LAW FOR ALL : 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.

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

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[1]

[2013 (8) SCC 154]

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