|VOLUME 2|ISSUE 1|JULY 2018|ISSN: 2581-3595|
THE MINES AND MINERALS LAWS IN INDIA: AN ANALYSIS OF THE EVOLUTION OF MINING LAWS TO THE PRESENT AUCTION REGIME.
AUTHORED BY: ASHIMA PANDEY & CO-AUTHORED BY ANVESH SHRIVASTAVA, PRACTISING ADVOCATES AT HON'BLE HIGH COURT OF JUDICATURE AT MADHYAPRADESH.
Mining has been part of the human development from time immemorial. During all the phases of history, be it pre-Mughal era, British rule or post-independence years, it has gone through regular and significant changes till the time it is in its present form. The potential of mining sector depends hugely on its legislative framework and hence, various legislative changes with certain landmark judicial interventions are discussed in this paper. Though there have been number of changes in laws but nevertheless there are various legislative gaps since our country has a confused federalism, where, the state does not want to give up its ownership on minerals and the Centre often overpowers state’s role omitting the concept of cooperative federalism hence, the paper seeks to analyse the changes and modifications in the division of power between the state and the centre with the lens of mining legislations.
The paper also discusses the 2015 amendment to the Mines and Minerals (development and regulation) Act, 1957, since the mining sector has taken a huge stride of change through it. The centre has attempted to distribute the power equitably by taking care of development of communities in mineral rich areas, since ironically, the most mineral rich states in India, like Orissa, Jharkhand, Andhra Pradesh, etc, have the poorest population, by delimiting the state’s role as mere care takers of minerals. Primarily, the purpose of the paper is to discuss the various modifications and development the mining legislation has gone through vis-à-vis the balance of power between centre and state.
‘Here, are the stiffening hills, Here the rich cargo congealed in the dark arteries Old veins. That hold Glamorgan’s blood. The midnight miner in the secret seams, Limb, life and bread.’ –From Rhondda Valley- By Mervyn Peak
The lines quoted below originally written for Glamorgan, a small town in Wales, stand true for mineral rich India very well. The practice of mining has held India’s blood from time immemorial. As per the latest data provided by Indian Bureau of Mines, there are 2488 mines active in India, which provides a share of 880.10 INR billion to the GDP, that amounts to up to 2.5% contribution to country’s GDP.
A ‘mine’ is defined under the Mines Act Section 2(j) as any excavation where any operation for the purpose of searching for or obtaining minerals has been or is being carried out from the earth by employing the methods of tunnelling and shafting as well as it includes open working or quarries.Mining can be defined as a process of extraction of valuable minerals or other geological materials from the earth.It involves exploration for ore bodies, analysis of the profit-potential of a proposed mine, extraction of the desired material and finally recoupment of the land to prepare it for other uses once mine is closed.Minerals, on the other hand, are non-renewable natural resources and are highly useful raw material in several basic and important industries. India has rich mineral deposit.Thus, mining industry is a very important industry in India. However, this sector has always been subject to number of legislative and judicial changes, which will be discussed in this article.
LEGISLATIVE EVOLUTION OF MINING IN INDIA
The first recorded mining activity in India dates to 1774 when Sir Warren Hastings, the then Governor General of Bengal, granted permission for mining coal. The first concrete proposal for inspection and regulation of mining operations in India came in 1890, when Mr. James Grundy, the first inspector of mines, in his first report to the Geographical Survey of India stressed the need for passing the mines regulation Act. Occurrence of a couple of disasters, one in 1897 in Kolar Gold fields in which 52 persons were killed and another in 1899 in Khost Coal Mine where a mine fire caused death of 47 people, triggered the expeditious finalisation of mining legislation and enactment of Mines Act, 1901.
Government of India Act, 1935:
The Indian Constitution specifically provides for the division of powers between the Centre and the State through various entries in the Schedule VII, the details of which shall be discussed later elaborately. A brief origin of such distribution can be related back to the Government of India Act, 1935 which provided for the legislative occupied field in the domain of regulation and control of mines and mining activities and further development of minerals. Since the lingual division of States as it existed today was not there in 1935, the powers were divided among the Centre and the Provincial Legislatures.
