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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

I.A. NO. 247,

I.A. NO. 250 IN I.A. NO. 247 AND

I.A. NO. 252 IN I.A. NO. 247

IN

WRIT PETITION (C) NO. 562 OF 2009

SAMAJ PARIVARTANA SAMUDAYA

& ORS. ...PETITIONER(S)

VERSUS

STATE OF KARNATAKA & ORS. ...RESPONDENT(S)

J U D G M E N T

RANJAN GOGOI, J.

1. Two related and connected issues have arisen

for determination in the present interlocutory

applications.

2.The first is with regard to the objection of

the mining lessees to continue to pay 10% of the

sale proceeds of mining to the Monitoring Committee

for eventual transfer to the Special Purpose

Vehicle (“SPV” for short) that has since been

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constituted to implement the Comprehensive

Environment Plan for the Mining Impact Zone

(“CEPMIZ” for short and hereinafter referred to as

‘the scheme’) in the Districts of Bellary,

Chitradurga and Tumkur of the State of Karnataka.

For the present, it will be sufficient to notice

that this Court by its orders passed from time to

time had directed the setting up of a Special

Purpose Vehicle for the purpose of execution of

ameliorative and mitigative works/measures to deal

with the large scale degradation of the environment

that had occurred due to the unprecedented illegal

mining that had taken place in the mining leases

operating in the aforesaid three districts at the

relevant point of time. This Court had, from time

to time, directed preparation of a scheme outlining

all the details of the works required to be

undertaken; the process of implementation of the

same by implementing agencies; accounting

procedures etc. and for submission of the same to

this Court in consultation with the Central

Empowered Committee (“CEC” for short). This Court

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was also of the view that the funds for the SPV to

enable ameliorative and mitigative measures to be

undertaken, as per the CEPMIZ to be prepared, would

primarily come from (a) 10% of the sale proceeds of

the minerals; (b) compensation for illegal mining

etc.; and (c) other receivables by the Monitoring

Committee to be directed to be transferred to the

SPV from time to time.

3. The various orders passed by this Court from

time to time had received final approval of this

Court in the judgment and order dated 18.4.2013

which finally terminated Writ Petition (C) No. 562

of 2009 titled “Samaj Parivartana Samudaya and Ors.

vs. State of Karnataka and Ors.

1

4.Pursuant to the aforesaid order(s), the

Government of Karnataka has constituted a Special

Purpose Vehicle known as Karnataka Mining

Environment Restoration Corporation (“KMERC” for

short) on 13.06.2014 with the Additional Chief

1

[2013 (8) SCC 154]

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Secretary to the Government of Karnataka as the

Chairman. The CEPMIZ i.e. the Scheme has since

been prepared and is presently awaiting the

approval of the Court which is the next/connected

aspect of the matter, for the present.

5.Insofar as the first question is concerned, the

prayer made by the applicant, Federation of Indian

Mining Industry, Southern Region (“FIMI-Southern

Region”) and duly supported by another lessee M/s.

Vedanta, in short, is that after the Mines and

Minerals (Development and Regulation) Amendment Act

2015 had brought in Section 9B in the Act with

effect from 12.1.2015 a District Mineral Foundation

is required to be set up in every district affected

by mining related operations. Under Section 9B(5)

and (6) lessees are required to pay to the District

Mineral Foundation (“DMF” for short) an amount

equivalent to such percentage of royalty not

exceeding one-third of such royalty, as may be

prescribed by the Central Government.

6.The Ministry of Mines, Government of India by a

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Notification dated 17.09.2015 has prescribed that

in respect of leases granted prior to 12.01.2015

the amount payable to the DMF shall be 30% of the

royalty i.e. 5.5% of the sale value (approx.) and

in respect of leases granted after 12.01.2005 the

contribution to the DMF shall be @ 10% of the

royalty i.e. 1.5% of the sale value. Consequently,

the leases in Category-A and Category-B mines,

presently, in addition to 10% of the sale value

payable to the Monitoring Committee/SPV are

required to pay about 4.5% of such value to the

District Mineral Foundation. It is contended by

FIMI-(Southern Region) that by Notification dated

11.01.2016 the District Mineral Foundation Rules,

2016 have been notified by the Government of

Karnataka. The objects of the District Mineral

Foundation as prescribed in Rule 3 is as follows:

“3. Objects of Foundation.- The objects of

the District Mineral Foundation shall be

to work for the interest and benefit of

the persons and areas affected by mining

related operations in the districts in

such manner as may be prescribed by the

State Government:-

(1) to implement various developmental and

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welfare projects or programs in mining

affected areas.

