Nafr High Court
Case Details
1 WPC No.3796 of 2024 2025:CGHC:12715 NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR Order reserved on 25-2-2025 Order delivered on 18-3- 2025 WPC No. 3796 of 2024 1. Pellet Manufacturers’ Association of No. S/RS/SW/0953/2013, A-84, Lower Ground Floor, Defence Colony New Delhi-110024 India Reg. Through Its Authorized Representative Mr. Deepak Bhatnagar, S/o Late Mr. Nityanand Swaroop Bhatnagar, Age 75 Years, R/o 16/2, Harmony Homes, Sector 57, Gurgaon 122011. ... Petitioner versus 1. State Of Chhattisgarh Through its Special Secretary & Director, Mineral Resources Department Indravati Bhawan, Block-4, Second Floor, Nawa Raipur, Atal Nagar, Chhattisgarh, India. 2. Ministry Of Mines, Government Of India Through its Secretary Shastri Bhawan, Dr. Rajendra Prasad Road, New Delhi, India 110001. 3. Ministry Of Steel, Government Of India Through its Secretary Udyog Bhawan, New Delhi, India 110011. ... Respondents (Cause title is taken from the Case Information System) For Petitioner : Shri Kishore Bhaduri, Senior Advocate with Shri Harsh Dave, Advocate For Respondents No.1/State : Shri Praveen Das, Dy. Adv. General For Respondent No.2&3/UOI : Shri Tushar Dhar Diwan, Advocate 2 C A V Order WPC No.3796 of 2024 Per Bibhu Datta Guru, J. 1. By the present writ petition, the petitioner-Pellet Manufacturers’ Association of India is seeking setting aside the impugned communication dated 5-1-2022 (Annexure-P/1) issued by the respondent No.1 to impose a mandatory requirement for obtaining transit passes for rail/road transportation of iron pellets, as being illegal, unlawful, unconstitutional and arbitrary. 2. (a) The instant petition is being preferred against the decision and directive dated 05.01.2022 issued by the respondent No.1 to prohibit transportation of iron ore pellets in the State of Chhattisgarh through
Legal Reasoning
rail/road transport means without first mandatorily obtaining transit passes in lieu of the same, which has subjected the Petitioner to grave prejudice, trade backlogs and massive financial predicaments, besides being a fundamental breach of the legislative competence accorded to the Respondent No.1 under the Mines and Minerals (Development and Regulation) Act, 19571. (b) The transport of raw materials sourced by pellets' manufacturers is governed by the appropriate rules framed by the concerned State Governments in furtherance of the liberty granted to them under Section 23C of the MMDR Act, which in particular confers the power of regulating transport of minerals under sub-section (2)(c). In exercise of this power, different States have devised their own methods for dispensing transit permits for transport of basic raw materials. However, 1 henceforth ‘the MMDR Act’ 3 WPC No.3796 of 2024 there is no requirement to obtain such a transit pass for transport of any value added products. (c) Under Rule 4 of the Chhattisgarh Minerals (Mining, Transportation and Storage) Rules, 20092, the applicability of an appropriate transit pass is attracted only towards the railway transport of any mineral/ore and/or beneficiated products, but not to value-added products. It is pertinent to note at this juncture that iron ore pellets are not minerals; rather they are value-added products upon which the relevant excise duty/GST is applicable. According to the petitioner, plain reading of the provision itself that the reading and interpretation accorded to it by the Respondent No.1 has no head, foot or tail to support it, insofar as the parent legislation underlying the Rules, i.e., the MMDR Act, is itself clearly intended to be a framework for development and regulation of minerals and not for value-added products e.g. iron ore pellets in the present matter, which come under the ambit of regulation of the Respondent No. 3. (d) Further contention of the petitioner is that the Respondent No.1 has surpassed the well-defined realms of its legislative powers not just by imposing its diktats upon transportation of iron ore pellets when it does not have the scope to do so, but also by mandating the requirement of these transport permits on both rail and road transport. The South Eastern Railway itself has seen its revenues being wiped off to the tune of Rs.250.00 crores as a result of the Respondent No.1's actions, thus 2 henceforth ‘the Rules, 2009’ 4 WPC No.3796 of 2024 causing hefty loss to the exchequer and also disrupting industrial employment generated at pelletizing plants in the State. In the above conspectus, it is clear that the Petitioner has been subjected to grave prejudice. The Petitioner has no effective alternate remedy but to approach this Court for setting aside the Respondent No.1's correspondence dated 05.01.2022 which had the effect of arbitrarily imposing the requirement of transit pass for rail/road transportation of iron ore pellets based on wholly irrational, discriminatory and illegal grounds which have no basis in law. Thus, this petition. 