2026 INSC 627 Page 1 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO OF 2026

(@ Special Leave Petition (Civil) No.16259 of 2019)

THE DIRECTOR OF MINES AND

GEOLOGY …APPELLANT (S)

[

VERSUS

M/s BMM ISPAT LTD & ANR. …RESPONDENT (S)

J U D G M E N T

SANJAY KAROL J.

Leave granted.

2. The Director of Mines and Geology, Department of Mines

and Geology, Government of Karnataka, in appeal by special

Page 2 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

leave, lays challenge to the judgement and order dated 18

th

March

2019 passed in Writ Petition No. 6979 of 2017 by the High Court

of Karnataka at Bengaluru, whereby the Court allowed the

respondent’s petition directed against an order passed by the

appellant herein, rejecting the respondent’s representation made

against the charge of higher royalty than what was stipulated in

the tender agreement, which in itself was a consequence of an

earlier round of litigation.

3. The question that we must consider, in essence, is whether

the State could, on account of a subsequent change in law, charge

an amount of royalty which is different from (increased) what is

stipulated in the tender agreement. The facts that give rise to this

question are:

3.1 This Court, in Writ Petition (Civil) No. 562 of

2009, on 23

rd

September 2011 constituted a committee

1

, for

ensuring sale of the existing stock of iron ore. The order is

extracted hereunder:

“Learned Amicus Curiae points out that it would be

useful if this Court could modify it’s Order dated 2nd

September, 2011, which was passed on the basis of

the Report of Central Empowered Committee

[‘CEC’, for short] dated 1st September, 2011, in

which certain recommendations were made by CEC.

By the said Order dated 2nd September, 2011, the

recommendations of CEC dated 1st September, 2011,

1

Hereafter ‘Monitoring Committee/ Second Respondent’

Page 3 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

have been accepted, subject to certain clarifications.

Learned Amicus Curiae suggests that it’s

recommendations may be re-produced. Accordingly,

the recommendations contained in the Report dated

1st September, 2011, are being reproduced

hereinbelow:

"Pursuant to this Hon’ble Court’s order

dated 26.8.2011 this Report is being filed by

the CEC regarding the modalities for sale

and keeping the accounts of the sale

proceeds of about 25 million MT (MMT) of

the existing stock of iron ore pertaining to

the various mining leases in the Districts of

Bellary, Chitradurga and Tumkur. Copies of

the representations on the subject received

by the CEC from the various associations

and individuals had been made available to

the Learned Amicus Curiae and the Learned

Attorney General for their consideration.

Detailed discussions were held between the

Learned Attorney General, the Learned

Amicus Curies Mr. Shyam Divan and Mr.

A.D.N. Rao, representatives of the MoEF

and Members of the CEC on 1.9.2011 and

this report reflects the consensus arrived at.

2. The following modalities for the sale of the existing

stock of iron ore, keeping the account of the sale

proceeds and related issues are submitted for the

consideration of this Hon’ble Court:

i) the quantity of 1.5 million MT of iron ore per

month, as per the breakup given at

ANNEXURE-R1 to this Report, will be sold;

ii) this quantity will be sold through e-

auction(s). For this purpose the mining lease-

wise/grade-wide reserve price will be fixed

after taking into consideration the sale price

obtained/ fixed by the NMDC;

iii) the steel and associated industries, who have

been wholly/partly dependent on the iron ore

from Karnataka, will be eligible to participate

Page 4 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

in the e- auction of iron ore for their own use.

No middlemen/traders will be eligible to

participate in the e-auction and no exports will

be permissible;

iv) the pelletisation and beneficiation plants

may participate in the e-auction provided that

the iron ore so purchased, after

processing/value addition, is made available

only to the steel and associate industries. No

exports will be permissible;

v) the physical verification of the existing stock

of the iron ore will be carried out before e-

auction so as to determine the quantity of iron

ore of different grades physically available;

vi) the terms and conditions and the procedure

being followed for e-auction of low grate iron

ore by the NMDC (A copy is enclosed at

ANNEXURE-R-2 to this Report), with

appropriate changes will be used for the

purpose of e- auction and delivery and

transportation of the auctioned iron ore;

