India: Extension Of Mining Lease By Operation Of Law- Who Is Entitled?

The Supreme Court Of India Restores Faith Of The Mining Industry

This article provides a critique of the Hon'ble Supreme Court of India's landmark judgment dated 4 April 2016, its impact on the unsettled positions in mining laws and implications on the anguished mining industry.

  1. BACKGROUND

The Hon'ble Supreme Court of India, in Common Cause vs .Union of India1, vide its order dated 16 May 2014, inter-alia restrained 102 mining leaseholders from carrying on any mining operations on the ground that the leaseholders were not in possession of the requisite clearances and approvals for carrying mining operations ('16 May 2014 Suspension Order'). However, liberty was granted to the leaseholders to move the Hon'ble Supreme Court to revoke the 16 May 2014 Suspension Order after obtaining the requisite clearances and approvals for carrying mining operations. Pursuant to the liberty granted, several leaseholders moved the Hon'ble Supreme Court of India for lifting the 16 May 2014 Suspension Order. The Hon'ble Supreme Court noted that the vital factual-legal issue is "Whether or not the applicant-leaseholders are possessed of subsisting mining leases"2 ('subsisting lease issue') as only then the requisite clearances and approvals would be meaningful and hence, it laid down parameters for determining whether a mining lease is subsisting. The legislative intervening factor being the Mines and Minerals(Development and Regulation)Amendment Act, 2015 dated 12 January 2015 ('12 January 2015 MMDRA') was the prime reason for framing of the subsisting lease issue as several leaseholders would now seek the benefit of extension of the mining lease by operation of law up to 31 March 2030 (in case of captive purpose mining) and up to 31 March 2020 (in case of other than captive purpose mining) under the newly inserted Sections 8A(5) and 8A(6), respectively3. Furthermore, Section 8A (9) of the 12 January 2015 MMDRA, provided for exceptions to Sections 8A (5) and 8A (6), being a mining lease granted before 12 January 2015, for which "renewal has been rejected", or which has "been determined", or "lapsed". Hence, the determination of the subsisting lease issue including the parameters for a subsisting lease would have a two-fold impact on: (a) Whether the 16 May 2014 Suspension Order if revoked would be meaningful and (b) Whether the lease holders would be entitled to the extension of the lease as envisaged under Section 8A of the 12 January 2015 MMDRA.

Consequently, on 4 April 2016, the much awaited occasion was set for the Hon'ble Supreme Court of India to: (a) delve into interpretation of Section 8A of the 12 January 2015 MMDRA on extension of mining lease by operation of law which incidentally led to: (i) chronological re-iteration of the provisions of law, amendments and judicial interpretations with regard to renewals under the old Section 8 (pre-the 12 January 2015 MMDRA), and (ii) interpretation of Section 4A (4) of the Minerals(Development and Regulation)Act, 1957 ('MMDR Act, 1957') on lapsing of mining lease and (b) be the guiding light for transition from the old Section 8 to the newly inserted Section 8A of the 12 January 2015 MMDRA.

  1. KEY HIGHLIGHTS OF THE JUDGMENT DATED 4 APRIL 2016

The Hon'ble Supreme Court of India has given a clear, comprehensive and praise-worthy judgment on 4 April 2016 and has shed light on the unsettled positions in mining laws affecting the mining industry. The key highlights of the judgment dated 4 April 2016 in Common Cause vs .Union of India 4 and Prafulla Samantra & Anr. vs. Union of India & Ors.5 Matters are summarized as follows6:

(A) Subsisting Lease (to) Benefit from Section 8A of the 12 January 2015 MMDRA

  1. Mining lease period or renewal period is in currency on 12 January 2015:
  1. A leaseholder would have a subsisting mining lease, if the period of the original grant was still in currency on 12 January 2015.7
  2. A leaseholder whose original lease had expired prior to 12 January 2015 but the original lease having been renewed, the renewal period was still in currency on 12 January 2015.8
  1. Renewal Application:
  1. A leaseholder whose renewal of the mining lease already extends to a period beyond 31 March 2030/31 March 2020, the lease period of such leaseholders, would continue up to the actual period contemplated by the renewal order.9 A leaseholder whose period of renewal would expire after 12 January 2015, but before 31 March 2030/31 March 2020, the lease period would stand extended up to 31 March 2030/31 March 2020 (in the case of captive/non-captive mines, respectively).10
  2. A leaseholder would have the benefit of treating the original lease period as of fifty years. Accordingly, even during the renewal period, if the period of the mining lease would get extended (beyond the renewal period) by treating the original lease as of fifty years, the leaseholder would be entitled to such benefit.11
  3. A leaseholder who had not moved an application for renewal of a mining lease (which was due to expire, prior to 12 January 2015), at least twelve months before the existing lease was due to expire, under the provisions of the unamended MMDR Act, 1957 and the Mineral Concession Rules, 1960 is not a valid/subsisting leaseholder, after the expiry of the lease period.
  4. A leaseholder who has moved an application for renewal (of the original/first or subsequent renewal) of a mining lease, at least twelve months before the existing lease was due to expire, and on consideration such an application has been rejected, then the same is not a valid/subsisting leaseholder as per the exception created under Section 8A (9).
  5. A leaseholder who has moved an application for "first renewal" of the original mining lease, at least twelve months before the original lease was due to expire, and such application has not been rejected, the same is a valid leaseholder having a subsisting right to carry on mining operations, till the expiry of two years after 18 July 2014, i.e., up to 17 July 2016, as is apparent from a conjoint reading of the unamended and amended Rule 24A of the Mineral Concession Rules, 1960.12
  6. A leaseholder who had moved a second (third or subsequent) renewal application under Section 8(3) of the unamended MMDR Act, at least twelve months before the renewed lease was due to expire, and whose application had not been considered and rejected (though not entitled to any benefit under the unamended Section 8A of the MMDR Act and the amended Rule 24A(6) of the Mineral Concession Rules) up to 12 January 2015, would still have the benefit of sub-sections (5) and (6) of Section 8A of the 12 January 2015 MMDRA.13

(B) No automatic Lapsing under Section 4A (4) of the MMDRA, 1957 read with Rule 28, Mineral Concession Rules, 1960

  1. Unless an order is passed by the State Government declaring, that a mining lease has lapsed, the mining lease would be deemed to be subsisting up to the date of expiry of the lease period provided by the lease document. 14
  2. Wherein an application has been filed by a leaseholder, when she is not in a position to (or for actually not) carrying on mining operations, for a continuous period of two years, the lease period will not be deemed to have lapsed, till an order is passed by the State Government on such application. Where no order has been passed, the lease shall be deemed to have been extended beyond the original lease period, for a further period of two years.15
  3. A leaseholder having suffered a lapse, is disentitled to any benefit of the 12 January 2015 MMDRA, because of the express exclusion contemplated under Section 8A (9). 16

The conclusions and findings of the Hon'ble Supreme Court of India, particularly on what will be construed to be a subsisting lease (to) benefit from the extension of mining lease under Section 8A of the 12 January 2015 MMDRA and the requirement of an order to be passed for a precious right of mining to lapse under Section 4A of the MMDRA, 1957, have restored the faith of the mining industry in the judiciary and diluted the myth that bias towards environment protection will cost the mining industry its legally entitled due. Furthermore, the State Authorities should now be able to implement the benefit under Section 8A of the 12 January 2015 MMDRA.

  1. UNDERLYING APPRAOCH AND PARAMOUNT CONSIDERATIONS IN THE JUDGMENT DATED 4 APRIL 2016

In view of the foregoing conclusions and findings, it is interesting to understand and analyze the approach adopted by the Apex Court as follows:

  1. Law First- Approach

The Hon'ble Supreme Court of India was mindful that the subsisting lease issue will not only impact the applicant-leaseholders in Orissa who had moved the Court pursuant to the liberty given to them vide the 16 May 2014 Suspension Order but will impact the entire mining industry in the country. Hence, it seems to have decided to interpret the letter of the law without complicating the same by applying the facts while interpreting the law and left the application of complicated leaseholder peculiar facts for later.

  1. Supreme Pedestal to Principles of Natural Justice

The finding of the Hon'ble Supreme Court of India that: "It is not possible for us to accept, that vital vested rights in a leaseholder, can be curtailed without affording him an opportunity to repudiate the impression(s) of the competent authority, namely, that the leaseholder could not have (or had actually not) carried out mining operations, for a continuous period of two years"17 has in unequivocal terms re-affirmed the rule of law and the non-negotiable compliance with the principles of natural justice by the State.

  1. Judiciary recognizes  the Legislature's Intention to Support the Executive

The Hon'ble Supreme Court of India gave due importance to the legislative intent behind the 12 January 2015 MMDRA by noting that: "The purpose for which the instant amendment came to be made by the Parliament, whereby the amended Section 8A was inserted into the MMDR Act reveals, that past litigation resulting in different interpretations of the provisions of the MMDR Act, and the alleged hardship caused to the mining industry, due to second and subsequent renewals remaining pending with the State Government without any decision, had occasioned the passing of the instant amendment."18 Hence, the Hon'ble Supreme Court of India gave due importance to the Legislature's intention to support the Executive in addressing the predicament of pending (second and subsequent) applications under the old Section 8 of the MMDR Act, 1957, by explicitly laying down parameters for being entitled to the extension of mining lease by Section 8A of the 12 January 2015 MMDRA.