(2) to minimize or mitigate the

adverse impacts, during and after mining,

on the environment, health and

socio-economics of people in mining

districts; and

(3) to ensure long-term sustainable

livelihood for the affected people in

mining areas”

“Rule 18 of DMF, 2016 prescribes the

purpose for which the funds shall be used

and which include drinking water supply,

education, welfare of women and children,

aged and disabled persons, skill

development, sanitation, physical

infrastructure, irrigation and energy and

watershed development.”

7.In the light of the aforesaid developments it

is contended by the applicant in I.A. No. 247 that

the object behind the ameliorative and mitigative

measures, in terms of the CEPMIZ prepared under the

Court’s orders issued, from time to time, is one

and the same as the object behind the creation of

the District Mineral Foundation. Accordingly, the

applicant-FIMI (Southern Region) has prayed for

clarification of the earlier orders of this Court

to the effect that the iron ore lessees in the

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State of Karnataka will no longer be required to

contribute 10% of the sale proceeds to the

Monitoring Committee or the SPV from the date of

which said lessees have become liable to make

payment to the District Mineral Foundation under

Section 9B of the Mines and Minerals (Development

and Regulation) Act 2015, as amended.

8.In response, the Union of India and the State

of Karnataka have opposed the grant of any

relief/clarification, as prayed for by the

FIMI-Southern Region. According to the Union of

India, the SPV contemplated under the orders of the

Court, for the purpose of taking various

ameliorative and mitigative measures in the three

Districts, which has since been established, is a

sequel to the large scale plundering of the

environment and consequential socio-economic damage

caused to this region by illegal mining that had

taken place on an unprecedented scale. The Union of

India has stated that taking note of the

extraordinary depredation of nature and environment

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that had occurred in the three mining districts of

Karnataka, the SPV has been constituted by the

Court to respond and to repair, reconstruct and

restore nature and environment in its pristine

form, as far as practicable. It was to answer a

situation which was extraordinary and specifically

confined to the mining regions of the districts of

Bellary, Chitradurga and Tumkur that the SPV has

been constituted. In Paragraph 10 of the affidavit

filed on 5.9.2016 by the Union of India, it has

been stated as follows:

“It is submitted that the District Mineral

Foundation (DMF) as contemplated by

Section 9B of the MMDR Act, 1957 is a body

that has been envisaged for the benefit of

mining affected areas and populations in a

situation where mining is carried out in a

responsible manner, within the limits, and

subject to the conditions, laid down by

various approvals and clearances such as

the forest clearances and the environment

clearances. The DMF mechanism is

applicable on a uniform basis across the

country. It is not a mechanism designed to

deal with any area specific extraordinary

situation arising out of large scale,

irresponsible and reckless mining carried

out with total disregard to the

consequences on the environment as was the

case in Karnataka.”

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9.Specifically, in paragraph 15 of the affidavit,

the Union of India has stated that:

“Considering all the above, it is clear

that the DMF was never intended to be, and

can never actually work as, a substitute

for the CEPMIZ.”

