Karnataka High Court
M/S Thakur Industries vs State Of Karnataka on 21 April, 2023
Author: Prasanna B. Varale
Bench: Prasanna B. Varale
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF APRIL 2023
PRESENT
THE HON'BLE MR. PRASANNA B. VARALE, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE ASHOK S. KINAGI
WRIT PETITION NO.19773 OF 2018 (GM-MMS)
C /W
WRIT PETITION NOS.8022 OF 2022 & 8134 OF 2022
IN W.P.NO.19773 OF 2018
BETWEEN:
M/S MSPL LIMITED
A COMPANY REGISTERED IN INDIA
UNDER THE PROVISIONS OF THE
COMPANIES ACT, 1956 WITH ITS
CORPORATE OFFICE SITUATED AT
BALDOTA ENCLAVE,
ABHERAJ BALDOTA ROAD,
HOSPET - 583202.
BELLARY DISTRICT
REP. BY ITS VICE PRESIDENT (LEGAL),
SRI. A.G. DESAI,
AGED ABOUT 53 YEARS,
...PETITIONER
(BY SRI. ASHOK HARANAHALLI, SR. ADVOCATE FOR
SRI. M.M. SWAMY, ADVOCATE)
2
AND:
1. THE STATE OF KARNATAKA
REP. BY ITS SECRETARY (MINES),
DEPARTMENT OF COMMERCE & INDUSTRIES,
VIKAS SOUDHA, 1ST FLOOR,
BANGALORE - 560001.
2. THE COMMISSIONER & DIRECTOR OF MINES &
GEOLOGY
KHANIJA BHAVAN, 5TH CROSS,
RACE COURSE ROAD,
BANGALORE - 560001.
3. THE DEPUTY DIRECTOR MINES & GEOLOGY
DEPARTMENT OF MINES & GEOLOGY,
KOPPAL - 583231.
KOPPAL DISTRICT.
4. THE PRINCIPAL CHIEF CONSERVATOR OF FORESTS
ARANYA BHAVAN, 18TH CROSS,
MALLESHWARAM,
BANGALORE - 560003.
....RESPONDENTS
(BY SRI. S.S. MAHENDRA, AGA)
THIS WRIT PETITION IS FILED UNDER ARTICLES
226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING
TO DECLARE THAT THE RESPONDENTS ARE NOT
ENTITLED TO DEMAND AND COLLECT ADDITIONAL
ROYALTY ON DIFFERENTIAL GRADE OF ORE UNDER RULE
4 (10) OF THE KARNATAKA (PREVENTION OF ILLEGAL
MINING, TRANSPORTATION AND STORAGE OF MINERALS)
RULES 2011, AS THE SAME IS UNCONSTITUTIONAL, IN
SO FAR AS THE PETITIONER IS CONCERNED.
IN W.P.NO.8022 OF 2022
BETWEEN
M/S THAKUR INDUSTRIES
A PARTNERSHIP FIRM DULY AUTHORIZED PARTNERS
3
REPRESENTED BY LIAISONING MANAGER
MR. SHEKHER MITTAL
S/O KAMTA PRASAD MITTAL
AGED ABOUT 52 YEARS,
HAVING ITS OFFICE AT F2,
1ST FLOOR, R.R.KUTEERA,
NO.48, 29TH WARD, BDCC BANK COLONY
M.J.NAGAR, HOSPET,
BELLARY DISTRICT-583 101.
...PETITIONER
(BY SRI. LAKAMAPURMATH CHIDANANDAYYA, ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRESENTED BY SECRETARY
TO GOVERNMENT,
COMMERCE AND INDUSTRIES DEPT.
(MINES, MSME AND SUGAR)
VIKASA SOUDHA,
BANGALORE-560 001.
2. THE DIRECTOR
DEPARTMENT OF MINES AND GEOLOGY
KHANIJA BHAVAN, R.C.ROAD,
BANGALORE-560 001.
3. SENIOR GEOLOGIST
DEPARTMENT OF MINES AND GEOLODY
KOPPAL DISTRIT
KOPPAL-583 231.
....RESPONDENTS
(BY SRI. S.S. MAHENDRA, AGA)
THIS WRIT PETITION IS FILED UNDER ARTICLES
226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING
TO CALL FOR RECORDS WHICH ULTIMATELY RESULTED
IN ENACTING THE IMPUGNED RULES AT ANNEXURE-A
PERMITTING THE ROYALTY CHARGES AT THE
4
PROCESSING PLANT IN PLACE OF MINE HEAD AT THE
TIME OF ISSUING THE MINERAL DISPATCH PERMITS FOR
TRANSPORTING THE BENEFICIATED ORE FROM THE
PLANT OF THE PETITIONER TO THE ULTIMATE CONSUMER
AND ETC.
IN W.P.NO.8134 OF 2022
BETWEEN
M/S ACORE INDUSTRIES PVT. LTD.
REP. BY ITS AUTHORIZED REPRESENTATIVE OF
ITS BOARD OF DIRECTORS
MR. YASHAVANTH T G
S/O LATE T. H. GANESH KUMAR
MANAGER ACCOUNTS
NO.12/3A, 2ND FLOOR
YAMUNABAI ROAD, MADHAVANAGAR
BANGALORE-560001.
