The Supreme Court today stayed the Kerala High Court's direction for refund of the royalties collected by the Kerala government from landowners under the Kerala Minerals (Vesting of Rights) Act 2021.

The Court further ordered that the State shall not levy or recover any royalty under the Act until further orders.

A bench of CJI Surya Kant, Justice Joymalya Bagchi and Justice V Mohana passed the order, while issuing notice on the Kerala government's challenge to the High Court order which declared the Act as "unconstitutional".

In the impugned order, the High Court examined the constitutional validity of the Kerala Minerals Act, which vested all rights in minerals beneath privately owned land in Malabar region in the State with retrospective effect from December 30, 2019. While the Single Judge upheld the validity of the Act, a Division Bench declared it unconstitutional.

The Division Bench held that the State cannot vest ownership of privately owned mineral rights in itself without providing compensation or complying with the constitutional safeguards under Article 300A. Aggrieved, the State approached the Supreme Court.

Senior Advocate V Giri, for Kerala, argued that by virtue of the direction to refund the royalties, a huge burden has been imposed on a "small state" like Kerala. When the CJI questioned the approximate burden which has fell upon the state, Giri replied, "about Rs.1200 crores".

Justice Bagchi observed that the State had a "public purpose" to make the law, but the question was, "when the state has a public purpose to make a law, and thereby vests certain properties, will it not be a part of the legislation to qualify the tests of Articles 14 and 19 to have some compensatory package?"

During the hearing, the CJI also asked if the State had plans to revisit the Act. Subsequently, Giri contended that the State does not extract the minerals. In fact, the Act contemplates levy of royalty when the landowner extracts and sells minor minerals.

"What happens is this - though there is a statutory declaration that the mineral rights vest in the state, we don't take it and sell it. The owner of the property, they sell it, and when they sell it, all that this Act contemplates is the levy of royalty on the quantity of mineral which they extract and they sell", Giri submitted.

Senior Advocate Arvind Datar, appearing for the respondent on caveat, countered Giri's submissions, contending that while the Travencore law provides for compensation, the Malabar law does not. Secondly, he referred to the second proviso of Article 31A of the Constitution, to contend that market rate has to be provided for lands that fall within ceiling limits.

Datar argued that the subject law needs to be completely re-enacted, saying "today the law is fatal because the second proviso to Article 31A, which says that if the lands are within the ceiling limits, you have to provide market compensation. And Article 31A applies to estate or any rights under that estate also."

Ultimately, the bench issued notice and passed the above order.

The State's petition was filed through Standing Counsel Zulfiker Ali PS AOR.

Case: STATE OF KERALA, AND ORS. Versus K.P.CHANDRAMOHAN AND ORS. SLP(C) No. 29034-29039/2026