STATE OF GUJARAT AND OTHERS ETC. versus JAYESHBHAI KANJIBHAI KALATHIYA ETC. on 1 March 2019

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SUPREME COURT REPORTS[2019] 4 S.C.R. 96

[2019] 4 S.C.R.

ASTATE OF GUJARAT AND OTHERS ETC.

v.

JAYESHBHAI KANJIBHAI KALATHIYA ETC.

(Civil Appeal Nos. 10373-10374 of 2010)

BMARCH 01, 2019

[A. K. SIKRI, S. ABDUL NAZEER AND M. R. SHAH, JJ.]

Mines and Minerals:

Minor minerals – Resolution by State Government prohibitingCexport of ordinary sand excavated in the State, to other States andto other countries – Thereafter State in exercise of powers conferredu/s. 15 r/w s.23-C of MMDR Act amended Gujarat Minor MineralRules by inserting r. 44-BB and thereby prohibited movement of thesand beyond the State – Writ petition challenging the Resolution aswell as insertion of r. 44-BB – High Court allowed the petition – OnDappeal, held: Section 15(1) does not empower the State Governmentto make rules for regulating grant of quarry leases, mining leasesor other concessions in respect of minor minerals – No such powerflows from even s.23-C to make rule for regulating transportationof the legally excavated minerals – Impugned Rules also violateEPart XIII of the Constitution as the effect thereof is to fetter thefreedom of trade, commerce and intercourse u/Art. 301 – In view ofscheme of Chapter XIII, State Government could not have imposedsuch 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.F15 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 SectionG15 of the Mines and Minerals (Development and Regulation)Act, 1957 (MMDR Act) does not include control over minorminerals after they are excavated. Therefore, it is not correctthat sub-section (1) of Section 15 of MMDR Act empowers theState Government to make rules for ‘regulating’ the grant ofquarry leases, mining leases or other concessions in respect ofH

minor minerals and for the purposes connected therewith. Section23-C of the MMDR Act was inserted by the Amendment Act of1999 with the objective to prevent illegal mining. That is clearlyspelled out in the Statement of Objects and Reasons. The words‘transportation’ and ‘storage’ in Section 23-C are used in thecontext of ‘illegal mining’. It is clear that it is the transportationand storage of illegal mining and not the mining of minor mineralslike sand which is legal and backed by duly granted license, whichcan be regulated under this provision. Therefore, no power flowsfrom this provision to make rule for regulating transportation ofthe 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) 2SCC 402 : [1995] 1 SCR 441; K.T. Varghese & Ors. v.State of Kerala & Ors. (2008) 3 SCC 735 : [2008] 1SCR 1205 – relied on.

D.K. Trivedi & Sons and Others v. State of Gujarat andOthers (1986) Supp SCC 20 : [1986] SCR 479; AmritlalNathubhai Shah and Others v. Union Government ofIndia and Another (1976) 4 SCC 108 : [1977] 1 SCR372 – distinguished.

2.1 The impugned rules also violate Part XIII of theConstitution 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 withthe expression ‘throughout the territory of India’. Under Article302, Parliament may impose restrictions on the freedom of trade,commerce or intercourse between one State and another as maybe required in the public interest. The expression ‘public interest’may include a regional interest as well. However, Article 302 isqualified by Article 303 which prohibits Parliament and the StateLegislatures from making any law that gives preference to oneState over another or discriminates between one State andanother. Situations of scarcity are to be dealt with by Parliamentunder Article 302(2). The power of State Legislature to imposereasonable restrictions on the freedom of trade, commerce orintercourse, as may be required in the public interest, requiressuch a Bill or amendment to be moved in the State Legislature A

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Aonly after receiving previous sanction from the President. ThePresident, being the head of the State and the guardian of thefederation, must be satisfied that such a law is indeed requiredand, thus, acts as a check on the promotion of provincial interestsover national interest. Going by the aforesaid scheme of thisChapter, it becomes apparent that when there are such restrictionsBon a State Legislature, then the State Government could not haveimposed such a prohibition under a statute whose object is toregulate mines and mineral development, and not trade andcommerce per se. [Para 43][124-E-H; 125-A]

2.2 Balanced development of the country is an equally vitalCfacet of economic integration. No doubt, Part XIII permits someforms of differentiation, for example, to encourage a backwardregion or to create a level playing field for parts of the countrythat may not have reached the desired level of development. Inthis context, Part XIII envisions a two-fold object: (i) facilitation Dof a common market through ease of trade, commerce andintercourse by erasing barriers; and (ii) Regulations (orrestrictions) which may have the effect of differentiating betweenStates or regions which may be necessary not only in emergentcircumstances of scarcity etc. or but even for development ofeconomically backward regions or otherwise justified in the publicEinterest. That Part XIII is not about “freedom” alone but is acode of checks and balances, intended at achieving economicunity 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 –Frelied 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 whichreliance is placed by the appellant focuses on the need to restrictGthe export of sand outside India and not within India. In anycase, nothing prevents the appellant from restricting the quantumof sand being excavated. However, once the appellant Statepermits sand to be excavated, neither can it legally restrict itsmovement within the territory of India nor is the sameHconstitutionally permissible. Likewise, there is no restriction STATE OF GUJARAT v. JAYESHBHAI KANJIBHAI KALATHIYA

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STATE OF GUJARAT v. JAYESHBHAI KANJIBHAI KALATHIYA

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on the State importing sand from other states. If it is the casethat the demand of any State is not being met, it may purchasesand from other states. In any event, the market will dictatetrade in sand inasmuch as it may make no business sense formining company to transport and sell its sand in a far awaydestination after incurring large costs on transportation.

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[Para 46][127-B-D]

C. Narayana Reddy and etc. v. Commissioner ofPanchayat Raj and Rural Employment, A.P. Hyderabadand others AIR 2004 AP 234; State of Tamil Nadu v.Hind Stone and Others (1981) 2 SCC 205 : [1981] 2SCR 742; T.N. Godavarman Thirumulpad v. Union ofIndia and Others (2006) 1 SCC 1 : [2005] 3 Suppl.SCR 552; Uttar Pradesh Power Corporation Limited v.National Thermal Power Corporation Limited andOthers (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. CooperativeCane Unions Federations v. West U.P. Sugar MillsAssociation and Others (2004) 5 SCC 430 : [2004] 2Suppl. SCR 238; Monnet Ispat and Energy Limited v.Union of India and Others (2012) 11 SCC 1 : [2012] 7SCR 644; State of Tripura and Others v. Sudhir RanjanNath (1997) 3 SCC 665 : [1997] 2 SCR 29 – referredto.

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Case Law Reference

BCIVIL APPELLATE JURISDICTION: Civil Appeal No.10373-10374 of 2010.

