The methodology for computing royalty under the MMDR Act is a policy decision, and courts should exercise restraint in reviewing such economic policies unless they violate constitutional provisions.

JUDGMENT :

J.B. PARDIWALA, J.

1. The petitioners have invoked the jurisdiction of this Court under Article 32 of the Constitution inter-alia seeking to challenge the validity of the Explanation to Rule 38 of the Mineral (Other than Atomic and Hydrocarbons Energy Minerals) Concession Rules, 2016 (for short, the “MCR, 2016”) and the Explanation to Rule 45(8)(a) of the Mineral Conservation and Development Rules, 2017 (for short, the “MCDR, 2017”) that stipulates the computation of royalty to be levied for the extraction or consumption of mined ores.

A. BRIEF FACTUAL MATRIX

2. The petitioner no.1 herein is a mining leasehold company inter-alia engaged in the extraction of pig iron and the manufacturing and sale of its by products by way of a mining lease for iron ores in the State of Karnatak in terms of the provisions and procedure envisaged under the Mineral (Development and Regulation) Amendment Act, 2015 (for short the “2015 Amendment Act”). The petitioner no.2 herein is one of the shareholders in the petitioner no.1 company. The respondent no. 1 herein is the Union of India through the Secretary, Ministry of Mines, whereas the respondent no. 2 herein is the Indian Bureau of Mines.

3. As per Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 (for short, the (“MMDR, Act”), the revenue required to be paid for any mineral removed or consumed from the leasehold area would be in the form of royalty and mandates the mining leaseholder to pay such royalty as may be specified in the Second Schedule in respect of any minerals removed or consumed in the leased area allotted to him. Section 9 sub-section (3) of the MMDR Act further empowers the Central Government to enhance or reduce the rate of royalty payable by the leaseholders by way of a notification once every 3-years. The aforesaid provision reads as under: -

“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 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.

(2A) The holder of a mining lease, whether granted before or after the commencement of the Mines and Minerals (Regulation and Development) Amendment Act, 1972 (56 of 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 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.”

4. Section(s) 13 and 18 of the MMDR Act respectively further empowers the Central Government to frame Rules for regulating the grant of mineral concession and for the conservation and systematic development of minerals respectively. Pursuant to the above provisions, the Central Government enacted the Mineral Concession Rules, 1960 (for short, the “MCR, 1960”) which later came to be replaced by the MCR, 2016 for the computation and payment of royalty in terms of Section 9 read with Schedule II of the MMDR, Act.

5. The erstwhile MCR,