10.The State of Karnataka has also filed its

detailed objections to the grant of any relief, as

sought for by FIMI-Southern Region. In addition to

the stand taken by the Union of India in its

affidavit, as noted above, the State of Karnataka

has pointed out that the CEPMIZ prepared and

submitted to the Court in consultation with the CEC

proceeds on the recommendations of the CEC that

henceforth the lessee should be directed to pay

5.5% of the sale proceeds to the Monitoring

Committee/SPV (details in this regard would be

noticed subsequently). The whole CEPMIZ Scheme,

particularly, the financial projections for

successful implementation thereof has been drawn up

on that basis. Grant of the prayer made by the

FIMI-Southern Region would result in upsetting the

entire scheme as a whole and would jeopardize its

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contemplated/planned implementation. Furthermore,

according to the State of Karnataka, any order of

discontinuance of the contribution to the

Monitoring Committee/SPV by the lessees of A and B

categories would seriously prejudice other lessees

who have obtained leases recently and who would be

obtaining such leases in future, inasmuch as, a

percentage of the sale proceeds for such leases is

to be contributed by the State of Karnataka and

made available to the SPV. The State contends that

such a situation would result in a highly

inequitable position inasmuch as the existing

lessees responsible, in a way, for the

environmental degradation would not be contributing

anything further to the SPV in undertaking

ameliorative and mitigative steps to restore the

environment whereas new leases e.g. category C

lessees, who may not be so responsible, would be so

contributing.

11.The CEC in its response dated 27.04.2016,

however, has taken a slightly different view of the

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matter. In the comprehension of the CEC there is a

fair amount of overlapping between the objects of

the District Mineral Foundation and the purpose for

which the Court had passed orders for creation of

the SPV with the task outlined, as noticed above.

According to the CEC, for existing leases, 30% of

the royalty paid presently works out roughly about

4.5% of the sale proceeds. Accordingly, the CEC has

suggested that the existing lessees may pay 5.5%

of the sale proceeds to the Monitoring

Committee/SPV (instead of 10%) and at the same time

continue to discharge the statutory liability of

payment to the District Mineral Foundation to the

extent of 30% of the royalty, equivalent to about

4.5% of the sale proceeds.

12.We have considered the matter. We have also

taken note of the previous orders of this Court

particularly the final order dated 18.04.2013

(Paragraph 37); the objects behind the amendment of

the Mines and Minerals (Development and Regulation)

Act by inclusion of the provisions of Section 9B;

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and also the notifications issued from time to time

including the objects of the District Mineral

Foundation as provided for by Rule 3 of the

District Mineral Rules, 2016 notified by the

Government of Karnataka on 11.01.2016. Though, at

first blush, it may appear that there is some

amount of overlapping between the objects of the

District Mineral Foundation and the purpose

contemplated by the Court’s order in setting up the

SPV, the observations of this Court in Paragraph 37

of the judgment dated 18.04.2013 (supra) would make

the position amply clear. The statutory enactments

and exercises carried out subsequent to the Court’s

order(s) will have to be understood to be the

expression of the legislative opinion of the

necessity to meet the challenges of mineral

exploitation that are incidental to any mining

operation. Every mining activity results in baneful

effects which need to be corrected and destruction

of environment that inevitably occurs in the

process needs to be mitigated. This is the specific

reiteration that has been made by the amendment of

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the provisions of the Act and the Rules framed

thereunder. What had happened in Bellary,

Chitradurga and Tumkur, has already been noticed by

this Court in Paragraph 37 of the judgment dated

18.04.2013 i.e. systematic, extraordinary and

unprecedented plunder of the natural wealth and

environment. This Court has specifically observed

in paragraph 37 that “ the situation being

extraordinary the remedy, indeed, must also be

extraordinary”. It is to deal with such an

extraordinary situation that the necessity of

CEPMIZ and implementation thereof by a Special

Purpose Vehicle out of funds in credit with the

Monitoring Committee was contemplated. The special

funds in deposit with the Monitoring Committee

being the proceeds of illegal mining were meant to

be deployed for recreation of what have been lost

due to such illegal activities. It is for the

aforesaid purpose that CEPMIZ was required to be

drawn up and thereafter implemented. The state of

implementation of the Scheme has not yet commenced.

Funds in huge proportions would be necessary. A

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full and clear picture is yet to emerge. In a

situation lessees who may be even remotely

connected with the degradation and destruction of

nature must continue to pay their share in the

process of restitution by contributing to the

Managing Committee from their present sale

proceeds. Even the new lessees who may not have

been involved with such degradation are

contributing to the process of reclamation and

restoration. In such a situation, we do not see how

we can vary or modify our earlier orders that

require all existing lessees to pay 10% of the sale

proceeds and/or to depart from the requirement of

payment of what has been already ordered, namely,

10% of the sale proceeds to the Monitoring

Committee/SPV.

