13 October 2017
Supreme Court
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FEDERATION OF INDIAN MINERAL INDUSTRIES Vs UNION OF INDIA

Bench: HON'BLE MR. JUSTICE MADAN B. LOKUR, HON'BLE MR. JUSTICE SANJAY KISHAN KAUL, HON'BLE MR. JUSTICE DEEPAK GUPTA
Judgment by: HON'BLE MR. JUSTICE MADAN B. LOKUR
Case number: T.C.(C) No.-000043-000043 / 2016
Diary number: 34280 / 2016
Advocates: ABHISHEK SHARMA Vs


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REPORTABLE  

 

 IN THE SUPREME COURT OF INDIA    

CIVIL ORIGINAL JURISDICTION      

TRANSFERRED CASE (CIVIL) NO. 43 OF 2016  

 

Federation of Indian Mineral Industries & ors.          …Petitioners  

 

versus  

 

Union of  India & Anr.                                         …Respondents   

WITH  

 

W.P. (C) No. 989/2016, W.P. (C) No. 1003/2016, T.C.  

(C) No. 51/2016, W.P. (C) No. 1014/2016, W.P. (C)  

No.1028/2016, T.C. (C) Nos. 273-275/2017 (arising out  

of T.P. (C) Nos. 74-76/2017), W.P. (C) No. 67/2017,  

W.P. (C) No. 205/2017, W.P. (C) No. 201/2017, S.L.P.  

(C) No. 12099/2017, S.L.P. (C) Nos. 12184-12185/2017,  

S.L.P. (C) No.14693/2017, S.L.P. (C) No.16685/2017,  

W.P. (C) No. 886/2016, W.P. (C) No. 912/2016, W.P.  

(C) No. 27/2017, W.P. (C) No. 112/2017 and W.P.(C)  

No. 69/2017.  

 

J U D G M E N T     

Madan B. Lokur, J.      

1. This batch of petitions (including transfer cases/petitions) relate  

to the establishment of the District Mineral Foundation under the Mines  

and Minerals (Development and Regulation) Act, 1957 and the  

contribution required to be made to the District Mineral Foundation by

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the holder of a mining lease or a prospecting licence-cum-mining lease  

in addition to the payment of royalty.   

Ordinance of 12 th

January, 2015  

2.  On 12 th

January, 2015 the President promulgated an Ordinance  

making several amendments to the Mines and Minerals (Development  

and Regulation) Act, 1957 (for short ‗the MMDR Act‘).   We are  

concerned with only a few of these amendments which are detailed  

below:  

(i) Section 9 of the Ordinance inserted Section 9B in the  

MMDR Act. This section provides that the State  

Government shall establish a non-profit trust called the  

District Mineral Foundation (for short ‗the DMF‘) in any  

district affected by mining operations.  The DMF shall  

have the object of working for the interest and benefit of  

persons and areas affected by mining related operations.  

What is of significance is that this provision requires the holder of a  

mining lease or a prospecting licence-cum-mining lease, in addition to  

payment of royalty, to pay to the DMF concerned an amount equivalent  

to a percentage of royalty not exceeding one-third thereof, as may be  

prescribed by the Central Government. Section 9B of the MMDR Act,

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as inserted by the Ordinance, reads as follows:  

―9B. District Mineral Foundation - (1) In any district  

affected by mining related operations, the State Government  

shall, by notification, establish a trust, as a non-profit body,  

to be called the District Mineral Foundation.   

 

(2) The object of the District Mineral Foundation shall be to  

work for the interest and benefit of persons, and areas  

affected by mining related operations in such manner as  

may be prescribed by the State Government.   

 

(3) The composition and functions of the District Mineral  

Foundation shall be such as may be prescribed by the State  

Government.  

  

(4) The holder of a mining lease or a prospecting licence-

cum-mining lease shall, in addition to the royalty, pay to the  

District Mineral Foundation of the district in which the  

mining operations are carried on, an amount which is  

equivalent to such percentage of the royalty paid in terms of  

the Second Schedule, not exceeding one-third of such  

royalty, as may be prescribed by the Central Government.‖  

   

(ii) Section 14 of the Ordinance inserted sub-clause  

(qqa) in Section 13(2) of the MMDR Act relating to the  

power of the Central Government to make rules in respect  

of minerals.  Clause (qqa) as inserted in the MMDR Act  

reads as follows:  

―(qqa)  the amount of payment to be made to the District  

Mineral Foundation under sub-section (4) of section 9B;‖  

 

(iii) Section 15 of the Ordinance inserted sub-section (4)  

in Section 15 of the MMDR Act relating to the power of

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the State Governments to make rules in respect of minor  

minerals.  Sub-section (4) as inserted in Section 15 of the  

MMDR Act reads as follows:  

―15. Amendment of section 15. –  In section 15 of the  

principal Act, after sub-section (3), the following sub-

section shall be inserted, namely:-  

 

―(4) Without prejudice to sub-sections (1), (2) and sub-

section (3), the State Government may, by notification,  

make rules for regulating the provisions of this Act for  

the following, namely:―   

 

(a) the manner in which the District Mineral Foundation  

shall work for the interest and benefit of persons and  

areas affected by mining under sub-section (2) of section  

9B;   

 

(b) the composition and functions of the District Mineral  

Foundation under sub-section (3) of section 9B; and   

 

(c) the amount of payment to be made to the District  

Mineral Foundation by concession-holders of minor  

minerals under section 15A.‖  

 

 

(iv) Section 18 of the Ordinance inserted Section 20A in  

the MMDR Act relating to the power of the Central  

Government to issue directions.  It is not necessary to  

reproduce the provisions of Section 20A of the MMDR  

Act except to say that the section enables the Central  

Government to issue appropriate directions to the State  

Governments for the conservation of mineral resources, or

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on any policy matter in the national interest, and for the  

scientific and sustainable development and exploitation of  

mineral resources.     

