REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 10373 – 10374 OF 2010

STATE OF GUJARAT AND OTHERS ETC. .....APPELLANT(S)

VERSUS

JAYESHBHAI KANJIBHAI KALATHIYA ETC. .....RESPONDENT(S)

J U D G M E N T

A.K. SIKRI, J.

Two writ  petitions were filed in the High Court of  Gujarat

under Article 226 of the Constitution of India.  One writ petition

was filed by a single person (respondent herein) who had been

awarded  contract  for  one  year  to  extract,  collect,  gather  and

remove ordinary sand from river Tapi falling within certain area at

village Amboli, Taluka Kamrej, Surat.  The sand being a mine and

mineral, it is the State Government which is empowered to grant

such leases.  After the excavation of sand, a part there of was

subjected  to  further  processing  by  addition  of  fly  ash  and  the

other part was sold as sand outside the State of Gujarat.  Second

petition was filed by ten petitioners (respondents in the second

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appeal).  They are in the business of processing ordinary river

sand after  buying  it  from leaseholders.   The  process  involves

washing, cleaning and mixing fly ash to convert it into IS-Zone-2-

Sand, which is then sold in 50 kg. Bags under a brand name.

These respondents supply that sand to builders in the State of

Maharashtra.

2) As is clear from the aforesaid facts, sand, after processing, is sold

outside  the  State  of  Gujarat.   The  challenge  laid  in  the  writ

petitions was against the Resolution No. GMR-102010-1-S-CHH

dated May 04, 2010 whereby all leaseholders, stockists, traders

and  exporters  were  prohibited  from  exporting  ordinary  sand

excavated from the areas in the State of Gujarat to other States

within the country or other countries by transporting such sand

outside the State or the country.  When these writ petitions were

pending  consideration,  the  Government  of  Gujarat  issued  a

Notification  on  June  11,  2010  thereby  amending  the  Gujarat

Minor Mineral Rules, 1966 by making the Gujarat Minor Mineral

(Amendment) Rules, 2010 with the insertion of Rule 44-BB, with

immediate  effect.   This  amendment  was  done  in  purported

exercise of powers conferred under Section 15 read with Section

23-C of the Mines and Minerals (Development and Regulation)

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Act, 1957 (hereinafter referred to as the ‘MMDR Act’).  By way of

Rule 44-BB, movement of sand 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  the State.   In  case any vehicle  is  found transporting sand  to  the  neighbouring  State,  even  with  authorized royalty  pass  or  delivery  challan,  it  shall  be  treated  as violation of the Act and the Rules made thereunder and the penal provisions as specified therein shall be applicable.”

3) Within two months thereafter, i.e. on August 26, 2010, the State of

Gujarat also notified the Gujarat Minor Mineral Concession Rules,

2010 so as to repeal the Gujarat Minor Mineral Rules, 1966.  Rule

71 of the new Rules was to the same effect as Rule 44-BB and

the same is as under:

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

4) This  led  the  respondents  to  amend  the  writ  petitions  thereby

incorporating challenge to Rule 44-BB of Amendment Rules as

well as Rule 71 of the Concession Rules.  The High Court has,

vide  impugned judgment,  allowed the  writ  petitions  and  struck

down the aforesaid Rules as  ultra vires  on the ground that the

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rule making power of the State Government does not empower

and cannot be stretched to empower the State Government to

make Rules  directly  prohibiting  movement  of  mineral  so  as  to

impinge  upon  the  freedom  guaranteed  by  Article  301  of  the

Constitution.  It may be noted here itself that a Division Bench of

the Andhra Pradesh High Court in C. Narayana Reddy and etc.

v.  Commissioner of Panchayat Raj and Rural Employment,

A.P.,  Hyderabad  and  others1 had  taken  a  contrary  view.

Likewise, the Madras High Court had also decided this issue vide

its  judgment  dated  April  27,  2009  in  D.  Sivakumar  v.

Government of Tamil Nadu2 by taking similar view as that of the

Andhra  Pradesh  High  Court.   In  the  impugned  judgment,  the

Gujarat  High  Court  has,  however,  differed  with  the  Andhra

Pradesh  and  Madras  High  Courts.  Having  regard  to  the

conflicting 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, in broad,

the scheme of the MMDR Act insofar as it relates to regulating

minor minerals are concerned and the powers that are delegated

by the Central Government to the State Governments in respect

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

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of minor minerals.  In this very hue, we also propose to take note

of the relevant provisions of the MMDR Act.

6) The  MMDR  Act  is  enacted  by  Parliament  to  provide  for  the

regulation  of  mines  and  development  of  minerals  under  the

control  of  the  Union,  i.e.  the  Central  Government.   Section  2

provides a declaration to this effect with the stipulation that it is

expedient in the public interest that Union should take under its

control, the regulation of mines and development of minerals, to

the extent provided in the Act.  It is for this reason the Union took

control  insofar  as  regulation  of  mines  and  development  of

minerals  is  concerned.   In  order  to  exercise  this  control,  no

reconnaissance or mining operations in any area are allowed by

any  person  except  with  the  permission  of  the  Central

Government.   Even  transportation  or  storage  is  prohibited

otherwise than in accordance with the provisions of the MMDR

Act and the Rules made thereunder (Section 4).

7) Section 13 of the MMDR Act empowers the Central Government

to make rules in respect of minerals.

8) It  follows  from  the  above  that  as  far  as  minor  minerals  are

concerned,  limited  powers  are  given  to  the  State  Government

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inasmuch  as  under  Section  15  of  the  MMDR  Act  the  State

Government  is  authorised  to  make  rules  in  respect  of  minor

minerals. Relevant portions of this Section read as under:

"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.

(1A)  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 –  

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(d)  the terms on which, and the conditions subject to which  and  the  authority  by  which  quarry  leases, mining leases or other mineral concessions may be granted or renewed;

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(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  and

Minerals  (Regulation  and  Development)  Amendment  Act,  1999

(No.  38  of  1999)  which  became effective  from December  18,

1999.  By this Amendment Act, Section 4(1A), Section 23-A and

Section 23-C were inserted.  We would like to reproduce these

sections along with the Statement of Objects and Reasons which

prompted the Legislature to insert these provisions:

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" STATEMENT OF OBJECTS AND REASONS

The Mines  and  Minerals  (Regulation  and  Development) Act,  1957  provides  for  the  regular  and  development  of minerals  other  than  petroleum  and  natural  gas. Consequent upon the decisions taken in the Conference of the State Ministers/Secretaries of Mines and Geology held in December, 1996, a Committee under the Chairmanship of the then Secretary, Ministry of Mines was constituted in February,  1997  to,  inter  alia,  make  recommendations regarding delegation of powers to the State Governments relating to grant and renewal of prospecting licences and mining leases and other related approvals and to suggest measures  to  reduce  delay  in  this  regard,  review  of  the existing laws and procedures governing the regulation and development of minerals to make them more compatible with the changed policies and measures for prevention of illegal mining.  The Committee in his report made wide- ranging  recommendations  in  the  area  of  delegation  of powers  to  the  State  Governments,  procedural simplifications, etc. which will go a long way to mitigate the problems  faced  by  the  States  and  the  prospective investors while, at the same time, keeping the interests of the mining industry in particular and the national interest, in  general,  in  tact.   After  careful  consideration  of  the recommendations of the Committee, the Government has decided to amend the Mines and Minerals (Regulation and Development) Act, 1946.