From the Judgment and Order dated 19.10.2010 of the High Courtof Gujarat at Ahmedabad in Special Civil Application Nos. 6204 of 2010with Special Civil Application Nos. 7321 of 2010.C

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. WasimA. Qadri, Raj Bahadur, Arun Kumar Yadav, Mrs. Sumita Ray, D.N.Ray, Lokesh K. Choudhary, Dilip Kumar Nayak, Ms. Disha Ray, Mrs.DSumita 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 HighCourt of Gujarat under Article 226 of the Constitution of India. One writEpetition was filed by a single person (respondent herein) who had beenawarded contract for one year to extract, collect, gather and removeordinary sand from river Tapi falling within certain area at village Amboli,Taluka Kamrej, Surat. The sand being a mine and mineral, it is the StateGovernment which is empowered to grant such leases. After theFexcavation of sand, a part there of was subjected to further processingby addition of fly ash and the other part was sold as sand outside theState of Gujarat. Second petition was filed by ten petitioners (respondentsin the second appeal). They are in the business of processing ordinaryriver sand after buying it from leaseholders. The process involveswashing, cleaning and mixing fly ash to convert it into IS-Zone-2-Sand,Gwhich is then sold in 50 kg. Bags under a brand name. These respondentssupply that sand to builders in the State of Maharashtra.

2. As is clear from the aforesaid facts, sand, after processing, issold outside the State of Gujarat. The challenge laid in the writ petitionswas against the Resolution No. GMR-102010-1-S-CHH dated May 04,H

2010 whereby all leaseholders, stockists, traders and exporters wereprohibited from exporting ordinary sand excavated from the areas in theState of Gujarat to other States within the country or other countries bytransporting such sand outside the State or the country. When thesewrit petitions were pending consideration, the Government of Gujaratissued a Notification on June 11, 2010 thereby amending the GujaratMinor Mineral Rules, 1966 by making the Gujarat Minor Mineral(Amendment) Rules, 2010 with the insertion of Rule 44-BB, withimmediate effect. This amendment was done in purported exercise ofpowers conferred under Section 15 read with Section 23-C of the Minesand Minerals (Development and Regulation) Act, 1957 (hereinafterreferred to as the ‘MMDR Act’). By way of Rule 44-BB, movement ofsand 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 theState. In case any vehicle is found transporting sand to theneighbouring State, even with authorized royalty pass or deliverychallan, it shall be treated as violation of the Act and the Rulesmade thereunder and the penal provisions as specified thereinshall be applicable.”

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

“Rule 71. Prohibition to transport sand beyond border. –No movement of sand shall be allowed beyond the border of theState. In case any vehicle is found transporting sand to theneighbouring State even with authorized royalty pass or deliverychallan, it shall be treated as violation of the Act and the rulesmade thereunder and the penal provisions, except compounding,as specified therein shall be applicable.”

4. This led the respondents to amend the writ petitions therebyincorporating challenge to Rule 44-BB of Amendment Rules as well asRule 71 of the Concession Rules. The High Court has, vide impugnedjudgment, allowed the writ petitions and struck down the aforesaid Rulesas ultra vires on the ground that the rule making power of the State A

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AGovernment does not empower and cannot be stretched to empowerthe State Government to make Rules directly prohibiting movement ofmineral so as to impinge upon the freedom guaranteed by Article 301 ofthe Constitution. It may be noted here itself that a Division Bench of theAndhra Pradesh High Court in C. Narayana Reddy and etc. v.Commissioner of Panchayat Raj and Rural Employment, A.P.,BHyderabad and others[1] had taken a contrary view. Likewise, theMadras High Court had also decided this issue vide its judgment datedApril 27, 2009 in D. Sivakumar v. Government of Tamil Nadu[2] bytaking similar view as that of the Andhra Pradesh High Court. In theimpugned judgment, the Gujarat High Court has, however, differed withCthe Andhra Pradesh and Madras High Courts. Having regard to theconflicting 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, inbroad, the scheme of the MMDR Act insofar as it relates to regulatingDminor minerals are concerned and the powers that are delegated by theCentral Government to the State Governments in respect of minorminerals. In this very hue, we also propose to take note of the relevantprovisions of the MMDR Act.

6. The MMDR Act is enacted by Parliament to provide for theEregulation of mines and development of minerals under the control ofthe Union, i.e. the Central Government. Section 2 provides a declarationto this effect with the stipulation that it is expedient in the public interestthat Union should take under its control, the regulation of mines anddevelopment of minerals, to the extent provided in the Act. It is for thisreason the Union took control insofar as regulation of mines andFdevelopment of minerals is concerned. In order to exercise this control,no reconnaissance or mining operations in any area are allowed by anyperson except with the permission of the Central Government. Eventransportation or storage is prohibited otherwise than in accordance withthe provisions of the MMDR Act and the Rules made thereunderG(Section 4).

7. Section 13 of the MMDR Act empowers the CentralGovernment to make rules in respect of minerals.

1 AIR 2004 AP 234 2 Writ Petition Nos. 23317 and 24211 of 2008H

8. It follows from the above that as far as minor minerals areconcerned, limited powers are given to the State Government inasmuchas under Section 15 of the MMDR Act the State Government isauthorised to make rules in respect of minor minerals. Relevant portionsof this Section read as under:

“15. Power of State Governments to make rules in respectof minor minerals. – (1) The State Government may bynotification in the Official Gazette make rules for regulating thegrant of quarry leases, mining leases or other mineral concessionsin respect of minor minerals and for purposes connected therewith.

(1A) In particular and without prejudice to the generality of theforegoing power, such rules may provide for all or any of thefollowing matters, namely –

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(d) the terms on which, and the conditions subject to which andthe authority by which quarry leases, mining leases or other mineralconcessions may be granted or renewed; xx xxxx (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 andMinerals (Regulation and Development) Amendment Act, 1999 (No. 38of 1999) which became effective from December 18, 1999. By thisAmendment Act, Section 4(1A), Section 23-A and Section 23-C wereinserted. We would like to reproduce these sections along with theStatement of Objects and Reasons which prompted the Legislature toinsert these provisions:

STATEMENT OF OBJECTS AND REASONS

The Mines and Minerals (Regulation and Development) Act, 1957provides for the regular and development of minerals other thanpetroleum and natural gas. Consequent upon the decisions takenin the Conference of the State Ministers/Secretaries of Minesand Geology held in December, 1996, a Committee under theChairmanship of the then Secretary, Ministry of Mines was A

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SUPREME COURT REPORTS

constituted in February, 1997 to, inter alia, make recommendationsregarding delegation of powers to the State Governments relatingto grant and renewal of prospecting licences and mining leasesand other related approvals and to suggest measures to reducedelay in this regard, review of the existing laws and proceduresgoverning the regulation and development of minerals to makethem more compatible with the changed policies and measuresfor prevention of illegal mining. The Committee in his report madewide-ranging recommendations in the area of delegation of powersto the State Governments, procedural simplifications, etc. whichwill go a long way to mitigate the problems faced by the Statesand the prospective investors while, at the same time, keeping theinterests of the mining industry in particular and the national interest,in general, in tact. After careful consideration of therecommendations of the Committee, the Government has decidedto amend the Mines and Minerals (Regulation and Development)Act, 1946.