Amendments to the MMDR Act  

3. On 27 th  March, 2015 the Ordinance was replaced by the Mines  

and Minerals (Development and Regulation) Amendment Act, 2015  

with effect from 12 th  January, 2015. However, Section 9B and Section  

13(2) clause (qqa) were further amended and they now read as follows:   

―9B. District Mineral Foundation. –  (1) In any district  

affected by mining related operations, the State  

Government shall, by notification, establish a trust, as a  

non-profit body, to be called the District Mineral  

Foundation.   

(2) The object of the District Mineral Foundation shall  

be to work for the interest and benefit of persons, and  

areas affected by mining related operations in such  

manner as may be prescribed by the State Government.   

(3) The composition and functions of the District  

Mineral Foundation shall be such as may be prescribed  

by the State Government.   

(4) The State Government while making rules under  

sub-sections (2) and (3) shall be guided by the  

provisions contained in article 244 read with Fifth and  

Sixth Schedules to the Constitution relating to  

administration of the Scheduled Areas and Tribal Areas  

and the Provisions of the Panchayats (Extension to the  

Scheduled Areas) Act, 1996 and the Scheduled Tribes  

and Other Traditional Forest Dwellers (Recognition of  

Forest Rights) Act, 2006.   

(5) The holder of a mining lease or a prospecting  

licence-cum-mining lease granted on or after the date of  

commencement of the Mines and Minerals

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(Development and Regulation) Amendment Act, 2015,  

shall, in addition to the royalty, pay to the District  

Mineral Foundation of the district in which the mining  

operations are carried on, an amount which is equivalent  

to such percentage of the royalty paid in terms of the  

Second Schedule, not exceeding one-third of such  

royalty, as may be prescribed by the Central  

Government.   

(6) The holder of a mining lease granted before the date  

of commencement of the Mines and Minerals  

(Development and Regulation) Amendment Act, 2015,  

shall, in addition to the royalty, pay to the District  

Mineral Foundation of the district in which the mining  

operations are carried on, an amount not exceeding the  

royalty paid in terms of the Second Schedule in such  

manner and subject to the categorisation of the mining  

leases and the amounts payable by the various categories  

of lease holders, as may be prescribed by the Central  

Government.‖    

―(qqa) the amount of payment to be made to the District  

Mineral Foundation under sub-sections (5) and (6) of  

section 9B.‖  

 

4.  Very broadly, the MMDR Act required the State Government to  

establish a District Mineral Foundation and the Central Government  

was required to prescribe the rate of contribution to the DMF, provided  

the contribution did not exceed one-third of the royalty payable by the  

holder of a mining lease or a prospecting licence-cum-mining lease.  

Notifications issued   

5. On 16 th  September, 2015 the Central Government, in exercise of  

its power under Section 20A of the MMDR Act issued a direction to all  

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the  State Governments that the notification establishing the DMF shall  

state that the DMF shall be deemed to have come into existence with  

effect from 12 th  January, 2015. The direction dated 16

th  September,  

2015 reads as follows:  

―No. 16/7/2015 –M.VI (Part)  

Government of India  

Ministry of Mines  

 

  New Delhi, Shastri Bhawan  Dated the 16

th  September, 2015  

 

ORDER  

WHEREAS in terms of the provisions of sub-section (1) of section  

9B of the Mines and Minerals (Development and Regulation)  

(MMDR) Act, 1957 (67 of 1957), the State Governments shall, by  

notification, establish a District Mineral Foundation in every  

district in the country affected by mining related operations.  

AND WHEREAS the said provision is deemed to have come into  

force on the 12 th

day of January, 2015.  

NOW THEREFORE, the Central Government in exercise of the  

powers conferred under section 20A of the MMDR Act, 1957, in  

the national interest hereby directs the concerned State  

Governments that the notification establishing the District Mineral  

Foundations shall state that such District Mineral Foundations shall  

be deemed to have come into existence with effect from the 12 th

 

day of January, 2015.  

(R Sridharan)  

Additional Secretary to the Government of India‖  

 

6. It is not necessary for us to examine the validity of the direction  

except to note that pursuant thereto, several State Governments did  

establish a DMF as per the table below:

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Date of Notification and Establishment of DMF  

State Date of Notification Date of Establishment  

1 Andhra Pradesh 14.3.2016 14.3.2016  

2 Chhattisgarh 22.12.2015 12.1.2015  

3 Goa 15.1.2016 12.1.2015  

4 Haryana 17.11.2016 12.1.2015  

5 Jharkhand 22.3.2016 12.1.2015  

6 Karnataka 11.1.2016 12.1.2015  

7 Madhya Pradesh 15.5.2015 15.5.2015  

8 Maharashtra 1.9.2016 16.9.2015  

9 Odisha 18.8.2015 18.8.2015  

10 Rajasthan 31.5.2016 12.1.2015  

11 Tamil Nadu 19.5.2017 19.5.2017  

12 Telangana 21.8.2015 21.8.2015  

13 Uttar Pradesh 25.4.2017 12.1.2015  

14 West Bengal 3.3.2016 3.3.2016  

 

7. On 17 th  September, 2015 the Ministry of Mines issued a  

notification promulgating the Mines and Minerals (Contribution to  

District Mineral Foundation) Rules, 2015. 1  In terms of the notification,  

the Contribution Rules were deemed to have come into force on 12 th   

January, 2015.   Paragraph 2 of the notification provides, inter alia, for  

payment to the DMF an amount of 10% of the royalty payable by the  

holder of a mining lease or prospecting licence-cum-mining lease  

granted on or after 12 th

January, 2015 and 30% of the royalty payable in  

respect of mining leases granted before 12 th  January, 2015.     

