Orissa HC quashes Rs 40 crore ore demand, gives miner a 10% buffer, not the 20% it had pleaded

A Division Bench led by Chief Justice Harish Tandon read the Supreme Court ruling in Common Cause to accept a variation of 10 per cent over the environmental clearance limit, set aside the Revisional Authority order and the demand under the MMDR Act, and ordered the demand recalculated on annual production.

An iron ore processor in Mayurbhanj told the mining authorities that a 20 per cent variation in output was approved and that it had produced within it. On 11 November 2026 the Orissa High Court quashed a demand of more than Rs 40 crore for 2019-20, but gave the company a smaller cushion of 10 per cent.

Chief Justice Harish Tandon wrote the judgment for a Bench with Justice Chittaranjan Dash. The authorities must now recalculate the sum using that buffer over the environmental clearance limit, and only if output still exceeds it do they claim compensation.

A mine that grew its capacity

M/s Lal Trades and Agencies Pvt Ltd has beneficiated iron ore in Mayurbhanj for 15 to 20 years, turning low-grade ore into high-grade. The Ministry of Environment and Forest gave it an environmental clearance on 9 April 2010 for 0.72 million tonnes a year.

The Indian Bureau of Mines approved a mining scheme on 27 March 2015 that raised output from 0.72 to 1.5 million tonnes a year. A supplementary lease deed of 20 December 2016 ran until 26 May 2020.

The company applied online on 9 March 2018 for terms of reference for an impact study at the higher capacity. The Bureau approved a modified mining plan for the Badampahar Iron Ore Mines on 26 July 2018.

The Expert Appraisal Committee recommended the increase on 22 and 23 January 2019, and the Ministry then granted clearance for 1.5 million tonnes a year.

A show cause notice, then a smaller demand

The Deputy Director of Mines, Baripada Circle, accepted the company’s output between April 2019 and March 2020 as showing no irregularity. Royalty for the year was paid.

Then, on 31 May 2023, the same office issued a show cause notice. It said the output for 2019-20 exceeded the clearance limit, and it demanded more than Rs 50 crore.

The company replied that production targets are fixed annually, not monthly, and that output stayed within the annual figure once the clearance was raised. A fresh notice of 7 May 2024 cut the demand to over Rs 40 crore.

The company answered that the Bureau of Mines had approved a variation of up to 20 per cent over the tentative annual production. A demand notice for over Rs 40 crore followed on 26 July 2024.

Licence renewal withheld, revision dismissed

The company challenged the demand before the Revisional Authority. While that was pending, it held a trading licence in Form D valid until 21 May 2025. Renewal was withheld because of the outstanding dues.

In W.P.(C) 14602 of 2025, decided on 20 May 2025, the High Court told the authorities to decide the renewal application within a stated time. Until then the company could keep trading on its old licence.

The renewal was later rejected because the company had not produced a Mining Dues Clearance Certificate. On 1 October 2025 the Revisional Authority dismissed the revision, in R.A. No. 22/(22)/2024-RC-1, and the company came back to the High Court.

The court noted that the Revisional Authority had dealt with one aspect only. The point the company had also raised, on the permitted variation, was left untouched. It heard both sides on that point. Mr Durga Prasad Nanda, Senior Advocate, appeared for the company, and Mr P.K. Parhi, Deputy Solicitor General, for the Union.

The State: unlawful beyond the clearance

The State, in its counter affidavit, accepted that the company extracted within the limit in its mining plan. Its case was that the output exceeded the limit in the environmental clearance for 2019-20.

Under the Supreme Court’s ruling in Common Cause v. Union of India (2017) 9 SCC 499, it argued, that was unlawful extraction. Section 21(5) of the Mines and Minerals (Development and Regulation) Act, 1957 then applies.

The Bench set the question as this:

“whether the variation of ± 20% can be read harmoniously with the judgment rendered by the apex Court in Common Cause v. Union of India and others” (para 7)

How the mining statute fits together

The court first surveyed the Act. Section 4(1) bars mining except under the terms of a lease, and Section 5 restricts the grant of a lease unless the mining plan is approved. Section 18 makes the Centre responsible for conserving minerals and protecting the environment.

Section 21(5) is the penal provision. Where anyone raises a mineral without lawful authority, the State may recover the mineral or its price, along with rent, royalty or tax for the period.

The Mineral Concession Rules, 1960 make an approved mining plan essential before any mining. The Mineral Conservation and Development Rules, 1988 govern how operations begin, how the plan may be modified and how the environment is protected.

The Bench said the environmental impact assessment notification of 27 January 1994 requires mining to follow the clearance. In Common Cause the Supreme Court held those notifications prohibitory, and mining that departs from the plan or the clearance unlawful.

What the Supreme Court said on variation

A letter of 12 December 2011 from the Centre said a 20 per cent deviation from the mining plan would be reasonable. The Supreme Court noted it, but its concern was leaseholders who went well beyond 20 per cent.

It quoted the Hoda Committee report of 22 December 2006, which spoke of a grace of ±10% allowed by the Bureau of Mines. In paragraph 121 it said it was not clear why the variation had shifted from ±10% to ±20%.

In paragraph 136 it said a variation of 20 per cent a year was subject to an overall 20 per cent limit over five years. A leaseholder could not extract five years’ quantity in one or two years.

The Bench noted paragraph 137, where the Centre’s letter recorded that 71 of 104 bulk mineral leases had gone beyond the 20 per cent limit. It also noted paragraph 140, which calls mining beyond the plan or clearance unlawful.

Why ten per cent, not twenty

The Bench read the Supreme Court as having taken the Bureau’s variation of ±10% into account, since the move to ±20% was held to lack clarity. The mining plan and the clearance, it said, complement each other.

The Bureau, as the statutory authority, looks at yearly extraction and its environmental impact. The court found a ±10% variation permissible for working reasons. In practice, extraction cannot be brought to a limit with strict precision.

The State had relied on paragraph 151 of Common Cause, which deals with the method of calculating compensation. The Bench said that reliance must be seen in the light of calculating compensation. It does not mean that a variation up to ±10% invites compensation or a penalty under Section 21(5).

The Supreme Court had accepted ±10% as reasonable and justified, the court said, so the authorities ought to have allowed for it. It held:

“the authorities ought to have given the buffer of ±10% variation” (para 16)

Order

The Revisional Authority’s order of 1 October 2025 is set aside, and so is the demand. The authorities must recalculate, taking account of a ±10% variation over and above the clearance limit.

The buffer applies in the formula in paragraph 155 of Common Cause, on permissible annual production and not monthly production. If extraction still exceeds the variation limit, compensation is to be calculated as that judgment lays down, after giving the company a reasonable time to meet it.

The writ petition was disposed of. The judgment does not say what follows for the trading licence.