Analysis of Minor Minerals (Concession) Rules, 1963 in India

The Legal Framework of Minor Mineral Concessions in India: An Analysis of State Rules with Emphasis on the 1963 Regime

Introduction

Minor minerals, while distinct from major minerals, play a crucial role in the economic development of India, primarily catering to local industries such as construction and infrastructure. The regulation of these minerals falls largely within the purview of State Governments, guided by the overarching Mines and Minerals (Development and Regulation) Act, 1957 (hereinafter "MMDR Act"). Section 15 of the MMDR Act empowers State Governments to formulate rules for granting mineral concessions for minor minerals. Consequently, various states enacted their own Minor Mineral Concession Rules, with many foundational frameworks, such as the Uttar Pradesh Minor Minerals (Concession) Rules, 1963 (hereinafter "U.P. Rules, 1963"), emerging around this period. These rules govern the entire lifecycle of minor mineral exploitation, from prospecting and leasing to royalty fixation and environmental compliance. This article seeks to provide a comprehensive analysis of the legal framework governing minor mineral concessions, with a particular focus on the principles underpinning rules like those established in 1963, their evolution through legislative amendments, and their interpretation by the Indian judiciary. It will draw extensively upon statutory provisions and judicial precedents to elucidate the complexities and nuances of this regulatory domain.

Constitutional and Legislative Backdrop

Constitutional Mandate

The legislative competence for the regulation of mines and mineral development is delineated in the Seventh Schedule of the Constitution of India. Entry 54 of the Union List (List I) empowers Parliament to legislate on "Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest."[14] Conversely, Entry 23 of the State List (List II) grants States the power over "Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union." The Supreme Court in Baijnath Kadio v. State Of Bihar And Others (1969)[2] affirmed that once Parliament makes a declaration under Entry 54, its legislative competence in that domain becomes exclusive, thereby limiting the State's authority.[2]

The Mines and Minerals (Development and Regulation) Act, 1957

Pursuant to Entry 54 of the Union List, Parliament enacted the MMDR Act, 1957. Section 2 of the Act contains a declaration that it is expedient in the public interest for the Union to take under its control the regulation of mines and the development of minerals to the extent provided therein.[11]

A crucial aspect of the MMDR Act is its definition of "minor minerals." Section 3(e) of the Act defines minor minerals as "building stones, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other mineral which the Central Government may, by notification in the Official Gazette, declare to be a minor mineral."[8], [10], [13], [15] This definition is dynamic, as the Central Government can expand the list of minor minerals through notifications.[15] For instance, limestone used for specific purposes has been declared a minor mineral by such notifications.[13], [15]

Significantly, Section 14 of the MMDR Act stipulates that the provisions of Sections 4 to 13 (inclusive) of the Act, which primarily deal with reconnaissance permits, prospecting licenses, and mining leases for major minerals, shall not apply to minor minerals.[11] This exclusion carves out a distinct regulatory space for minor minerals, primarily managed by State Governments.

State Governments' Rule-Making Power under Section 15 of the MMDR Act

Delegation of Legislative Power

The cornerstone of State regulation of minor minerals is Section 15(1) of the MMDR Act, which empowers State Governments to make rules for regulating the grant of quarry leases, mining leases, or other mineral concessions in respect of minor minerals and for purposes connected therewith.[11], [13] The Supreme Court, in cases like Quarry Owners' Association v. State Of Bihar[1] and D.K Trivedi & Sons v. State Of Gujarat[5], has upheld the constitutional validity of this delegation. The Court in Quarry Owners' Association clarified that this delegation is not unbridled; it is guided by the Preamble, Statement of Objects and Reasons, and various provisions of the MMDR Act itself.[1] The power to make rules is vested in the State Government (executive) and not the State Legislature.[11]

Continuation of Pre-existing State Rules

Section 15(2) of the MMDR Act provided a transitional arrangement, stating that until rules are made by the State Government under sub-section (1), any rules made by a State Government regulating the grant of concessions for minor minerals in force immediately before the commencement of the Act would continue in force.[11] This ensured regulatory continuity. For example, prior to the enactment of specific state rules under the 1957 Act, rules like the Mineral Concession Rules, 1949 (Central Rules), which under its Rule 4 allowed State Governments to prescribe rules for minor minerals, or any existing state rules, governed the field.[9]