                                                           1  The administration of the MMDR Act is with the Ministry of Mines for minerals other than coal, lignite and  

sand for stowing

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8. Since the administration of MMDR Act with the Ministry of  

Mines is limited to minerals other than coal, lignite and sand for  

stowing, it is assumed that the notification did not relate to these three  

minerals.  

9. The notification dated 17 th

September, 2015 reads as follows:  

―MINISTRY OF MINES    

NOTIFICATION  

 

New Delhi, the 17 th

September, 2015  

 G.S.R. 715(E).—In exercise of the powers conferred by sub-

sections (5) and (6) of Section 9B of the Mines and Minerals  

(Development and Regulation) Act, 1957 (67 of 1957), the Central  

Government hereby makes the following rules specifying the  

amount to be paid by holder of a mining lease or a prospecting  

licence-cum-mining lease, in addition to the royalty, to the District  

Mineral Foundation of the district established by the concerned  

State Government by notification, in which the mining operations  

are carried on, namely:—  

 

1. Short title and commencement.—(1) These rules may be  

called as the Mines and Minerals (Contribution to District Mineral  

Foundation) Rules, 2015.  

 

(2) These rules shall be deemed to have come into force on the 12 th

 

day of January, 2015.  

 

2. Amount of contribution to be made to District Mineral  

Foundation.—Every holder of a mining lease or a prospecting  

licence-cum-mining lease shall, in addition to the royalty, pay to  

the District Mineral Foundation of the district in which the mining  

operations are carried on, an amount at the rate of —  

 

(a) ten per cent of the royalty paid in terms of the Second Schedule  to the Mines and Minerals (Development and Regulation) Act,  

1957 (67 of 1957) (herein referred to as the said Act) in respect

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of mining leases or, as the case may be, prospecting licence-

cum-mining lease granted on or after 12 th

January, 2015; and  

 

(b) thirty per cent of the royalty paid in term of the Second  Schedule to the said Act in respect of mining leases granted  

before 12 th

January, 2015.‖  

   

10. On 20 th  October, 2015 the Ministry of Coal issued a notification  

promulgating the Mines and Minerals (Contribution to District Mineral  

Foundation) Rules, 2015. 2   The Contribution Rules are deemed to have  

come into force on the date of their publication in the Official Gazette.  

These rules pertain to payment to the DMF at the same rate and on the  

same terms as mentioned in the notification dated 17 th  September, 2015.  

The subject notification, having been issued by the Ministry of Coal,  

specifically mentioned that the rules were in respect of coal, lignite and  

sand for stowing.     

11. What is of significance in the notification dated 20 th  October,  

2015 is paragraph 3 thereof. This provides that the amount payable to  

the DMF shall be paid from the date of the notification issued under  

Section 9B(1) of the MMDR Act by the State Government establishing  

the DMF or the date of coming into force of the Contribution Rules,  

whichever is later.  The notification dated 20 th

October, 2015 reads as  

follows:                                                              2  The administration of the MMDR Act is with the Ministry of Coal for coal, lignite and sand for stowing.

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―MINISTRY OF COAL    

NOTIFICATION  

 

New Delhi, the 20 th

October, 2015  

 G.S.R. 792(E).—In exercise of the powers conferred by sub-

sections (5) and (6) of Section 9B of the Mines and Minerals  

(Development and Regulation) Act, 1957 (67 of 1957), the Central  

Government hereby makes the following rules in r/o of coal and  

lignite and sand for stowing specifying the amount to be paid by  

holder of a mining lease or a prospecting licence-cum-mining  

lease, in addition to the royalty, to the District Mineral Foundation  

of the district established by the concerned State Government by  

notification, in which the mining operation are carried on,  

namely:—  

 

1. Short title and commencement.—(1) These rules may be  called as the Mines and Minerals (Contribution to District Mineral  

Foundation) Rules, 2015.  

 

(2) These rules shall be deemed to have come into force on the  

date of their publication in the Official Gazette.  

 

2. Amount of contribution to be made to District Mineral  Foundation.—Every holder of a mining lease or a prospecting  

licence-cum-mining lease in respect of coal and lignite and sand  

for stowing shall, in addition to the royalty, pay to the District  

Mineral Foundation of the district in which the mining operation  

are carried on, an amount at the rate of:—  

 

(a) ten per cent of the royalty paid in term of the second schedule  to the Mines and Minerals (Development and Regulation) Act,  

1957 (67 of 1957) (herein referred to as the said Act) in respect  

of mining lease or, as the case may be, prospecting licence-

cum-mining lease granted on or after 12 th

January, 2015; and  

 

(b) thirty per cent of the royalty paid in term of the Second  Schedule to the said Act in respect of mining lease granted  

before 12 th

January, 2015.  

