A) ABSTRACT / HEADNOTE

The Supreme Court of India in Chandra Bhan Singh v. State of Uttar Pradesh & Others dealt with a critical issue concerning the liability of a successful mining bidder to contribute a percentage of the bid amount to the District Mineral Foundation (DMF) under the Mines and Minerals (Development and Regulation) Act, 1957 and the Uttar Pradesh Minor Minerals (Concession) Rules, 1963. The appellant, a successful bidder for sand mining, was issued a demand notice requiring him to deposit 10% of the total bid amount with the DMF Trust. The appellant challenged the notice on the ground that Section 9B of the 1957 Act permitted levy only in proportion to the royalty and not on the entire bid amount.

The Court clarified that Section 14 excluded the application of Sections 5 to 13, including Section 9B, to minor minerals. The Court further held that Section 15A expressly empowered the State Government to prescribe payments to the DMF in cases of minor minerals. Thus, the State was competent to prescribe contribution at 10% of the bid amount. The Court rejected the appellant’s reliance on Rules 21 and 54 of the 1963 Rules, clarifying that under Rule 23(3) these provisions were inapplicable in e-tender processes. The Court upheld the policy decision of 22 April 2017 and affirmed that the demand notices were validly issued.

The judgment highlights the legislative scheme distinguishing between major and minor minerals, affirms the State’s regulatory autonomy, and underscores the principle that bidders cannot challenge policy decisions under which they have already taken benefit.

Keywords: Mines and Minerals (Development and Regulation) Act, 1957; Uttar Pradesh Minor Minerals (Concession) Rules, 1963; District Mineral Foundation Trust Rules, 2017; Section 9B; Section 14; Section 15A; Rule 68; Rule 10(2); Demand Notice; 10% contribution; minor minerals; sand mining; policy decision dated 22.04.2017.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute in this case arose from the contribution mechanism to the District Mineral Foundation Trust (DMF Trust) in Uttar Pradesh, which was established pursuant to the mandate under Section 9B of the Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter, 1957 Act). The appellant, Chandra Bhan Singh, was a successful bidder in an e-tender process for sand mining. Following the allotment of the mining permit, the State issued a demand requiring him to deposit 10% of the total bid amount in favour of the DMF Trust, apart from the statutory royalty and stamp duty.

The appellant questioned this demand before the Allahabad High Court, relying upon Section 9B(5) of the 1957 Act and Rule 54 of the U.P. Minor Minerals (Concession) Rules, 1963 (hereinafter, 1963 Rules). He contended that the levy could only be calculated on royalty as prescribed under the Second Schedule of the 1957 Act, and not on the total bid amount. The High Court rejected the plea, holding the State competent to impose such a levy.

The Supreme Court was thus called upon to decide whether the demand of 10% of the total bid amount—rather than 10% of the royalty amount—was legally sustainable. The Court also had to consider whether the Policy decision of 22.04.2017, under which the demand was framed, was validly issued under Rule 68 of the 1963 Rules.

This case has significant implications for the regulatory framework governing minor minerals, balancing the State’s revenue interests with bidders’ contractual obligations. The ruling clarifies the demarcation of legislative competence between the Union and the State, particularly with reference to minor minerals, and affirms the enforceability of State-level policy directions issued in exceptional circumstances of environmental regulation and mining bans.

D) FACTS OF THE CASE

The appellant, Chandra Bhan Singh, was declared a successful bidder for the mining of sand—a minor mineral—pursuant to an e-tender process initiated by the Uttar Pradesh Government under its mining policy dated 22.04.2017. He was allotted a mining permit on 16.10.2017. As per the bid, the appellant deposited an amount of ₹5,41,29,600 at the rate of ₹630 per cubic metre of sand.

Subsequently, a demand notice dated 25.10.2017 was issued requiring the appellant to deposit an additional ₹54,12,960, being 10% of the total bid amount, in favour of the DMF Trust, Kanpur. The appellant challenged this notice before the Allahabad High Court, contending that under Section 9B of the 1957 Act, contribution to the DMF could only be levied at a rate proportionate to royalty, not on the bid amount. He further argued that the Policy decision dated 22.04.2017 was ultra vires as it was not issued in compliance with Rule 68 of the 1963 Rules, which permitted relaxation of rules under exceptional circumstances.