Laying Rules Before Legislature

While the MMDR Act and some state enactments may require rules framed by the State Government to be laid before the State Legislature, procedural lapses in this regard may not necessarily invalidate the rules. The Supreme Court in Quarry Owners' Association held such a requirement to be directory, meaning non-compliance did not render the notifications enhancing royalty rates invalid.[1] The principle of laying rules before the legislature, as seen in older central acts like Section 10 of the Act under which the Mineral Concession Rules, 1949 were framed, aims at legislative oversight.[10]

Key Provisions and Judicial Interpretations of Minor Mineral Concession Rules (Illustrating with the U.P. Minor Minerals (Concession) Rules, 1963)

The U.P. Rules, 1963, serve as a pertinent example of the state-level regulatory frameworks established for minor minerals. These rules, and similar rules in other states, typically cover a wide array of aspects from the grant of concessions to the enforcement of mining regulations.

Grant and Regulation of Concessions

A fundamental tenet, enshrined in Section 4(1) of the MMDR Act and mirrored in state rules (e.g., Rule 3 of the U.P. Rules, 1963[12]), is the prohibition of any reconnaissance, prospecting, or mining operations except under and in accordance with a permit, license, or lease granted under the Act and the rules.[8]

The procedures for granting concessions have evolved. Initially, methods like application-based grants were common. However, policies shifted over time, with some states, like Uttar Pradesh, moving between application-based systems (Chapter II of U.P. Rules) and auction/tender-cum-auction systems (Chapter IV of U.P. Rules).[20] The issuance of Government Orders, such as the G.O. dated 31.5.2012 in U.P. mandating e-tendering under Rule 23, significantly impacted pending applications, often leading to their automatic rejection if not finalized before such policy changes.[21], [22]

State rules also incorporated provisions for preferential rights in granting leases. For instance, Rules 9-A and 53-A of the U.P. Rules, 1963, provided for preferential rights to socially and educationally backward classes engaged in excavation as a profession.[18] Such rules faced legal challenges, with Rule 9-A of the U.P. Rules being struck down by the Allahabad High Court,[20] and subsequent amendments like the introduction of a new Rule 9-A in 2014 also being held bad in law for conflicting with other rules like Rule 23(3).[25]

The duration, renewal, and extension of leases are also governed by these rules. Courts have intervened where lease periods were wrongfully curtailed, directing consideration for extension.[17] The power of the State Government to extend expired leases, sometimes under provisions like Rule 68 of the U.P. Rules, 1963, has also been a subject of judicial review.[20]

Fixation and Collection of Royalty and Dead Rent

State Governments are empowered under Section 15 of the MMDR Act to make rules for fixing and collecting rent, royalty, fees, etc. The U.P. Rules, 1963, for example, under Rule 21, empower the State Government to fix royalty payable by a leaseholder.[12] The Supreme Court in D.K Trivedi & Sons[5] and Quarry Owners' Association[1] affirmed the State's power to fix and enhance royalty rates for minor minerals. However, this power is subject to restrictions, notably Section 15(3) of the MMDR Act (as it stood or as amended), which often imposed limitations on the frequency of such enhancements (e.g., not more than once in a specified period, such as three or four years).[1], [5]

It is important to distinguish royalty from taxes on land. The Supreme Court in India Cement Ltd. And Others v. State Of Tamil Nadu And Others[6] held that royalty is not a tax on land but a payment for the mineral extracted, and a state-levied cess on royalty could be ultra vires if it encroached upon the Union's legislative field concerning mineral rights.[6] State rules, like Rules 54 and 58 of the U.P. Rules, 1963, detail the manner of royalty deposit and consequences of non-payment.[12]

Regulation of Transport and Storage

Section 4(1A) of the MMDR Act prohibits the transport or storage of any mineral otherwise than in accordance with the Act and rules made thereunder.[8] State rules, such as Rule 70 of the U.P. Rules, 1963, mandate transit passes (e.g., Form MM-11) for carrying minor minerals and prescribe penalties for contravention.[12], [19] The levy of transit fees by states has also been examined. While State Of U.P And Others v. Sitapur Packing Wood Suppliers And Others[7] dealt with transit fees for forest produce, it established the principle that for regulatory fees, a direct quid pro quo (specific service in return) is not mandatory, a principle potentially applicable to regulatory fees under mineral transit rules.[7]

