Supreme Court Allows State Government to levy royalty on production and disposal of brick earth being minor metal

Introduction

In a recent batch of civil appeals presented in front of a division bench of the Hon’ble Supreme Court against the decision of Punjab and Haryana High Court which allowed the appeals of respondents stating that mere declaration of brick earth as a minor metal does not vest the right in the state government to levy royalty, Hon’ble Justice Abhay S. Oka and Ujjal Bhuyan while allowing the appeal and setting aside the impugned order of the Punjab and Haryana High Court, held that once the brick earth had been accepted as a minor mineral under the competent rules, the State Government had the de facto right to levy royalty on production and disposal of minor minerals.

Brief Background of the Case

The present case was filed by the Plaintiffs seeking permanent injunction for restraining the defendants from assessing, levying or recovering any amount from the respondents for making use of earth for baking bricks. According to the respondents, the land had been taken by the defendants for the purpose of ‘making bricks’ from private owners on a lease. According to the respondents, any piece or part of land which was used by them in order to make bricks was not owned in any manner by the State or Central Government.

Moreover, placing reliance upon the Punjab Land Revenue Act 1887 and Mines and Minerals (Regulations and Development) Act 1957, the respondent contended that the notice by the petitioners and the State Government was blatantly illegal and not in consonance with the law. The High Court also concluded that through mere declaration of brick earth as a minor mineral, no right can be vested in the state government to levy royalty.

Analysis of the Court

It was noted by the court that in the year 1958, the Government of India published a notification in exercise of powers conferred to it statutorily, under which brick earth was also declared a minor mineral within the reference of 1957 Act. While referring to the Trial Court’s decision the court had observed that the respondents did not claim to be the owners of the said lands from which they were excavating brick earth. According to the version of the respondent, the said land was owned by some private entity and not by the government and was taken on lease by the respondents. In the present case, the individuals claiming to be the landowners had to be made a party to the suit to enable the court to decide upon the title.

Moreover, the court pointed out that Section 41 of the Land Revenue Act has also provided that all the minerals, metals and coal including earth and soil shall be deemed to be the property of the state and Section 42 provided for the presumption of forests and waste lands being property of the state. However, in the present case, the Hon’ble Supreme Court had stated that in the impugned judgment of the High Court, the ownership of land which was in question had been missed as an important issue for adjudication of the dispute. Since the respondents had claimed themselves to not be the owners of the land and had taken it on lease from the real owners and the persons claiming to be the real owners were not made party to the suit. This has therefore led to one of the most important issues being missed out of the picture while adjudication of the suit.

Even though in arguendo it is accepted that the land belonged to a private entity where the excavations have been carried out, the question still remains as to whether the State Government was powerless to levy royalty. While deciding upon the same substantial question of law, the Court has referred to Rule 54A – 54C of the above notification which provides that no individual or entity shall be allowed to undertake any quarrying or mining operations unless there has been a prior certification of approval in format provided by the Government and the individual or entity to whom such certificate has been issued is required to file returns showing such production and disposal of mines and minerals which has been obtained from such processes.

Therefore, while applying the rules stated above it shall be held that once it has been accepted that brick earth has the status of a ‘minor mineral’ under the Mineral Rules, the State Government possesses the right to levy royalty on such production and disposal of minor minerals and it has been further clarified that once it has been adjudicated that the Central or State government is empowered to levy royalty, the issue of the ownership of land loses its significance and therefore the argument of the respondents does not hold ground. However, such exemption to the mining of minerals shall be allowed only if the land falls under the ‘exempted’ category of mining under the rules.

Conclusion

While holding that as per the Mineral Rules, the State Government is entitled to levy of royalty on activity of mining brick earth, the issue of land ownership becomes irrelevant, the Hon’ble Supreme Court has answered a substantial question of law pertaining to ownership of land and royalty rights of the concerned governments therein. Moreover, the court has also laid down that mere ownership of land which possesses any valuable minerals, metals or other resources does not entitle the owners to excavate them on their own will but requires a prior sanction of the respective State Government along with payment of stipulated royalty for such excavation, failing to do so, the State Government is competent to levy additional fines and duties.

The judgment can be accessed here.

King Stubb & Kasiva,
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