2026 INSC 690
State of Haryana & Ors. v. M/s Faridabad Gurgaon Minerals & Anr.
(Connected with State of Haryana & Ors. v. M/s Ganpati Enterprises Slate Mines)
HEAD NOTES
A. Mines and Minerals (Development and Regulation) Act, 1957 — Section 15(3) — Minor Minerals — Royalty and Dead Rent — Statutory power of revision — Effect of lease deed.
(Paras 21 to 37)
Held, a mining lease granted under the MMDR Act and the Rules framed thereunder is a statutory grant. Mere absence of an express clause in the lease deed providing for future enhancement of royalty or dead rent does not denude the State of its statutory power under Section 15(3) and the applicable Rules to revise such rates. The statutory power of revision forms an implied condition of every mining lease.
B. Mining Lease — Statutory Contract — Contract vis-à-vis Statutory Power.
(Paras 21 to 35)
Held, Government cannot, by entering into a statutory contract, surrender or fetter a statutory power conferred upon it for public purposes unless the statute itself expressly permits such exclusion. A contractual stipulation cannot override or extinguish the statutory authority of the State to regulate mineral development and revise royalty in public interest.
C. MMDR Act, 1957 — Section 15 — Punjab Minor Mineral Concession Rules, 1964 — Rules 10 & 21 — Implied incorporation into mining lease.
(Paras 26 to 31)
Held, where the auction notice and letter of acceptance expressly provide that the mining lease shall be governed by the statutory Rules, omission to reproduce those provisions in the executed lease deed does not exclude their operation. Rules 10 and 21 become implied conditions of the lease and bind the lessee throughout the subsistence of the lease.
D. Royalty and Dead Rent — Enhancement — Judicial Review of Policy Decisions.
(Paras 38 to 44)
Held, fixation or enhancement of royalty and dead rent constitutes an economic and fiscal policy decision. Judicial review is confined to examining legality, arbitrariness or Wednesbury unreasonableness. Courts cannot substitute their own assessment regarding the quantum of enhancement merely because another rate may also appear reasonable.
E. Constitution of India — Article 166 — Rules of Business — Financial Decisions — Chief Minister's approval.
(Paras 45 to 65)
Held, although compliance with Rules of Business is essential in matters involving public finance, where the impugned decision has been approved by the Chief Minister himself and there is nothing to indicate disagreement by the Finance Minister, absence of express concurrence by the Council of Ministers or Finance Department does not, in the peculiar facts of the case, invalidate the decision.
F. Constitutional Governance — Mineral Resources — Public Trust Doctrine.
(Paras 32 & 33)
Held, mineral resources are public assets held by the State in trust for the people. The State is constitutionally obliged to ensure that exploitation of such resources secures an appropriate return to the public exchequer. Mining leases must therefore be interpreted consistently with the State's continuing statutory authority to regulate and revise royalty and dead rent.
G. Relief — Recovery of arrears — Interest.
(Paras 69 & 70)
Held, while upholding enhancement of royalty and dead rent, equitable considerations arising from prolonged interim protection and expiry of the mining lease justified limiting interest on arrears to 12% per annum instead of permitting recovery at higher statutory rates.
Analysis of Facts
The respondents were granted mining leases for extraction of minor minerals under the Punjab Minor Mineral Concession Rules, 1964, as adopted by the State of Haryana. The auction notice and letters of acceptance specifically stated that the leases would remain governed by Rules 10 and 21 of the 1964 Rules.
Subsequently, the State amended the Rules by notification dated 3 June 2005, enhancing royalty and dead rent by 50%. The lessees challenged the notification before the High Court on the grounds that the executed lease deeds did not contain any clause permitting enhancement during the lease period, that the enhancement lacked any rational basis, and that the notification had been issued without complying with the Rules of Business framed under Article 166 of the Constitution.
The High Court accepted these contentions and quashed the notification.
Allowing the State's appeals, the Supreme Court held that mining leases are statutory grants governed by the MMDR Act and the statutory Rules. The statutory power to revise royalty and dead rent remained available notwithstanding the silence of the lease deed. The Court further found that the enhancement was based upon relevant considerations, fell within statutory limits, and did not suffer from arbitrariness. It also rejected the challenge based on the Rules of Business, holding that approval by the Chief Minister and the surrounding circumstances sufficiently satisfied the constitutional requirements in the facts of the case.
Analysis of Law
The Court laid down the following principles:
A statutory mining lease cannot curtail the State's statutory power to revise royalty and dead rent under Section 15 of the MMDR Act.
Statutory Rules governing mining leases become implied conditions of every lease, even if not expressly reproduced in the lease deed.
Royalty is a statutory levy, and the liability to pay revised royalty flows from the statute rather than from contractual stipulations.
Fiscal and economic policy decisions relating to royalty are subject only to limited judicial review on grounds such as arbitrariness, irrationality or illegality.
Mineral resources are held by the State in public trust, requiring periodic revision of royalty to secure an appropriate public return.
Rules of Business under Article 166 cannot invalidate a financial policy decision where the Chief Minister himself approved the proposal and no material establishes dissent by the Finance Department.
Even while upholding statutory recovery, equitable circumstances may justify moderation of interest on outstanding dues.
Ratio Decidendi
A mining lease granted under the Mines and Minerals (Development and Regulation) Act, 1957 is a statutory grant governed by the Act and the Rules framed thereunder. The State's statutory power to revise royalty and dead rent under Section 15 cannot be curtailed merely because the executed lease deed does not expressly reserve such power. Statutory provisions authorising revision constitute implied terms of every mining lease. Enhancement of royalty made pursuant to statutory authority is a matter of fiscal policy subject only to limited judicial review on grounds of illegality or manifest arbitrariness. A challenge based on alleged non-compliance with the Rules of Business cannot succeed where the decision bears the approval of the Chief Minister and no substantive prejudice or constitutional infirmity is established.
