(Civil Appeal No. 12314 of 2024), delivered on 23 May 20251.
2025 7 SCR 94
The case concerned the legality of a Demand Notice issued to a successful bidder for mining minor minerals, requiring a deposit of 10% of the total bid amount to the District Mineral Foundation (DMF)23.
Background of the Case
Chandra Bhan Singh (the Appellant) was a successful bidder for a tender to mine sand, which is classified as a minor mineral3. Following the tender allotment and in line with a policy decision dated 22 April 2017, the Appellant received a Demand Notice on 25 October 2017. This notice required him to deposit ₹54,12,960/-, representing 10% of the total bid amount of ₹5,41,29,600/-, to the District Mineral Foundation Trust, Kanpur3. The Appellant challenged this Demand Notice, arguing it was contrary to statutory provisions, specifically Section 9B of the Mines and Minerals (Development and Regulation) Act, 1957 (1957 Act)4. The High Court had rejected his challenge, leading to this appeal before the Supreme Court4.
Appellant’s Arguments
The Appellant raised several contentions:
• The Demand Notice was contrary to Section 9B of the 1957 Act, which, according to him, limited the additional amount to be deposited with the DMF to a percentage of the royalty fixed in the Second Schedule of the 1957 Act, not the total bid amount45.
• The underlying policy decision dated 22 April 2017, under which the demand was made, was itself unsustainable because the due process under Rule 68 of the Uttar Pradesh Minor Minerals (Concession) Rules, 1963 (1963 Rules), was allegedly not followed6. Rule 68 allows for relaxation of rules, but the Appellant argued the policy instead imposed a higher amount than prescribed6.
• Rules 21 and 54 of the 1963 Rules, pertaining to royalty payment and deposit, should apply, and the High Court erred in concluding they were inapplicable7.
Respondent’s Arguments (State of Uttar Pradesh)
The State defended the Demand Notice and the High Court’s decision, arguing:
• Section 9B of the 1957 Act is not applicable in this case due to Section 14 of the same Act, which explicitly states that Sections 5 to 13 (including 9B) do not apply to minor minerals8.
• The State Government is empowered under Section 15 of the 1957 Act to make rules for minor minerals, and specifically under Section 15A to prescribe the amount payable to the DMF for minor mineral concessions89.
• The policy decision was legally sound, and the Appellant, having participated and succeeded under its terms, could not later challenge it10.
Supreme Court’s Reasoning and Judgment
The Supreme Court upheld the High Court’s judgment and the Demand Notice, dismissing the appeal. Its reasoning was as follows:
1. Applicability of Section 9B of 1957 Act: The Court firmly established that Section 9B of the 1957 Act is not applicable to minor minerals like sand. This is explicitly stated in Section 14 of the 1957 Act, which provides that Sections 5 to 13 (inclusive) do not apply to quarry leases or mineral concessions for minor minerals11. Therefore, the Appellant’s argument based on Section 9B(5) was misplaced11.
2. State Government’s Power to Fix Amount for DMF: The Court clarified that the State Government is empowered under Section 15A of the 1957 Act to “prescribe the payment by all holders of concessions related to minor minerals of amounts to the District Mineral Foundation”12. This statutory empowerment allows the State to determine and fix the amount for minor minerals, and thus, the fixed rate of 10% of the bid amount for the DMF Trust was valid and in consonance with statutory provisions1213. The Court also noted that Rule 10(2) of the District Mineral Foundation Trust Rules, 2017, allows for an amount equivalent to 10% of royalty or “as may be prescribed by the State Government from time to time” for minor minerals13.
3. Validity of the Policy Decision (22 April 2017): The Court examined the process behind the policy decision and found that there was a reasoned decision by the State for exercising its powers under Rule 68 of the 1963 Rules14. This exercise was necessitated by a total ban on mining activity, which had stopped and delayed crucial construction and development works. The Court found no fault in the procedure adopted by the State in framing this policy14.
4. Inapplicability of Rules 21 and 54 of 1963 Rules: The Court held that Rules 21 and 54 of the 1963 Rules do not apply in this case because of Rule 23(3) of the 1963 Rules1516. Rule 23(3) explicitly states that when an e-tender process is followed (as it was in this case), Chapters II, III, and VI of the rules (where Rules 21 and 54 fall) do not apply1516.
In conclusion, the Supreme Court found no merit in the Appellant’s challenge, affirming that the Demand Notice was lawful and in line with the relevant statutory framework16. The appeal was dismissed, and the Appellant’s liability towards the DMF Trust was upheld1617.
