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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION

I.A. NO.248 OF 2015 IN

WRIT PETITION (CIVIL) NO.562 OF 2009 SAMAJ PARIVARTANA SAMUDAYA  AND ORS.  ...PETITIONER(S)

VERSUS STATE OF KARNATAKA  & ORS.       ...RESPONDENT(S) AND IN THE MATTER OF  FEDERATION OF INDIAN MINERAL  INDUSTRIES, SOUTHERN REGION [FIMI SOUTH) ..APPLICANT(S)

JUDGMENT RANJAN GOGOI, J.

1. This application (I.A. NO.248 of 2015) has  been  filed  seeking  the  following direction from the Court:

“that iron-ore and manganese ore may be sold in Karnataka without recourse  to  e-auction  conducted by the monitoring committee set up by this Hon'ble Court.”

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2. The response of the Central Empowered Committee (“CEC” for short) was sought for by this Court. Pursuant thereto a report dated 28th April, 2016 of the CEC has been submitted. In the said report the CEC has stated that it agrees with the statement of  the  applicant  –  Federation  of  Indian Industries,  Southern  Region  (FIMI  South) that the basic objectives behind the sale of  iron  ore  through  the  Monitoring Committee, in terms of the various orders passed by this Court from time to time, have  been  achieved  and  an  alternative system needs to be put in place.  The main suggestions of the CEC are as follows:

(I) The  mechanism  must  provide  for  the registration  of  both  the  buyers  and sellers of iron-ore.  The sellers of the  ore,  or  the  mining-ore  lessees, must  declare  their  statutory

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approvals,  modalities  of  the Reclamation  and  Rehabilitation  Plan ('R  &  R  Plan')  and  the  estimated annual  quantity  of  iron-ore  produced by them.  The buyers of the ore must declare their eligibility to purchase the  ore  and  the  industry  connected with said purchase.

(II)The sale of iron-ore by sellers to the buyers  must  be  through  an  online platform.   This  e-platform  must provide  for  all  the  relevant information  concerning  the  iron-ore, such as the grade and moisture-content of the ore, minimum acceptable price by  the  seller  and  the  provision  to view  the  bids  offered  by  registered buyers on  a real-time  basis so  that there could be a price-match amongst prospective buyers.

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(III)The mechanism must provide for online registration  of  the  agreements  and transactions  executed  between  the registered buyers and sellers.

(IV)The  mechanism  must  provide  a  method for  online  deposit  of  applicable royalty,  taxes,  contribution  to  the Special  Purpose  Vehicle  ('SPV')  and other statutory duties; along with the subsequent online confirmation of such receipt.

(V) The  mechanism  must  consist  of checks-and-balances  which  can  be implemented across the e-platform, in order  to  ensure  that  the  sale  or purchase  of  iron-ore  is  not substantially below the market price.

3. In  its  counter/reply,  the  State  of Karnataka  has  indicated  its  broad agreement with the suggestions of the CEC

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and  has  incorporated  certain  additional recommendations including setting up of a Committee consisting of officials of the State  Government  to  monitor  the  sale  of iron-ore  through  the  e-platform  on  the basis of long term agreements,  a Model of which  has  also  been  submitted  to  the Court.   

4. Other  stake-holders  like  the  writ petitioners  in  Writ  Petition  (C)  No. 562/2009 – Samaj Parivartana Samudaya and ors. have objected to any change from the existing  pattern  of  sale  of  iron-ore through  the  Monitoring  Committee  whereas M/s  Vedanta  Ltd.,  an  iron-ore  lessee operating  within  the  State  of  Karnataka has  supported  the  stand  taken  by  FIMI South in the present I.A. i.e. I.A. No.248 of 2015.

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5. The Monitoring Committee through whom iron-ore  is  currently  being  sold  by e-auction was constituted by the order of this  Court  dated  2nd September,  2011 accepting the recommendations of the CEC dated 1st September, 2011 to sell the total quantity  of  illegally  extracted  iron-ore which at that point of time was 25 MMT (approximately).   

6. After the sale of the illegally mined iron-ore was complete, this Court by order dated  23rd September,  2011  continued  to entrust  the  duty  and  responsibility  of sale  of  iron-ore  to  the  Monitoring Committee.  The  above  position  was continued by this Court by its Order dated 18.4.2013 disposing of Writ Petition (C) No.  562/2009 and other connected cases. This is how the current status/situation with  regard  to  sale  of  iron-ore  by e-auction  through  the  Court  Appointed

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Monitoring Committee continues.   