vii) the e-permit system for the issue of transit

passes (Mineral Dispatch Permit/trip sheet) will

be followed. The weigh bridges will be linked

with the online e-permit system. The

transportation route will be determined in such

a way so as to ensure that the trucks

transporting the iron ore pass through at least

one check post having weigh bridge and where

the quantity of the iron ore being transported

will be verified with reference to the quantity

loaded in the truck;

viii) the successful bidder will, in addition to

the sale price of the iron ore, be required to pay

the applicable royalty (at 10% of the market

price), Forest Development Tax, sales tax, cess

and other applicable charges;

ix) the sale price along with the royalty

applicable taxes and other charges will first be

deposited in the designated bank account(s) in

the nationalised bank(s). Out of the above, the

royalty, taxes and other charges payable on the

Page 5 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

sale price will be paid under the respective

"Heads of Receipts" to the Government and the

balance amount, after payment of the service

charges for e-auction, will be invested in fixed

deposit(s) in the nationalized bank(s). The

accounting of the receipts and payments,

mining lease-wise, will be maintained under

double entry system;

x) it is submitted that in respect of the mining

leases found (by the Joint Team) to be involved

in illegal mining no amount towards the sale

price may presently be disbursed to them. In

respect of the mining leases where the Joint

Team has not found any illegality (as per the list

enclosed at ANNEXRE-R- 3 to this Report),

presently 80% of the sale price may be

disbursed to the respective lease holders and the

balance 20% of the sale price may be retained;

xi) a Committee comprising of Mr. Deepak

Sharma, Additional Principal Chief

Conservator of Forest, Karnataka Forest

Department, Dr. U.V. Singh, Chief Conservator

of Forest, Karnataka Forest Department and

Mr. H.R. Srinivasa, Director, Mines &

Geology, Government of Karnataka may be

constituted (hereinafter called the ‘Monitoring

Committee’) for dealing with the various issues

related to the sale and the transportation of the

existing stock of iron ore, keeping account of

the sale proceeds and related issues. The above

said three officers are at present functioning as

Members of the Joint Team constituted by the

Hon’ble Court by order dated 6.5.2011;

xii) the Monitoring Committee will have the

powers and responsibilities for/to:

(a) physical verification of the existing stock

of the iron ore of various grades in each of

the mining lease;

(b) decide upon the frequency of auctions for

a month (and within the month), prescribe

the terms and conditions of the auction

(including Prior Registration of eligible

Page 6 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

buyers and their capacities), fixation of the

reserve price, including regarding the

payment of the EMD, period of

transportation, transport route, size of each

lot (of various grades of iron ore in each

mining lease), procedure for delivery of the

iron ore sold, issue of bulk permit, the

Mineral Dispatch Permit (trip sheet) and

Form No. 27 (Forest Permit). It is suggested

that the Monitoring Committee may fix the

lot size after taking into consideration the

quantum of iron ore that can be transported

by the railways in one rake (each rake is

estimated to carry about 4012 MT of iron ore

based on the assumption that a rake normally

has 59 wagons/boxes and the capacity of

each wagon/box is approximately 68 MT);

(c) the receipt of sale price, royalty, taxation

of applicable charges in bank account(s)

maintained in the nationalized bank(s),

investment in the fixed deposits in the

nationalized bank(s), payment of royalty,

taxes and applicable charges, payment of

service charges for e-auction, investment of

the balance amount in the fixed deposits with

the nationalized bank(s) and its disbursal as

per the directions of this Hon’ble Court;

(d) co-opt the respective Deputy

Commissioner and the Superintendent of

Police of the concerned District as special

invitees for keeping an effective check on

the movement of trucks carrying iron ore

including surprise checks and other

associated activities; and

(e) to consider complaints with regard to

hoarding and to debar a particular party/

industry from taking part in the e-auction if

(i) the quantity of iron ore being purchased

by it is found to be in excess of its actual

requirement and which consequently is

adversely affecting the availability of iron

ore to the other eligible buyers and (ii) non

Page 7 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

compliance of the terms and conditions of e-

auction.

xiii) in the event of any violation of the terms

and conditions regarding loading, lifting and

transportation of the quantity sold by e-auction,

the purchaser will be liable for deterrent action

including imposition of the penalty and/or

debarring him from taking part in future

auctions. and xiv) the MSTC Ltd., a Mini Ratna

Category I, Public Sector Enterprise under the

administrative control of Ministry of Steel,

Government of India be engaged for conducting

e-auction. For the reasons set out hereafter,

service charge of 0.3% may be fixed as payable

to the MSTC Ltd.