2. Some of the more important amendments to be made are asfollows:

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(iii) A new provision is proposed to be inserted in the Actprohibiting transportation or storage or anything causingtransportation or storage of any mineral except under the dueprovisions of the Act, with a view to preventing illegal mining.Further, the Act is proposed to be amended to cover the breachof the provisions of the proposed new provision of the Act tobe punishable. It is also proposed to insert a new provision toprovide for anything seized under the Act as liable forconfiscation under court orders. A new section is proposed tobe inserted to empower the State Governments to make rulesfor preventing illegal mining, transportation and storage ofminerals and for purposes connected therewith.

Section 4(1A)

No person shall transport or store or cause to be transported orstored any mineral otherwise than in accordance with the provisionsof this Act and the rules made thereunder.

Section 23-C

(1) The State Government may, by notification in the OfficialGazette, make rules for preventing illegal mining, transportationand storage of minerals and for the purposes connected therewith.

(2) In particular and without prejudice to the generality of theforegoing power, such rules may provide for all or any of thefollowing mattes, namely:–

(a) establishment of check-posts for checking of minerals undertransit; (b) establishment of weigh-bridges to measure the quantity ofmineral being transported;

(c) regulation of mineral being transported from the area grantedunder a prospecting licence or a mining lease or a quarryinglicence or a permit, in whatever name the permission toexcavate minerals, has been given; (d) inspection, checking and search of minerals at the place ofexcavation or storage or during transit; (e) maintenance of registers and forms for the purposes ofthese rules; (f) the period within which and the authority to whichapplications for revision of any order passed by any authoritybe preferred under any rule made under this section and thefees to be paid therefor and powers of such authority fordisposing 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 CentralGovernment shall have no power to revise any order passed by aState Government or any of its authorised officers or any authorityunder the rules made under sub-sections (1) and (2).”

10. As noted above, the impugned Rules are made in exercise ofthe powers conferred under Section 23-C of the MMDR Act. Further,as Section 14 categorically states that provisions of Section 5 to 13 are A

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Anot applicable in respect of minor minerals, rule making power of theCentral Government contained in Section 13 does not extend to minorminerals. It is in this context Section 15 gives power to the StateGovernment to make rules in respect of minor minerals. The StateGovernment, thus, is given power under Section 15. It is also givenpower under Section 23-C.B

11. A perusal of Sections 15 and 23-C in relation to the aforesaiddiscussion would clearly suggest that the power of the State Governmentto make rules is restricted to:

(a) making rules for grant of quarry leases, mining leases orCother mineral concessions in respect of minor minerals and for thepurposes connected therewith; and (b) making rules for preventing illegal mining, transportation andstorage of minerals and for the purposes connected therewith.

12. In the aforesaid context, question arose before the High CourtDas to whether in exercise of such powers delegated by the Legislatureupon the State Government, could the State Government make a rule tothe effect that the sand which is a minor mineral would not be allowed tobe taken beyond the borders of the State of Gujarat and making suchmovement as punishable offence. According to the High Court,Edelegation of powers to the State Government under the aforesaidprovisions does not include or envisage restriction on inter-State trade,commerce and intercourse which shall be free. Thus, the impugnedrules are held to be ultra vires the provisions of Section 15 and 23-C ofthe MMDR Act. They are also held to be violative of Article 301 of theConstitution. Relevant discussion on this aspect by the Gujarat HighFCourt in the impugned judgment runs as under:

“14. As seen earlier, the provisions of section 4(1-A) and section23-C were simultaneously added by the amendment of 1999, withthe objective of prohibiting transportation or storage of any mineral,except in accordance with the provisions of the Act and the Rulesmade in that behalf, with a view to preventing illegal mining.Prohibition or restriction of inter-State trade of any mineral wasneither intended nor provided or envisaged either expressly or bynecessary implication. On the other hand, delegation of powersto make rules either in section 15 or in section 23-C of the Act isnot couched in general terms as in section 18. Section 18

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STATE OF GUJARAT v. JAYESHBHAI KANJIBHAI KALATHIYA[A. K. SIKRI, J.]

exclusively empowers the Central Government to make such rulesas it thinks fit for the purpose of conservation and development ofminerals in the whole country. Apart from delegation of suchpowers couched in wider terms, the Central Government isspecifically authorized to make rules for regulation of excavationor collection of minerals from any mine as well as for storage ofminerals. As against that, the State Government is empowered tomake rules, in respect of all minerals, for regulation of mineralsbeing transported from the area granted under a prospectinglicence or a mining lease or a quarry licence or a permit. Thecontext and the composite scheme of the Act contained in theprovisions of sections 4(1-A), 15, 18, 21 and 23-C clearly indicatethat the delegation of power to regulate or make rules fortransportation or storage of minerals, including minor minerals,does not empower and cannot be stretched to empower the StateGovernment to make rules directly prohibiting movement ofminerals so as to impinge upon the freedom guaranteed by Article301 of the Constitution. In fact, the State Government hasadmittedly made the Gujarat Mineral (Prevention of Illegal Mining,Transportation and Storage) Rules, 2005 in exercise of the powersconferred by section 23-C of the Act for regulating transport,possession and storage of minerals in the State; and those rulesare not under challenge. Although it is not significant, in light ofthe view being taken herein about validity of the impugned rules,it needs to be noted that the part of new Rule 71 taking away thefacility of compounding is apparently repugnant to section 23-Aof the Act. And, if validity of the impugned rules cannot be upheld,the impugned resolution cannot stand without the support of anylegal, executive or legislative authority.”

13. We may also, at this stage, refer to the reasoning given by theHigh Courts of Andhra Pradesh and Madras in support of their view,which is in conflict with the view taken by the Gujarat High Court. Thejudgment of the Andhra Pradesh High Court proceeds to decide theissue in the following manner:

“27. Sector 23-C of the Act authorises the State Government tomake rules not only for the purpose of preventing illegal miningbut also for transportation and storage of minor minerals, whichpower would imply that even after the minor mineral has been ABCDEF

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mined, the power is conferred on the State Government to frameRules for such mined minor mineral as regards its storage and/orits transportation and also to frame rules to see that no illegalmining activity is carried on. Sub-clauses (a) to (g) of Clause (2)of Section 23-C are illustrative of the matters, which are coveredunder the rule making power. Sub-section (2) says that in particularand without prejudice to the generality of the powers conferredunder Section 23-C, rules may provide for all or any of the saidmatters. Sub-clause (c) itself say that regulations can be framedof mineral being transported from the area granted under thelicence or a mining lease. Rules can be framed on any of thematters including transportation of the excavated mineral. Section23-C is the source of power under which Rule 9-W can be said tohave been framed by the State Government. We have to keep inmind that the Parliament passed the Amendment Act, 1999 (ActNo. 38 of 1999) thereby inserting Section 23-C in the PrincipalAct after the decision of the Supreme Court in Kavery Chetty’scase (supra). By the said provision, power was specificallyconferred on the State Government to make rules for preventingillegal mining, transportation and storage of minerals. The StateGovernment has framed the Rules thereafter. Thus, there is amplepower with the State Government to frame Rules regardingtransportation of the excavated minor mineral, which would includerestriction on the transport of the said minor mineral beyond thelimits of the State borders. In this view of the matter, the challengeto Rule 9-W is without any substance.”