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

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(iii)  A new provision is proposed to be inserted in the Act prohibiting transportation or storage or anything causing  transportation  or  storage  of  any  mineral except  under the due provisions of  the Act,  with a view to preventing illegal mining.  Further, the Act is proposed to be amended to cover the breach of the provisions of the proposed new provision of the Act to be punishable.  It is also proposed to insert a new provision to provide for anything seized under the Act as liable for confiscation under court orders.  A new section is proposed to be inserted to empower the State  Governments  to  make  rules  for  preventing

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illegal mining, transportation and storage of minerals and for purposes connected therewith.

Section 4(1A)

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

Section 23-C

(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 mattes, 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;

(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  therefor  and powers  of  such  authority  for  disposing  of  such applications; and  

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(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 authorised officers or any authority under the rules made under sub-sections (1) and (2).”

10) As noted above, the impugned Rules are made in exercise of the

powers conferred under Section 23-C of the MMDR Act.  Further,

as Section 14 categorically states that provisions of Section 5 to

13 are not applicable in respect of minor minerals, rule making

power of the Central Government contained in Section 13 does

not extend to minor minerals.  It is in this context Section 15 gives

power to the State Government to make rules in respect of minor

minerals.   The  State  Government,  thus,  is  given  power  under

Section 15.  It is also given power under Section 23-C.

11) A perusal  of Sections 15 and 23-C in relation to the aforesaid

discussion  would  clearly  suggest  that  the  power  of  the  State

Government to make rules is restricted to:

(a)   making rules for  grant  of  quarry leases,  mining leases or

other mineral concessions in respect of minor minerals and for

the purposes connected therewith; and

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(b)  making rules for preventing illegal mining, transportation and

storage of minerals and for the purposes connected therewith.

12) In the aforesaid context, question arose before the High Court as

to  whether  in  exercise  of  such  powers  delegated  by  the

Legislature  upon  the  State  Government,  could  the  State

Government make a rule to the effect that the sand which is a

minor  mineral  would  not  be  allowed  to  be  taken  beyond  the

borders of the State of Gujarat and making such movement as

punishable offence.  According to the High Court, delegation of

powers to the State Government under the aforesaid provisions

does  not  include  or  envisage  restriction  on  inter-State  trade,

commerce  and  intercourse  which  shall  be  free.   Thus,  the

impugned rules are held to be ultra vires the provisions of Section

15 and 23-C of the MMDR Act.  They are also held to be violative

of  Article  301 of  the Constitution.   Relevant discussion on this

aspect by the Gujarat High Court in the impugned judgment runs

as under:

"14.  As seen earlier, the provisions of section 4(1-A) and section  23-C  were  simultaneously  added  by  the amendment  of  1999,  with  the  objective  of  prohibiting transportation  or  storage  of  any  mineral,  except  in accordance with the provisions of the Act and the Rules made  in  that  behalf,  with  a  view  to  preventing  illegal mining.  Prohibition or restriction of inter-State trade of any mineral  was neither  intended nor provided or  envisaged either expressly or by necessary implication.  On the other

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hand, delegation of powers to make rules either in section 15 or in section 23-C of the Act is not couched in general terms as in section 18.  Section 18 exclusively empowers the Central Government to make such rules as it thinks fit for  the  purpose  of  conservation  and  development  of minerals in the whole country.   Apart  from delegation of such  powers  couched  in  wider  terms,  the  Central Government  is  specifically  authorized  to  make  rules  for regulation of excavation or collection of minerals from any mine as well as for storage of minerals.  As against that, the  State  Government  is  empowered  to  make  rules,  in respect  of  all  minerals,  for  regulation  of  minerals  being transported  from  the  area  granted  under  a  prospecting licence or a mining lease or a quarry licence or a permit. The  context  and  the  composite  scheme  of  the  Act contained in the provisions of sections 4(1-A), 15, 18, 21 and 23-C clearly indicate that the delegation of power to regulate  or  make  rules  for  transportation  or  storage  of minerals, including minor minerals, does not empower and cannot be stretched to empower the State Government to make rules directly prohibiting movement of minerals so as to impinge upon the freedom guaranteed by Article 301 of the  Constitution.   In  fact,  the  State  Government  has admittedly made the Gujarat Mineral (Prevention of Illegal Mining,  Transportation  and  Storage)  Rules,  2005  in exercise of the powers conferred by section 23-C of the Act  for  regulating  transport,  possession  and  storage  of minerals  in  the  State;  and  those  rules  are  not  under challenge.  Although it is not significant, in light of the view being taken herein about validity of the impugned rules, it needs to  be noted  that  the  part  of  new Rule  71 taking away the facility of compounding is apparently repugnant to section 23-A of the Act.  And, if validity of the impugned rules cannot  be upheld,  the impugned resolution cannot stand  without  the  support  of  any  legal,  executive  or legislative authority.”

13) We may also, at this stage, refer to the reasoning given by the

High Courts of Andhra Pradesh and Madras in support of their

view, which is in conflict with the view taken by the Gujarat High

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Court.  The judgment of the Andhra Pradesh High Court proceeds

to decide the issue in the following manner:

"27.   Sector  23-C  of  the  Act  authorises  the  State Government  to  make  rules  not  only  for  the  purpose  of preventing  illegal  mining  but  also  for  transportation  and storage of minor minerals, which power would imply that even after the minor mineral has been mined, the power is conferred  on  the  State  Government  to  frame  Rules  for such mined minor mineral as regards its storage and/or its transportation and also to frame rules to see that no illegal mining  activity  is  carried  on.   Sub-clauses  (a)  to  (g)  of Clause (2) of Section 23-C are illustrative of the matters, which are  covered under  the  rule  making power.   Sub- section (2) says that in particular and without prejudice to the generality of the powers conferred under Section 23-C, rules may provide for all or any of the said matters.  Sub- clause  (c)  itself  say  that  regulations  can  be  framed  of mineral being transported from the area granted under the licence or a mining lease.  Rules can be framed on any of the  matters  including  transportation  of  the  excavated mineral.  Section 23-C is the source of power under which Rule 9-W can be said to have been framed by the State Government.  We have to keep in mind that the Parliament passed the Amendment  Act,  1999 (Act No.  38 of  1999) thereby inserting Section 23-C in the Principal Act after the decision  of  the Supreme Court  in  Kavery  Chetty’s  case (supra).   By  the  said  provision,  power  was  specifically conferred  on  the   State  Government  to  make  rules  for preventing  illegal  mining,  transportation  and  storage  of minerals.   The State Government has framed the Rules thereafter.   Thus,  there  is  ample  power  with  the  State Government to frame Rules regarding transportation of the excavated minor mineral,  which would include restriction on the transport of the said minor mineral beyond the limits of  the  State  borders.   In  this  view  of  the  matter,  the challenge to Rule 9-W is without any substance.”

