Supreme Court Upholds Demand Notices Issued to Successful Bidders for Mining of Minor Minerals, Directing Them to Deposit 10% of the Total Bid Amount – “Once a Party Accepts the Terms of a Tender, They Cannot Later Challenge the Policy Framework”

Court’s Decision

The Supreme Court dismissed Civil Appeals No. 12314–12316 of 2024 and upheld the Allahabad High Court’s judgment dated 15.11.2017, affirming the validity of the Demand Notice requiring a 10% contribution to the District Mineral Foundation (DMF) on the total bid amount. The Court ruled that:

“The impugned Demand Notice thus being in consonance with the Statutory provisions cannot be said to be illegal or unsustainable.”

Facts

The appeals arose from Demand Notices issued to successful bidders for mining of minor minerals (sand), directing them to deposit 10% of the total bid amount with the concerned District Mineral Foundation Trust (DMF Trust), along with 2% stamp duty. The lead appellant had deposited ₹5.41 crores for the mining quantity as per the tender, and was subsequently asked to pay ₹54.12 lakhs to the DMF Trust under a Policy dated 22.04.2017. This Policy was challenged as violative of statutory provisions, particularly Section 9B of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) and Rule 68 of the Uttar Pradesh Minor Minerals (Concession) Rules, 1963.

Issues

1. Whether the Demand Notice requiring 10% of the total bid amount (rather than royalty) payable to the DMF Trust was legally sustainable.
2. Whether the Policy dated 22.04.2017 violated Rule 68 of the 1963 Rules.
3. Whether Section 9B of the MMDR Act applied to minor minerals such as sand.
4. Whether Rules 21 and 54 of the 1963 Rules were applicable in this case.

Petitioner’s Arguments

• The Policy dated 22.04.2017 was invalid as it did not follow the procedure under Rule 68 of the 1963 Rules.
• Section 9B of the MMDR Act limited the DMF contribution to a maximum of one-third of the royalty, hence the 10% charge on the bid amount exceeded statutory limits.
• Royalty was to be paid as per the First Schedule of the 1963 Rules, and the High Court erred in holding that Rules 21 and 54 were inapplicable.
• The Demand Notice was beyond the scope of the statutory framework.

Respondent’s Arguments

• Section 9B is inapplicable due to Section 14 of the MMDR Act, which excludes its application to minor minerals.
• Under Section 15 and 15A of the MMDR Act, the State has power to frame rules and determine DMF contributions for minor minerals.
• Rule 10(2) of the 2017 DMF Rules allows the State to prescribe the amount payable to the DMF Trust.
• The appellant, having accepted and benefitted from the Policy under which the tender was issued, cannot now challenge its validity.
• Rules 21 and 54 do not apply due to Rule 23(3) of the 1963 Rules, as the area was auctioned via e-tender.

Analysis of the Law

• Section 14 of the MMDR Act excludes application of Sections 5 to 13 (including Section 9B) to minor minerals.
• Sections 15 and 15A empower State Governments to frame rules and prescribe DMF contributions for minor minerals.
• Rule 10(2) of the 2017 Rules allows contributions “equivalent to 10% of royalty or as may be prescribed by the State Government.”
• The State’s Policy fixing contribution as 10% of total bid amount is within its rule-making authority under Section 15A.
• Rule 23(3) of the 1963 Rules excludes the applicability of Chapters II, III, and VI — including Rules 21 and 54 — in e-tendered areas.

Precedent Analysis

The Court noted that the High Court had earlier allowed the State to exercise power under Rule 68 in a PIL order dated 18.04.2017 to address the crisis due to a mining ban. This context justified the Policy dated 22.04.2017 and the subsequent tendering process.

Court’s Reasoning

• The records demonstrated that the State followed due procedure under Rule 68 in formulating the Policy dated 22.04.2017.
• The DMF contribution under the Policy was not governed by Section 9B but by State-specific rules framed under Section 15A.
• The terms of the tender, Letter of Intent, and Mining Permit clearly indicated the obligation to pay 10% of the total bid amount.
• Since the appellant voluntarily participated in the process and accepted its terms, the challenge was barred by acquiescence.
• Rules 21 and 54 were rendered inapplicable due to Rule 23(3), as the area was declared for lease through e-tender.

Conclusion

The Supreme Court held that the Demand Notice for 10% of the total bid amount payable to the DMF Trust was valid and in conformity with the statutory provisions and rules framed by the State. It dismissed all three appeals and upheld the High Court’s decision.

Implications

This judgment clarifies that:

• State Governments have autonomy under Sections 15 and 15A of the MMDR Act to prescribe DMF contributions for minor minerals.
• Once a party accepts the terms of a tender, they cannot later challenge the policy framework under which the tender was issued.
• Section 9B of the MMDR Act does not apply to minor minerals due to the bar under Section 14.
• Rules relating to royalty computation in non-e-tendered areas are not applicable where leases are granted through e-tendering.

The decision reinforces the authority of States in regulating minor mineral concessions and upholds the enforceability of policy decisions arising from urgent administrative needs.

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