3. In this regard a copy of the profile of the MSTC

Ltd. is enclosed at ANNEXURE-R-4 to this Report.

The MSTC Ltd. has been engaged by the NMDC for

e-auction of its low grade iron ore. The MSTC Ltd.

has vide their letter dated 30th August, 2011 sought

service charge of 0.6% of the sale value/ auction value

plus the applicable service tax and the cess thereon

(enclosed at ANNEXURE-R-5 to this Report). On the

other hand the MMTC, which is a Public Sector

Undertaking under the administrative control of the

Ministry of Commerce & Industry, has vide its letter

dated 30th August, 2011 shown its willingness to take

up the work of e-auction at a flat rate of 0.1% of the

sale price realized (copy enclosed at ANNEXURE-R-

6 to this Report). In the premiss, service charge of

0.3% appears to be fair and reasonable.

4. It is also recommended that the Monitoring

Committee may not be allowed to utilize any part of

the sale proceeds or interest thereon except for

depositing the royalty, taxes and other applicable

charges, payment of the service charges towards the

e-auction service and payment to the lessees as per

para 2 (x) above. The CEC may for the present be

permitted to release funds to the Monitoring

Committee for meeting the expenditure towards

Page 8 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

monitoring, online linking of weigh bridges with e-

permit system and related activities. The amount paid

by the CEC may be reimbursed to it in due course of

time and as per directions of this Hon’ble Court.

5. The above modalities for sale and keeping the

account of the sale proceeds of the existing stock of

the iron ore may also be made applicable in respect of

the manganese ore available in the respective mining

leases.

This Hon’ble Court may please consider the above

Report and may please pass appropriate orders in the

matter."”

The Monitoring Committee, functioning on the strength of this

Court’s order, organised an e-auction being No. 41 (14 – 15) in

which the respondent was declared the successful bidder of

several lots.

3.2 Having been declared as such, respondent No.1

furnished to the Authority the amount as requested for sale

price, royalty, FDT, VAT etc. and acceptance letter was

accordingly issued, which is reproduced below:

ANNEXURE P-2

Acceptance Letter/Sale Order Details/Invoice

Buyer Details:

Buyer’s Ref No : 41456

Company Name : BMM ISPAT

LIMITED

Contact Person : Anil Kumar S C

Street/Door No : #114, Danapur

Village

City : Hospet

Country : INDIA

Seller Details:

Company Name : MONITORING

COMMITTEE, DEPARTMENT

OF MINES AND GEOLOGY

Contact Person : H R SRINIVASA

Location : Bangalore

Street : Khanija Bhavan, Race

Course Road

City : Bangalore – 560 001

Page 9 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

Pin : 583222

PAN NO : AACCB3556B

VAT/TIN No : 29430245525

Telephone No. : +919972309492

Mobile No. : 9972309492

Email : anil@bmm.in

Country : India

TIN No. : 29860633143

Telephone : 080 22375346,

22269632

Fax : 080 22341135

Email :

moncom.eauction@gmail.com

Reference : MSTC/BLR/14-15 Tax Invoice No. EA-

Number : 39/41456/215

Date : 28/06/2014

Auction Number : MSTC/BLR/MONITORING

COMMITTEE/39/BANGALORE/14-15/3795

Date Of Opening : 27/06/2014

We acknowledge receipt of your payment of Rs. 25,00,000/- towards EMD

as per details below.

DD/Po/Chq No. 575134, Dated: 11/06/2014, Bank/Branch: SBH,

Bangalore.

We confirm acceptance of your rate for the following items as per details

given below:

Lot No.

Qty (MT) Rate Material

Value

Royalty VAT FDT Total EMD/SD

:

FINES/JUN/

C/338

12000 2428 29136000

2913600 1762728 3496320 37308648 1500000

Inclusive of Rs. 50/- P.T. Contingency (Rs. 6,00,000/-)

*3790864

8

LOT DESCRIPTION: Iron Ore fines

LOCATION: M/s. NMDC Kumarswamy Mines M.L. No. 1111 (C Block Forest Land) State :

Karnataka

Royalty: 10%, VAT: 5.5%, FDT: 12%

Page 10 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

*Rs. 50/- per tonne is included to meet variance in royalty or

other taxes which may arise in future

You are requested to deposit Rs. 3,69,08,648/-** for the above

lot into the account No. 31944819186 (IFS Code:

SBIN0014431) in the name of MONITORING COMMITTEE

with State Bank of India, SPL. AGR. COM. Branch Bangalore

560001 by way of RTGS for the above Lot(s) by 21/07/2014.

