The Supreme Court has held that it is constitutionally impermissible for a state to restrict the movement of the sand legally excavated within the territory of India.

The bench comprising Justice AK Sikri, Justice S. Abdul Nazeer and Justice MR Shahupheld the Gujarat High Court judgment that had struck down the Rules brought in by the State of Gujarat prohibiting the movement of sand beyond the border of the State.

Before the Gujarat High Court, the vires of the Rule 44-BB of the Gujarat Minor Mineral Rules, 1966, which prohibited the movement of sand beyond the border of the State of Gujarat, were challenged. The said rule was brought in by an amendment which was done in purported exercise of powers conferred under Section 15 read with Section 23-C of the Mines and Minerals (Development and Regulation) Act, 1957. The High allowed the writ petitions and struck down the Rules as ultra vires on the ground that the rule making power of the State Government does not empower and cannot be stretched to empower the State Government to make Rules directly prohibiting movement of mineral so as to impinge upon the freedom guaranteed by Article 301 of the Constitution. The High Court disagreed with the contrary view taken by Andhra Pradesh High Court in C. Narayana Reddy and etc. v. Commissioner of Panchayat Raj and Rural Employment, A.P., Hyderabad, and by the Madras High Court in D. Sivakumar v. Government of Tamil Nadu.

Assailing this verdict, the State of Gujarat approached the Apex Court. The bench considered these two issues in the appeal: (1) Whether the impugned rules framed by the State of Gujarat as a delegate of Parliament are beyond the powers granted to it under the MMDR Act? In other words, whether the impugned rules are ultra vires Sections 15, 15A and 23-C of the MMDR Act? (2) Whether the impugned rules are violative of Part XIII of the Constitution of India?
Cannot regulate transportation of the legally excavated minerals
Referring to Section 23C of the Act, the bench said that it is the transportation and storage of illegal mining and not the mining of minor minerals like sand which is legal and backed by duly granted license, which can be regulated. No power flows from this provision to make rule for regulating transportation of the legally excavated minerals, the bench added.
‘Freedom’ in Article 301 must be read with the expression ‘throughout the territory of India’
The court also observed that the impugned rules violate Part XIII of the Constitution as the effect thereof is to fetter the freedom of trade, commerce and intercourse under Article 301 of the Constitution. The court said that the expression ‘freedom’ in Article 301 must be read with the expression ‘throughout the territory of India’. Explaining it further, the bench said:

“Under Article 302, Parliament may impose restrictions on the freedom of trade, commerce or intercourse between one State and another as may be required in the public interest. The expression ‘public interest’ may include a regional interest as well. However, Article 302 is qualified by Article 303 which prohibits Parliament and the State Legislatures from making any law that gives preference to one State over another or discriminates between one State and another. Situations of scarcity are to be dealt with by Parliament under Article 302(2). The power of State Legislature to impose reasonable restrictions on the freedom of trade, commerce or intercourse, as may be required in the public interest, requires such a Bill or amendment to be moved in the State Legislature only after receiving previous sanction from the President. The President, being the head of the State and the guardian of the federation, must be satisfied that such a law is indeed required and, thus, acts as a check on the promotion of provincial interests over national interest. Going by the aforesaid scheme of this Chapter, it becomes apparent that when there are such restrictions on a State Legislature, then the State Government could not have imposed such a prohibition under a statute whose object is to regulate mines and mineral development, and not trade and commerce per se.”

Balanced development of the country is an equally vital facet of economic integration
The court further said that balanced development of the country is an equally vital facet of economic integration. The bench, in this regard, observed:

“No doubt, Part XIII permits some forms of differentiation, for example, to encourage a backward region or to create a level playing field for parts of the country that may not have reached the desired level of development. In this context, Part XIII envisions a two-fold object: (i) facilitation of a common market through ease of trade, commerce and intercourse by erasing barriers; and (ii) Regulations (or restrictions) which may have the effect of differentiating between States or regions which may be necessary not only in emergent circumstances of scarcity etc. or but even for development of economically backward regions or otherwise justified in the public interest. That Part XIII is not about “freedom” alone but is a code of checks and balances, intended at achieving economic unity and parity.”

The bench disapproved the contrary view adopted by the Andhra Pradesh High Court and Madras High Court.It added:

“In any case, nothing prevents the appellant from restricting the quantum of sand being excavated. However, once the appellant State permits sand to be excavated, neither can it legally restrict its movement within the territory of India nor is the same constitutionally permissible. Likewise, there is no restriction on the State importing sand from other states. If it is the case that the demand of any State is not being met, it may purchase sand from other states. In any event, the market will dictate trade in sand inasmuch as it may make no business sense for mining company to transport and sell its sand in a far away destination after incurring large costs on transportation.