Mr. Singh, the lease deed does not contain any clause saying royalty can be enhanced. The parties have signed a contract. How can the State unilaterally change the rate of royalty after the contract has been executed?

My Lord, the lease deed is not a purely private contract; it is a statutory grant. The lease derives its validity from the MMDR Act and the Rules framed thereunder. Section 15(3) of the MMDR Act mandates payment of royalty at rates prescribed 'for the time being' in the rules, and Rule 21(1)(i)(a) expressly provides for payment at revised rates notified from time to time. The Auction Notice and LoA also stipulated the applicability of these rules. The respondents had clear notice that the rates were subject to revision. The omission of an express clause in the lease deed cannot efface the statutory character of the lease or bar the State from exercising its statutory power.

But the respondents say the lease deed is the final agreement, and the Auction Notice and LoA are mere preliminaries. Doesn't the lease deed supersede all prior negotiations?

My Lord, the lease deed is not a standalone contract. It is executed under the 1964 Rules, and the Rules themselves prescribe the form and content of the lease deed. The lease deed is a statutory document, and its terms are subject to the Rules. The respondents cannot rely on the lease deed to exclude the applicability of the statutory rules, especially when the Auction Notice and LoA expressly stipulated the applicability of Rules 10 and 21. The lease deed must be read harmoniously with the statutory framework, and its silence cannot be interpreted as a bar to the State's statutory power.

You say the enhancement is not arbitrary. What was the basis for the 50% increase? Why not 40% or 60%? Where is the material to support this specific figure?

My Lord, the State had considered the rates prevailing in neighbouring States before enhancing the rates. The previous revision had taken place in September 1999, and the impugned revision was made after a lapse of about five and a half years, well beyond the three-year gap permitted by the proviso. The 50% increase was within the ceiling contemplated for dead rent, and the Court should not substitute its own assessment for that of the competent authority. In matters of fiscal and economic policy, the Government must be allowed some free play in the joints. The test is Wednesbury unreasonableness, and the enhancement cannot be said to be so unreasonable that no reasonable authority could have arrived at it.

The respondents also say the Rules of Business were violated because the Finance Department was not consulted. Is that not a fatal flaw?

My Lord, the Rules of Business under Article 166(3) are mandatory in matters affecting State finances, and we do not dispute that. However, on the facts of this case, the decision was taken by the Chief Minister himself, who was also the Minister-in-charge of Mining. This satisfies the requirement of Chief Minister's approval. There is no evidence that the Finance Minister had any reservation; in fact, he was empowered under Rule 34 to call for any paper if he disagreed. In the absence of any evidence of dissent, there was deemed consent of the Finance Minister. The decision was also not challenged on this ground in the amended writ petition; it was raised only in an application. The High Court erred in entertaining this plea without proper pleadings.

For PetitionerCommercial Premium

Statutory Rules Permit Enhancement Despite Lease Silence — (2026) INSC 690

The State's power to enhance royalty and dead rent flows from Section 15 of the MMDR Act and Rules 10 and 21 of the 1964 Rules, which are statutory and regulatory.

State of Haryana & Ors. v. M/s. Faridabad Gurgaon Minerals & Anr. — (2026) INSC 690

Core Argument

The State's power to enhance royalty and dead rent flows from Section 15 of the MMDR Act and Rules 10 and 21 of the 1964 Rules, which are statutory and regulatory. The lease deed, being a statutory grant, is subject to these rules, and its silence on enhancement does not bar the State from exercising its statutory power.

Key Precedents

State of Rajasthan v. J.K. Synthetics Ltd. (2011) 12 SCC 518 — Held that terms of a mining lease must yield to statutory rules; a lease deed prescribing a lower rate of interest must yield to an amended statutory rule prescribing a higher rate.
Mineral Area Development Authority v. SAIL (2024) 10 SCC 1 — Held that the State acts as trustee for minerals and has constitutional duty to regulate exploitation in public interest.

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