The EMD amount, mentioned above, is converted into

Security Deposit.

** After taking into account the amount of Rs. 10,00,000/-

received in excess of applicable EMD.

Remark:

1) SALE IS ON AS-IS WHERE–IS BASIS & GOVERNED BY

TERMS & CONDITIONS OF E-AUCTION SALE.

2) LAST DATE TO TAKE DELIVERY OF IRON ORE IS

WITHIN 20 DAYS FROM THE DATE OF ISSUE OF BULK

PERMIT.

Please note that in case, you fail to make payment towards

material value and other charges for any or all lots, your

security deposit for the corresponding lot/s shall be forfeited.

You are required to submit Form 27(C) to this office lot-wise

while submitting documents for Bulk Permit. Form 27(C)

should also be submitted to the Lessees/Stock Yard.

For Monitoring Committee

Sd/-

Signature

3.3 The Central Government, by amendment to the

Second Schedule appended to the Mines and Minerals

(Development and Regulation) Act, 1957 dated 1

st

September 2014 revised the rates of royalty for iron ore to

Page 11 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

15% w.e.f. the very same date, as opposed to 10% which

was the applicable rate as on the date of the tender

agreement i.e., 20

th

July 2014.

3.4 Relevant clauses of the Agreement between

respondent no.1 and the Monitoring Committee, are as

follows:

“3. Contract period: The periods of contract for

various quantities of materials are as given below. The

period is reckoned from the date of Acceptance letter

issued by the MONITORING COMMITTEE.

QUANTITY OF IRON

ORE BOOKED

PERIOD OF CONTRACT

UPTO 20000 WMT 20 CALENDAR DAYS

ABOVE 20000 WMT ADDITIONAL 5 (FIVE)

CALENDAR DAYS FOR

EVERY 4000 WMT SUBJECT

TO MAXIMUM PERIOD OF

CONTRACT THAT IS 60 DAYS

IN CASE OF LOTS

FROM NMDC-DIOM

10 DAYS FROM THE DATE

OF BULK PERMIT

The successful bidders have to lift the allocated quantity

under this contract within the contractual period as

mentioned above. Time is the essence of the contract. The

time period given is firm and fixed. Any extension of time

may be granted in exceptional circumstances at the sole

discretion of the MONITORING COMMITTEE. This

contract does not in any way grant the successful bidder

any right to claim extension of time. The bidder shall

acquaint him with the local conditions and shall not

complain on any issue later.

8. Security Deposit (SD): On issuance of Acceptance

Letter by the Monitoring Committee, the EMD amounts,

corresponding to the Nos. of lots allotted, paid by the

successful bidder, will be automatically converted into

Page 12 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

Security Deposit. The security deposit will not carry any

interest.

The Security deposit will be returned only after

satisfactory performance of contract of sale upon written

request from the successful bidder. In case,

MONITORING COMMITTEE is held liable to pay any

claims to outside agencies due to lack of diligence, skill

or care in the performance of duties of the successful

bidder, such claims will be recovered from the security

deposit. If the amount of such claims exceeds the SD

amount, the differential amount shall also be paid by the

successful bidder.

The Security deposit will be forfeited in case successful

bidder fails to comply with all or any of the Terms &

conditions regarding the online auction or to lift

allocated quantity within the contract period.

9. PAYMENT: Full payment shall be made for the entire

allotted quantity in advance by RTGS or Demand Draft

within the date stipulated in the acceptance letter. The

advance amount shall include the bid value, royalty,

sales tax, forest development fee (wherever applicable)

and any other statutory duties, levies and taxes etc. In

addition to the above, the Party has to deposit in cash @

Rs.100/- per tonne to meet the variance in royalty, or

other taxes, which may arise in future…”

(emphasis supplied)

3.5 In pursuance of the tender, respondent no. 1 in

batches, removed the iron ore from the allotted areas, some

of which was after the date of the amendment of the Second

Schedule. Upon completion of the tendered work, vide letter

dated 1

st

of February 2016 addressed to respondent no. 2,

respondent no.1 sought reimbursement of the security

deposit.