13.In view of the aforegoing, Interlocutory

Application No. 247 and the connected Interlocutory

applications are dismissed.

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14.The second issue that has to be dealt with is

with regard to grant of approval to the CEPMIZ

which has been prepared by the State Government in

consultation with the CEC in terms of the various

orders passed by this Court from time to time. The

aforesaid Scheme, if approved, is to be implemented

through the Special Purpose Vehicle i.e. Karnataka

Mining Environment Restoration Corporation (“KMERC”

for short) which has since been constituted.

15.We have perused the CEPMIZ which has been

presented before us by the CEC by report dated

29.04.2016. Very broadly speaking, the works

proposed under the Scheme can be divided into two

broad categories, one pertaining to socio-economic

development and the other for integrated mining and

railway infrastructure, industrial infrastructure

and medical infrastructure. The Chart extracted

below would indicate what is comprehended in the

Scheme, the total cost projected and the source of

funds.

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EXPENDITURE INCURRED IN REFERENCE TO THE IMPLEMENTATION OF THE

CEPMIZ SCHEME (OVER A PERIOD OF TEN YEARS)

SER

IAL

CATEGORY OF EXPENDITURE AMOUNT

INCURRED

(in crore

rupees)

LOGISTICS FACT ON RECORD

1I. Public Health 410.94 The entire sum of 7,142

crore rupees is borne by

the Special Purpose

Vehicle. The sum is spread

across ten years and the

SPV submits that this sum

is sufficient to implement

the utility infrastructure

requirements of the

CEPMIZ.

The amount represented

across the individual

category of utility

infrastructure is further

divided by the SPV across

the three districts of

Bellary, Tumkur and

Chitradurga after

appropriately ascertaining

the requirements on

ground.

II. Education 442.27

III. Water Supply and Quality 1,320.91

IV. Transport and Communication 2,252.66

V. Agriculture and allied activities 573.14

VI. Drainage and Sanitation 375

VII. Woman and Child Welfare 403.59

VIII. Forest, Ecology and Environment 809.05

IX. Strengthening the Forest Check-Posts 70.97

X. Skill Development 336.23

XI. Tourism 147.59

SUB-TOTAL 7,142.35

2I. Conveyor Belt System and Railway Sidings2,900 This amount is completely

borne by the lessees

holding mining-ore

licenses.

The SPV submits that it is

advantageous and

economical for the lessees

to move the iron-ore

through the conveyor belt

system. The SPV thus

seeks a contribution of

2,900 crore rupees from

the lessees as their share

on part of mutual

consideration.

II. Railway Sidings 500 This amount is completely

borne by the SPV.

The SPV is contributing a

sum of 1,500 crore rupees

as their share towards the

development of Mining

and Rail Infrastructure

within the CEPMIZ

Scheme.

III. Railway Sub-Lines 1,000

IV. Tumkur-Chitradurga-Davanagere Railway

Line

2,500 The Indian Railways is

investing a sum of 1,000

crore rupees within this

project and the SPV is

contributing a sum of

1,500 crore rupees.

The Indian Railways is

executing this project

independently in order to

strengthen the

Bengaluru-Mumbai

Economic Corridor. The

SPV is contributing a sum

of 1,500 crore rupees

within this project, since

the completion of the same

would greatly benefit the

effective implementation

of the CEPMIZ Scheme.

SUB-TOTAL 6,900

3Industrial Infrastructure 750 This amount is completely

borne by the SPV.

An industrial project,

costing to the tune of 1537

crore rupees, is already

underway across the

Bellary-Tumkur-Chitradur

ga area. This project is

executed by the Karnataka

Industrial Area

Development Board

(‘KIADB’). Since this

project is situated within

the mining-affected area,

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the SPV is contributing a

sum of 750 crore rupees as

their share of the

consideration.

4Medical Infrastructure 950 This amount is completely

borne by the SPV.

The SPV is investing a

collective sum of 700

crore rupees to open two

new medical colleges

within the districts of

Tumkur and Chitradurga.

