While observing that with respect to mining, actual value can only be determined once mining operations commence, the Supreme Court has explained that as per the proviso to Section 26 of the Indian Stamp Act, 1899, the estimated royalty or value of the share in such cases would be sufficient for the purposes of determining stamp duty. The Apex Court also rejected the case put forward by the appellant that the proviso is inconsistent with the main provision.

The Apex Court clarified that the method of calculation of stamp duty is through anticipated royalty.

The Apex Court was considering an appeal challenging the order of the Madhya Pradesh High Court.

The Division Bench of Justice Sanjay Karol and Justice Augustine George Masih held, "At the outset, we record our rejection of the case put forward by the appellant that the proviso is inconsistent with the main provision. The section, as is obvious, deals with Stamp duty to be paid in cases of indeterminate value. Since, with respect to mining, actual value can only be determined once mining operations commence, it is undisputed that on the date of the execution of the agreement, the value is indeed indeterminate. This appears by way of a plain reading and general understanding. It is difficult to conceive otherwise."

"The above makes abundantly clear that the amount which is higher is to be paid and for the purposes of statutory rules, the method of calculation of stamp duty is through anticipated royalty only", it added.

AOR Praveen Kumar represented the Appellant while AOR Harmeet Singh Ruprah represented the Respondent.

Factual Background

The Apex Court was dealing with a matter involving a lease for the mining of limestone for an area of 56.27 hectares at village Birhauli, Tehsil Raghuraj Nagar, District Satna, when the appellant, who had applied for a fresh lease, was asked to pay a stamp duty of Rs 4,32,00,000 by way of anticipated royalty by the District Collector, Satna. Being aggrieved by the order of the aforesaid authority, the appellant challenged this decision before the Madhya Pradesh High Court by way of a Writ Petition. The Division Bench dismissed the writ petition relying on a judgment of a coordinate Bench of that Court holding that the proviso to Section 26 of the Indian Stamp Act, 1899, applicable to the mining lease is required to be read separately from the main Section which deals with imposition of stamp duty. It was held that stamp duty or dead rent was to be charged based on the amount of royalty payable. Dissatisfied and aggrieved, the appellant approached the Apex Court.

Reasoning

The Bench, at the outset, explained that “Dead rent” is the minimal amount payable to the lessor by the lessee irrespective of whether the mines so leased out are put to use or not. The important factor in the determination thereof is the area that is leased out, whereas “royalty” is directly proportionate to the amount/quantity of the minerals removed from the mine. As such, while one depends on the area of the mine and is fixed, the other relates to the quantity of minerals extracted only and is variable.

“Section 9 of the MMDR Act, and particularly clause (2) thereof, underscores this interpretation of variability. Regarding, dead rent Section 9A provides for its payment as being on rates as may be specified by the Government, notwithstanding anything contained in any other law or in the instrument of lease itself. Once the lessee is liable to pay both royalty and dead rent, he must pay whichever of the two is higher”, it added.

The Bench rejected the case put forward by the appellant that the proviso is inconsistent with the main provision. The Bench explained, “At this stage, the argument of the parties regarding Section 26 of the Stamp Act may be dealt with. As reproduced supra, the Section deals with payment of stamp duty in cases where at the time of the execution of the agreement, the value of the subject matter is indeterminate. The proviso thereto deals specifically with mining leases and provides that in such cases the estimated royalty or value of the share thereof shall be sufficient for the purposes of determining stamp duty. It further clarifies that in cases where the government is the lessor, the estimation is to be carried out by the Collector.”

Dealing with the argument pertaining to Form K of the 1960 Rules, the Bench explained that Rule 31 provides that where an order has been made for the grant of a mining lease, a lease deed as laid out in Form-K or in a form as near thereto as circumstances of each case may require, shall be executed within six months of the order, as extendable by the State Government. If the same is not executed due to any default on the part of the applicant, however, the State Government may revoke the order granting the lease and forfeit the amount of application fee. “Reproducing the entire form would only be adding pages without serving any purpose and as such we refrain from doing so as relevant part thereof already stands extracted”, it added.

The Bench further stated that the amount which is higher is to be paid and for the purposes of statutory rules, the method of calculation of stamp duty is through anticipated royalty only. “A perusal of the record of this case reveals that in the Form-K lease entered into between the parties, this clause does find a place. In our considered view, when this is the case there remains no manner of doubt as to the method by which stamp duty is to be computed”, it clarified while dismissing the appeal.

Cause Title: M/S Birla Corporation Limited v. The State of Madhya Pradesh (Neutral Citation: 2026 INSC 738)

Appearance

Appellant: AOR Praveen Kumar, Advocate Sunaina Kumar

Respondent: AOR Harmeet Singh Ruprah, Advocates Shashank Shekhar, Karan Singh, Kanishk Sharma

Click here to read/download Judgment


Justice Sanjay KarolJustice Augustine George Masih

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.