Supreme Court holds enhanced royalty on minerals applies when minerals are removed after statutory royalty rate increase.

Case Name: The Director of Mines and Geology v. M/s BMM Ispat Ltd. & Anr.

Citation: 2026 INSC 627

Date of Judgment/Order: 04 June 2026

Bench: Sanjay Karol, J. and Nongmeikapam Kotiswar Singh, J.

Held: The Supreme Court held that where the statutory rate of royalty is enhanced after execution of an e-auction contract but before actual removal or dispatch of minerals from the leased area, the enhanced royalty on minerals is payable at the rate prevailing on the date of removal or dispatch. The Court held that royalty under Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 is a statutory impost linked to removal or consumption of minerals, and a contractual stipulation cannot freeze or limit the effect of a subsequent statutory amendment increasing royalty.

Summary: The dispute arose from an e-auction of already extracted iron ore conducted by the Monitoring Committee constituted pursuant to orders of the Supreme Court in relation to iron ore stock in Karnataka. M/s BMM Ispat Ltd. was declared the successful bidder and paid the sale price, royalty at 10%, Forest Development Tax, VAT and other charges before the Central Government amended the Second Schedule to the MMDR Act on 01.09.2014, increasing royalty on iron ore from 10% to 15%. Since part of the iron ore was lifted after the amendment came into force, the authorities deducted the additional 5% royalty from the security deposit. The Karnataka High Court held that imposing royalty above the rate applicable on the date of acceptance of bid was unjust and set aside the deduction. Reversing the High Court, the Supreme Court held that Section 9 applied, that royalty is payable at the rate “for the time being specified” in the Second Schedule, and that the relevant point is the date of removal or dispatch of minerals, not the date of contract or payment.

Decision: The Supreme Court allowed the appeal filed by the Director of Mines and Geology, quashed the judgment dated 18.03.2019 passed by the Karnataka High Court, and upheld the deduction of additional 5% royalty from the security deposit of M/s BMM Ispat Ltd. The Court held that although the contract had been signed and payments made before the statutory amendment, the minerals were removed after the royalty rate had increased, and therefore the respondent could not avoid payment of enhanced royalty. All pending applications were disposed of.