14) Likewise, the Madras High Court has proceeded to discuss the

issue as follows:

"13.  Definition of the word ‘Regulation’

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Shri V.T. Gopalan has contended that the word ‘regulation’ mentioned  in  Section  23-C  of  the  Act  should  not  be construed to mean prohibition.  He further contended that a total prohibition is impermissible in law, violative of Article 19(1)(g) and, therefore, the impugned rule is liable to be declared as bad in law.  We are of the opinion that the word ‘regulation’ has no fixed connotation.  The said word will  have  to  be  given  wider  meaning  when  the  public interest is involved.  In the judgment reported in (1981) 2 SCC 205 (State of Tamil Nadu v. Hind Stone), the Hon’ble Supreme Court has held as follows:

“10. One of  the arguments pressed before us was that  Section  15  of  the  Mines  and  Minerals (Regulation  and  Development)  Act  authorised  the making  of  rules  for  regulating  the  grant  of  mining leases  and  not  for  prohibiting  them  as  Rule  8-C sought to do, and, therefore, Rule 8-C was ultra vires Section  15.  Well-known cases  on  the subject  right from  Municipal Corporation of the City of Toronto v. Virgo and  Attorney-General  for Ontario v.  Attorney- General  for  the  Dominions  up  to  State  of  U.P.  v. Hindustan Aluminium Corporation Ltd. 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 the expression is used in the statute and the object sought  to  be  achieved  by  the  contemplated regulation.  It  was  observed by  Mathew,  J.  in  G.K. Krishnan v.  State  of  Tamil  Nadu :  “The  word ‘regulation’  has  no  fixed  connotation.  Its  meaning differs according to the nature of the thing to which it is applied.” In modern statutes concerned as they are with economic and social activities, “regulation” must, of necessity, receive so wide an interpretation that in certain situations, it must exclude competition to the public  sector from the private sector.  More so in a welfare State. It was pointed out by the Privy Council in Commonwealth of Australia v. Bank of New South Wales — and we agree with what was stated therein —  that  the  problem  whether  an  enactment  was regulatory or something more or whether a restriction was direct or only remote or only incidental involved, not  so  much  legal  as  political,  social  or  economic consideration and that it could not be laid down that in  no  circumstances  could  the  exclusion  of competition so as to create a monopoly, either in a

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State or  Commonwealth  agency,  be justified.  Each case, it  was said, must be judged on its own facts and in its own setting of time and circumstances and it might be that in regard to some economic activities and at some stage of social development, prohibition with a view to State monopoly was the only practical and  reasonable  manner  of  regulation.  The  statute with  which  we  are  concerned,  the  Mines  and Minerals  (Development  and  Regulation)  Act,  is aimed, as we have already said more than once, at the conservation and the prudent and discriminating exploitation  of  minerals.  Surely,  in  the  case  of  a scarce mineral, to permit exploitation by the State or its  agency  and  to  prohibit  exploitation  by  private agencies  is  the  most  effective  method  of conservation and prudent exploitation. If you want to conserve  for  the  future,  you  must  prohibit  in  the present.  We have  no  doubt  that  the  prohibiting  of leases  in  certain  cases  is  part  of  the  regulation contemplated 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’ will  have  to  be  given  a  wide  interpretation  taking  into consideration of social, economic and political justice.  We are of  the opinion that while deciding as to whether the prohibition  is  reasonable,  the  Court  has  to  take  into consideration  the  greater  public  and  social  interest  as against the fundamental right of the citizen.  In (2003) 7 SCC 59 (Indian Handicrafts Emporium v. Union of India), the  Hon’ble  Supreme Court  has  held  that  prohibition  of trade in ivory does not offend Article 19(1)(g) and the same is  a  reasonable  restriction  under  Article  19(6)  of  the Constitution.  It is also to be noted only sand is prohibited from taking outside the State in view of the overwhelming public interest.  Therefore, we are of the opinion that the definition of the word ‘regulation’ is wide enough to cover the  prohibition  and  movement  of  minerals  outside  the State.

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16.  Environmental Perspective

The said rule has been introduced in view of the attempt made by the dealers of sand and contractors of building to transport  the  sand  purchased  from  the  Government

Civil Appeal Nos. 10373-10374 of 2010 Page 14 of 41

outside the State.  According to the Government, the said rule has been made in public interest and also taking into consideration  of  the  hardship  that  caused  to  the consumers in the State of Tamil Nadu as well as the high rate of urbanisation in the State.  In the counter affidavit, it is also stated by the Government that illegal, unaccounted sand is also transported outside the State.  It is well known that  sand  in  the  present  form  has  already  undergone various changes over thousands of years.  As found by the Expert  Committee,  due  to  over  exploitation  and indiscriminate mining of  river sand, the environment and the  eco-system  got  very  much  affected.   The  Expert Committee  has  also  found  out  that  the  indiscriminate mining  has  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 and reduction of bio-diversity. Therefore, what is important is to use the barest minimum of sand for developmental activities.  If the sand is allowed to be transported due to the demands in various places outside the State it  would only increase the demand for more  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 is the conservation and protection of the environment.   The  right  to  clean  environment  is  a guaranteed fundamental right under Article 21.  Article 48- A  of  the  Constitution  speaks  about  protection  and improvement  of  environment  and  Article  51(A)  of  the Constitution deals with the fundamental duties to protect and  improve  the  natural  environment  including  forest, lakes, rivers and wild life.  The Hon’ble Supreme has held in  (2003)  7  SCC  589  (Indian  Handicrafts  Emporium  v. Union  of  India)  that  the  implementation  of  Directive principle  is  within  the  expression  of  restriction  in  the interest of general public.  Hence, we hold that from the environmental perspective also the impugned rule has to be sustained.”

