The Karnataka High Court has set aside a ₹482.69 crore penalty imposed on Adani-controlled ACC Limited over its limestone mining operations in Kalaburagi, ruling that the State’s action was inconsistent with the legislative intent behind the 2015 changes to the Mines and Minerals (Development and Regulation) Act, 1957.
A Bench comprising Chief Justice Vibhu Bakhru and Justice KS Hemalekha held that ACC’s mining lease had been statutorily extended under Section 8A(5) of the MMDR Act and that the company did not lose its right to continue mining merely because a supplementary lease deed had not been executed.
The court observed that the amendment extended the validity of mining leases granted before 2015. In ACC’s case, the lease was extended until March 31, 2030.
Requiring a supplementary lease deed as a condition for continuing operations, the Bench said, would effectively defeat the purpose of the statutory extension granted by Parliament.
ACC had obtained the mining lease in 1963 and operates limestone mines in Ingalgi and Ravoor villages in Kalaburagi district. The limestone extracted from the mines is used as a raw material at the company’s cement manufacturing facility.
The Karnataka Department of Mines and Geology had treated ACC’s mining activity after 2023 as illegal, arguing that the original lease had expired and that the company had continued operations without executing a supplementary lease deed. On that basis, the department imposed the ₹482-crore penalty.
The court rejected that reasoning, holding that the statutory extension remained effective even in the absence of the supplementary document.
Dispute over royalty calculation
The case also involved a separate dispute over how much royalty ACC was required to pay for the limestone extracted and consumed at its cement plant.
The State had refused to issue the supplementary lease deed, citing outstanding royalty dues. It also sought to calculate the royalty using a notional, consumption-based formula rather than relying on the quantity of limestone actually weighed and transported from the mines.
ACC maintained that royalty should be calculated on the mineral actually raised and consumed. While the company accepted that royalty was payable on consumed mineral, it disputed the State’s method of determining the quantity.
The High Court backed a decision of the Central government’s revisional authority, which had rejected the State’s notional calculation.
The Bench noted that ACC operated the mines for captive use and that the limestone was transported directly to its cement plant. The key question was therefore the actual quantity consumed.
Records showed that ACC had installed a beltometer to measure the limestone transported from the mining lease to the cement plant, with the readings regularly submitted to the authorities. The court noted that the accuracy of those measurements had not been specifically challenged.
A report prepared by the National Council for Cement and Building Materials had also assessed ACC’s limestone consumption. The court found that the State could not disregard that material and instead impose royalty using a notional formula.
₹125 crore deposit to be returned
The High Court also dealt with ACC’s access to the Integrated Lease Management System portal, which the company said had been blocked since November 2023.
The portal is used for royalty payments and for obtaining electronic permits required to transport limestone from the mining area to the cement plant.
The court directed the State and the Department of Mines and Geology to restore ACC’s full access to the portal.
It further ordered the authorities to refund ₹125 crore deposited by ACC under an earlier interim order.
Alongside setting aside the ₹482.69-crore penalty and rejecting the State’s challenge to the revisional authority’s royalty ruling, the court directed the authorities to execute a supplementary lease deed in favour of ACC.
The ruling effectively clears the way for ACC to continue its mining operations under the statutory lease extension while requiring royalty payments to be assessed on the basis of actual mineral consumption rather than the disputed notional formula.
