The Supreme Court has ruled that the Haryana government was legally entitled to revise royalty and dead rent payable under mining leases for minor minerals, even when the executed lease deed did not expressly mention future revisions. Holding that mining leases are governed by the statutory framework of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), the Court allowed the State's appeals and reversed the Punjab and Haryana High Court's decision.
Background of the Case
The dispute arose after the Haryana government enhanced royalty and dead rent by 50% through a notification issued on June 3, 2005. The revision applied to mining leases granted to M/s Faridabad Gurgaon Minerals and M/s Ganpati Enterprises Slate Mines for extraction of minor minerals.
The leaseholders challenged the notification before the Punjab and Haryana High Court, arguing that their lease deeds fixed the applicable royalty and did not contain any clause allowing the State to increase the rates during the lease period. They also questioned the basis of the enhancement and alleged violations of the State's Rules of Business.
The High Court accepted these arguments in 2016 and quashed the notification. Haryana then approached the Supreme Court.
Court's Observations
Justice Dipankar Datta, writing the judgment, said the absence of an express clause in the lease deed did not prevent the State from exercising its statutory powers under the MMDR Act and the Punjab Minor Mineral Concession Rules, 1964.
The Bench observed that mining leases are statutory grants rather than purely private contracts. It held that the statutory rules governing mining automatically become part of such leases, even if every provision is not reproduced in the lease document.
The Court observed,
"Mere silence in the lease deed with regard to revision of royalty cannot denude the State of a statutory power and/or operate as a bar to the exercise of power under Section 15 of the MMDR Act."
The judgment further explained that minerals are public resources held by the State in trust and that the government has a constitutional responsibility to ensure their exploitation generates an appropriate return for the public exchequer.
According to the Court, interpreting the lease deeds as freezing royalty rates for the entire lease period would undermine that public obligation and run contrary to the purpose of the MMDR Act.
Enhancement Was Not Arbitrary
The lessees had argued that the 50% increase lacked any empirical basis and was therefore arbitrary.
Rejecting this contention, the Supreme Court noted that the State had considered royalty rates prevailing in neighbouring States before issuing the notification. The Court said judicial review does not permit courts to reassess whether a lower or higher percentage would have been more appropriate.
The Bench observed,
"Judicial review does not extend to the wisdom of the rate. The test is Wednesbury unreasonableness."
It found that the increase came more than five years after the previous revision and could not be described as excessive or irrational.
Rules of Business Challenge Rejected
The respondents had also argued that the notification was invalid because it allegedly did not comply with Haryana's Rules of Business, including consultation with the Finance Department and approval by the Council of Ministers.
The Supreme Court examined the issue in detail but found no reason to invalidate the notification on that ground. It also noted that the pleadings before the High Court did not properly raise this challenge in the writ petitions themselves, although the parties had subsequently addressed the issue during the proceedings. After analysing the applicable constitutional principles and precedents, the Court declined to uphold the High Court's findings on this aspect.
Supreme Court's Decision
Allowing the appeals filed by the State of Haryana, the Supreme Court held that the power to revise royalty and dead rent flows from the MMDR Act and the applicable statutory rules, forming an implied condition of every mining lease granted under those rules.
The Court concluded that the June 3, 2005 notification enhancing royalty and dead rent was legally valid, was issued after considering relevant material, and was not arbitrary. It accordingly set aside the Punjab and Haryana High Court's judgment and restored the State's notification.
Case Details:
Case Title: The State of Haryana & Ors. v. M/s Faridabad Gurgaon Minerals & Anr. (Connected with The State of Haryana & Ors. v. M/s Ganpati Enterprises Slate Mines)
Case Number: Civil Appeal No. of 2026 (Arising out of SLP (Civil) Diary No. 15252 of 2017) with Civil Appeal No. of 2026 (Arising out of SLP (Civil) Diary No. 30225 of 2017)
Judge: Justice Dipankar Datta and Justice Satish Chandra Shrama
Decision Date: 13 July 2026
-300x169.webp)
