Federation of Indian Mineral Industries & ors. vs Union of India & Anr.

13.10.2017

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
the holder of a mining lease or a prospecting licence-cum-mining lease
in addition to the payment of royalty.
Ordinance of 12th January, 2015
2. On 12th 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,
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 licencecum-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
T.C. (C) Nos.43/2016 etc.etc. Page 4 of 34
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 subsection
shall be inserted, namely:-
―(4) Without prejudice to sub-sections (1), (2) and subsection
(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
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 27th March, 2015 the Ordinance was replaced by the Mines
and Minerals (Development and Regulation) Amendment Act, 2015
with effect from 12th 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
T.C. (C) Nos.43/2016 etc.etc. Page 6 of 34
(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 16th September, 2015 the Central Government, in exercise of
its power under Section 20A of the MMDR Act issued a direction to all
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 12th January, 2015. The direction dated 16th September,
2015 reads as follows:
―No. 16/7/2015 –M.VI (Part)
Government of India
Ministry of Mines
New Delhi, Shastri Bhawan
Dated the 16th 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 12th 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 12th
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:
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 17th 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 12th
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 12th January, 2015 and 30% of the royalty payable in
respect of mining leases granted before 12th January, 2015.

The administration of the MMDR Act is with the Ministry of Mines for minerals other than coal, lignite and sand for stowing T.C. (C) Nos.43/2016 etc.etc. Page 9 of 34
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 17th September, 2015 reads as follows:
―MINISTRY OF MINES
NOTIFICATION
New Delhi, the 17th September, 2015
G.S.R. 715(E).—In exercise of the powers conferred by subsections
(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 12th
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
of mining leases or, as the case may be, prospecting licencecum-mining
lease granted on or after 12thJanuary, 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 12th January, 2015.‖
10. On 20th 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 17th 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 20th 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 20th October, 2015 reads as
follows:

The administration of the MMDR Act is with the Ministry of Coal for coal, lignite and sand for stowing.
―MINISTRY OF COAL
NOTIFICATION
New Delhi, the 20th October, 2015
G.S.R. 792(E).—In exercise of the powers conferred by subsections
(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 licencecum-mining
lease granted on or after 12thJanuary, 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 12th 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
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 31st August,
2016 substituting paragraph 3 of the notification dated 20th October,
2015. The substituted paragraph provided that payment under the
notification dated 20th October, 2015 shall be made to the DMF with
effect from 12th January, 2015. The notification dated 31st August,
2016 reads as follows:
―MINISTRY OF COAL
NOTIFICATION
New Delhi, the 31st August, 2016
G.S.R. 837(E).—In exercise of the powers conferred by subsections
(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 12th January, 2015.‖
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 12th 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 12th 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 12th January, 2015. But be that as it may, the
State Governments did issue a notification establishing the DMF –
some with effect from 12th 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 12th January, 2015 or any date thereafter. Some States chose to
issue a notification establishing the DMF from an anterior date (12th
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
Potti3 in support of his contention.

(1955) 2 SCR 1196

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 7th 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 26th July, 1949 bringing the
statute into force on 22nd July, 1949 a date obviously later than 7th
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
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 12th
January, 2015 since its object is to work for the interest and benefit of
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 12th 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 16th 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 12th
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 12th January, 2015 in view of
the decision in Musaliar. The DMFs were not established from a date
prior to 12th 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 –
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 India4
and Mahabir Vegetable Oils (P) Ltd. v. State of

4 (1972) 2 SCC 601
Haryana5
).
(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 Rajasthan6
).
(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
Pasawalla7
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 Limited9
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

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

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 12th 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

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 12th 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
T.C. (C) Nos.43/2016 etc.etc. Page 23 of 34
prior to the date of the relevant notifications, that is, 17th September,
2015 and 20th October, 2015 (as the case may be). For this purpose,
reliance was placed on M/s Govind Saran Ganga Saran v.
Commissioner of Sales Tax10 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

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.
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. Singh12 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 14th edition revised by Justice A.K. Patnaik, former Judge, Supreme Court of India, page 876

maximum amount of compensation to be paid to the DMF in terms of
Section 9B of the MMDR Act, being an amount not exceeding onethird
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 12th
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 licencecum-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 17th 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
T.C. (C) Nos.43/2016 etc.etc. Page 27 of 34
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 12th 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, 17th September,
2015 even though the DMF was established or deemed to be established
with effect from 12th 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 17th
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

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 17th
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 Pradesh13 one of
the questions raised was that since the Madhya Pradesh Building and
Other Construction Workers Welfare Board came to be constituted only
on 9th April, 2003 the recovery of cess under the Building and Other
Construction Workers Welfare Cess Act, 1996 with effect from 1st
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

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
17th 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 20th October, 2015 which is very explicit. It provides that
the contribution, though payable, shall be paid only from the date of the
notification (20th 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 licencecum-mining
lease from 20th 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 12th 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 20th October, 2015. Therefore in view of the law
discussed above, it cannot be said that the contribution should be paid
by the holders of a mining lease or a prospecting licence-cum-mining
lease with effect from 12th January, 2015.
44. The learned Additional Solicitor General sought to rely on the
subsequent notification dated 31st August, 2016 which substituted
paragraph 3 in the notification of 20th October, 2015 with the
requirement that the contribution ―shall be paid with effect from the 12th
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 31st 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
20th 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 licencecum-mining
lease shall pay the contribution to the DMF from 20th
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
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 12th 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
12th 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 12th 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
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 17th 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 20th 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 31st 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 31st 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
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 licencecum-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.