Page 13 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

3.6 In terms of letter dated 11

th

February 2016,

addressed to the Monitoring Committee, the appellant

communicated the objections of the Accountant General

qua deficiency of 5% in the royalty amount considering the

rate prevalent at the time of transportation of the tendered

goods. Accordingly, the discrepancy in the amount, to the

tune of Rs.2,09,26,077/- which was inclusive of VAT

@5.5% totaling Rs.10,19,933/- were deducted from the

total amount of security deposit amounting to

Rs.2,91,92,750/- and the balance amount of Rs.82,66,673/-

was refunded. The Monitoring Committee, in its letter dated

18

th

March 2016 supported the deduction of further 5%

royalty as follows:

“1. The effective enhancement in Royalty from 10% to

15% on the material value has come into effect from 01-

09-2015. The Monitoring Committee has been

recovering Royalty amount of 15% since then. The

qualification of the AG's audit was that the collection of

Royalty is linked to the removal/consumption of mineral

from the leased area. Accordingly the difference arose on

account this was recovered. Hope you might have

referred Sec.9 (1) pertaining to Royalties in respect of

mining leases in Mines & Minerals (Development &

Regln.) Act 1957. For your kind information, under this

provision only the recovery was made which please note.

2. In para 4 of your letter you have mentioned that the

date of bulk permit is the date of despatch of minerals, is

not true. Further in para 5 of your letter you have

mentioned that the respective letter of acceptance/sale

order/invoice which are to be construed as the date of

vesting of title and is relevant to levy Royalty is also not

acceptable, as Sec.9 (1) of the MMDR act 1957, ascribes

Page 14 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

mainly as per the sale of good act 1932. Wherein,

Chapter 4 of sale of goods act 1932, Sec. 33 and 34

describes on acceptance and delivery. Unless the

delivery takes place, by mere acceptance, the sale is not

complete. Accordingly, your mere acceptances of having

acceptance letter/sale order/invoice/bulk permit are

considered as only your acceptance and not the delivery

per se. Completion of sale takes place when you apply

for the delivery of the goods and remove thereby. Your

submission/issuance of trip sheet is only the conclusive

evidence of delivery i.e date of despatch of minerals as

against your claim in para 7, that trip sheet can't be

construed as despatch of ore.

3. In view of what has been stated above, we may not be

in a position to consider refunding of the amount so

collected. Further, we have to inform you that, the money

so collected has already been transferred to DMG,

Bangalore, as per their direction and for any such

claim/refund you may please prefer with them.”

Yours faithfully,

Sd/-

Jaganath Poojary

Finance Manager

Monitoring Committee

3.7 Such action of the appellant was challenged before

the High Court by way of Writ Petition No.57901 of 2016.

The same was disposed of by the High Court vide order

dated 29

th

November, 2016 observing that the matter has to

be reconsidered by the competent authority and as such

directed them to appear before the appellant on 7

th

December 2016.

Page 15 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

3.8 The appellant, in compliance of the above order

passed an order on 25

th

/31

st

January 2017, rejecting the

claim of respondent no.1 against such deduction from the

security deposit. The ground to do so as it appears from the

perusal of the order was Section 9 of the MMDR Act 1957.

3.9 It is this rejection of representation that was

challenged before the High Court in the impugned order.

4. The relevant extract of the High Court order is as under:

“6. It is not in dispute that by notification dated 01.09.2014,

the Central Government brought amendment to sub-Section

(3) of Section 9 of the Act, whereby royalty payable on iron

ore was increased from 10% to 15%. It is also not in dispute

that petitioner had submitted his bid to purchase iron ore.

Petitioner’s bids were accepted prior to 01.09.2014. As per

e-auction conditions, petitioner has tendered entire value of

iron ore and royalty at 10% applicable as on the date prior

to 01.09.2014.

7. The contention of Shri Keshava Reddy that, Rs.50/- per

tonne of iron ore collected to meet variation in royalty and

other taxes if any, which may arise in future is sufficient

circumstance to show that petitioner had agreed to pay

royalty at increased tariff, must fail because as on the date

on which the bids were accepted and amount was paid by

petitioner to the Monitoring Committee, the amendment

had not come into force.