15) The  Court  also  took  aid  of  the  doctrine  of  public  trust  as

enunciated in  State of Tamil Nadu v.  Hind Stone and Others3

3 (1981) 2 SCC 205

Civil Appeal Nos. 10373-10374 of 2010 Page 15 of 41

as well  as  T.N.  Godavarman Thirumulpad  v.  Union of India

and Others4.

16) Mr.  Pritesh  Kapur,  learned  counsel  appearing  for  the  State  of

Gujarat  submitted  in  the  first  instance  that  scope of  language

used in Section 15(1) of the MMDR Act was extremely wide as

per  which  the  Parliament  had  delegated  to  the  States  entire

power to 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.   According  to

him, this Court,  by a series of judgments,  settled the following

propositions:

(i) The power to regulate under Section 15(1) is plenary and

the Parliament has delegated to the States complete control over

the subject matter, namely, minor minerals, especially in view of

the fact that power has been conferred for all purposes connected

with the regulation of the minor minerals.

(ii) This power is not exhausted by the grant and continues to

control activities even post grant.

(iii) In respect of minor minerals, Parliament has not retained

any control under the Act.  Historically as well as under the 1957

Act, complete control over minor minerals has been delegated by

4 (2006) 1 SCC 1

Civil Appeal Nos. 10373-10374 of 2010 Page 16 of 41

Parliament to the State Government since these minerals have

always been viewed as being important for local development.

17) To support the above plea, he invited the attention of this Court to

the judgment in  D.K. Trivedi & Sons and Others  v.  State of

Gujarat and Others5 wherein this Court considered the power of

the State Governments to make rules under the said Section 15

to  enable  them to  charge  dead rent  and  royalty  in  respect  of

leases of  minor minerals granted by them and to enhance the

rates of  dead rent  and royalty  during the subsistence of  such

leases – a power exercised by the State to govern conditions

subsequent to the grant of the lease.  After tracing the legislative

history in respect of minor minerals, it was observed that by virtue

of the Act the whole of the field was taken over by Parliament and

thereafter  all  powers  in  respect  of  minor  minerals  had  been

delegated to the State Governments.  The Court also observed,

inter alia, that the power to regulate minor minerals under Section

15  is  extremely  wide;  that  control  over  minor  minerals  fell

exclusively  within  the domain of  the State  Governments;   that

minor minerals have historically been viewed by the Legislature,

both pre and post Independence, as being for the use of local

areas and local purposes; and it is left to the State Governments

5 1986 Supp SCC 20

Civil Appeal Nos. 10373-10374 of 2010 Page 17 of 41

to prescribe such restrictions as they think fit by rules made under

Section 15(1).

18) From the above judgment, his line of action was that if the power

of regulation permits the States to utilise the minor minerals for

the  benefit  of  the  State  through  its  own  agency,  it  would

necessarily  also  encompass  the  power  to  ensure  that  even

private parties utilise the sand within the State as a condition of

the  lease.   Furthermore,  the  argument  that  sub-section  (1)  of

Section 15 is for regulating the grant of leases and other mineral

concessions in respect  of  minor minerals  and that  rules under

that sub-section can be made only with respect to the time when

such leases or concessions are granted and not with respect to

any point of time subsequent thereto, was specifically considered

and rejected in the case of D.K. Trivedi & Sons.

19) Mr. Kapur also argued that a three Judge Bench of this Court in

Uttar Pradesh Power Corporation Limited v. National Thermal

Power Corporation Limited and Others6 has reiterated the view

that the power of regulation conferred upon an authority is not

spent or exhausted with the grant of permission.  He relied upon

the judgments in  Hind Stone  and  K. Ramanathan  v.  State of

6 (2009) 6 SCC 235

Civil Appeal Nos. 10373-10374 of 2010 Page 18 of 41

Tamil Nadu and Another7 wherein this Court reiterated that the

word ‘regulate’ must be given the widest amplitude.  He submitted

that  in  K. Ramanathan’s  case this  Court  was considering the

validity of an order issued by the State Government under the

Essential  Commodities  Act  banning  the  transport  of  paddy

outside the State.  In that context, this Court has observed that:

"19...At the same time, the power to regulate carries with it full  power  over  the  thing  subject  to  regulation  and  in absence of restrictive words, the power must be regarded as plenary over the entire subject...The power to regulate implies the power to check and may imply the power to prohibit under certain circumstances, as where the best or only efficacious regulation consists of suppression…

xx xx xx

23...One of the ways in which such regulation or control over the production, supply and distribution of, and trade and commerce in, an essential commodity like foodstuffs may be exercised is  by  placing a ban on inter-State  or intra-State  movement  of  foodstuffs  to  ensure  that  the excess  stock  of  foodstuffs  held  by  a  wholesale  dealer, commission agent or retailer is not transported to places outside the State or from one district to another with a view to maximise the procurement of such foodstuffs from the growers in the surplus area for their equitable distribution at fair prices in the deficit areas.  The placing of such ban on export of foodstuffs across the State or from one part of the  State  to  another  with  a  view  to  prevent  outflow  of foodstuffs from a State which is a surplus State prevents the  spiral  rise  in  prices  of  such  foodstuffs  by  artificial creation of shortage by unscrupulous traders...These are nothing but regulatory measures.”

20) Mr. Kapur further submitted that the above observations and the

expansive interpretation given to the power of regulation in both

7 (1985) 2 SCC 116

Civil Appeal Nos. 10373-10374 of 2010 Page 19 of 41

the aforesaid cases have been approved by a Constitution Bench

of this Court in  U.P. Cooperative Cane Unions Federations  v.

West U.P. Sugar Mills Association and Others8.  In this case,

the Constitution Bench was considering the competence of the

State Government to fix the State advised price for purchase of

sugarcane by an occupier of a sugar factory over and above the

minimum price fixed by the Central Government.  The relevant

section,  i.e.  Section  16,  also  provided  merely  a  power  of

regulation and the power to provide for terms and conditions and

did not grant the power to fix prices.  Discussing that aspect, it

was observed as under:

"...”Regulate” means to control or to adjust by rule or to subject  to  governing  principles.   It  is  a  word  of  broad impact having wide meaning comprehending all facets not only specifically enumerated in the Act, but also embraces within  its  fold  the  powers  incidental  to  the  regulation envisaged  in  good  faith  and  its  meaning  has  to  be ascertained in the context in which it has been used and the purpose of the statute.”

