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    Rungtas accused of excessive mine holdings by Common Cause

    Synopsis

    The allegation was made through written submissions to a committee of two former Supreme Court judges--GS Singhvi and Anil Dave--tasked with investigating 16 cases of illegal mining in Odisha.

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    The NGO’s petition against illegal mining in Odisha had resulted in Supreme Court fine of more than Rs 17,000 crore on mine owners in a landmark order in Aug 2017.
    The Chaibasa, Jharkhand-based, SR Rungta family has been accused by NGO Common Cause of using the corporate veil to hold almost three times the leasehold area allowed to an individual miner in Odisha. The Rungtas and the state government have denied any wrongdoing.

    The allegation was made through written submissions to a committee of two former Supreme Court judges--GS Singhvi and Anil Dave--tasked with investigating 16 cases of illegal mining in Odisha. Senior Supreme Court advocate Prashant Bhushan, on behalf of the NGO, argued that since the significant shareholders of four companies and a partnership firm were the same members of just one family, these be treated as one entity. Rungta Sons, Rungta Mines, Feegrade, Bonai Industrial Co. and the partnership firm Mangilal Rungta hold the mining rights for iron ore and manganese in about 29 sq km in Odisha, against the prescribed cap of 10 sq km or 1,000 hectares per miner.

    The companies, despite common beneficiaries, operate more than a dozen mines in violation of a section of the law meant to check monopolisation of natural resources, claims the affidavit. The low-profile Rungtas, through their iron ore mines in Odisha and Jharkhand, are among the most influential players in the business. They rarely make the headlines except when hosting ministers and Bollywood stars during family functions. In Odisha alone, the combined output of their firms is more than 20 million tonnes of iron ore annually, a fifth of the state’s production. Their permitted capacity is twice that much. In their rejoinder to the committee, the Rungta firms refuted all charges, which they described as “legally misconceived and factually incorrect.”

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    The Rungtas denied all the allegations and declined to comment beyond that in response to ET’s queries. “While denying all allegations, we would like to submit that the matter is pending before the hon’ble committee appointed by the hon’ble Supreme Court, wherein proceedings have been completed and the orders are reserved,” advocate Sandeep Das told ET on behalf of the Rungtas. “Therefore, we would not like to comment since the matter is sub judice.” Siddharth Rungta, a director at the four firms and past president of the Federation of Indian Mineral Industries, also refused to comment on a matter that was “sub judice.” He said the committee was investigating many cases.

    Common Cause, which is “dedicated to championing public causes” and has been criticised by various political parties for its activism, often uses the public interest litigation (PIL) route to unearth corruption. Among the cases it has been involved in are those that led the Supreme Court to cancel telecom spectrum and coal block allocations and strike down Section 66A of the IT Act for curbing freedom of speech. Bhushan, who’s on the governing council, is among its most high-profile members and lead lawyer on most of the cases. The NGO’s petition against illegal mining in Odisha’s iron ore and manganese sector had resulted in the Supreme Court imposing a fine of more than Rs 17,000 crore on mine owners in a landmark order in August 2017. The bench had set up a committee of retired Supreme Court judges to examine de novo (since the start) a number of specific cases. While doing so, the bench had clarified, “the committee would be entitled to lift the corporate veil.”

    The cases fall into two categories. The first relates to lessees accused of transferring control of their mines without the state’s approval in violation of Rule 37 (now Rule 24) of the Mineral Concession Rules. (ET has reported previously on this accusation also faced by Aryan Mining and Trading Corp., DR Patnaik, KJS Ahluwalia and Sarda Mines among others.) In the second category are lessees accused of violating Section 6 of the MMDR Act, a provision that caps the grant for each mineral and the total area that can be granted to a person or company in a state, unless the Centre has made a special exemption as it has in Tata Steel’s case. The Rungta firms fall in this latter category.

    The committee finished hearing the matter in early July and is expected to submit its report in the next few weeks. The Rungta companies have strongly objected to the submissions by Common Cause, alleging they had been filed on July 10, 2018, three months after the committee had finished hearing them, “with a view to reopen their cases.” Bhushan’s submission had claimed Nandlal Rungta, his brother Mukund Rungta, son Siddharth Rungta, and their respective wives are the only significant shareholders of all five firms (see table). “The various mining leases in Odisha held by each of these companies are in reality for the benefit of one family,” Common Cause said. “The Rungtas have sought to cheat the area restriction provided under Section 6 of the MMDR Act by holding these mining leases in the names of their companies.”

    Subsection 3 spelling out how the total area should be determined, requires “the area held ...by a person as a member of a co-operative society, company or other corporation or a Hindu undivided family or a partner of a firm) to be deducted from maximum prescribed area... so that the sum total of the area held by such person (whether as a member or partner or individually) does not exceed the specified cap.” Bhushan’s petition said Nandlal Rungta and Mukund Rungta also exceed the 10sq km cap individually on a pro rata basis through their stakes in the companies and share in the family business. The Odisha government has maintained that no laws have been broken. It said the Supreme Court’s Central Empowered Committee had given a clean chit to the companies and the state, which was found to have “meticulously followed provisions while granting and renewing these leases.” Its affidavit also quotes the amicus curiae’s reasoning to the Supreme Court that “none of these persons (lessees) are members (shareholder/partners) in other persons’ lessees.”

    The Rungta lawyers make the same argument--that each company is a separate legal entity registered under the Companies Act and distinct for the purpose of the MMDR. None of them have exceeded the cap, not even between 1958 and 1972, when the limit was 10 sq miles or 2,589.99 hectares, they claim. Their rejoinder argues that as far as the MMDR was concerned, a “person”, whether as an entity or an individual member of a company or cooperative, must always necessarily mean a lessee or someone applying for a mining grant.

    According to them, subsection 3 aims to “inhibit crossholding” by one lessee as a member partner in another lessee. None of the five firms were shareholders in any of the other firms, and none of their shareholders (or individual Rungta family members) were lessees. That’s why the logic of aggregating proportionate leasehold areas of Nandlal Rungta and Mukund Rungta had no legal basis, they said. In any case, even by that “erroneous logic”, they held (on March 31, 2017) a cumulative 825.61 hectares and 960.47 hectares, respectively, less than 10sq km each, according to the Rungta lawyers.

    The Supreme Court’s August 2017 order recognising that “person” was not defined in the MMDR Act, also pointed out that the law bars a person (or company) acquiring in the name of another person (or company) a lease intended for himself or herself. The Rungta firms strongly objected to the charge of “cheating”, pointing out that all five companies were incorporated or established decades before subsection 3 as introduced into the statute in 1972, according to them, because “large portions of leasehold area was being left unutilised then and not to prevent monopolisation of natural resources.”


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