Permitted Quarrying Quantity Must Be Calculated Based on Full Lease Potential, Not Actual Years of Operation: Kerala High Court - 2025-07-30

Kerala High Court Partially Quashes ₹23 Crore Demand on Quarry Operator, Orders Recalculation of Permitted Extraction

ERNAKULAM: In a significant ruling on mining regulations, the Kerala High Court, presided over by Justice C. Jayachandran, has partially set aside a demand notice of over ₹23 crore issued to Kavumkal Granites for unauthorized quarrying. The court found a "basic fallacy" in the government's calculation of the legally permissible extraction quantity and directed the Department of Mining and Geology to issue a fresh demand after correcting the figures.

However, the court firmly rejected the petitioner's argument that exceeding permit limits should not attract stringent penalties under the Kerala Minor Mineral Concession (KMMC) Rules, 2015, upholding the state's power to penalize operators for extracting minerals far beyond their authorized quota.

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Background of the Dispute

The case, marking the third round of litigation between Kavumkal Granites and the State of Kerala, revolves around allegations of massive illegal extraction of granite building stone between 2004 and 2022. The Department of Mining and Geology, following a site inspection, determined that the petitioner had extracted a total of 64,67,006.25 MT of minerals. After accounting for what the department considered the legally permitted quantity (9,63,171.008 MT), it found an excess extraction of over 55 lakh MT.

This led to an initial demand of nearly ₹39.67 crores. After a series of appeals and revisions, the matter reached a departmental Adalat, which finalized the demand at ₹23,00,50,571. The petitioner challenged this final notice in the High Court.

Arguments in Court

Petitioner's Contentions: Kavumkal Granites presented a three-pronged argument:

1. Incorrect Permitted Quantity: The petitioner argued that based on their three leases and two permits, the total legally extractable quantity should be 13,41,570 MT, significantly higher than the 9,63,171 MT calculated by the department.

2. 'Unauthorised' vs. 'Illegal' Extraction: They contended that since they held valid leases, their over-extraction was merely "unauthorised," not "illegal." Therefore, they should only be liable to pay royalty and the price of the mineral as per the proviso to Rule 108 of the KMMC Rules, rather than facing heavy penalties.

3. Unscientific Bifurcation: The year-wise distribution of the excess quantity, which affected the rate of royalty and penalty, was claimed to be arbitrary.

State's Response: The Senior Government Pleader countered that:

1. The lower figure for permitted quantity was justified because the quarry was non-operational for several years within the lease periods.

2. The petitioner's interpretation of Rule 108 was flawed, as extracting quantities far beyond the permitted limits constituted a clear contravention of the rules, attracting penalties.

3. The year-wise bifurcation was based on a sketch prepared by a Recognised Qualified Person (RQP) using Google Earth data, which was provided by the petitioner.

Court's Analysis and Ruling

Justice C. Jayachandran addressed each contention separately, leading to a nuanced final order.

1. On Calculation of Permitted Quantity: The court sided with the petitioner on this crucial point. It held that the state's argument for reducing the permitted quantity due to non-operational years was not pleaded in its official statements and was introduced belatedly. The judgment stated:

"Assuming that there were no quarrying operations for a particular year, the same cannot impinge upon the petitioner's right to extract the mineral up to the total quantity covered by [the leases and permits]... If that be so, the present contention, which cannot be traced to any of the pleadings or any of the Orders so far issued by the department, is only to be eschewed."

The court directed the authorities to recalculate the demand by taking the legally permissible quantity as 13,41,570 MT .

2. On Interpretation of Rule 108 and Penalties: The court unequivocally rejected the petitioner's distinction between "unauthorised" and "illegal" extraction in this context. It cited two Division Bench judgments, including Vallamattom Stone Aggregates Pvt. Ltd v. State of Kerala , to affirm that leaseholders must confine their extraction to the limits specified in their grants. The court observed:

"Having indulged in such a high-handed action, contrary to law, the petitioner cannot be heard to say that he should be left scot-free by merely paying the royalty in terms of the proviso to Rule 108... Lease/permit is granted only by virtue of the provisions of the Rules, which expressly stipulates the maximum mineral, which can be extracted... and in case, he choose to do the contrary, it is certainly a case of violation or contravention of the provisions of the Rules."

3. On Bifurcation of Extraction Period: This contention was dismissed as it was raised late in the litigation and was based on a sketch provided by the petitioner's own expert.

Final Decision and Implications

The writ petition was disposed of with the following directions:

- The impugned demand notice (Annexure-R3(q)) was set aside only to the extent of the calculation of the permissible quantity.

- The Department of Mining and Geology must issue a fresh demand notice, recalculating the excess amount based on a legally permissible quantity of 13,41,570 MT.

- The petitioner is granted six equal instalments to pay the revised amount. The ₹7 crore already paid as a pre-deposit will be adjusted against these instalments.

This judgment clarifies that while authorities must base their demands on the full potential of a lease grant, quarry operators cannot escape stringent penalties by claiming that massive over-extraction is a minor infraction. It reinforces the principle that adherence to permitted quantities is a strict statutory requirement, the violation of which has serious financial and legal consequences.