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14. Likewise, the Madras High Court has proceeded to discussFthe 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 tomean prohibition. He further contended that a total prohibition isimpermissible in law, violative of Article 19(1)(g) and, therefore,the impugned rule is liable to be declared as bad in law. We are ofthe opinion that the word ‘regulation’ has no fixed connotation.The said word will have to be given wider meaning when thepublic interest is involved. In the judgment reported in (1981) 2SCC 205 (State of Tamil Nadu v. Hind Stone), the Hon’ble Supreme G

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Court has held as follows:

“10. One of the arguments pressed before us was that Section15 of the Mines and Minerals (Regulation and Development)Act authorised the making of rules for regulating the grant ofmining leases and not for prohibiting them as Rule 8-C soughtto do, and, therefore, Rule 8-C was ultra vires Section 15.Well-known cases on the subject right from MunicipalCorporation of the City of Toronto v. Virgo and Attorney-General for Ontario v. Attorney-General for the Dominionsup to State of U.P. v. Hindustan Aluminium CorporationLtd. 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 theexpression is used in the statute and the object sought to beachieved by the contemplated regulation. It was observed byMathew, J. in G.K. Krishnan v. State of Tamil Nadu : “Theword ‘regulation’ has no fixed connotation. Its meaning differsaccording to the nature of the thing to which it is applied.” Inmodern statutes concerned as they are with economic andsocial activities, “regulation” must, of necessity, receive so widean interpretation that in certain situations, it must excludecompetition to the public sector from the private sector. Moreso in a welfare State. It was pointed out by the Privy Councilin Commonwealth of Australia v. Bank of New South Wales— and we agree with what was stated therein — that theproblem whether an enactment was regulatory or somethingmore or whether a restriction was direct or only remote oronly incidental involved, not so much legal as political, social oreconomic consideration and that it could not be laid down thatin no circumstances could the exclusion of competition so asto create a monopoly, either in a State or Commonwealthagency, be justified. Each case, it was said, must be judged onits own facts and in its own setting of time and circumstancesand it might be that in regard to some economic activities andat some stage of social development, prohibition with a view toState monopoly was the only practical and reasonable mannerof regulation. The statute with which we are concerned, theMines and Minerals (Development and Regulation) Act, is A

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aimed, as we have already said more than once, at theconservation and the prudent and discriminating exploitationof minerals. Surely, in the case of a scarce mineral, to permitexploitation by the State or its agency and to prohibit exploitationby private agencies is the most effective method of conservationand prudent exploitation. If you want to conserve for the future,you must prohibit in the present. We have no doubt that theprohibiting of leases in certain cases is part of the regulationcontemplated 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’ willhave to be given a wide interpretation taking into consideration ofsocial, economic and political justice. We are of the opinion thatwhile deciding as to whether the prohibition is reasonable, theCourt has to take into consideration the greater public and socialinterest as against the fundamental right of the citizen. In (2003)7 SCC 59 (Indian Handicrafts Emporium v. Union of India), theHon’ble Supreme Court has held that prohibition of trade in ivorydoes not offend Article 19(1)(g) and the same is a reasonablerestriction under Article 19(6) of the Constitution. It is also to benoted only sand is prohibited from taking outside the State in viewof the overwhelming public interest. Therefore, we are of theopinion that the definition of the word ‘regulation’ is wide enoughto cover the prohibition and movement of minerals outside theState.

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16. Environmental Perspective

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16. Environmental Perspective

The said rule has been introduced in view of the attempt made bythe dealers of sand and contractors of building to transport thesand purchased from the Government outside the State. Accordingto the Government, the said rule has been made in public interestand also taking into consideration of the hardship that caused tothe consumers in the State of Tamil Nadu as well as the high rateof urbanisation in the State. In the counter affidavit, it is alsostated by the Government that illegal, unaccounted sand is alsotransported outside the State. It is well known that sand in thepresent form has already undergone various changes overthousands of years. As found by the Expert Committee, due to over exploitation and indiscriminate mining of river sand, theenvironment and the eco-system got very much affected. TheExpert Committee has also found out that the indiscriminate mininghas 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 andreduction of bio-diversity. Therefore, what is important is to usethe barest minimum of sand for developmental activities. If thesand is allowed to be transported due to the demands in variousplaces outside the State it would only increase the demand formore 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 isthe conservation and protection of the environment. The right toclean environment is a guaranteed fundamental right under Article21. Article 48-A of the Constitution speaks about protection andimprovement of environment and Article 51(A) of the Constitutiondeals with the fundamental duties to protect and improve the naturalenvironment including forest, lakes, rivers and wild life. TheHon’ble Supreme has held in (2003) 7 SCC 589 (IndianHandicrafts Emporium v. Union of India) that the implementationof Directive principle is within the expression of restriction in theinterest of general public. Hence, we hold that from theenvironmental perspective also the impugned rule has to besustained.”

15. The Court also took aid of the doctrine of public trust asenunciated in State of Tamil Nadu v. Hind Stone and Others[3] as wellas T.N. Godavarman Thirumulpad v. Union of India and Others[4].

16. Mr. Pritesh Kapur, learned counsel appearing for the State ofGujarat submitted in the first instance that scope of language used inSection 15(1) of the MMDR Act was extremely wide as per which theParliament had delegated to the States entire power to make rules forregulating the grant of quarry leases, mining leases or other mineralconcessions in respect of minor minerals and for purposes connectedtherewith. According to him, this Court, by a series of judgments, settledthe following propositions:

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(i) The power to regulate under Section 15(1) is plenary and theParliament has delegated to the States complete control over the subjectmatter, namely, minor minerals, especially in view of the fact that powerhas been conferred for all purposes connected with the regulation of theminor minerals.

B(ii) This power is not exhausted by the grant and continues tocontrol activities even post grant.

(iii) In respect of minor minerals, Parliament has not retained anycontrol under the Act. Historically as well as under the 1957 Act,complete control over minor minerals has been delegated by ParliamentCto the State Government since these minerals have always been viewedas being important for local development.

