IN THE SUPREME COURT OF INDIA

ORIGINAL CIVIL JURISDICTION

I.A. NO.2134 of 2007 IN

WRIT PETITION (CIVIL) NO.202 OF 1995

T.N. Godavaraman Thirumulpad … Petitioner  

Versus

Union of India & others     … Respondent(s)

AND IN THE MATTER OF:

M/s. Sterlite Industries (India) Ltd. (SIIL) ... Applicant

O R D E R

This Interlocutory Application preferred by M/s. Sterlite

Industries  (India)  Ltd. [SIIL]  is a sequel  to  our Order  dated

23.11.07  in  I.A.  Nos.1324  and  1474  in  Writ  Petition  (C)

No.202  of  1995  etc.  in  the  case  of  T.N.  Godavaraman

Thirumulpad v.  Union of India & others And in the matter

of : Vedanta Alumina Ltd. reported in (2008) 2 SCC 222.  We

need  not  repeat  the  contents  of  our  Order  dated  23.11.07

except to state that in our Order we suggested a Rehabilitation

Package  and  modalities  to  subserve  the  principle  of

Sustainable Development.   

2. For the sake  of convenience  we quote  hereinbelow the

suggestions made in our earlier order dated 23.11.07 which

read as under:

“(i) State  of  Orissa  shall  float  a  Special  Purpose  Vehicle (SPV)  for  scheduled  area  development  of  Lanjigarh Project  in  which  the  stake-holders  shall  be  State  of Orissa,  OMC Ltd.  and M/s. SIIL.   Such SPV shall  be incorporated  under  the  Companies  Act,  1956.   The Accounts  of  SPV  will  be  prepared  by  the  statutory auditors of OMC Ltd. and they shall be audited by the Auditor General  for State  of  Orissa every  year.   M/s. SIIL will  deposit,  every year commencing from 1.4.07, 5% of  its  annual  profits  before  tax and interest  from Lanjigarh Project or Rs.10 crores    whichever is higher   for Scheduled Area Development with the said SPV and it shall be the duty of the said SPV to account for the expenses each year.  The annual report of SPV shall be submitted  to  CEC  every  year.   If  CEC  finds  non- utilisation or mis-utilisation of funds the same shall be brought to the notice of this Court.  While calculating annual profits before tax and interest M/s. SIIL shall do so  on  the  basis  of  the  market  value  of  the  material which is sold by OMC Ltd. to M/s. SIIL or its nominee.

(ii) In addition to what is stated above, M/s. SIIL shall pay NPV  of  Rs.55  crores  and  Rs.50.53  crores  towards Wildlife  Management  Plan  for  Conservation  and Management of Wildlife around Lanjigarh bauxite mine and  Rs.12.20  crores  towards  tribal  development.   In addition,  M/s.  SIIL  shall  also  bear  expenses  towards compensatory afforestation.

(iii) A statement shall be filed by M/s. SIIL with CEC within eight weeks from today stating number of persons who shall  be  absorbed  on  permanent  basis  in  M/s.  SIIL including  land-losers.   They  shall  give  categories  in which they would be permanently absorbed.   The list would also show particulars of persons who would be

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employed by the contractors of M/s. SIIL and the period for which they would be employed.

(iv) The State Government has the following suggestions on this issue:-

1. The  user  agency  shall  undertake  demarcation of  the  lease area  on  the  ground  using  four  feet  high  cement  concrete pillars with serial  number,  forward and back bearings and distance from pillar to pillar.

2. The user agency shall make arrangements for mutation and transfer  of  equivalent  non-forest  land  identified  for compensatory  afforestation  to  the  ownership  of  the  State Forest Department.

3. The  State  Forest  Department  will  take  up  compensatory afforestation at project cost with suitable indigenous species and  will  declare  the  said  area  identified  for  compensatory afforstation as “protected forest”   under the Orissa Forest Act 1972 for the purpose of management.

4. The  user  agency shall  undertake  Rehabilitation  of  Project affected families, if any as per the Orissa Rehabilitation and Resettlement Policy 2006.

5. The  user  agency  shall  undertake  Phased  reclamation of mined  out  area.   All  overburden  should be  used  for  back filling and reclamation of the mined out areas.

6. The user agency shall undertake fencing of the safety zone area and endeavour for protection as well as regeneration of the said area.   It shall deposit funds with the State Forest Deptt. for the protection and regeneration of the safety zone area.   

7. Adequate  soil conservation measures  shall be undertaken by  the  Lessee  on  the  overburden  dumps  to  prevent contamination of steam flow.

8. The user agency should undertake comprehensive  study on hydrogeology   of the area and the impact of mining on the surrounding water quality and stream flow at regular interval and take effective measures so as to maintain the pre mining water condition as far as possible.   

