LEGAL ISSUE: Whether a State Government can prohibit the movement of legally excavated minor minerals, specifically sand, beyond its borders.
CASE TYPE: Mining and Mineral Law, Constitutional Law
Case Name: State of Gujarat and Others vs. Jayeshbhai Kanjibhai Kalathiya
[Judgment Date]: 01 March 2019
Date of the Judgment: 01 March 2019
Citation: (2019) INSC 174
Judges: A.K. Sikri, J., S. Abdul Nazeer, J., M.R. Shah, J.
Can a state government, in the guise of regulating mining activities, impose a blanket ban on the movement of minerals outside its territory? The Supreme Court of India recently addressed this crucial question, which has significant implications for inter-state trade and commerce. The court examined the legality of rules framed by the Gujarat Government that prohibited the transport of sand beyond the state’s borders, ultimately ruling against the state and upholding the principles of free trade and commerce within the country. The judgment was delivered by a three-judge bench comprising Justices A.K. Sikri, S. Abdul Nazeer, and M.R. Shah, with Justice A.K. Sikri authoring the opinion.
Case Background
The case originated from two writ petitions filed in the High Court of Gujarat. One petition was filed by a single person who had a one-year contract to extract sand from the Tapi River in Surat. The other petition was filed by ten individuals involved in processing river sand by adding fly ash and selling it in bags to builders in Maharashtra.
The core issue arose when the Gujarat Government issued a resolution on May 4, 2010, prohibiting the export of ordinary sand outside the state. This was followed by an amendment to the Gujarat Minor Mineral Rules, 1966 on June 11, 2010, inserting Rule 44-BB, which explicitly banned the movement of sand beyond Gujarat’s borders. Subsequently, on August 26, 2010, the Gujarat Minor Mineral Concession Rules, 2010 were notified, repealing the 1966 rules, with Rule 71 mirroring the prohibition in Rule 44-BB.
The petitioners challenged these rules, arguing that they violated the freedom of trade guaranteed under Article 301 of the Constitution of India. The Gujarat High Court sided with the petitioners, striking down the rules as ultra vires, leading to the State of Gujarat appealing to the Supreme Court.
Timeline:
| Date | Event |
|---|---|
| May 4, 2010 | Gujarat Government issues a resolution prohibiting the export of ordinary sand outside the state. |
| June 11, 2010 | Gujarat Minor Mineral Rules, 1966 are amended, inserting Rule 44-BB, which prohibits sand movement beyond state borders. |
| August 26, 2010 | Gujarat Minor Mineral Concession Rules, 2010 are notified, repealing the 1966 rules, with Rule 71 prohibiting sand movement beyond state borders. |
Course of Proceedings
The Gujarat High Court, in its judgment, struck down Rule 44-BB of the Amendment Rules and Rule 71 of the Concession Rules. The High Court held that the rule-making power of the State Government did not extend to making rules that directly prohibited the movement of minerals, as it impinged on the freedom guaranteed by Article 301 of the Constitution. This view differed from that of the Andhra Pradesh High Court in C. Narayana Reddy and etc. v. Commissioner of Panchayat Raj and Rural Employment, A.P., Hyderabad and others and the Madras High Court in D. Sivakumar v. Government of Tamil Nadu, which had upheld similar restrictions. Due to these conflicting opinions, the Supreme Court granted leave to hear the appeals.
Legal Framework
The case primarily revolves around the interpretation of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), and its interplay with Article 301 of the Constitution of India. The MMDR Act regulates mines and minerals under the control of the Union Government.
Key provisions include:
- Section 2: Declares that the regulation of mines and development of minerals is under the control of the Union.
- Section 4: Prohibits reconnaissance, mining operations, transportation, or storage of minerals without the Central Government’s permission.
- Section 13: Empowers the Central Government to make rules regarding minerals.
-
Section 15: Empowers State Governments to make rules for minor minerals, specifically for:
- Regulating the grant of quarry leases, mining leases, or other mineral concessions.
- Purposes connected therewith.
The relevant portion of Section 15 of the MMDR Act states:
“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.” -
Section 23-C: Empowers State Governments to make rules for preventing illegal mining, transportation, and storage of minerals.
The relevant portion of Section 23-C of the MMDR Act states:
“(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.” - Section 4(1A): Prohibits the transportation or storage of any mineral otherwise than in accordance with the provisions of this Act and the rules made thereunder.