17. To support the above plea, he invited the attention of this Courtto the judgment in D.K. Trivedi & Sons and Others v. State of Gujaratand Others[5] wherein this Court considered the power of the StateGovernments to make rules under the said Section 15 to enable them toDcharge dead rent and royalty in respect of leases of minor mineralsgranted by them and to enhance the rates of dead rent and royalty duringthe subsistence of such leases – a power exercised by the State togovern conditions subsequent to the grant of the lease. After tracing thelegislative history in respect of minor minerals, it was observed that byEvirtue of the Act the whole of the field was taken over by Parliamentand thereafter all powers in respect of minor minerals had been delegatedto the State Governments. The Court also observed, inter alia, that thepower to regulate minor minerals under Section 15 is extremely wide;that control over minor minerals fell exclusively within the domain of theFState Governments; that minor minerals have historically been viewedby the Legislature, both pre and post Independence, as being for the useof local areas and local purposes; and it is left to the State Governmentsto prescribe such restrictions as they think fit by rules made underSection 15(1).

G18. From the above judgment, his line of action was that if thepower of regulation permits the States to utilise the minor minerals forthe benefit of the State through its own agency, it would necessarily alsoencompass the power to ensure that even private parties utilise the sandwithin the State as a condition of the lease. Furthermore, the argument 5 1986 Supp SCC 20H

that sub-section (1) of Section 15 is for regulating the grant of leasesand other mineral concessions in respect of minor minerals and thatrules under that sub-section can be made only with respect to the timewhen such leases or concessions are granted and not with respect toany point of time subsequent thereto, was specifically considered andrejected in the case of D.K. Trivedi & Sons.

19. Mr. Kapur also argued that a three Judge Bench of this Courtin Uttar Pradesh Power Corporation Limited v. National ThermalPower Corporation Limited and Others[6] has reiterated the view thatthe power of regulation conferred upon an authority is not spent orexhausted with the grant of permission. He relied upon the judgments inHind Stone and K. Ramanathan v. State of Tamil Nadu and Another[7]wherein this Court reiterated that the word ‘regulate’ must be given thewidest amplitude. He submitted that in K. Ramanathan’s case thisCourt was considering the validity of an order issued by the StateGovernment under the Essential Commodities Act banning the transportof paddy outside the State. In that context, this Court has observed that:

“19...At the same time, the power to regulate carries with it fullpower over the thing subject to regulation and in absence ofrestrictive words, the power must be regarded as plenary overthe entire subject...The power to regulate implies the power tocheck and may imply the power to prohibit under certaincircumstances, as where the best or only efficacious regulationconsists of suppression…

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23...One of the ways in which such regulation or control over theproduction, supply and distribution of, and trade and commerce in,an essential commodity like foodstuffs may be exercised is byplacing a ban on inter-State or intra-State movement of foodstuffsto ensure that the excess stock of foodstuffs held by a wholesaledealer, commission agent or retailer is not transported to placesoutside the State or from one district to another with a view tomaximise the procurement of such foodstuffs from the growersin the surplus area for their equitable distribution at fair prices inthe deficit areas. The placing of such ban on export of foodstuffsacross the State or from one part of the State to another with a 6 (2009) 6 SCC 235

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114SUPREME COURT REPORTS

Aview to prevent outflow of foodstuffs from a State which is asurplus State prevents the spiral rise in prices of such foodstuffsby artificial creation of shortage by unscrupulous traders...Theseare nothing but regulatory measures.”

20. Mr. Kapur further submitted that the above observations andBthe expansive interpretation given to the power of regulation in both theaforesaid cases have been approved by a Constitution Bench of thisCourt in U.P. Cooperative Cane Unions Federations v. West U.P.Sugar Mills Association and Others[8]. In this case, the ConstitutionBench was considering the competence of the State Government to fixthe State advised price for purchase of sugarcane by an occupier of aCsugar factory over and above the minimum price fixed by the CentralGovernment. The relevant section, i.e. Section 16, also provided merelya power of regulation and the power to provide for terms and conditionsand did not grant the power to fix prices. Discussing that aspect, it wasobserved as under:D“...”Regulate” means to control or to adjust by rule or to subjectto governing principles. It is a word of broad impact having widemeaning comprehending all facets not only specifically enumeratedin the Act, but also embraces within its fold the powers incidentalto the regulation envisaged in good faith and its meaning has to beEascertained in the context in which it has been used and the purposeof the statute.”

21. On the basis of the aforesaid judgments, submission of Mr.Kapur was that this Court has consistently held that power to regulatewas of widest amplitude and, therefore, it would encompass power toFregulate the movement of minor minerals as well, including the conditionnot to transport the excavated sand outside the State of Gujarat in thelease itself. He submitted that this Court in State of Tamil Nadu v.M.P.P. Kavery Chetty[9] held that there is no power conferred upon theState Government under the MMDR Act to exercise control over theminor minerals after they have been excavated. His submission wasGthat this is the only judgment which has taken discordant note and whiledeciding this, the earlier judgment in D.K. Trivedi & Sons was not broughtto the notice of the Court.

22. Another submission of Mr. Kapur was that power to frame 8 (2004) 5 SCC 430H 9 (1995) 2 SCC 402

such a rule can be traced to Section 15(1A)(d) of the MMDR Act. Thissection empowers the State Government to impose conditions in a mininglease and, therefore, would include the power to impose all such conditionsas flown from the ownership of the minerals. Since it is the StateGovernment which is the ‘owner of the minerals’ and the minerals that‘vest’ in it, as held in Amritlal Nathubhai Shah and Others v. UnionGovernment of India and Another[10], while granting the licence, it canput conditions pertaining to movement and flow of such minerals aswell. He also took support from the following observations in MonnetIspat and Energy Limited v. Union of India and Others[11]:

“86...The judgment of this Court in Amritlal Nathubhai Shahestablishes the distinction between the power of reservation toexploit a mineral as its own property on the one hand and theregulation of mines and minerals development under the 1957 Actand the 1960 Rules on the other. The authority of the StateGovernment to make reservation of a particular mining area withinits territory for its own use is the offspring of ownership; and it isinseparable therefrom unless denied to it expressly by anappropriate law by the 1957 Act that has not been done byParliament. Setting aside by a State of land owned by it for itsexclusive use and under its dominance and control, in my view, isan incident of sovereignty and ownership.”

23. In any case, argued Mr. Kapur, power to frame the impugnedrule is conferred by Section 23-C of the MMDR Act as well. Accordingto him, it would be erroneous to contend that the word ‘illegal’ occurringin 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 andneither can cut down the width of the other.

24. He also argued that while construing a similar power to regulatetransport of forest produce, this Court upheld a rule prohibiting transportbeyond the borders of the State in the case of State of Tripura andOthers v. Sudhir Ranjan Nath[12] in the following words:

“...The object of the Act is to preserve and protect the forestwealth 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 Statesand their people. It is for achieving the above purpose that theAct provides for declaration of reserve forests, formation of villageforests and declaration of protected forests. It is for achievingthe very purpose that the Act vests, in the Government, controlover forest and lands not being the property of the Governmentand controls even the collection and movement of drift and strandedtimber. It is not a taxing enactment but an enactment designed topreserve, protect and promote the forest wealth in the interests ofthe nation. It must necessarily take within its fold catering to theneeds of the people of the State and that is what sub-rule (8)provides. In our opinion, therefore, sub-rule (8) of Rule 3 isperfectly valid.”