21) On the basis of the aforesaid judgments, submission of Mr. Kapur

was that this Court has consistently held that power to regulate

was  of  widest  amplitude  and,  therefore,  it  would  encompass

power  to  regulate  the  movement  of  minor  minerals  as  well,

including  the  condition  not  to  transport  the  excavated  sand

outside the State of Gujarat in the lease itself.  He submitted that

8 (2004) 5 SCC 430

Civil Appeal Nos. 10373-10374 of 2010 Page 20 of 41

this Court in State of Tamil Nadu v. M.P.P. Kavery Chetty9 held

that  there  is  no  power  conferred  upon  the  State  Government

under the MMDR Act to exercise control over the minor minerals

after they have been excavated.  His submission was that this is

the  only  judgment  which  has  taken  discordant  note  and  while

deciding this, the earlier judgment in  D.K. Trivedi & Sons  was

not brought to the notice of the Court.

22) Another submission of Mr. Kapur was that power to frame such a

rule can be traced to Section 15(1A)(d) of the MMDR Act.  This

section empowers the State Government to impose conditions in

a mining lease and, therefore, would include the power to impose

all such conditions as flown from the ownership of the minerals.

Since  it  is  the  State  Government  which  is  the  ‘owner  of  the

minerals’ and the minerals that  ‘vest’ in  it,  as held in  Amritlal

Nathubhai  Shah and Others  v.  Union Government  of  India

and Another10, while granting the licence, it can put conditions

pertaining to movement and flow of such minerals as well.  He

also  took  support  from  the  following  observations  in  Monnet

Ispat and Energy Limited v. Union of India and Others11:

"86...The  judgment  of  this  Court  in  Amritlal  Nathubhai Shah  establishes  the  distinction  between  the  power  of

9 (1995) 2 SCC 402 10 (1976) 4 SCC 108 11 (2012) 11 SCC 1

Civil Appeal Nos. 10373-10374 of 2010 Page 21 of 41

reservation to exploit a mineral as its own property on the one  hand  and  the  regulation  of  mines  and  minerals development under the 1957 Act and the 1960 Rules on the other.  The authority of the State Government to make reservation of a particular mining area within its territory for its  own  use  is  the  offspring  of  ownership;  and  it  is inseparable therefrom unless denied to it expressly by an appropriate law by the 1957 Act that has not been done by Parliament.  Setting aside by a State of land owned by it for its exclusive use and under its dominance and control, in my view, is an incident of sovereignty and ownership.”

23) in any case, argued Mr. Kapur, power to frame the impugned rule

is conferred by Section 23-C of the MMDR Act as well.  According

to him, it  would be erroneous to contend that the word ‘illegal’

occurring  in  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 and neither can cut

down the width of the other.

24) He also argued that while construing a similar power to regulate

transport of forest produce, this Court upheld a rule prohibiting

transport beyond the borders of the State in the case of State of

Tripura and Others  v.  Sudhir  Ranjan Nath12 in  the following

words:

12 (1997) 3 SCC 665

Civil Appeal Nos. 10373-10374 of 2010 Page 22 of 41

"...The  object  of  the  Act  is  to  preserve  and  protect  the forest  wealth  of  the country  and to regulate the cutting, removal, transport and possession of the forest produce in the  interest  of  the  States  and  their  people.   It  is  for achieving  the  above  purpose  that  the  Act  provides  for declaration of reserve forests, formation of village forests and declaration of protected forests.  It is for achieving the very purpose that the Act vests, in the Government, control over  forest  and  lands  not  being  the  property  of  the Government  and  controls  even  the  collection  and movement of drift and stranded timber.  It is not a taxing enactment but an enactment designed to preserve, protect and promote the forest wealth in the interests of the nation. It must necessarily take within its fold catering to the needs of the people of  the State and that  is what sub-rule (8) provides.  In our opinion, therefore, sub-rule (8) of Rule 3 is perfectly valid.”

25) Last submission of Mr. Kapur was that once it becomes clear that

power  to  regulate  minor  minerals  conferred  upon  the  State

Government would include power to regulate its movements as

well, there was no question of treating the same as violative of

Article 301 of the Constitution.  For this purpose, he relied upon

certain judgments of this Court.  Referring to the case of  Hind

Stone, he submitted that in that case the Court specifically held

that  regulatory  measures  or  measures  imposing  compensatory

taxes  for  the  use  of  trading  facilities  do  not  come  under  the

purview of  restrictions  contemplated  by  Article  301.   Likewise,

according to him, in Sudhir Ranjan Nath’s case, this Court had

held that once a provision made by the State as the delegate of

Parliament to carry out the purposes of the Act is saved by Article

Civil Appeal Nos. 10373-10374 of 2010 Page 23 of 41

302, it will not be hit by Article 301.  Such a rule, therefore, would

not offend the principle of federalism.

26) Having regard to the fact that it is the Union which can regulate

and  control  the  minerals  in  this  country  and  States  exercise

power of minor minerals as delegates of the Union, this Court had

deemed it  fit  to issue notice of  these proceedings to Union of

India as well in order to elicit its stand on this issue.  The Union of

India has filed its reply, taking a specific stand that there is no

such power to frame rule like 44-BB of the 1966 Rules or Rule 71

of  the  2010  Rules.   Ms.  Madhavi  Divan,  learned  Additional

Solicitor  General,  appeared for  Union of  India and pitched the

case to even a higher level.  Her argument was that there is no

such power even with the Union of India to frame rules of the

nature  impugned  in  these  proceedings  as  these  would  be

offensive of Article 301 of the Constitution.  Therefore, under no

circumstances,  such  a  power  can  vest  with  the  State

Government.  She argued that Section 15 which empowers the

State  Government  to  make rules  in  respect  of  minor  minerals

does  not  extend  to  the  regulation  of  already  excavated  minor

minerals under the terms and conditions of a mining lease.  This

is made clear by the three Judge Bench in M.P.P. Kavery Chetty

Civil Appeal Nos. 10373-10374 of 2010 Page 24 of 41

wherein this Court upheld the striking down of rules made by the

State Government  to  fix  minimum price for  the sale of  granite

after its excavation.  The Court emphatically held that the State

Government had no power under Section 15 of the MMDR Act to

exercise  to  control  over  minor  minerals  after  they  had  been

excavated.  The power under Section 15 was restricted and did

not empower the State to control the sale or sale price of minor

minerals once they had been mined.  The latter  judgment has

been followed in another  three Judge Bench judgment  in  K.T.

Varghese & Ors. v. State of Kerala & Ors.13.  In the latter case,

one of the impugned conditions of the license was that minerals

could be sold only within the State of Kerala, that too for domestic

and agricultural purposes.  The same was found impermissible.