3. (i) Learned senior counsel appearing for the petitioner would submit that when the rule making power of respondent No.1 is restricted in any manner through the MMDR Act read with the Rules, 2009, then any law enacted which is opposed to the fundamental law is in excess of the legislative authority and is thus a nullity. He would further submit that a plain reading of Section 23C of the MMDR Act clarifies that it empowers the State Government to make rules for preventing illegal mining, transport and storage of minerals. In pursuance of this power, the respondent No.1 had framed the Rules, 2009, vide which a scheme of transit pass was designed under Rule 4 to regulate the transport of minerals. Not only the transit pass scheme thus applicable only in context of minerals rather than to pellets, but it is also apparent that Rule 4 makes prescriptions only in respect of transportation of minerals through the means of railway. He would submit that on the contrary the respondent No.1 has put a complete stop on all sorts of transportation of 5 WPC No.3796 of 2024 value-added manufactured products like pellets without transit permits, be it through rail or road-based modes, thus completely undermining its legislative competence. Pelletizing is a strictly metallurgical process that falls under the regulation through respondent No.3 whereas the processes connected with and incidental to mining of iron ores are controlled by respondent No.2, thus, both these processes exist separately and the deliberate linking of the two by respondent No.1 is an erroneous interpretation of the law. (ii)
Legal Reasoning
Learned counsel would submit that the respondent No.1 was not conferred with adequate legislative competence to make any rule or issue any directive with respect to the conduct of transport of pellets through rail/road as this matter falls under the special domain of respondent No.3 rather than respondent No.1. According to the learned counsel, the rule making power extended to the executive through the doctrine of delegated legislation cannot be to such an extent that the legislature effectively abdicates its powers and effaces itself from the picture to allow the executive to create a parallel legislative body. (iii) Learned counsel would submit that in the impugned correspondence the respondent No.1 is made an attempt to regulate the transport of pellets, which are value-added manufactured products, rather than that of any mineral. There is no direct or indirect connection of regulating the transport of pellets to the declared purpose and there is no rational nexus sought to be achieved by respondent No.1 in restricting the movement of pellets and subjecting the same to transit passes insofar 6 WPC No.3796 of 2024 as there is no question of exchequer earning any royalty from these value-added products as they are subject to excise duty and now GST. (iv) According to the learned counsel, the action of the respondent No.1 is thus ultra vires the statutory mandate under the MMDR Act read with the Rules, 2009, and must not be allowed to continue to remain in operation to the prejudice of the Petitioner. Respondent No.1 cannot by itself go on to usurp the executive rule-making power in respect of value-added products when the parent legislation through which the power is being exercised speaks only of the subject-matter of minerals. To adopt such a manoeuvre is tantamount to a violent transgression and trespass onto a field of powers which it is barred from grazing in. He would submit that the impugned correspondence clashes vigorously against the tenets of the separation of powers between the legislature and the executive insofar as it indicates that the executive, i.e. respondent No.1 has taken over the mantle of legislating the regulation of transport of value-added products from the respondent No.3. (v) Learned counsel would submit that object of delegating rule making power under Section 23C being confined to arrest of illegal mining, transport and storage, there is no necessity to stretch regulatory arm beyond these stages and interfere with processing and manufacturing activities. In fact, to prevent illegal mining, there is no need to make rules covering such activities, because no lessee can operate quarry and extract mineral clandestinely, without knowledge of departmental officials. 7 WPC No.3796 of 2024 (vi) The discriminatory nature of the impugned correspondence is further laid bare from the fact that while various articles / products such as pellets, sponge iron and more, are classified under the same category of being value-added manufactured products, respondent No.1 has imposed its diktat only in the case of pellets. Thus, respondent No.1 being a form of the State, is not permitted to permeate any kind of discriminatory elements into its legislative or executive action so as to put a certain category of persons at risk or threat of injury, whereas another category is placed on a higher pedestal vis-à-vis the same subject-matter. The value-added product industries must be dealt with the same hand by respondent No.1 and the step-parental treatment being meted out to the Petitioner must be halted in its tracks. (vii) Learned counsel would submit that the rights of the petitioner under Article 19(1)(g) to conduct free trade and business have substantially been affected through the decision of respondent No.1 to impose transit pass requirements on the movement and transportation of pellets. In fact, such has been the extent of damage to the industry, insofar as the Railways has completely stopped making available any rakes for the transportation of pellets as the notification dated 5.01.2022 was also marked to Railways by respondent No.1, thereby leading to an inventory pile-up, that the complete industry has now ground to a halt due to the complete lack of transparency. The impugned correspondence is an extremely disproportionate, irrational and capricious exercise of the powers vested in respondent No.1, and hence the same is liable to be 8 WPC No.3796 of 2024 quashed for being a perverse and manifestly arbitrary exercise of the executive rule-making power. To buttress his contention, learned counsel would place reliance upon the decisions rendered by the Supreme Court in the matter of Ardeshir H. Bhiwandiwala v State of Bombay (Now Maharashtra)3 and Uttaranchal Forest Development Corpn. and Another v Jabar Singh and Others4. He would also place reliance upon the decision rendered by the High Court of Judicature at Bombay (Panaji Bench) in the matter of Mandovi Pellets Ltd. v Union of India and Others5. 