Kerala High Court says state can’t claim royalty on mining activity before 2021, upholds state minerals law

“Kerala State, often referred to as ‘God’s Own Country,’ is rich in various mineral resources, including minor minerals. The State has a wide range of mineral deposits, making it a significant contributor to India’s mineral wealth,” the court observed.

Referring to Article 304 of the Constitution, the court noted that necessary power had been conferred on the respective state legislatures to frame laws concerning the “restriction on trade, commerce, and intercourse among states”.

The court, however, said that the state cannot claim royalty for minerals extracted by private persons from their own land that fall within the Malabar area, prior to the Minerals Vesting Act, 2021.

While referring to the Chandramohan v. State of Kerala, the court held that mere ownership and possession of land within the Malabar area would not make any difference insofar as the authority of the State to collect royalty, and that any person indulging in quarrying activities in such land has to obtain an Environmental Clearance from the statutory authority concerned.

Arguments

Appearing for the petitioners, advocates M K S Menon, P A Augustine, Shashank Devan, K M Aneesh and Adarsh Kumar challenged the constitutional validity of the Minerals Vesting Act, 2021, which vests ownership of the subsoil and mineral wealth of the land within the former Malabar province in the state, primarily on the ground that it violates Articles 300A and 14 of the Constitution of India, since it does not compensate mineral owners upon vesting these rights in the State.

They further submitted that the Minerals Vesting Act, 2021, being an enactment that provides no compensation, attracts the vice of illegal deprivation of property under Article 300A of the Constitution and is therefore liable to be struck down.

They also argued that the impugned Act is not a statute relating to agrarian reforms and, therefore, does not enjoy the protection of Article 31A.

Appearing for the state, advocate S Kannan and Aswin Sethumadhavan defended the constitutional validity of the Minerals Vesting Act, 2021, and submitted that the state, as the trustee of the natural resources under the public trust doctrine, has a legal duty to protect them, which are meant for public use.

They further submitted that the Act impugned has been enacted in consonance with the policy of the state with an objective to ensure that the resources of the community are evenly distributed at its best, to serve the common good of the public at large, and for the protection of the environment.

They argued that the Act was envisaged to bring uniformity in the State of Kerala insofar as the rights over the subsoil and mineral wealth are concerned.

Decision

The court ruled that the Minerals Vesting Act, 2021, is constitutional and valid. It ruled that the Act does not violate the right to property under Article 300A or the right to equality under Article 14, and is not in conflict with central legislations like the MMDR (Mines and Minerals Development and Regulation) Act, 1957, or the RFCTLARR (Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act) Act, 2013.

Background

The case stems from the question of who owns the minerals beneath the land in Malabar– the State or the landowners.

The Kerala High Court initially ruled that the minerals belonged to the State and that landowners had to pay royalty to the government for quarrying. This decision was challenged in the Supreme Court.

In 2013, the Supreme Court overturned the High Court’s ruling and held that, since there was no law transferring mineral rights to the state, ownership of minerals follows ownership of land. Therefore, in Malabar, the minerals belong to the landowners, not the state.

However, the Court did not decide whether landowners still had to pay royalties, as that question was pending before a larger bench.

After this judgment, the Kerala government passed the Kerala Mineral (Vesting of Rights) Ordinance in 2019, which was later replaced by the Kerala Minerals (Vesting of Rights) Act, 2021.

The Act declared that all mineral rights, regardless of land ownership, belong to the State. Meanwhile, the Supreme Court also clarified that royalty is not a tax and should be paid to the actual owner of minerals.

Landowners then challenged the state’s demand for royalties under existing mining laws.