8. The parties were ad idem so far as sale of iron ore to

petitioner at the price offered by him and accepted by the

Monitoring Committee together with 10% royalty is

concerned. It is not in dispute that petitioner participated

in the auction and bid for iron ore mineral which was

already extracted. Petitioner has paid the entire value of the

iron ore purchased in auction and the royalty payable

thereon. The only act remained was to transport the iron ore

Page 16 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

from the stock yard. Admittedly, there was no time limit

prescribed to do so. However, in the interregnum, the rate

of royalty has increased from 10% to 15%.

9. In the facts and circumstances of this case recorded

hereinabove, in our considered view, any attempt to

impose royalty more than what was applicable as on the

date of acceptance of bid would be unjust.

10. In the circumstances, the order dated

25.01.2017/31.01.2017 (Annexure-M) holding that

petitioner’s application is not maintainable under Section

9 of the Act is unsustainable in law. Hence, this writ

petition merits consideration and it is accordingly

allowed.

The order dated 25.01.2017/31.01.2017 (Annexure-M) is

set aside.”

5. We have heard Mr. Devdutt Kamat, learned senior counsel

for the appellant and Ms. Kiran Suri, learned senior counsel for

the respondent(s) and perused the record as well as the written

submissions.

5.1 The substance of the appellant’s case is that the

enhancement of royalty is a statutory function and

discretion vests with the Central Government, which

cannot be taken away since there is no legal concept of

“crystallisation” of royalty at the time of auction.

Royalty, being a statutory import, cannot be frozen by

contractual arrangements or equitable considerations.

5.2 On the other hand, the respondents submit, inter-

alia, that the royalty payable by them would be only at

10%. The provision of Section 9 would not apply to the

Page 17 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

present proceedings, since the appellants do not qualify

as holders of mining leases within the Act. The word

‘applicable’ used in the order of this Court by which they

came into the picture does not signal scope for any

variance. The ‘variance’ that was contemplated, in the

Agreement only dealt with existing law and not

subsequent legislation.

6. The fulcrum of the dispute rests on Section 9 of the

MMDR Act 1957. It reads thus:

9. Royalties in respect of mining leases.—(1) The holder

of a mining lease granted before the commencement of

this Act shall, notwithstanding anything contained in the

instrument of lease or in any law in force at such

commencement, pay royalty in respect of any

1

[mineral

removed or consumed by him or by his agent, manager,

employee, contractor or sub-lessee] from the leased

area after such commencement, at the rate for the time

being specified in the Second Schedule in respect of that

mineral.

(2) The holder of a mining lease granted on or after the

commencement of this Act shall pay royalty in respect of

any mineral removed or consumed by him or by his

agent, manager, employee, contractor or sub-lessee

from the leased area at the rate for the time being

specified in the Second Schedule in respect of that

mineral.

(2-A) The holder of a mining lease, whether granted

before or after the commencement of the Mines and

Minerals (Regulation and Development) Amendment

Act, 1972, shall not be liable to pay any royalty in

respect of any coal consumed by a workman engaged in

a colliery provided that such consumption by the

Page 18 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

workman does not exceed one-third of a tonne per

month.

(3) The Central Government may, by notification in the

Official Gazette, amend the Second Schedule so as to

enhance or reduce the rate at which royalty shall be

payable in respect of any mineral with effect from such

date as may be specified in the notification:

Provided that the Central Government shall not enhance

the rate of royalty in respect of any mineral more than

once during any period of three years.

A perusal of the above reveals the following to be the main facets

of Section 9:-

1. Existence of a Mining Lease

The provision applies to the holder of a mining lease,

whether granted before or after the commencement of the

Act.

2. Removal or Consumption of Mineral

Royalty becomes payable when any mineral is removed

or consumed from the leased area.

3. Persons Covered

The liability extends not only to removal or consumption

by the leaseholder personally but also by his agent,

manager, employee, contractor, or sub-lessee.

4. Rate of Royalty

Royalty must be paid at the rate for the time being

specified in the Second Schedule of the Act. The rate to

be paid shall not be enhanced more than once every

Page 19 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

three years.

5. Power of Central Government to Amend Rates

The Central Government may, by notification, amend the

Second Schedule to enhance or reduce royalty rates, but

enhancement cannot be made more than once within a

period of three years.