 

3. Date from which contribution to be made.—The amount  

calculated at the rate prescribed in rule 2 shall be paid from the

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date of notification issued under Section 9B(1) of the Act by the  

State Government establishing District Mineral Foundation or the  

date of coming into force of these rules, whichever is later.‖  

 

 

12. The Ministry of Coal issued another notification on 31 st  August,  

2016 substituting paragraph 3 of the notification dated 20 th  October,  

2015.  The substituted paragraph provided that payment under the  

notification dated 20 th  October, 2015 shall be made to the DMF with  

effect from 12 th

January, 2015.  The notification dated 31 st  August,  

2016 reads as follows:  

―MINISTRY OF COAL  

NOTIFICATION  

 

New Delhi, the 31 st  August, 2016  

 G.S.R. 837(E).—In exercise of the powers conferred by sub-

sections (5) and (6) of section 9B of the Mines and Minerals  

(Development and Regulation) Act, 1957, (67 of 1957), the Central  

Government hereby makes the following rules in respect of coal,  

lignite and sand for stowing, to amend the Mines and Minerals  

(Contribution to District Mineral Foundation) Rules, 2015,  

namely:-  

 

1. These rules may be called as the Mines and Minerals  (Contribution to District Mineral Foundation) (Amendment) Rules,  

2016.  

 

In the Mines and Minerals (Contribution to District Mineral  

Foundation) Rules, 2015, for rule 3, the following rule shall be  

substituted, namely:-  

 

―3. Date from which contribution to be made. – The  

amount calculated at the rate specified in rule 2 shall be  

paid with effect from the 12 th

January, 2015.‖

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Questions raised by the petitioners  

13. On the basis of these notifications, the questions raised by  

learned counsel for the petitioners are: Firstly, whether the DMFs could  

be established with effect from 12 th  January, 2015? Secondly, whether  

contributions to the DMFs were required to be made by the petitioners  

at the rate mentioned in both sets of Contribution Rules with effect  

from 12 th  January, 2015? The validity of the notifications was  

challenged or was under challenge to this extent depending on their  

interpretation and their impact and effect.     

(i) The first question  

14. In terms of sub-section (1) of Section 9B the State Government is  

required to establish a trust as a non-profit body and that trust would be  

called the District Mineral Foundation. For establishing the trust the  

State Government is required to issue a notification. It is entirely for the  

State Government to decide the date from which to set up the trust. The  

Central Government has no role to play in this, although a direction was  

issued by the Central Government to the State Governments to establish  

a trust with effect from 12 th

January, 2015. But be that as it may, the  

State Governments did issue a notification establishing the DMF –

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some with effect from 12 th

January, 2015 and some with effect from the  

date of the notification establishing the DMF.  

15. The submission of learned counsel for the petitioners is that the  

DMF could not have been established from a retrospective date prior to  

the date of the notification.    

16. To answer this issue, it is necessary to first of all decide whether  

the DMF has in fact been established retrospectively. The learned  

Additional Solicitor General submitted that the DMFs were not  

established with retrospective effect. His contention was that under  

Section 9B of the MMDR Act the DMF could be established with effect  

from 12 th

January, 2015 or any date thereafter. Some States chose to  

issue a notification establishing the DMF from an anterior date (12 th   

January, 2015) while some others did not, notwithstanding the direction  

of the Central Government. According to the learned Additional  

Solicitor General establishing the DMF from a date anterior to the date  

of the notification did not mean that the DMF was established with  

retrospective effect. He relied on a decision of the Constitution Bench  

of this Court in A. Thangal Kunju Musaliar v. M. Venkitachalam  

Potti 3  in support of his contention.   

                                                           3  (1955) 2 SCR 1196

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17. Musaliar  advances the case of the learned Additional Solicitor  

General. The Constitution Bench acknowledged that the general law is  

that a statute comes into force on the day it received the assent of the  

competent authority. However that date could be postponed if so  

provided in the statute. In Musaliar the statute provided that it was to  

come into force on a date notified in the Government Gazette. Since the  

statute was passed by the Legislature on 7 th  March, 1949 it would have  

ordinarily come into force on that date but by virtue of Section 1(3) of  

the statute, a notification was issued on 26 th  July, 1949 bringing the  

statute into force on 22 nd

July, 1949 a date obviously later than 7 th   

March, 1949. The Constitution Bench held that the notification did not  

prejudicially affect any vested rights and (by implication) its  

retrospective operation could not be looked upon with disfavour.  

Moreover, the operation of the statute was not from a date prior to its  

passing and so it could not be said to have retrospective operation.  

Fixing a date anterior to the date of the notification bringing the statute  

into force did not attract the principle of disfavouring retrospective  

operation. The Constitution Bench however did not consider the further  

submission of the learned Attorney General that the notification was  

good to bring the statute into operation from the date of issue of the

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notification. The law laid down by the Constitution Bench is quite  

explicit when it was held:  

