Interest runs for two months and then the remedy is cancellation: Patna High Court caps what the mining department can recover on a defaulted instalment

Justices Bibek Chaudhuri and Rana Vikram Singh hold that Rule 52(5) does not create two simultaneous consequences, and decline to decide the wider questions the appellants raised.

Three companies that won stone mining blocks at Rajouli in Nawadah district fell behind on their instalments, and the Bihar Mines and Geology Department charged them interest for every month the money stayed unpaid. A Division Bench of the Patna High Court has held that the rule it relied on does not permit that. Rule 52(5) of the Bihar Minor Mineral Concession Rules allows interest for up to two months and then directs that action be taken for cancellation — and those are alternatives, not a cap followed by an open meter.

Three blocks, one question

The appeals arose out of three judgments of a Single Judge, all of 4 February 2025, dismissing three writ petitions. Because all three concerned the settlement of stone mining blocks at Rajouli and raised the same question about interest on delayed instalments under Rule 52(5), they were heard together and disposed of by a common judgment, with the facts of each noticed separately.

The lead appellant's history shows how the default arose, and it is not a story of a company sitting on money.

It was declared the successful bidder for Block No. 2, Mouza Rajouli, under a tender notice published in November 2014, having participated in January 2015. The letter of acceptance issued in February 2015 and the mining plan was approved in June 2015. Environmental clearance came only in June 2017, subject to conditions that included obtaining the necessary consents and permissions before mining operations began. The lease deed was executed in September 2017.

The company applied for Consent to Establish in October 2017. While that was pending, the Department issued a demand in January 2018 for the second instalment, to which the company objected later that month. Consent to Establish was granted in January 2018 and Consent to Operate in May 2018. The company then pursued permission from the Directorate General of Mines Safety and asked the District Collector for permission to commence mining — its position being that mining could not lawfully have begun before the statutory permissions were in hand. The Collector's permission came on 30 July 2018, and the second instalment was deposited in January 2019.

In February 2020 the Department raised a further demand, treating the payment already made as the third instalment and demanding the second with interest. That demand went to the High Court, which in September 2020 directed payment of the principal of the second instalment together with interest for two months, in three equal monthly instalments, while granting liberty to represent before the competent authority on the interest claimed for the remaining period. The company paid as directed and represented. The representation was rejected and a fresh demand for the balance interest followed. A second round of litigation ended in July 2023 with a direction to submit a fresh representation, and the order of 14 September 2023 resulted. The writ petition against that order was dismissed, and this appeal followed.

The second appeal follows the same pattern on the adjoining block, settled in favour of the same company under the same tender notice, with the letter of acceptance bearing the next serial number. There too the mining plan was approved in June 2015, environmental clearance came in June 2017 and the lease was executed in September 2017, and there too the Department demanded the second instalment in January 2018. That company objected, and in June 2018 submitted a representation asking that the commencement of the lease for the purpose of instalment liability be judged in the light of the statutory clearances and permissions required before mining could actually begin. The Collector's permission came in March 2019; the instalment had been deposited in January and February 2019. The demand that followed in February 2020 was for Rs 2,65,54,000 towards the instalment and interest. The third appeal, by a different company, travelled the same route. All three were sent to representations that failed, and all three ended in the orders of September 2023.

Compliance with a direction is not adjudication of liability

The Bench's first move was to separate two things that the proceedings below had run together.

Before the competent authority the company had specifically raised its liability for interest beyond two months and relied on the statutory scheme in Rule 52(5). But those proceedings ultimately turned on the earlier court orders and on whether the amount should be allowed in instalments as a matter of sympathetic consideration. The statutory question — what interest is legally recoverable under the rule — was never examined on its own terms.

The Single Judge had found that the competent authority rightly passed its order in compliance with the earlier direction. That, the Division Bench held, could not conclude the separate question of how much interest could lawfully be recovered. Compliance with a judicial direction and adjudication of a statutory liability are distinct matters; once the appellants questioned the legality of the continuing demand by reference to Rule 52(5), that question required consideration.

What the rule provides, and what it does not

The construction the Court adopted rests on the shape of the sub-rule.

It is necessary, the judgment says, to keep distinct the obligation to pay an instalment under the terms of the agreement and the statutory consequence that follows on default. That an instalment was payable and was not paid does not by itself settle how much interest can be recovered; that question is answered by the provision governing the consequence of default.

Rule 52(5) does not provide for two simultaneous and continuing monetary consequences after two months have passed. It provides for interest up to two months, and thereafter it contemplates action for cancellation. To let interest run indefinitely, notwithstanding the express prescription of a two-month period and the consequence contemplated after it, would be to add to the rule something it does not contain.

The Bench declined to treat either half of the provision as surplus. The expression “upto two months” cannot be regarded as incidental or meaningless, and equally significant is the direction that follows it — that after that, action for cancellation shall be taken. There would be little meaning in prescribing a period up to which interest is to be charged and then directing the authority to move for cancellation, if interest simply continued regardless.

So the answer to the question as the Court framed it — whether the Department, after the two-month period expires, can continue to levy interest for the subsequent period merely because the defaulted instalment remains unpaid — was that the language of the rule does not authorise such a continuing levy. If the Department wants more than two months' interest, its remedy is the one the rule gives it: cancellation.

What the Court deliberately did not decide

The judgment is careful to record how much it is leaving alone, and the list is long.

The appellants had raised the commencement of the mining lease, the effect of Rule 25(2) of the same Rules, the date from which rent or royalty becomes payable, the statutory permissions required before actual mining can begin, the conduct of the Department, and a plea of force majeure, with authorities cited on each. The Bench held it unnecessary to determine those wider questions, because the appeals could be decided on the narrower issue arising directly from Rule 52(5), and expressly left open the questions about the commencement of the lease, liability for rent and royalty under Rule 25(2), and the effect of the permissions and clearances relied on.

It also declined an invitation that would have gone further in the appellants' favour. It did not consider it necessary to hold that the Department's mere failure to cancel the settlement automatically amounts to waiver, extension of time or novation, that proposition being wider than what the appeals required.

Order

All three appeals were allowed and the Single Judge's judgments of February 2025 set aside. The orders of 14 September 2023 and the consequential demands were quashed to the extent that they seek to recover interest beyond the two-month period contemplated by Rule 52(5).

Two things were preserved. The appellants' liability for the principal amount of the respective instalments remains unaffected. And the amounts already deposited under the earlier orders of the Court, including the two months' interest, remain undisturbed. There was no order as to costs.

The judgment closes with a paragraph that is uncommon in a revenue appeal: the Bench records its appreciation of the diligence and assistance of the two law researchers attached to the Court, naming them, and says the depth of their research and attention to the record were of considerable assistance in reaching the conclusion.

The practical effect for lessees in Bihar is a ceiling where there used to be a meter. A defaulted instalment still has to be paid, and two months of interest with it; what the Department can no longer do is let the arrears accumulate interest for years while taking no step to cancel. The incentive the rule creates now runs the other way: if the default matters, cancellation is the route, and if the Department prefers to keep the lessee in place, it does so without a growing interest claim.

The narrowness is worth noticing too. On these facts the appellants had a considerable case that the delay was not theirs — environmental clearance took two years from the approval of the mining plan, and the Collector's permission to actually mine came six months after the Department had demanded the second instalment. None of that was decided. The appeals were won on the text of a sub-rule, and the arguments about who caused the delay remain available to the next lessee who needs them.