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Thursday, March 23, 2017

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 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.= 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 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.

                                                                  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  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  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 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  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 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  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 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.”


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  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 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; 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 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 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.


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.
       EXPENDITURE INCURRED IN REFERENCE TO THE IMPLEMENTATION OF THE
                 CEPMIZ SCHEME (OVER A PERIOD OF TEN YEARS)
|SERI|CATEGORY OF EXPENDITURE        |AMOUNT     |  LOGISTICS       |FACT ON RECORD                                |
|AL  |                               |INCURRED   |                  |                                              |
|    |                               |(in crore  |                  |                                              |
|    |                               |rupees)    |                  |                                              |
|1   |I. Public Health               |410.94     |The entire sum of |The amount represented across the individual  |
|    |                               |           |7,142 crore rupees|category of utility infrastructure is further |
|    |                               |           |is borne by the   |divided by the SPV across the three districts |
|    |                               |           |Special Purpose   |of Bellary, Tumkur and Chitradurga after      |
|    |                               |           |Vehicle. The sum  |appropriately ascertaining the requirements on|
|    |                               |           |is spread across  |ground.                                       |
|    |                               |           |ten years and the |                                              |
|    |                               |           |SPV submits that  |                                              |
|    |                               |           |this sum is       |                                              |
|    |                               |           |sufficient to     |                                              |
|    |                               |           |implement the     |                                              |
|    |                               |           |utility           |                                              |
|    |                               |           |infrastructure    |                                              |
|    |                               |           |requirements of   |                                              |
|    |                               |           |the CEPMIZ.       |                                              |
|    |II. Education                  |442.27     |                  |                                              |
|    |III. Water Supply and Quality  |1,320.91   |                  |                                              |
|    |IV. Transport and Communication|2,252.66   |                  |                                              |
|    |V. Agriculture and allied      |573.14     |                  |                                              |
|    |activities                     |           |                  |                                              |
|    |VI. Drainage and Sanitation    |375        |                  |                                              |
|    |VII. Woman and Child Welfare   |403.59     |                  |                                              |
|    |VIII. Forest, Ecology and      |809.05     |                  |                                              |
|    |Environment                    |           |                  |                                              |
|    |IX. Strengthening the Forest   |70.97      |                  |                                              |
|    |Check-Posts                    |           |                  |                                              |
|    |X. Skill Development           |336.23     |                  |                                              |
|    |XI. Tourism                    |147.59     |                  |                                              |
|    |SUB-TOTAL                      |7,142.35   |                  |                                              |
|2   |I. Conveyor Belt System and    |2,900      |This amount is    |The SPV submits that it is advantageous and   |
|    |Railway Sidings                |           |completely borne  |economical for the lessees to move the        |
|    |                               |           |by the lessees    |iron-ore through the conveyor belt system. The|
|    |                               |           |holding mining-ore|SPV thus seeks a contribution of 2,900 crore  |
|    |                               |           |licenses.         |rupees from the lessees as their share on part|
|    |                               |           |                  |of mutual consideration.                      |
|    |II. Railway Sidings            |500        |This amount is    |The SPV is contributing a sum of 1,500 crore  |
|    |                               |           |completely borne  |rupees as their share towards the development |
|    |                               |           |by the SPV.       |of Mining and Rail Infrastructure within the  |
|    |                               |           |                  |CEPMIZ Scheme.                                |
|    |III. Railway Sub-Lines         |1,000      |                  |                                              |
|    |IV.                            |2,500      |The Indian        |The Indian Railways is executing this project |
|    |Tumkur-Chitradurga-Davanagere  |           |Railways is       |independently in order to strengthen the      |
|    |Railway Line                   |           |investing a sum of|Bengaluru-Mumbai Economic Corridor. The SPV is|
|    |                               |           |1,000 crore rupees|contributing a sum of 1,500 crore rupees      |
|    |                               |           |within this       |within this project, since the completion of  |
|    |                               |           |project and the   |the same would greatly benefit the effective  |
|    |                               |           |SPV is            |implementation of the CEPMIZ Scheme.          |
|    |                               |           |contributing a sum|                                              |
|    |                               |           |of 1,500 crore    |                                              |
|    |                               |           |rupees.           |                                              |
|    |SUB-TOTAL                      |6,900      |                  |                                              |
|3   |Industrial Infrastructure      |750        |This amount is    |An industrial project, costing to the tune of |
|    |                               |           |completely borne  |1537 crore rupees, is already underway across |
|    |                               |           |by the SPV.       |the Bellary-Tumkur-Chitradurga area. This     |
|    |                               |           |                  |project is executed by the Karnataka          |
|    |                               |           |                  |Industrial Area Development Board (‘KIADB’).  |
|    |                               |           |                  |Since this project is situated within the     |
|    |                               |           |                  |mining-affected area, the SPV is contributing |
|    |                               |           |                  |a sum of 750 crore rupees as their share of   |
|    |                               |           |                  |the consideration.                            |
|4   |Medical Infrastructure         |950        |This amount is    |The SPV is investing a collective sum of 700  |
|    |                               |           |completely borne  |crore rupees to open two new medical colleges |
|    |                               |           |by the SPV.       |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;     |7,000          |
|       |amounting from 10% to 20% of the annual sale proceeds|               |
|       |of the iron-ore facilitated through the e-Auction    |               |
|       |Committee of the CEC                                 |               |
|2      |Funds received from yearly receipt of 5.5% of total  |1,624          |
|       |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)                        |               |
|3      |Funds received from the State Government of          |1,712          |
|       |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’            |               |
|TOTAL                                                         |10,336         |

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 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:

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);

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);

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

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  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  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  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 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 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  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 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 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  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,  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  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

-----------------------
[1]

       [2013 (8) SCC 154]


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