Supreme Court Refuses Lease Extension for Obstructed Mining Periods, Orders Refund: Dharmendra Kumar Singh vs. State of UP (28 October 2020)

Introduction

Date of the Judgment: 28 October 2020

Citation: [Not provided in the document]

Judges: Sanjay Kishan Kaul, J. and Hrishikesh Roy, J.

Can mining leases be automatically extended when operations are disrupted by court orders, or should leaseholders receive a refund? The Supreme Court of India recently tackled this question, focusing on mining leases in Uttar Pradesh that were halted due to environmental concerns. The core issue was whether leaseholders should have their leases extended for the time they could not operate or if a refund of the lease amount would suffice. This judgment was delivered by a two-judge bench comprising Justice Sanjay Kishan Kaul and Justice Hrishikesh Roy.

Case Background

The case originates from mining leases granted in the Sonbhadra district of Uttar Pradesh, an area rich in minerals. In 1989, Sonbhadra was carved out of the Mirzapur district. The All India Kaimur People’s Front (AIKPF) raised concerns about illegal mining near the Kaimur Wildlife Sanctuary in 2016, leading to legal actions before the National Green Tribunal (NGT). The NGT issued notices due to the area’s ecological sensitivity. Subsequently, the Ministry of Environment, Forest and Climate Change (MoEFCC) declared the area an Eco-Sensitive Zone (ESZ) on 20 March 2017, under the Environment (Protection) Act, 1986.

The State of Uttar Pradesh informed the NGT that 33 mining leases were operational outside the ESZ. The NGT then directed the State to clarify the status of these leases, referencing a previous order from 4 May 2016, in the T.N. Godavarman Thirumalpad case. This order had directed the cancellation of mining leases on lands notified under Section 4 of the Indian Forest Act, 1927. The NGT noted that some leases were still active on lands notified under Section 4, but without the required notification under Section 20 of the Forest Act. Consequently, on 13 July 2018, the NGT ordered a prohibition on all mining leases within the Section 4 area. The appellants, who were leaseholders, were not made parties to this proceeding. The District Magistrate of Sonbhadra issued administrative orders on 29 August 2018 and 5 February 2019, halting mining and transportation activities. Aggrieved by these orders, the leaseholders appealed to the Supreme Court.

Timeline:

Legal Framework

The case is primarily governed by the following legal provisions:

• The Environment (Protection) Act, 1986 (EPA): The MoEFCC issued a notification declaring the area an Eco-Sensitive Zone (ESZ) under sub-section (1) and clauses (v) and (xiv) of sub-section (2) and (3) of the EPA.
• The Indian Forest Act, 1927 (Forest Act):
  • Section 4: This section deals with the notification by the State Government when it decides to constitute any land as a reserved forest. It includes:
    
    “(a) declaring that it has been decided to constitute such land a reserved forest; (b) specifying, as nearly as possible, the situation and limits of such land; and (c) appointing an officer (hereinafter called “the Forest Settlement-officer”) to inquire into and determine the existence, nature and extent of any rights alleged to exist in favour of any person in or over any land comprised within such limits or in or over any forest-produce, and to deal with the same as provided in this Chapter.”
  • Section 20: This section deals with the notification declaring a forest reserved after the claims process under Section 6 and 9 are completed. It states:
    
    “(1) When the following events have occurred, namely:—(a) the period fixed under section 6 for preferring claims have elapsed and all claims (if any) made under that section or section 9 have been disposed of by the Forest Settlement-officer; (b) if any such claims have been made, the period limited by section 17 for appealing from the orders passed on such claims has elapsed, and all appeals (if any) presented within such period have been disposed of by the appellate officer or Court; and (c) all lands (if any) to be included in the proposed forest, which the Forest Settlement-officer has, under section 11, elected to acquire under the Land Acquisition Act, 1894 (1 of 1894), have become vested in the Government under section 16 of that Act, the State Government shall publish a notification in the Official Gazette, specifying definitely, according to boundary-marks erected or otherwise, the limits of the forest which is to be reserved, and declaring the same to be reserved from a date fixed by the notification. (2) From the date so fixed such forest shall be deemed to be a reserved forest.”
• The Mines and Minerals (Development and Regulation) Act, 1957:
  • Section 3(e): Defines minor minerals, which includes building stone, gravel, ordinary clay, ordinary sand other than sand used for prescribed purposes, and any other material the Central Government may declare as a minor mineral.
• Uttar Pradesh Mining Minerals (Concession) Rules, 1963 (Mining Rules):
  • Rule 40(h): Specifies that in the event of disruption of mining operations, the District Magistrate, with the State Government’s approval, shall adjust the amount equivalent to the installment payable during the disrupted period against the forthcoming installment.
    