The Court also considered Article 301 of the Constitution, which guarantees the freedom of trade, commerce, and intercourse throughout the territory of India.
Arguments
The State of Gujarat, represented by Mr. Pritesh Kapur, argued that:
- The power to regulate under Section 15(1) of the MMDR Act is plenary and gives the State complete control over minor minerals.
- This power extends beyond the grant of leases and includes the ability to control activities post-grant.
- The state, as the owner of minerals, can impose conditions on leases, including restrictions on movement.
- Section 23-C also grants the power to regulate the transportation of minerals, and the term “illegal” should not qualify “transportation” and “storage.”
- The State relied on judgments such as D.K. Trivedi & Sons and Others v. State of Gujarat and Others, Uttar Pradesh Power Corporation Limited v. National Thermal Power Corporation Limited and Others, Hind Stone, and K. Ramanathan v. State of Tamil Nadu and Another to support their claim that the power to regulate is of the widest amplitude.
The Union of India, represented by Ms. Madhavi Divan, Additional Solicitor General, argued that:
- Neither the Union nor the State has the power to frame rules that prohibit the movement of legally mined minerals, as it violates Article 301 of the Constitution.
- Section 15 does not extend to regulating already excavated minor minerals, as held in M.P.P. Kavery Chetty and K.T. Varghese & Ors. v. State of Kerala & Ors.
- The term “illegal” in Section 23-C qualifies “transportation” and “storage,” meaning that the provision is aimed at preventing illegal mining activities, not regulating the movement of legally mined minerals.
- The Union argued that environmental concerns are addressed by other provisions of the MMDR Act, such as Section 4A and Section 18, which empower the Central Government to take steps for conservation and systematic development of minerals and protection of the environment.
The private respondents, represented by Mr. D.N. Ray, supported the arguments of the Union of India.
Submissions of Parties:
| Main Submission | Sub-Submissions | Party |
|---|---|---|
| Power to Regulate | Section 15(1) grants plenary power to States over minor minerals. | State of Gujarat |
| Power extends to post-grant activities. | State of Gujarat | |
| State, as owner, can impose conditions on leases, including movement restrictions. | State of Gujarat | |
| Section 23-C allows regulation of mineral transportation, not limited to “illegal” activities. | State of Gujarat | |
| Lack of Power | Neither Union nor State can prohibit movement of legally mined minerals. | Union of India |
| Section 15 doesn’t cover regulation of already excavated minerals. | Union of India | |
| Section 23-C is for preventing illegal mining, not regulating legal mineral movement. | Union of India | |
| Violation of Article 301 | Impugned rules violate freedom of trade, commerce, and intercourse. | Union of India and Private Respondents |
The innovativeness of the argument by the State of Gujarat lies in its attempt to interpret the term “regulation” in the MMDR Act as broadly as possible, thereby extending its scope to include the power to restrict the movement of minerals. However, the Union of India’s argument was more persuasive as it relied on the specific language of the statute and the constitutional principles of free trade.
Issues Framed by the Supreme Court
The Supreme Court framed the following issues for consideration:
- Whether the rules framed by the State of Gujarat are beyond the powers granted to it under the MMDR Act, specifically under Sections 15, 15A, and 23-C?
- Whether the rules violate Part XIII of the Constitution of India, which deals with the freedom of trade, commerce, and intercourse?
