Supreme Court Clarifies Validity and Extension of Mining Leases Under MMDR Act Amendment

Court Rules Mining Leases Extending Beyond Expiry Date Can Be Valid If Renewal Applications Are Pending; Lapse Not Automatic Without Government Order

In a landmark judgment delivered on April 4, 2016, the Supreme Court of India in the case of Common Cause v. Union of India has elucidated the legal position concerning the subsistence and renewal of mining leases under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act), especially after the significant amendments introduced in 2015. The judgment provides much-needed clarity on the contentious issues surrounding mining leases, renewal applications, and the effect of non-commencement or discontinuance of mining operations on lease validity.

The Court observed that the suspension of mining operations ordered earlier due to lack of environmental clearances or approvals can only be lifted if the leaseholders possess a valid subsisting mining lease. This was critical because mere possession of clearances without a valid lease does not entitle leaseholders to recommence mining operations.

The judgment carefully analyzed the regime governing mining leases and their renewal under Section 8 of the MMDR Act and Rule 24A of the Mineral Concession Rules, 1960, as they stood prior to the 2015 amendment. It explained that originally mining leases could be granted for a maximum of 30 years, with a first renewal period of up to 20 years and further renewals subject to the satisfaction of the State Government and approval of the Central Government.

A key aspect was the interpretation of Rule 24A(6), which formerly provided for a deemed extension of the lease period if the renewal application was pending disposal by the State Government. The Supreme Court clarified that this deemed extension applied only to first renewals and that second or subsequent renewals require explicit government orders based on mineral development interests. Consequently, second and subsequent renewals could not be automatically extended merely by pending applications.

The Court then considered the effect of the Mines and Minerals (Development and Regulation) Amendment Act, 2015, which introduced Section 8A, mandating uniform mining lease periods of 50 years and doing away with renewals for leases granted after January 12, 2015. Under the amended provisions, leases granted before the amendment are deemed to have been granted for 50 years and certain extended periods are provided for leases used for captive and non-captive purposes, lasting up to March 31, 2030, and March 31, 2020, respectively.

Importantly, the Court held that the benefits of Section 8A would apply not only to leases subsisting on the date of amendment but also to those whose original lease or renewal period had expired before January 12, 2015, provided the leaseholder had made a valid application for renewal at least twelve months before expiry and the application had not been rejected. The judgment rejected the contention that the expiry of a lease automatically amounts to its lapse, emphasizing that “lapse” is a specific legal term applicable only when the State Government passes an order declaring the lease lapsed due to non-operation.

The Court further clarified that under Section 4A(4) of the MMDR Act and Rule 28 of the Mineral Concession Rules, a mining lease lapses only if the leaseholder fails to commence or discontinues mining operations for two continuous years, but this lapse is not automatic. The State Government must pass an order declaring the lease lapsed and communicate the same to the lessee. If the leaseholder applies for an extension citing reasons beyond their control, the lease continues until the Government passes an order or for a maximum of two years.

Summarizing the legal principles, the Supreme Court highlighted:

- A valid subsisting lease exists if the original grant or renewal period was in force as of January 12, 2015.

- Leaseholders who failed to apply for renewal timely or whose renewal applications were rejected do not have a valid lease and cannot benefit from the amended provisions.

- Leaseholders who applied timely and whose applications are pending or not rejected enjoy deemed extensions under Section 8A up to specified dates (2030 for captive mines and 2020 for non-captive mines) or 50 years from the original grant, whichever is later.

- Lease lapse is not automatic and requires a government order; until such order is passed, leases are deemed subsisting.

The judgment effectively balances the interests of leaseholders and the State, providing legal certainty on lease validity while ensuring compliance with regulatory conditions. It also underlines the necessity of obtaining requisite environmental and statutory clearances to carry on mining operations legitimately.

Statutory provisions

Mines and Minerals (Development and Regulation) Act, 1957 - Sections 4A(4), 8, 8A(2), 8A(3), 8A(5), 8A(6), 8A(9); Mineral Concession Rules, 1960 - Rule 24A (including sub-rules 1, 4, 5, 6), Rule 28 (including sub-rules 1, 2, 4)

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This comprehensive ruling affirms that mining leases do not automatically lapse on expiry without due governmental process and recognizes the extension of leases under the 2015 amendment for pending renewals, thereby protecting lawful mining rights and promoting regulatory clarity.

Common Cause v. Union of India (SC) : Law Finder Doc Id # 754519