    “40. Liberties, powers and privileges .— (h) In the event of disruption of mining operation in the lease area owing to any special circumstances, the District Magistrate with the prior approval of the State Government shall adjust the amount equivalent to the installment payable during the disrupted period, online against the forthcoming installment.”
  • Rule 68: Allows the State Government to relax the rules in special cases for mineral development by order in writing and for reasons recorded.
    
    “68. Relaxation of rules in special cases.- The State Government may, if it is of opinion that in the interest of mineral development it is necessary so to do, by order in writing and for reasons to be recorded authorised in any case the grant of any mining lease or the working of any mine for, the purpose of winning any minerals on terms and conditions different from those laid down in these rules.”

Arguments

Appellants’ Arguments:

• The appellants argued that the lands for which they were granted mining leases were excluded from the purview of the Section 4 notification, based on prior settlement proceedings as per the directions in Banwasi Seva Ashram v. State of U.P & Ors. [(1986) 4 SCC 753].
• They contended that the suspension of their mining leases was not due to any fault of theirs but due to the delay by the State in issuing the Section 20 notification.
• The appellants claimed that the NGT order was passed without notice to them, violating principles of natural justice.
• They argued that the State has the power to extend leases under Rule 68 of the Mining Rules, citing J.P. Yadav v. Kanhaiya Singh & Ors. [CA No.8621/2013 decided on 19.9.2013] and Jagdish Prasad Nishad v. State of UP & Ors. [(2015) 128 RD 150].
• The appellants relied on the principle that an act of the Court should not prejudice anyone (Actus curiae neminem gravabit) and cited Beg Raj Singh v. State of UP & Ors. [(2003) 1 SCC 726], stating that they should be placed in the same position as if the wrong had not occurred.
• They argued that the G.O. dated 31.5.2012 and the New Mining Policy of 2017 do not apply to their leases, citing M/s. Peethambra Granite Pvt. Ltd. v. State of UP & Ors. [WRIT – C No. – 30066 of 2017 decided on 18.2.2020], where the Allahabad High Court held that the directions issued in Vijay Kumar Dwivedi v. State of Uttar Pradesh [(2016) 4 All LJ 690] do not apply to granite building stone.
• The appellants also argued that G.O. dated 31.5.2012 was not applicable as their leases were granted before that date.
• They provided calculations for compensation, including losses from idle machinery, salaries, and litigation costs.

State of Uttar Pradesh’s Arguments:

• The State of UP argued that it complied with the NGT order and that extending mining leases would have consequences due to judicial orders.
• It contended that there is no provision under the Uttar Pradesh Mining Minerals (Concession) Rules, 1963, for granting permission to mine for the obstructed period.
• The State relied on Sukhan Singh v. State of UP & Ors. [(2015) 2 All LJ 619], stating that filing an application for a lease does not confer a vested right for its grant or renewal.
• It cited Mohammad Yunus Hasan v. State of UP & Ors. [(2016) 4 All LJ 418] to argue that Rule 68 of the Mining Rules does not allow for extending a lease beyond the contracted period.
• The State argued that Vijay Kumar Dwivedi v. State of Uttar Pradesh [(2016) 4 All LJ 690] clarified that no permission for mining can be granted for the obstructed period after 31.5.2012.
• The State contended that Rule 40(h) of the Mining Rules only allows for adjustment of the amount equivalent to the installment payable during the disrupted period against the forthcoming installment, and that it is only liable to refund (i) any security deposit, or (ii) advance royalties paid.
• The State argued that the New Mining Policy of 12.6.2017 does not provide for extensions for obstructed periods and that all mining leases should be permitted through e-tendering or e-auction.
• The State also relied on Nar Narain Mishra v. The State of UP and Ors. [2013 SCCOnline All 13919], which was approved by the Supreme Court in Sulekhan Singh & Company and Ors. V. State of Uttar Pradesh & Ors. [(2016) 4 SCC 663], to argue that the G.O. dated 31.5.2012 applies to all building stones, including those found in situ.