...PETITIONER
(BY SRI. LAKAMAPURMATH CHIDANANDAYYA, ADVOCATE)
AND:
1. STATE OF KARNATAKA
REPRESENTED BY SECRETARY
TO GOVERNMENT
COMMERCE AND INDUSTRIES DEPT.
(MINES, MSME AND SUGAR)
VIKASA SOUDHA, BANGALORE-560001.
2. THE DIRECTOR
DEPARTMENT OF MINES AND GEOLOGY
KHANIJA BHAVAN, R C ROAD
BANGALORE-560001.
3. DEPUTY DIRECTOR
DEPARTMENT OF MINES AND GEOLOGY
HOSPET-583201.
4. DEPUTY DIRECTOR
DEPARTMENT OF MINES AND GEOLOGY
5
BELLARY DISTRICT
BELLARY-583104.
.....RESPONDENTS
(BY SRI. S. S. MAHENDRA, AGA)
THIS WRIT PETITION IS FILED UNDER ARTICLES
226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING
TO CALL FOR RECORDS WHICH ULTIMATELY RESULTED
IN ENACTING THE IMPUGNED RULES AT ANNEXURE-A
PERMITTING THE ROYALTY CHARGES AT THE
PROCESSING PLANT IN PLACE OF MINE HEAD AT THE
TIME OF ISSUING THE MINERAL DISPATCH PERMITS FOR
TRANSPORTING THE BENEFICIATED ORE FROM THE
PLANT OF THE PETITIONER TO THE ULTIMATE CONSUMER
AND ETC.
THESE WRIT PETITIONS HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT ON 20.04.2023, COMING ON
FOR PRONOUNCEMENT, THIS DAY, ASHOK S KINAGI J.,
MADE THE FOLLOWING:
ORDER
These writ petitions are filed challenging the constitutional validity of Rule 4(10) of the Karnataka (Prevention of Illegal Mining, Transportation & Storage of Minerals) Rules, 2011 (hereinafter referred to as 'the Rules of 2011' for short) and also sought for a mandamus directing the respondents to refund the amount of royalty collected on differential grade of one ore from the petitioner along with interest. 6
2. Brief facts leading rise to filing of this petition are as under:
The petitioner in W.P.No.19773/2018 has been into mining business for more than 5 decades. The petitioner is a lessee under a subsisting mining lease for mining iron ore (M.L.No.2416 of Vyasankere Village, Hospet Taluk in Ballari District) and the mining lease is valid upto 2022. The petitioner has undertaken forward integration of mining activities and in the process has established iron ore "pellet"
manufacturing plant at Halawarthy Village in Koppal Taluk & District. The pellet plant of petitioner is buying the iron ore required for its production through e-auction. It is mandatory to register pellet plant as a mineral base industry under the provisions of the Rules of 2011. The iron ore may be in the form of 'fines' or 'lumps' or both. When iron ore is a mix of both fines and lumps, i.e., run of mines, the pellet plant after processing the uses only fines and lump ore is separated and sold. After processing the grade 7 of fines is lower and the grade of lump is higher than ROM grade. The weightage average grade of fines and lumps is more than for which royalty is paid while transporting from lease area, the State Government issues permit to the transport, the same only after collecting royalty on such differential grade under the Rules of 2011, the petitioner aggrieved by the levy of royalty on iron ore to the extent of differential grade, filed this writ petition challenging the enactment of the Rules of 2011, regulating the transporting of minerals and issue of permits for transportation, etc. Rule 4(10) of the Rules of 2011 provides for collection of royalty. The said provision has been introduced by the State Government in order to extract additional royalty which is neither found in the MMDR Act nor in MC Rules which alone have all the powers to control, regulate and manage the iron ore. The iron ore mineral is considered tobe a major mineral and therefore the State Government cannot have control over the same by way of introducing State Rules. The 8 tenor of Rule 4(10)(b) of the State Rules creates an additional liability to the lease holder/processing company by imposing a royalty for the differential higher grade of ore after beneficiating process. When the ore is transported to the plant, the iron ore is bifurcated into fines and lumps. When the lumps which is a waste for pellet plant, is transported outside the plant. The State insist pellet plant to pay additional royalty for differential grade and the pellet plant has been constrained to pay such additional royalty solely on account of the said Rule which is without authority of law and unconstitutional. The petitioner being not liable to pay differential royalty, requested Senior Geologist, Department of Mines & Geology, Koppal to refund differential royalty collected vide letter dated 14.11.2017 and the Senior Geologist did not respond to the said representation. The State has no power to promulgate the impugned Rule as the entire field of royalty is covered by Central Legislation. Action of collection of additional royalty is 9 arbitrary, illegal and unconstitutional. Hence the petitioner aggrieved by the impugned Rules, filed this writ petition.