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25. Last submission of Mr. Kapur was that once it becomes clearthat power to regulate minor minerals conferred upon the StateGovernment would include power to regulate its movements as well,Dthere was no question of treating the same as violative of Article 301 ofthe Constitution. For this purpose, he relied upon certain judgments ofthis Court. Referring to the case of Hind Stone, he submitted that inthat case the Court specifically held that regulatory measures or measuresimposing compensatory taxes for the use of trading facilities do not comeunder the purview of restrictions contemplated by Article 301. Likewise,Eaccording to him, in Sudhir Ranjan Nath’s case, this Court had heldthat once a provision made by the State as the delegate of Parliament tocarry out the purposes of the Act is saved by Article 302, it will not be hitby Article 301. Such a rule, therefore, would not offend the principle offederalism.

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26. Having regard to the fact that it is the Union which can regulateand control the minerals in this country and States exercise power ofminor minerals as delegates of the Union, this Court had deemed it fit toissue notice of these proceedings to Union of India as well in order toelicit its stand on this issue. The Union of India has filed its reply, takingGa specific stand that there is no such power to frame rule like 44-BB ofthe 1966 Rules or Rule 71 of the 2010 Rules. Ms. Madhavi Divan,learned Additional Solicitor General, appeared for Union of India andpitched the case to even a higher level. Her argument was that there isno such power even with the Union of India to frame rules of the natureimpugned in these proceedings as these would be offensive of Article H

301 of the Constitution. Therefore, under no circumstances, such apower can vest with the State Government. She argued that Section 15which empowers the State Government to make rules in respect of minorminerals does not extend to the regulation of already excavated minorminerals under the terms and conditions of a mining lease. This is madeclear by the three Judge Bench in M.P.P. Kavery Chetty wherein thisCourt upheld the striking down of rules made by the State Governmentto fix minimum price for the sale of granite after its excavation. TheCourt emphatically held that the State Government had no power underSection 15 of the MMDR Act to exercise to control over minor mineralsafter they had been excavated. The power under Section 15 wasrestricted and did not empower the State to control the sale or sale priceof minor minerals once they had been mined. The latter judgment hasbeen followed in another three Judge Bench judgment in K.T. Varghese& Ors. v. State of Kerala & Ors.[13]. In the latter case, one of theimpugned conditions of the license was that minerals could be sold onlywithin the State of Kerala, that too for domestic and agricultural purposes.The same was found impermissible. She also submitted that there is noconflict whatsoever between the judgments of this Court in AmritlalNathubhai Shah and D.K. Trivedi & Sons on the one hand and M.P.P.Kavery Chetty on the other. Her contention was that in AmritlalNathubhai Shah, while it was emphatically stated that the StateGovernment is the ‘owner of minerals’ within its territory and mineralsvest in it, this was held in the context of a challenge to the reservation bythe State Government of certain areas of exploitation of bauxite in thepublic sector. Private parties challenged the notification to that effectand the Central Government to whom they applied for revision held thatthe minerals vested in the State Government which was its owner andthat the State Government had the inherent right to reserve any area forexploitation in the public sector. She did not quarrel with such aproposition. However, her caveat was that this was a matter wherethere were no leases in favour of private parties but rather the privateparties were petitioning the government for the grant of leases.

27. Likewise, in D.K. Trivedi & Sons, this Court held that minorminerals are used mostly in local areas and for local purposes whileminerals other than minor minerals are those necessary for industrialdevelopment on a national scale. She submitted that it is totally differentproposition. She also pointed out that in the said case the finding that the 13 (2008) 3 SCC 735

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AState Government could enhance dead rent even during the subsistenceof a lease has no application in the present case. Such observations ofthis Court in D.K. Trivedi & Sons were in the context of enhancementof dead rent which is collected as a fixed amount in consideration for thegrant of the lease by the lessor apart from royalty and is incidental to theregulation and development of mines and minerals which is avowed objectBof 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 mineralsbeyond the borders of the State of Gujarat. She argued that on the otherhand, both M.P.P. Kavery Chetty and K.T. Varghese were matterswherein what was sought to be controlled post grant of lease was theCsale of the excavated minerals. Such restrictions were found to bebeyond the powers granted to the State as a delegate of Parliament andwere accordingly struck down.

28. The learned Additional Solicitor General also rebutted theargument of the appellants that power to regulate would encompassDpower to restrict the movement beyond the State. She argued that whileit is well settled that the expression ‘regulation’ has many shades ofmeaning and can refer to prohibition (Sudhir Ranjan Nath and HindStone), the issue in the present case is whether a prohibition on thetransportation of legally mined materials can be imposed under theprovisions of the MMDR Act. There is no doubt that a prohibition canEbe imposed on mining under certain circumstances or on the grant ofleases under the aforesaid Act but not on transportation de hors illegalmining.

29. In this hue, the learned ASG submitted that Section 23-C wasinserted with specific object to curb ‘illegal mining’. Therefore, theFwords ‘transportation’ and ‘storage’ occurring therein would take theircolour from the expression ‘illegal mining’ on the principle of noscitur asociis. That was clear from the Statement of Objects and Reasons aswell. On the aforesaid basis, Ms. Divan submitted that the High Courtrightly concluded that there was lack of power with the State GovernmentGto 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 arguedthat there was no question of public interest as well. On this aspect, hercontention was that Parliament was wholly conscious of the environmentalHconcerns impacted on account of mining activity, which concern is reflected in Section 4A of the MMDR Act. This provision provides fortermination of prospecting licenses or mining leases on account ofexpediency in the interest of, inter alia, reservation of the naturalenvironment and conservation of mineral resources. Further, Section 18provides that it shall be the duty of the Central Government to take allsuch steps as may be necessary for the conservation and systematicdevelopment of minerals in India and for the protection of environmentby preventing or controlling any pollution which may be caused byprospecting mining operation. In this regard, the Central Government isempowered to make rules as it thinks fit. In other words, there arespecific provisions empowering the Central Government to make rulesin respect of conservation of minerals in the interest of the environment.

31. Ms. Divan also argued that the impugned rules are violativeof Article 301 of the Constitution as they seek to fetter the freedom oftrade, commerce and intercourse. Highlighting the purpose behind PartXIII of the Constitution which starts with Article 301, she emphasisedthat it was to achieve economic integration. Further, balancingdevelopment and economic equality of the country is equally vital facetof economic integration, stressed the learned Additional Solicitor General.She referred to various judgments of this Court on the aforesaid aspectsand concluded her submissions with the submission that the conclusionof the High Court in the impugned judgment was correct on this aspectas well.

32. Mr. D.N. Ray, Advocate, appeared on behalf of the privaterespondents and made his submissions almost on the same lines as arguedby the learned Additional Solicitor General. Therefore, it is not necessaryto repeat the same.