AIKPF’s Arguments:

• AIKPF supported the NGT order, highlighting the prohibition of mining in the ESZ around Kaimur National Park.
• AIKPF also supported the State’s argument regarding the G.O. dated 31.5.2012 and cited Deepak Kumar and Ors. v. State of Haryana and Ors. [(2012) 4 SCC 629] regarding the definition of minor minerals.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the primary issue as:

1. Whether, in view of judicial pronouncements, the appropriate order to pass would be for a refund of the lease amount for the period it was not permitted to operate, or whether the leases are liable to be renewed for the period of obstructed time.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• Banwasi Seva Ashram v. State of U.P & Ors. [(1986) 4 SCC 753] – Supreme Court of India: This case dealt with the rights of Adivasis concerning land notified under Section 4 of the Forest Act. The court’s directions led to the settlement proceedings that excluded the appellants’ lands from the Section 4 notification.
• T.N. Godavarman Thirumalpad v. Union of India and Ors. [M.A. No. 1166 and 1164 of 2015 decided on 4.5.2016] – National Green Tribunal: The NGT directed the State of UP to cancel all mining leases and non-forestry activities on Section 4 lands.
• Sukhan Singh v. State of UP & Ors. [(2015) 2 All LJ 619] – Allahabad High Court: This case established that filing an application for a lease does not confer a vested right for its grant or renewal.
• Mohammad Yunus Hasan v. State of UP & Ors. [(2016) 4 All LJ 418] – Allahabad High Court: This case interpreted Rule 68 of the Mining Rules, stating it does not allow for extending a lease beyond the contracted period.
• Vijay Kumar Dwivedi v. State of Uttar Pradesh [(2016) 4 All LJ 690] – Allahabad High Court: This case held that no permission for mining can be granted for the obstructed period after 31.5.2012.
• J.P. Yadav v. Kanhaiya Singh & Ors. [CA No.8621/2013 decided on 19.9.2013] – Supreme Court of India: This case observed that Rule 68 confers powers to extend leases for the obstructed period.
• Jagdish Prasad Nishad v. State of UP & Ors. [(2015) 128 RD 150] – Allahabad High Court: This case reiterated that Rule 68 allows the State to extend leases for obstructed periods, in line with the Supreme Court’s view in J.P. Yadav.
• Beg Raj Singh v. State of UP & Ors. [(2003) 1 SCC 726] – Supreme Court of India: This case established that a successful party should be placed in the same position as if the wrong had not occurred.
• M/s. Peethambra Granite Pvt. Ltd. v. State of UP & Ors. [WRIT – C No. – 30066 of 2017 decided on 18.2.2020] – High Court Judicature at Allahabad: This case held that the directions in Vijay Kumar Dwivedi do not apply to granite building stone.
• Nar Narain Mishra v. The State of UP and Ors. [2013 SCCOnline All 13919] – Allahabad High Court: This case held that the G.O. dated 31.5.2012 applies to all building stones, including those found in situ.
• Sulekhan Singh & Company and Ors. V. State of Uttar Pradesh & Ors. [(2016) 4 SCC 663] – Supreme Court of India: This case approved the decision in Nar Narain Mishra.
• Deepak Kumar and Ors. v. State of Haryana and Ors. [(2012) 4 SCC 629] – Supreme Court of India: This case discussed the definition of minor minerals.
• Delhi Transport Corporation v. Balwan Singh and Ors., [2019 SCC OnLine SC 276] – Supreme Court of India: This case discussed the principle of literal interpretation of statutes.

Legal Provisions:

• Environment (Protection) Act, 1986: Used for declaring the area as an Eco-Sensitive Zone (ESZ).
• Indian Forest Act, 1927:
  • Section 4: Notification of reserved forests.
  • Section 20: Declaration of reserved forests.
• The Mines and Minerals (Development and Regulation) Act, 1957:
  • Section 3(e): Definition of minor minerals.
• Uttar Pradesh Mining Minerals (Concession) Rules, 1963:
  • Rule 40(h): Adjustment of lease amounts during disruption.
  • Rule 68: Relaxation of rules in special cases.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Banwasi Seva Ashram v. State of U.P & Ors. [(1986) 4 SCC 753]:* Acknowledged as the basis for the settlement proceedings that excluded the appellants’ lands from Section 4 notification, but not sufficient to warrant lease extension.
• T.N. Godavarman Thirumalpad v. Union of India and Ors. [M.A. No. 1166 and 1164 of 2015 decided on 4.5.2016]:* The NGT order was acknowledged as the basis for the State’s actions, but the court noted that the leaseholders were not made parties.
• Sukhan Singh v. State of UP & Ors. [(2015) 2 All LJ 619]:* Approved, stating that filing an application for a lease does not confer a vested right for its grant or renewal.
• Mohammad Yunus Hasan v. State of UP & Ors. [(2016) 4 All LJ 418]:* Approved, stating that Rule 68 of the Mining Rules does not allow for extending a lease beyond the contracted period.
• Vijay Kumar Dwivedi v. State of Uttar Pradesh [(2016) 4 All LJ 690]:* Approved, stating that no permission for mining can be granted for the obstructed period after 31.5.2012.
• J.P. Yadav v. Kanhaiya Singh & Ors. [CA No.8621/2013 decided on 19.9.2013]:* Not followed, as the court interpreted Rule 68 differently in the present context.
• Jagdish Prasad Nishad v. State of UP & Ors. [(2015) 128 RD 150]:* Not followed, as the court interpreted Rule 68 differently in the present context.
• Beg Raj Singh v. State of UP & Ors. [(2003) 1 SCC 726]:* Acknowledged as a general principle but not applicable in this specific context due to statutory provisions and the New Mining Policy.
• M/s. Peethambra Granite Pvt. Ltd. v. State of UP & Ors. [WRIT – C No. – 30066 of 2017 decided on 18.2.2020]:* Not followed, as the court interpreted the G.O. dated 31.5.2012 differently.
• Nar Narain Mishra v. The State of UP and Ors. [2013 SCCOnline All 13919]:* Approved, stating that the G.O. dated 31.5.2012 applies to all building stones, including those found in situ.
• Sulekhan Singh & Company and Ors. V. State of Uttar Pradesh & Ors. [(2016) 4 SCC 663]:* Approved, as it upheld the decision in Nar Narain Mishra.
• Deepak Kumar and Ors. v. State of Haryana and Ors. [(2012) 4 SCC 629]:* Cited to define minor minerals, but not directly relevant to the core issue of lease extension.
• Delhi Transport Corporation v. Balwan Singh and Ors., [2019 SCC OnLine SC 276]:* Cited to emphasize that when the words of a statute are clear and unambiguous, recourse to different principles of interpretation, other than the rule of literal construction, cannot be resorted to.