The petitioners in W.P.No.8022/2022 and W.P.No.8134/2022 have installed benefication plant which carries out the process of miling, scrubbing, magnetic separation, hydro-cyclone, jigging, tabling and thickening of iron ore and manganese ore. The petitioner carries out the process of upgrading low grade iron and manganese ore mineral and carries out the benefication of the ore which will minimize the waste dump generated and manufacture the mineral which is used by the steel plants in the State of Karnataka. The petitioners used to purchase the iron ore, mineral and manganese ore from the subsisting lease on payment of royalty charges at the mine head and used to transport to the factory premises from the mining lease with all the valid permits issued by the Department of Mines & Geology. The respondent 10 Nos.1 to 3 used to collect the royalty charges at the mine head from the lessee on the unprocessed ROM and used to issue Mineral Despatch Permits (MDP) for transporting the iron ore/manganese ore from mining lease to the plant of the petitioner. The respondents cannot collect the difference of royalty charges from the plants where they were carrying on benefication of the ore. It is submitted that royalty charges is covered by the Central Act & Rules framed by the Central Enactments. The State Government has no jurisdiction to enact fixing royalty charges under Section 23-C of the Mines & Minerals (Development & Regulations) Act MMDR Act (hereinafter referred to as 'the MMDR Act' for short). The impugned Rules framed by the State Government is beyond the jurisdiction of the State under Section 23-C of the MMDR Act. The petitioners do not have any mining lease of its own to carry on the manufacture of beneficiated ore by utilizing the iron ore and manganese ore of its own mining lease.11
Hence the petitioners filed this writ petition challenging clause(b) of Sub-rule 10 of Rule 4 of the impugned Rules as arbitrary without jurisdiction, repugnant to Section 9 of the MMDR Act, Rule 64-B of the Mineral Concession Rules, 1960 (hereinafter referred to as 'the Rules of 1960' for short) and Rule 39 of the Minerals (Other than Atomic, Hydro Carbons, Energy Minerals) Concession Rules, 2016 (hereinafter referred to as 'the Rules of 2016' for short) Rules of 2016 and the same is liable to be declared as unconstitutional.
3. Respondent No.3 filed statement of objections contending that the writ petitions are liable to be dismissed as the petitioners have not stated any grounds in order to demonstrate that the legal rights have been violated. It is contended that the petitioners have registered before the Department of Mines & Geology and issued a certificate of 12 registration and it is further contended that the petitioners are purchasing iron ore through monitoring committee constituted by the Hon'ble Apex Court by way of e-auction upon payment of royalty on ad volarem basis. The petitioners are carrying activity and had paid differential royalty as prescribed under Rule 4(10) of the Rules of 2011. It is further contended that the constitutional validity of the provision can be challenged on one of the following two grounds:
(a) The impugned provision violates any fundamental rights under the constitution; or
(b) The provisions have been enacted without necessary legislative competency.
4. The petitioners have failed to demonstrate as to how Rule 4(10) of the Rules of 2011 violates any fundamental rules or the petitioners have pleaded that the rule issued without legislative competency. It is contended that Rule 4(10) provides for collection of differential royalty after beneficiation 13 is in excess of the State Government rule making power under the Mines & Minerals (Development & Regulations) Act. Further it is contended that Section 23C of the MMDR Act empowers the State Government to make the rules for the prevention of illegal mining, transportation and shortage of minerals and for the purposes connected therewith. The power conferred on the State Government under Section 23C are wide in nature. It is expressly in pursuance of rule making power under Section 23C that the Rules of 2011 have been issued and the impugned rule is strictly in accordance with the provisions of the MMDR Act, including Sections 9 and 23, hence prayed to dismiss the writ petition.
5. Heard Sri. Ashok Haranahalli, learned Senior Counsel for the petitioner in W.P.No.19773/2018 and Sri. Chidanandayya, learned counsel for the petitioners in W.P.Nos.8022/2022 & 8134/2022 and 14 Sri. S. S. Mahendra, learned Additional Government Advocate for the respondents.
6. Learned Senior Counsel for the petitioner submits that the State Government has no jurisdiction to amend Rule 4(10) of the Rules of 2011. He submits that the petitioner cannot be directed to pay royalty on two occasions. He submits that the impugned Rules is in violation of Article 30(2) and Article 254 of the Constitution of India. He submits that once mineral is extracted, royalty is paid, the State Government cannot demand royalty on the beneficiated minerals (after processing). He submits that Section 13(1) is substituted with effect from 10.02.1987. He submits that Section 2 prescribes that every act of mines and minerals is under the control of Union of India, but not under the State Government as per Schedule VII to the Constitution of India, Entry No.54. He submits that regulation of mines declared by the Parliament. He further submits 15 that it is only the Central Government which can make the rules, but not the State Government. He submits that the impugned rule framed by the State Government is contrary to the Rules framed by the Central Government. In order to buttress his argument, he has placed reliance on the judgment of the Hon'ble Apex Court in Tata Steels Limited vs. Union of India & Ors., reported in (2015) 6 SCC
193. Hence on these grounds he prays to allow the writ petition.
7. Sri. Chidanandayya, learned counsel for petitioners in W.P.No.8022/2022 and 8134/2022 reiterates the arguments of Sri. Ashok Haranahalli, learned Senior Counsel for the petitioner in W.P.No. 19773/2018.
