[MMDR Act] Formation Of District Mineral Foundation Is Beneficial Legislation, Must Be Construed Liberally: Allahabad High Court

The Allahabad High Court has held that formation of District Mineral Foundations vide Section 9-B of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) is a beneficial legislation and must be construed liberally for those who are affected negatively by mining operations.The bench of Justice Saral Srivastava and Justice Amitabh Kumar Rai held“The object behind creating DMF can be discerned from Rule 3 of Rules, 2017 that it is a benevolent provision inserted with an object to provide help and aid to the affected person and affected area because of mining activity carried out in that area. The law is settled that a benevolent provision should be interpreted liberally to achieve the purpose for which it has been enacted.….. Therefore, narrow interpretation to Section 9-B would render otiose the very object of the insertion of Section 9-B of MMDR Act which is for the benefit of people at large who are affected by mining operation and suffer injury and damage because of mining operation.”Directorate of Geology & Mining, Lucknow and its subordinate offices issued E-Tender in 2018 for the auction of limestone. In the auction notice, sale price was mentioned as royalty and the word 'royalty' was not to be read as understood under the MMDR Act. Since discrepancies were found in the tender, a fresh E-Tender Notice was issued on 24.03.2018. in this notice, it was mentioned that the successful bidder would have to pay tax and other contributions like DMF as per rules.Petitioner was issued the letter of intent (LOI) dated 02.05.2018 by which petitioner was also asked to deposit Rs.1,25,20,970/- and Rs.4,06,95,150/- as contribution towards DMF for the mineral stacked. This demand was challenged by the petitioner before the High Court on grounds that under Rule 2 of Mines and Minerals (Contribution to District Mineral Foundation) Rules, 2015 the liability to pay DMF is of every holder of mining lease or a prospecting licensee-cum-mining, but the auction in favour of the petitioner does not fall in any of the aforesaid category.It was further argued that the use of term 'royalty' in the tender would not attract DMF as royalty was the actually the sale price of the mineral. It was also argued that the petitioner was not mining for 'winning minerals' rather the extraction was an incidental consequence of infrastructure development. Relying on Mineral Area Development Authority & Another Vs. Steel Authority of India and Another, the Court held royalty mentioned in the e-tender was payable to the Government and flows from an agreement (a mining lease) between the lessor and the lessee. Further, held that the royalty represented return for grant of privileges (to the lessee) of removing or consuming the minerals and was determinable based on quantity of minerals. Accordingly, it was 'royalty' in terms of the aforesaid judgment of the Apex Court and in terms understood under the MMDR Act. Regarding the argument that the petitioner was not 'winning mineral' but transporting limestone, the Court held that 'mining operations' as defined in Section 3(d) of the MMDR Act included every activity by which mineral was obtained from earth, whether the activity was carried out dep inside the earth or in its surface was irrelevant. Relying on the judgment of Supreme Court in held“the clearance of the limestone from the site in the instant case would fall within the 'mining operation' in the light of the aforesaid judgements of the Apex Court defining that the mining operations includes every activity carried out for the purpose of extracting or obtaining mineral either on the surface of the earth or beneath the earth.”Accordingly, it was held that the object of the petitioner in gaining the LOI was to win the material. The Court also held that the LOI could be treated as a valid agreement even if no mining lease was entered into after the LOI was issued. It held that the petitioner had never contested the condition that failure to pay DMF and TCS would lead to forfeiture of royalty. It held that petitioner had accepted he conditions for transporting limestone. “If the law postulated by the Apex Court in the aforesaid cases that LOI in certain cases can be treated as a contract is applied in the facts of the present case, the irresistible conclusion in the instant case is that by accepting the terms and conditions of the Letter of Acceptance voluntarily and also the letter dated 21.05.2018 granting permission to the petitioner to transport the mineral, and acting upon the LOI and letter dated 21.05.2018, the LOI can be construed as binding contract between the petitioner and the State-respondents for clearing the limestone from the site.”Accordingly, it was held that activities carried out by the petitioner were for 'winning mineral' and would fall under mining operations. It held that petitioner knew about the terms and conditions of the E-tender which included DMF contribution, so now the petitioner could not turn...

[MMDR Act] Formation Of District Mineral Foundation Is Beneficial Legislation, Must Be Construed Liberally: Allahabad High Court

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[MMDR Act] Formation Of District Mineral Foundation Is Beneficial Legislation, Must Be Construed Liberally: Allahabad High Court

Upasna Agrawal

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