The SPV also intends to

upgrade the Vijaynagar

Institute of Medical

Sciences at Bellary. A sum

of 250 crore rupees has

been earmarked for the

maintenance of medical

infrastructure.

5 GRAND TOTAL 15,742.35 The Cost of implementing the Comprehensive

Environmental Plan for the Mining Impact Zone.

16.Out of the Rs. 15,742.35 crores which is

envisaged as the total cost of implementation of the

CEPMIZ over a period of 10 years, the funds presently

available and that would be forthcoming in the future

so far as the SPV is concerned, as indicated in the

report of the CEC, is as follow.

SERIAL SOURCE AMOUNT

(in crore

rupees)

1 Funds transferred from the Monitoring

Committee; amounting from 10% to 20% of the

annual sale proceeds of the iron-ore

facilitated through the e-Auction Committee of

the CEC

7,000

2 Funds received from yearly receipt of 5.5% of

total iron-ore sale effected by mining-ore

lessees holding license in Category ‘A’ and

‘B’, after the commencement of mining

operation (payments spanning across a period

of ten years)

1,624

3 Funds received from the State Government of

Karnataka, at a premium rate of 25% of

sale-value, effected after the

renewal/sale/auction of mining-ore licenses

within Category ‘A’, ‘B’ and ‘C’

1,712

TOTAL 10,336

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17.The above would indicate that while a total of

Rs. 11,842 Crores is the cost that is proposed to be

incurred by the SPV, keeping in view the amount

available, as mentioned above, i.e. Rs. 10,336

Crores, there is a shortfall of Rs. 1,560 Crores. The

same is contemplated to be made up by cost savings

and reduction in project cost; interest accruing on

different amounts from time to time and on a possible

expectation of an over-estimate of the costs

calculated under different heads.

18.The CEC in its report and the learned Amicus

Curiae in his written note submitted jointly with the

CEC has suggested that the scheme may be approved in

the following terms:

“(i) the CEPMIZ prepared by the State of

Karnataka may be approved for implementation

through the KMERC. The KMERC may be granted

liberty to approach this Hon’ble Court

seeking addition/ modification of any of the

Schemes/ Projects envisaged in the CEPMIZ;

(ii) Monitoring Committee may be

permitted to transfer Rs. 7,000 Crores upto

31.03.2017 out of the funds lying with it

including the interest received by it;

(iii) “The Implementation and Monitoring

and Supervision Framework for the CEPMIZ”

(Annexure A-3 at Page 101 of CEC Report dated

29.04.2016) may be made binding on the KMERC

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and the State Government;

(iv) the accounts of the KMERC will be

annually audited by the CAG;

(v) a ceiling of 5% of the annual

expenditure on works on the administrative

expenses of KMERC may be prescribed;

(vi) the commitment made by the State

Government that 25% of the annual premium

amount receivable from all the auctioned

leases (new leases/ Dalmia lease/ Category-A/

Category-B leases) may be recorded in the

order;

(vii) it may be clarified that the

‘Guidelines for Preparation of R&R Plans’ as

approved by this Hon’ble Court are equally

applicable to all the new leases granted

through auction/ under Section 10A(2)(a) and

10A(2)(c) of the MMDR Act;

(viii)Hon’ble Court may consider

clarifying that any amount required for

construction of railway sidings and/ or

alternate road in Districts Chitradurga will

be incurred by the KMERC only on the capital

cost recovery basis;

(ix) regular quarterly progress report

regarding the implementation of the CEPMIZ

will be filed before this Hon’ble Court by

the Chairman, KMERC;

(x) the closed pipe downhill conveyer

systems will be installed at their cost by:

(a)each one of the Category-A/Category-B

leases with MPAP of 1 MMT and above and

balance lease period of 8 years and

above (six leases in District Bellary

and one in District Chitradurga

identified);

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(b)each one of the auctioned Category-C

leases and Dalmia Lease (ML No. 2010)

with MPAP of 0.75 MMT and above (ten

leases provisionally identified);

(c)all nine new leases proposed to be

auctioned, Category-A/ Category-B leases

that may be auctioned after expiry of

their lease periods and leases that may

be granted under Section 10A(2)(c) and

10A (2)(a) of the MMDR Act (presently 10

leases identified); and

(d)JSW Steel Ltd., the largest buyer of

iron ore (buyer of about 70% of the iron

ore produced in these Districts) between

Nandllhalli to its plant at Turanagallu

and linked conveyer system with a

capacity for annual transportation of at

least 15 MMT or iron ore.