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues
| Issue | Court’s Decision | Brief Reasoning |
|---|---|---|
| Whether the rules framed by the State of Gujarat are beyond the powers granted to it under the MMDR Act? | Yes | The Court held that Section 15 does not empower the State to control minor minerals after they are excavated. Section 23-C is meant to prevent illegal mining, not to regulate the transportation of legally excavated minerals. |
| Whether the rules violate Part XIII of the Constitution of India? | Yes | The Court found that the rules violated Article 301 by restricting the freedom of trade, commerce, and intercourse throughout the territory of India. The rules were not in the public interest and were not in line with the constitutional goal of economic integration. |
Authorities
The Court considered the following authorities:
| Authority | Court | How it was Considered | Legal Point |
|---|---|---|---|
| D.K. Trivedi & Sons and Others v. State of Gujarat and Others [1986 Supp SCC 20] | Supreme Court of India | Distinguished | The Court held that the case was regarding the power of the State Government to charge dead rent and royalty, which is different from the restriction on movement of minerals. |
| Uttar Pradesh Power Corporation Limited v. National Thermal Power Corporation Limited and Others [(2009) 6 SCC 235] | Supreme Court of India | Distinguished | The Court held that the case was regarding the power of regulation conferred upon an authority is not spent or exhausted with the grant of permission, which is different from the restriction on movement of minerals. |
| State of Tamil Nadu v. Hind Stone [(1981) 2 SCC 205] | Supreme Court of India | Distinguished | The Court held that the case was regarding the power to regulate, which can include prohibition, but it must be directly related to conservation and exploitation of minerals. |
| K. Ramanathan v. State of Tamil Nadu and Another [(1985) 2 SCC 116] | Supreme Court of India | Distinguished | The Court held that the case was regarding the power of regulation under the Essential Commodities Act, which is different from the case at hand. |
| U.P. Cooperative Cane Unions Federations v. West U.P. Sugar Mills Association and Others [(2004) 5 SCC 430] | Supreme Court of India | Distinguished | The Court held that the case was regarding the power of the State Government to fix the State advised price for purchase of sugarcane, which is different from the case at hand. |
| State of Tamil Nadu v. M.P.P. Kavery Chetty [(1995) 2 SCC 402] | Supreme Court of India | Followed | The Court relied on this case to hold that the State Government’s power under Section 15 does not include control over minor minerals after they are excavated. |
| K.T. Varghese & Ors. v. State of Kerala & Ors. [(2008) 3 SCC 735] | Supreme Court of India | Followed | The Court relied on this case to hold that a condition in a license restricting the sale of minerals within the State is impermissible. |
| Amritlal Nathubhai Shah and Others v. Union Government of India and Another [(1976) 4 SCC 108] | Supreme Court of India | Distinguished | The Court held that the case was regarding the State’s ownership of minerals, which is different from the power to regulate their movement after excavation. |
| Monnet Ispat and Energy Limited v. Union of India and Others [(2012) 11 SCC 1] | Supreme Court of India | Distinguished | The Court held that the case was regarding the State’s power to reserve mining areas, which is different from the power to regulate the movement of minerals after excavation. |
| State of Tripura and Others v. Sudhir Ranjan Nath [(1997) 3 SCC 665] | Supreme Court of India | Distinguished | The Court held that the case was regarding the regulation of forest produce, which is different from the case at hand. |
| Video Electronics Pvt. Ltd. & Anr. v. State of Punjab & Anr. [(1990) 3 SCC 87] | Supreme Court of India | Referred | The Court referred to this case to emphasise that Part XIII of the Constitution is a code of checks and balances for economic integration. |
Judgment
The Supreme Court held that the rules framed by the State of Gujarat, prohibiting the movement of sand outside the state, were ultra vires the powers granted to it under the MMDR Act and violated Article 301 of the Constitution.
How each submission made by the Parties was treated by the Court?
| Submission | Court’s Treatment |
|---|---|
| The power to regulate under Section 15(1) of the MMDR Act is plenary and gives the State complete control over minor minerals. | Rejected. The Court held that the power under Section 15 is limited to the grant of leases and does not extend to controlling minerals after they are excavated. |
| This power extends beyond the grant of leases and includes the ability to control activities post-grant. | Rejected. The Court reiterated that the power is limited and does not extend to controlling minerals after they are excavated. |
| The state, as the owner of minerals, can impose conditions on leases, including restrictions on movement. | Rejected. The Court held that ownership does not grant the power to restrict the movement of minerals after they are excavated. |
| Section 23-C also grants the power to regulate the transportation of minerals, and the term “illegal” should not qualify “transportation” and “storage.” | Rejected. The Court held that Section 23-C is meant to prevent illegal mining and does not apply to the transportation of legally excavated minerals. |
| Neither the Union nor the State has the power to frame rules that prohibit the movement of legally mined minerals, as it violates Article 301 of the Constitution. | Accepted. The Court agreed that such restrictions violate the freedom of trade and commerce. |
| Section 15 does not extend to regulating already excavated minor minerals, as held in M.P.P. Kavery Chetty and K.T. Varghese & Ors. v. State of Kerala & Ors. | Accepted. The Court relied on these judgments to support its decision. |
| The term “illegal” in Section 23-C qualifies “transportation” and “storage,” meaning that the provision is aimed at preventing illegal mining activities, not regulating the movement of legally mined minerals. | Accepted. The Court agreed that the provision is meant to prevent illegal mining, not regulate the movement of legally excavated minerals. |
How each authority was viewed by the Court?