4. (A) Learned counsel appearing for the State, ex adverso, would submit that the erstwhile State of Madhya Pradesh for the purpose of value addition/encouragement of industrialization in the State vide notification dated 02/02/1981, decided to allocate iron ore mines to private industries those offer to set up iron ore based industry in the State. Pursuant to the aforesaid notification several private companies signed Memorandum of Understandings6 with the State and on the basis of the so signed MoUs preference for grant of iron ore mining lease was given to the companies those have established iron ore based plant as well as to those going to set up iron ore based plant for captive use. He would further submit that it clearly mentioned in the mining lease grant order and lease agreement that 100% of the extracted Iron Ore from such captive mines shall be utilized in their captive plant for the purposes of making Iron/ Steel. 1961 SCC OnLine SC 53 (2007) 2 SCC 112 3 4 5 WP No.127 of 1986 (decided on 30-3-1988) 6 henceforth ‘the MoU’ 9 WPC No.3796 of 2024 (B) Learned counsel would submit that the Iron Ore is mainly extracted from mines in two forms, i.e. fines and lumps wherein, lumps can directly be used for steel/iron production by putting them into the steel/iron plants. However, the iron ore fines are converted into uniform sized pellets and then those pellets are utilized for making/producing iron/steel. He would submit that the pellets are intermediate products, which can be considered as raw material for making iron/steel and not end product as claimed by the petitioner association. (C) According to the learned counsel, with respect to any Iron Ore which remains surplus with the captive plant after its usage to full capacity, the remaining Iron Ore in form of Fines and Lumps can be sold by the plant in the prescribed manner. He would also submit that for Iron Ore Fines 150% and Iron Ore Lumps 250% of Royalty respectively would be payable as additional amount other than the payable royalty. He would submit that the captive mine owners were found more indulged in selling iron ore pellets instead of utilizing the same for producing iron/steel in order to create more profit. The said act of selling the intermediate product i.e. pellet, completely defeats the purpose of value addition/Industrialization in the State. (D) Learned counsel would submit that Section 23C of the Act, 1957 empowers the State Government to make Rules for preventing illegal mining, transportation and storage of minerals. The scope of framing Rules covers many matters, specifically regulation of mineral being transported from the area granted under a prospecting license or a 10 WPC No.3796 of 2024 mining lease or a quarrying license or a permit, in whatever name the permission to excavate minerals, has been given. Further the State is also empowered 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. Learned counsel would submit that the entire exercise was done with respect to ensuring that the State Government does not suffer any loss of revenue with respect to payment of royalty and other taxes. 5. (Aa) Learned counsel appearing for the UOI placed a copy of the communication dated 5-12-2024 issued by the Ministry of Steel wherein it has been stated that the said Ministry has nothing to say in the matter, as the issue pertains to the Government of Chhattisgarh. However, the Ministry of Mines has filed its reply. According, the respondent No.2/Ministry of Mines the MMDR Act is the principal legislation governing the mining sector (other than petroleum and natural gas), and has been enacted to provide for the development and regulation of mines and minerals under the control of the Union in accordance with Entry 54 of the Seventh Schedule of the Constitution of India. The MMDR Act, inter alia, provides for procedures to grant mineral concessions, regulate mining activities and provisions for mineral development in the Country. (Ab) The respondent No.2 vide letter dated 11.07.2024 intimated the Government of Chhattisgarh regarding the impugned communication dated 5-1-2022 that the Central Government has no power to revise any order passed by the State Government or any of its authorized officers or 11 WPC No.3796 of 2024 any authority under the rules made under Section 23C of the MMDR Act. He would submit that the impugned communication has been issued by the Government of Chhattisgarh well within its powers and the State Government is fully empowered to review/revise the order. He would also submit that Section 23C of MMDR Act empowers the State Governments to frame rules to prevent illegal mining, transportation and storage of minerals and for the purposes connected therewith. As per Section 23C(3), any order passed under Section 23C is not revisable before the Central Government under Section 30. Since, the subject matter of challenge is order dated 05.01.2022 passed by the State Government under Section 23C of the MMDR Act, it is for the State Government to justify its action that the same is within the ambit of the provisions of the MMDR Act and Rules framed thereunder and/or the rules framed there under section 23C of the MMDR Act. 6. I have heard learned counsel appearing for the parties at length and perused the documents. 