The respective lessees/ successful

bidders of auctioned lease will be

required to finalise the alignment

within a maximum period of three months.

The area for the Right of Way (ROW) and/

or the approvals under the Forest

(Conservation) Act, will be acquired/

obtained by the State Government at the

cost of the respective lessees/ Steel

Plant. Such acquisition of ROW/

approvals under the Forest

(Conservation) Act will not be treated

as mining or related activities but for

the purpose of the implementation of the

CEPMIZ. The State Government and the

MoEFCC will expedite the necessary

clearances/ approvals.

The lessees/ Steel Plant will be

required to install the conveyer system

within a maximum period of 18 months

after the area under the ROW is made

available failing which the mining

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operations in the concerned lease(s)

will be suspended and permitted to

recommence only after the conveyer

system is installed.

(xi) the identified lessees dealt with

above will also be required to individually/

collectively construct or up-grade railway

sidings so that the bulk of the mineral

produced in such mining leases is transported

through closed pipe conveyer systems/

railways and not by road. Wherever, due to

technical reasons/ practical difficulties the

individual lessees are not in a position to

undertake construction/ up-gradation of

railway sidings, KMERC may undertake such

construction on capital cost recovery basis;

(xii) total production of 30 MMT from

operating Category-A/Category-B leases and

those granted under Section 10A(2)(a) and

10A(2)(c) of the MMDR Act will be permissible

i.e., the present cap will not apply to the

auctioned leases.

Under the directions of this Hon’ble

Court NMDC Ltd. has been permitted to produce

12 MMT annually from its two mining leases.

The MPAP as per the approved R&R Plans for

its ML No. 1111 is 6.07 MMT and for ML No.

2396 is 3.38 MMT i.e. presently permitted

production, under the directions of this

Hon’ble Court, is 2.55 MMT more than the

total of MPAP permissible in the approved R&R

Plans. In addition, the MML has been

permitted under the directions of this

Hon’ble Court to produce 3 MMT or iron ore

beyond the MPAP as per the approved R & R

Plans of its two mining leases. As and when

the sum total of production from the

operating Category-A/ Category-B leases and

Section 10A(2)(a) and 10A(2)(c) leases is

likely to exceed 30MMT the production of

additional 2.55 MMT from two Mines of NMDC

Ltd. and additional 3 MMT from the two Mines

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of MML will be permissible to be reduced on

pro-rata basis and to such an extent that the

total production from all the Mining Leases

does not exceed the cap;

(xiii)additional production of 10MMT will

be permissible from the auctioned Category-C

and auctioned Dalmia mining leases and

subject to the compliance of the

prescriptions of the R & R Plans, lease wise

permissible MPAP and condition regarding

installation of conveyer belt systems and

railway sidings dealt with earlier.

(xiv) this Hon’ble Court may consider any

further enhancement of production only after

the proposed construction of conveyer belt

systems for downhill transportation, conveyer

belt system by JSW Steel Ltd. and the

construction/ up-gradation of railway sidings

are completed and the objective of ensuring

transportation of most of the mineral by

railways/ conveyer system is achieved i.e. a

situation is reached on the ground where even

if any further enhancement of production is

permitted, the present level of

transportation of mineral by road would not

exceed.”

19.The various suggestions made by the CEC and the

learned Amicus Curiae and the conditions subject to

which the approval of the Scheme has been sought can

be better understood by taking into account the

objections to the CEPMIZ as raised by the

FIMI-Southern Zone in its written objections filed

and also the report of the State of Karnataka insofar

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as the Scheme presented to the Court is concerned.