It was only after Independence that the Government established its Industrial Policy Resolution in furtherance of the Industrial (Department and Regulation) of 1951. The said policy proposed to include minerals amid the activities whose locality had to be administered by economic factors of all India significance or which required considerable financing or a high degree of methodological skill and accordingly had to be under the regulation and control of the Central Legislature. Correspondingly, in furtherance of the power entrusted through the Entry 36 of the Federal legislative list, the Dominion of India (as it existed today) promulgated the Mines and Minerals (Regulation and Development) Act, 1948 which was made enforceable from October 25, 1949.
That this was about time when the reorganization of States started to be in order, and hence after the Constitution of India was brought into force the word ‘provincial’ was swapped by the word “State”.
The parliament decided that the regulation and development of Mines and Minerals should feature by themselves in a separate Act in 1957. Accordingly, Parliament passed on December 28, 1957, the Mines and Minerals (Regulation and Development) Act 1957. Section 32 of the 1957 Act amended the 1948 Act in the manner set out in Schedule III to the 1957 Act so as to remove from the 1948 Act all references to mines and minerals and to confine it to oilfields and mineral oil resources. The title of 1948 Act was amended suitably.
The MMDR Act, 1957 together with the Mineral Concession Rules (MCR), Mineral Conservation & Development Rules (MCDR), 1988, Mines Rules, 1955 and Mines Act, 1952 comprises the legal framework for this sector. The Mineral Concessions Rules lays down the process of grant of mineral concessions as per the provisions of Section 13 of the MMDR Act, 1957. Mineral Conservation & Development Rules (MCDR) lays down guidelines for the conservation and development of minerals as per the provisions of Section 18 of the MMDR Act, 1957. The Mines Act, 1952 prescribes the laws relating to the regulation of labor safety in mines, regulations for carrying out mining operations and management of mines. The Mines Rules, 1955 defines the framework for medical examination of persons employed or to be employed in mines, basic health and sanitation provisions.
MANOHAR LAL SHARMA V. THE PRINCIPAL SECRETARY & ORS.
In this landmark judgment, Manohar Lal Sharma and Common Cause, an NGO, challenged licenses that the Central Government appointed Screening Committee had granted to private companies and certain public-sector undertakings. The Screening Committee over a period had allocated 216 coal blocks to companies for carrying out coal mining in seven states. The grants were challenged, principally on the following grounds:
- Central Government did not follow mandatory procedure under the Mines & Minerals Act;
- Section 3(3)(a)(iii) of the Coal Mines Act, which provides for parties entitled to carry on mining operations, was violated by Central Government by making allocations in favour of ineligible companies
- Screening Committee granted licenses to ineligible applicant companies over a course of 36 meetings based on subjective and arbitrary criteria.
The Supreme Court first examined the scheme of the regulatory and legislative framework in respect of coal mining operations. Entry 23 of List II in Schedule 7 of the Constitution of India, 1950, empowers States in the Union to enact laws in respect of mines and mineral development. However, Entry 23 is subject to Entry 54 of List 1 in terms of which Central Government is empowered to legislate in respect of mines and minerals. Generally, legislative powers of States defer to those of Central Government in the event of a conflict.
Section 4 of Mines & Minerals Act provides that all mining operations shall be under a licence. Under the Mineral Concession Rules of 1960, framed in exercise of powers under Section 13 of the Mines & Minerals Act, an applicant would first make an application to the relevant State Government. Thereafter, the applicant is required to submit the plan to the Central Government and once approved by Central Government, the applicant was entitled to licence from the State Government. The Mines & Minerals Act and the Rules provide for the grant of licence for operating in respect of mines and minerals stated under the Mines & Minerals Act.