7. For the sake of convenience, it would be apt to quote Section 23C of the MMDR Act, which reads as under : Section 23C of the MMDR Act : 23C. Power of State Government to make rules for preventing illegal mining, transportation and storage of mineral.--(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:— 12 WPC No.3796 of 2024 (a) establishment of check-posts for checking of minerals under transit; (b) establishment of weighbridges 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 (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). 8. It is pertinent to mention here that in the mining lease grant order and lease agreement it has been mentioned that 100% of the extracted Iron Ore from such captive mines shall be utilized in the captive plant for the purposes of making Iron/ Steel. At this juncture, it is to be note that the Iron Ore is mainly extracted from mines in two forms, i.e. fines and lumps wherein, lumps can directly be used for steel/iron production by putting them into the steel/iron plants, however, the iron ore fines are 13 WPC No.3796 of 2024 converted into uniform sized pellets and then those pellets are utilized for making/producing iron/steel. In fact, the pellets are intermediate products, which can be considered as raw material for making iron/steel and not end product as claimed by the petitioner association. 9. The iron ore, which remains surplus with the captive plant after its usage to full capacity, the remaining iron ore in form of Fines and Lumps can be sold by the plant in the prescribed manner. For Iron Ore Fines 150% and Iron Ore Lumps 250% of Royalty respectively would be payable as additional amount other than the payable royalty. The captive mine owners were found more indulged in selling iron ore pellets instead of utilizing the same for producing iron/steel in order to create more profit, despite the fact that the said act of selling the intermediate product i.e. pellet, completely defeats the purpose of value addition/Industrialization in the State. 10. Section 23C of the MMDR Act empowers the State Government to make Rules for preventing illegal mining, transportation and storage of minerals. The scope of framing Rules covers many matters, specifically regulation of mineral being transported from the area granted under a prospecting license or a mining lease or a quarrying license or a permit, in whatever name the permission to excavate minerals, has been given. Further the State is also empowered 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. The entire exercise was done with respect to ensuring that the State Government does not 14 WPC No.3796 of 2024 suffer any loss of revenue with respect to payment of royalty and other taxes. 11. Iron ore fines are small, fine-grained particles of iron ore that often contain impurities like silica, alumina, and clay. Iron ore fines can be the result of beneficiation, a process used to improve the quality of iron ore by removing impurities and increasing its iron content, making the ore more suitable for steel production. When iron ore fines subjected to beneficiation processes, the same can be transformed into a valuable feedstock for the iron and steel industry, enhancing the efficiency and sustainability of steel production. Thus, the petitioner cannot take a plea that the imposition of mandatory requirement for obtaining transit passes for rail/road transportation of iron pellets is illegal and arbitrary. 12. Reliance placed by the petitioner upon decisions rendered by the Supreme Court in the matters of Ardeshir H. Bhiwandiwala (supra) and Uttaranchal Forest Development Corpn. (supra) are distinguishable and the principles laid down in the said decisions are not relevant for adjudication of the present petition. The impugned communication dated 5-1-2022 (Annexure-P/1) has been issued by the State Government by exercising power under Section 23C of the MMDR Act to protect and prevent illegal transportation of mineral by transporting pellets in place of mineral whereas the judgments cited by the petitioner are about applicability of particular Rules or Act when the mineral processed to a by-product. 15 WPC No.3796 of 2024 13. For the reasons mentioned hereinabove, in the opinion of this Court there is no illegality or irregularity in the impugned communication dated 5-1- 2022 (Annexure – P/1) by which mandatory requirement for obtaining transit pass for rail/road transport of iron ore pellets has been imposed. The impugned communication has been issued by the State by exercising the power conferred under Section 23C of the MMDR Act. In fact, the State is having sufficient power under Section 23C(g) to prevent illegal mining, transportation and storage of minerals. When it is came to the knowledge of the State that the captive mine owners were found more indulged in selling iron ore pellets instead of utilizing the same for producing iron/steel in order to create more profit, the State Government has taken a decision and issued the impugned communication. The same is just and proper warranting no interference of this Court. 14.
Decision
Ex-consequenti, the writ petition, sans substratum, is liable to be and is hereby dismissed. 15. There shall be no order as to cost(s). K GOWRI SANKARA RAO Digitally signed by K GOWRI SANKARA RAO Date: 2025.03.18 14:51:56 +0530 Gowri Sd/- (Bibhu Datta Guru) Judge