33. We have give our due consideration to the arguments advancedby the counsel for the parties on both sides.

34. From the subject matter of these appeals as well as argumentsnoted above, it clearly follows that the main issues that arise forconsideration are as under:

(a) Whether the impugned rules framed by the State of Gujaratas a delegate of Parliament are beyond the powers granted to it underthe MMDR Act? In other words, whether the impugned rules are ultravires Sections 15, 15A and 23-C of the MMDR Act?

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A(b) Whether the impugned rules are violative of Part XIII of theConstitution of India?

35. The appellants have submitted that Section 15 gives such apower. Sub-section (1) of Section 15 empowers the State Governmentto make rules for ‘regulating’ the grant of quarry leases, mining leasesBor other concessions in respect of minor minerals and for the purposesconnected therewith. This power of regulation pertains to granting ofleases. It is the submission of Mr. Kapur that the expression ‘regulating’is of widest amplitude and would, therefore, confer power to make therules of the nature made herein. He has referred to various judgmentsof this Court wherein the expression ‘regulating’ has been explained.CHe has also submitted that in any case under Section 15(1A) such apower is there and this provision has to be read independent of Section15(1).

36. It is difficult to accept the aforesaid contention in view of thejudgments of this Court in M.P.P. Kavery Chetty and K.T. Varghese.DIn those judgments, it has been categorically held that power of theState Government under Section 15 of the MMDR Act does not includecontrol over minor minerals after they are excavated. Followingobservations from the said judgment are extracted herein:

“19. The High Court quashed Rules 8-D and 19-B principally onthe ground that Section 15 of the said Act gave no power to theEState Government to frame rules to regulate internal or foreigntrade in granite after it had been quarried. Section 15 also did notempower the State Government to frame rules to enable a StateGovernment company or corporation to fix a minimum price forgranite.

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20. Learned counsel for the appellant State submitted that Rules8-D and 19-B were valid having regard to the Preamble of thesaid Act and Section 18 thereof. He submitted that the rule-makingpower of the State under Section 15(o) was wide enough toencompass Rules 8-D and 19-B.

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21. The said Act is enacted to provide for the regulation of minesand the development of minerals under the control of the Union.Section 2 of the said Act declares that it is expedient in the publicinterest that the Union should take under its control the regulationof mines and the development of minerals to the extent providedin the said Act. Section 13 empowers the Central Government to H

make rules for regulating the grant of prospecting licences andmineral leases in respect of minerals and for purposes connectedtherewith. Sub-section (1) of Section 15 empowers the StateGovernment to make rules for regulating the grant of quarry leases,mining leases and other mineral concessions in respect of minorminerals and for purposes connected therewith. Sub-section (1-A) of Section 15 states that such rules may provide for the mattersset out therein, namely, the person by whom and the manner inwhich an application for a quarry lease, mining lease and the likemay be made; the fees to be paid therefor; the time and the formin which the application is to be made; the matters which are tobe considered where applications in respect of the same land arereceived on the same day; the terms and conditions on whichleases may be granted or regulated; the procedure in this behalf;the facilities to be afforded to lease-holders; the fixation andcollection of rent and other charges and the time within whichthey are payable; the protection of the rights of third parties; theprotection of flora; the manner in which leases may be transferred;the construction, maintenance and use of roads, power transmissionlines, etc. on the land; the form of registers to be maintained;reports and statements to be submitted and to whom; and therevision of any order passed by any authority under the said Rules.Clause (o) of sub-section (1-A) reads “any other matter which isto be or may be prescribed”. Section 18 of the said Act states thatit shall be the duty of the Central Government to take all suchsteps as may be necessary for the conservation and systematicdevelopment of the environment by preventing or controlling anypollution which may be caused by prospecting or miningoperations.

22. Rules 8-D and 19-B empower the State Government or itsofficers or a State Government company or corporation as theState Government may direct to control the sale by every permit-holder of quarried granite or other rock suitable for ornamental ordecorative purposes. They also empower the State Governmentor its officers or a State Government company or corporation, asthe 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 protectgranite resources.

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23. It is difficult to see how granite resources can be protectedby controlling the sale of granite after its excavation and fixingthe minimum price thereof.

24. There is no power conferred upon the State Governmentunder the said Act to exercise control over minor minerals afterBthey have been excavated. The power of the State Government,as the subordinate rule-making authority, is restricted in the mannerset out in Section 15. The power to control the sale and the saleprice 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 tothe regulation of the grant of quarry and mining leases and otherCmineral concessions and it does not confer the power to regulatethe sale of already mined minerals.”

37. Likewise, the condition of license granted by the State of Keralato the effect that it could be sold only within the Sate, that too for domesticand agricultural purposes, was struck down in the following words:D

“3. The appellants’ complaint is that certain conditions in theform of restrictions have been incorporated while issuing thelicences. One of such conditions which the appellants attack isthat the minerals permitted to be stocked were to be purchasedonly from authorised quarrying permit-holders on that behalf.EAnother condition is that they are permitted to sell the mineralsonly within the State of Kerala, that too for domestic andagricultural purposes. The appellants’ complaint is that as far ascooperative societies are concerned, they are not saddled withany such restrictions imposed in the case of the appellants. Thus,Faccording to the appellants, there is a clear discrimination betweenthe cooperative societies and the individuals in the matter ofrestrictions imposed in the licences granted to them. Apart fromthat there is no legal sanction for such restrictions.”

38. Argument of Mr. Kapur that M.P.P. Kavery Chetty did notGconsider the earlier judgment in D.K. Trivedi & Sons is misplaced. Inthis behalf, we entirely agree with the learned Additional Solicitor Generalthat judgment in D.K. Trivedi & Sons and other judgments cited by Mr.Kapur are clearly distinguishable as the context and the subject mattersin those cases were entirely different. It is not necessary to point outthe differences in two sets of cases, as we entirely agree with the H

argument of Ms. Divan in drawing the distinction between the two andpointing out that there is no conflict whatsoever. She is right that thetwo 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 withthe grant or the refusal to grant a lease. In the instant appeals, whichconcern the sale of already excavated minerals that belong to the lessee,a prohibition by the State Government on sale thereof outside the Stateis 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 prudentand discriminating exploitation of minerals’. Following passage fromthe said judgment shows that as a method of regulation, prohibition isclearly permissible, provided, however, that it has a direct nexus with theconservation, exploitation and excavation of minerals:

“10...The statue with which we are concerned, the Mines andMinerals (Development and Regulation) Act, is aimed, as we havealready said more than once, at the conservation and the prudentand discriminating exploitation of minerals. Surely, in the case ofa scarce mineral, to permit exploitation by the State or its agencyand to prohibit exploitation by private agencies is the most effectivemethod of conservation and prudent exploitation. If you want toconserve for the future, you must prohibit in the present. Wehave no doubt that the prohibiting of the leases in certain cases ispart of the regulation contemplated by Section 15 of the Act.”

40. On the other hand, the prohibition on the transport or sale ofthe already mined minerals outside the State has no direct nexus withthe object and purpose of the MMDR Act which is concerned withconservation and prudent exploitation of minerals.