7. So, for Section 9 to be applicable to a given set of facts,

there must be an existing mining lease; there must be removal or

consumption of mineral, and the person who has done the above

two acts, must be covered by the text of the statute.

8. The stockpile in regard to which the order dated 23

rd

September 2011 came to be passed by this Court in WP (C) No.

562 of 2009 is as a result of this Court having passed an order,

banning mining of any nature in the concerned areas on 29

th

July

2011. The Centrally Empowered Committee, made certain

recommendations regarding the mining in that area and the ore

that had already been mined and extracted was also thereby

allowed to be sold in terms of sale, in which the appellant got the

rights over the iron ore in question. Before coming to the core

question arising in this matter, we may take care to restate some

basic propositions as referred to in Mineral Area Development

Page 20 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

Authority v. SAIL,

2

(a) Rates of royalty

“83. Rates of royalty were primarily governed by the terms

of lease prior to the enactment of the MMDR Act. Once a

mining lease was entered into between a lessor and lessee,

the rates of royalty would remain static during the

subsistence of the lease. Section 9 of the MMDR Act has

enabled the Central Government to examine the rates of

royalty in respect of all minerals and modulate them

periodically after taking into consideration various factors,

including the uniformity of mineral prices. The primary

reason for empowering the Central Government to fix the

rate of royalty could be traced to the Industrial Policy

Resolution which underscored the active and predominant

role of the State in organising and utilising mineral

resources. The State Governments were not empowered to

determine royalty in order to maintain a uniform regime of

royalty across India. This was intended to promote

domestic industry and maintain competitive commodity

prices in the international market. [ Lok Sabha Debates,

Vol. VIII (11-11-1957 to 22-11-1957, Third Session) 463.]”

(b) What is a lease?

“86. The expressions “lease” and “licence” have been used

in the context of mining operations in the Constitution and

in the MMRD Act. Therefore, it is important to understand

the meaning of these expressions in their general legal sense

to appreciate their application to mineral operations.

87. A “lease” connotes a transfer of a right of enjoyment in

immovable property for a certain time in lieu of

consideration. [Mulla on the Transfer of Property Act,

1882 (13th Edn.).] Section 105 of the Transfer of Property

Act, 1882 defines a lease of immovable property as a

transfer of a right to enjoy such property, made for a certain

time, express or implied, or in perpetuity, in consideration

of a price paid or promised, or of money, a share of crops,

2

(2024) 10 SCC 1

Page 21 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

service or any other thing of value, to be rendered

periodically or on specified occasions to the transferor by

the transferee, who accepts the transfer on such terms.

[Transfer of Property Act, 1882, Section 105.] The

provision defines “lessor”, “lessee”, “premium”, and

“rent”. The “transferor is called the lessor, the transferee is

called the lessee, the price is called the premium, and the

money, share, service or other thing to be so rendered is

called the rent”. This Court has interpreted the expression

“rent” widely to mean any payment for the use or

occupation of land or building including the payment by a

lessee in respect of the use or occupation of any land or

building. [State of Punjab v. British (India) Corpn. Ltd.,

1963 SCC OnLine SC 218 : (1964) 2 SCR 114, para 15]

88. According to Section 3(26) of the General Clauses Act,

1897, immovable property is defined to include land,

benefits to arise out of land, and things attached to the earth,

or permanently fastened to anything attached to the earth.

[ General Clauses Act, 1897, Section 3(26).] Section 2(6)

of the Registration Act defines immovable property to

include land, buildings, hereditary allowance, rights of way,

lights, ferries, fisheries, or any other benefit to arise out of

land, and things attached to earth, or permanently fastened

to anything which is attached to the earth, except for

standing timber, growing crops, and grass. [ Registration

Act, 1908, Section 2(6).] A mineral is also a benefit arising

out of land. The right to carry out mining operations to

extract minerals under a mining lease has been held by this

Court to be a right to enjoy immovable property within the

meaning of Section 105. [State of Karnataka v. Subhash

Rukmayya Guttedar, 1993 Supp (3) SCC 290, para

6; Tarkeshwar Sio Thakur Jiu v. Dar Dass Dey & Co.,

(1979) 3 SCC 106, para 37]

89. The expression “licence” is defined in the Easements

Act, 1882 as follows:

“52. “Licence” defined.—Where one person grants

to another, or to a definite number of other persons,

a right to do, or continue to do, in or upon the

immovable property of the grantor, something

Page 22 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

which would, in the absence of such right, be

unlawful, and such right does not amount to an

easement or an interest in the property, the right is

called a licence.” [ Easements Act, 1882, Section

52.]”

