Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(All) 747

HIGH COURT OF JUDICATURE AT ALLAHABAD
SARAL SRIVASTAVA, SUDHANSHU CHAUHAN, JJ.
Jai Shakti Realcon – Petitioner
Versus
State of U.P. and others – Respondent
Writ - C No. 3056 of 2020 Along with Writ - C No. 18896 of 2019
Decided On : 08-05-2026

Advocates Appeared:
For the Petitioner: Adarsh Bhushan, Amit Upadhyay, Mukesh Prasad(senior Adv.), Syed Safdar Ali Kazmi Counsel
For the Respondent: C.S.C.

The state's failure to invoke lease termination powers promptly upon a lessee's default, while denying the lessee a unilateral exit mechanism, constitutes arbitrary state action under Article 14, rendering the recovery of arrears for the period occurring after the lease should have been terminated legally unjustified.

Headnote:(A) Mining Laws - U.P. Minor Minerals (Concession) Rules, 1963 - Rule 58 - U.P. Mines and Minerals (Development and Regulation) Act, 1957 - Section 15(3) - Constitution of India - Article 14 - Mining lease - Determination of lease - Non-payment of royalty - Whether authority is obligated to act expeditiously - Held, requirement of payment of royalty on minerals not extracted is not barred under Act where lease follows auction process - However, inaction or delay by authorities in invoking powers to determine lease under Rule 58, particularly where the lessee lacks a unilateral exit option, constitutes arbitrary state action under Article 14 - Recovery of dues for periods post-potential termination held unjustified - (Paras 42, 59, 62, 70, 84).

Facts of the case:
The petitioner challenged recovery notices and a lease determination order, arguing that mining operations were not possible and that royalty should only be paid on the actual quantity of minerals excavated. The petitioner contended that the authorities should have exercised their power to terminate the lease immediately upon the petitioner’s default in paying installments, instead of protracting the proceedings and allowing liabilities to accumulate, as the lease deed did not provide the lessee with an exit option.

Findings of Court:
The Court held that in competitive auction leases, the lessee is liable for the full installment amount irrespective of the volume of material actually removed, thereby rejecting the argument that royalty is payable only on extracted minerals. However, it found that the state's failure to exercise its power under Rule 58 to terminate the lease in a timely manner, despite the lessee's default, resulted in an arbitrary accumulation of liability, thus violating the principles of fairness and reasonableness enshrined in the constitutional guarantee of equality.

Issues: The main issues were whether a lessee is entitled to pay royalty only on actual mineral extraction in an auction lease, and whether the state's delay in invoking lease termination powers constitutes arbitrary action under Article 14 when the lessee is bound by the contract without an exit clause.

Ratio Decidendi: The state possesses an implied duty to exercise its statutory power of lease determination without delay. Where the statutory or contractual framework denies the lessee an exit mechanism, the state’s inaction in terminating a defaulting lease is arbitrary and violative of Article 14, as it forces the accumulation of liability upon the lessee without corresponding benefit or operational ability.

Result: Writ petition partly allowed.

Table of Content
1. factual background and history of the mining lease dispute (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21)
2. arguments regarding liability for royalty and interpretation of section 15(3) (Para 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40)
3. courts analysis on administrative arbitrariness regarding delay in lease determination under rule 58 (Para 41 , 42 , 43 , 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83)
4. determination of royalty liability and invalidation of post-effective-determination recovery (Para 84 , 85 , 86 , 87 , 88)
5. final order disposing of the writ petitions (Para 89)

Judgment :

Saral Srivastava, J.

1. Heard learned counsel for the petitioner and Sri Kartikey Saran, learned Additional Advocate General assisted by Sri Rajeshwar Tripathi, learned Chief Standing Counsel-II for the State-respondents.

2. In Writ-C No.18896 of 2019, the petitioner has assailed the show cause notice dated 24.04.2019 and notice dated 21.05.2019 issued by District Magistrate, District Fatehpur seeking recovery of Rs.7,74,18,000/- of second and third installment towards royalty due on 01.01.2019 and 01.04.2019.

3. The petitioner in Writ-C No.3056 of 2020 has assailed the order dated 01.01.2020 passed by the District Magistrate, Fatehpur by which the mining lease of the petitioner has been determined and petitioner’s firm has been blacklisted for two years.

4. For convenience, the facts have been delineated from Writ-C No.3056 of 2020.

5. The facts, in brief, are that a lease deed was executed on 29.11.2018 and registered on 30.11.2018 for a period commencing from 29.11.2018 to 28.11.2023 for mining sand/moram with regard to the area known as Khand No.K-4, Gata No.391 Mi, measuring 40.48 hectares situated in Village Korrakanak, Tehsil and District Fatehpur at a price of Rs.255/- per cubic meter. The petitioner before execution of lease deed deposited Rs.3,87,09,000/- towards security and an equal amount as first installment of royalty.

6. According to the petitioner, after commencement of mining operation, the District President of Bhartiya Janta Party (BJP) filed a complaint against the petitioner for illegal mining. The District Magistrate taking cognizance of the said complaint, sent a team of SDM, Fatehpur alongwith the team of Revenue Officers to inspect the mining area of the petitioner.

7. The District Magistrate, thereafter, submitted a report on 31.12.2018 to the Principal Secretary, Geology and Mining, U.P., stating therein that no illegal mining activity was found in the petitioner’s area. The State Government also constituted a team which conducted spot inspection and found no illegal mining operation.

8. The petitioner states that he on 08.02.2019 submitted an application before the District Magistrate, Fatehpur stating therein that since most part of land allotted to the petitioner had submerged in the water, and in the remaining area on excavation upto one meter, water comes out due to which mining operation is arduous, therefore, the quantity of mineral be reduced accordingly.

9. It is stated that pursuant to the application of petitioner, a survey by Regional Office, Prayagraj on 06.03.2019 was conducted. As per survey report, some area of the petitioner was across the river towards boundary of District Banda.

10. The petitioner, thereafter, again on 11.03.2019 submitted an application to the District Magistrate, Fatehpur on the basis of survey report dated 11.03.2019 requesting him to get the mining area re- surveyed and demarcated again. It is stated that the District Magistrate, Fatehpur in pursuance to the petitioner’s letter dated 11.03.2019 sent a letter dated 14.03.2019 to the District Magistrate, Banda to appoint a team of competent authorities of district Ba