CHANDRA BHAN SINGH versus STATE OF UTTAR PRADESH & OTHERS (22/05/2025) — Supreme Court headnote

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Summary

Successful bidders for sand mining permits in Uttar Pradesh challenged demand notices requiring deposit of 10% of the total bid amount with the District Mineral Foundation Trust, contending the contribution was capped by Section 9B of the Mines and Minerals (Development and Regulation) Act, 1957 at a percentage of royalty. The Court held that Section 9B does not apply to minor minerals by virtue of Section 14, that Sections 15(4)(c) and 15A empower the State to fix the amount payable, and that Rule 10(2) of the 2017 Rules lets a State-prescribed amount prevail over the 10%-of-royalty default; the appeals were dismissed.

Issues

Whether the State's policy decision dated 22.04.2017 under Rule 68 of the Uttar Pradesh Minor Minerals (Concession) Rules, 1963 was issued without following due process.
Whether the contribution payable to the District Mineral Foundation by a holder of a minor mineral permit is limited by Section 9B of the Mines and Minerals (Development and Regulation) Act, 1957 to a percentage of royalty.
Whether the State Government is empowered to prescribe 10% of the total bid amount as the contribution to the District Mineral Foundation Trust for minor minerals.
Whether Rules 21 and 54 of the 1963 Rules, fixing royalty under the First Schedule, apply to areas leased through e-tender.

Provisions considered

Section 14, Mines and Minerals (Development and Regulation) Act, 1957Sections 5 to 13 do not apply to quarry leases, mining leases or other mineral concessions in respect of minor minerals; since sand is a minor mineral, the appellant's reliance on Section 9B(5) was misplaced. (¶¶ 17, 18)
Section 9B, Mines and Minerals (Development and Regulation) Act, 1957The appellant argued the DMF contribution could not exceed the percentage of royalty prescribed under Section 9B(5) read with the Second Schedule. The Court held Section 9B is excluded for minor minerals by Section 14, and sub-sections (2) and (3) operate only to the limited extent incorporated by Section 15(4)(a) and (b), which do not deal with the amount payable. (¶¶ 6, 16, 18, 19, 20)
Section 15(4), Mines and Minerals (Development and Regulation) Act, 1957Clauses (a) and (b) import Section 9B(2) and (3) only for the working, composition and functions of the DMF; clause (c) separately empowers the State to make rules on the amount of payment to the DMF by minor mineral concession holders under Section 15A. (¶¶ 19, 20)
Section 15A, Mines and Minerals (Development and Regulation) Act, 1957The State Government may prescribe the payment by all holders of minor mineral concessions to the DMF of the district; this statutory empowerment meant the State's fixation of the amount could not be faulted and the demand notice was in consonance with the statute. (¶¶ 20, 21)
Rule 10(2), District Mineral Foundation Trust Rules, 2017 (Uttar Pradesh)A minor mineral concession/permit holder must pay, in addition to royalty, an amount equivalent to 10% of royalty 'or as may be prescribed by the State Government from time to time'. The 10%-of-royalty figure is a default that applies only in the absence of a State-prescribed amount; where the State has prescribed an amount, that prevails. (¶¶ 9, 22, 23, 24)
Rule 23(3), Uttar Pradesh Minor Minerals (Concession) Rules, 1963On declaration of an area for auction/tender, Chapters II, III and VI of the 1963 Rules do not apply to it. Rule 21 (Chapter III) and Rule 54 (Chapter VI), relied on by the appellant for royalty rates under the First Schedule, were therefore not available for an e-tendered area. (¶ 25)
Rule 68, Uttar Pradesh Minor Minerals (Concession) Rules, 1963On perusal of the original records, the policy decision of 22.04.2017 was found to be a reasoned decision taken at the highest competent level in relaxation of the Rules, in a situation where a total mining ban was stalling vital projects and a High Court PIL order had required exercise of the Rule 68 power; the process was held to satisfy the Rule. (¶¶ 13, 14, 15)

Held

The State's policy decision of 22.04.2017 under Rule 68 of the 1963 Rules was validly made: the original file showed due consideration at different levels up to the highest competent authority, a reasoned decision, and exercise of the relaxation power in circumstances (a total ban on mining stalling construction and development work, and a High Court order in a PIL requiring the exercise of Rule 68) that fell within the Rule. (¶ 15)
Section 9B of the 1957 Act, including the cap in sub-section (5) linked to royalty under the Second Schedule, does not apply to minor minerals such as sand because Section 14 excludes Sections 5 to 13 from quarry leases, mining leases and other concessions in respect of minor minerals. (¶¶ 17, 18)
Section 9B(2) and (3) operate for minor minerals only to the extent imported by Section 15(4)(a) and (b), which concern the working, composition and functions of the DMF and not the amount to be deposited. The amount payable is governed by Section 15(4)(c) read with Section 15A, which empowers the State Government to prescribe the payment by minor mineral concession holders to the DMF; the State's fixation of the amount therefore cannot be faulted. (¶¶ 19, 20, 21)
Under Rule 10(2) of the 2017 Rules, 10% of royalty is payable to the DMF Trust only in the absence of an amount prescribed by the State Government; where the State has prescribed a rate or amount, that prescription prevails. The demand for 10% of the title amount (the total amount payable for the minerals to be extracted), which had been made clear in the tender notice, letter of intent and mining permit, was in accordance with Rule 10(2). (¶¶ 22, 23, 24)
Rules 21 and 54 of the 1963 Rules do not assist a permit holder under an e-tender process, because Rule 23(3) makes Chapters II, III and VI of those Rules inapplicable to areas declared for auction/tender, and those Rules fall within Chapters III and VI respectively. (¶ 25)

Result

Appeals dismissed; the High Court's judgment dated 15.11.2017 and the demand notice dated 25.10.2017 upheld, confirming the appellant's liability to the DMF Trust; connected appeals dismissed in the same terms; no order as to costs; pending applications disposed of.