UP Minor Minerals Rules | Royalty Or Other Dues Can Be Recovered As Land Arrears Only, Not From Security Deposit: Allahabad HC

The Allahabad High Court has held that under the Uttar Pradesh Minor Minerals (Concession) Rules 1963 royalty or any other dues which have not been paid under a mining lease can only be recovered as arrears of land revenue.

The bench comprising of Justice Siddhartha Varma and Justice Manoj Bajaj held that rent, royalty and other dues cannot be recovered from the security deposit made at the time of entering into the lease agreement for mining.

“A composite reading of Rules 58, 59 and 60 of the 1963 Rules, definitely makes it clear that if a particular royalty or any other due under the lease was not paid then in addition to the determination of lease, the amount which was payable by the petitioner to the Government could be recovered only as arrears of land revenue. However, if there was any penalty for non- compliance of any of the many rules or if there was violation of any lease condition except those relating to payment of royalty, rent or other dues, the State Government could determine the lease and could also impose a penalty under Rules 59 and 60 of forfeiting the security”

Factual Background

The petitioner successfully obtained a 5-year lease for Yamuna River Khand no. 16/2 and 16/3 measuring 20.23 acres in District Kaushambi wherein the availability of minerals was shown as 4,00,000 cubic meters per year. Petitioner deposited Rs. 1,74,00,000/- as security and the equivalent amount as the first instalment. As per the agreement, in the second year, the petitioner had to deposit instalments of Rs. 1,91,40,000/- in four equal instalments.

After the commencement of work, the petitioner discovered that the mineral available was not of proper standard and that the work of excavation from the mines, which she had taken on lease, was not a profitable venture.

Consequently, the petitioner applied online to the District Magistrate, Kaushambi requesting him to get the mining area surveyed for assessing as to whether the quantity of mineral as was earlier given out was there or not and as to whether the minerals were mixed with mud. She also prayed for the determination of the lease as the mineral was not available in the area allotted.

The Mines Inspector, Kaushambi stated that there was no provision for re-assessing as to whether minerals were available or not in the mining area which was given out to the petitioner. The petitioner had deposited money until the third instalment.

However, after filing of online application, the petitioner did not do any mining work and consequently, did not pay the fourth instalment. In response to the demand notice for the fourth instalment, the petitioner stated that since no mineral was available, it was not possible for her to continue mining Prayer was made to refund the amount already deposited.

Even before the objection could be dealt with, the first instalment of the second year became due. Consequently, the petitioner deposited Rs. 1,91,40,000/- after the determination of the lease. Petitioner pleaded that despite depositing two instalments of the first year and the first instalment of the second year, the District Magistrate raised the demand for the fourth instalment of the first year and also the first instalment of the second year.

The appeal against the demand was rejected. Revision filed before the State Government under Rules 78 of 1963 Rules was also dismissed.

The order of demand and subsequent rejection of appeal was challenged by the petitioner on grounds that under Rule 58 (Consequences of non-payment of royalty, rent or other dues) of the 1963 Rules if any mining lease was determined after serving a notice on the lessee to pay within 30 days of the receipt of notice, any amount due or dead rent under the lease including the royalty due to the State Government and if it was not paid within the next 15 days then the State Government could realise the dues from the lessee as arrears of land revenue.

It was further contended that the amount not paid by the petitioner could be realised as arrears of land revenue with interest. Petitioner argued that default amount, if any, cannot be recovered in any manner other than what is prescribed under Rule 59 (Consequences of contravention of certain conditions) of 1963 Rules and the security deposit could not be forfeited.

High Court Verdict

The question before the Court was “whether the security money which miner deposits at the time of grant of the lease under the Uttar Pradesh Minor Minerals (Concession) Rules, 1963 could be forfeited when a lease is determined for the non-payment of royalty, rent or other dues.”

The Court held that since the petitioner had defaulted on the fourth instalment of the first year, the amount payable towards the District Mineral Foundation Trust Fund could be recovered only as arrears of land revenue only.

The Court observed that

“Rule 58 is only about the consequences of non-payment of royalty, rent or other dues. Rule 59 is with regard to the contravention of certain conditions wherein penalty could be imposed and that penalty, if not paid, could be deducted by the District Magistrate from the security money deposited by the lessee. Rule 60 was with regard to the breach or contravention by a lessee of any of the Rules of 1963 Rules or conditions and covenant contained therein except those relating to payment of royalty, rent or other sums due.”

The Court held that reading Rules 58, 59 and 60 of the 1963 Rules together shows that any amount due under the lease or royalty can only be recovered as arrears of land revenue and not from the security deposit. The Court held that the security deposit could only be forfeited if there was a penalty being imposed for violation of provisions of the 1963 Rules or lease agreement.

Accordingly, while allowing the writ petition, the Court held that the amount which was due from the petitioner could have been recovered only as arrears of land revenue. Since the petitioner had offered that the money due be recovered from the security deposit, the Court directed that after deducting the due amount, the remaining security deposit be released to the petitioner.

Case Title: Smt. Kalpana Karwariya vs. The State Of U P And 4 Others 2023 LiveLaw (AB) 498 [WRIT - C No. - 28355 of 2021]

Citation: 2023 LiveLaw (AB) 498

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