―The reason for which the Court disfavours retroactive  

operation of laws is that it may prejudicially affect vested  

rights. No such reason is involved in this case. Section 1(3)  

authorises the Government to bring the Act into force on such  

date as it may, by notification, appoint. In exercise of the power  

conferred by this section the Government surely had the power  

to issue the notification bringing the Act into force on any date  

subsequent to the passing of the Act. There can therefore, be no  

objection to the notification fixing the commencement of the  

Act on the 22nd July, 1949 which was a date subsequent to the  

passing of the Act. So the Act has not been given retrospective  

operation, that is to say, it has not been made to commence  

from a date prior to the date of its passing. It is true that the  

date of commencement as fixed by the notification is  

anterior to the date of the notification but that  

circumstance does not attract the principle disfavouring the  

retroactive operation of a statute. Here there is no question  

of affecting vested rights. The operation of the notification  

itself is not retrospective. It only brings the Act into operation  

on and from an earlier date. In any case it was in terms  

authorised to issue the notification bringing the Act into force  

on any date subsequent to the passing of the Act and that is all  

that the Government did. In this view of the matter, the further  

argument advanced by the learned Attorney-General and  

which found favour with the Court below, namely, that the  

notification was at any rate good to bring the Act into  

operation as on and from the date of its issue need not be  

considered.‖ (Emphasis supplied by us)    

18. The notifications establishing the DMF in the States mentioned  

in the table above were issued pursuant to the provisions of Section 9B  

of the MMDR Act. The intention of Parliament appears to have been  

for the State Governments to establish the DMF with effect from 12 th   

January, 2015 since its object is to work for the interest and benefit of

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persons and areas affected by mining related operations. The object  

being the welfare of those adversely affected by mining operations, the  

DMFs ought to have been established on 12 th

January, 2015. However,  

not surprisingly, every State Government took it easy (including to a  

lesser extent the State Governments of Madhya Pradesh, Odisha and  

Telangana) compelling the Central Government to issue a direction  

under Section 20A of the MMDR Act on 16 th  September, 2015  

requiring the State Governments to issue a notification that the DMF  

shall be deemed to have come into existence with effect from the 12 th   

January, 2015.   

19. In any event, even assuming that since the DMFs were  

established from a date anterior to the date of the notification and  

therefore they were established with retrospective effect, their  

establishment did not adversely affect anybody‘s vested rights (as will  

be seen later). This is crucial. Therefore there can be no real objection  

to the operation of the notifications from 12 th  January, 2015 in view of  

the decision in Musaliar.  The DMFs were not established from a date  

prior to 12 th  January, 2015 and to that extent cannot be said to have  

been established with retrospective effect.  

20. Assuming the DMFs were  established with retrospective effect –

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is that permissible in law? This question really does not arise in the  

view that we have taken following Musaliar but since it was  

vehemently argued by learned counsel by citing several decisions, we  

briefly give our views.   

21. The power to give retrospective effect to subordinate legislation  

whether in the form of rules or regulations or notifications has been the  

subject matter of discussion in several decisions rendered by this Court  

and it is not necessary to deal with all of them – indeed it may not even  

be possible to do so. It would suffice if the principles laid down by  

some of these decisions cited before us and relevant to our discussion  

are culled out. These are obviously relatable to the present set of cases  

and are not intended to lay down the law for all cases of retrospective  

operation of statutes or subordinate legislation. The relevant principles  

are:  

(i) The Central Government or the State Government (or any  

other authority) cannot make a subordinate legislation having  

retrospective effect unless the parent statute, expressly or by  

necessary implication, authorizes it to do so. (Hukum Chand v.  

Union of India 4  and Mahabir Vegetable Oils (P) Ltd. v. State of  

                                                           4  (1972) 2 SCC 601

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Haryana 5 ).  

(ii) Delegated legislation is ordinarily prospective in nature  

and a right or a liability created for the first time cannot be given  

retrospective effect.  (Panchi Devi v. State of Rajasthan 6 ).   

(iii) As regards a subordinate legislation concerning a fiscal  

statute, it would not be proper to hold that in the absence of an  

express provision a delegated authority can impose a tax or a fee.  

There is no scope or any room for intendment in respect of a  

compulsory exaction from a citizen. (Ahmedabad Urban  

Development Authority v. Sharadkumar Jayantikumar  

Pasawalla 7   and State of Rajashtan v. Basant Agrotech (India)  

Limited. 8 ).  

22. A much more erudite, general and broad-based discussion on the  

subject is to be found in the Constitution Bench decision in  

Commissioner of Income Tax (Central) – I v. Vatika Township  

Private Limited 9  and we are obviously bound by the conclusions  

arrived at therein.  It is not at all necessary for us to repeat the  

discussion and the conclusions arrived at by the Constitution Bench in  

                                                           5  (2006) 3 SCC 620   

6  (2009) 2 SCC 589  

7  (1992) 3 SCC 285  

8  (2013) 15 SCC 1  

9  (2015) 1 SCC 1

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the view that we have taken except to say that our conclusions do not  

depart from the conclusions arrived at by the Constitution Bench.  

23. On the facts before us, it is clear that Section 15 of the MMDR  

Act empowers the State Government 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. This  

section does not specifically or by necessary implication empower the  

State Government to frame any rule with retrospective effect.  Also, the  

MMDR Act does not confer any specific power on the State  

Government to fictionally create the DMF deeming it to be in existence  

from a date earlier than the date of the notification establishing the  

DMF. Therefore, it must follow that under the provisions of the MMDR  

Act that we are concerned with, no State Government has the power to  

frame a rule with retrospective effect or to create a deeming fiction,  

either specifically or by necessary intendment.   