8. Per contra, learned Additional Government Advocate submits that the Rules are enacted in the year 2011 and the petitioners have applied for registration under the said Rules and petitioners 16 accepted the said Rules and paid the royalty upto 2017 without any protest and these writ petitions are filed after 7 years from the date of enactment of the Rules. He further submits that the petitioners have undertaken to pay the royalty as per Rule 4(10) of the Rules of 2011 and also sworn an affidavit to the said extent. He further places reliance on Rule 3 of the Rules of 2011. He submits that the impugned Rule applies for transportation of beneficiated mineral from stockyard to the destination. He submits that there are two steps for payment of royalty. One is processing and the other is beneficiation. After processing, then it will come to know about the percentage of lumps. He further submits that Section 23C of the Act empowers the State to make a rule to prevent illegal mines & minerals. Section 23C(g) provides any other matter which is required tobe from preventing of illegal mining, transportation, shortage of minerals. He submits that in the instant case, ROM of mine is transported from the stockyard and Section 17 9 of the MMDR Act, royalty is chargeable on the minerals and not for ROM. Rule 40 of the Rules of 2016 provides that for provisional payment of royalty. He also submits that ROM differs from mines to mines. He submits that iron ore has to undergo process and the party will not be in a position to require to fix royalty for lump. Rule 4(10) imposes payment of differential royalty. He submits that there is no repugnancy in between Section 9 of the MMDR Act and the impugned Rules. Further he places reliance on the following judgments of the Hon'ble Apex Court as well as this court:
(1) W.P.No.6985/2008 disposed on
24.09.2010 in the case of M/s.
Kumaraswamy Minerals Exports & Ors. vs. State of Karnataka & Ors.;
(2) M/s. V.S.Lad & Sons vs. State of Karnataka reported in ILR 2011 Kar 1333; (3) M/s. Mideast Integrated Steel Limited & Anr. vs. State of Odisha & Ors., reported in 2015 SCC Online Orissa 489;
(4) Thirumuruga Kirupananda Variyar Thavathiru Sundara Swamigal Medical Educational & Charitable Trust vs. State of Tamil Nadu & Ors., reported in (1996) 3 SCC 15 18 (5) Civil Appeal No.6575/2004, disposed on 12.03.2013, in the case of M/s. PGF Limited & Ors. vs. Union of India & Anr.; and (6) State of Madhya Pradesh vs. Rakesh Kohli & Anr., reported in (2012) 6 SCC 312.
Hence on these grounds, he prays to dismiss the writ petitions.
9. Perused the records and considered the submissions made by the learned counsel for the parties.
10. The points that arise for our consideration are as under:
(1) Whether the State is justified in framing the impugned Rules in regard to the royalty in exercise of power conferred under Section 23C of the Karnataka Minor Mineral Concession Rules, 1994?
(2) Where, however, a law made by the State Legislature on the subject covered by the concurrent list is inconsistent with and repugnant to a previous law made by the Parliament, then such a law can be protected by obtaining the assent of the 19 President under Article 254(2) of the Constitution of India?
11. Point No.1: In order to consider the submissions of the learned counsel for the parties it is necessary to extract some of the provisions of the MMDR Act, the Rules of 2011, the constitutional provision and Rule 4(10) of the Rules of 2011, which reads as under:
"4(10) Transportation of Beneficiated Mineral: Any person intending to transport the beneficiated mineral or any mineral from stock yard to destination within the geographic territory of India, shall apply for Mineral Dispatch Permit in Form-10 to the jurisdictional competent authority:
(a) The Competent Authority shall verify whether the receipt of the mineral into the stock yard/Beneficiation plant has already being covered under royalty, if so, shall issue a MDP in Form- 11.
(b) In case of processing and beneficiation, royalty payable shall be determined based on the percentage of lump recoverable from the ROM, the difference of royalty amount shall be collected from applicant before issue of Mineral Dispatch Permits;
(c) If the mineral in a stock yard/Beneficiation plant is not covered under prior royalty the Competent Authority shall proceed to take penal action under the provisions of these Rules and the Act. Before proceeding with such action the Competent Authority shall serve a notice in Form-12."20
12. Section 2, 9(2), 13(2)(i) and 23C of the MMDR Act reads as under:
"2. Declaration as to expediency of Union Control.― It is hereby declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent hereinafter provided."
"9(2). Royalties in respect of mining leases.― The holder of a mining lease granted on or after the commencement of this Act shall pay royalty in respect of any 1[mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-lessee from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral."
"13(2)(i):- Power of Central Government to make rules in respect of minerals.― the fixing and collection of fees for (reconaaissance permits, prospecting licences or mining leases) surface rent, security deposit, fines, other fees or charges and the time within which and the manner in which the dead rent or royalty shall be payable"
"23C. Power of state Government to make rules for preventing illegal mining, transportation and storage of minerals:
(1) The State Government may, by notification in the Official Gazette, make rules for preventing illegal mining, transportation and storage of minerals and for the purposes connected therewith.
(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:
--
(a) establishment of check-posts for checking of minerals under transit;
(b) establishment of weigh-bridges to measure the quantity of mineral being transported;21
(c) regulation of mineral being transported from the area granted under a prospecting licence or a mining lease or a quarrying licence or a permit, in whatever name the permission to excavate minerals, has been given;
(d) inspection, checking and search of minerals at the place of excavation or storage or during transit;
(e) maintenance of registers and forms for the purposes of these rules;
(f) the period within which and the authority to which applications for revision of any order passed by any authority be preferred under any rule made under this section and the fees to be paid therefore and powers of such authority for disposing of such applications; and
(g) any other matter which is required to be, or may be, prescribed for the purpose of prevention of illegal mining, transportation and storage of minerals.
(3) Notwithstanding anything contained in Section 30, the Central Government shall have no power to revise any order passed by a State Government or any of its authorized officers or any authority under the rules made under sub-sections (1) and (2)."
13. Rule 64B and Rule 64C of the Rules of 1960 reads as under:
"Rule 64B: Charging of Royalty in case of minerals subjected to processing:
(1) In case processing of run-of-mine mineral is carried out within the leased area, then, royalty shall be chargeable on the processed mineral removed from the leased area.