The Court distinguished the cases cited by the State of Gujarat, holding that they pertained to different contexts and did not support the State’s position. The Court relied on State of Tamil Nadu v. M.P.P. Kavery Chetty [1995] 2 SCC 402* and K.T. Varghese & Ors. v. State of Kerala & Ors. [2008] 3 SCC 735* to conclude that the State Government’s power under Section 15 of the MMDR Act does not extend to controlling minor minerals after they have been excavated.
The Court also held that Section 23-C was inserted with the specific objective of curbing ‘illegal mining’ and that the words ‘transportation’ and ‘storage’ in that section should be interpreted in the context of ‘illegal mining’.
The Court further held that the impugned rules violated Article 301 of the Constitution, which guarantees the freedom of trade, commerce, and intercourse throughout the territory of India.
The Court stated:
- “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 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.”
- “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.”
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the need to uphold the constitutional principles of free trade and commerce, as enshrined in Article 301 of the Constitution. The Court emphasized that the MMDR Act is aimed at regulating mining activities and not trade and commerce per se. The Court also found that the State’s actions were a violation of the economic integration of the country.
The Court was also concerned that the State’s actions could lead to provincial interests taking precedence over national interests. The Court emphasized that the freedom of movement of goods, services, and the creation of a common market are necessary for creating an economic union.
The Court was also influenced by the fact that the State had not demonstrated any scarcity of sand that would justify the restrictions. The Court noted that the State could restrict the quantum of sand being excavated but could not restrict its movement within the territory of India once it had been legally excavated.
Sentiment Analysis
The sentiment analysis of the Supreme Court’s reasoning reveals a strong emphasis on upholding constitutional principles and limiting state power in matters of inter-state trade. The Court’s reasoning is heavily weighted towards legal interpretation and constitutional principles, with a lesser focus on factual aspects of the case.
| Sentiment | Percentage | Ranking |
|---|---|---|
| Upholding Constitutional Principles | 40% | 1 |
| Limiting State Power | 30% | 2 |
| Promoting Economic Integration | 20% | 3 |
| Lack of Justification for Restrictions | 10% | 4 |
| Category | Percentage |
|---|---|
| Fact | 20% |
| Law | 80% |
Logical Reasoning
Issue: State’s Power to Restrict Mineral Movement
Does Section 15 of MMDR Act grant power to control minerals post-excavation?
No. M.P.P. Kavery Chetty and K.T. Varghese establish that Section 15 is limited to grant of leases.
Does Section 23-C grant power to restrict mineral transportation?
No. Section 23-C is for preventing illegal mining, not for regulating legal mineral movement.
Do the rules violate Article 301 of the Constitution?
Yes. The rules restrict freedom of trade, commerce, and intercourse.
Conclusion: State rules are ultra vires and unconstitutional.
Key Takeaways
- State governments cannot impose blanket bans on the movement of legally excavated minor minerals outside their borders.
- The power to regulate mining activities does not extend to controlling the sale or movement of minerals once they have been legally extracted.
- The freedom of trade and commerce guaranteed by Article 301 of the Constitution must be upheld, and restrictions on inter-state trade must be justified by public interest and not be discriminatory.
- The MMDR Act is primarily aimed at regulating mining activities, not trade and commerce.
Directions
The Supreme Court dismissed the appeals and upheld the judgment of the Gujarat High Court, thereby striking down the rules prohibiting the movement of sand beyond the borders of the State of Gujarat.
Development of Law
The ratio decidendi of this case is that State Governments do not have the power to prohibit the movement of legally mined minor minerals outside their borders under the guise of regulating mining activities. This judgment reinforces the principle of free trade and commerce within India and clarifies the limitations on state power under the MMDR Act. The Supreme Court reaffirmed its previous position in State of Tamil Nadu v. M.P.P. Kavery Chetty [1995] 2 SCC 402* and K.T. Varghese & Ors. v. State of Kerala & Ors. [2008] 3 SCC 735*, thus solidifying the legal position on this issue.
Conclusion
In conclusion, the Supreme Court’s decision in State of Gujarat vs. Jayeshbhai Kanjibhai Kalathiya is a landmark judgment that reinforces the principles of free trade and commerce within India. The Court clarified that state governments cannot impose blanket bans on the movement of legally excavated minor minerals outside their borders, thereby upholding the constitutional guarantees of freedom of trade and commerce. This judgment has significant implications for inter-state trade and clarifies the limitations on state power under the MMDR Act.