The Chhattisgarh High Court has delivered an important judgment clarifying that the two-year period for declaring a mining lease as lapsed under Section 4A(4) of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) begins only after the grant of environmental clearance. The Court held that a mining lessee cannot be penalized for failing to commence operations when a statutory bar prevents it from doing so without prior clearance from environmental authorities.
A Division Bench comprising Justice Sanjay K. Agrawal and Justice Sachin Singh Rajput passed the order in two connected writ petitions filed by JSW Steel Limited, formerly Monnet Ispat & Energy Limited, challenging a notice issued by the State of Chhattisgarh proposing to declare its limestone mining lease as lapsed. The Court quashed the State’s notice dated September 20, 2022, holding that the proceedings were without jurisdiction and contrary to the law governing mining operations.
The controversy arose after JSW Steel received a show-cause notice from the State Government alleging that the company had failed to commence mining within two years of executing the lease in January 2017. The mining lease, located in the villages of Gaitra, Pausri, Bharsela and Bharseli in Balodabazar district, had originally been granted to Monnet Ispat and Energy Limited in 2009 and later transferred to JSW Steel following insolvency proceedings and an approved resolution plan under the Insolvency and Bankruptcy Code in 2018.
The lease was executed under the Mines and Minerals (Development and Regulation) Removal of Difficulties Order, 2017, which permitted State Governments to execute leases where all conditions of a Letter of Intent were fulfilled except for obtaining environmental clearance. However, the 2017 Order explicitly prohibited mining activity until environmental clearance was secured. Clause 5.18 of the lease deed contained the same restriction, stating that no mining operations could commence before an environmental clearance was obtained under the Environment (Protection) Act, 1986.
After taking over Monnet Ispat’s assets, JSW Steel informed the State Government in December 2018 that it was in the process of securing environmental clearance and requested that the lease remain valid. Despite this, the State issued a notice asserting that the company had failed to commence mining operations within two years and that the lease had automatically lapsed under Section 4A(4) of the MMDR Act read with Rule 20(3) of the 2016 Mineral Concession Rules.
Senior Advocate Ashok K. Parija, appearing for JSW Steel, argued that the notice was issued without jurisdiction, as the company was legally barred from commencing mining operations without environmental clearance. He contended that the two-year lapse period prescribed under Section 4A(4) could not begin until the company was legally entitled to start mining, and that any contrary interpretation would make compliance with the law impossible. The State of Chhattisgarh, represented by Additional Advocate General Ranbir Singh Marhas, maintained that the company had delayed seeking clearance and failed to apply for an extension in time, arguing that the writ petition was premature since it challenged a show-cause notice.
The High Court examined in detail the provisions of Sections 4, 4A(4), 10A(2)(c), and 21 of the MMDR Act, as well as the 2017 Removal of Difficulties Order. The Bench observed that Section 4(1) of the Act prohibits mining operations unless carried out strictly in accordance with the terms of a valid lease, and any violation attracts criminal and civil penalties under Section 21. The Court noted that both the 2017 Order and the lease deed created an explicit statutory injunction against commencing mining without environmental clearance. Therefore, the company’s inability to start operations was not due to negligence but because of a legal prohibition.
The judges held that the two-year lapse period mentioned in Section 4A(4) could begin only when the lessee was legally permitted to undertake mining. Since JSW Steel had been barred from doing so until clearance was obtained, the statutory period had not even commenced. The Bench stated that applying the lapse provision without satisfying this condition would amount to exercising power without jurisdiction. It further held that the State could not rely on Rule 20(3) of the 2016 Rules to override the clear provisions of the MMDR Act.
In its reasoning, the Court relied on Supreme Court precedents, including Common Cause v. Union of India (2016) and Calcutta Discount Co. Ltd. v. Income Tax Officer (1960), to emphasize that jurisdiction cannot be assumed when statutory preconditions do not exist. The judges observed that JSW Steel could not be held responsible for non-performance of a legal obligation that it was expressly forbidden by statute from fulfilling. The Bench also reiterated that there is no concept of automatic lapse under Section 4A(4) and that a lease can be considered lapsed only when the State Government passes and communicates an explicit order to that effect.
The Court concluded that the September 20, 2022, notice issued by the Additional Secretary, Mineral Resources Department, Chhattisgarh, was without jurisdiction and void in law. It quashed the notice along with all subsequent proceedings. The Bench clarified that the period of two years prescribed under Section 4A(4) of the MMDR Act would begin only after environmental clearance is granted. While allowing JSW Steel’s petitions, the Court left open the question of the constitutional validity of Rule 20(3) of the 2016 Rules for determination in an appropriate case.
This ruling is expected to have significant implications for mining operations across India, particularly in cases where leases are pending environmental or forest clearances. It underscores that environmental approval is not merely procedural but a statutory prerequisite for lawful mining. The decision also ensures that lessees are not unfairly penalized for delays beyond their control, bringing clarity and consistency to the interpretation of Section 4A(4) of the MMDR Act.
Case Details : WPC No. 4817 of 2022 and WPC No. 4819 of 2022, JSW Steel Limited, (Formerly M/s. Monnet Ispat and Energy Limited) vs Union of India.
For Petitioner : Mr. Ashok K. Parija, Senior Advocate with Mr. Ankit Singhal, Mr. Dhananjay Mishra,
Mr. Aman Saxena, through Video Conferencing, Mr. Ritesh Patnaik and Mr. Ashish Mittal, Advocates.
For Respondent No.1/ Union of India : Mr. Tushar Dhar Diwan, Central Government Counsel.
For Respondents No.2 to 5/State : Mr. Ranbir Singh Marhas, Additional Advocate General.