(2) In case run-of-mine mineral is removed from the leased area to a processing plant which is located outside the leased area, then, royalty shall be 22 chargeable on the unprocessed run-of-mine mineral and not on the processed product.
Rule 64C. Royalty on tailings or rejects:-
On removal of tailings or rejects from the leased area for dumping and not for sale or consumption, outside leased area such tailings or rejects shall not be liable for payment of royalty:
Provided that in case so dumped tailings or rejects are used for sale or consumption on any later date after the date of such dumping, then, such tailings or rejects shall be liable for payment of royalty.
14. Rule 39 of the Rules of 2016 reads as under:
"Rule 39: Payment of royalty.- (1) In case processing of run-of-mine is carried out within the leased area, then royalty shall be chargeable on the processed mineral removed from the leased area.
(2) In case run-of-mine is removed from the leased area to a processing plant which is located outside the leased area, then royalty shall be chargeable on the unprocessed run-of-mine and not on the processed product.
(3) Wherever the Act specifies that the royalty in respect of any mineral is to be paid on an Ad valorem basis, the royalty shall be calculated at the specified percentage of the average sale price of such mineral grade/ concentrate, for the month of removal / consumption, as published by the Indian Bureau of Mines.
(4) Wherever the Act specifies that the royalty in respect of any mineral is to be paid based on London Metal Exchange or London Bullion Market Association price, the royalty shall be calculated at the specified percentage of the average sale price of the metal for the month as published by the Indian Bureau of Mines, for the metal contained in the ore removed or the total by-product metal actually produced, as the case may be, of such mineral for the month.23
(5) Wherever the Act specifies that the royalty of any mineral is to be paid on tonnage basis, the royalty shall be calculated as product of mineral removed or consumed from the lease area and the specified rate of royalty."
15. The following constitutional provisions relating to Mines & Minerals are relevant, which are as under:
Entry-1 to VII Schedule: (Union List) Entry: 54 - Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest.
List-II Entry 23: Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union.
Article-13 of the Constitution of India provides that law in consistent with the constitution shall be void. The said Article-13 of the Constitution of India is extracted herewith:
Article-13: Laws inconsistent with or in derogation of the fundamental rights: All laws in force in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to the extent of such inconsistency, be void.
Article-254 of the Constitution of India provides any law consistent with the law made by the Parliament laws made by the state legislature to the extent of repugnancy is void.
Article-254 : Inconsistency between laws made by Parliament and laws made by the Legislatures of States
- If any provision of a law made by the Parliament, which parliament is competent to enact, or to any provision of an existing law with respect to one or the matters enumerated in the concurrent List, then, 24 subject to the provisions of clause(2) the law made by Parliament, whether passed before or after the law made by the Legislature of such State, or as the case may be, the existing law, shall prevail and the law made by the Legislature of the State shall, to the extent of the repugnancy, be void.
16. Section 2 of the MMDR Act declares that in the interest of public, Union of India should take under its control the regulation of mines and the development of minerals to the extent herein provided.
Section 9 of the MMDR Act is the charging section which provides for fixing of payment of royalty by the Government of India in conjunction with Second Schedule of the MMDR Act.
Section 9(2) provides for payment of royalty in respect of any mineral removed or consumed from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral.
Section 13 of MMDR Act empowers the Central Government to frame the rules including charging of royalty, dead rent. The Central Government is 25 competent to frame the rules and also fixing the collection of fees, the security deposit, fines, fees, royalty, dead rent and as a consequence, the State Government, to the extent of major minerals, has no jurisdiction to levy royalty in the manner of collecting dead rent which is exclusive domain of the Central Government. Entry-54 in the List of Schedule-7 of the Constitution of India makes it clear that the Regulation of Mines & Minerals Development to the extent to which such a regulation and development to be under the control of Union as is declared by the Parliament. Entry-23 of List-II of the State, List of Schedule-VII of the Constitution of India states that MMRD subject to the provisions of List-I to be under the control of the Union.
17. The Government of India in exercise of the power conferred under Section 13 of MMDR Act has framed the Rules of 1960, which provides levy of royalty and therefore the levy of royalty at the mine 26 head level. Rule 64B of the Rules of 1960 provides if the Run Of Mines (ROM) is processed within the leased area, the royalty is payable on the processed mineral removed from the leased area. In case of ROM being processed outside the leased area, the royalty shall be chargeable on the unprocessed ROM at mines and not on the processed products.
18. Rule 64C of the Rules of 1960 provides that the royalty shall not be charged on tailings and rejects from the leased area. The State Government has no competency to frame the rules regarding payment of difference of royalty. The State Government has no competency to change the rules regarding payment of difference of royalty.
