Karnataka High Court Overturns State Penalty on ACC Limited
In a significant legal development, the Karnataka High Court has invalidated a substantial ₹482.69 crore penalty levied by the Karnataka Department of Mines and Geology (DMG) against ACC Limited, a company under the Adani Group, for its mining activities in Kalaburagi. This decision, delivered by Chief Justice Vibhu Bakhru and Justice KS Hemalekha, quashes the state’s action, which was deemed to contravene the legislative intent behind an amendment to the Mines and Mineral (Development and Regulation) Act, 1957.
Judicial Analysis and Court Findings
The court’s decision centered around the 2015 amendment to the MMDR Act, which extended the tenure of mining leases that were in existence before 2015. The bench clarified, “A mining lease has been executed in favor of ACC, with its term extended under the MMDR Act. Although executing a supplementary lease deed is ideal, the absence of it does not invalidate ACC’s right to continue mining under the statutorily extended lease period granted by Section 8A(5) of the MMDR Act.”
Moreover, the court dismissed the state’s objection to a decision by a Central government revisional authority, which had found fault with the state’s notional formula for calculating royalty payments owed by ACC, ruling it unjustifiable.
Background and Legal Arguments
ACC Limited, involved in cement manufacturing, sources its key raw material, limestone, from mines located in Kalaburagi’s Ingalgi and Ravoor villages. The original mining lease was granted in 1963, and the state imposed the penalty on grounds that ACC was unlawfully extracting minerals after the lease’s expiration in 2023, owing to the lack of a renewed supplementary lease deed.
ACC contested this penalty in the High Court, arguing that their lease had been extended under Section 8A(5) of the MMDR Act, allowing operations to continue until March 31, 2030. The state argued in its separate petition that ACC’s failure to clear royalty arrears justified the penalty, proposing a notional consumption-based formula for royalty calculation, rather than using the weight of limestone extracted.
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Court’s Decision on Royalty and Lease Deed
The court favored ACC’s position, emphasizing that royalties should be based on the actual quantity of minerals consumed, not on a hypothetical basis. The court noted the revisional authority’s observation that ACC had consistently provided readings from a beltometer installed to measure limestone transported to its plant. This evidence was deemed reliable, and the state’s notional formula was rejected, leading to the penalty’s annulment.
Furthermore, the court instructed the DMG and the state to grant ACC full access to the Integrated Lease Management System (ILMS) Portal, which had been restricted since November 2023. The portal facilitates royalty payments and the issuance of e-permits for transporting limestone.
Finally, the court ordered a refund of ₹125 crore to ACC, an amount previously deposited under an interim court order, and directed the execution of a supplementary lease deed in ACC’s favor.
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Legal Representation
Senior Advocate KN Phaneendra and Advocate Vaishali Hegde represented ACC, while Central Government Standing Counsel Vinay Venugopal appeared for the Union of India. The state was represented by Additional Advocate General Reuben Jacob and Government Advocate KS Harish.
[Read Judgment]
