of the Orissa High Court which allowed the writ petition filed by H

Respondent No. 1, Jindal Steel and Power Ltd. (hereinafter “JSPL”)seeking a writ of mandamus against the appellant, State of Odisha, forallowing lifting of legally procured, processed, royalty and tax-paid stockof Iron Ore lying at the dispatch point within the lease-area of M/s SardaMines Pvt. Ltd. (hereinafter “SMPL”) in Thakurani B-Block Mines inKeonjar, Odisha and transporting it to the railway siding at Deojhar forcarrying to its Pelletisation Plants and Steel Plants in Odisha andChhattisgarh.

FACTS

4. JSPL is an industrial entity which runs Steel-production plantsacross the country and regularly purchases numerous raw materials,including Iron Ore as part of its commercial activities. It had enteredinto an arrangement with SMPL to purchase certain Iron Ore, whichwas to be processed into Lump Ores and Fines and transported to JSPL’splants. The mining activity was conducted by SMPL and possession ofthe stocks was handed over to JSPL within SMPL’s premises. WithinSMPL’s leasehold area, JSPL would process these Ores and later storethem at the dispatch point, pending transportation by trains to thePellitisation Plant of JSPL located at Deojhar, Odisha as well as itsIntegrated Steel Plant located in Raigarh, Chhattisgarh. The appellant(State of Odisha) had earlier granted approval to this arrangement forselling Iron Ore, subject to payment of royalty at the “highest rate”.

5. This continued uninterruptedly until 31.03.2014, when a letterwas issued by the Deputy Director of Mines, Joda (in Keonjhar, Odisha)(Appellant No. 3) which highlighted that SMPL’s EnvironmentalClearance for enhanced production had expired and hence ‘transit permit’for transporting the procured and processed Iron Ore (CLO and Fines)from the despatch point to JSPL’s plants could not be granted.

6. JSPL approached the State authorities contending that royaltyhad duly been paid on the Iron Ore, and that the stocks lying at thedespatch point were owned by JSPL and not SMPL. Numerousrepresentations were made requesting permission to transport theprocessed minerals. Appellant No. 3, therefore, recommended to theDirector of Mines (Appellant No. 2) that JSPL be granted requisitetransport clearances. However, Appellant No. 2 in his communicationwith the Commissioner-cum-Secretary, Steel & Mines Department drewattention to the fact that the material lay within the leasehold area ofSMPL and its transportation would form part of mining operations which AB

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Acould not proceed without appropriate statutory clearances. Accordingly,the appellants through letters dated 23.05.2014 and 26.06.2014 rejectedJSPL’s prayers.

7. The aggrieved JSPL approached the High Court and soughtquashing of appellants’ letters refusing transport permits and a writ ofBmandamus directing the State of Odisha to grant permission fortransportation of entire processed ore from dispatch point within SMPL’slease area to JSPL’s units in Odisha and Chhattisgarh.

8. JSPL claimed that through a letter dated 15.01.2015, SMPLhad obtained clarification from the Ministry of Environment and Forests,CGovernment of India (hereinafter “MOEF”) that SMPL could operateits mine and produce up to 4 million tons of Iron Ore (Lumps) for aperiod of 20 years from 22.09.2004. Given that SMPL had validenvironmental clearance, no objection could be raised by appellantsagainst transportation of iron ore by JSPL. This was vehemently contestedby the appellants who contended that owing to the Supreme Court’sDinterim directions on 16.05.2014, no “mining activities/operations” couldtake place which would also include a prohibition on transportation ofmined ore.

