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

Civil Appeal Nos. 10373-10374 of 2010 Page 1 of 41

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)

Civil Appeal Nos. 10373-10374 of 2010 Page 2 of 41

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

Civil Appeal Nos. 10373-10374 of 2010 Page 3 of 41

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 others

1

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 Nadu

2

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

1AIR 2004 AP 234

2Writ Petition Nos. 23317 and 24211 of 2008

Civil Appeal Nos. 10373-10374 of 2010 Page 4 of 41

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

Civil Appeal Nos. 10373-10374 of 2010 Page 5 of 41

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 –

xx xx xx

(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;

xx xx xx

(o) any other matter which is to be, or may be prescribed.

xx xx xx”

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:

Civil Appeal Nos. 10373-10374 of 2010 Page 6 of 41

"

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:

xx xx xx

(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

Civil Appeal Nos. 10373-10374 of 2010 Page 7 of 41

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

Civil Appeal Nos. 10373-10374 of 2010 Page 8 of 41

(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

Civil Appeal Nos. 10373-10374 of 2010 Page 9 of 41

(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

Civil Appeal Nos. 10373-10374 of 2010 Page 10 of 41

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

Civil Appeal Nos. 10373-10374 of 2010 Page 11 of 41

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’

Civil Appeal Nos. 10373-10374 of 2010 Page 12 of 41

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

Civil Appeal Nos. 10373-10374 of 2010 Page 13 of 41

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.

xx xx xx

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 Others

3

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 Others

4

.

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 Others

5

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

51986 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 Others

6

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 Another

7

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 Others

8

. 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 Chetty

9

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 Another

10

, 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 Others

11

:

"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 Nath

12

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

Civil Appeal Nos. 10373-10374 of 2010 Page 32 of 41

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

Civil Appeal Nos. 10373-10374 of 2010 Page 34 of 41

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.

Civil Appeal Nos. 10373-10374 of 2010 Page 37 of 41

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

Civil Appeal Nos. 10373-10374 of 2010 Page 38 of 41

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

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