20.Briefly and broadly, the objections of the

FIMI-Southern Region relate to the very broad,

sketchy and vague nature of the Scheme formulated and

presented to the Court, which, according to the said

body, is a superficial exercise prepared after a long

period of slumber. According to the FIMI-Southern

Region, the preparation of the Scheme should have

been started in the right earnest way back in the

year 2012 after the Court in its Order dated

28.9.2012 had expressed that, ”the formation of the

Special Purpose Vehicle and the drawing up of the

Comprehensive Environmental Plan for Mining Impact

Zone is perhaps the most essential part in the

process of reclamation and rehabilitation of the area

devastated by illegal mining”. The FIMI-Southern

Region also contends that some of the measures

included in the CEPMIZ travel beyond the contours of

this Court’s order constituting the SPV and the

purpose behind it. The outlay of funds, it is

contended, goes beyond the scope of the earlier

orders of this Court which clearly contemplate that

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no part of the special fund would stand transferred

to the Consolidated Fund of India but would be used

exclusively for purposes connected with the SPV.

Several socio-economic projects like tourism and

infrastructural measures; laying of railway lines;

setting up of industrial and medical infrastructure

involve deployment of SPV funds for purposes which

are to be executed in the course of normal/ordinary

governmental functions. Expenses in connection with

such activities are required to be met out of the

Consolidated Fund and not from the special fund. The

FIMI-Southern Region has also disputed the extent of

availability of funds that the Monitoring Committee

has indicated in the CEPMIZ prepared by the State

Government in consultation with the CEC. According to

the FIMI-Southern Region, the total funds available

with the Monitoring Committee as on 31.03.2016 is Rs.

8,124 Crores and not Rs. 7,000 Crores, as claimed. As

there is a surplus of about Rs. 1,800 Crores (as on

31.03.2016) over and above what is shown in the

CEPMIZ, the core projects of the scheme envisaged,

namely, construction of conveyor belt system and

railway lines and railway sidings can be met from the

Page 25 25

available funds instead of again burdening the

lessees to the tune of Rs. 2,900 Crores. It further

contends that from final report of the CEC dated

3.02.2012, investment in facility of transportation

of iron ore such as conveyor belt, railway sidings

was to be met from SPV funds. In its objections,

FIMI-Southern Region has further contended that the

Tumkur, Chitradurga, Davanagere railway line is a

normal venture undertaken by the Indian Railways and

it is not understood how the same can be beneficial

to the restoration of environment in the three

districts devastated by large scale illegal mining.

Though, a sum of Rs. 500 Crores to be spent on

railway sidings was initially to be borne by SPV, in

the joint report of the CEC and the learned Amicus

Curiae it is mentioned that DPR for construction of

the railway sidings will be on capital cost recovery

basis. Similarly, the investment of Rs. 750 Crores in

industrial infrastructure, namely, in projects

undertaken by Karnataka Industrial Area Development

Board and such other bodies is beyond the scope of

the ameliorative and mitigative measures for which

incurring of expenditure and investment from the

Page 26 26

special fund was permitted by the Court. Projects

undertaken by the KIADB and other such bodies pertain

to the normal activities of such State bodies.

Besides objecting to further continuance of any levy

on the sale proceeds of iron ore (either by existing

lessees or future lessees) after the establishment of

the District Mineral Foundation, FIMI-Southern Region

also contends that the funds that would be available

with the District Mineral Foundation for the next 10

years have not been taken into account in preparing

the financial estimates mentioned in the CEPMIZ.

21.The State of Karnataka being virtually the author

of the CEPMIZ had submitted to the Court that the

same should have the Government’s approval subject to

certain conditions. Of particular significance are

the suggestions of the State of Karnataka for raising

the cap on production from 30 MMT to 40 MMT and,

thereafter, to 50 MMT with a margin of additional 20%

and the insistence on payment for the conveyor belt

system and railway sidings by the lessees themselves.

There are certain other incidental features/ aspects

covered by the suggestions of the State of Karnataka

Page 27 27

which pertain to the rate of contribution out of the

sale proceeds so far as the NMDC mines are concerned

as well as the mines that would eventually be leased

out under Section 10A(2)(b) and (c) of the MMDR Act.