9. JSPL contended that the afore-stated direction only prohibitedSMPL from resuming mining operations, and not JSPL from transportingEthe mineral already mined, purchased, processed and royalty paid upon.It placed reliance upon the expression “mining operation” as definedunder Section 3(d) of the Mines and Minerals (Development &Regulation) Act, 1957 (“MMRDA”), which did not include transportationof minerals. As soon as the ore was mined and sold by the miningFleaseholder, it was contended that the OMPTS Rules would come intoforce. JSPL being a buyer who possessed necessary license to transportunder OMPTS Rules and who also had paid all necessary royalties,could not be stopped from transporting its ore merely because it lay inthe leasehold premises of SMPL on the ground that the latter did nothave a valid environmental clearance.G10. The High Court noted that this Court’s interim directionsprohibited “mining operations”, which as per Section 3(d) of MMDRAmeant “winning” of minerals. Relying upon the Constitutional Benchdecision in The Bihar Mines Ltd. v. Union of India[1], interpreting “mining H1 AIR 1967 SC 887.

operations” to include only processes necessary to raise/extract mineralsfrom mines, the High Court held that the transportation of minerals alreadyraised would not be estopped through this Court’s interim directions.Having noticed the fact that SMPL had environmental clearance, it hadobtained due permission for selling Iron Ore to JSPL, and that requisiteroyalties had already been paid, the High Court found no valid reasonfor the State of Odisha to stop transportation of the iron ore by JSPL.Accordingly, the impugned letters which directed stoppage oftransportation were quashed, and instead the State-authorities weredirected to grant transport permission to JSPL.

CONTENTIONS OF PARTIES

CONTENTIONS OF PARTIES

11. The aggrieved State-authorities initially sought leave to appealcontending that mere sale of the mined ore by SMPL would not meanthat MMDRA would cease to operate, and grant of approval underOMPTS Rules, 2007 to JSPL would not obviate the necessity forobtaining clearance/approvals under other statutes. JSPL’s title over thegoods could not be better than the title owned by SMPL; and merecompletion of sale per the Sales of Goods Act would not regulariseillegalities or dispense with the necessity of complying with the law. TheHC statedly misinterpreted the MOEF’s clarificatory letter regardingEnvironmental Clearance, which was granted only for 4 MPTA, whereasSMPL had extracted minerals far in excess. At least some part of theOre sold to JSPL came from this unauthorised excess production, andhence JSPL could not be said to have “validly procured” the materialsand thus had no right to transport the same. The appellants further claimedthat “mining operation” would in fact cover transportation of materialswithin the leasehold area, and Section 3(d) of MMDRA ought not to beconstrued restrictively in light of this Court’s observations in SamajParivartana Samudaya v. State of Karnataka[2], and hence JSPL’sprayer was barred by this Court’s interim directions dated 16.05.2014.

12. Appellants also underscored the larger implications of upholdingthe High Court’s finding that sale of minerals would cease application ofthe MMDRA and instead only the OMPTS Rules would apply, for itwould create a loophole to evade application of environmental legislations.

13. JSPL, on the other hand, highlighted how it was not seekingany permission for crushing or processing of the iron ore, but only2 (2013) 8 SCC 154.

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Atransportation of the Ore already legally procured, processed and storedat the dispatch point prior to expiry of the environmental clearance ofSMPL. Transportation was claimed, per se, not to be a part of miningoperations for which environmental clearances were required. It placedreliance on the appellant’s failure to raise objections to transportation ofminerals in other similar cases. Even otherwise, per Clause 5 of Part-IXBof Form K (Model Form of Mining Lease under Rule 31(1) of MCRules, 1960) lifting and transportation of minerals was claimed as beingpermissible upto six months after the expiry of the lease, whichdemonstrated the clear intention of the legislation to protect the right ofthe lessee who has excavated minerals during the validity of the leaseCperiod.

14. During the pendency of this appeal, SMPL filed an applicationfor intervention (I.A. No. 8725 of 2020) and at the time of hearingreferred to the order dated 15.01.2020 passed in I.A. No. 186810 of2019 in WP(C) No. 114 of 2014 (Common Cause v. Union of India)Dwhereby this Court noticing irregularities committed by several miningcompanies, directed SMPL to deposit dues as assessed by the CentralEnvironment Committee in its report dated 08.05.2019 and asked it tofile an undertaking to comply with all rules, regulations and mandatoryprovisions; post which SMPL could resume its mining operations in theleased-area. SMPL has filed another application (I.A. No. 8734 of 2020)Eundertaking to comply with this Court’s directions dated 15.01.2020 withan oral prayer to extend the time limit till the end of February, for doingthe needful.