24. Similarly, Section 13 of the MMDR Act does not confer any  

specific power on the Central Government to frame any rule with  

retrospective effect. Section 9B(5) and (6) read with clause (qqa)  

inserted in Section 13(2) of the MMDR Act enable the Central  

Government to make rules to provide for the amount of payment to be

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made to the DMF established by the State Government under Section  

9B(1) of the MMDR Act. None of these provisions confer any power  

on the Central Government to require the holder of a mining lease or a  

prospecting licence-cum-mining lease to contribute to the DMF with  

retrospective effect. Therefore, even the scope and extent of the rule  

making power of the Central Government is limited.  

25. In view of the position in law as explained above and the factual  

position before us, the notifications issued by the State Governments  

must be understood to mean (assuming the DMF could not be  

established with effect from 12 th

January, 2015 by a notification issued  

on a later date) that the DMF was established on the date of publication  

of each notification. This is reflective of the further submission of the  

learned Attorney General in Musaliar that was not considered by the  

Constitution Bench. In our opinion this submission can be extrapolated  

to the facts of the cases before us and if we do so, we find it well taken.  

To the extent possible, the validity of a rule, regulation or notification  

should be upheld. It is not obligatory to declare any notification ultra  

vires the rule making power of the State Government if its validity can  

be saved without doing violence to the law. In these cases, we are of  

opinion that it is not obligatory to declare the notifications ultra vires

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the rule making power of the State Governments to the extent of their  

establishing the DMF from a retrospective date, since we can save their  

validity by reading them as operational from the date of their  

publication. In any event, no prayer was made before us for striking  

down the establishment of the DMF as such.  

26. Therefore our answer to the first question is that the DMFs were  

not established retrospectively even though the notifications established  

them from a date anterior to the date of the notifications - but not before  

the date of the Ordinance. Assuming the DMFs were established with  

retrospective effect from 12 th  January, 2015 it is of no consequence  

since the retrospective establishment does not prejudicially affect the  

interests of anybody (as will be seen later). In this view of the matter,  

the notifications do not violate the law laid down in Musaliar and  

Vatika Township. Even otherwise, their validity can be saved by  

reading them as operational from the date of publication.  

(ii) The second question  

27. Learned counsel for the petitioners submitted that assuming the  

issue of retrospective operation of the notifications and the  

establishment of the DMFs is decided against them, even then the  

petitioners cannot be compelled to make the contribution for a period

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prior to the date of the relevant notifications, that is, 17 th

September,  

2015 and 20 th  October, 2015 (as the case may be). For this purpose,  

reliance was placed on M/s Govind Saran Ganga Saran v.  

Commissioner of Sales Tax 10

and Vatika Township.   

28. In Govind Saran this Court was concerned with the taxation of  

goods under Sections 14 and 15 of the Central Sales Tax Act, 1956 (the  

CST Act) and the assessment made under the Bengal Finance (Sales  

Tax) Act, 1941 as applied to the Union Territory of Delhi. Section 15 of  

the CST Act reads:  

―15. Every sales tax law of a State shall, insofar as it imposes  

or authorizes the imposition of a tax on the sale or  

purchase of declared goods, be subject to the following  

restrictions and conditions, namely:  

(a) the tax payable under that law in respect of any  sale or purchase of such goods inside the State  

shall not exceed three percent of the sale or  

purchase price thereof, and such tax shall not be  

levied at more than one stage.‖    

 

 

This Court noted that Section 15 of the CST Act prescribed the  

maximum rate of tax that could be imposed and that such tax shall not  

be levied at more than one point. Expanding on these requirements, this  

Court observed in paragraph 6 of the Report as follows:  

―The components which enter into the concept of a tax are well  

known. The first is the character of the imposition known by its  

                                                           10

1985 (Supp) SCC 205

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nature which prescribes the taxable event attracting the levy,  

the second is a clear indication of the person on whom the levy  

is imposed and who is obliged to pay the tax, the third is the  

rate at which the tax is imposed, and the fourth is the measure  

or value to which the rate will be applied for computing the tax  

liability. If those components are not clearly and definitely  

ascertainable, it is difficult to say that the levy exists in point of  

law. Any uncertainty or vagueness in the legislative scheme  

defining any of those components of the levy will be fatal to  

its validity.‖ (Emphasis supplied by us)    

29. After the above observations, this Court primarily dealt with the  

absence of specifying the single point at which the tax might be levied  

and held that the prerequisite of Section 15 of the CST Act that the tax  

shall not be levied at more than one stage had not been satisfied.  

Therefore, it quashed the assessment complained of and allowed the  

appeal of the assessee.   

30. In Vatika Township the Constitution Bench was concerned with  

the impact of the proviso appended to Section 113 of the Income Tax  

Act, 1961 inserted by the Finance Act. 11

The rate of surcharge was not  

specified in the proviso nor the date for the levy. The consequence of  

this was that some assessing officers were not levying any surcharge  

and those who were levying surcharge adopted different dates for the  

                                                           11 113. Tax in the case of block assessment of search cases.-The total undisclosed income of the block  period, determined under Section 158BC, shall be chargeable to tax at the rate of sixty per cent:  

Provided that the tax chargeable under this section shall be increased by a surcharge, if any, levied by any  Central Act and applicable in the assessment year relevant to the previous year in which the search is  initiated under section 132 or the requisition is made under section 132A.