She also submitted that there is no conflict whatsoever between

the  judgments  of  this  Court  in  Amritlal  Nathubhai  Shah  and

D.K. Trivedi & Sons on the one hand and M.P.P. Kavery Chetty

on the other.   Her  contention was that  in  Amritlal  Nathubhai

Shah, while it was emphatically stated that the State Government

is the ‘owner of minerals’ within its territory and minerals vest in it,

this was held in the context of a challenge to the reservation by

the State Government of certain areas of exploitation of bauxite in

13 (2008) 3 SCC 735

Civil Appeal Nos. 10373-10374 of 2010 Page 25 of 41

the public sector.   Private parties challenged the notification to

that effect and the Central Government to whom they applied for

revision held that the minerals vested in the State Government

which  was  its  owner  and  that  the  State  Government  had  the

inherent right  to reserve any area for  exploitation in the public

sector.  She did not quarrel with such a proposition.  However, her

caveat was that this was a matter where there were no leases in

favour  of  private  parties  but  rather  the  private  parties  were

petitioning the government for the grant of leases.

27) Likewise,  in  D.K.  Trivedi  &  Sons,  this  Court  held  that  minor

minerals are used mostly in local areas and for local purposes

while minerals other than minor minerals are those necessary for

industrial development on a national scale.  She submitted that it

is totally different proposition.  She also pointed out that in the

said case the finding that the State Government could enhance

dead  rent  even  during  the  subsistence  of  a  lease  has  no

application in the present case. Such observations of this Court in

D.K. Trivedi & Sons were in the context of enhancement of dead

rent which is collected as a fixed amount in consideration for the

grant  of  the  lease  by  the  lessor  apart  from  royalty  and  is

incidental  to  the  regulation  and  development  of  mines  and

Civil Appeal Nos. 10373-10374 of 2010 Page 26 of 41

minerals which is avowed object of 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 minerals beyond the borders of the

State of Gujarat.  She argued that on the other hand, both M.P.P.

Kavery Chetty  and  K.T. Varghese  were matters wherein what

was sought to be controlled post grant of lease was the sale of

the  excavated  minerals.   Such  restrictions  were  found  to  be

beyond  the  powers  granted  to  the  State  as  a  delegate  of

Parliament and were accordingly struck down.

28) The  learned  Additional  Solicitor  General  also  rebutted  the

argument  of  the  appellants  that  power  to  regulate  would

encompass  power  to  restrict  the  movement  beyond the  State.

She  argued  that  while  it  is  well  settled  that  the  expression

‘regulation’  has  many  shades  of  meaning  and  can  refer  to

prohibition (Sudhir Ranjan Nath and  Hind Stone), the issue in

the present case is whether a prohibition on the transportation of

legally mined materials can be imposed under the provisions of

the  MMDR Act.   There  is  no  doubt  that  a  prohibition  can  be

imposed on mining under certain circumstances or on the grant of

leases under the aforesaid Act but not on transportation de hors

illegal mining.

Civil Appeal Nos. 10373-10374 of 2010 Page 27 of 41

29) In this hue, the learned ASG submitted that Section 23-C was

inserted with specific object to curb ‘illegal mining’.  Therefore, the

words ‘transportation’ and ‘storage’ occurring therein would take

their colour from the expression ‘illegal mining’ on the principle of

noscitur a sociis.  That was clear from the Statement of Objects

and  Reasons  as  well.   On  the  aforesaid  basis,  Ms.  Divan

submitted that  the High Court  rightly concluded that  there was

lack  of  power  with  the  State  Government  to  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 argued that

there was no question of public interest as well.  On this aspect,

her contention was that Parliament was wholly conscious of the

environmental concerns impacted on account of mining activity,

which concern is reflected in Section 4A of the MMDR Act.  This

provision  provides  for  termination  of  prospecting  licenses  or

mining leases on account of expediency in the interest of,  inter

alia, reservation of the natural environment and conservation of

mineral resources. Further, Section 18 provides that it shall be the

duty of the Central Government to take all such steps as may be

necessary for  the conservation and systematic development  of

Civil Appeal Nos. 10373-10374 of 2010 Page 28 of 41

minerals  in  India  and  for  the  protection  of  environment  by

preventing or controlling any pollution which may be caused by

prospecting  mining  operation.   In  this  regard,  the  Central

Government is empowered to make rules as it thinks fit.  In other

words,  there  are  specific  provisions  empowering  the  Central

Government to make rules in respect of conservation of minerals

in the interest of the environment.

31) Ms. Divan also argued that the impugned rules are violative of

Article 301 of the Constitution as they seek to fetter the freedom

of trade,  commerce and intercourse.   Highlighting the purpose

behind Part XIII of the Constitution which starts with Article 301,

she  emphasised  that  it  was  to  achieve  economic  integration.

Further,  balancing  development  and  economic  equality  of  the

country is equally vital facet of economic integration, stressed the

learned  Additional  Solicitor  General.   She  referred  to  various

judgments of this Court on the aforesaid aspects and concluded

her submissions with the submission that the conclusion of the

High Court in the impugned judgment was correct on this aspect

as well.

32) Mr.  D.N.  Ray,  Advocate,  appeared  on  behalf  of  the  private

respondents and made his submissions almost on the same lines

Civil Appeal Nos. 10373-10374 of 2010 Page 29 of 41

as argued by the learned Additional Solicitor General.  Therefore,

it is not necessary to repeat the same.

33) We have give our due consideration to the arguments advanced

by the counsel for the parties on both sides.

34) From the subject matter of these appeals as well as arguments

noted above, it clearly follows  that the main issues that arise for

consideration are as under:

(a) Whether the impugned rules framed by the State of Gujarat

as a delegate of Parliament are beyond the powers granted to it

under the MMDR Act?  In other words,  whether the impugned

rules are ultra vires Sections 15, 15A and 23-C of the MMDR Act?

(b) Whether the impugned rules are violative of Part XIII of the

Constitution of India?

35) The  appellants  have  submitted  that  Section  15  gives  such  a

power.   Sub-section  (1)  of  Section  15  empowers  the  State

Government  to  make  rules  for  ‘regulating’ the  grant  of  quarry

leases, mining leases or other concessions in respect of minor

minerals and for the purposes connected therewith.  This power

of regulation pertains to granting of leases.  It is the submission of

Mr. Kapur that the expression ‘regulating’ is of widest amplitude

Civil Appeal Nos. 10373-10374 of 2010 Page 30 of 41

and  would,  therefore,  confer  power  to  make  the  rules  of  the

nature made herein.  He has referred to various judgments of this

Court  wherein  the  expression  ‘regulating’ has  been  explained.

He has also submitted that  in  any case under  Section 15(1A)

such  a  power  is  there  and  this  provision  has  to  be  read

independent of Section 15(1).

36) It  is  difficult  to  accept  the  aforesaid  contention  in  view of  the

judgments  of  this  Court  in  M.P.P.  Kavery  Chetty  and  K.T.

