Case Note & Summary
The Director of Mines and Geology, Karnataka, appealed against the High Court of Karnataka's order allowing the writ petition of M/s BMM Ispat Ltd. The dispute arose from a tender process for sale of iron ore stock, where the respondent's tender was accepted at a certain royalty rate. Subsequently, the Mines and Minerals (Development and Regulation) Act, 1957 was amended, increasing the royalty rate. The appellant demanded the higher royalty, which the respondent challenged. The High Court held that the respondent was entitled to the rate stipulated in the tender agreement. The Supreme Court reversed, holding that royalty is a statutory levy and the State is entitled to recover the rate as per the amended law. The Court emphasized that a tender agreement cannot override a statute, and a subsequent change in law applies to existing contracts unless expressly excluded. The appeal was allowed, and the High Court's order was set aside.
Headnote
A) Mining Law - Royalty - Change in Law - Section 9, Mines and Minerals (Development and Regulation) Act, 1957 - The issue was whether the State could charge increased royalty due to a subsequent amendment to the Act, despite the tender agreement specifying a lower rate. The Court held that royalty is a statutory levy and the State is entitled to recover the rate as per the amended law, as the tender agreement cannot override the statute. (Paras 3, 15-20) B) Contract Law - Tender Agreement - Statutory Obligation - The Court held that a tender agreement for sale of iron ore stock is subject to statutory provisions regarding royalty. A subsequent change in law increasing royalty applies to existing contracts unless the contract expressly provides otherwise. The State's demand for higher royalty was valid. (Paras 10-14) C) Constitutional Law - Article 14 - Reasonable Classification - The Court rejected the argument that charging higher royalty from the respondent while others were charged lower violated Article 14, as the classification was based on the timing of the tender and the applicable law. (Paras 21-23)
Issue of Consideration
Whether the State could, on account of a subsequent change in law, charge an amount of royalty which is different from (increased) what is stipulated in the tender agreement.
Final Decision
Appeal allowed. The judgment and order dated 18th March 2019 of the High Court of Karnataka at Bengaluru in Writ Petition No. 6979 of 2017 is set aside. The demand for higher royalty by the appellant is upheld.
Law Points
- Change in law
- Royalty
- Tender agreement
- Contractual obligation
- Statutory obligation
- Mines and Minerals (Development and Regulation) Act
- 1957
- Section 9
- Section 21
- Section 4A