7. In the order of this Court dated 18th

April, 2013 in Writ Petition (C) No.  562 of  2009  there  is  a  vivid  and  graphic description of the enormity of the illegal mining  and  consequential  damage  to  the ecology  and  environment  that  had  led  to the  intervention  of  this  Court  and  had prompted exercise of its jurisdiction in the present matter.  Innovative measures and orders with the aid of Article 142 of the  Constitution  of  India  were  felt necessary and consequently passed by the Court  from  time  to  time  including  the final  order  dated  18th April,  2013  to comprehensively  deal  with  the  issue  of illegal mining and depredation of nature and environment.  It is in the above said context  that  the  constitution  of  the Monitoring  Committee and the continuance of  its  role  in  the  matter  of  sale  of

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iron-ore by e-auction had been conceived and continued by this Court on the basis of the various orders passed from time to time.   

8. It is  in the  aforesaid backdrop  and having regard to the progress achieved in terms  of  what  was  contemplated  and visualized  by  this  Court  in  its  final order  dated  18th April,  2013  that  the tenability of the prayers made by the FIMI South will have to be considered.   

9. What has been suggested in the report of the CEC dated 28th April, 2016 and the in-principle approval thereof by the State of  Karnataka  along  with  the  suggestions offered  by  the  State  would  seem  to indicate  that  in  place  of  Monitoring Committee  constituted  by  this  Court another Monitoring Committee consisting of officials  of  the  State  Government  (of

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Karnataka)  is  proposed  to  over-see  and supervise the sale of iron-ore through a hybrid system of long term contracts and sales  through  an  e-platform  including payment of taxes, royalty, etc.   

10. While it is correct that any trading process  has  to  be  free  and  fair  with liberty to the contracting parties to work out their own terms of sale and purchase, what  cannot  be  ignored  are  the circumstances which had prompted the Court to  conceive  of  and  continue  with  a departure from the normal rule and instead to  have  a  regulated,  if  not,  highly controlled system of sale and purchase of iron-ore.  Sale and purchase of iron-ore through  the  Court  Appointed  Monitoring Committee  and  by  e-auction  is  not  a singular but a connected facet of what was visualized  by  the  Court  in  its  bid  to check,  control  and  regulate  mining  and

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also to restore nature and environment to its  earlier  pristine  purity,  so  far  as possible.

11. A cap on production and restoration of ecology  and  environment  through  a Comprehensive  Environment  Plans  for  the Mining  Impact  Zone  ('CEPMIZ'  for  short) has been visualized by this Court in its order  dated  18th April,  2013.   The connected aspects i.e. lifting of the cap or  enhancement  thereof  and  launching  of the  CEPMIZ  scheme  is  under  active consideration  of  this  Court  in  other connected  Interlocutory  Applications (I.As.).  When  the  said  connected  issues are  pending  it  cannot  be  said  that  the situation has become ripe for the normal rule of sale and purchase to be restored so  far  as  the  sale  of  iron-ore  in  the State  of  Karnataka  is  concerned.   The experience of the past has been horrific.

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It cannot be allowed to come back. Sale and  purchase  of  iron-ore  had  been conducted  in  the  most  outrageous  manner and  on  wholly  unacceptable  terms resulting, inter alia, in huge leakage of government revenue.  Such experiences and events  cannot  be  allowed  to  resurface. Taking an overall view of the matter, we are of the opinion that time has not come to  dispense  with  the  existing  policy  of sale and purchase of iron-ore in the State of Karnataka through the Court Appointed Monitoring  Committee  by  e-auction.   The restoration of 'normalcy'  in the process of sale and purchase of iron-ore must wait for the future and at least till  such time that  significant headways are made in  the  other  connected  aspects  of  the matter dealt with by the final order of this Court dated 18th April, 2013 passed in Writ Petition (Civil) No.562 of 2009.

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12. We, therefore, for the present reject the  application  (I.A.  No.248)  filed  by FIMI  South  and  consequently  do  not entertain the support to the prayers made therein by M/s Vedanta Ltd. For the same reason  we  do  not  also  accept  the suggestions of the CEC and the State of Karnataka  as  made  in  their  respective reports/affidavits filed before the Court.

13. I.A. No.248 accordingly is disposed of in the above terms.  

....................,J. (RANJAN GOGOI)

....................,J. (PRAFULLA C. PANT)

....................,J. (NAVIN SINHA)

NEW DELHI AUGUST 28, 2017