15. Additionally, ICICI Bank and the State Bank of India havealso filed intervention applications (I.A. No. 54052 of 2018 and I.A. No.F4 of 2017), claiming that they (as part of a consortium of seven banks)had granted sums totalling Rs 8400 Crores to JSPL as working capital.Part of these loan amounts had been used by JSPL to buy Iron Ore fromSMPL and these stocks were in turn hypothecated with the consortium.The banks hence had exposure of about Rs 434 Crores in the presentGcase, which would adversely be affected in case JSPL was not allowedto transport the said Iron Ore to its plants expeditiously. In addition, theysought that JSPL be directed to undertake that the amount realised by itin pursuance of transporting the Ore, should be credited only to theworking capital limit account.

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16. JSPL has also filed an application (I.A. No. 187580 of 2019)seeking interim directions to allow it to transport the Iron Ore stock(totalling 29977.818 metric tons of Iron Ore lumps and about 12.2 milliontons of Iron Ore fines) and directions to the State of Odisha to grantnecessary transit permits. Insisting that the appellants’ concerns ofrecovering compensation dues had been satisfied consequent to SMPL’sundertaking, JSPL drew attention to the distress being faced by the Steelsector in India, and that its own working facility account had beenrestructured pursuant to RBI directions and how a Trust & RetentionAccount had been opened under the supervision of the State Bank ofIndia into which the entire proceeds of JSPL were being deposited.

17. It was urged on behalf of JSPL that in light of this Court’sdirections dated 15.01.2020 in I.A. No. 186810 of 2019, and theconsequent undertaking filed by the lessee (SMPL) on 16.01.2020 tocomply with the same, no dispute indeed survived between the consequentbuyer (JSPL) and the lessor (State of Odisha). Learned Counselrepresenting the State of Odisha and SMPL also did not controvert thisfact-situation.

ANALYSIS

18. As noticed above, although the appellant-State had raisedseveral disputes and questions of law in its written submissions, but atthe time of oral hearing both parties have confined themselves to thesolitary issue regarding conditional entitlement of JSPL to lift and transportthe iron ore from SMPL’s lease-area to its plants in Odisha andChhattisgarh. Thus, no occasion arises for venturing into the numerouslegal disputes raised in the main appeal.

19. Counsel for the appellants have expressed no objection todisposing of this petition in light of the subsequent developments whichhave taken place post the filing of appeal, subject to SMPL filing theaforementioned undertaking.

CONCLUSION

20. In light of parties having restricted their contentions and ourconsequent analysis to the framework of I.A. No. 187580 of 2019 (movedfor directions by JSPL), we dispose of all the I.As. as well as the CivilAppeal with the following directions:

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A(i) SMPL’s prayer for modification of our order dated 15.01.2020passed in I.A. No. 186810 of 2019 in WP(C) 114 of 2014, whereinone-month time was granted for payment of dues as assessed bythe CEC, is accepted. SMPL must pay its dues and give therequisite undertaking by 29 February, 2020 post which alone itshall be at liberty to resume its mining operations as per our orderBdated 15.01.2020.

(ii) Once SMPL complies with direction no. (i) above, JSPL canlift the already mined, processed and royalty paid Iron Ore lyingat the dispatch point within SMPL’s premises and transport thesestocks to its plants across the country. The proceeds thereof mustCbe deposited with the Trust & Retention Account under thecustody of the State Bank of India.

(iii) Failure to comply with these directions shall result in any suchsale being deemed legally void.

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Kalpana K. Tripathy

Matters disposed of.

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