  1. No injustice by the operation of Law?

The Hon'ble Supreme Court of India has held that: A leaseholder who had moved a second (third or subsequent) renewal application under Section 8(3) of the unamended MMDR Act, 1957 within the prescribed time period and whose application had not been considered and rejected (though not entitled to any benefit under the unamended Section 8 A of the MMDR Act, 1957 and the amended Rule 24 A (6) of the Mineral Concession Rules, 1960' 19) up to 12 January 2015, would still have the benefit of sub-sections (5) and (6) of Section 8A. 20 Hence, the Hon'ble Supreme Court appears to have saved injustice by operation of law for those whose (second and subsequent) renewal applications which were in a limbo during the period from 18 July 2014 (date of legislative amendment) to 12 January 2015, by holding that such applicants are entitled to the extension of the mining lease under Section 8A.

However, there may be confusion as the Hon'ble Supreme Court of India also expressed its view that: "all second renewals which were assumed to be subsisting by State Governments, would expire with effect from the date of the judgment in the Goa Foundation case, i.e., 21.4.2014, and expressly, with effect from 18.7.2014, when the second proviso to Rule 24A (6) provided accordingly. Unless of course, the Government had passed an express order in writing, as mandated under Section 8(3) of the MMDR Act, extending the subsisting mining lease by a second or subsequent renewal." 21

  1. CONCLUSION & WHAT NEXT?

Although the Law-first Approach is praise-worthy as it benefits all the mining industry stakeholders to understand the law, however, much more is awaited from the Hon'ble Supreme Court of India as follows:

  1. Application of complicated leaseholder peculiar facts will shed clarity on how to apply the law on facts and set factual instances for other to follow.  In the meantime, the State authorities or the leaseholders will be (dis)advantaged due to ambiguity on whether a mining lease is subsisting or not in absence of a factual example by the Hon'ble Supreme Court of India.
  1. Mercy on the already anguished mining industry due to the approaching cut-off date of 31 March 2030/31 March 2020 (as applicable) for entitlement of the extension of mining lease under Section 8A, who as on date is losing time in litigation proceedings.
  1. Balancing idle natural resources versus illegally utilized resources.
  1. Balancing the revenue generated from mining operations benefitting the economy versus protection of the environment.

Common Cause vs .Union of India 22 and Prafulla Samantra & Anr. vs. Union of India & Ors. 23 matters are still pending before the Hon'ble Supreme Court of India and the final judgment disposing the matters will hopefully be in time and provide holistic answers to the mining industry stakeholders.

Footnotes

1 (2014) 14 SCC 155.

2 Supreme Court Judgment dated 4 April 2016 in Common Cause vs .Union of India [Writ Petition (Civil) No. 114 of 2014] and Prafulla Samantra & Anr. vs. Union of India & Ors., [Writ Petition (Civil) No 194 of 2014], Paras 4 and 7, available at: http://supremecourtofindia.nic.in/FileServer/2016-04-04_1459763492.pdf (last visited on 16 May 2016)  

3 Section 8(A) of the 12 January 2015 MMDRA: Period of grant of a mining lease for minerals other than coal, lignite and atomic minerals. —

(1) The provisions of this section shall apply to minerals other than those specified in Part A and Part B of the First Schedule.

(2) On and from the date of the commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015, all mining leases shall be granted for the period of fifty years.

(3) All mining leases granted before the commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015 shall be deemed to have been granted for a period of fifty years.

(4) On the expiry of the lease period, the lease shall be put up for auction as per the procedure specified in this Act.

(5) Notwithstanding anything contained in sub-sections (2), (3) and sub-section (4), the period of lease granted before the date of commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015, where mineral is used for captive purpose, shall be extended and be deemed to have been extended up to a period ending on the 31st March, 2030 with effect from the date of expiry of the period of renewal last made or till the completion of renewal period, if any, or a period of fifty years from the date of grant of such lease, whichever is later, subject to the condition that all the terms and conditions of the lease have been complied with.

(6) Notwithstanding anything contained in sub-sections (2), (3) and sub-section (4), the period of lease granted before the date of commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015, where mineral is used for other than captive purpose, shall be extended and be deemed to have been extended up to a period ending on the 31st March, 2020 with effect from the date of expiry of the period of renewal last made or till the completion of renewal period, if any, or a period of fifty years from the date of grant of such lease, whichever is later, subject to the condition that all the terms and conditions of the lease have been complied with.

(7) Any holder of a lease granted, where mineral is used for captive purpose, shall have the right of first refusal at the time of auction held for such lease after the expiry of the lease period.

