Tata Steel's Massive Fine May Not Stand in Court of Law, Say Experts

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A massive fine imposed by a provincial government in India on 27 miners, including one of the world’s largest steelmakers, Tata Steel Ltd., is being viewed not only with consternation by those fined themselves, but even other industry leaders and legal experts.

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The government of Orissa, an eastern state, issued notices to Tata and others late last month, for allegedly violating various sections of the mining act. Tata has been asked to cough up as much as Rs 56 crore (about US $1 billion) for alleged excessive extraction of ore, the largest-ever fine perhaps by any government on any Indian company.

Tata Steel has officially taken the stand that it would be contesting this. Newspapers here quoted a company spokesperson as saying there was no question of paying the fine. Tata Steel will appeal the fine, the company said in the written statement. The company reiterated its stand that it had always undertaken mining in Orissa and also in other states of India in strict conformity with the existing laws.

Along with Tata Steel, the Orissa Government slapped similar fine notices of varying amounts on other companies like Essel Mining, Mesco, and even the government-run Steel Authority of India (SAIL). The move, though, has not halted mining activity in the state.

The local government has asked them to pay the market value of the minerals extracted in the past decade in excess of the approved plan, along with simple interest of 24 percent.

Legal opinion seems to be against the Orissa government’s move.

A report in the Financial Express, quoting lawyers familiar with the issue, said among other things, the notice would not be able to stand scrutiny in any court of law. One of the points, said lawyers, in favor of Tata Steel and other companies was that the Steel and Mining Department of the Orissa Government was not empowered under the law to issue such a notice. Another lawyer has even opined that more extraction could not be termed “illegal” under existing laws.

current steel prices - MetalMiner IndXThe notices have sent the mining sector here scurrying, as well as the steel industry. For over a year now, there’s been a ban on mining in at least two states, Goa and Karnataka, after it was found that minerals had sometimes been mined without even basic permissions. This had forced companies to import iron ore from other nations, including South Africa.

If for some reason mining activity in Orissa too were affected, it would come as a very big blow at this stage for India’s steel industry.

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