In 1973, the Central Government nationalized mining activities through the Coal Mines Act to reorganize and reconstruct coal mines and ensure coordinated and scientific development and utilization of coal. The objective was to distribute coal resources as best to sub serve the common good. Section 5(1) of the Coal Mines Act empowers Central Government, through an order in writing, to vest the right, title and interest of an owner in relation to a coal mine a Government company. Section 1A, inserted by way of an amendment, empowered the Central Government to ‘take under its control the regulation and development of coal mines’. Section 1A (3) of the Coal Mines Act restricted the right to carry on coal mining operations exclusively in favour of:
- The Central Government or a Government company, or a corporation owned, managed or controlled by the Central Government,
- A person to whom a sub-lease had been granted by such Government, company or corporation, or,
- A company engaged in the production of iron and steel.
In 1991, Section 3 (3) of Coal Mines Act was amended to allow private sector participation in coal mining operations for captive consumption towards generation of power and another end use.
The Supreme Court held that the power of allocating coal blocks could not be traced to the Mines & Minerals Act or the Coal Mines Act. It rejected the contention that executive power would extend to all matters in respect of which Central Government had legislative competence. The Supreme Court noted, based on submissions of various States of the Union, that their role was completely denuded and consequently, their powers under the two laws was completely whittled down. It was held that the amended provisions of both laws did not restrict the role of State Government but the system of the Screening Committee, effectively denuded the powers of the State Government.
As per the new policy the process of auction has been designated as part of the standard operating procedure for allotment of contracts. In the current case however, the observations of the court with respect to ‘auction’ is noteworthy- it was stated that auctioning is not necessarily the best procedure as it would increase the cost of input thereby triggering a cascading effect. Furthermore, the process of auction would also favour bigger corporations which would in turn hinder the growth of smaller players in the market. At the crux of this case lies the latent friction between the Centre and the States, in that the States have always wanted to retain greater control over their resources.
ALLOCATION OF JURISDICTION
Minerals are of two categories: (i) Major minerals and (ii) Minor minerals. Minor mineral have been defined under section 3 (e) of Mines and Minerals (Regulation and development) Act, 1957. It includes building stones, gravel, ordinary clay, ordinary sand, limestone used for lime burning,etc. There is no definition provided for major minerals under any act and therefore, all other minerals major minerals. They include coal, manganese ore, iron ore, bauxite, limestoneand many other minerals used for industrial purposes.
The Constitution of India itselfempowers the Union & State Governments respectively for management of minerals. Central government lays down rules and regulations regarding grant of concession for major minerals are therefore same throughout the country. Whereas, rules for grant of concessions of minor minerals are formulated by the State Government as per powers delegated under section 15 of Mines and Minerals (Regulation and Development) Act, 1957.
The Central Government retains the power of revision, fixation of royalty etc. in respect of major minerals. The Ministry of Coal exercises all powers of the Central Government with respect to Coal and Lignite under the Act. The Department of Atomic Energy similarly exercises all powers for Atomic Minerals. In case of offshore areas, the ownership of minerals vests exclusively with the Central Government. TheOffshore Areas Minerals (Development and Regulation) Act, 2002 has been enacted for the purpose. Through the powers derived by the Act the Central Government to grant mineral concessions for offshore areas and collect royalty. The Ministry of Mines administers the OAMDR Act, 2002 and the rules made there under, for all minerals, other than Petroleum and Natural Gas within the territorial waters and the continental shelf. The Indian Bureau of Mines is the administrative authority for concession management of offshore areas
The law with regard to the parliamentary competency of the State to pass any law with regard to the regulation and development of mines and minerals has been settled by the Hon’ble Apex Court in the case of Hingir- Rampur Coal Co. Ltd v State of Orissa, wherein the challenge was on the validity of the Orissa Mining Areas Development Fund Act on the ground that there was no legislative competence of the Orissa State Legislature as the same was not provided for in the Mines and Minerals (Regulation and Development) Act, 1948 (53 of 1948) which is a central legislation.