(8) Notwithstanding anything contained in this section, the period of mining leases, including existing mining leases, of Government companies or corporations shall be such as may be prescribed by the Central Government.

(9) The provisions of this section, notwithstanding anything contained therein, shall not apply to a mining lease granted before the date of commencement of the Mines and Minerals (Development and Regulation) Amendment Act, 2015, for which renewal has been rejected, or which has been determined, or lapsed.

4 [Writ Petition (Civil) No. 114 of 2014].

5 [Writ Petition (Civil) No 194 of 2014].

6 Supra Note 2, Para 32.

7 Supra Note 2, Para 32 (i)

8 Supra Note 2, Para 32 (i)

9 Supra Note 2, Para 32 (vi)

10 Supra Note 2, Para 32 (vi)

11 Supra Note 2, Para 32 (vi)

12 Supra Note 2, Para 32 (iv)

13 Supra Note 2, Para 32 (v)

14 Supra Note 2, Para 32 (vii)

15 Supra Note 2, Para 32 (vii)

16 Supra Note 2, Para 32 (vii)

17 Supra Note 2, Para 30

18 Supra Note 2, Para 25

19 Section 8 prior to 12 January 2015 MMDRA [Unamended Section 8 A]:

Periods for which mining leases may be granted or renewed.—

(1) The maximum period for which a mining lease may be granted shall not exceed thirty years: Provided that the minimum period for which any such mining lease may be granted shall not be less than twenty years;

(2) A mining lease may be renewed for a period not exceeding twenty years.

(3) Notwithstanding anything contained in sub-section (2), if the State Government is of opinion that in the interests of mineral development it is necessary so to do, it may, for reasons to be recorded, authorise the renewal of a mining lease in respect of minerals not specified in Part-A and Part-B of the First Schedule for a further period or periods not exceeding twenty years in each case.

(4) Notwithstanding anything contained in sub-section (2) and sub-section (3), no mining lease granted in respect of mineral specified in Part-A or Part-B of the First Schedule shall be renewed except with the previous approval of the Central Government.

Rule 24 A (6) post 18 July 2014 Amendment (inserted codifying the judgment in Goa Foundation vs. Union of India, (2014) 6 SCC 590 dated 21 April 2014) and as on 12 January 2015 [Amended Rule 24 A (6)]:

xxx xxx xxx

(6) If an application for first renewal of a mining lease made within the time referred to in sub-rule (1) is not disposed of by the State Government before the date of expiry of the lease, the period of that lease shall be deemed to have been extended by a further period of two years or till the State Government passes order thereon, whichever is earlier: Provided that the leases where applications for first renewal of mining lease have been made to the State Government and which have not been disposed of by the State Government before the date of expiry of lease and are pending for disposal as on the date of the notification of this amendment, shall be deemed to have been extended by a further period of two years from the date of coming into force of this amendment or till the State Government passes order thereon or the date of expiry of the maximum period allowed for first renewal, whichever is the earliest: Provided further that the provisions of this sub-rule shall not apply to renewal under sub-section (3) of Section 8 of the Mines and Minerals (Development and Regulation) Act, 1957.

Rule 24 A (6) prior to 18 July 2014 Amendment:

Renewal of mining lease. —(1) An application for the renewal of a mining lease shall be made to the State Government in Form J, at least twelve months before the date on which the lease is due to expire, through such officer or authority as the State Government may specify in this behalf.

(2) The renewal or renewals of a mining lease granted in respect of a mineral specified in Part A and Part B of the First Schedule to the Act may be granted by the State Government with the previous approval of the Central Government.

(3) The renewal or renewals of a mining lease granted in respect of a mineral not specified in Part A and Part B of the First Schedule to the Act may be granted by the State Government: Provided that before granting approval for second or subsequent renewal of a mining lease, the State Government shall seek a report from the Controller General, Indian Bureau of Mines, as to whether it would be in the interest of mineral development to grant the renewal of the mining lease.

Provided further that in case a report is not received from Controller General, Indian Bureau of Mines in a period of three months of receipt of the communication from the State Government, it would be deemed that the Indian Bureau of Mines has no adverse comments to offer regarding the grant of the renewal of mining lease.

(4) An application for the renewal of a mining lease shall be disposed of within a period of six months from the date of its receipt.

(5) If an application is not disposed of within the period specified in sub-rule (4) it shall be deemed to have been refused.

(6) If an application for renewal of a mining lease made within the time referred to in sub-rule (1) is not disposed of by the State Government before the date of expiry of the lease, the period of that lease shall be deemed to have been extended by a further period till the State Government passes order thereon.

20 Supra Note 2, Para 32 (v)

21 Supra Note 2, Para 14

22 [Writ Petition (Civil) No. 114 of 2014]

23 [Writ Petition (Civil) No 194 of 2014]

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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