Varghese.   In  those judgments,  it  has been categorically  held

that  power  of  the  State  Government  under  Section  15  of  the

MMDR Act does not include control over minor minerals after they

are excavated.  Following observations from the said judgment

are extracted herein:

"19.  The  High  Court  quashed  Rules  8-D  and  19-B principally on the ground that Section 15 of the said Act gave no power to the State Government to frame rules to regulate  internal  or  foreign  trade  in  granite  after  it  had been quarried. Section 15 also did not empower the State Government to frame rules to enable a State Government company or corporation to fix a minimum price for granite.

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

21.  The said Act is enacted to provide for the regulation of mines and the development of minerals under the control of the Union. Section 2 of the said Act declares that it is

Civil Appeal Nos. 10373-10374 of 2010 Page 31 of 41

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 provided in the said Act.  Section  13  empowers  the  Central  Government  to make rules for regulating the grant of prospecting licences and mineral leases in respect of minerals and for purposes connected  therewith.  Sub-section  (1)  of  Section  15 empowers  the  State  Government  to  make  rules  for regulating the grant of quarry leases, mining leases and other  mineral  concessions  in  respect  of  minor  minerals and for purposes connected therewith. Sub-section (1-A) of Section 15 states that such rules may provide for the matters set out therein, namely, the person by whom and the  manner  in  which  an  application  for  a  quarry  lease, mining lease and the like may be made; the fees to be paid  therefor;  the  time  and  the  form  in  which  the application  is  to  be  made;  the  matters  which  are  to  be considered where applications in respect of the same land are received on the same day; the terms and conditions on which leases may be granted or regulated; the procedure in this behalf; the facilities to be afforded to lease-holders; the fixation and collection of rent and other charges and the time within which they are payable; the protection of the  rights  of  third  parties;  the  protection  of  flora;  the manner  in  which  leases  may  be  transferred;  the construction,  maintenance  and  use  of  roads,  power transmission lines, etc. on the land; the form of registers to be  maintained;  reports  and  statements  to  be  submitted and to whom; and the revision of any order passed by any authority under the said Rules. Clause (o) of sub-section (1-A) reads “any other matter which is to be or may be prescribed”. Section 18 of the said Act states that it shall be the duty of  the Central  Government  to take all  such steps  as  may  be  necessary  for  the  conservation  and systematic development of the environment by preventing or  controlling  any  pollution  which  may  be  caused  by prospecting or mining operations.

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

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10-6-1992,  quoted  above,  is  to  conserve  and  protect granite resources.

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

24.   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 of the State Government, as the subordinate rule-making authority, is restricted in the manner set out in Section 15. 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. This clause can relate only to the regulation of the grant of quarry and mining leases and other  mineral  concessions  and  it  does  not  confer  the power to regulate the sale of already mined minerals.”

37) Likewise, the condition of license granted by the State of Kerala

to the effect that it could be sold only within the Sate, that too for

domestic  and  agricultural  purposes,  was  struck  down  in  the

following words:

"3.  The appellants' complaint is that certain conditions in the  form  of  restrictions  have  been  incorporated  while issuing  the  licences.  One  of  such  conditions  which  the appellants  attack  is  that  the  minerals  permitted  to  be stocked  were  to  be  purchased  only  from  authorised quarrying permit-holders on that behalf. Another condition is that they are permitted to sell the minerals only within the State of Kerala, that too for domestic and agricultural purposes.  The  appellants'  complaint  is  that  as  far  as cooperative societies are concerned, they are not saddled with  any  such  restrictions  imposed  in  the  case  of  the appellants.  Thus, according to the appellants,  there is a clear discrimination between the cooperative societies and the individuals in the matter of restrictions imposed in the licences granted to them. Apart from that there is no legal sanction for such restrictions.”

Civil Appeal Nos. 10373-10374 of 2010 Page 33 of 41

38) Argument  of  Mr.  Kapur  that  M.P.P.  Kavery  Chetty  did  not

consider  the  earlier  judgment  in  D.K.  Trivedi  &  Sons  is

misplaced.   In  this  behalf,  we  entirely  agree  with  the  learned

Additional Solicitor General that judgment in D.K. Trivedi & Sons

and  other  judgments  cited  by  Mr.  Kapur  are  clearly

distinguishable as the context and the subject matters in those

cases were entirely different.  It is not necessary to point out the

differences in two sets of cases, as we entirely agree with the

argument of Ms. Divan in drawing the distinction between the two

and pointing out that there is no conflict whatsoever.  She is right

that the two 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

with  the  grant  or  the  refusal  to  grant  a  lease.   In  the  instant

appeals, which concern the sale of already excavated minerals

that belong to the lessee, a prohibition by the State Government

on sale thereof  outside the State is  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  prudent  and

discriminating exploitation of minerals’.  Following passage from

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the  said  judgment  shows  that  as  a  method  of  regulation,

prohibition is clearly permissible, provided, however, that it has a

direct nexus with the conservation, exploitation and excavation of

minerals:

"10...The statue with which we are concerned, the Mines and Minerals (Development and Regulation) Act, is aimed, as  we  have  already  said  more  than  once,  at  the conservation  and  the  prudent  and  discriminating exploitation of minerals.  Surely, in the case of a scarce mineral, to permit exploitation by the State or its agency and to prohibit exploitation by private agencies is the most effective method of conservation and prudent exploitation. If you want to conserve for the future, you must prohibit in the present.  We have no doubt that the prohibiting of the leases  in  certain  cases  is  part  of  the  regulation contemplated by Section 15 of the Act.”

40) On the other hand, the prohibition on the transport or sale of the

already mined minerals outside the State has no direct nexus with

the object and purpose of the MMDR Act which is concerned with

conservation and prudent exploitation of minerals.

41) Insofar as Section 23-C of the MMDR Act is concerned, it was

inserted  by  the  Amendment  Act  of  1999  with  the  objective  to

prevent illegal mining.  That is clearly spelled out in the Statement

of Objects and Reasons.  We may reproduce a portion thereof

again:

"(iii)  A new provision is proposed to be inserted in the Act prohibiting transportation or  storage or  anything causing transportation or storage of any mineral except under the due provisions of the Act, with a view to preventing illegal

Civil Appeal Nos. 10373-10374 of 2010 Page 35 of 41

mining.  Further,  the Act  is proposed to be amended to cover the breach of  the provisions of  the proposed new provision of the Act to be punishable.  It is also proposed to insert  a  new provision to provide for  anything seized under the Act as liable for confiscation under court orders. A new section is proposed to be inserted to empower the State  Governments  to  make  rules  for  preventing  illegal mining,  transportation  and  storage  of  minerals  and  for purposes connected therewith.

