SUPREME COURT RULES THAT STATE HAS THE POWER TO LEVY DEMANDS UNDER THE MINES AND MINERALS (DEVELOPMENT AND REGULATION) ACT, 1957
INTRODUCTION
In Chandra Bhan Singh v. State of Uttar Pradesh & Ors. (Civil Appeal No.12314 of 2024) (decided by the Supreme Court of India on 23rd May 2025 relating to the question of levy of additional amounts sought to be collected from an individual granted mining rights for the minor minerals in the District Mineral Foundation (DMF) Trust. The Appellant argued that the imposition of 10% of the total bid amount, to be deposited with DMF was in violation of statutory provisions of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act). This judgment lays down the ambit of the State’s authority under the MMDR Act, particularly in respect of minor minerals and their regulation.
FACTUAL BACKGROUND
The Appellant Chandra Bhan Singh was the successful bidder in respect of mine lease for extraction of sand. A mining lease under such allotment was granted on 16.10.2017. The Appellant had already paid ₹5,41,29,600 by way of consideration for the entire sand to be excavated.
Thereafter the District Magistrate, Kanpur issued Demand Notice dated 25.10.2017 calling upon Singh to deposit a further sum of ₹ 54,12,960 which is 10% of total bid amount to DMF Trust, Kanpur and also 2% stamp duty. Singh challenged this demand stating that such a levy was not maintainable under the imposing statute and was beyond the fair limit specified under Section 9b[1]of the MMDR Act.
PROCEDURAL BACKGROUND
The Appellant filed a writ petition before the High Court of Allahabad assailing the Demand Notice. The writ petition was rejected by the High Court, by its judgment dated 15.11.2017, upholding the demand as legal. Singh challenged this Order by filing a civil appeal to the Supreme Court of India. Two connected appeals which are on similar issues were heard together.
ISSUES
The Supreme Court was called upon to determine the following essential legal questions:
- Whether the requirement of 10 per cent of the total bid amount to be contributed to DMF Trust and not 10% of royalty, was ultra vires the MMDR Act, 1957, i.e. sections 9B, 15 and 15A.
- Whether any procedural provisions under Rule 68 of the U.P. Minor Minerals (Concession) Rules, 1963 (1963 Rules) had been violated by the State Government when it had issued the Policy dated 22.04.2017. (Policy)
- Whether the levy under Rule 10(2) of the District Mineral Foundation Trust Rules, 2017 (2017 Rules) restricted the levy to only 10% of the royalty, as claimed by the Appellant.
ANALYSIS
- Validity of Policy under Rule 68, 1963 Rules
The main contention of the Appellant was that the said Policy suffered from procedural impropriety under Rule 68 of 1963 Rules. Rule 68 provides for relaxation of rules by the State Government in certain circumstances. But the Court found that the State had observed due process, providing the original records to show a rational formation of Policy. The Court also observed that the Lucknow Bench of the High Court had already approved the use of powers under Rule 68 in view of the State’s pressing needs when mining was banned. Therefore, the Policy was constitutional.
- Applicability of Section 9B of the MMDR Act
The Court also rejected the Appellants’ reliance on Section 9(b)(5), which governs DMF contributions calculated based on value of mineral, as it treated the DMF contribution as one based on proportionate royalty basis. Section 14 of MMDR Act specifically provides that the provisions of Sections 5 to 13 are not applicable to minor minerals. Since sand falls in minor mineral category, sub-section (5) of Section 9B, which is for major mineral, was inapplicable.
- Scope of Section 15
The Court held that under Section 15 of the MMDR Act, State Governments possess the power to frame rules concerning minor minerals. The sub-section (4) of Section 15 (c) and the newly introduced Section 15A confer power on the State to determine and prescribe the payment to be made to the DMF by the holder of the mineral concessions for minor minerals. The challenged 10% levy was based on this statutory source of power and was found to have been validly enacted.
- Construction of Rule 10(2) of the 2017 DMF Rules
The Appellant contended that according to Rule 10(2) of the 2017 Rules, contributions to DMF should be restricted to 10% of the royalty and not 10% of the bid amount in total. The Court clarified that there is an explicit provision in Rule 10(2) to the effect that 10% of royalty has to be paid unless “any other percentage is prescribed by the State Government from time to time”. The legal sanctity of this lay in the fact that the State Government had fixed the benchmark of 10% of bid through the Policy and bidding documents.
E. Inapplicability of Rules 21 and 54
The Appellant further cited Rules 21 and 54 of the 1963 Rules, which address royalties and permits. The contention was rejected by the Supreme Court with reference to Rule 23(3) of the Rules according to which after a place is notified for e-tendering, Chapters II, III and VI (and thereto Rules 21 and 54) stand excluded. Accordingly, such rules did not apply to e-tender based leases of the present Appellant.
CONCLUSION
Upon a meticulous scrutiny of the statutory provisions, the Supreme Court dismissed the Appeal and affirmed the judgment of the High Court. It was of the view that State Government was necessarily authorized by law to collect 10% of the total bid amount as a DMF contribution under Section 15A of the MMDR Act. The decision upholds the competence of the State to fix financial obligations in the case of minor mineral leases and narrows down the scope of some of the central provisions (including Section 9B) to major minerals.
This case emphasizes the significance of the stacked statutory framework in a mineral-regulation context. It also consolidates the principle that concessionaires who appear in tenders of the administration are tied by the terms of the same and cannot resort to judicial review against the agreed obligations. This case is important as providing a landmark jurisprudence on the scope of State authority under delegated legislation and the enforceability of tender requirements in the extractive industries.
BENJAMIN THOMAS,
4th Year Intern, Symbiosis Law School, Hyderabad
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