41. Insofar as Section 23-C of the MMDR Act is concerned, itwas inserted by the Amendment Act of 1999 with the objective to preventillegal mining. That is clearly spelled out in the Statement of Objects andReasons. We may reproduce a portion thereof again:

“(iii) A new provision is proposed to be inserted in the Actprohibiting transportation or storage or anything causingtransportation or storage of any mineral except under the dueprovisions of the Act, with a view to preventing illegal mining.

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AFurther, the Act is proposed to be amended to cover the breach ofthe provisions of the proposed new provision of the Act to bepunishable. It is also proposed to insert a new provision to providefor anything seized under the Act as liable for confiscation undercourt orders. A new section is proposed to be inserted to empowerthe State Governments to make rules for preventing illegal mining,Btransportation and storage of minerals and for purposes connectedtherewith.

(emphasis supplied)”

42. It is in this context the words ‘transportation’ and ‘storage’ inCSection 23-C are to be interpreted. Here the two words are used in thecontext of ‘illegal mining’. It is clear that it is the transportation andstorage of illegal mining and not the mining of minor minerals like sandwhich is legal and backed by duly granted license, which can be regulatedunder this provision. Therefore, no power flows from this provision tomake rule for regulating transportation of the legally excavated minerals.D

43. As far as Issue No. (b) above is concerned, we are also of theconsidered opinion that the impugned rules violate Part XIII of theConstitution as the effect thereof is to fetter the freedom of trade,commerce and intercourse under Article 301 of the Constitution. Underthis Article, the expression ‘freedom’ must be read with the expressionE‘throughout the territory of India’. Under Article 302, Parliament mayimpose restrictions on the freedom of trade, commerce or intercoursebetween 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 ParliamentFand the State Legislatures from making any law that gives preference toone State over another or discriminates between one State and another.Situations of scarcity are to be dealt with by Parliament under Article302(2). The power of State Legislature to impose reasonable restrictionson the freedom of trade, commerce or intercourse, as may be requiredin the public interest, requires such a Bill or amendment to be moved inGthe State Legislature only after receiving previous sanction from thePresident. The President, being the head of the State and the guardianof the federation, must be satisfied that such a law is indeed requiredand, thus, acts as a check on the promotion of provincial interests overnational interest. Going by the aforesaid scheme of this Chapter, it H

becomes apparent that when there are such restrictions on a StateLegislature, then the State Government could not have imposed such aprohibition under a statute whose object is to regulate mines and mineraldevelopment, and not trade and commerce per se.

44. That apart, we find force in the submission of the learnedAdditional Solicitor General that Part XIII of the Constitution is a codeon checks and balances on the legislative power intended to achieve theobjective of economic integration of the country. This was emphasisedin 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 beread in isolation. It is part and parcel of a single constitutionalinstrument envisaging a federal scheme and containing generalscheme conferring legislative powers in respect of the mattersrelating to List II of the Seventh Schedule on the States. It alsoconfers plenary powers on States to raise revenue for its purposesand does not require that every legislation of the State must obtainassent of the President. Constitution of India is an organicdocument. It must be so construed that it lives and adapts itself tothe exigencies of the situation, in a growing and evolving society,economically, politically and socially. The meaning of theexpressions used there must, therefore, be so interpreted that itattempts to solve the present problem of distribution of power andrights of the different States in the Union of India, and anticipatethe future contingencies that might arise in a developing organism.Constitution must be able to comprehend the present at the relevanttime and anticipate the future which is natural and necessarycorollary for a growing and living organism. That must be part ofthe constitutional adjudication. Hence, the economic developmentof States to bring these into equality with all other States andthereby develop the economic unity of India is one of the majorcommitments or goals of the constitutional aspirations of this land.For working of an orderly society economic equality of all theStates is as much vital as economic unity.”

Freedom of movement of goods, services and the creation of acommon market must be understood contextually and as necessary forcreating an economic union.

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A45. It is also rightly contended by all the respondents that balanceddevelopment of the country is an equally vital facet of economicintegration. No doubt, Part XIII permits some forms of differentiation,for example, to encourage a backward region or to create a level playingfield for parts of the country that may not have reached the desired levelof development. In this context, Part XIII envisions a two-fold object:B(i) facilitation of a common market through ease of trade, commerceand intercourse by erasing barriers; and (ii) Regulations (or restrictions)which may have the effect of differentiating between States or regionswhich may be necessary not only in emergent circumstances of scarcityetc. or but even for development of economically backward regions orCotherwise justified in the public interest. That Part XIII is not about“freedom” alone but is a code of checks and balances, intended atachieving economic unity and parity. Such a desired objective foreconomic integration through checks and balances was also articulatedin Video Electronics Pvt. Ltd.:

D“36. ...Economic unity is a desired goal, economic equilibrium andprosperity is also the goal. Development on parity is one of thecommitments of the Constitution. Directive principles enshrinedin Articles 38 and 39 must be harmonised with economic unity aswell as economic development of developed and under developedareas. In that light on Article 14 of the Constitution, it is necessaryEthat the prohibitions in Article 301 and the scope of Article 304(a)and (b) should be understood and construed. Constitution is a livingorganism and the latent meaning of the expressions used can begiven effect to only if a particular situation arises. It is not thatwith changing times the meaning changes but changing timesFillustrate and illuminate the meaning of the expressions used. Theconnotation of the expressions used takes its shape and colour inevolving dynamic situations. A backward State or a disturbed Statecannot with parity engage in competition with advanced ordeveloped States. Even within a State, there are often backwardareas which can be developed only if some special incentives areGgranted. If the incentives in the form of subsidies or grant aregiven to any part of (sic or) units of a State so that it may comeout of its limping or infancy to compete as equals with others,that, in our opinion, does not and cannot contravene the spirit andthe letter of Part XIII of the Constitution. However, this is H

permissible only if there is a valid reason, that is to say, if thereare justifiable and rational reasons for differentiation. If there isnone, it will amount to hostile discrimination….”

46. In order to justify any ‘preference’ or ‘discrimination’ underArticle 303, a scarcity of goods would have to be made out. It is amatter of record that the Study Group’s report on which reliance is placedby the appellant focuses on the need to restrict the export of sand outsideIndia and not within India. In any case, nothing prevents the appellantfrom restricting the quantum of sand being excavated. However, oncethe appellant State permits sand to be excavated, neither can it legallyrestrict its movement within the territory of India nor is the sameconstitutionally permissible. Likewise, there is no restriction on the Stateimporting sand from other states. If it is the case that the demand of anyState is not being met, it may purchase sand from other states. In anyevent, the market will dictate trade in sand inasmuch as it may make nobusiness sense for mining company to transport and sell its sand in a faraway 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 PradeshHigh Court and Madras High Court. Rather, we affirm the impugnedjudgment of the Gujarat High Court and dismiss these appeals.

Kalpana K. Tripathy

Appeals dismissed.

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