Environmental and Other Considerations

Modern minor mineral concession rules increasingly incorporate environmental safeguards. The judiciary has emphasized the need to balance mining activities with environmental preservation, recognizing that rules promoting this balance (e.g., Rule 41 of U.P. Rules, 1963) act as reasonable restrictions under Article 19(6) of the Constitution, while the right to carry on mining (e.g., Rule 40 of U.P. Rules) is a facet of Article 19(1)(g).[23] State rules also empower authorities to enter and inspect mines (e.g., Rule 66, U.P. Rules, 1963).[12]

Termination and Forfeiture of Leases

Lease agreements for minor minerals are subject to terms and conditions, breach of which can lead to termination or forfeiture. The Supreme Court in State Of U.P And Others v. Maharaja Dharmander Prasad Singh And Others[3], while dealing with a lease of Nazool land, laid down general principles applicable to state actions: authorities must act within their legal powers, adhere to natural justice, and avoid arbitrary actions.[3] Leases can be cancelled for illegal mining or other breaches of rules or lease conditions, as seen in cases like Mohammad Yunus Hasan v. State Of U.P. And Others.[17]

Enforcement Machinery and Adjudication of Disputes

Prevention of Illegal Mining

Illegal mining of minor minerals is a persistent challenge. State Governments frame rules not only for concessions but also for the prevention of illegal mining, transportation, and storage. For instance, Rule 48 of the Rajasthan Minor Mineral Concession Rules, 1986, provides for penalties for unauthorized mining operations.[16] Similarly, Uttarakhand has rules for preventing illegal mining.[14] These rules often empower authorities to impose penalties, including recovery of the cost of illegally excavated minerals.[16]

Cognizance of Offences

A critical aspect of enforcement is the mechanism for prosecuting offences under the MMDR Act and the rules made thereunder. Section 22 of the MMDR Act provides that no court shall take cognizance of any offence punishable under the Act or any rules made thereunder except upon a complaint in writing made by a person authorized in this behalf by the Central Government or the State Government.[19], [24] Consequently, FIRs lodged by the police for offences under the MMDR Act or state minor mineral rules are generally not maintainable, and prosecution must proceed via a formal complaint by an authorized officer.[19], [24]

Administrative Discretion and Judicial Review

Administrative authorities exercising powers under minor mineral concession rules are bound by the principles of administrative law. Their discretion is not absolute and is subject to judicial review.[3] Courts have scrutinized and, where necessary, struck down rules or executive actions found to be arbitrary, ultra vires the parent Act, or violative of fundamental rights. For example, in State Of T.N v. M.P.P Kavery Chetty[4], the Supreme Court struck down rules framed by the Tamil Nadu government (Rules 8-D and 19-B) that sought to regulate the sale and pricing of quarried granite post-extraction, holding such regulation to be beyond the State's rule-making power under Section 15 of the MMDR Act.[4]

Overarching Principles: Supremacy of Central Legislation and Limits on State Power

The entire framework of state-level minor mineral concession rules operates under the shadow of the MMDR Act. A fundamental principle, reiterated in Baijnath Kadio (SC)[2], is that State legislation (or rules framed under delegated power) cannot encroach upon fields occupied by Parliament. If the MMDR Act comprehensively covers a particular aspect of mineral regulation, State rules must conform to it. Any state provision inconsistent with the MMDR Act would be ultra vires.[2]

Similarly, the State's power to impose financial levies in the mineral sector is circumscribed. As established in India Cement Ltd.[6], states cannot impose taxes or cesses on royalties if such levies effectively tax mineral rights, a domain controlled by Union legislation. The regulation of trade or price control of minerals after they have been mined might also fall outside the scope of Section 15 of the MMDR Act, which primarily concerns the grant and regulation of mining concessions.[4]

Conclusion

The Minor Mineral Concession Rules formulated by State Governments, exemplified by frameworks like the U.P. Minor Minerals (Concession) Rules, 1963, form the bedrock of minor mineral administration in India. These rules, born out of the delegation of power under Section 15 of the MMDR Act, 1957, have evolved significantly over the decades through numerous amendments and judicial pronouncements. They attempt to balance the need for economic exploitation of locally important minerals with objectives of revenue generation, environmental protection, and equitable distribution of resources.