22.We have considered the matter in depth. Beyond

recording the view that the CEPMIZ, at this stage, is

really in the nature of a vision document with all

concrete measures, steps and proposals left to be

worked out at a later stage i.e. the stage of

preparation of the detailed project reports, we would

not like to comment on the merits of the Scheme save

and except to say that so far as the socio-economic

measures are concerned, very broadly and roughly

speaking, the different heads under which restoration

and reclamation work is proposed to be done, subject

to final details being worked out later, appears to

be sufficiently comprehensive. Insofar as the

integrated mining and railway infrastructure,

industrial and medical infrastructure is concerned,

we are of the view that except for the integrated

mining infrastructure and part of the railway

infrastructure so far as railway sidings and railway

Page 28 28

sub-lines mentioned in the Chart shown hereinabove,

the rest of the infrastructural measures can wait for

the present. Having considered the various dimensions

of the matter, we are of the view that instead of

approving the CEPMIZ as a whole on the basis of the

inputs available at this stage, we should hold back

our views in the matter until more comprehensive

details are available in respect of each of the broad

heads under which ameliorative and mitigative

measures are proposed to be undertaken. However, at

the same time, we must convey our approval to the

integrated mining and part of the railway

infrastructure that is proposed, namely, construction

of the conveyor belt system; railway sidings and

railway sub-lines. It is only once a decision is

taken on raising the aforesaid infrastructure and

noticeable headway in the matter of execution thereof

is reached, that the other ameliorative and

mitigative socio-economic measures can have any

relevance. This is because it is the limited

infrastructure that have been indicated above i.e.

conveyor belt, railway sidings and railway sub-lines

which would constitute the most significant steps

Page 29 29

towards controlling the environmental pollution that

persists on account of open movement of iron ore by

road. It is only after controlled and regulated

movement of iron ore is achieved that the other

socio-economic measures should be undertaken so as to

produce meaningful results. So far as the industrial

infrastructure is concerned, all measures already

being undertaken by the KIADB in the Bellery,

Chitradurga, Tumkur areas may continue. It will not

be necessary to involve the SPV in such activities at

this stage. Transfer of funds from the SPV for such

projects already undertaken by the KIADB and other

bodies can always be considered at a later stage. The

medical infrastructure on which an outlay of Rs. 950

Crores is contemplated need not engage the attention

of this Court for the present. In other words, the

entire CEPMIZ Scheme need not be approved in one go

and such approval may be considered and accorded in

phases. The initial activity identified, namely,

construction of conveyor belt system; railway sidings

and railway sub-lines needs to be prioritized.

23.Insofar as the transfer of funds is concerned,

Page 30 30

even without going into the issue of the exact

quantum of funds available with the Monitoring

Committee for transfer to the SPV, it would be

suffice to say that the funds available with the

Monitoring Committee as on date is more than adequate

to meet the cost projected against the works which

have been identified by the Court to be the priority

works for the repair and restoration of the

environment. Once further details with regard to the

aforesaid three items of work are available

indicating what exactly that is proposed to be done;

the period of time that is likely to be taken if the

work is to be carried out independently of the other

measures included in the CEPMIZ, the issue with

regard to the source of funds, namely, whether the

sum should be exclusively from the funds to be

transferred to the SPV or such cost is to be borne by

the lessees can be decided by the Court.

24.Accordingly, for the present, we close the matter

by reserving our views with regard to phasing out of

the scheme in different parts; the precise point of

time at which the works in each of such phases can

Page 31 31

and should be made operative; the sources of funds to

be deployed for each of such phases and such other

connected issues. All that we deem fit for the

present is to call upon State of Karnataka and the

CEC to submit a detailed proposal with regard to

implementation of the Scheme of construction of

conveyor belt system in respect of existing leases

and the details of the project relating to the

construction of railway sidings and railway

sub-lines. No sooner the said proposal/report is

filed before this Court, further orders will follow.

....................,J.

(RANJAN GOGOI)

....................,J.

(PRAFULLA C. PANT)

....................,J.

(A.M. KHANWILKAR)

NEW DELHI

MARCH 21, 2017