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9. The user agency should undertake a comprehensive study of the wild life available in the area in association with institutes of repute like Wild Life Institute of India, Dehradun, Forest Research Institute,  Dehradun etc.  and shall prepare  a  site specific  comprehensive  Wild  Life  Management  plan  for conservation and management of the wild life in the project impact area under the guidance of the Chief Wild Life Warden of the State.   

10. The  user  agency shall  deposit the NPV  of  the  forest  land sought for diversion for undertaking mining operations.

11. The user agency shall prepare a comprehensive plan for the development of tribals in the project impact area taking into consideration  their  requirements  for  health,  education, communication, recreation, livelihood and cultural lifestyle.

12. As per the policy of the State Government, the user agency shall earmark 5% of the net profit accrued in the project to be  spent  for  the  development  of  health,  education, communication,  irrigation  and  agriculture  of  the  said schedule area within a radius of 50 Kms.

13. Controlled Blasting may be used only in exigencies wherever needed  to minimize  the impact  of  noise  on wild life  of  the area.

14. The User Agency shall undertake  development of greenery by  way  of  plantation  of  suitable  indigenous  species  in  all vacant areas within the project.

15. Trees shall be felled from the diverted area only when it is necessary  with  the  strict  supervision  of  the  State  Forest Deptt. at the cost of the project.

16. The forest land diverted shall be non transferable.  Whenever the forest land is not required, the same shall be surrendered to  the  State  Forest  Deptt.  under  intimation  to  Ministry  of Environment and Forests, Government of India.”

                  (emphasis supplied by us)

3. By our Order dated 23.11.07 we made it clear that if SIIL

is  agreeable  to  the  suggested  Rehabilitation  Package they

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were  at  liberty  to  move  this  Court  by  way  of  interlocutory

application.  Consequently, the present I.A. No.2134 of 2007

has been preferred by SIIL.   

4. In  the  present  I.A.  SIIL,  State  of  Orissa  and  Orissa

Mining  Corporation  Ltd.  [OMCL]  have  unconditionally

accepted the terms and conditions and modalities suggested

by this Court under the caption “Rehabilitation Package” in

its Order dated 23.11.07.  However, CEC has filed its Report

dated  24.4.08.   The  Report  contains  response/counter

suggestions on certain aspects.  In our Order dated 23.11.07

we  inter alia suggested formation of  SPV for Scheduled Area

Development of Lanjigarh Project in which we suggested that

the stake-holders  shall  be  State  of  Orissa,  OMCL and SIIL.

We  also  inter  alia  suggested  that  the  said  SPV shall  be

incorporated under the Companies Act, 1956.    

5. CEC in its response has suggested that SPV should work

the  Niyamgiri  Bauxite  Mine  in  a  business-like  manner  and

that  the  mining  lease  of  Niyamgiri  Bauxite  Mine  may  be

assigned to the SPV from OMCL.  In other words, CEC wants

that  State  of  Orissa  should  participate  in  the  mining

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operations  and  it  has  further  suggested  that  the  State  of

Orissa should transfer or assign the mining lease from OMCL

to SPV.

6. There  are  serious  problems  in  the  above  suggestion

made by CEC.  At the outset, it needs to be stated that under

our  Order  dated  23.11.07  we  suggested,  as  a  part  of

Rehabilitation Package, formation of SPV for Scheduled Area

Development  of  Lanjigarh Project.   We wanted  the  State  of

Orissa  to  be  associated  with  SPV  in  order  to  ensure

implementation of proper schemes for the development of the

tribal  area and in our  Order  it  has not been suggested  for

incorporation of SPV to take over the mines which have been

leased out by State of Orissa to OMCL (lessee).  The reason is

obvious.   We  cannot  change  leases/MoUs/joint  venture

agreements signed between the parties at earlier point of time

which  have  been  approved  by  the  Ministry  of  Mines,

Government of India,  and other Authorities.   The object  for

passing  the  Order  dated  23.11.07  was  to  strike  a  balance

between  development  and  environmental  protection.   The

Lanjigarh Tehsil in District Kalahandi, as stated in our Order

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dated 23.11.07, faces abject  poverty.  At the same time the

area is eco-sensitive area.  We have tried to strike a balance in

order to subserve the principle of Sustainable Development.

Under our Order we suggested Rehabilitation Package under

which apart from NPV, SIIL is also required to deposit 5% of

annual profits before tax and interest from Lanjigarh Project

or  Rs.10  crores  per  annum whichever  is  higher.   The  said

Project  covers  both  mining  and  refining.   The  amount  is

required  to  be  deposited  by  SIIL  with  SPV every  year

commencing from 1.4.07.  This condition has been accepted

by  SIIL.   Moreover,  by  reasons  of  acceptance  of  suggested

Rehabilitation  Package, 2090  persons  (including  displaced

persons)  would  get  employment  as  indicated  in  the  Charts

annexed  to  the  Report  of  CEC.   In  addition,  2400  more

persons would earn income by support services.  However, we

cannot change the existing structure in its entirety.  If we were

to accept the said counter suggestion of CEC, namely, that the

mines be taken over by  SPV then we would be violating the

terms  and conditions  of  the  joint  venture  Agreement  dated

5.10.04  between OMCL and VAL (now substituted  by SIIL).

