States May Levy DMF Contributions on Minor Minerals Independent of Royalty: The Significance of Chandra Bhan Singh v. State of Uttar Pradesh (2025 INSC 763)

1. Introduction

The Supreme Court’s decision in Chandra Bhan Singh v. State of Uttar Pradesh & Ors. (2025 INSC 763) has settled a fiercely contested question: Can a State demand District Mineral Foundation (DMF) contributions from minor-mineral concessionaires on the total bid amount rather than on the royalty component alone?

Three connected civil appeals arose from demand notices requiring successful sand-mine bidders to deposit 10 % of the total bid/tender amount with the District Mineral Foundation Trust (“DMF Trust”). The appellants contended that Section 9B of the Mines and Minerals (Development and Regulation) Act, 1957 (“MMDR Act”) capped DMF contributions at a percentage of royalty only, and that the Uttar Pradesh Government’s 2017 policy, enacted under Rule 68 of the Uttar Pradesh Minor Minerals (Concession) Rules, 1963 (“1963 Rules”), was ultra vires.

2. Summary of the Judgment

• The Court dismissed all three appeals and upheld the demand notices.
• Held:
  • Section 9B (and Sections 5–13) of MMDR Act do not apply to minor minerals owing to Section 14.
  • State power to fix DMF payments for minor minerals flows from Section 15(4)(c) read with newly inserted Section 15A.
  • Rule 10(2) of the Uttar Pradesh District Mineral Foundation Trust Rules, 2017 (“2017 Rules”) allows the State to prescribe any amount in excess of 10 % of royalty; once such amount is prescribed (10 % of bid amount), it prevails.
  • Policy decision dated 22 April 2017, framed under Rule 68 of the 1963 Rules, was validly issued after following due process and in public interest (mitigating mining ban-induced scarcity).
  • Rules 21 & 54 of the 1963 Rules (royalty provisions) are excluded by virtue of Rule 23(3) whenever areas are auctioned through the tender system; hence appellants could not invoke them.

3. Detailed Analysis

3.1 Precedents and Authorities Cited

1. Section 14 MMDR Act – statutory exclusion of Sections 5–13 (including 9B) for minor minerals.
2. Section 15 & 15A MMDR Act – State’s rule-making and fund-collecting powers for minor minerals. The Court treated 15A (inserted by 2015 Amendment) as the enabling provision for fixing any amount towards DMF.
3. Rule 68, Uttar Pradesh 1963 Rules – confers relaxation power on the State; Court accepted that the 2017 Policy satisfied procedural safeguards mandated by Rule 68.
4. Rule 23(3), 1963 Rules – declares that Chapters II, III, VI do not apply when areas are auctioned; thus royalty-centric Rules 21 (Chapter III) and 54 (Chapter VI) are inoperative.
5. Rule 10(2), UP DMF Trust Rules 2017 – default 10 % of royalty “or as may be prescribed” clause relied on by State.
6. No binding precedent directly on issue; Court therefore laid down a fresh interpretative approach.

3.2 The Court’s Legal Reasoning

1. Statutory Scheme for Minor Minerals
   Section 14 creates an explicit carve-out: Titles 5–13 (royalty, premium, dead rent, and critically Section 9B) are inapplicable to minor minerals. Therefore, reliance on Section 9B(5) to restrict DMF to royalty basis was unsound.
2. Source of State Power
   Section 15(4)(c) empowers States to make rules “for the amount of payment to be made to the District Mineral Foundation by concession holders of minor minerals under Section 15A.” Section 15A itself authorises States to prescribe such amounts. Court interpreted “amount” broadly to include any % of bid, royalty, or other metric so long as rational and within legislative competence.
3. Interplay with UP Rules, 2017
   Rule 10(2) is a hybrid provision: It fixes 10 % of royalty unless the State prescribes a different figure. The 2017 Policy constituted such prescription — 10 % of the total bid amount.
4. Role of Rule 68 Discretion
   The Rule 68 “relaxation” power was exercised amid a High Court PIL order (18 Apr 2017) urging expedited mining permissions. The Government’s file-notings showed due consideration. Judicial review of policy content was, therefore, minimal: Court examined procedural fidelity and rational nexus, found both satisfied.
5. Waiver/Estoppel Angle
   Since the appellant bid with full knowledge of tender terms mandating 10 % of bid amount to DMF, Court held he was estopped from challenging the very framework he accepted.

3.3 Impact of the Judgment

• Clarificatory Precedent: Affirms that States have independent power to configure DMF contributions for minor minerals, unconstrained by central royalty schedules.
• Policy Latitude: Validates flexible fiscal models (percentage of sales proceeds, bid amount, tonnage-based levy) so long as conceived under Section 15A & rule-making provision.
• Litigation Outlook: Ongoing and future writs challenging similar DMF demands in other States (e.g., Rajasthan, Karnataka) will have a persuasive, possibly binding answer.
• Revenue Implications: States may now mobilise larger DMF funds for local area development, environmental restoration and community welfare.
• Investor Caution: Bidders must account for higher DMF outgo while framing bids, as courts will not entertain post-award challenges grounded in earlier acceptance of terms.

4. Complex Concepts Simplified

Minor Mineral

Under MMDR Act, minerals of lower importance/limited distribution (e.g., sand, clay, building stone), regulated primarily by States.

District Mineral Foundation (DMF)

A statutory non-profit trust in every mining district, funded by contributions from miners, devoted to the welfare of people and areas affected by mining.

Royalty vs. Bid Amount

• Royalty: Statutory payment per unit of mineral extracted.
• Bid Amount / Tender Premium: Lump-sum or annual payment offered by bidder in competitive auction for mining rights, often far exceeding royalty.

Rule-making Power (Section 15)

Constitutionally delegated authority enabling States to craft detailed regulations for minor minerals; may override earlier generic rules when exercised validly.

Estoppel in Tender Law

You cannot accept tender terms, gain contract, and later challenge those very terms unless they are patently illegal or unconstitutional; here, they were not.

5. Conclusion

Chandra Bhan Singh decisively articulates that Section 14’s exclusion of Sections 5–13 of the MMDR Act strips minor-mineral concessionaires of arguments rooted in Section 9B’s royalty-linked limit. The ruling confers expansive fiscal autonomy upon States to structure DMF contributions, provided they act through statutory rule-making channels, thereby strengthening district-level welfare funds.

Practically, mining stakeholders must carefully scrutinise tender conditions and State notifications on DMF, as courts will presume awareness and assent. For legislatures and policymakers, the decision underscores the importance of transparent, well-documented processes while exercising relaxation powers (Rule 68 or analogous provisions) to avoid procedural infirmities.

The case thus serves as an authoritative benchmark on the interface between Central mining legislation and State rule-making prerogatives, likely influencing regulatory design and litigation strategy in the Indian mining sector for years to come.