The High Court dismissed the writ petition on 15.11.2017, upholding the validity of the demand notice. The appellant then approached the Supreme Court through Civil Appeal No. 12314 of 2024, which was heard along with connected appeals.

The central issues before the Supreme Court were: (i) whether the State could legally mandate a contribution of 10% of the bid amount to the DMF Trust, and (ii) whether the Policy of 22.04.2017 and the consequential demand notice were issued in compliance with statutory procedure.

E) LEGAL ISSUES RAISED

i. Whether Section 9B of the 1957 Act is applicable to minor minerals such as sand in light of Section 14 of the Act?
ii. Whether the contribution to the DMF Trust should be calculated on royalty or on the total bid amount?
iii. Whether the Policy decision dated 22.04.2017 was validly issued under Rule 68 of the 1963 Rules?
iv. Whether Rules 21 and 54 of the 1963 Rules are applicable in e-tender processes governed by Rule 23(3)?
v. Whether the demand notice dated 25.10.2017 is valid and enforceable?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for the appellant submitted that Section 9B of the 1957 Act clearly stipulated that the DMF contribution could only be in addition to royalty and restricted to a percentage of such royalty as prescribed by the Central Government. The demand of 10% of the bid amount was therefore contrary to the scheme of the Act. It was urged that Section 14 did not exclude Section 9B, as Section 15(4) extended its application to minor minerals as well, covering both constitution and financial contributions to the DMF.

They contended that under Rule 54 of the 1963 Rules, royalty was payable only for the mineral quantity permitted for extraction and at rates specified under Rule 21. Hence, calculation of DMF contributions must be restricted to royalty, not bid value. Further reliance was placed on the Second Schedule of the 1957 Act, which fixes royalty rates for different minerals, thereby excluding any other mode of calculation.

The appellant also challenged the validity of the Policy decision dated 22.04.2017, arguing that it did not comply with Rule 68 of the 1963 Rules. This rule permitted relaxation of rules under exceptional situations, but here the State had effectively introduced a new levy bypassing the prescribed procedure. It was argued that the levy was excessive, arbitrary, and ultra vires the statute.

G) RESPONDENT’S ARGUMENTS

The counsels for the respondent-State, led by the Additional Solicitor General, submitted that Section 14 of the 1957 Act expressly excluded the application of Sections 5 to 13, which included Section 9B, to minor minerals. Consequently, reliance on Section 9B was misplaced. Instead, the relevant provision was Section 15A, which empowered the State Government to prescribe contributions to the DMF in respect of minor minerals.

They relied on Rule 10(2) of the District Mineral Foundation Trust Rules, 2017, which provides that every permit holder shall pay to the DMF Trust either 10% of the royalty or such amount as may be prescribed by the State Government. Since the State had prescribed 10% of the bid amount under its Policy decision, this demand was lawful and binding.

The State further argued that the appellant could not challenge the Policy decision after voluntarily participating in the tender floated under it and securing allotment. Having derived benefit under the Policy, the appellant was estopped from questioning its validity. They also pointed out that the Policy decision dated 22.04.2017 was issued under Rule 68 of the 1963 Rules in compliance with judicial directions issued by the Lucknow Bench of the High Court in a Public Interest Litigation. Given the peculiar circumstances of a complete mining ban and urgent developmental needs, the State’s invocation of Rule 68 was justified.

H) RELATED LEGAL PROVISIONS

i. Section 9B, 14, 15, 15A – Mines and Minerals (Development and Regulation) Act, 1957
ii. Rules 21, 23(3), 54, 68 – U.P. Minor Minerals (Concession) Rules, 1963
iii. Rule 10(2) – District Mineral Foundation Trust Rules, 2017
iv. Second Schedule – MMDR Act, 1957 (royalty rates)
v. Constitution of India – Article 246 (distribution of legislative powers), Entry 23 List II

I) JUDGEMENT

The Supreme Court dismissed the appeals and upheld the demand notice dated 25.10.2017 along with the Allahabad High Court’s judgment of 15.11.2017. The Court held that Section 14 of the 1957 Act explicitly excluded the application of Section 9B to minor minerals, thereby rendering the appellant’s reliance misplaced. Instead, Section 15A was decisive, empowering the State Government to prescribe contributions to the DMF in respect of minor minerals.

The Court found that under Rule 10(2) of the 2017 Rules, the State was competent to mandate 10% of the bid amount as contribution, since the rule permitted the State to prescribe amounts higher than 10% of royalty. It was further clarified that Rules 21 and 54 of the 1963 Rules were inapplicable in e-tender processes due to Rule 23(3), which excluded the operation of Chapters II, III, and VI.

