Karnataka Mining : Supreme Court Allows NMDC To Reclaim Half Of Contribution Made To KMERC From 2019
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In the PIL regarding iron ore mining in certain districts of Karnataka, the Supreme Court has passed an interim order allowing central government undertaking National Mineral Development Corporation (NMDC) to reclaim half of the contribution made to Karnataka Mining Environment Restoration Corporation (KMERC) from 2019.KMERC is a Special Purpose Vehicle set up by the Karnataka Government as...
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In the PIL regarding iron ore mining in certain districts of Karnataka, the Supreme Court has passed an interim order allowing central government undertaking National Mineral Development Corporation (NMDC) to reclaim half of the contribution made to Karnataka Mining Environment Restoration Corporation (KMERC) from 2019.
KMERC is a Special Purpose Vehicle set up by the Karnataka Government as per the orders of the Supreme Court for taking steps for mitigating the environmental damage due to mining. NMDC, which is carrying out iron ore mining in Karnataka, has been paying 20% of the sale value of the ores as contribution to KMERC as per Court orders. The Court allowed its plea to reduce the contribution as 10%.
Also, the Court passed an interim order that the Special Purpose Vehicle shall remit back to NMDC Ltd, the collection to the extent of 10% of the sale value which was made from NMDC from 2019.
The court also added that NMDC (the contribution towards the SPV up till now of which was 20% of the sale value of the two mines owned by it), shall now continue to pay at the rate of only 10%, at par with other Category 'A' mining leases. The Central Empowered Committee (CEC) had submitted a report on 03.02.2012, making several recommendations- one of which was to categorise the mines into three categories based on the extent of encroachment in respect of the mining pits and overburden dumps, determined in terms of percentage qua the total lease area. Three categories of the mines were suggested as ‘A’, ‘B’ and ‘C
The bench of Justices K. M. Joseph, Sanjiv Khanna and M. M. Sundresh was hearing the matter.
The bench ordered as follows- "After we have heard the learned counsel for the parties, we are of the view that the applicant (NMDC) has made out a case for the grant of partial relief. At this stage, we bear in mind that Mr. Bhushan (for the petitioner) submitted that the applicant became compliant in April, 2018. No doubt the applicant is claiming remit of 10% from 2013, we feel that the interest of justice would be subserved at this stage pending a final adjudication in the matter, if we direct the Karnataka Mining Environment Restoration Corporation (KMERC; the SPV) to remit amount at the rate of 10% out of the 20% which has been collected from the applicant from 2019 till 31.1.2023 and the amount shall be remitted within a period of two months from today, subject to further orders passed by this court pending adjudication on all issues. The applicant will continue to remit contribution at the rate of 10%"
Orally remarking that it is "agonised" that the progress towards rehabilitation remains at the stage of the DPR (Detailed Project Report), the Court also ordered that an affidavit will be filed on behalf of the state of Karnataka on the steps taken and the reason why the Comprehensive Environment Plan for the Mining Impact Zone (CEPMIZ) has not progressed, detailing within what Timelines the progress will be achieved with regard to it.
The Karnataka government had constituted the Special Purpose Vehicle known as Karnataka Mining Environment Restoration Corporation on June 13, 2014, following a direction by the apex court in a PIL filed by NGO Samaj Parivartan Samudaya. The Court later passed directions that mining companies should make contributions to the SPV. Last week, amicus curiae Senior Advocate Shyam Divan had suggested that the 10% contribution to SPV can be done away with.
Below is the exchange from yesterday's hearing :
Senior Advocate Mukul Rohatgi, for NMDC: "The order of the Supreme Court was clear that when it became 10, it would apply to all of category A. The CEC has recommended on 26.9.2022 again that please release 10% to NMDC. This 10% which I should get, which I have paid over the last 10 years or more, amounts to about 2400 crore. What is the reason to stop a government corporation from getting it? The state is opposing, the monitoring committee is opposing? The CEC has recommended twice, that it is the order of this court that all category A will get 10%. There is no reason why I should not be getting my money just because somebody is opposing. As a matter of practice, the CEC has been treated by the Supreme Court to be an extension of an arm of the Supreme Court in every case. In every case, the CEC has to give a report before the Supreme Court, whether it is putting wireless lines or whatever. It was a body created under the orders of the Supreme Court. There are hundreds and thousands of orders of this court where the Supreme Court has always relied upon the CEC report, except for a minor variation here or there. Not only CEC, I am category A, that is confirmed by the final judgment of this Court. If everybody in category A is getting 10, I should also. Whatever be the position, I am a government corporation, I am presently before the Supreme Court, I should get my money as soon as possible. We are suffering, we also need money, there is no reason why a central government PSU should be deprived!"
