In a significant decision emphasizing judicial restraint in economic policy matters, the Supreme Court on Thursday reiterated that determining the computation of royalty on minerals is a complex policy issue best left to the legislative and executive branches. The ruling came in response to a challenge regarding provisions in the Mineral (Other than Atomic and Hydrocarbons Energy Minerals) Concession Rules, 2016, and the Mineral Conservation and Development Rules, 2017, concerning the computation of royalty based on “average sale price” for mineral extraction (Kirloskar Ferrous Industries Limited and Another v. Union of India and Others).
Key Judicial Observations:
1. Judicial Hands-Off in Economic Policy: The Court underscored that economic matters, such as royalty computation, involve intricate fiscal decisions that fall within the legislature’s domain, which has the expertise and mandate to design and implement economic policies. Recognizing that courts need to utilize economic knowledge, the bench affirmed that legislative experimentation and flexibility are essential in shaping economic regulations.
2. Respect for Legislative Expertise: In addressing the balance between judicial intervention and legislative freedom, the Court emphasized that policy decisions in economic legislation should receive a high degree of judicial deference. The Court clarified that its role is to assess only whether the policy decision falls within the legal framework and authority of the relevant legislative or executive body. The Court refrains from second-guessing or substituting its perspective for that of policymakers, even if the approach or policy appears controversial.
3. Recognition of Anomalies in Royalty Rules: the Court acknowledged existing anomalies in the royalty calculation rules, which the legislature recognized. This acknowledgment prompted the Court to provide the Union government with a final opportunity to address and rectify these issues. The bench ordered the government to complete its public consultation process on amendments to the Mines and Minerals (Development and Regulation) (MMDR) Act, initiated in May 2022, within two months and to resolve any cascading effects of royalty computation on “average sale price.”
Court’s Directive to the Government:
The Supreme Court gave the Union government two months to finalize its consultation process and take conclusive steps to address the anomalies related to royalty computation. The government is expected to report on its compliance with this directive in two months.
The bench’s remarks highlight the importance of maintaining a balance between judicial scrutiny and respect for the expertise of legislative and executive authorities in economic policy matters. Such policies, especially those impacting industry and natural resources, often rely on complex data and projections and are crafted to address multiple policy objectives, such as balancing domestic industry interests with international obligations.
Representation and Legal Perspectives:
The petitioners were represented by Senior Advocate AM Singhvi, who argued against the validity of the royalty-related provisions. The Union of India was represented by Additional Solicitor General Shailesh Madiyal, who defended the legislative requirements and advocated for allowing government policy decisions to guide economic regulation in the mineral sector.
Implications of the Ruling:
This ruling reinforces the judiciary’s commitment to a restrained approach in economic and fiscal matters, underlining that the complexities of royalty and tax policies require deference to the policy-making arms of government. It sets a precedent for future monetary policy cases, where courts will likely defer to the executive and legislature on complex fiscal decisions unless a clear violation of authority or legal principles is evident.
The Court’s decision underscores the need for economic policy to be shaped by those with sector-specific expertise and acknowledges the importance of public consultations in addressing regulatory anomalies. This case, while initially focused on royalty provisions, could influence broader judicial treatment of economic legislation, promoting a more precise separation of roles among the judiciary, legislature, and executive in policy matters.
The matter is slated for review after two months to ensure the government complies with the directive following the completion of the public consultation and the amendment process as outlined.