19. Section 23C of the MMDR Act categorically restricts the power of the State Government to frame the Rules pertaining to transport, prevention of illegal mining operation. (emphasis supplied) The said Rule has no application whatsoever pertaining to royalty. 27 The said section does authorize the state Govt. permitting to levy of additional royalty at plant level. The Government of India after the enactment of Act No.10 of 2015 framed, the Rules of 2016 in exercise of power under Section 13 of MMDR Act. Rule 39 of the Rules of 2016 provides and reiterates Rule 64B of the Rules of 1960 with regard to the collection of royalty charges at the mine head. The payment of royalty for transporting the iron ore mineral is governed by Sections 2, 9 and 13 of MMDR Act and Rules 64B & 64C of the Rules of 1960, and Rule 39 of the Rules of 2016. The above said provisions provides that lessee shall have to pay the royalty at the mine head. Rule 39(3) provides the method of calculating the royalty charges at the mine head. Rule 42 of the Rules of 2016 provides that the computation of the average sale price shall be computed on ex- mines and Rule 42 abundantly makes it clear that the royalty shall be computed on the average sale price of 28 the minerals ex-mines. Rule 42(1) of the Rules of 2016 is extracted as under:
"Rule 42: Computation of average Sale Price:- (1) The ex-mine price shall be used to compute average sale price of mineral grade/ concentrate."
20. The entire method of calculating the royalty charges and all other issues relating to the payment of royalty is governed by the Rules of 2016. It does not authorize the State Government to frame the rules authorizing the State Government to collect the difference of royalty charges at the plant instead of mine head.
21. As observed above the Government of India after the enactment of the Act of 10 of 2015 framed the Rules of 2016 in exercise of power under Section 13 of the MMDR Act. Section 2 of the MMDR Act declares that in the interest of public, Union of India should take under its control and regulation of mines and development of minerals to the extent therein provided and Section 9 of the Act provide for fixing 29 payment of royalty by the Government of India in conjunction with the Second Schedule of MMDR Act and Section 13 empowers the Central Government to frame the Rules regarding charging of royalty, dead rent and the Central Government is competent to frame the Rules regarding royalty. The impugned Rules framed by the Government is beyond jurisdiction, and as such, the powers conferred on the State Government is without jurisdiction.
22. The Division Bench of this court in the case of M/S.V.S.LAD & SONS VS. STATE OF KARNATAKA reported in ILR 2011 (KAR) 1333, held that the State Government has no jurisdiction in respect of the matter governed by part 1 and 2 of the MMDR Act and the State Government has no power to frame the rules and it is exclusively vested with the Central Government. Para 31 and 35 of the judgment is extracted with the ready reference:
"31. We have given our thoughtful consideration of the first contention advanced by the Learned Counsel for the petitioners. Before recording out conclusion, it 30 would be essential to notice that the provisions contained in the Mines and Minerals Act can divided into three parts. The 'First Part' is covered by sections 4 to 17A. The provisions in the first part deal with the subject of "regulation" of mining, of minerals. The 'Second Part' is covered by Section 18 and 18A. The provision in the second part deal with the subject of "development" of minerals. The "third part" is "miscellaneous" 19 to 33. The provisions in the third part deal with "miscellaneous" matters connected with development and regulation of mines and minerals.
32. xxx
33. xxx
34. xxx
35. On the basis of the inferences drawn in the foregoing three paragraphs it would be reasonable to conclude, that if the subject matter of the impugned order falls under the "first part", the State Government would have no authority. Likewise, if the subject matter of the impugned order would fall under the "second part", again the State Government would have no authority. But if the subject matter of the impugned order would fall under section 23C of the Mines and Minerals Act under the "third part", then in out view, the state government would have the exclusive power and authority, to pass the required orders."
If the impugned rule is compared with Rule 64B of the Rules of 1960 and Rule 39 of the Rules of 2016, it is clear that the impugned rule is in direct conflict with the Central Rules. Prima facie, there appears to us that there is inconsistency between the State Act and Central Act.
31
23. The Co-ordinate Bench interpreted Section 23-C of MMDR Act and held that Section 23-C either expressly or impliedly does not grant any power to the State Government to postpone the levy of royalty charges and collect the royalty charges at the plant level on the processed minerals. The said rule in effect and substance amount to usurpation of the powers conferred on the Central Government under Section 13(2)(1)(i) of the MMDR Act and without jurisdiction.
24. The Hon'ble Apex court in the case of UNION OF INDIA VS. S. SRINIVASAN, reported in 2012 (7) SCC 683 held that delegated legislation cannot go beyond the rule making power. The Hon'ble Apex Court in the afore said judgment, in paragraphs 21 to 32, extracted hereunder, lays a law that the rule making authority cannot go beyond the powers:
"21. At this stage, it is apposite to state about the rule making powers of a delegating authority. If a rule goes beyond the rule making power conferred by the statute, the same has to be declared ultra vires. If a rule supplants any provision for which power has not 32 been conferred, it becomes ultra vires. The basic test is to determine and consider the source of power which is relatable to the rule. Similarly, a rule must be in accord with the parent statute as it cannot travel beyond it.
22. In this context, we may refer with profit to the decision in General Officer Commanding - in - Chief V. Subhash Chandra Yadav,[(1998)2 SCC 351: 1988 SCC (L&S) 542 : (1998) 7 ATC 296: AIR 1988 Sc 876] wherein it has been held as follows: (SCC P. 357, Para
14) "14. Before a rule can have the effect of a statutory provision, two conditions must be fulfilled, namely (1) it must confirm to the provisions of the statute under which it is framed; and (2) it must also come within the scope and purview of the rule making power of the authority framing the rule. If either of these two conditions is not fulfilled, the rule so framed would be void."
23. In Delhi Admn. Vs. Siri Ram [(2000) 5 Scc 451: AIR 2000 SC 2143] it has been ruled that it is a well recognised principle that the conferment of rule making power by an Act does not enable the rule making authority to make a rule which travels beyond the scope of the enabling Act or which is inconsistent therewith or repugnant thereto.