Advocate Prashant Bhushan, for the petitioner: "On 29.7.2011, the order of this court had suspended all mining operations in Bellary district, there was complete ban on all mining and transportation. However, by an order dated 5.8.2011, only and only NMDC was permitted to carry out mining to the tune of 1 million tonnes per month which is 12 million tonnes annually, as opposed to their mining of 4.59 million tonnes in the previous year. They were permitted to mine more because there was a ban on everything else, the industry said we would not be able to run our steel industry without iron ore etc so the state said NMDC being state agency will be permitted to mine to this extent....Then comes the order of 23.9.2011 by which the court said that the NMDC may be permitted to continue mining operations and the monitoring committee shall disperse 80% of sale proceedings to them, retaining 20%. All other mines had remained closed from 29.7.2011. Only after they have successfully completed, satisfactorily implemented their R and R plans and secured all other approvals required by law, only then were others permitted. By this time, NMDC had not satisfactorily implemented R and R plans. That happened only in 2018. In both these mines of NMDC, there were large scale encroachments and illegal mining being done by other lessees. There was 28 hectares of encroachment by other companies who were doing mining in NMDC area. Court had ordered CBI investigation into that. Then came the 13.4.2012 order by which the court said that NMDC will be permitted to continue mining but they will be treated as category B mine for the purpose of compensation, that is because they did not have satisfactory completion by that time or implementation of their R and R plans. What I am respectfully submitting is that here is a mining Corporation which has derived, Mr Rohatgi said that this 10% would amount to 2400 crore, which means that they have received about 10 times of that.They have received more than 20,000 crores worth of proceeds from this mining activity at a time when mining activity had been banned for some part of this time, at a time when mining activity has not been allowed to be resumed without satisfactorily implementation of R and R plans etc. And now they are saying that because subsequently we have been classified as category A....The court had said mining can only be resumed after you have satisfactorily implemented R and R plan. In their case, their final implementation of R and R plan happened in 2018"
Bench: "Can you say that you agree that since 2018, they enter in category A? Then according to your line of contention, from 18, they can be given 10%?"
Mr. Bhushan: "Except this that Your Lordships have to now see the equities. From 2011, they were allowed to continue mining at a very high rate of 12 million tonnes per year when the cap for the whole state was 30 million tonnes. They have made a huge profit. On the question of equity, what is this money going to be used for- for the rehabilitation, resettlement of the entire area devastated by the mining. That is what the state government is saying that we need these funds. If you take away the funds to give back to NMDC, which has already made such huge profits from mining etc, who were permitted to mine when nobody else was permitted to mine, who was permitted to mine at such a high rate...."
Bench: "As far as the period when they have virtually the sole selling rights, sole mining rights, that is fine. But after they are competing with all others...."
Mr. Bhushan: "By that time, the order was that only those mines will operate which have satisfactorily implemented R and R. They finally implemented only in 2018"
Senior Advocate Jaideep Gupta, for the state of Karnataka: "What is this money meant for- Mr Bhushan has already told your lordships. Your Lordships may look into the order. This money was meant for rehabilitation of the entire area. Up to a particular point of time, the only person allowed to mine was NMDC. They were allowed to mine a particular amount by your lordships' order. There was a total Cap as far as these districts were concerned. NMDC was permitted to mine a disproportionate amount of that cap. Whatever has been collected- 20,10, anything- all of it is going to this fund which is working under the Justice Sudershan Reddy Authority, which is the Oversight Authority for the rehabilitation of the entire area which has been devastated. This entire money is going into a Special Purpose Vehicle for the re-generation of the whole area"
Bench: "What is the state of rehabilitation as of today?"
The bench was informed that it is yet to start, and that only one DPR has been approved so far, and that the budget has been created.
Bench: "What is the amount that you have?"
Mr. Gupta: "About 23,000 crores"
Bench: "From NMDC or from all?"
Mr. Gupta: "From all"
Bench: "If the rehabilitation is yet to be done, for a degradation done in the past, by the orders of the court, you can’t take money away just from this person, that because you are permitted to do, under the orders of the court, we will not give you back. There was only one entity, which is a central government entity, which was permitted"
Mr. Gupta: "This approach would not be correct at this point of time because the land is seriously devastated"
Bench: "It is high time that something happens. You are saying nothing has been done till now. Let’s cut short the matter. What we intend is- that they have made that money so they will have to cough up more than others, we accept that- But let’s take a cut-off date"
Mr. Gupta: "The amount required is 35,000, if you take away 5000, then it is severely compromised"
Bench: "Till now, you have just done one report. Nothing has been done so far. Can’t the NMDC seek parity with other A category entities?"
Mr. Gupta: "There are atleast seven aspects according to which they are not at parity with the other A category entities. They were given favourable treatment as compared to others. It is not just that they had a monopoly. That is just one aspect. Other aspect is that they were in violation of forest clearances. That is why one of their mines was actually shut. There was illegal mining in both the leases of the applicant which was forgotten because they were allowed to start business immediately. What will be the consequence for the rehabilitation project if the amount is given back to them? Your lordships may get recommendations from the oversight authority, which is the Justice Sudershan Reddy authority"
Mr. Rohatgi: "I will show those 7 points. It is only an attempt to make sure that I don’t get (the money back) from 2013. As an interim measure, your lordships may give me from 2018, then hear me, I will show. The state is saying our budget will go awry if we have to pay? This is the kind of thing?"