To understand the respective occupied field in mining, the two entries in the Seventh Schedule,namely Entry 54 of list I and Entry 23 of List II are required to be looked upon,
“54 (List I) Regulation of mines and minerals development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest. 
23 (List II) Regulation of mines and minerals development subject to the provisions of List I with respect to regulation and development under the control of the Union.” 
The Hon’ble Supreme Court while dealing with rival contentions in the Rampur Coal Co. Ltd held that the authority of the State Legislature under Entry 23 is subject to the limitation cast upon by the concluding part of the said entry. In case the Parliament by its law has pronounced that the regulation and development of mines should in public interest, be under the power of the Union, to the extent and scope of such pronouncement, the power of the State Legislature is barred.
The issue of legislative jurisdiction over the mines and minerals was again considered by the Hon’ble Supreme Court in the case of State of Orissa v. M/s Tulloch, wherein it was observed that as per the provisions of Entry 23 of the State list in the Seventh Schedule, the power to legislate upon the subject of mines and minerals including their regulation and development lies with the State, however such power is restricted by the List I which provides for the control of the Union over the regulation and development of mines and minerals. The Hon’ble Apex Court further observed that there lies no controversy to the fact that the Central Act of 1957 has been passed by the Parliament exercising the power conferred upon it under Entry 54. The Hon’ble Court further quoted Section 2 of the 1957 act which reads as under:
“2. Declaration as to expediency of Union Control―It is hereby declared that it is 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 hereinafter provided.”
The above quoted Section 2 clearly stated that all the mines and minerals, in the garb of their development and regulation, shall be under the control of the Central Legislation and hence there was so much that was extracted from the domain of the State which was provided for under the Indian Constitution, and it was clearly made visible through this enactment that any legislation made by the State under the powers conferred upon it under Article 23 of the Constitution would be surpassed or be rendered ineffective to effect of the control conferred upon by the Parliament upon itself.
The major concern of the State Legislatures about control over regulation and control over mines and minerals finds its genesis in the provisions as contained in Entry 54, which provides that it is open to Parliament to proclaim that it is pragmatic in the public importance that the jurisdiction of regulation and governance of the mines and minerals should vest in Central Government. To what extent such a declaration can go is for Parliament to determine and this must be commensurate with public interest. Once this declaration is made and the extent laid down the subject of Legislation to the extent laid down becomes an exclusive subject for legislation by Parliament. Any Legislation by the State after such declaration and trenching upon the field disclosed in the declaration must necessarily be unconstitutional because that field is abstracted from the legislative competence of the State Legislature. The only dispute, therefore, can be to what extent the declaration by Parliament leaves any scope for legislation by the State Legislature. If the impugned Legislation falls within the ambit of such scope it will be valid; if outside it, then it must be declared invalid. 
The declaration is contained Section 2 of Act 67 of I957 and speaks of the taking under the control of the Central Government the regulation of mines and development of minerals to the extent provided in the Act itself.
In State of West Bengal v. Union of India one of the questions that came up for consideration was whether Parliament was not competent to make a law authorizing the Union Government to acquire land and rights in or over land which are vested in a State and that the Coal Bearing Areas (Acquisition and Development) Act, 1957 enacted by Parliament and particularly Sections 4 and 7 thereof ultra vires the legislative competence of Parliament.
The observation of the Supreme Court in this case is when once a legislation is made by the Union Parliament about the regulation of mines and minerals development it has the power to acquire land wherein such mines and minerals exist, and the State Government has no power to acquire the same. It follows that no legislation for the acquisition of the mines and minerals can be enacted by the State Legislature. It is, therefore, evident that in the case of regulation of mines and minerals development had been taken over by the Union Government by enacting the Mines and Minerals (Regulation and Development) Act, 1957 and the regulation includes, acquisition of land in which mines exist.