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by a combination of factors, primarily focusing on the need to balance the rights of the leaseholders with the statutory provisions and the State’s new mining policy. The court acknowledged that the leaseholders were not at fault for the disruption in their mining operations, but it also emphasized that the statutory rules and policies did not allow for automatic extensions of leases. The court was also mindful of the need to maintain transparency and fairness in the grant of mining leases, as reflected in the New Mining Policy. The court’s reasoning also indicates a concern for environmental protection, as the initial disruption was caused by concerns about mining in an eco-sensitive zone.

Sentiment Analysis of Reasons Given by the Supreme Court:

Ratio: Fact vs. Law

Logical Flowchart of the Court’s Reasoning:

Decision

The Supreme Court, in its judgment dated 28 October 2020, held that the leaseholders were not entitled to an extension of their mining leases for the period during which mining operations were suspended due to court orders. Instead, the Court ordered the State of Uttar Pradesh to refund the security deposits and advance royalties paid by the leaseholders, along with interest at the rate of 8% per annum from the date of deposit until the date of refund. The Court clarified that the New Mining Policy of 2017 and the statutory provisions, particularly Rule 40(h) of the Uttar Pradesh Mining Minerals (Concession) Rules, 1963, did not allow for automatic extensions of mining leases in such circumstances.

Dissenting Opinion/Alternate View (if any)

There were no dissenting opinions in this judgment, as it was a unanimous decision by the two-judge bench.

Implications

The Supreme Court’s judgment in Dharmendra Kumar Singh vs. State of UP has significant implications for mining law and environmental regulations in India. The judgment clarifies that mining lease extensions are not automatic, even if operations are halted due to judicial orders or environmental concerns. The decision emphasizes the need for leaseholders to be aware of and comply with statutory provisions and the State’s mining policies. It also highlights the importance of transparency and fairness in the grant of mining leases, as well as environmental protection. The judgment reinforces the principle that the State’s policies and rules must be strictly adhered to, and that leaseholders cannot expect automatic extensions based on the principle of actus curiae neminem gravabit when statutory provisions do not support such extensions.

Impact on Leaseholders:

• Financial Implications: Leaseholders will receive a refund of their security deposits and advance royalties, along with interest. However, they will not be compensated for losses incurred due to idle machinery, salaries, and litigation costs.
• Operational Implications: Leaseholders must now apply for new leases through e-tendering or e-auction, as per the New Mining Policy. They cannot rely on automatic extensions of existing leases.
• Legal Implications: Leaseholders must be aware of the statutory provisions and the State’s mining policies before entering into mining leases. They cannot expect favorable treatment based on equitable principles alone.

Impact on Mining Law and Environmental Regulations:

• Clarity on Lease Extensions: The judgment clarifies that lease extensions are not automatic, even in cases of disruption due to judicial orders or environmental concerns.
• Emphasis on Statutory Provisions: The judgment emphasizes the importance of adhering to statutory provisions and the State’s mining policies.
• Transparency and Fairness: The judgment reinforces the need for transparency and fairness in the grant of mining leases, as reflected in the New Mining Policy.
• Environmental Protection: The judgment implicitly supports environmental protection by acknowledging the need to halt mining in eco-sensitive zones.