No Royalty Shield for Minor Minerals: Supreme Court Backs State’s Right to Demand DMF from Total Bid Amount

“State Is Empowered to Fix DMF Contribution for Minor Minerals Under Section 15A of MMDR Act”— Supreme Court of India upholding the demand notices requiring mining permit holders to deposit 10% of the bid amount with the District Mineral Foundation (DMF) Trust. The Court, while dismissing Civil Appeal No. 12314 of 2024 and connected matters, reaffirmed that the power to fix such contributions lies with the State Government under Section 15A of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act). The ruling clarifies the scope of state authority in mineral revenue matters and limits the application of certain provisions of the MMDR Act to minor minerals.

The appellant, Chandra Bhan Singh, a successful bidder for minor mineral (sand) mining rights in Uttar Pradesh, was issued a demand notice dated October 25, 2017, requiring a deposit of ₹54,12,960—10% of his bid amount of ₹5,41,29,600—with the DMF Trust, Kanpur. The appellant had already paid the bid amount in accordance with the mining permit issued on October 16, 2017.

Challenging this demand before the Allahabad High Court, the appellant contended that such an imposition was contrary to Section 9B of the MMDR Act, which limits the DMF contribution to a percentage of the royalty prescribed in the Second Schedule. The High Court, however, dismissed the challenge, prompting the present appeal before the Supreme Court.

The central issue revolved around whether the State Government could demand 10% of the total bid amount, rather than merely 10% of the royalty amount, as a DMF contribution.

Justice Augustine George Masih, delivering the judgment, held: “The impugned Demand Notice... being in consonance with the Statutory provisions cannot be said to be illegal or unsustainable” .

The Court noted that under Section 14 of the MMDR Act, Sections 5 to 13—including Section 9B—do not apply to minor minerals. Thus, the appellant’s reliance on Section 9B(5) was held “misplaced and thus, unacceptable.”

The Court emphasized the application of Section 15A: “The State Government may prescribe the payment by all holders of concessions related to minor minerals of amounts to the District Mineral Foundation...” and such power includes fixing a payment different from that linked to royalty .

The Court also observed that the tender documents and the mining permit clearly stipulated the 10% contribution on the total bid amount, which the appellant had accepted: “The Appellant... cannot be permitted to turn around and challenge the very Policy under which he had sought benefit and had actually availed as well” .

Rejection of Rule-Based Objections

The appellant’s arguments based on Rules 21 and 54 of the Uttar Pradesh Minor Minerals (Concession) Rules, 1963 were also dismissed. The Court cited Rule 23(3), which excludes the application of Chapters II, III, and VI (where Rules 21 and 54 reside) when the lease is granted via e-tendering.

Further, Rule 10(2) of the District Mineral Foundation Trust Rules, 2017 was interpreted to allow the State to prescribe a contribution based on the bid amount rather than royalty:

“...in case an amount is prescribed by the State Government then the said rate or amount would prevail...” .

The Supreme Court upheld the decision of the Allahabad High Court and dismissed all three appeals, confirming that demand notices requiring a 10% DMF contribution based on the bid amount are valid under statutory and regulatory frameworks.

Date of Decision: May 23, 2025