Regarding the validity of the Policy decision of 22.04.2017, the Court held that it was a reasoned exercise of power under Rule 68 of the 1963 Rules undertaken in light of exceptional circumstances following a ban on mining. The policy was also backed by judicial directions issued in a Public Interest Litigation. The Court rejected the plea of procedural impropriety, holding that the State had complied with the requirements of Rule 68.

Accordingly, the Court concluded that the appellant’s liability to pay 10% of the bid amount to the DMF Trust was legal, valid, and enforceable.

a. RATIO DECIDENDI

The ratio decidendi of the case is that Section 9B of the MMDR Act, 1957 is inapplicable to minor minerals in view of Section 14; instead, Section 15A empowers the State Government to prescribe contributions to the DMF Trust in respect of minor minerals. Rule 10(2) of the DMF Rules, 2017, when read with the State’s policy directions, permits the State to levy DMF contribution on the total bid amount. Bidders participating in tenders issued under such policies are bound by the terms and cannot subsequently challenge the levy.

b. OBITER DICTA

The Court observed that mining of minor minerals is a critical economic activity with direct implications for developmental projects and public infrastructure. Policies aimed at regulating such mining and ensuring contributions to the DMF are intended to safeguard communities and regions affected by mining. The Court emphasized that bidders who voluntarily participate in tenders under specific policies cannot later challenge the terms, as such challenges undermine contractual certainty and governmental revenue planning. It also remarked that judicial review of policy decisions must be limited, especially when framed in compliance with statutory rules and judicial directives.

c. GUIDELINES

i. Section 9B of the MMDR Act, 1957 does not apply to minor minerals; Section 15A governs contributions to DMFs for such minerals.
ii. The State Government has the authority to prescribe DMF contributions on amounts beyond royalty, including bid amounts, provided such prescription is made under valid statutory rules.
iii. Rule 23(3) of the U.P. Minor Minerals (Concession) Rules, 1963 excludes the operation of Rules 21 and 54 in cases where mining leases are granted through e-tender.
iv. Policy decisions issued under Rule 68 of the 1963 Rules are valid if undertaken in exceptional circumstances and backed by judicial approval.
v. Bidders participating under a policy are estopped from challenging its terms after deriving benefit under it.

J) CONCLUSION & COMMENTS

This judgment strengthens the regulatory autonomy of States in matters concerning minor minerals, affirming their competence under Section 15A of the 1957 Act to prescribe levies payable to DMFs. By clarifying that Section 9B is inapplicable to minor minerals, the Court removes ambiguity in the statutory scheme and distinguishes between the treatment of major and minor minerals.

The Court’s reliance on Rule 23(3) to exclude the operation of Rules 21 and 54 in e-tender processes is significant, as it ensures consistency and prevents conflict between provisions. The ruling also reinforces the principle of estoppel against approbation and reprobation, preventing bidders from challenging policy terms after participation.

While the judgment supports the State’s fiscal powers, it also raises concerns about potential burden on bidders, as levy on bid amounts could escalate costs. However, by upholding contributions to DMFs, the Court has affirmed the broader public interest in ensuring welfare of mining-affected communities. The decision thus strikes a balance between contractual fairness, statutory interpretation, and developmental policy, setting a precedent for future cases concerning DMF levies on minor minerals.

K) REFERENCES

a. Important Cases Referred

i. State of Orissa v. M.A. Tulloch & Co., AIR 1964 SC 1284.
ii. Sandur Manganese & Iron Ores Ltd. v. State of Karnataka, (2010) 13 SCC 1.
iii. Hind Stone v. Union of India, (1989) 4 SCC 548.
iv. Monnet Ispat & Energy Ltd. v. Union of India, (2012) 11 SCC 1.
v. Natural Resources Allocation, In Re Special Reference No.1 of 2012, (2012) 10 SCC 1.

b. Important Statutes Referred

i. Mines and Minerals (Development and Regulation) Act, 1957 – Sections 9B, 14, 15, 15A.
ii. U.P. Minor Minerals (Concession) Rules, 1963 – Rules 21, 23(3), 54, 68.
iii. District Mineral Foundation Trust Rules, 2017 – Rule 10(2).
iv. Constitution of India – Article 246, Entry 23 List II.