Another issue arose about the levying taxing power on the mining activities carried on by a person holding mineral concessions. The Hon’ble Court while deciding the issue of such taxing power in case of a mineral that finds mention in the First Schedule to the Act in respect of which no mining lease can be granted without the previous approval of the Central Government, held that normally the Government, like any other owner of property, is entitled to choose with whom it shall deal and what sort of a contract it will enter into, but being a public authority its acts are necessarily regulated by certain rules. The Act and the rules are intended to regulate the development of mines and minerals under the control /of the Union. No person can claim as of right any lease or prospecting license in any land belonging to Government except under and in accordance with the provisions of the Act and the Rules or any right except those created or conferred by the Act.
Reservation of certain areas for the State Government:
Article 73 of the Constitution of India indicates the extent of the executive power of the Union while Article 162 of the Constitution deals with the executive power of the State. Article 298 of the Constitution further extends the scope of the executive power of the Union and of each State Article 297 also lays down that all lands, minerals and other things of value underlying the ocean within the territorial waters or the continental shelf of India shall vest in the Union and be held for purpose of the Union.
This aspect of the matter came up for consideration before the High Court of Andhra Pradesh in Kotaiah Naidu’s case. While discussing the scope of Section 5 of the Mines and Minerals (Regulation and Development) Act, 1948 and Rules 13 and 17 of the Mineral Concession Rules 1949, the Court held as that once the State Government has issued a notification to reserve certain areas to regulate and develop mining areas with the approval of the central legislature, and the same in pursuance of the Industrial Policy of the Government of India, there cannot be any constitutional inhibition in regard to the action taken by the State Government.
It would be relevant at this point to note that the executive power of the State to carry on trade and business draws its origin in the provisions contained in Article 298 of the Constitution of India. The Gujarat High Court has also taken a similar view holding that reservation of certain areas by the State Government of exploitation by the public sector is within the competence of the executive power of the State Government in terms of Article 298 of the Constitution as amended by the seventh amendment and that therefore Section 4 (1) of the Mines and Minerals (Regulation and Development) Act, 1957 is inapplicable to the State Government.
However, it is a disputable point whether reservation of the areas for exploitation by the State Government can be made in pursuance of the Industrial Policy Resolution after coming into force, the Mines and Minerals (Reg. and Development) Act, 1957. Even in respect of the lands in which the minerals vest in the Government of a State, which was not already held under any prospecting license or mining lease, if the Central Government propose to undertake the prospecting or mining operations, it must follow the procedure under Section 17 of the said Act.  There is, however, no similar provision in the Act or the Mineral Concession Rules, 1960 empowering Government to reserve an area for exploitation by themselves. In the absence of such a power having been conferred on the State Government by the provisions of the Act, it is difficult to sustain the plea that the State Government can make reservation of certain areas for exploitation by themselves as the executive power of the State was subject to legislation by Parliament.
THE 2015 AMENDMENT: THE AUCTION-ALLOTMENT
Realizing the shortcomings in the existing Mines and Minerals (Development and Regulation) Act, 1957 as to allocation of natural resources and the decisions in Centre of Public Interest Litigation v. Union of India  and Natural Resources Allocation, In re Special Reference No.1 of 2012; the Central Government promulgated Mines and Minerals (Development and Regulation) Amendment Ordinance, 2015 on 12.1.2015. In March 2015 (27.3.2015), Parliament enacted the Mines and Minerals (Development, and Regulation) Amendment Act, 2015 (referred to as Amendment Act, 2015).
The Amendment Act, 2015, as is evident from the objects, aims at: (i) eliminating discretion (ii) improving transparency in the allocation of mineral resources (iii) simplifying procedures (iv) eliminating delay on administration, so as to enable expeditious and optimum development of the mineral resources of the country (v) obtaining for the government an enhanced share of the value of the mineral resources and (vi) attracting private investment and the latest technology.