The judiciary has played a vital role in shaping this legal landscape, by interpreting the scope of delegated powers, scrutinizing the fairness of procedures for granting concessions, upholding restrictions on royalty enhancements, and ensuring that enforcement mechanisms adhere to due process. While State Governments enjoy considerable autonomy in regulating minor minerals, which primarily serve local purposes[1], their powers are always subject to the overarching framework of the MMDR Act and constitutional limitations.

Ongoing challenges such as illegal mining, environmental degradation, and ensuring transparency in the concession process necessitate continuous refinement of these rules. A clear, consistent, and constitutionally sound regulatory regime for minor minerals is indispensable for sustainable development and upholding the rule of law in this critical sector of the Indian economy.

References

  1. Quarry Owners' Association v. State Of Bihar And Others (2000 SCC 8 655, Supreme Court Of India, 2000)
  2. Baijnath Kadio v. State Of Bihar And Others (1969 SCC 3 838, Supreme Court Of India, 1969)
  3. State Of U.P And Others v. Maharaja Dharmander Prasad Singh And Others (1989 SCC 2 505, Supreme Court Of India, 1989)
  4. State Of T.N v. M.P.P Kavery Chetty . (1995 SCC 2 402, Supreme Court Of India, 1995)
  5. D.K Trivedi & Sons And Others v. State Of Gujarat And Others (1986 SUPP SCC 1 20, Supreme Court Of India, 1986)
  6. India Cement Ltd. And Others v. State Of Tamil Nadu And Others (1990 SCC 1 12, Supreme Court Of India, 1989)
  7. State Of U.P And Others v. Sitapur Packing Wood Suppliers And Others (2002 SCC 4 566, Supreme Court Of India, 2002)
  8. Jayeshbhai Kanjibhai Kalathiya v. State Of Gujarat Through Principal Secretary (Gujarat High Court, 2010)
  9. Baij Nath Kedia And Another v. State Of Bihar And Others (Patna High Court, 1966)
  10. Amar Singh-Modi Lal, Petitioner. v. State Of Haryana And Another, (Punjab & Haryana High Court, 1971)
  11. Laddu Mal And Others v. The State Of Bihar And Others Opposite Party. (Patna High Court, 1965)
  12. M/S. J.K Construction Engineers And Contractor & Ors. v. Union Of India & Ors. (Allahabad High Court, 2006)
  13. Gorelal Dubey v. State Of Madhya Pradesh And Others (Supreme Court Of India, 1975)
  14. Haridwar Stone Crusher Welfare Association And Oth v. State Of Uttarakhand (Uttarakhand High Court, 2015)
  15. Smt Rukmani Bai Gupta v. State Government Of Madhya Pradesh, Bhopal And Others (Supreme Court Of India, 1974)
  16. Mishri Khan v. State Of Rajasthan Through Chief Secretary To Government Of Rajasthan (Rajasthan High Court, 2019)
  17. Mohammad Yunus Hasan v. State Of U.P. And Others. (2016 SCC ONLINE ALL 3535, Allahabad High Court, 2016)
  18. Maiyadeen v. State Of U.P And Another (1996 SCC ONLINE ALL 601, Allahabad High Court, 1996)
  19. Mahendra Kumar Yadav And Another Petitioners v. State Of U.P And 2 Others S (2014 SCC ONLINE ALL 10026, Allahabad High Court, 2014)
  20. Inam v. State Of U.P And Others (2002 SCC ONLINE ALL 282, Allahabad High Court, 2002)
  21. Vijay Kumar Dwivedi v. State Of U.P. And Ors. (2016 SCC ONLINE ALL 3548, Allahabad High Court, 2016) [First instance of this case in provided materials]
  22. Shiv Prasad v. State of U.P. & Others (Allahabad High Court, 2015)
  23. Zunaid Ahmad v. State Of U.P And Ors. (Allahabad High Court, 2008)
  24. Indrasan Maurya v. State of U.P. and Another (Allahabad High Court, 2021)
  25. Vijay Kumar Dwivedi v. State Of U.P. And Ors. (Allahabad High Court, 2016) [Second instance of this case, referring to Rule 9A amendment, in provided materials]