No Supplementary Lease Deed Needed For Statutorily Extended Mining Lease: Karnataka High Court Quashes ₹482 Crore Penalty On ACC
The Karnataka High Court has on September 8 [Tuesday] quashed a Rs 482.69 crore penalty imposed on ACC Limited- a part of the Adani Group- holding that mining operations during a statutorily extended lease term won't be deemed as 'unlawful' merely because a Supplementary Lease Deed was not executed to that effect.A Division Bench of Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha...
The Karnataka High Court has on September 8 [Tuesday] quashed a Rs 482.69 crore penalty imposed on ACC Limited- a part of the Adani Group- holding that mining operations during a statutorily extended lease term won't be deemed as 'unlawful' merely because a Supplementary Lease Deed was not executed to that effect.
A Division Bench of Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha has allowed the writ petitions filed by ACC Ltd, while dismissing the State's challenge to a revisional order that had rejected the State's demand for royalty on a notional basis.
“…By virtue of Section 8A(5) of the MMDR Act, the term of the mining lease in question has been extended till 31.03.2030. Thus, by virtue of the statute, ACC held the mining lease and the right to extract minerals... In this view, the minerals extracted by ACC cannot be construed as minerals extracted without authority of law solely on the reason that a Supplementary Lease Deed recording the extension of term... was not executed”, the Court observed while rejecting the State's argument that a registered lease deed is essential for the validity of mining operations during the extended period.
Noting that there was a distinction between 'extension' by virtue of a statute and 'renewal', the court opined that in an extension, the same lease continues in force by operation of law, and no fresh deed is necessary by relying on Provash Chandra Dalui v. Biswanath Banerjee. The Court further pointed to Rule 24A of the Mineral Concession Rules, 1960, and the Central Government's model letter, which indicated that a supplementary deed merely modifies the existing lease, and it is not a precondition for lawful mining.
To recap, the case in question is with respect to the validity of the cement producer's mining lease in Kalaburagi district, which was originally valid until February 18, 2023.
As per the version of ACC, by virtue of statutory provisions such as Section 8A (5) of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), the lease for captive mining was deemed to be extended until March 31, 2030, even without a supplementary deed in place.
However, the State Government and the Department of Mines and Geology (DMG) reportedly took the stance that the lease extension was contingent upon the execution of a Supplementary Lease Deed as well as the clearance of outstanding royalty arrears owed by ACC.
When ACC allegedly failed to pay the demanded arrears computed on a notional basis, the DMG blocked its access to the Integrated Lease Management System (ILMS) portal and imposed a penalty of Rs 482,69,65,137 under Section 21(5) of the MMDR Act for allegedly mining the minerals without lawful authority.
“….the impugned demand notice is set aside; the State and the DMG are directed to grant full access to the ILMS Portal and not block the ILMS Portal as prayed for in W.P.No.25298/2024… the concerned authorities are directed to execute a Supplementary Lease Deed in favour of ACC without insisting on the no dues certificate; and the State is directed to refund the amount deposited by ACC pursuant to the interim order dated 29.10.2024 passed in WP No. 25298/2024”, the court concluded.
The Court has also upheld the Revisional Authority's order dated September 9, 2025, which had set aside the State's demand for royalty computed on a 'notional' clinker-to-limestone ratio of 1:1.42.
The State had demanded Rs 492.51 crores in arrears, arguing that ACC's reported consumption based on actual weighment was unreliable.
The Court, however, found that ACC had installed a beltometer in 2009, maintained daily weighment records, and that there was no credible challenge to the accuracy of this equipment by either the DMG or the Legal Metrology Department.
“…The Revisional Authority had rightly held that there is no material to indicate that any complaint had been raised to the Legal Metrology Department regarding the functioning of the equipment... Absent any finding that the weighment equipment was inaccurate, assessment of Royalty on a notional basis would be unjustified…”, the Court added.
The Bench also disapproved the state's action of disregarding a prior Revisional Order in 2019 which required the Government to reconsider the royalty demand in light of a meeting held on March 31, 2012, where it was decided that royalty should be calculated on actual production and weighment.
“…. The State Government could not disregard the order dated 06.05.2019... The question is whether the State Government was bound by the Revisional Authority's decision... Once the Revisional Authority had so directed, it was no longer open for the State Government to disregard the decision taken on 31.03.2012…”, the Court ruled.
“…The State's failure to avail the opportunity [of filing written submissions] cannot furnish it a ground to contend that the impugned order was rendered in violation of the principles of natural justice”, the court held.
Hence, allowing ACC's petitions, the Court has also rejected the state's challenge to the Revisional Authority's order and directed it to refund the Rs 125 crores deposited by ACC pursuant to an interim order dated October 29, 2024.
Case Title: A.C.C. Limited v. Union of India & Others & Connected Matters
Case Numbers: WP No. 25298 of 2024 (GM-MM-S) C/W WP No. 18655 of 2025 (GM-MM-S) & WP No. 36850 of 2025 (GM-MM-S)
Citation: 2026 LiveLaw (Kar) 344