Mr. Gupta: "Not the budget of the state, the budget of the SPV. This is not going to the state funds. This is going to the SPV"
Bench: "Can you say that you agree that since 2018, they enter in category A? Then according to your line of contention, from 18, they can be given 10%?"
Mr. Bhushan: "Except this that Your Lordships have to now see the equities. From 2011, they were allowed to continue mining at a very high rate of 12 million tonnes per year when the cap for the whole state was 30 million tonnes. They have made a huge profit. On the question of equity, what is this money going to be used for- for the rehabilitation, resettlement of the entire area devastated by the mining. That is what the state government is saying that we need these funds. If you take away the funds to give back to NMDC, which has already made such huge profits from mining etc, who were permitted to mine when nobody else was permitted to mine, who was permitted to mine at such a high rate...."
Bench: "As far as the period when they have virtually the sole selling rights, sole mining rights, that is fine. But after they are competing with all others...."
Mr. Bhushan: "By that time, the order was that only those mines will operate which have satisfactorily implemented R and R. They finally implemented only in 2018"
Senior Advocate Jaideep Gupta, for the state of Karnataka: "What is this money meant for- Mr Bhushan has already told your lordships. Your Lordships may look into the order. This money was meant for rehabilitation of the entire area. Up to a particular point of time, the only person allowed to mine was NMDC. They were allowed to mine a particular amount by your lordships' order. There was a total Cap as far as these districts were concerned. NMDC was permitted to mine a disproportionate amount of that cap. Whatever has been collected- 20,10, anything- all of it is going to this fund which is working under the Justice Sudershan Reddy Authority, which is the Oversight Authority for the rehabilitation of the entire area which has been devastated. This entire money is going into a Special Purpose Vehicle for the re-generation of the whole area"
Bench: "What is the state of rehabilitation as of today?"
The bench was informed that it is yet to start, and that only one DPR has been approved so far, and that the budget has been created.
Bench: "What is the amount that you have?"
Mr. Gupta: "About 23,000 crores"
Bench: "From NMDC or from all?"
Mr. Gupta: "From all"
Bench: "If the rehabilitation is yet to be done, for a degradation done in the past, by the orders of the court, you can’t take money away just from this person, that because you are permitted to do, under the orders of the court, we will not give you back. There was only one entity, which is a central government entity, which was permitted"
Mr. Gupta: "This approach would not be correct at this point of time because the land is seriously devastated"
Bench: "It is high time that something happens. You are saying nothing has been done till now. Let’s cut short the matter. What we intend is- that they have made that money so they will have to cough up more than others, we accept that- But let’s take a cut-off date"
Mr. Gupta: "The amount required is 35,000, if you take away 5000, then it is severely compromised"
Bench: "Till now, you have just done one report. Nothing has been done so far. Can’t the NMDC seek parity with other A category entities?"
Mr. Gupta: "There are atleast seven aspects according to which they are not at parity with the other A category entities. They were given favourable treatment as compared to others. It is not just that they had a monopoly. That is just one aspect. Other aspect is that they were in violation of forest clearances. That is why one of their mines was actually shut. There was illegal mining in both the leases of the applicant which was forgotten because they were allowed to start business immediately. What will be the consequence for the rehabilitation project if the amount is given back to them? Your lordships may get recommendations from the oversight authority, which is the Justice Sudershan Reddy authority"
Mr. Rohatgi: "I will show those 7 points. It is only an attempt to make sure that I don’t get (the money back) from 2013. As an interim measure, your lordships may give me from 2018, then hear me, I will show. The state is saying our budget will go awry if we have to pay? This is the kind of thing?"
Mr. Gupta: "Not the budget of the state, the budget of the SPV. This is not going to the state funds. This is going to the SPV"
Bench: "They have not spent even a single pai?"
Mr. Rohatgi: "They spent nothing, they treat it like a fixed deposit as if it belongs to the state, like it should not be broken and the money should not go back"
Mr. Rohatgi: "They spent nothing, they treat it like a fixed deposit as if it belongs to the state, like it should not be broken and the money should not go back"
Mr. Gupta: "Instead of giving money back to them, they still have to pay 10%, let it be adjusted in the future dues, because giving that money today means that the entire DPR has to be slashed. Let it be adjusted from the future dues"
Bench: "If you were spending the money, and then if your coffers were dry, then this would have been fine, but now...."
Mr. Rohatgi: "These are desperate attempts to hold onto the money. Yesterday night, 200 pages were emailed to your lordships"
Bench: "If you were spending the money, and then if your coffers were dry, then this would have been fine, but now...."
Mr. Rohatgi: "These are desperate attempts to hold onto the money. Yesterday night, 200 pages were emailed to your lordships"
Bench: "Today, we are going to say that from 1.1.2019, as a temporary measure, the amount of 10% be paid back to them"
Case : Samaj Parivarthana Samudaya versus State of Karnataka and others