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SUPREME COURT OF INDIA
SANJAY KAROL, NONGMEIKAPAM KOTISWAR SINGH, JJ.
The Director of Mines and Geology – Appellant
Versus
M/s BMM Ispat Ltd. and Another – Respondents
Civil Appeal No. 8433 of 2026 [Special Leave Petition (Civil) No. 16259 of 2019]
Decided On : 04-06-2026
Mines and Minerals (Development and Regulation) Act, 1957 – Section 9 – Quantum of Royalty – Mining lease – For Section 9 to be applicable to a given set of facts, there must be existing mining lease; there must be removal or consumption of mineral, and person who has done these two acts, must be covered by text of Statute – Payment is to be made on the date of movement of minerals – If date of movement is after enhancement in royalty, contract entered into prior to statutory change cannot be limiting its impact – Appellant was correct in deducting additional 5% royalty from security deposit of respondent – It would have been entirely open to respondents to remove iron ore from site at one go or at any date prior to amendment, which they chose not to do – It is they who either adopted piecemeal approach in moving mineral or moved entire quantity after date of amendment – As such, they cannot escape payment of enhanced royalty – Impugned Judgment of High ruling against charge of higher royalty than what was stipulated in tender agreement, quashed and set aside. (Paras 7, 13 and 14)
Facts of the case:
The question to consider, in essence, is whether State could, on account of a subsequent change in law, charge amount of royalty which is different from (increased) what is stipulated in tender agreement.
Findings of Court:
Had the increase been by way of any other method other than a statutory amendment, the contractual provision limiting the respondent’s liability would have prevailed.
Result : Appeal allowed.
Key Points: - The judgment holds that payment of royalty is on the date of movement/despatch of minerals and that a statutory amendment increasing royalty can impact pre-existing contracts, requiring deduction of the enhanced amount from security deposits (!) (!) . - It confirms that if the royalty increase is via statutory amendment, contractual provisions cannot shield against the higher rate; the appellant’s deduction of 5% extra royalty from the security deposit was correct (!) (!) (!) . - The central question addressed: whether the State could charge a royalty amount different from that in a tender agreement due to a subsequent change in law; the court allows the appeal and sets aside the High Court's ruling, holding that enhanced royalty applies to the movement/despatch after amendment (!) (!) (!) . - Section 9 MMDR Act allows the Central Government to amend the Second Schedule to adjust royalty rates, but such enhancements cannot be more than once every three years (!) (!) . - The decision discusses the elements for applicability of Section 9: existence of mining lease, removal/consumption of mineral, and liability extending to agents/lessees (!) (!) (!) . - The court cites that dispatch/removal is the basis for royalty payable, and that payment is linked to the act of removal/despatch, not merely acceptance/delivery documents (!) (!) . - The 9-judge context references Mineral Area Development Authority and the principle that royalty is payable on dispatch/removal from the leased area (!) (!) .
JUDGMENT :
SANJAY KAROL J.
1. Leave granted.
2. The Director of Mines and Geology, Department of Mines and Geology, Government of Karnataka, in appeal by special leave, lays challenge to the judgment and order dated 18th 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 23rd September 2011 constituted a committee1 [Hereafter ‘Monitoring Committee/Second Respondent’] 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, 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 herein-below:
“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 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
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