Madras High Court Upholds 100% Mineral Value Recovery for Mining Without Environmental Clearance

Chennai: The Madras High Court has ruled that mineral extraction carried out without the requisite Environmental Clearance (EC), even within a licensed area, constitutes mining "without any lawful authority" under Section 21(5) of the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act). Consequently, the State is entitled, and in fact mandated by Supreme Court precedent, to recover 100% of the value of such illegally extracted minerals as compensation.

Justice D.BHARATHA CHAKRAVARTHY delivered the common order on June 5, 2025, dismissing a batch of numerous writ petitions (W.P.Nos.33079 of 2024 and others) filed by quarry licensees challenging demand notices from the State of Tamil Nadu.

The core dispute centered on demands issued to licensees operating stone quarries (minor minerals) and major mineral mines, primarily those with lease areas less than 5 hectares, for the period between January 15, 2016, and January 10, 2017. The State demanded 100% of the mineral value, citing the petitioners' failure to obtain prior Environmental Clearance during this period.

The petitioners, including Mathavakannan in the lead case, argued that during the relevant period, there was no clear legal mandate for obtaining EC for leases less than 5 hectares, especially for major minerals. They contended that the State's own rules and actions, such as granting time extensions for EC applications (up to January 10, 2017) and issuing transport permits, created a legitimate expectation that their operations were lawful. They also argued that the 2021 amendment to Section 21(5) of the MMDR Act, which clarifies "without lawful authority" to mean operations without a license or in contravention of rules under the MMDR Act , should apply retrospectively, excluding EC violations under the Environment Protection Act. They further claimed that the delay in processing their EC applications by the State Level Environmental Impact Assessment Authority (SEIAA) or District Level Expert Appraisal Committee (DEAC) was the State's fault and that the demand orders were stereotypical and lacked specific consideration of their cases. If compensation was payable, they argued that already paid seignorage fees should be adjusted.

The State, represented by the Advocate General, countered that the requirement for EC originates from the Environment Protection Act, 1986, and subsequent notifications and judgments. Relying on the Supreme Court's ruling in Deepak Kumar (2012), which mandated EC even for minor minerals under 5 hectares (at renewal), and subsequent NGT orders and MoEF clarifications (particularly the notification dated January 15, 2016), the State argued that obtaining EC became mandatory for all mining leases, existing and new, major or minor, regardless of size, from January 15, 2016. The State highlighted the NGT Southern Zone judgment in Tamil Nadu Small Mine Owners Federation (O.A.No.136 of 2017), which explicitly upheld this mandate for existing leases from January 15, 2016.

Crucially, the State cited the Supreme Court judgment in Common Cause v. Union of India (2017), which held that mining without EC constitutes illegal or unlawful mining under Section 21(5) of the MMDR Act, attracting 100% compensation for the mineral value. The State argued that its extensions under State rules could not override the mandatory requirement under Central law and judicial directives. The 2021 amendment to Section 21(5) was, by its clear wording, prospective from March 28, 2021, and thus irrelevant to the period in question (2016-2017).

Justice Bharatha Chakravarthy , after considering the elaborate arguments and reviewing relevant statutory provisions and precedents, sided with the State on the fundamental legal question. The Court held that the explanation inserted into Section 21(5) by the 2021 amendment is explicitly prospective and does not apply to the period of the impugned demands.

Referring to the Common Cause judgment, the Court reiterated that mining operations conducted in violation of the Environment Protection Act, including the requirement of obtaining EC, renders the extraction illegal and unlawful. This, the Court affirmed, squarely falls under the purview of Section 21(5) of the MMDR Act, irrespective of whether the mining occurs within the licensed area. The judgment cited excerpts from Common Cause emphasizing that there can be "no compromise on the quantum of compensation" and that 100% recovery is mandatory for unlawfully extracted minerals.

Regarding the petitioners' claims of promissory estoppel and legitimate expectation based on the State's conduct (issuing permits, seeking NGT extensions), the Court relied on Common Cause again, stating that such actions cannot create a right against complying with mandatory legal requirements under Central law and judicial pronouncements. A "soft implementation" approach by the State cannot excuse non-compliance with the law.

The Court also dismissed the argument that the non-functioning or delay by SEIAA/DEAC in processing applications absolves the petitioners. It held that while such delays might justify seeking directions against the authorities or claims for lost time, they do not legitimize continuing mining operations without the mandatory EC.

Finding that the legal mandate for EC existed from January 15, 2016, for all mining leases regardless of size (major or minor, < 5 hectares included), the Court upheld the principle of recovering 100% of the mineral value under Section 21(5). However, taking into account that the petitioners had operated under permits and paid seignorage fees, the Court granted a limited relief on the calculation of the payable amount.

The Court directed that the seignorage fee already paid by the petitioners for the extracted mineral during the relevant period shall be credited against the total 100% value demanded. Only the balance amount is recoverable from the petitioners.

The individual demand orders imposing 100% compensation were thus upheld in principle, but with the crucial direction to deduct the already paid seignorage fee. The respondents were directed to communicate the exact balance amount payable to each petitioner within three weeks, and the petitioners were granted two months thereafter to make the payment.

This judgment clarifies the application of Section 21(5) of the MMDR Act concerning EC violations and reinforces the rigorous stance taken by the Supreme Court and NGT regarding environmental compliance in mining operations.