24. In Sukhdev Singh Vs. Bhagatram Sardar Singh Raghuvanshi [(1975) 1 SCC 421 : 1975 SCC (L & S) 101 : AIR 1975 SC 1331] the Constitution Bench has held that : (SCC P. 433, Para 18) "18. .... statutory bodies cannot use the power to make rules and regulations to enlarge the powers beyond the scope intended by the legislature. Rules and regulations made by reason of the specific power conferred by the statute to make rules and regulations establish the pattern of conduct to be followed."
25. In State of Karnataka Vs. H. Ganesh Kamath [(1983) 2 SCC 402:1983 SCC (Cri) 514: AIR 1983 SC 550] it has been stated that: (SCC P. 410, para 7) "7. it is a well settled principle of interpretation of statutes that the conferment of rule making power by an Act does not enable the rule-making authority to make a rule which travels beyond 33 the scope of the enabling Act or which is inconsistent therewith or repugnant thereto."
26. In Junj Behari Lal ButailV. State of H.P. [(2000) 3 SCC 40: AIR 2000 SC 1069] it has been ruled thus: (SCC P. 46, Para 13) "13. It is very common for the legislature to provide for a general rule making power to carry out the purpose of the Act. When such a power is given, it may be permissible to find out the object of the enactment and then see if the rules framed satisfy the test of having been so framed as to fall within the scope of such general power confirmed. If the rule making power is not expressed in such a usual general form then it shall have to be seen if the rules made are protected by the limits prescribed by the parent act... "
27. In St. Johns Teachers Training Institute v. National Council for Teacher Education [(2003) 3 SCC 321 : AIR 2003 SC 1533] it has been observed that:
(SCC p.331, para 10) "10. A regulation is a rule or order prescribed by a superior for the management of some business and implies a rule for general course of action.
Rules and Regulations are all comprised in delegated legislation. The power to make subordinate legislation is derived from the enabling Act and it is fundamental that the delegate on whom such a power is conferred has to act within the limit of authority conferred by the Act. Rules cannot be made to supplant the provisions of the enabling Act but to supplement it. What is permitted is the delegation of ancillary or subordinate legislative functions, or, what is fictionally called, a power to fill up details."
28. In Global Energy Ltd. V. Central Electricity Regulatory Commission [(2009) 15 SCC 570] this Court was dealing with the validity of clauses (b) and (f) of Regulation 6-A of the Central Electricity Regulatory Commission (Procedure, Terms and Conditions for Grant of Trading Licence and other Related Matters) Regulations, 2004. In that context, this Court expressed thus: (SCC p. 579, para 25) "25. It is now a well-settled principle of law that the rule-making power "for carrying out the 34 purpose of the Act" is a general delegation. Such a general delegation may not be held to be laying down any guidelines. Thus, by reason of such a provision alone, the regulation-making power cannot be exercised so as to bring into existence substantive rights or obligations or disabilities which are not contemplated in terms of the provisions of the said Act."
29. In the said case, while discussing further about the discretionary power, delegated legislation and the requirement of law, the Bench observed thus:
(Global Energy Ltd. Case [(2009) 15 SCC 570], SCC p. 589, para 73) "73. The image of law which flows from this framework is its neutrality and objectivity: the ability of law to put sphere of general decision-
making outside the discretionary power of those wielding governmental power. Law has to provide a basic level of "legal security" by assuring that law is knowable, dependable and shielded from excessive manipulation. In the contest of rule- making, delegated legislation should establish the structural conditions within which those processes can function effectively. The question which needs to be asked is whether delegated legislation promotes rational and accountable policy implementation. While we say so, we are not oblivious of the contours of the judicial review of the legislative Acts. But, we have made all endeavours to keep ourselves confined within the well-known parameters."
30. In this context, it would be apposite to refer to a passage from State of T.N. v. P. Krishnamurthy [(2006) 4 SCC 517]] wherein it has been held thus SCC p. 529, para 16) "16. The court considering the validity of a subordinate legislation, will have to consider the nature, object and scheme of the enabling Act, and also the area over which power has been delegated under the Act and then decide whether the subordinate legislation conforms to the parent statute. Where a rule is directly inconsistent with a mandatory provision of the statute, then, of course, the task of the court is simple and easy. But where the contention is that the inconsistency or non-conformity of the rule is not with reference to any specific provision of the 35 enabling Act, but with the object and scheme of the parent Act, the court should proceed with caution before declaring invalidity."
31. In Pratap Chandra Mehta v. State Bar Council of Madhya Pradesh and others[(2011) 9 573], while discussing about the conferment of extensive meaning, it has been opined that: (SCC p.604, para 58) "58. The Court would be justified in giving the provision a purposive construction to perpetuate the object of the Act, while ensuring that such rules framed are within the field circumscribed by the parent Act. It is also clear that it may not always be absolutely necessary to spell out guidelines for delegated legislation when discretion is vested in such delegated bodies. In such cases, the language of the rule framed as well as the purpose sought to be achieved would be the relevant factors to be considered by the Court."
32. Keeping in view the aforesaid enunciation of law, we think it appropriate to consider the nature, object and scheme of the enabling Act, the power conferred under the rule, the concept of purposive construction and the discretion vested in the delegated bodies."