(emphasis supplied)”

42) It  is  in  this  context  the  words  ‘transportation’  and  ‘storage’ in

Section 23-C are to be interpreted.  Here the two words are used

in  the  context  of  ‘illegal  mining’.   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.

Therefore, no power flows from this provision to make rule for

regulating transportation of the legally excavated minerals.

43) As far as Issue No. (b) above is concerned, we are also of the

considered opinion that the impugned rules violate Part XIII of the

Constitution 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 with the

expression ‘throughout the territory of India’.  Under Article 302,

Parliament  may  impose  restrictions  on  the  freedom  of  trade,

Civil Appeal Nos. 10373-10374 of 2010 Page 36 of 41

commerce or intercourse between 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 Parliament and the State

Legislatures from making any law that gives preference to one

State  over  another  or  discriminates  between  one  State  and

another.  Situations of scarcity are to be dealt with by Parliament

under Article 302(2).  The power of State Legislature to impose

reasonable  restrictions  on  the  freedom of  trade,  commerce  or

intercourse, as may be required in the public interest,  requires

such a Bill or amendment to be moved in the State Legislature

only after receiving previous sanction from the President.   The

President, being the head of the State and the guardian of the

federation, must be satisfied that such a law is indeed required

and, thus, acts as a check on the promotion of provincial interests

over  national  interest.   Going by the aforesaid scheme of  this

Chapter,  it  becomes  apparent  that  when  there  are  such

restrictions on a State Legislature,  then the State Government

could not have imposed such a prohibition under a statute whose

object  is  to  regulate  mines  and mineral  development,  and  not

trade and commerce per se.

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44) That  apart,  we  find  force  in  the  submission  of  the  learned

Additional Solicitor General that Part XIII of the Constitution is a

code on checks and balances on the legislative power intended to

achieve the objective of economic integration of the country.  This

was emphasised in 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 be  read  in  isolation.  It  is  part  and  parcel  of  a  single constitutional instrument envisaging a federal scheme and containing general scheme conferring legislative powers in respect  of  the  matters  relating  to  List  II  of  the  Seventh Schedule on the States. It also confers plenary powers on States  to  raise  revenue  for  its  purposes  and  does  not require  that  every  legislation  of  the  State  must  obtain assent of the President. Constitution of India is an organic document. It must be so construed that it lives and adapts itself to the exigencies of the situation, in a growing and evolving society, economically, politically and socially. The meaning of the expressions used there must, therefore, be so interpreted that it attempts to solve the present problem of distribution of power and rights of the different States in the Union of India, and anticipate the future contingencies that  might  arise  in  a  developing  organism.  Constitution must be able to comprehend the present at the relevant time  and  anticipate  the  future  which  is  natural  and necessary  corollary  for  a  growing  and  living  organism. That must be part of the constitutional adjudication. Hence, the economic development  of  States to bring these into equality  with  all  other  States  and  thereby  develop  the economic unity of India is one of the major commitments or goals of the constitutional aspirations of this land. For working of an orderly society economic equality of all the States is as much vital as economic unity.”

14 (1990) 3 SCC 87

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Freedom of movement of goods, services and the creation

of  a  common market  must  be understood contextually  and as

necessary for creating an economic union.

45) It is also rightly contended by all the respondents that balanced

development of the country is an equally vital facet of economic

integration.   No  doubt,  Part  XIII  permits  some  forms  of

differentiation, for example, to encourage a backward region or to

create a level playing field for parts of the country that may not

have reached the desired level of development.  In this context,

Part XIII envisions a two-fold object: (i) facilitation of a common

market  through  ease  of  trade,  commerce  and  intercourse  by

erasing barriers; and (ii) Regulations (or restrictions) which may

have the effect of differentiating between States or regions which

may be necessary not only in emergent circumstances of scarcity

etc.  or  but  even  for  development  of  economically  backward

regions or otherwise justified in the public interest.  That Part XIII

is  not  about  “freedom”  alone  but  is  a  code  of  checks  and

balances, intended at achieving economic unity and parity.  Such

a desired objective for economic integration through checks and

balances was also articulated in Video Electronics Pvt. Ltd.:

"36.  ...Economic  unity  is  a  desired  goal,  economic equilibrium and prosperity is also the goal.  Development on parity is one of the commitments of  the Constitution.

Civil Appeal Nos. 10373-10374 of 2010 Page 39 of 41

Directive principles enshrined in Articles 38 and 39 must be harmonised with economic unity as well as economic development of developed and under developed areas. In that light on Article 14 of the Constitution, it is necessary that the prohibitions in Article 301 and the scope of Article 304(a)  and  (b)  should  be  understood  and  construed. Constitution is a living organism and the latent meaning of the  expressions  used  can  be  given  effect  to  only  if  a particular situation arises. It is not that with changing times the  meaning  changes  but  changing  times  illustrate  and illuminate  the  meaning  of  the  expressions  used.  The connotation of the expressions used takes its shape and colour in evolving dynamic situations. A backward State or a disturbed State cannot with parity engage in competition with advanced or developed States. Even within a State, there are often backward areas which can be developed only  if  some  special  incentives  are  granted.  If  the incentives in the form of subsidies or grant are given to any part of (sic or) units of a State so that it may come out of its limping or infancy to compete as equals with others, that, in our opinion, does not and cannot contravene the spirit  and  the  letter  of  Part  XIII  of  the  Constitution. However, this is permissible only if there is a valid reason, that is to say, if there are justifiable and rational reasons for differentiation. If there is none, it will amount to hostile discrimination….”

46) 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 which reliance

is  placed by the appellant  focuses on the need to  restrict  the

export of sand outside India and not within India.  In any case,

nothing  prevents  the appellant  from restricting  the quantum of

sand  being  excavated.   However,  once  the  appellant  State

permits  sand to be excavated, neither  can it  legally restrict  its

movement  within  the  territory  of  India  nor  is  the  same

Civil Appeal Nos. 10373-10374 of 2010 Page 40 of 41

constitutionally permissible.  Likewise, there is no restriction on

the State importing sand from other states.  If it is the case that

the demand of any State is not being met, it may purchase sand

from other states.  In any event, the market will dictate trade in

sand inasmuch as it  may make no business sense for  mining

company to transport and sell its sand in a far away 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 Pradesh High

Court and Madras High Court.  Rather, we affirm the impugned

judgment of  the Gujarat High Court and dismiss these appeals.

.............................................J. (A.K. SIKRI)

.............................................J. (S. ABDUL NAZEER)

.............................................J. (M.R. SHAH)

NEW DELHI; MARCH 01, 2019

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