(c) Characteristics of royalty:

“103. The essential characteristics of royalty are that:

(i) it is a consideration or payment made to the proprietor

of minerals, either the government or a private person;

(ii) it flows from a statutory agreement (a mining lease)

between the lessor and the lessee;

(iii) it represents a return for the grant of a privilege (to the

lessee) of removing or consuming the minerals; and

(iv) it is generally determined on the basis of the quantity of

the minerals removed.”

9. If we consider the recent decision by a Bench of 9 judges

of this Court, in Mineral Area Development Authority (supra)

and its reference to RS Sarkaria J’s opinion rendered Tarkeshwar

Sio ThakurJiu v. Dar Dass Dey & Co

3

wherein the term ‘mining

operations’ has been interpreted to be expansive “so as to

comprehend every activity by which the mineral is extracted or

obtained from the earth irrespective of whether such activity is

carried out on the surface or in the bowels of the earth”, then,

what the respondent is engaged in, would also be covered.

3

(1979) 3 SCC 106

Page 23 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

10. In view of the above, at the outset the respondent’s

contention of non-applicability of Section 9 of the Act has to be

negated. This is more so for the reason that the respondent herein

has chosen not to challenge the determination of the Division

Bench in the impugned judgment that Section 9 would apply to

them. Keeping that aside, we proceed further. It is a matter of

record that the contract inter se the parties stood signed prior to

the amendment coming into force. All payments, including

royalty had been made. All that remained was for the iron ore to

be lifted and transported away from the site of mining. It is also

seen from record that between the time all the payments having

been made and the actual moving of the iron ore, took place the

rate of royalty stood increased.

11. One would think that a specified amount (Rs.100 as

envisaged in the tender document and Rs.50 as finalized in the

contract) being already given, the respondent’s liability on

account of increase in royalty would be limited thereto, but

according to the appellant it is not so. The difference in royalty

between 10% and 15% was subtracted from the security deposit

and remainder was returned. This, in our view, appears to be the

correct approach for a contractual provision would have to give

way to a statutory amendment. Had the increase been by way of

any other method other than a statutory amendment, the

Page 24 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

contractual provision limiting the respondent’s liability would

have prevailed.

12. This Court in its order fixing the rate of royalty at 10% use

the word ‘applicable’, which denotes, in our understanding,

applicability at the relevant time, of removing the tendered goods

which already stood extracted, and does not intend to freeze the

rate of royalty. We are supported in our conclusion by the

understanding of a 9-Judge Bench in Mineral Area Development

Authority (supra) wherein the payment of royalty is linked with

dispatch. D.Y. Chandrachud, CJI writing for majority held as

under:

“92…The expression “dispatch” has been defined to mean

the removal of minerals or mineral products from the

leased area and to include the consumption of minerals and

mineral products within such area. [ MMDR Act, Section

3(aa).] It is worth noting that royalty is payable under

Section 9 on the removal or consumption of minerals by the

lessee in the leased area. Thus, essentially royalty is

payable on the dispatch of minerals from the leased area.”

(emphasis supplied)

13. In that view of the matter, the payment is to be made on

the date of the movement of the minerals. If the date of the

movement is after the enhancement in royalty, a contract entered

into prior to the statutory change cannot be limiting its impact. In

other words, the appellant was correct in deducting the additional

5% royalty from the security deposit of the respondent. It would

Page 25 of 25

Civil App.No…/2026 @ SLP (C)16259/2019

have been entirely open to the respondents to remove the iron ore

from the site at one go or at any date prior to the amendment,

which they chose not to do. It is they who either adopted the

piecemeal approach in moving the mineral or moved the entire

quantity after the date of the amendment. As such, they cannot

escape payment of enhanced royalty.

14. Resultantly, the appeal is allowed. Impugned judgment,

the particulars of which are mentioned in paragraph 1 is quashed

and set aside.

Pending application(s), if any, shall stand disposed of.

………………………. ……………………J.

(SANJAY KAROL)

……….…………………………………….J.

(NONGMEIKAPAM KOTISWAR SINGH)

New Delhi;

June 4, 2026