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Chhattisgarh Vs Jayaswal throws light on murky mine sector-Ruchira Singh

The Chhattisgarh government has filed a writ petition in the Delhi high court against the Central government over Jayaswal Neco Ltd’s applications for mining leases in a case that throws light on the murky world of mining in India.

The state alleges that the mid-sized steel-maker forged documents in its application to get iron ore mining leases in Rowghat in Bastar district and that the Union government directed it to consider the application favourably—even after the state showed investigative reports that said Jayaswal Neco had allegedly faked paperwork to show it had conducted prospecting (preliminary exploration) in Rowghat when it had actually not done so.

Neither the company secretary of Jayaswal Neco nor India’s mining secretary responded to e-mails or phone calls seeking comment.

India’s mining sector has been in the spotlight over allegations of rampant illegal mining and activists, government officials and company executives have spoken about the opaque way in which many leases are issued and the way some unscrupulous miners secure their interests.

The Jayaswal Neco case, which will be heard on 30 April, may reveal the inner workings of miners and government officials—especially if the court finds the allegations contained in the 205-page petition to be true.

At stake are iron ore deposits of 280 million tonnes (mt) valued at over Rs.80,000 crore, in Rowghat iron ore deposits A, B, C, D, E situated in the reserved forest area of Narayanpur forest division of Kanker forest circle of Bastar, the writ petition says.

Jayaswal Neco, a 1mt steel producer based in Nagpur, is listed on BSE as Jayaswal Neco Industries Ltd and has been trying to get four mining leases in the Rowghat iron ore deposits on the grounds that it had prospecting licences in 1999 and, therefore, must get preferential allotment.

These forests are Maoist territory, but are nonetheless attractive for steel companies given the shortage of mineral resources in the country. Tata Steel Ltd, also eyeing the deposits, impleaded itself in the case and has been named respondent number three, after the Union government and Jayaswal Neco.

“Any deposits in that area arevaluable because of the proximity to steel plants (in east India) as well as the general quality of the ores,” said Ravindra Deshpande, metals analyst at Elara Securities (India) Pvt. Ltd.

Rowghat’s deposit F belongs to Steel Authority of India Ltd’s Bhilai Steel Plant, and amid security fears, the company has retained Chhattisgarh State Power Transmission Co. Ltd and the railways to create the required infrastructure before developing the mine.

Jayaswal Neco’s prospecting licences (PLs) for a total of 1601.47 hectares in and around Rowghat’s deposits A to E, were valid for up to two years and in 2000 the company made an application to the Chhattisgarh government asking for mining leases (ML) in the very same areas claiming preferential rights under the Mines and Minerals Development and Regulation Act (MMDR Act), the writ petition shows.

Till 2006, its applications remained in the initial stages. Then, the divisional forest officer, Narayanpur, informed the state’s mineral resources department that Jayaswal Neco had not undertaken any prospecting operations. The department’s suspicions were further aroused, the writ shows, when state government officials scrutinizing Jayaswal Neco’s application found references to the “state government of Chhattisgarh” in back-dated papers. Chhattisgarh had not been created at the time (the state was formed in November 2000).

In 2007, the state government rejected all applications after Jayaswal Neco failed to provide proof justifying its claim.

“As prices of iron ore had started rising, there was a lot of pressure from companies to get mining leases,” said an official in the Chhattisgarh government who did not want to be identified.

Jayaswal Neco filed a “revision application” with the appropriate authority in the central government’s mines ministry. “With their revision application, respondent number two (Jayaswal Neco) filed photocopies of two letters dated 20.1.2000, purportedly having been written by the Conservator of Forest (CF), Kanker Forest Circle to the Divisional Forest Officer, Narayanpur, conveying permission for prospecting operations in 186 ha and 388 ha of PL areas,” the writ says. “However, no such letters were ever issued by the CF, Kanker, which are prima facie and to our belief, forged documents.”

The state government wrote to the secretary of mines for instituting an inquiry by the office of the controller general, Indian Bureau of Mines, in Nagpur.

“Chief Vigilance Officer (CVO) of the Mineral Exploration Corporation Ltd. (MECL)/Indian Bureau of Mines (IBM) conducted an inquiry into state government’s complaint and submitted a detailed report to the ministry of mines confirming that the alleged irregularities had in fact been committed in the Office of Regional Controller, IBM Nagpur,” the writ says. “In the CVO’s report, prospecting reports submitted by respondent number two were found to be ante-dated and acknowledgements issued by the Office of Regional Controller, IBM, Nagpur to respondent number two, to be forged,” it adds.

In September 2007, the revisionary authority in the mines ministry directed the state government to grant the mining lease and did not consider the CVO’s report. The Chhattisgarh government challenged the revision authority’s order filing a writ in the Delhi high court in 2008.

The Delhi high court, in 2009, remanded the matter back to the revision authority in the mines ministry, asking it to review the matter afresh after taking into consideration CVO’s investigative report against Jayaswal Neco.

“In August 2011 disregarding the entire factual matrix presented by the petitioner state, the revisionary authority decided the revision application of respondent number two...the state was directed to pass a reasoned order on the mining lease applications,” the writ petition said.

The petition alleged that the mines ministry, by a 16 December 2009, order, changed the composition of the revision authority, from a two-member bench to a single non-judicial member bench, for reasons not known, in a move that was “both unconstitutional and ultra vires.”

The writ alleged that had the original composition of the revision authority been retained, it may not have omitted the investigative reports of the CVO showing Jayaswal Neco forged papers.  

On 13 December 2011, the petitioner filed a writ petition under Articles 226 and 227 of the Constitution of India challenging the changes to the revision authority.

The petition also sought the revision authority’s order asking Chhattisgarh to consider Jayaswal Neco’s mining lease application to be set aside and challenges Section 55(4) of Mineral Concession Rules (MCR) which gives the central government bigger powers than the MMDR Act itself.

The case has the potential to hurt the company’s reputation and earnings, said Arun Kejriwal, director, of Mumbai-based equity research firm KRIS.

“If the case is proved bona fide, there could be strictures laid down by the court. There could be some fine or penalty,” Kejriwal said. “Something like this could be held against the company in future as well.”