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levy.  In this context it was held that the rate at which a tax or for that  

matter a surcharge is to be levied is an essential component of the tax  

regime. The decision in Govind Saran was referred to by the  

Constitution Bench, particularly the passage extracted above.  It was  

further held: ―It is clear from the above that the rate at which the tax is  

to be imposed is an essential component of tax and where the rate is not  

stipulated or it cannot be applied with precision, it would be difficult to  

tax a person.‖  

31. We may also note a similar view expressed in Principles of  

Statutory Interpretation by Justice G.P. Singh 12

that: ―There are three  

components of a taxing statute, viz. subject of the tax, person liable to  

pay the tax and the rate at which the tax is levied. If there be any real  

ambiguity in respect of any of these components which is not  

removable by reasonable construction, there would be no tax in law till  

the defect is removed by the legislature.‖  

32. In view of the decision of the Constitution Bench of this Court  

that the specification of the rate of tax (or any compulsory levy for that  

matter) is an essential component of the tax regime, it is difficult to  

agree with the learned Additional Solicitor General that specifying the  

                                                           12

14 th

edition revised by Justice A.K. Patnaik, former Judge, Supreme Court of India, page 876  

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maximum amount of compensation to be paid to the DMF in terms of  

Section 9B of the MMDR Act, being an amount not exceeding one-

third of the royalty, satisfies the requirements of law. What is required  

by the law is certainty and not vagueness – not exceeding one-third  

could mean one-fourth or one-fifth or some other fraction. It is this  

uncertainty that is objectionable.   

33. Therefore, our answer to the second question is that the  

petitioners are not liable to make any contribution to the DMF from 12 th   

January, 2015.   

Crucial date for making the contribution to the DMF  

34. What then is the crucial date for making the contribution?  There  

are two categories of holders of a mining lease or a prospecting licence-

cum-mining lease. We will consider the effect of the notifications on  

each such category.   

Lease holders for minerals other than coal, lignite and sand for  

stowing  

 

35. On 17 th  September, 2015 the Ministry of Mines in the Central  

Government issued a notification regarding the contribution to the DMF  

in respect of minerals other than coal, lignite and sand for stowing. The  

rate at which the contribution was required to be made by the holder of

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a mining lease or a prospecting licence-cum-mining lease is specified in  

the notification. Although the notification provides that the contribution  

is payable from 12 th

January, 2015 in view of our conclusion that the  

contribution to the DMF cannot be with retrospective effect, it would be  

payable only from the date of the notification, that is, 17 th  September,  

2015 even though the DMF was established or deemed to be established  

with effect from 12 th

January, 2015.  

36. The further question raised by learned counsel for the petitioners  

in this regard was: How can the contribution be made to an entity like  

the DMF that was established only on a date subsequent to 17 th   

September, 2015 (except for the States of Madhya Pradesh, Odisha and  

Telangana)? Can the contribution be paid to a non-existent trust?  

37. We are afraid this line of questioning does not appeal to us. The  

object of the DMF is ―to work for the interest and benefit of persons,  

and areas affected by mining related operations‖. The purpose of  

Section 9B of the MMDR Act and the object of the DMF are in  

furtherance of the cause of social justice for those affected by the  

mining related operations – including tribals who may be dislocated or  

displaced from their habitat. To deny them a benefit that is rightfully  

theirs only because the State Government has been lax in establishing

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the DMF would be doing injustice to them.   

38. Additionally, Section 9B of the MMDR Act creates a liability  

and only the quantum of the liability remained to be determined. That  

determination came on the issuance of the notification of 17 th   

September, 2015.   The fact that it would take time (even more than a  

year as in the case of  Tamil Nadu and Uttar Pradesh) for the benefit to  

reach the affected persons cannot detract from the liability of the  

petitioners to contribute nor does it absolve them of their liability to pay  

the contribution. The only criticism could be of the tardiness and lack of  

concern by State Governments in setting up the DMF in spite of the  

direction of the Central Government.     

39. In A. Prabhakara Reddy v. State of Madhya Pradesh 13

one of  

the questions raised was that since the Madhya Pradesh Building and  

Other Construction Workers Welfare Board came to be constituted only  

on 9 th  April, 2003 the recovery of cess under the Building and Other  

Construction Workers Welfare Cess Act, 1996 with effect from 1 st   

April, 2003 did not arise.  On this basis, the requirement to pay cess  

was challenged.  

40. This Court rejected the contention and held that after the Cess  

                                                           13

(2016) 1 SCC 600  

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Act and the rules framed thereunder came into effect and the Workers  

Welfare Board was constituted and the rate of cess was notified, the  

State was under an obligation to collect the cess in respect of on-going  

projects. The fact that passing on the benefit to the workers might take  

some time had no impact on the liability to pay the cess. It was further  

held that: ―Any other interpretation would defeat the rights of the  

workers whose protection is the principal aim or primary concern and  

objective of the BOCW Act as well as the Cess Act.‖  

41. We hold, therefore, that the effective date of payment of  

contribution to the DMF in the case of those petitioners who are (or  

were) holders of a mining lease or a prospecting licence-cum-mining  

lease for minerals other than coal, lignite and sand for stowing would be  

17 th  September, 2015.   

Lease holders for coal, lignite and sand for stowing  

42. The position with regard to contribution to the DMF by the  

holders of a mining lease or a prospecting licence-cum-mining lease for  

coal, lignite and sand for stowing is quite different from the situation of  

the other holders of a mining lease or a prospecting licence-cum-mining  

lease. The reason for this is to be found in the text of paragraph 3 of the  

notification of 20 th

October, 2015 which is very explicit. It provides that

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the contribution, though payable, shall be paid only from the date of the  

notification (20 th

October, 2015) or from the date of establishment of  

the DMF in the concerned State, whichever is later.  Therefore, only  

Madhya Pradesh, Odisha and Telangana would be entitled to the  

contribution from holders of a mining lease or a prospecting licence-

cum-mining lease from 20 th  October, 2015 since their DMF was  

established much earlier. As far as all other States are concerned, the  

holders of a mining lease or a prospecting licence-cum-mining lease  

could claim to postpone payment to the DMF till it was established, as  

per the notification issued by the State Government.  