These amendments brought in vogue (i) the auction to be the sole method of allotment (ii) extension of tenure of existing lease from the date of their last renewal to 31.3.2030 (in the case of captive mines) and till 31.3.2020 (for the merchant miners) or till the completion of renewal already granted, if any, or a period of fifty years from the date of grant of such lease (iii) establishment of District Mineral Foundation for safeguarding interest of persons affected by mining related activities (iv) setting up of a National Mineral Exploration Trust , in order to have a dedicated fund for encouraging exploration and investment (v) removal of the provisions requiring “previous approval” from the Central Government for grant of mineral concessions in case of important minerals to make the process simpler and quicker (vi) introduction of stringent penal provisions to check illegal mining prescribing higher penalties (vii) empowering the State Government to set up Special Courts for trial of offences under MMDR Act.
The 2015 Amendment to the Mines and Minerals (Development and Regulation) Act, 1957 has been a great leap in the mining legislation. A major attempt has been made to bring about an equilibrium between the state and the central government. The state government whose role was felt to be denuded, is now given auctioning rights and power to set up special courts by this legislation, providing them with a sense of ownership towards their minerals and its management. However, all is still not roses. The existing concession holders are suffering heavy losses due to the introduction of auctioning as a method of allocation. Moreover, the act would result in increased competition between companies in the mining sector and would also allow companies engaged in downstream activities such as steel production and alumina production to bid for captive ore sources to attain raw material security.
The mineral rich states such as Odisha, Jharkhand and Chhattisgarh are clearly benefitting from the increased revenue and livelihood opportunities, even though the private sector is affected by the allocation. Lastly, it should be marked that the Centre’s role in the system ends with formulation of rules and auctions need to be conducted by the states in a planned and time-bound manner, which would ensure greater flow of funds into the state coffers.
Journey of Indian bureau of Mines, (The Official Website for Indian bureau of Mines) ¶ 10, http://ibm.nic.in/writereaddata/files/07142014165751ibmreport%20Chapter-I.pdf.
 The Mines Act, 1952 (Act No. 35 of 1952 ), § 2(j).
Dr. Nitish Priyadarshi, Effects of Mining on Environment in the state of Jharkhand, India, (May 2, 2012), available at http://nitishpriyadarshi.blogspot.in/2012/05/effects-of-mining-on-environment-in.html.
Id, at ¶ 7.
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Id, at ¶ 10-11.
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 The Industries (Development and Regulation) Act, No. 65 of 1951.
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 D. K. Trivedi & Sons v. State of Gujarat, A.I.R. 1986 S.C. 1323 (India).
Manohar Lal Sharma v. The Principal Secretary &Ors. (2014) 9 S.C.C. 614 (India) .
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Id, ¶ 32.
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Supra, note 29, ¶ 13.
 Manohar Lal Sharma vs The Principle Secretary & Others, Supra, note 23 (India).
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Id, at ¶ 5.
Id, at ¶ 6.5.
Hingir-Rampur Coal Co. Ltd v State of Orissa. A.I.R. 1961 S.C. 459 (India).
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 The Mines and Minerals (Development and Regulation) Act, No. 67 of 1957, § 2.
Supra, note 45.
 State of West Bengal v. Kesoram Industries, (2004) 10 S.C.C. 201 (India).
Hingir-Rampur Coal Co. Ltd v State of Orissa,Supra,note 42 ¶ 15-21 (India).
 Krishna Chandra Ganopadhyay v Union of India &Ors, (1975) 2 S.C.C. 302 (India).
 State of West Bengal v. Union of India, A.I.R. 1963 S.C. 1241 (India).
Supra, note 42 ¶ 20.
 A. Kotaiah Naidu v. State of Andhra Pradesh, A.I.R. 1969 A.P. 185 (India).
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 M/S S Lal & Co, Ltd v. Union of India, A.I.R. 1975 Pat. 44 (India).
 Centre for Public Interest Litigation v. Union of India, (2012) 3 S.C.C. l (India).
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