25. The learned counsel for the petitioners have placed reliance on the judgment of the Hon'ble Apex court in the case of TATA STEEL LIMITED VS. UNION OF INDIA & ORS. reported in 2015 (6) SCC 193 wherein it is held at paragraphs 67 and 68 as under:
"67. On the other hand, in the case of dolomite or limestone (subject matter of SAIL) the process described in paragraph 4 of the Report is undertaken not to upgrade or improve the quality of the mineral but to remove waste and foreign matter. It is not clear whether dolomite or limestone can be utilized as it is or in the 36 ROM state without removal of waste and foreign matter. That question was adverted to by the Orissa High Court but not considered by his Court, hence the critical reference. As mentioned above. the decision in SAIL was based not on removal but on consumption of the mineral On the basis of the mineral extracted and the decision rendered by this court, therefore, no similarity can be found between SAIL (Case of consumption) and National Coal Development Corporation Limited (case of removal) although royalty is charged on dolomite and limestone, as in coal, on a per ton basis.
68. Iron ore (with which NMDC is concerned) falls in the same generic category for levy of royalty as dolomite, limestone and coal namely on a tonnage basis but there is a crucial difference between iron ore and coal (as also between dolomite, limestone and iron ore). In the case of iron ore, beneficiation is necessary before it can be utilized. It has been observed in NMDC that "in iron ore production the run-of-mine (ROM) is in a very crude form. A lot of waste material called "impurities"
accompanies the iron ore. The ore has to be upgraded. Upgrading the ores is called "beneficiation". That saves the cost of transportation. Different processes have been developed by science and technology and accepted and adopted in different iron ore projects for the purpose of beneficiation". lt is for this reason, inter alia, that the levy of royalty on iron ore is postponed, as held in NMDC, to a post-beneficiation stage." As observed above, the State Government has no competency to introduce / frame rules regarding 37 payment of difference of royalty under Section 23-C of the MMDR Act.
In view of the above discussion, we answer point No.1 in negative.
26. Point No.2: Rule 4(10)(b) of the impugned rules is directly in conflict and repugnant to the rules framed by the Government of India, namely, Rule 64B of the Rules of 1960 and Rule 39 of the Rules of 2016 and by virtue of Article 254 of the Constitution of India. Article 254 of the Constitution of India contains provisions for inconsistency between the laws made by the Parliament and by the legislatures of the States. Clause 1 of Article 254 stipulates that, where a state law 'is repugnant' to a parliamentary law which the parliament is competent to enact or to any provision of an existing law 'with respect to one of the matters enumerated in the concurrent list', then the law made by the Parliament is to prevail and the law 38 made by the legislature of a state shall 'to the extent of repugnance' be void.
27. The impugned rules provides for the levy of royalty at the plant level which is in direct conflict of Rule 64B of the Rules of 1960 and Rule 39 of the Rules of 2016 and therefore it is in conflict with Central Rules. Before repugnancy can arise, the following conditions must be satisfied:
(1) It must be shown that the two enactments contain inconsistent and irreconcilable provision, so that they cannot stand together or operate in the same field. (2) That there can be no repeal by implication unless the inconsistency appears on the face of the two statutes.
(3) That where two statutes occupy a particular field, but there is a room or possibility of both the statutes operating in the same field without coming into collision with each other, no repugnancy results.
(4) That where there is no inconsistency, but a statute occupying the same field seeks 39 to create distinct and separate offences, no question of repugnancy arises and both the statutes continue to operate in the same field.
28. We would like to place reliance upon the judgment of the Constitution Bench of the Hon'ble Apex Court in the case of M. KARUNANIDHI VS. UNION OF INDIA reported in AIR 1979 SC 898, wherein it is observed at paragraph-35 as under:
"35. On a careful consideration, therefore, of the authorities referred to above, the following propositions emerge:-
1) That in order to decide the question of repugnancy it must be shown that the two enactments contain inconsistent and irreconcilable provision, so that they cannot stand together or operate in the same field.
2) That there can be no repeal by implication unless the inconsistency appears on the face of the two statutes.
3) That where the two statutes occupy a particular field, but there is room or possibility of both the statutes operating in 40 the same field without coming into collision with each other, no repugnancy results.
4) That where there is no inconsistency but a statute occupying the same field seeks to create distinct and separate offences, no question of repugnancy arises and both the statutes continue to operate in the same field."
Therefore, the State rule to an extent of collection of additional royalty is repugnant to the corresponding provisions of the MMDR Act. In view of the above discussion, we answer point No.2 in the affirmative.
29. To sum up, we hold that the impugned Rules framed by the State Government is without competency and the impugned Rules to the extent of collection of additional royalty is repugnant to the corresponding provisions of the MMDR Act. The powers are vested with the Central Government to frame the Rule pertaining to royalty. 41
30. In view of the above discussions we come to a conclusion that the impugned Rule is unconstitutional. Accordingly, we proceed to pass the following:
ORDER The writ petitions are allowed in part.
The impugned Rule 4(10)(b) of the Karnataka (Prevention of Illegal Mining, Transportation and Storage of Minerals) Rules, 2011 is unconstitutional. The same is declared as ultra vires and we strike down the said rule.
We clarify with abundant caution that our striking down of the impugned Rule in the present judgment will not, in any manner, effect the royalty which was paid earlier.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE RD/SSB