43. It is true that many notifications establishing the DMF provided  

the date of establishment as 12 th

January, 2015 but as mentioned earlier  

the rule making power of the Central Government and the State  

Government under the MMDR Act does not permit retrospective  

operation of subordinate legislation.  It cannot also be said that the  

Contribution Rules have retrospective operation by necessary  

implication. Even this occasion does not arise. Furthermore, as held  

above, the rate at which the contribution was to be paid came to be  

notified only on 20 th  October, 2015. Therefore in view of the law  

discussed above, it cannot be said that the contribution should be paid

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by the holders of a mining lease or a prospecting licence-cum-mining  

lease with effect from 12 th  January, 2015.  

44. The learned Additional Solicitor General sought to rely on the  

subsequent notification dated 31 st  August, 2016 which substituted  

paragraph 3 in the notification of 20 th  October, 2015 with the  

requirement that the contribution ―shall be paid with effect from the 12 th   

January, 2015.‖  For the same reasons already given by us, such a  

retroactive substitution is ultra vires the rule making power of the  

Central Government. The notification dated 31 st  August, 2016 is clearly  

beyond the rule making power of the Central Government and must be  

struck down and we do so. All that this means is that the notification of  

20 th  October, 2015 remains untouched and must be read and understood  

on its plain language. The result is that in respect of coal, lignite and  

sand for stowing the holder of a mining lease or a prospecting licence-

cum-mining lease shall pay the contribution to the DMF from 20 th   

October, 2015 or the date of establishing the DMF, whichever is later.  

45. Finally, it was submitted by one of the learned counsel that  

Section 9B of the MMDR Act was a conditional legislation and that it  

could become operative only on the fulfilment of certain conditions. We  

cannot agree. Section 9B of the MMDR Act delegates power to the

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State Governments to establish the DMF without any pre-condition.  

Similarly, it delegates power to the Central Government to prescribe the  

rate at which the contribution should be made to the DMF. This again is  

without any pre-condition. In view of this, we are unable to describe  

Section 9B of the MMDR Act as a conditional legislation.  

Conclusion  

46. Having considered the issues raised by the petitioners and by the  

learned Additional Solicitor General in different perspectives, we hold:  

(i) Merely because the DMFs have been established or are deemed to  

have been established from a date prior to the issuance of the relevant  

notifications does not make their operation retrospective. (ii) In any  

event, the establishment of the DMFs (assuming the establishment is  

retrospective) from 12 th  January, 2015 does not prejudicially affect any  

holder of a mining lease or a prospecting licence-cum-mining lease. (iii)  

In view of the failure of the Central Government to prescribe the rate on  

12 th  January, 2015 at which contributions are required to be made to the  

DMF, the contributions to the DMF cannot be insisted upon with effect  

from 12 th

January, 2015.  Fixing the maximum rate of contribution to  

the DMF is insufficient compliance with the law laid down by the  

Constitution Bench in Vatika. (iv) Contributions to the DMF are

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required to be made by the holder of a mining lease or a prospecting  

licence-cum-mining lease in the case of minerals other than coal, lignite  

and sand for stowing with effect from 17 th

September, 2015 when the  

rates were prescribed by the Central Government. (v) Contributions to  

the DMF are required to be made by the holder of a mining lease or a  

prospecting licence-cum-mining lease in the case of coal, lignite and  

sand for stowing with effect from 20 th  October, 2015 when the rates  

were prescribed by the Central Government or with effect from the date  

on which the DMF was established by the State Government by a  

notification, whichever is later. (vi) The notification dated 31 st  August,  

2016 issued by the Central Government is invalid and is struck down  

being ultra vires the rule making power of the Central Government  

under the MMDR Act.  

47. We fervently hope the State Governments recognize their  

responsibilities and utilize the contributions to the District Mineral  

Funds quickly and for the object for which they have been established,  

particularly since the amounts involved are huge.   

48. We grant time till 31 st  December, 2017 to those holders of a  

mining lease or a prospecting licence-cum-mining lease who have not  

made the full contribution to the District Mineral Funds to pay the

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contribution, failing which they will be liable to make the contribution  

with interest at 15% per annum from the due date. We also make it  

clear that in the event any holder of a mining lease or a prospecting  

licence-cum-mining lease has mistakenly made contributions to the  

District Mineral Fund from a date prior to the date that we have  

determined, such a holder of a mining lease or a prospecting licence-

cum-mining lease shall not be entitled to any refund but may adjust the  

contribution against future contributions, without the benefit of any  

interest.   

49. With the above conclusions, Transfer Petition Nos.74-76/2017  

are allowed, Transferred Cases (arising out of Transfer Petition (C)  

Nos.74-76/2017), Transferred Cases (C) Nos.43 and 51 of 2016 and the  

batch of petitions are disposed of.  All other pending applications are  

also disposed of.  

.......……………………J  

        (Madan B. Lokur)   

   

              

...………………………J  

         (Sanjay Kishan Kaul)       

 

 

……………………….....J  

New Delhi;                   (Deepak Gupta)   

October 13, 2017