Moreover,  it may be noted that the joint venture Agreement

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dated  5.10.04  was  executed  because  the  Government  of

Orissa  wanted  its  Undertaking,  namely,  OMCL  to  earn

revenue on its own account.  Therefore,  we cannot direct  a

complete  changeover.   Under  the  joint  venture  Agreement,

OMCL was a lessee from Government of Orissa.  We cannot

modify that lease.  We cannot direct the lease to be assigned

by  Government  of  Orissa  to  SPV as  it  would  amount  to

substitution of lease earlier executed by Government of Orissa

in favour of OMCL.

7. CEC has further  suggested pre-determined mechanism

for  price  fixation.   Under  the  suggested  new  price-fixation

mechanism CEC has suggested as follows:

“The  price  of  the  Bauxite  Ore  in  the  market  is  not ascertainable since there is no market for this ore as such of significance, but its price can be ascertained by reducing the  normative  cost  of  conversion plus profit from the  market  price  of  Aluminium.   The  CEC also examined the feasibility of determining the price of the Ore by reducing the cost of conversion (plus profit) from the  price  of  Alumina,  but  did  not  consider  this  an advisable  option since  the  price  of  Alumina  shows  a great degree of variation from supplier to supplier (…). This  method of  calculating price  is  in  effect  a  mirror image  of  the  Cost  plus  Return  basis  adopted  for determining tariff.”

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8. We  may  state  that  price  discovery/mechanism  is  a

complicated  exercise.   Moreover,  on  account  of  economic

factors, price variation takes place throughout the year.  We

do  not  wish  to  rule  out  the  formula  suggested  by  CEC.

Ultimately,  as  stated  in  our  Order  dated  23.11.07,  SIIL  is

required  to deposit  5% of  its  annual  profits  before  tax and

interest from Lanjigarh Project  or Rs.10 crores whichever  is

higher as contribution for Scheduled Area Development.  This

contribution  is  to  be  made  every  year  commencing  from

1.4.07.  Under clause (i) of Rehabilitation Package, SPV has

to account for Scheduled Area Development.  Further under

the said Package, SIIL is also required to contribute Rs.12.20

crores towards tribal development apart from payment of NPV

and  apart  from contribution  to  the  Management  of  Wildlife

around  Lanjigarh  Bauxite  Mine  (See:  clause  (ii)  of  the

Rehabilitation Package).  While allocating CAMPA Funds the

said  amount  of  Rs.12.20  crores  shall  be  earmarked

specifically for tribal development.   Therefore,  we are of the

view that, at the pre-operational stage, we need not apply the

price  mechanism  suggested  by  CEC.   If  at  the  end  of  the

Accounting  Year  of  SIIL,  CEC finds  that  the  annual  profits

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before tax and interest is depressed by the pricing mechanism

mentioned  in  joint  venture  Agreement  dated  5.10.04  vide

clause  2.3.3(a)  then it  would  be  open  to CEC to move  this

Court with the suggested price mechanism in its Report.  In

fact, in our Order dated 23.11.07 we have directed that the

Accounts of SPV to be audited by Auditor General for State of

Orissa  after  they  are  prepared  by  the  statutory  auditors  of

OMCL.   It  would  be  open even to the statutory  auditors  of

OMCL as well as CEC to inform this Court at the end of the

Accounting  Year  whether  annual  profits  before  tax  and

interest stands depressed for any reason and at that stage we

will certainly consider the price mechanism suggested by CEC

in its Report placed before us.

9. For the above reasons and in the light of the Affidavits

filed  by  SIIL,  OMCL  and  State  of  Orissa,  accepting  the

Rehabilitation Package, suggested in our Order 23.11.07, we

hereby grant clearance - to the forest diversion proposal for

diversion of 660.749 ha of forest land to undertake bauxite

mining  on  the  Niyamgiri  Hills  in  Lanjigarh.  The  next  step

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would be for MoEF to grant its approval in accordance with

law.

10. I.A. No.2134 of 2007 is disposed of accordingly.  

      ….…………………………….CJI.

        (K.G. BALAKRISHNAN)  

…….…………………………….J.          (DR. ARIJIT PASAYAT)  

…….…………………………….J.          (S.H. KAPADIA)

New Delhi; August  8, 2008.  

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