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Sets Aside ₹482.69 Crore Penalty Against ACC, Orders Refund of ₹125 Crore
In a significant ruling that reinforces the statutory protections available to mining leaseholders, the has quashed a ₹482.69 crore penalty imposed on Adani Group-controlled for allegedly carrying out limestone mining . A Division Bench of Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha held that ACC's mining lease stood automatically extended under (MMDR Act), and that the absence of a did not render the mining unlawful.
The Long-Running Dispute Over Lease Extension and Royalty
ACC holds a mining lease in Ingalgi and Ravoor villages, Kalaburagi district, granted in . The lease, covering 471.03 hectares, was renewed from time to time and remained valid until . In , the Karnataka government extended the lease until , under Section 8A(5) of the MMDR Act, but made the extension subject to execution of a and payment of all government dues. ACC could not secure a because it disputed the royalty arrears demanded by the State—arrears calculated not on actual limestone consumption but on a of 1:1.42.
The blocked ACC's access to the Integrated Lease Management System (ILMS) portal, preventing the company from obtaining e-permits and paying royalty. On , the DMG issued a demand for ₹482.69 crore under , alleging that ACC had extracted 78.33 lakh metric tonnes of limestone between and .
Does Not Require Supplementary Deed
The State argued that without a registered , ACC had no right to continue mining after the original lease term expired. The court emphatically rejected this contention. It noted that Section 8A(5) of the MMDR Act was introduced precisely to address the hardship faced by leaseholders due to prolonged delays in renewals. The Bench observed:
"It would frustrate the of statutorily extending the term of mining leases if the same is held to be contingent on execution of the further deeds and conditions."
Citing the 's decisions in and , the court explained that in the case of an extension—as opposed to a renewal—the same lease continues in force. Execution of a supplementary deed, while desirable for good order, is not a prerequisite for the validity of mining operations during the extended period.
The court also noted that the Central Government, through the , had consistently taken the position that a is not essential for lawful mining during the statutorily extended term.
Notional Royalty Assessment Held Unjustified
The second major issue was the State's insistence on calculating royalty using a notional conversion factor of 1:1.42 (clinker to limestone), instead of relying on ACC's . ACC had installed a beltometer in , and its daily weighment data had not been disputed by the DMG or the . The under had earlier found that the was unjustified, and the High Court upheld that finding.
The court observed that the ratio of limestone to clinker varies considerably depending on the chemical composition of raw materials, and that the State had not provided any tolerance limits for testing the veracity of ACC's reported consumption. The HLC report showed that for the period 2011-12 to 2022-23, ACC's actual consumption ratio was 1:1.3218, compared to the State's adopted 1:1.42. The Bench stated:
"Absent any finding that the weighment equipment was inaccurate, assessment of Royalty on a notional basis would be unjustified."
The court further noted that the State had disregarded the 's order dated , which directed that royalty be assessed in light of a government meeting decision from , where officials had agreed to calculate royalty based on actual weighment.
What the Court Ordered
The High Court allowed ACC's writ petitions (WP No. 25298/2024 and WP No. 18655/2025) and dismissed the State's challenge (WP No. 36850/2025). Specifically, the court:
- Set aside the ₹482.69 crore penalty demand notice dated ;
- Directed the State and DMG to immediately restore full access to the ILMS portal;
- Directed the authorities to execute the in ACC's favour without insisting on a ;
- Ordered the refund of ₹125 crore deposited by ACC pursuant to an interim order of .
The judgment reinforces the principle that statutory extensions under Section 8A(5) of the MMDR Act are and cannot be made contingent on administrative formalities like the execution of a . It also underscores that royalty must be assessed on the basis of actual mineral removal or consumption, and that notional formulas can only be applied when the lessee's weighment data is credibly challenged and found unreliable.
